F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

I N R E L A R R Y M I L L E R , Debtor

,

F I R S T C O M M

U N I T Y B A

N K , Plaintiff-Appellant

,

v

.

M A U R E E N G A U G H A N , Chapter 7 Trustee, Defendant-Appellee. No. 14-16854

D.C. No. 2:13-cv-02050-NVW

OPI NI ON

A ppeal from the United States District Court for the District of Ariz o na N eil V. W a k e , District J udg e, Presiding

Arg ued and Submitted October 18, 2016 San F rancisco, California

F iled March 31, 2017

B efore: A. W allace Tashima and Milan D. Smith, J r., Circuit J udg es, and Edward R. Korman, * District J udg e.

Opinion by

J udg e Korman

* T h e Ho n o rab le Ed w ard R

. Ko rm an , S en i o r D i s t r i c t J u d g e f or th e U.S. District Co u rt f

o r t h e E astern District o f New Yo rk

, sittin g b y d esig n atio n

.I N R E M I L L E R 2

SUMMARY * *

Bankruptcy

The panel reversed the district court’s reversal of the bankruptcy

court’s summary judg ment in favor of a creditor that broug ht a n a d v ersary proceeding ag ainst a chapter 7
t rustee, seeking a d eclaration that the creditor had a n enforceable judg

ment lien on real property , thereby g ranting it priority over the proceeds of the trustee’s sale of the property

.

The judg ment on w hich the lien was based arose from a g uaranty sig ned by the debtor but not by his wife. The couple

w e r e Ariz ona domiciles. The panel held that while the rea l property , a San F rancisco co-op apartme n t owned by both
spouses, was n ot community property under Ca l i f ornia law, i t w a s a tenancy -in-common. Under California law, the interests of a co

- tenant-in-common are subject to the enforcement o f a judg ment lien. A pply ing California’s choice-of-law rules, the panel held that California law, rather than A riz o na law, g overned. Therefore, the d ebtor’s interest in the co-op was subject to enforcement of the judg ment lien. The pa n el rejected the arg ument that the creditor’s
reg istratio n o f the judg ment in the Northern District o f C alifornia was sufficient, b y itself, to create an enforceab l e lien ag ainst the co-op.

** T h is su m m ary co n stitu

t es n o p art o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.I N R E M I L L E R 3

COUNSEL

J oseph E. Cotterman ( arg ued), Andante L aw Group PL L C, Scottsdale, Ariz ona, for Plaintiff-Appellant.

Steven J

. Br o w n (arg

ued), Steven J

. B rown & Associates L L C, Phoenix , Ariz ona, for Defendant-Appellee.

OP INION

KORMAN, District J udg e:

L arry and Kari Miller, both Ariz o na d omiciliaries, owned

a cooperative apartment located a t 2 170 J ackson Street in San Fr ancisco, California. T he co-op was held in each of thei r

n a mes, as husband and wife. F irst Community B an k

, a judg ment creditor of L a

rry Miller, obtained a lien ag ainst the Millers’ co-op.

Under Ariz o na law, t h e c o

- op would be treated a s community p roperty

. See A.R.S. § 25-211. I f A r iz ona law applies, F CB ’s judg ment lien could not be e n f o r c ed ag ainst the co-op, b ecause t h e j u d g ment upon which the lien was based arose from a g uaranty sig n ed by L a r r y Miller and not Kari Miller, and a g uaranty that is sig ned by only one o f two spouses is not binding on the couple’s community p rop erty under Ariz ona law.

Under California law, the c o

- op wou l d not constitute community p r o perty because it was not acquired by the Millers w hile they were domiciled i n California. See C A L

. F A M

. C O D E § 760. I nstead, it w ould constitute a tenancy

- inc ommon. See C A L

. C I V

. C O D E § 685. The application o fI N R E M I L L E R 4

California law would permit the judg ment lien to be enforced
ag ainst L arry Miller’s sole and separate interest in the co-op, because “[ t] enants in common may each unilaterally alienate their shares throug h sale or g ift or place encumbrances upon these shares.” United S t a t e s v. Craft

, 535 U .S. 274, 280 (2002) (emphasis supplied). Thus, if California law a pplies,

a judg ment ag ainst L arry Miller would be e nforceable only
ag ainst his interest in the apartment, but n o t Kari Miller’s separate interest.

