Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-00379/USCOURTS-azd-2_09-cv-00379-0/pdf.json

Nature of Suit Code: 490
Nature of Suit: Cable/ Satellite TV
Cause of Action: 28:1331 Fed. Question

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

DIRECTV, Inc., a California corporation,

Plaintiff/Judgment Creditor, 

vs.

Eagle West Communications, Inc., d/b/a

Eagle West Cable, a Nevada corporation;

et al., 

Defendant/Judgment Debtor. _________________________________

Francisco and Marla Delores Saldana,

Garnishee.

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No. CV 09-00379-PHX-JAT

REPORT AND RECOMMENDATION

TO THE HONORABLE JAMES A. TEILBORG, UNITED STATES DISTRICT JUDGE:

On January 13, 2010, a consent judgment was entered against Defendants Paul D.H.

LaBarre and Terri S. LaBarre, and others, in favor of Plaintiff, in the amount of $400,000.00.

(Doc.99.) Subsequently, on June 7, 2010, then presiding Judge Mary H. Murguia referred

garnishment proceedings to undersigned Magistrate Judge. (Doc. 122.) This matter arises

upon Plaintiff/Judgment-Creditor DIRECTV’s (“Plaintiff”) Application for Writ of

Garnishment against Garnishee Francisco and Marla Delores Saldana (“Garnishee”), filed

on May 10, 2012. (Doc. 151.) Plaintiff seeks entry of Judgment against the Garnishee for

nonexempt monies purportedly belonging to Defendants/Judgment Debtors Paul and Terri

LaBarre (“Defendants”). Garnishee filed an Answer on May 15, 2012, indicating that

Garnishee was indebted to Defendants on a 2001 promissory note for $50,000.00, and

attached the note to their Answer. (Doc. 155.) On June 6, 2012, Plaintiff filed a Motion for

Case 2:09-cv-00379-JAT Document 182 Filed 12/17/12 Page 1 of 9
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Judgment Against Garnishee. (Doc. 157.) Prior to a ruling on the Motion, Defendant Terri

Labarre, appearing pro se, on June 8, 2012, filed a Motion for Hearing re: Writ of

Garnishment. (Doc. 159.) Plaintiff filed an Objection, (Doc. 160), and Defendant Terri

LaBarre filed a Reply. (Doc. 161.) On October 19, 2012, this Court granted Defendant Terri

LaBarre’s request for a hearing on the garnishment. (Doc. 166.) The hearing took place on

December 6, 2012.

BACKGROUND

The Promissory Note attached to Garnishee’s Answer establishes that, on April 24,

2001, Garnishee promised to pay Defendants Paul and Terri LaBarre, for value received, the

principal sum of Fifty Thousand dollars ($50,000.00), payable in monthly installments of

$537.30. (Doc. 155, at 5-6.) The promissory note was secured by a Deed of Trust or Realty

Mortgage on real property, and was signed by all parties. (Id.) In her request for a hearing,

Defendant Terri LaBarre claims that the monies being garnished are exempt monies because

the “note [was] assigned to third party [in] 2008.” (Doc. 159.) Attached to her request is a

document titled Assignment of Promissory Note to a Minor. (Doc. 159, at 10.) The note

provides that Defendant Paul Labarre, as the assignor, assigned the promissory note to Dante

Jay LaBarre, a minor, with Defendant Terri LaBarre as the trustee. (Id.) The note is signed

by Defendants and notarized on March 4, 2008. (Id.) 

Defendant Terri LaBarre also attached to her request for a hearing letters dated March

5, 2008. The first, addressed to Garnishee, purports to notify Garnishee that the Promissory

Note was being assigned to her youngest son to “allow for his Gym fees to be paid from the

proceeds.” (Doc. 159, at 8.) The second, addressed to First American Title, purports to

enclose the Assignment of Promissory Note to a Minor (hereinafter “Assignment”), with a

request that it be filed with the recorders office of Pinal County. (Id., at 9.) 

