Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_02-cv-01277/USCOURTS-azd-2_02-cv-01277-7/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

FINOVA Capital Corporation, a

Delaware corporation, 

Plaintiff, 

vs.

Richard A. Arledge, Inc., a

Texas corporation d.b.a.

Arledge Motor Co.; Richard A.

Arledge, individually and as

the husband of Peggy L.

Arledge; and Peggy L. Arledge,

individually and as the wife of

Richard A. Arledge, Defendants. 

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No. 02-1277-PHX-RCB

O R D E R

On September 20, 2006, a monetary judgment (doc. 269), which

was amended on July 27, 2007 (doc. 296) (“the judgment”), was

entered in favor of FINOVA and against defendants. “[T]he

judgment is in the net principal amount of $1,663,809.42 . . . in

favor of FINOVA and against, jointly and severally defendant

Richard A. Arledge, Inc. d/b/a Arledge Motor Company, Richard A.

Case 2:02-cv-01277-RCB Document 314 Filed 03/26/08 Page 1 of 12
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1 It is FINOVA’s belief that the property is the only asset defendants

have which would be subject to execution based upon the judgment. The opposite

seems to be the case, however. Defendants unequivocally state that “[t]he only

asset that [they] have that is not protected from seizure, is . . . the

[p]roperty[.]” Resp. & Cross-Mot. (doc. 302) at 2 (emphasis added); see also

Reply (doc. 307) at 4 n.10 (“Defendants do not believe any other non-exempt

assets exist at this time.”) Based upon these representations, it does not

appear, as FINOVA suggests, that defendants “are attempting to prevent [it] from

exercising any meaningful collection activities.” Resp. (doc. 306) at 4

(emphasis in original).

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Arledge and Peggy Arledge (. . . “the Defendants”).” Mot. (doc.

297) at 2. On July 30, 2007, defendants timely filed a Notice of

Appeal in the Ninth Circuit (doc. 299). Currently pending before

the court is a motion by plaintiff FINOVA Capital Corporation

(“FINOVA”) for entry of an order allowing registration of that

judgment pursuant to 28 U.S.C. § 1963 (doc. 297); and a crossmotion by defendants to “approve an alternative bond” and for a

stay pursuant to Fed. R. Civ. P. 62(d) (doc. 302). 

Background

Defendants maintain that the only asset they have which is

not protected from seizure is a parcel of real estate located at

415 N. Central Expressway, Richardson, Texas 75080 (“the

property”).1 “As part of the Loan and Security Agreement, made

the subject of this lawsuit, [defendants] [Richard] Arledge and

Peggy L. Arledge pledged th[at] Property as security for their

Continuing Guaranty.” Resp. & Cross-Mot. (doc. 302) at 2. 

Consequently, FINOVA “has a second lien position behind Legacy

Texas Bank, the purchase money lender for the Property.” Id. at

2-3. 

FINOVA is seeking to register its judgment in, among other

places, the Northern District of Texas where the property is

located. Defendants are cross-moving pursuant to Fed. R. Civ. P.

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62(d) to be allowed to provide alternative security in the form

of an injunction and a $10,000.00 bond, and for a partial stay of

execution of that judgment.

I. Registration of Judgment

FINOVA specifically “requests the entry of an Order allowing

it to register the Judgment under 28 U.S.C. § 1963 in one or more

districts outside of Arizona, including, without limitation, the

Northern District of Texas[,]” where the subject property is

located. Mot. (doc. 297) at 3 (emphasis added). 28 U.S.C.

§1963. That statute reads in pertinent part as follows:

 A judgment in an action for the recovery 

of money . . . entered in any . . . , district 

court, . . . may be registered by filing a certified 

copy of the judgment in any other district . . . 

when ordered by the court that entered the judgment 

for good cause shown. . . . . A judgment so 

registered shall have the same effect as a 

judgment of the district where registered 

and may be enforced in like manner.

28 U.S.C. § 1963 (West 2006). Defendants agree that FINOVA has a

“right . . . to register the Judgment in Texas” under section

1963. Resp. & Cross-Mot. (doc. 302) at 2. Accordingly, they “do

not oppose this relief.” Id.; see also id. at 3-4 (“Defendants

are not opposing Finova’s motion to register the Amended Judgment

in Texas[.]”) Defendants’ response is silent with respect to

registering the judgment in districts other than Texas, however. 