F ACTUAL BACK G ROUND

Ag ainst this backdrop for the choice-of-law issue presented by this case, we turn to a more detailed discussion of the underly ing facts. L arry Miller was the Preside n t o f Miller H olding I nvestments, I n c

. , which in turn was the General Partner of both El Paseo P a r t ners, L .P. a nd El Rancho Partners, L P, both limited pa rtnerships org a niz ed under California law. F irst Community Ba n k ( “F CB ”) is a C a l i f ornia corporation, doing business in the State of California, with its principal place of business in Sonoma County
, California.

I n December 2006, F CB ex tended credit to Paseo a nd R a n cho in e x chang e f

or a B usiness L oan Ag reement, a Promissory N ote in the orig inal principal amount o f $5,744,000, and a Commercial Guaranty from Miller that personally secured repay

ment of all o blig ations owed to F CB under the Note and the L oan A gr e e m e n t

. All three of these
contracts selected California’s local law a s the g overning law. The B usiness L oan Ag reement and the Promissory Note both stated on their face that they w e re accepted by F CB in California. I ndeed, the gu a r anty g iven by Miller not only selected California as the g overning law, it also provided thatI N R E M I L L E R 5

“[ a] ny married person who sig n s this Guaranty hereby

ex p ressly ag rees that recourse u nder this Guaranty may be had ag ainst both his or her separate property and community property .” Unfortunately

, Paseo and Rancho could not live
up to their o blig ations on the loans, and Miller defaulted on the g uaranty

.

P ROCEDURAL HISTORY

On October 24, 2008, F CB sued L arry and Kari Miller in the United States District Court for the District of Ariz ona. F CB moved for summary judg ment as to liability a nd damag es on L arry Miller’s breach o f the Commerc i al Guaranty
, and also requested a “[ r] uling that Kari Miller has received notice and due p rocess in connection with this leg al action, to the ex tent that any of t h e p r o p e rty subject o r potentially subject to enforcement a n d ex ecution u pon the judg ment, whether located in the State of Ariz ona, t h e State of California or elsewhere, is asserted to belong in w h o l e o r in part to her marital community .” Com p laint a t 7, F irst Communi t

y B a n k v. Larry L. Miller and Kari Miller

, No. 2:08-cv-01952-NVW (D. Ariz

. 2009), ECF No. 1. While the

answer filed to the c o m plaint alleg e d that neither the “Miller[ s’] marital community property , nor K a ri Miller’s sole and s e parate property , is subject to the claims in [ F irst Community ] B ank’s complaint,” Answer at ¶ 4, id.

, ECF No. 11, the Millers’ “only leg al opposition” to F CB ’ s motion for
summary judg ment was that “California law requires [ F CB ] first to e x ecute on collateral securing the loan

, ” b e f ore making their motion. O rder Granting Motio n for Summary J udg ment as to L iability

at 2–3, id.

, ECF No. 23.

The district court rejected this arg u m e n t , and entered judg ment a g ainst L arry Miller for the principal amoun t o fI N R E M I L L E R 6

$5.744 million plus accrued interest a n d a ncillary d amag es, for a total judg ment o f $6.373 m i l l ion (the “Ariz o na judg ment”). J udg ment, id

, ECF No. 36. The judg ment made

no reference to the Millers’ community property , althoug h the order g r anting the motio n o b s erved, in dictum a nd without undertaking a choice-of

-l a w analy sis, that “any [liability o f the marital community ] appears to be precluded by A .R.S. § 25-214(C)(2).” O rder Granting M otion for Summary J udg m e n t as t o L iability at 3, id.

, ECF No. 23. F CB
reg istered this judg ment in the U n i t e d States District Court for the Northern District of California pursuant to 28 U .S.C. § 1963. See Certifica t i o n of a J u dg ment to be Reg istered in Another District, First Communit y B a n k v. Miller

, N o. 09- mc-80131-PJ H (N.D. Cal. 2009), ECF No. 1.

As of the time that F CB reg istered its jud gm en t i n California, L arry and Kari Miller held an ownership interest,
to w hich reference was made earlier, in real p roperty located
at 2170 J ackson Street, San F rancisco, C alifornia, which consisted of their ownership share in Twenty -One Seventy J ackson Street Corporation and a leas e h o l d in an apartment owned by the co-op. 1 On J une 23, 2009, consistent with the

manner in which a judg ment lien is obtaine d

, F CB recorded the California judg ment in the O ff i c i a l Records o f the San F rancisco County

Recorder’s Office.