Plaintiff objected to Defendant Terri LaBarre’s request for a hearing on the basis that

it was untimely filed by eight (8) days. (Doc. 160.) Plaintiff also objected on the basis that

the purported assignment of the note to Defendants’ minor son was a fraudulent assignment

for the following three reasons: (1) the Assignment was without consideration (parents are

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responsible for their children and an assignment to pay child-rearing costs is of questionable

validity); (2) Defendant Terri LaBarre maintained possession and control of the promissory

note payments by depositing them into two different bank accounts, a business account and

Defendant Paul LaBarre’s account, the payments were co-mingled with other deposits, and

expenses other than the “gym fees” were paid out of the account; and (3) the purported

Assignment was concealed because Garnishee was not in fact notified (in its Answer

Garnishee did not indicate an indebtedness to anyone other than Defendants, and Garnishee’s

attorney had notified Plaintiff’s that his clients were unaware of the Assignment until after

their receipt of the Writ of Garnishment), and because the Assignment was never recorded

(a search of the records of the Pinal County Recorder revealed that the Assignment was never

recorded). (Id., at 5-7; Exhibits 4, 5.) 

In response, Plaintiff submitted a copy of a letter purportedly authored by the notary

public whose notary stamp and signature appeared on the Assignment. (Doc. 163, Exh. A.)

In the letter, Daniel Pero confirms that he was a licensed notary at the time of the assignment,

recognized his signature and notary stamp on the document, but could not provide copies of

his notary journal log for that date because his book “is either lost, destroyed, [or] nonrecoverable.” (Doc. 163, at 4.)

The hearing on Defendant Terri LaBarre’s objection to the garnishment commenced

on December 6, 2012. (Doc. 180.) During the hearing, Defendants both made statements,

under oath regarding the validity of the assignment of the promissory note to their minor son

for the payment of his gym fees. While Defendant Paul LaBarre stated that he had sent the

letter in 2008 to First American title directing that the Assignment be recorded, and that the

assignment was in fact recorded, Plaintiff introduced into evidence an affidavit of Maureen

Zachow indicating that a search of Pinal County Reorder records did not reveal a recording

of the Assignment. (Plaintiff’s Exhibit 1.) Plaintiff also introduced into evidence an

affidavit of a custodian of the records of First American Title Insurance Company, indicating

that the letter Defendant Paul LaBarre produced, that was purportedly mailed to First

American in 2008 directing the company to record the Assignment, was not found in their

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records. (Plaintiff’s Exhibit 2.) 

In response to a Motion to Compel Discovery Responses filed by Plaintiffs that sought

an order directing Defendants to produce certain records relating to the assignment, (Doc.

171), Defendants produced the following documents: a copy of USA Youth Fitness Center

bill, dated November 6, 2012, sent to Defendant Teri LaBarre indicating a monthly tuition

for Dante’ LaBarre of $345.00 for the months of September through November, and a

$15.00/month team fee, (Doc. 175, at 21): a copy of a money order from Garnishee made

out to Defendants Paul and Terri LaBarre, dated July 10, 2001, in the amount of $584.49 (Id.,

at 22): a letter dated August 13, 2001, written by Defendants Paul and Terri LaBarre

addressed to Garnishee reminding Garnishee to send the payments by the 12th of the month

(Id., at 23): various other correspondence written by Defendants to Garnishee relating to

insurance and tax payments on the property secured by the promissory note, (Id., at 24-27).

In their Response to Plaintiff’s request for production of documents, Defendants also

produced a copy of the USA Youth Fitness Center “Rules/Policies” relating to membership

at the Center. (Doc. 177, at 9-10.) 

During the garnishment hearing, Defendants referenced a ledger, in the record, created

by Terri LaBarre detailing the gym fees, and payments made between January 2008, and

August, 2012. (Doc. 181, at 18-25). Defendants’ ledger indicates that a total of $19,147.43

was paid to the gym for the years 2008 through 2012, and that the total amount paid for the

months January through July, 2012, was $2,829.00. (Id.) The gym charges appear to be

primarily monthly tuition and team fees, although there are miscellaneous snack and special

event fees included. (Id.)