As section 1963 requires, the court has determined, that

“good cause” exists to allow FINOVA to register the Judgment in

the Northern District of Texas. That finding of good cause is

based, among other things, upon the representation of FINOVA’s

counsel that “it appears that none of the defendants owns any

assets in Arizona and that, to the extent that any of the

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defendants currently owns assets at all, such assets are located

within the jurisdiction of the United States District Court for

the Northern District of Texas.” Decl’n of Robert P. Simbro

(doc. 298) at 1-2, ¶ 3. That good cause finding is supported by

the following additional factors: (1) “a good portion (if not

all) of defendant’s [sic] assets appear[] to be located in the

Northern District of Texas[;]” (2) “none of the defendants has

filed a supersedeas bond to preclude execution upon the judgment

pursuant to Rule 62(d), Federal Rules of Civil Procedure[;]” and

(3) “FINOVA would be able to use other (but less efficient) means

to domesticate its judgment anyway outside of Arizona.” Mot.

(doc. 297) at 1-2. 

Based upon the foregoing, the court will allow the judgment

to be registered in the Northern District of Texas. The court

will not, however, allow registration in any other districts

because FINOVA has not made the necessary showing that defendants

have assets in any districts other than the Northern District of

Texas. See Blaine Larsen Processing, Inc. v. Hapco Farms, Inc.,

2000 WL 35539979, at *15 (D.Idaho 2000) (emphasis added)(citing

In re Southern Industrial Banking Corp. V. Avery, 121 B.R. 229,

231 (Bankr.E.D. Tenn. 1990) (“[G]ood cause must be demonstrated

for each state in which the Plaintiff seeks to register the

judgment.”)) 

II. Alternative Security and Stay of Judgment 

A. Summary of Arguments

Pursuant to Fed. R. Civ. P. 62(d), defendants are crossmoving for a partial stay of execution of the judgment pending

appeal. Defendants are seeking a stay only with respect to the

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subject property. Defendants are seeking such a stay because

“Finova is insolvent and actively liquidating its assets to wind

up its business.” Resp. & Cross-Mot. (doc. 302) at 3. Thus, 

defendants are concerned that if FINOVA is allowed to execute on

the judgment and foreclose on the property pending appeal, and

defendants succeed on appeal, they will be left without a remedy. 

Defendants raise the prospect of FINOVA executing on the

judgment, selling the property and then, because of FINOVA’s dire

financial situation, their not being able to seek restitution

from FINOVA.

To obtain a partial stay, in lieu of a supersedeas bond,

defendants are requesting that the court exercise its “wide

discretion” and approve an alternative form of security. Id. at

5. More specifically, in exchange for a partial stay, defendants

would agree to be enjoined from engaging in several activities

pertaining to the subject property. For example, they would

agree to be enjoined from failing to make timely mortgage

payments, and from “encumbering, transferring, assigning, or

selling the Property.” Id. at 3, ¶ ©. 

Interestingly, in their memorandum defendants do not offer

to post a bond of any kind. Their suggested alternative security

focuses exclusively on an injunction. In the supporting

affidavit of defendant Richard Arledge, however, he avers that he

is “willing to post a [$10,000.00] bond as security for the

issuance of the injunctive relief being requested.” Id., exh. 1

thereto (Aff. of Richard A. Arledge) at 5, ¶ 17.

FINOVA counters that the court should deny this cross-motion

because defendants are “merely offer[ing] to be subjected to the 

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same covenants under which they already are bound pursuant to

FINOVA’s deed of trust on the subject property.” Resp. (doc.

306) at 1. Even if defendants “propos[ed]” injunction is deemed

to be “some form of additional security[,]” FINOVA contends that

denial is proper because defendants have not “satisf[ied] the

requirements for injunctive relief[,]” in that they have not

“establish[ed] a probability of success on the merits of their

appeal.” Id. at 1-2.

Somewhat surprisingly, FINOVA does not comment upon

defendants’ offer to post a $10,000.00 bond. Perhaps FINOVA is

unaware of that offer since it does not appear in defendants’

memorandum. In any event, it is safe to assume that FINOVA would

view such a bond wholly insufficient given that the judgment

exceeds $1.6 million dollars. 

In their Reply, defendants dispute the applicable legal

standard. Contrary to what FINOVA asserts, defendants assert

that the preliminary injunction standard does not apply here. 