1 C alif o rn ia law treats co rp o ratio n s f o rm ed “ p rim arily f

o r th e p u rp ose

o f h o ld i n g title to

. . . im pro v ed real p ro perty , an d [in w h i c h] a ll or

su b stan tially all o f th e sh areh old ers o f th e co rp o ratio n receiv e a rig h t of

ex clu siv e o ccu

p an cy in a p ortio n o f t

h e real p ro p er t y , ” a s real p ro p erty

. C A L

. C I V

. C ODE § 6 5 6 6

. “ [T ] h e c o r relativ e in terest i n th e sto ck

co o p erativ e co rp o ratio n ” is also treated as an in terest in real p ro p erty

. S ee C A L

. C I V

. C ODE § 7 8 3 .1

.I N R E M I L L E R 7

Several y ears later, L arry Mi l l er filed a petition for
reorg aniz ation under Chapter 11 o f the B ankruptcy Code in the District of A r i z ona. Miller’s proceeding was later converted to a Chapter 7 liquidation. I n the course o f administering the Miller es t ate, the Chapter 7 Trustee, Maureen Gaug han, sold the Miller s’ co-op. F CB filed an adversary proceeding seeking a declaration that it h e l d a n enforceable judgm e n t lien on the co-op, thereby g r a nting it priority over the proceeds of the sale.

The bankruptcy court held that, “[ b ] e c ause the Miller J udg ment was reg istered in California, Cal i f o r n i a l a w g o verns the enforceability of the Miller J udg ment ag ainst Debtors’ community property located in California, a nd under California law, Deb t o r s ’ community property located in California is liable for sat i s f ac tion of the Miller J udg ment.” J udg ment in F avor of F irst Community B ank at 4, F irst Community Bank v. Miller

, N o. 2:13-ap-00436-EPB (B ankr. D. Ariz

. 2013), ECF No. 25. The Miller s a ppealed to the district court.

THE DISTRICT COURT’S DECISION

The district court framed the issue presented as “whether

an A r iz ona judg ment ag ainst a husband on his sole a nd separate debt may be ex e cuted aga i n st the Ariz ona couple’s community property in Californi a

. ” In re M iller

, 517 B .R. 145, 147 (D. A riz

. 2 014). Answering this quest i o n in the
neg ative, th e district c ourt held that “the Ariz ona federal judg ment ag ainst the husband a lone, later reg iste r ed in a California federal court and recorded in California, does not l i e n their community real property in California.” I d

. Moreover, it continued th a t “[ t] his is the rule by A riz o na statute, a n d C al i fornia choice of law principles y ield to theI N R E M I L L E R 8

Ariz ona rule concerni n g Ariz ona domiciliaries.” Id. Presumably

drawing upon those principles, the d istrict court concluded that “California has no interest in ousting A riz o na marital law concerning oblig a t i o ns between husband a

nd wife

a nd of persons contracting with o ne spouse, a n d t h e California community p r o p e rty statute by its terms does not purport to do so.” Id.

W e reverse the judg

ment of the district court. W hile we

a gree that the co-op apartment does not come within t h e definition of community pro p erty , as that term is defined in Section 760 of the California F amily Code, it does come within the definition of a tenancy -in-common. See C A L

. C I V

. C O D E § 685. T h e i n terests of a co-tenant in such tenancies,

w h i ch are presumed to be held in equal shares, see Cai t o v. United California Bank

, 2 0 Cal. 3d 694, 7 05 (1978), a re subject to the enforcement of a judg ment lien. The issue, then, is whether California should y ield to A r i z o na’s community property law, and treat the Millers’ co-op a s community property n ot subject to the enforcement of a judg ment. A pply ing California’s choice-of-la w rules, we hold that California law g overns, and that the co-op would be treated a s a tenancy -in-common, as d efined in Section 685 o f the California Civil C o d e, making L a rry Miller’s interest in the co-op subject to enforcement of the judg ment lien. 2

2 T h e d istrict co u rt an d th e t r u s tee relied o n Gra p p o v. Co ven try Fin a n cia l Co rp

. , 2 3 5 Cal. A p p. 3 d 4 9 6 (1 9 9 1 ), f

o r th e p ro p o sitio n “ th at th e p ro p erty rig h ts o f a h u sb an d an d w if e are g o v ern ed b y

th e law o f th e

co u p le’ s m atrim o n ial d o m icile at th e tim e o f th e a c q u isitio n o f th e p ro p erty reg ard less o f [w

h ere] th e p ro p erty is lo cated .” Gra p p o , h o w ev er, in v o lv ed a d isp u te b etw een a h u sb an d an d w if e reg ard in g th eir resp ectiv e rig h ts u n d er f

