Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-01238/USCOURTS-azd-2_06-cv-01238-4/pdf.json

Nature of Suit Code: 240
Nature of Suit: Torts to Land
Cause of Action: 28:1441 Petition for Removal- Declaratory Judgement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Marian B. Farris, 

Plaintiff,

vs.

Advantage Capital Corporation,

Defendant.

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No. CV-06-1238-PHX-PGR

 

 ORDER

Pending before the Court is defendant Advantage Capital Corporation’s

Motion for Summary Judgment (doc. #52). Having considered the parties’

memoranda in light of the admissible evidence of record, the Court finds that

there are no genuine disputed issues of material fact and that the Advantage

Capital is entitled to entry of judgment in its favor as a matter of law pursuant to

Fed.R.Civ.P. 56.

Background

Advantage Capital, a securities brokerage firm, filed an action in the

Maricopa County Superior Court on March 31, 2006 against Charles Bolton, his

wife, Brenda Bolton, and his mother, Marian Farris; the action arose from the

disappearance of some $649,000 from the accounts of some of Advantage

Capital’s customers which were serviced by Charles Bolton while he was one of

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Advantage Capital’s registered representatives. As one of its claims in its suit to

recover the missing funds, Advantage Capital alleged that the sale of the Boltons’

residence at 8350 East Windrose Drive in Scottsdale, Arizona to Farris in

September 2005 was void as a fraudulent conveyance under A.R.S. § 44-1001 et

seq. because it was made for the purpose of defrauding the Boltons’ creditors. 

On the same date it filed its verified complaint, Advantage Capital filed a Notice of

Lis Pendens against the East Windrose Drive property pursuant to A.R.S. § 12-

1191.

In response, Farris filed a Petition for Special Action in the Maricopa

County Superior Court on April 20, 2006, alleging that Advantage Capital’s filing

of the lis pendens violated A.R.S. § 33-420 because the notice was groundless

and invalid in that Advantage Capital’s claims in the fraudulent conveyance

litigation did not affect or involve the legal title to the East Windrose Drive

property. Advantage Capital subsequently removed the action to this Court on

the basis of diversity jurisdiction.

At the request of the parties following their filing of cross-dispositive

motions on the issue of whether Advantage Capital’s fraudulent transfer claim did

or did not affect title to the East Windrose Drive property, the Court certified the

following question to the Arizona Supreme Court on March 30, 2007:

Whether a fraudulent transfer action under A.R.S. § 44-1001 et seq., which seeks to void the transfer of real property, is an action

“affecting title to real property” within the meaning of the lis pendens

statute, A.R.S. § 12-1191, where the action is brought by a creditor

of the transferor to make the real property available for the collection

of a debt or judgment.

The Arizona Supreme Court resolved the certified question in Advantage

Capital’s favor in Farris v. Advantage Capital Corporation, 170 P.3d 250, 253

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(Ariz. 2007), wherein it stated in relevant part:

[B]ecause an action under A.R.S. § 44-1007(A)(2) for avoidance

plainly affects title to real property, our statutes authorize a creditor

to file a lis pendens under the circumstances presented by this case.

Therefore, in answer to the District Court’s certified question ,

we hold that an action under Arizona’s version of the [Uniform

Fraudulent Transfer Act] seeking to void an allegedly fraudulent

transfer of real property is one “affecting title to real property” under

A.R.S. 12-1191(A), the lis pendens statute.

Discussion

In its summary judgment motion, Advantage Capital argues that Farris’

wrongful lis pendens claim fails as a matter of law given the finding of the Arizona

Supreme Court that the underlying fraudulent transfer claim was one affecting

title to real property. Farris argues that summary judgment is not warranted

notwithstanding the Arizona Supreme Court’s decision because Advantage

Capital’s filing of the lis pendens was contrary to Arizona law in that Advantage

Capital had no reasonable basis for filing it.

In order to prevail on its claim that the filing of the lis pendens was wrongful

under A.R.S. § 33-420(A), Farris has the burden of establishing in part that

Advantage Capital knowingly filed a lis pendens that was “forged, groundless,

contains a material misstatement or false claim or is otherwise invalid.” 

Evergreen West, Inc. v. Boyd, 810 P.2d 612, 617 (Ariz.App.1991). The Court

concludes as a matter of law that Farris has not met her burden of proof.

The gist of Farris’ argument is that the lis pendens was groundless

because it cannot reasonably be disputed that no fraudulent transfer occurred

since she was a bona fide, good faith purchaser of the East Windrose Drive

property. The Court cannot agree. Under Arizona law, a lis pendens is

groundless for purposes of § 33-420 only where “the claim that the underlying

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1

 Farris also argues that the summary judgment motion must be denied

because Advantage Capital currently has no action pending to support its lis

pendens as its underlying action has been dismissed by the Bankruptcy Court. 

The Court notes that the dismissal was not based on the lack of any merit to

Advantage Capital’s fraudulent transfer claim, but solely on the fact that Farris,

the removing party, failed to supply the state court record to the Bankruptcy Court

as ordered. The issue of whether the transfer of the East Windrose Drive

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action is one affecting title to real property has no arguable basis or is not

supported by any credible evidence.” Id. at 619. In resolving this question, the

Court “need only find ‘some basis’ for concluding that the action affects title to

real property; it need not, and should not unless necessary to its decision,

determine which party will prevail on the merits.” Id. at 618; accord, Chevron

U.S.A., Inc. v. Schirmer, 11 F.3d 1473, 1480 (9th Cir. 1993) (“If there is an

arguable basis for asserting that the underlying action will affect title to the

property at issue - even if a court might find that the action ultimately fails on the

merits - the notice of lis pendens is not groundless [for purposes of A.R.S. § 33-

420(A)].”)

Notwithstanding Farris’ contention that Advantage Capital’s fraudulent

transfer claim was based on “strained inferences and speculation,” Farris has not

provided any admissible significant probative evidence establishing that

Advantage Capital had no minimal, arguable basis for claiming that the

underlying action would affect the East Windrose Drive property. The evidence of

record related to the various “badges of fraud” known to Advantage Capital in

March 2006, viewed in Farris’ favor, clearly establishes that no factfinder could

reasonably conclude that Advantage Capital did not have at least an arguable

factual and legal basis for believing that the property transfer was fraudulent. The

filing of the lis pendens was therefore proper as a matter of law.1

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property to Farris was fraudulent is still being litigated in the Bankruptcy Court in

other actions.

 The Court further notes that Advantage Capital formally released the lis

pendens on December 11, 2007, two weeks after the Bankruptcy Court

dismissed the underlying fraudulent transfer action.

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Therefore,

IT IS ORDERED that defendant Advantage Capital Corporation’s Motion

for Summary Judgment (doc. #52) is granted and that this action is dismissed. 

The Clerk of the Court shall enter judgment accordingly.

DATED this 2nd day of June, 2008.

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