Plaintiffs introduced into evidence bank records demonstrating that for the months

January through June, 2010, Defendant Terri LaBarre had three different TCF National bank

accounts in the name of “Terri Sue LaBarre Trustee,” none of which reflected deposits of

Garnishee’s payment on the promissory note, or reflect payment of gym fees. (Plaintiff’s

Exhibit 4.) Plaintiff also submitted, in its Objection to Defendants’ request for a hearing,

copies of money orders obtained by Garnishee made payable to Paul and Terri LaBarre in

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1

 Rule 69(a), Fed.R.Civ.P., provides in pertinent part:

A money judgment is enforced by a writ of execution, unless the court directs

otherwise. The procedure on execution – in proceedings supplementary to and

in aid of judgment or execution – must accord with the procedure of the

state where the court is located, ... .

(emphasis added).

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the amount of the promissory note payment that were deposited into a TCF Bank account in

the name of Real Star Communications. (Doc. 160-1, at 14-18.) The payments were

deposited in May and June 2010. (Id.) Plaintiff also submits copies of checks written on that

account during this same time period by Defendant Paul LaBarre for expenses related to

dental care and utilities. (Id., at 19-20.) Finally, Plaintiff submitted copies of money orders

obtained by Garnishee made payable to Paul and Terri LaBarre in the amount of the

promissory note payments that were deposited into a TCF Bank account in the name of Paul

D.H. LaBarre between November, 2010 and January, 2012. (Id., at 24-41.)

During the hearing, Plaintiff called Garnishee Francisco Saldana as a witness, who,

when shown the 2008 letter Defendants purportedly sent to the Saldanas regarding the

Assignment, testified that he had not seen the letter before. Defendants then called Maria

Saldana, the daughter of Garnishees, who testified that the first time she had seen the 2008

letter addressed to her parents was “a long time ago,” and that she knew the letter had

something to do with the assignment of the note. The Court finds that the resolution of the

factual dispute over Garnishee’s receipt of the 2008 letter is not necessary to this Court’s

determination in this garnishment action.

ANALYSIS

Generally, a federal writ of garnishment is governed by the law of the state in which

the district court sits. See Fed.R.Civ.P. 69(a)1

; Hilao v. Estate of Marcos, 95 F.3d 848, 851

(9th Cir. 1996). Under Arizona law, “garnishment reaches only debts existing at the time of

the service of the writ.” Reeb v. Interchange Resources, Inc. of Phoenix, 478 P.2d 82, 84

(Ariz. 1970). “[I]t is well settled in Arizona that the rights of a garnishor-creditor to assets

in the hands of a garnishee are no greater than rights of the defendant-debtor to those assets.”

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Webster v. USLife Title Co., 598 P.2d 108, 110 (Ariz. Ct. App. 1979) (citing Mid-State

Electric Supply Co. v. Arizona Title Insurance & Trust Co., 464 P.2d 604, 606-07 (Ariz.

1970)).

A. Fraudulent Transfer.

Plaintiff alleges that the Assignment was a fraudulent, voidable transfer. A

garnishment proceeding is an appropriate forum for a creditor to prove a fraudulent

conveyance under the Fraudulent Transfer Act - no separate action is required. Retzke v.

Larson, 166 Ariz. 446, 448 (Ariz. App. 1990). Under the Fraudulent Transfer Act, a transfer

is fraudulent if the debtor made the transfer under either of the following circumstances:

1. With actual intent to hinder, delay or defraud any creditor of the debtor.

2. Without receiving a reasonably equivalent value in exchange for the transfer or

obligation and the debtor either:

(a) Was engaged or was about to engage in a business or a transaction for which the

remaining assets of the debtor were unreasonably small in relation to the business or

transaction.

(b) Intended to incur, or believed or reasonably should have believed that he would

incur, debts beyond his ability to pay as they became due. 

A.R.S. §44-1004(A). A creditor has the remedy of avoidance of the transfer to the extent

necessary to satisfy the creditor’s claim. A.R.S. §44-1107(A)(1),(2). During the

garnishment hearing, Plaintiff argued that the Assignment was created to place the payments

on the promissory note beyond the reach of creditors: however, the Complaint filed by

Plaintiffs, that resulted in the consent judgment in this matter, was filed after the Assignment

was created. Plaintiff argues that, nonetheless, Defendants were aware that they would be

pursued by creditors for debts they had incurred. This argument is simply not supported by

any documents or testimony in the record, and thus, this Court finds that there is insufficient

evidence to support a finding of fraudulent transfer.