am ily l aw in a p iece o f real pro p erty h eld in th e w if e’ s n am e,

a lth o u g h claim ed b y t

h e h u sb an d to b e co m

m u n ity p ro perty

. Aft e r

co n d u ctin g a ch o ice- o f

- law an aly s is, id

. at 5 0 5

– 0 6
, t

h e Calif o rn i a Co u rtI N R E M I L L E R 9

D ISCUSSION

I. 28 U.S. C

. § 1 9 6 3 Does Not Obviate the Need for a Choice-of-Law Analysis

F CB ’ s principal arg u ment on appeal is that the
reg istration of the judg ment a g ainst L arry Miller, pursuant to 28 U.S.C. § 1963, in the Northern District of California, was sufficient, by itself, to c re a te an enforceable lien ag ainst the
co-op. While F CB is c orrect tha t § 1963 requires the use o f California’s lien creation rules, it d oes not do away with the task of conducting a choice-of-law analy sis in the event that another state has an interest in application of its law.

A party may reg iste r a nd enforce a federal judg ment in

an o t h e r d istrict, and “[ a] judg ment so reg istered shall have the same e ffect as a judg ment of the dist r i c t co u r t of the district where reg istered a nd may be enforced in like manner.” 28 U.S.C. § 1963. “This sy stem of e n f o r c i ng f e d e ral judg ments parallels the California and Ariz o na sy stems for e nforcing sister state judg m e n t s

. ” In re Miller

, 517 B .R. at 154. Moreover, “ [ e] nforcement measures do not travel w ith the sister state judg ment as preclusive effects do; such measures remain subject to th e even-handed control o f forum law.” Baker v. Gen. Motors Corp.
, 522 U.S. 222, 235 (1998).

o f A p p eal rej ected th e h u sb an d ’ s claim

, b ased o n it s c o n clu sio n “ th at Calif o rn ia, an d n o t Nev ad a [w h ere th e pro perty w as lo cated ], is th e state

w h ich h as th e m o st sig n if

i can t relatio n sh ip to th e p arties an d issu es in th is case.” I d

. a t 5 0 6

. T h e d isp u te in th e p resen t case i n v o lv es a claim b y a Calif o rn ia- b ased th ird -p a rty cred ito r, on p ro p erty lo cated in Calif o rn ia,
g iv in g Calif

o rn ia an in t erest in th e ap p licatio n o f its law

.I N R E M I L L E R 10

Thus, under California’s enforcement p rocedures, when F CB reg istered the judg ment rendered by the federal district
court i n A r i z o na in the Northern D istrict of California, a nd f o rmally recorded such judg ment with the San F r anc i s c o County Recorder’s Office, it acquired a judg ment lien on the Millers’ co-op. See C A L

. C I V

. P R O C

. C O D E § 697.310(a). Nevertheless, pe r f

e c t i o n of a lien alone does not ensure that such a lien can be enforced ag ainst a particular piece o f property

— t he property must be “ subject to enforcement o f the money j udg ment.” See Lezine v. S ec. Pac. Fin.
, 14 Cal. 4th 56, 65 (1996). Under California law, “ [e ] x c ept as otherwi s e p r o vided by law

, all property of the judg ment debtor is subject to enforcement o f a money judg ment.” C A L

. C I V

. P R O C

. C O D E § 695.010(a) (emphasis supplied).

W h ile we are not aware of any California c a s e that construes the term “ex c e pt as otherwise provided by law” in

a comparable contex t, the most r easonabl e c onstruction
sug g ests that it refers n o t j u s t to the local law of California, but a lso to the laws of other states that may a pply as a result of the application of California’s choice-of-law rules. Our construction of the term is informed by a comparison with a similar term, which ap pears in the same Article of the California Code of Civil Procedure (“Enforcement o f Money J u d gm ents”) as does § 695.010. California Code of Civil Procedure § 697.310(a), which provides the r u l e o n the creation of judg ment l i ens, contains an ex ception for circumstances “as otherwise provided by statute ,” rather than “as otherwise provided by law .” C A L

. C I V

. P R O C

. C O D E § 697.310 ( a ) ( emphasis supplied). T h is difference sug g ests to us that w hile the California L e g i slature intended to limit the ex ception in § 697.310 ( a) to certain ex press statutory carve-outs, it intended t o make the ex ception contained in § 695.010(a) e ncompass California’s w hole law, including itsI N R E M I L L E R 11

choice-of-law rules. Cf. R E S T A T E M E N T (S E C O N D ) O F C O N F L I C T O F L A W S (1971) (“Restatement”) § 4(2) (“As used in the Restatement of this Subject, the ‘law’ of a state is that state’s local law, tog ether with its r u le of Conflict o f L aws.”).

