AEA Federal Credit Union v. Yuma Funding, Inc.

Citations: 237 Ariz. 105; 346 P.3d 991; 709 Ariz. Adv. Rep. 7; 2015 Ariz. App. LEXIS 61Docket: No. 1 CA-CV 14-0305

Court: Court of Appeals of Arizona; March 31, 2015; Arizona; State Appellate Court

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Yuma Funding, Inc. appealed the trial court's denial of its motion to set aside the orders appointing and releasing a receiver requested by AEA Federal Credit Union (AEA). The court ruled that such orders are not final appealable orders under Arizona Revised Statutes (A.R.S. § 12-2101(A)(5)(b)), leading to the dismissal of the appeal for lack of jurisdiction.

In the underlying case, Yuma Funding, owned by Ken Stevenson, his wife, and daughter Tammy Sherman, had taken out nearly 300 loans from AEA to facilitate vehicle purchases from Stevenson’s dealership, T.K. Enterprises. AEA filed a complaint in January 2010, alleging breaches of loan agreements and obstruction in accessing business records, including attempts to destroy those records. AEA sought monetary damages and the appointment of a receiver to manage Yuma Funding and ensure loan repayment.

The trial court granted AEA's request for a receiver on an ex parte basis, citing the risk of losing AEA's interest in the collateral if urgent action was not taken. The receiver was empowered to manage Yuma Funding's operations and finances, with the appointment becoming effective upon the receiver posting a $100,000 bond.

Yuma Funding was served with the complaint and appointment order but did not engage legal counsel or contest the receiver's appointment. AEA subsequently filed for default due to Yuma Funding's lack of response. The receiver reported on Yuma Funding’s finances and operational issues, managing the company and submitting regular status reports, to which there were no objections from the defendants.

In June 2010, AEA requested the termination of the receivership and the return of all property held by the receiver to address alleged debts owed by Yuma Funding. AEA claimed that the receiver had retrieved all vehicles under lien and only needed to collect accounts receivable, thus fulfilling the receivership's purpose. The receiver supported this request, leading the trial court to issue an order on July 16, 2010, which released the receiver, discharged him from liability, exonerated the bond, approved final compensation, mandated a final accounting within thirty days, and directed the abandonment of all books and records to AEA. 

In August and September 2010, the receiver submitted interim and final status reports. Over two years later, in December 2012, AEA sought to dismiss the receivership and release the bond. Yuma Funding, making its first appearance, requested a thirty-day extension to object, citing a lack of urgency. Following Yuma Funding's objection and oral arguments, the court denied AEA's dismissal motion but released the receivership bond.

In November 2013, Yuma Funding moved to set aside the appointment order from January 22, 2010, claiming jurisdictional defects and due process violations. The trial court denied this motion on January 30, 2014, prompting Yuma Funding to appeal on February 5, 2014. The discussion highlighted AEA’s argument against jurisdiction over the appeal, emphasizing that appellate rights are constitutionally or statutorily granted, as established in case law. The court noted that Yuma Funding's appeal regarding the denial of its motion to set aside both the appointment order and the release order was not clearly appealable under A.R.S. 12-2101, particularly focusing on the interpretation of the statute's language concerning injunctions and receivers.

The interpretation of a statute begins with its plain language and sentence structure. If the language is clear and unambiguous, it must be applied as is, without resorting to other construction rules. Words are assumed to hold their natural meanings unless specified otherwise. Statutes should be construed sensibly to reflect legislative intent and avoid absurd outcomes. 

In analyzing A.R.S. 12-2101(A)(5)(b), the conjunction 'or' links alternatives, and Yuma Funding's proposed reading—dividing the statute into two alternatives—results in an illogical interpretation. This reading would imply that only refusals to grant or dissolve an injunction or appoint a receiver are appealable, contradicting the statute's previous clear allowance for appeals from orders appointing a receiver. Minor changes in wording or punctuation, such as the deletion of a serial comma, do not indicate a substantive legislative intent to alter appellate jurisdiction unless explicitly stated.

Furthermore, Yuma Funding’s argument that terms like 'preliminary injunction,' 'temporary restraining order,' and 'receivership' are interchangeable is rejected, as these terms are defined separately in statutes and involve different legal processes. Thus, A.R.S. 12-2101(A)(5)(b) provides the right to appeal in three specific scenarios: (1) an order granting or dissolving an injunction, (2) an order refusing to grant or dissolve an injunction, and (3) an order appointing a receiver.

Yuma Funding also claims that the January 2014 order denying the motion to set aside the receiver's appointment is appealable under A.R.S. 12-2101(A)(4) as a final order affecting a substantial right. However, this order does not qualify as 'after judgment' since no judgment has been entered, nor does it arise from a 'special proceeding,' which is defined as independent of an ongoing action. Consequently, the motion to set aside the appointment of the receiver is part of the original proceeding and does not meet the criteria for appeal under A.R.S. 12-2101(A)(4).

Yuma Funding contends that the ruling will lead to an absurd situation where the appointment of a receiver can only be appealed within thirty days, asserting that deficiencies in jurisdiction or due process can be raised at any time. The court disagrees, stating that limiting the appeal period for a receiver's appointment is reasonable due to the significant impacts it has on third-party relationships and transactions. The court emphasizes that without jurisdiction over Yuma Funding's substantive arguments, it cannot evaluate claims regarding the trial court's jurisdiction or due process violations in appointing the receiver. Yuma Funding's failure to timely appeal the receiver's appointment precludes the court from addressing alleged errors.

Regarding the appeal of the order denying Yuma Funding's motion to set aside the July 16, 2010 order discharging the receiver, the court finds it lacks jurisdiction. The relevant statute, A.R.S. § 12-2101(A)(5)(b), pertains solely to the appointment of a receiver and does not extend to other receivership orders. The motion to set aside the discharge is not a separate proceeding or final order, thus A.R.S. § 12-2101(A)(4) does not apply.

Yuma Funding also requests the court to exercise special action jurisdiction, which is permissible when appellate jurisdiction is lacking. However, the court notes that special action jurisdiction is typically reserved for cases of statewide importance or pure legal questions and is not exercised when an appeal from a potentially appealable order is not filed within the prescribed timeframe. Since the time to appeal the January 2010 appointment order has elapsed, and adequate remedies exist through appeals from final judgments or accounting orders, the court declines to consider Yuma Funding's appeal as a special action.

The appeal by Yuma Funding to set aside the orders related to the appointment and release of a receiver has been dismissed. Both parties requested attorney fees and costs under A.R.S. 12-341.01 and ARCAP 21; however, Yuma Funding is not deemed the prevailing party, and thus its request is denied. Although AEA, as the prevailing party, is entitled to costs on appeal upon compliance with ARCAP 21, its request for attorney fees is also declined. Yuma Funding contends that a July 16, 2010 order constituted liquidation of the company, but the order itself does not specify the disposition of its assets. The court allowed a new shareholder, appearing pro per, to intervene in the defense on matters prior to his interest in the corporation, although ultimately, Yuma Funding was required to retain counsel for representation. Yuma Funding argues that a motion to "set aside" a receivership is equivalent to a motion to "dissolve" it, but the court finds it unnecessary to determine any distinction between these terms.