Rather, because defendants contend that they are seeking relief

in accordance with Rule 62(d), whether to grant a stay and allow

alternative security lies within the court’s discretion under

that Rule. Furthermore, defendants assert that the “alternative

security,” in the form of the proposed injunction, actually

“places [FINOVA] in a better position.” Reply (doc. 307) at 4. 

FINOVA’s position will be “enhance[d],” from defendants’

perspective, because while the appeal is pending, they “will be

paying approximately $5,000" monthly “in principal towards . . .

reduction of the first lien on the Property.” Id. at 5. 

Reduction of that first lien will mean, in turn, that “FINOVA’s

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second lien position will improve each month[.]” Id. In light of

the foregoing, defendants maintain that the court should grant

their motion for alternative security and stay execution of the

judgment with respect to the subject property.

B. Analysis

Generally enforcement of a final judgment is not stayed

during the pendency of an appeal. See Fed. R. Civ. P. 62(a). 

However, pursuant to Fed. R. Civ. P. 62(d), “an appellant may

obtain a stay of judgment by posting a supersedeas bond at or

after the time of filing of the notice of appeal.” Kassel v.

U.S., 2007 WL 2729570, at *1 (N.D.Cal. 2007) (citation omitted). 

“‘The posting of a bond protects the prevailing plaintiff from

the risk of a later uncollectible judgment and compensates him

for delay in the entry of the final judgment.’” Id. (quoting

N.L.R.B. v. Westphal, 859 F.2d 818, 819 (9th Cir. 1988)). “Rule

62(d) is a purely procedural mechanism to preserve the status quo

during a stay pending appeal of a district court decision[.]” 

Vacation Village, Inc. v. Clark County, Nev, 497 F.3d 902, 914

(9th Cir. 2007) (internal quotation marks and citation omitted). 

“In lieu of a supersedeas bond, a court may allow for the

posting of alternate forms of security.” American Color

Graphics, Inc. v. Travelers Property Cas. Ins. Co., 2007 WL

1520952, at *1 (N.D.Cal. 2007) (citing, inter alia, Townsend v.

Holman Consulting Corp., 929 F.2d 1358, 1367 (9th Cir. 1990) (en

banc)). Of the “two recognized justifications for allowing . . .

alternative form[s] of security[,]” only one is being invoked

here – defendants’ financial condition. SIBIA Neurosciences,

Inc. v. Cadus Pharmaceutical Corp., 1999 WL 33554683, at *4

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(S.D.Cal. 1999). Essentially defendants contend that their

“present financial condition is such that the posting of a full

bond would impose an undue financial burden[]” on them. See id.

(internal quotation marks and citations omitted). When “the

posting of a full bond would impose an undue financial burden,

the court . . . is free to exercise a discretion to fashion some

other arrangement for substitute security through an appropriate

restraint on the judgment debtor’s financial dealings, which

would furnish equal protection to the judgment creditor.” Id.

(internal quotation marks and citations omitted). Here,

defendants are suggesting an injunction, coupled with a

$10,000.00 bond as “substitute security.”

Before deciding whether “substitute security” is proper

here, the court must resolve the issue of the applicable legal

standard. Relying upon Lopez v. Heckler, 713 F.2d 1432 (9th Cir.

1983), as mentioned earlier, FINOVA contends that the court

should employ a preliminary injunction framework to resolve the

issue of whether defendants are entitled to a stay and

alternative security. Employing that framework, FINOVA contends

that the court should deny this motion primarily because

defendants cannot show a “probability of success on the merits”

with respect to their appeal. Resp. (doc. 306) at 5. 

Defendants, on the other hand, urge the court to exercise its

“sound discretion[]” under Rule 62(d) and grant their motion. 

Reply (doc. 307) at 3 (footnote omitted). 

Faced with these same arguments, the court in Bolt v.

Merrimack Pharmaceuticals, Inc., 2005 WL 2298423 (E.D.Cal. 2005),

aff’d other grounds, 503 F.3d 913 (9th Cir. 2007), held that

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2 The court is fully cognizant that in Bolt the defendant was seeking

an unsecured stay and defendants in the present case are seeking a secured stay

(albeit nominal in the proposed form). That distinction does not render Bolt

inapplicable, however. Critical to the court’s decision to apply Rule 62(d) in

Bolt was the form of the judgment - monetary versus injunctive relief – not the

nature of the stay. And here, there is no doubt that the judgment for which a

stay is sought is monetary; hence Rule 62(d) governs.