Our discussion would end here if this case w e r e b eing litig ated in California. Some additional discussion, however, is required. W hile California’s c hoice-of-law rul es a pply here, they d o so as a result of a somewhat indirect path, which

we now trace

. “I n federal question cases with ex clusive jurisdiction in federal c ourt, such as bankruptcy

, ” i n cluding this case, we a

pply f ederal choice-of-law rules. See In re Lindsay

, 59 F .3d 942, 948 (9th Cir. 1995). F ederal choice-oflaw rules are based on the Restatement (Second) of Conflict of L aws. See In re Vortex Fishing Sys., Inc.
, 277 F .3d 1057, 1069 (9th Cir. 2 001). Rest atement § 230 provides that, “[ w] hether a lien creates an interest in land and the nature o f the interest c reated are determined by the law that would be applied by the courts of the situs.” Moreover, if the c ourt o f the situs “would have decided the particul a r question b y reference to the local law o f some other state, the forum will do likewise

. ” R estatement § 230, cmt. b. As noted previously

, California is the situs of the real p roperty at issue,

so we a pply its ch o i ce-of-law rules to resolve the conflict in this case.

II. Choice-of-Law Analysis

California applies the g overnmental in t erests mode o f analy sis to resolve choice-o f- l a w problems. See McCann v

. Foster W heeler LLC
, 48 Cal. 4 t h 68, 87 (2010). U nder this approach, we analy

z e three rel a t e d questions: (1) does

r elevant law v ary between the p otentially affec t e d jurisdictions? ; (2) I f there is a difference in law, does a trueI N R E M I L L E R 12

conflict ex ist such that “each of the states involved has a leg itimate but conflicting interest in a pply ing its own law[ ? ] ”; (3) I f there is a true conflict, “which state’s interest would be

more impaired if its policy were subordinated to the policy o f the o ther state[ ? ] ” See K e a r n e y v

. Salomon Smith Barney, Inc. , 39 Cal. 4th 95, 111–12 (2006) (citations omitted).

W e begi n our analy sis with Ariz ona law, and more specifically its community property law, and then proceed to discuss California law.

Community property res t s on a notion that h u sband and wife are a marital partnershi p ( a ‘ c o m m u n i t y ’ ) a n d s h o u l d s h a r e

acc o r d i n gly

. . . . B ecause it can e x ist only between husb a n d and wife a nd cannot be converted int o separate property without the
consent of both spouses, c o mmunity property

can be convey ed to a th i r d p e r son only as an undivided whole.

. . . Prior to the 1960s, the husband was deemed to be manag er o f the community

, b ut beg i n ning in the late 1960s, all

. . . community property states enacted
stat u tes g iving the husband and wife equal
manag em e n t p o w e r s

. T hese statutes, however, differ in many

details.

J E S S E D U K

E M I N I E R , P R

O P E R T Y 3 54–55 (2d ed. 1988).

Althoug h A riz o n a and California both have community
proper t y laws, there is one difference between the two that
g ives rise to the necessity o f a choice-of

- l a w a n aly sis. I n Ariz ona, “[ a ] ny trans a c tion of g uaranty , indemnity o r surety ship” requires t h e “joinder of both spouses”—aI N R E M I L L E R 13

requirement that has been construed to mean the sig nature o f both spouses on the g uaranty contract. Ariz

. R e v. Stat. (“A.R.S.”) § 25-214(C)(2). Thus, the statute “bars collection

o f the g uaranteed debt from the c ommunity ’s proper t y , ” unless both spouses sig n the g uaranty

. See Rackmaster Sys., Inc. v. Maderia , 219 Ariz . 60, 64 (Ct. App. 2008).

California has no such d ual-sig nature requirement with respect to e ither community property , joint prope rty , or a tenancy -in-common

. Cf. C A L

. F A M

. C O D E § 1102(a); C A L

. C I V

. P R O C

. C O D E § 695.010. Thus, a ll such pr o perty is subject to the enforcement o f a money judg ment, even where

a g uaranty u nderlying the judg ment is sig ned by only one o f
two spouses. The difference between Ariz ona and California law, however, does not compel the conclusion that there is a “true conflict,” as that term is understood in the choice-of-law
contex t. The ex istence of such a conflict turns on whether the circumstances of the case implicate the polic ies underly ing the ostensibly

conflicting laws.