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B. Validity of the Assignment.

Plaintiff also argues that if the intent of the Defendants was to create a valid transfer

under the Arizona Uniform Transfers to Minors Act (“UTMA”) by the Assignment

document, it was wholly inadequate. Pursuant to A.R.S. §14-7659, several requirements

must be met in order to create a valid UTMA transfer, one of which is that the custodian, or

“trustee” must not be the same as the transferor of the asset. Here, Terri LaBarre was a

beneficiary of the promissory note, and thus, for the transfer to be valid, she would have to

transfer her interest. She could not, therefore, serve as the custodian of the minor’s assets.

A.R.S. §14-7659. Furthermore, the custodian must keep all custodial property separate and

distinct from all other property. A.R.S. §14-7662(D). The evidence submitted by Plaintiff

demonstrates that the funds from Garnishee were deposited into a business account, and into

Defendant Paul LaBarre’s bank account, and that expenses other than gym fees were paid

out of the latter account. The Court finds, given the facts presented, that no valid UTMA

account was created.

The only evidence presented by Defendants to establish the creation of a valid

Assignment of any legal force and effect is a ledger created by Defendants denoting

payments made on behalf of their son Dante for fees related to his membership in the gym.

Defendants do not submit any bank records that support the entries in this ledger, or that the

payments from Garnishee were used solely for these fees, or that show that a proper trust

account was created. Yet, Defendants ask the Court to find that Garnishee’s monthly

payments to Defendants should be exempt from garnishment. On this evidence, such a

finding would mean that all a debtor would have to do to place payments on a note beyond

the reach of creditors is claim that the monies are being “directed” toward the payment of a

minor child’s expenses, whether it be gym fees, piano or horseback riding lessons, dance

lessons, or private tutoring. 

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The garnishment statute is not, however, blind to debtor hardship. The garnishment

statute provides that certain monies are exempt from garnishment, and defines exempt

monies as “monies or property that, pursuant to a state or federal law, is not subject to

judicial process, including ...garnishment.” A.R.S. §12-1570(2). Exempt monies include

child support, spousal maintenance, earnings of a minor child or a variety of insurance

payments. See, A.R.S. §33-1126(A). In addition, 75% of disposable earnings are also

exempt from garnishment. A.R.S. §12-1598(5). Workers’ Compensation benefits may also

be exempt from garnishment. A.R.S. §23-1068(B). Thus, there are many statutorily created

exemptions from garnishment, that ensure that no debtor is left without the ability to provide

for the basic necessities. No exemption is claimed here, and Defendants cite no authority to

establish that the purported Assignment here is valid or that it places Garnishee’s payment

on the promissory note immune from garnishment.

In accordance with the foregoing,

IT IS HEREBY RECOMMENDED that Defendants’ Objection to the Writ of

Garnishment is overruled, and that Plaintiff’s Application for Judgment against the Garnishee

(Doc. 157) be GRANTED. Plaintiff shall have seven (7) days from the Court’s Order

adopting this Report and Recommendation to submit to the Court a proposed judgment

against Garnishee.

This recommendation is not an order that is immediately appealable to the Ninth

Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of

Appellate Procedure, should not be filed until entry of the District Court’s judgment. The

parties shall have fourteen (14) days from the date of service of a copy of this

recommendation within which to file specific written objections with the Court. See 28

U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(b) and 72. Thereafter, the parties have fourteen (14)

days within which to file a response to the objections. Failure to timely file objections to the

Magistrate Judge’s Report and Recommendation may result in the acceptance of the Report

and Recommendation by the district court without further review. See United States v.

Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003). Failure to timely file objections to any

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factual determinations of the Magistrate Judge will be considered a waiver of a party’s right

to appellate review of the findings of fact in an order of judgment entered pursuant to the

Magistrate Judge’s recommendation. See Fed.R.Civ.P. 72.

DATED this 17th day of December, 2012.

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