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Lopez “may very well” be “the appropriate standard for evaluating

a motion to stay injunctive relief pending appeal[,]” but that

“test is irrelevant in a case controlled by Rule 62(d).” Id. at

*2 (footnote omitted). In so holding, the court astutely pointed

out that “[t]he Federal Rules of Civil Procedure impose distinct

standards for stays of judgments involving injunctions, see Fed.

R. Civ. P. 62©, and stays of other judgments, see Fed. R. Civ. P.

62(d).” Id. (other citation omitted). Because the judgment

which defendants sought to stay in Bolt was “more akin to a money

judgment . . . than [to] injunctive relief[,]” the court held

that in deciding whether to grant an unsecured stay, it should

look to Rule 62(d). Id. at *2 (footnote and citations omitted). 

The same is true here. Just because the alternative

security which defendants propose is in the form of injunctive

relief does not change the fact that they are seeking to stay a

monetary judgment as Rule 62(d) allows. Thus, the court declines

to apply a preliminary injunction standard, as FINOVA urges. 

Instead, the court will rely upon Rule 62(d) and the case law

construing that Rule.2

Defendants are seeking approval of alternative security

because they claim that they do not have “sufficient assets to

meet an insurance company’s bonding requirements[]” for posting a

supersedeas bond. Resp. & Cross-Mot. (doc. 302) at 3. Defendant

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Richard Arledge explains that he has “investigated the

requirements for obtaining a bond in order to supercede the . . .

Judgment.” Id., exh. 1 thereto (Aff. of Richard A. Arledge) at

2, ¶ 4. Mr. Arledge further avers that “in order to have an

insurance company post a bond in the amount of the . . .

Judgment, $1,663,809.42 plus interest, [he] [is] required to have

liquid assets totaling at least that much.” Id. Mr. Arledge

claims “not [to] have liquid assets totaling anything near” that

amount, although he does not elaborate. Id. In light of the

foregoing, Mr. Arledge further avers that he is “unable to secure

the posting of a supercedeas [sic] bond through an insurance

company.” Id. Finally, Mr. Arledge avers that he is

“financially unable to personally post a supercedeas [sic] bond

directly with the Court[,]” but again, he does not explain why. 

See id. 

In the exercise of its discretion under Fed. R. Civ. P.

62(d), the court grants defendants’ motion for alternative

security, but not in the form which they are proposing. Having

carefully considered the terms of defendants’ proposed

alternative security, i.e. injunction, and taking into account

the Arledges’ current obligations as grantors under the Deed of

Trust, the court finds the proposed injunction would not “furnish

equal protection to” FINOVA as the “judgment creditor.” See

SIBIA, 1999 WL 33554683, at *4 (internal quotation marks and

citation omitted). The posting of a $10,000.00 bond, as

defendants offer, does not convince the court otherwise,

especially given the relative magnitude of the judgment. 

To preserve the status quo, which is the goal here, the

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court will require defendants to post a bond in the amount of

$228,137.97, which, according to Mr. Arledge, was the approximate

amount of equity in the subject property as of August 1, 2007. 

See Resp. & Cross-Mot. (doc. 302), exh. 1 thereto (Aff. of

Richard A. Arledge) at 4, ¶ 12. Thus, the court grants

defendants’ motion for alternative security under Rule 62(d)

(doc. 302), but it is requiring the posting of a bond as just

described. Defendants’ motion for a partial stay of execution is

conditionally granted upon the posting of such a bond (doc. 302). 

For the reasons set forth above, the court:

(1) GRANTS “FINOVA’s Motion for Entry of Order Allowing

Registration of Judgment Under 28 U.S.C. § 1963" (doc. 297) to

the extent it is seeking to register the judgment in the Northern

District of Texas, but DENIES that motion in all other respects;

and

(2) GRANTS defendants’ “Cross-Motion to Approve Alternative

Bond” (doc. 302) and requires defendants to post a bond in the

amount of $228,137.97; and

(3) GRANTS defendants’ motion for a partial stay of

execution as to the subject property upon the CONDITION that

defendants post a bond in the amount of $228,137.97 (doc. 302). 

DATED this 26th day of March, 2008.

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Copies to all counsel of record

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