Hamada v. Valley National Bank

, 27 Ari z

. A p p

. 433 (1976), contains a h elpful discussion of the history a nd
pur p o s e o f Ariz ona’s dual-sig nature requirement. I n Hamada

, the Ariz ona Court of Appeals e x plained that “[ t] he husband, as a member of the community

, has no power under the law without the knowledge and consent o f h is wife

, to use communi ty assets to g uarantee the pay ment of a debt of a strang er to the community

, it deriving no benefit therefrom.” Id. at 436 (emphasis supplied). I t continued, “[ t] his law has

now been codified in A.R.S. Sec. 2 5-214(C)(2) which requires both spouses to join i n any transaction of g uaranty , indemnity or surety shi p

. ” Id. Thus, H amada makes clear
t h a t the policy underly ing A riz ona’s dual-sig nature requirement is to ensure that a spouse who lacks knowledg eI N R E M I L L E R 14

of, and does n ot a cquiesce to, a g u aranty is not bound. See also Vance-Koepnick v

. Koepnick

, 1 97 Ariz

. 162, 163 (Ct. App. 1999) ( “The purpose of such statutes is to protect o ne spouse ag ainst oblig a ti o n s undertaken by the other spouse without the first spouse’s knowledg e and consent.”).

The absence of the sig nature of one s p o u se, however, does not necessarily indicate that the non-sig ning spouse did
not know of, or consent to, the ex ecution of the gu a r anty

. The sig nature requirement i s simply the mechanism for avoiding a dispute as to this issue. See All-W ay Leasing, Inc.

v. Kelly

, 182 Ariz

. 213, 216 (C t

. A p p

. 1984). A g uaranty without b o th required sig natures is “ not p er s e void, only voidable by the nonsig ning spouse.” Geronimo Hotel & Lodge v. Putzi
, 151 Ariz

. 477, 479 (1986). Thus, the A riz o na Court of Appeals has r ecog n iz ed that “there may be circumstances where a spouse may be estopped from disaffirming a contract.” Consol. Roofing & Supply Co., Inc. v. Grimm , 140 Ariz . 452, 458 (Ct. App. 1984). 3

The complaint filed by F CB in Ariz ona, which ended with the judg ment a g ainst L arry Mille r t h at underlies the lien at issue, put the Millers on notice that F CB planned to g o after their community

property . Nevertheless, the Millers did not

3 Oth er co m

m u n ity p ro p erty j u

risd ictio n s w ith statu tes sim ilar t o A .R.S. § 2 5

- 2 1 4 also reco g n ize th at esto p p el p rin cip les m ay ap p ly

. S ee, e.g

. , Miller v. Jo hn sto n , 2 7 0 Cal. A p p

. 2 d 28 9
, 3 0 0 n .6 (1 9 6 9 ) (h o ld in g th at a sp o u se w as b o u n d b y a co n v ey an ce of co m m u n ity p ro p erty to w

h ich sh e w as n o t a p arty , b ecau se o f h er “ k n ow led g e an d acq u iescen ce” to th e

co n v ey an ce); Co lo

. Na t ’l Ba n k o f Den ver v. Merlin o , 3 5 W ash

. A p p

. 6 1 0
, 6 1 6 (1 9 8 3) (“ A co m

m u n i ty is esto p p ed to d en

y l iab ility d u e to th e f

ailu re

o f o n e sp o u se to j o in a tran sactio n w h en o n e s p o u se p erm its th e o th er to

co n d u ct th e tran s actio n , b o th h av e a g en eral k n o w led g e o f th e tran sactio n , an d b o th are read y to accep t th e b en ef

i ts w h ich m ay co m e f ro m it.”).I N R E M I L L E R 15

defend o n the g round that Kari Miller lacked“knowledg e a nd acquiescence” sufficient to enable the Millers to r e ly on the absence of h er sig nature o n the g uaranty

. I nde e d

, as we

ex p lained earlier, rather than invoking A.R.S. § 25-21 4 i n response to FC B’ s m otion for summary judg ment in the proceeding on the g uar a n t y , their only leg al o p position was based on F CB ’s alleg ed f ailure to comply with a Cal i f ornia procedural rule. See Order Granting Motio n for Summary J udg ment as to L iability at 2–3, First Community Bank v

. Larry L. M

iller and Kari M

iller

, No. 2 :08-cv-01952-NVW (D. Ariz

. 2009), ECF No. 2 3. Moreover, altho u g h L arry Miller warranted in the g uaranty that he had the “full power,

r ig ht, and authority to enter into this g uaranty ,” the t r u s t e e failed to come forward with any evidence in t he bankruptcy
court t o s u g g est that Kari Miller did n ot either know of, o r acquiesce to, the g

uaranty

. 4

W h ile we d o n o t invoke the doctrines of estoppel o r waiver h ere, our discussion of it is intended to underscore the fact that a g uaranty , sig ned b y only one o f two spouses, does not necessarily

implicate the underly

ing policy of protecting

a spouse w ho lacks knowledg e of a g u a r anty

. I ndeed, h ere, because of the manner in w h i c h t he Millers chose to litig ate the complaint that g a ve ris e t o t h e underlying judg ment, we do not know the ex tent that the u n d er l y i ng policy interest

4 “ [T ]h e o rd in ary

ru le, b ased o n

co n sid eratio n s o f

f airn ess, d o es n o t p lace th e b u rd en u

p o n a litig an t o f estab lish i n g f acts p ecu l iarly w i t

h in th e k n o w l ed g e of h is ad v ersary .” Ca mp b ell v. Un ited S ta tes , 3 6 5 U .S. 8 5
, 9 6 (1 9 6 1); see a lso Nea ley v. Tra n sp o rta cio n Ma ritima Mexica n a , S .A.
, 6 6 2 F.2 d 1 2 7 5
, 1 2 8 0

– 8 1 ( 9 t h Cir. 1 98 0 ). T h u s, if Kari Miller h ad ch allen g ed th e v alid ity

o f th e lien p rio r to b an k

ru p tcy o n th e g ro u n d th at

s he d id n o t k

n o w o f o r acq u iesce to th e g u aran ty , th e b u rd en o f p r o o f

w o u ld h av e b een o n h er. B ecau s e th e t ru s tee is essen tially rely i n g o n h er asserted in terest, th e b u rd en in b an k ru ptcy sh o u l d lo g ically

f all to h er.I N R E M I L L E R 16

would be impaired by t he enforcement o f the judg ment ag ainst the couple’s community property

.

On the other hand, under t h e circumstances h ere, California does have a sig n ificant inte rest in effectuating its policy r eg arding enforcement of judg ments i n f a v o r o f California creditors ag a in s t real property located there, whethe r t h e property c onstitutes community property or a tenancy -in-co m m o n

. “ California, as does every state, has a substantia l i n terest in the economic health of corporations which do business within its borders. I t derives s u b s tantial sales and income tax es, as well as other revenues, directly a nd indirectly from a corporation’s activities within the state.” I n

re Air Crash D i s a s t e r Near Chi., Ill. on May 25, 1979
, 644 F .2d 594, 614 (7th Cir. 1981). Moreover, California also has an interest in fosterin g the g rowth of commercial activities that require r eady access to c redit—a p olicy t hat would be undermined by limiting the a b i l i t y of California creditors to enforce oblig ations for activities undert a ken in California and made subject to the o peration of California law by consent o f the parties. I ndeed, when L arry Miller soug ht credit in California to finance h i s b u siness venture, he took

a dvantag e of the credit environment fostered by wha t t h e district court described as California’s “g e neral poli c y favoringcreditors.” In re Miller , 517 B .R. at 149 n.1.

These c o n s i d e r a

t i o n s “ r eflect[ ] the principle articulated b y the California Supreme Court that the policy of protecting the creditors of a spouse outweig hs the policy of protecting family income.” Ordlock v. Comm’r
, 533 F .3d 1136, 1139 (9th Cir. 2008) (internal e llipses and alterations omitted). So
too does the fact that California renders the entire community property of a married cou p l e s u b ject to e nforcement of a g uaranty

— even if the g uaranty was made solely for theI N R E M I L L E R 17

benefit of a sing le spouse. S ee Lezine v. Sec. P ac. F

in. Servs., I n c

. , 1 4 Cal. 4th 56, 64 ( 1996). W hile the co-op owned b y the Millers did not come within the d efinition of community property in California

, we refer to the manner in which

c o m m unity p roperty is treated there simply to illustrate t h e streng th of California ’ s interest in the enforcement of the jud gm e n t lien ag ainst the co-op a p artment located in San F rancisco.

The policy interests d iscussed above are especially strong where, as here, the law chosen by the parties in their various
ag reements (including the g uara n ty ) includes California’s creditor-friendly int e r e s t described above. I ndeed, the Supreme C o u r t of California has adopted § 187 o f the Restatement, see Nedll o

y d Lines B.V. v. Superior Court
, 3 Cal. 4th 459, 464–65 ( 1992), which upholds “[ t] he law o f the state chosen by the parties to g overn their contractual rig hts and duties

. . . , even if the p articular issue is one which the parties could not h ave resolved by an ex plicit provision in their ag r eement directed to that issue.” Restatement § 187(2). Section 187 is a p olicy “providing for incorporation b y reference” that enables parties “to d e t e rmine the terms o f their contractual eng ag ements, ” n o t a choice-of-law rule a s such. Id. § 187, cmt. c.

The purposes u nderly ing this section “are to protect the justified ex p ectations of the parties and to make it possible fo r t h e m to foretell with accuracy w hat will be their rig hts and liabiliti e s u n d er the contract.” Id. § 187, cmt. e

. Moreover, the Restatement recog niz es that, in mul ti-state
transa c tions such as the one at issue, “letting the parties choose the law to g overn the validity of the contract and the rig hts created thereby

” is the better route to ensure “certainty and p r edictability of result

. ” Id. I ndeed, an e ven moreI N R E M I L L E R 18

specific provision, Restatement § 194
, provides that “[ t] he validity o f a contract of surety ship a nd the rig hts created thereby are determined, in the absence of an effective choiceof-law by the parties, by the law g overning the principal oblig ation which the contract of surety ship was intended to secure,” subject to ex c eptions similar to those applicable to § 187. 5 Ag ain, there was an effective choice-of-law made b y the parties. Moreover, “ the principal oblig ation t h at the
contract of surety ship was intended t o s ecure”—the Promissory Note —was g overned by “ the laws of the State o f California without reg a

rd to its conflicts of law provisions.” Those laws w ould m ake the lien enforceable a g ainst L arry Miller’s own e r s h i p interest as a co-tenant of the co-op apartment.

Neither of the ex ceptions to the incorporation b y reference rule of § 187, which a lso apply to the rule of § 194, is present here. Specifically

, this is not a case in which “the

c h o s e n state h as no substantial relationship to the parties o r the transaction,” Restatement § 1 87(2)(a), n o r would the chosen law “be contrary to a f undamen t a l policy of a state which has a materially g reater in t e r est than the chosen state in the determination of the particular issue.” Id. § 1 87(2)(b). W h ile Ariz ona may have a n interest i n t h e determination o f this issue, we cannot say that its interest is “materially g reater

. . . than [ that of] the chosen state,” particularly where the record does n ot adequately show whether or n o t Kari Miller had knowledg e of, or consented to, the g uaranty

. Nor, to use the test applied in cases of a t rue conflict, is Ariz ona’s interest more substantially impaired than that of California.

5 “ ‘ S u rety sh i p ,’ as h ere u sed

, in clu d es ‘ g u aran ty ,’ f o r

. . . th ere h as

n ev er b een g en era l a g r e e m e n t as to w h at distin ctio n , if an y , sh o u l d b e d raw n b etw een th e tw o term s .” Restatem en t § 1 9 4 , cm t. a.I N R E M I L L E R 19

W e recog niz e that L a

r ry Miller’s ag reemen t to the application of California law d oes n ot bind K a ri M iller. Nevertheless, the ag re em e n t should bind L a rry Miller, a

nd permit the enforcement of that ag reement ag ainst him as a tenant-in-common. Moreover, the enforcement o f the
ag reement in that way protects Kari Miller’s one-half interest in the property

as a co-tenant. Thus, the underly ing purpose of A.R.S. § 25-214(C)(2), w h i c h i s “to protect one spouse ag ainst oblig ations u n dertaken by the other spous e wi thout the first spouse’s knowled ge and c onsent,” see VanceKoepnick

, 197 Ariz

. at 163, is accommodated to a sig nificant deg ree, rather than substantially impaired

, b y application o f California law.

California’s interest is similarly a c commodated, because F C B, the California c r editor that w as the beneficiary of the
g uaranty , is able to recover the share of procee d s f r om the sale of the c o-op attributable to L arry M i l l e r ’s interest. A pplication of Ariz ona law would defeat that interest entirely

. Under these circumstances, e ven if there were a true conflict, we would apply California law because its “interest would be more impaired if its policy were subordinated to the policy of the other state. ” See Kearney
, 39 Cal. 4th at 112. I n sum, we a gree w ith F CB “that California [ has] a

c ompelling interest in apply ing its law,” under th e circumstances presented here.

CONCLUSION

The judg ment of the district court is REVERSED AND REMANDED for proceeding s consistent with this opinion.