Court Opinion

ID: 9930218
Source: CourtListenerOpinion
Date Created: 2024-02-06 16:06:46.833739+00
Date Added: 2024-06-11T11:08:54.111102
License: Public Domain

IN THE
            ARIZONA COURT OF APPEALS
                             DIVISION ONE

                           PNC BANK, N.A.,
                              Petitioner,

                                   v.

              THE HONORABLE CHRISTOPHER COURY,
    Judge of the SUPERIOR COURT OF THE STATE OF ARIZONA,
                  in and for the County of MARICOPA,
                             Respondent Judge,

   JENNINGS, STROUSS & SALMON, P.L.C., an Arizona professional
   limited liability company; RED CITYSCAPE DEVELOPMENT, LLC,
 a Delaware limited liability company; and RESOLUTE COMMERCIAL
  SERVICES, LLC, an Arizona limited liability company in its capacity
             as Receiver for Jennings, Strouss & Salmon, P.L.C.,
                            Real Parties in Interest.

                          No. 1 CA-SA 23-0231
                            FILED 2-6-2024

 Petition for Special Action from the Superior Court in Maricopa County
                            No. CV 2023-012249
                 The Honorable Christopher Coury, Judge

           JURISDICTION ACCEPTED; RELIEF GRANTED

                               COUNSEL

Engelman Berger, P.C., Phoenix
By Kevin M. Judiscak, Scott B. Cohen, Bradley D. Pack
Counsel for Petitioner
Burch & Cracchiolo, P.A., Phoenix
By Andrew Abraham, Ralph Harris, Daryl Manhart
Counsel for Real Party in Interest Red Cityscape Development, LLC

Sacks Tierney P.A., Scottsdale
By Bryan J. Gottfredson, Phil Rudd, Wesley Ray
Counsel for Real Party in Interest Jennings, Strouss & Salmon, P.L.C.

Allen, Jones & Giles, PLC, Phoenix
By Michael A. Jones
Counsel for Real Party in Interest Resolute Commercial Services, LLC

                                  OPINION

Presiding Judge D. Steven Williams delivered the Court’s opinion, in which
Judge Samuel A. Thumma and Judge Paul J. McMurdie joined.

W I L L I A M S, Judge:

¶1              Petitioner PNC Bank, N.A. (“PNC Bank”) seeks special action
relief regarding a landlord’s lien. More specifically, PNC Bank challenges
the superior court’s ruling that a landlord’s lien held by Red Cityscape
Development, LLC (“Red Cityscape”) under A.R.S. § 33-362 on “all
property . . . placed upon or used on” Jennings, Strouss & Salmon, P.L.C.’s
(“the Firm”) leased office space (“the Premises”) has priority over PNC
Bank’s perfected security lien on the Firm’s general intangibles, including
its accounts receivable. Because a statutory landlord’s lien attaches only to
tangible property on leased premises, it does not include accounts
receivable. Accordingly, we accept special action jurisdiction and grant
relief.

                              BACKGROUND

¶2           The parties do not dispute the relevant facts. Since 2010, the
Firm has leased the Premises from Red Cityscape under a written lease
agreement that expires by its terms in 2026. While the written lease
agreement lists various remedies in the event of the Firm’s default, it does
not provide for a contractual landlord’s lien upon the Firm’s property.

¶3           In May 2023, a few months before it ceased operating, the
Firm obtained a written line of credit (“the Loan”) from PNC Bank. The
Firm also executed a security agreement granting PNC Bank an interest in

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              PNC BANK v. HON COURY/JENNINGS et al.
                        Opinion of the Court

its property (“the Collateral”). The agreement defined the Collateral
securing the Loan as:

       [A]ll of the following property of the [Firm], whether now
       owned or hereafter acquired, created, or existing, however
       the [Firm’s] interest may arise or appear, and wherever
       located: (i) accounts . . . (xv) general intangibles, of every kind
       and description, including payment intangibles . . . (xix) any
       and all other personal property and assets of the [Firm]; and
       (xx) cash and noncash proceeds . . . of any of the foregoing
       property.

In June 2023, PNC Bank filed a Uniform Commercial Code (“UCC”)
financing statement with the Arizona Secretary of State, perfecting its
security interest in the Collateral.

¶4             Soon thereafter, the Firm defaulted on the Loan, and PNC
Bank filed a complaint against it, alleging breach of contract and requesting
the appointment of a receiver. In written correspondence to PNC Bank, Red
Cityscape asserted that it held a superior landlord’s lien on the Firm’s
accounts receivable. Upon the parties’ stipulation, the superior court
directed PNC Bank and Red Cityscape to file simultaneous briefing
concerning the “priority of their respective liens in and to the accounts
receivable of [the Firm].” Thereafter, Red Cityscape filed a creditor claim in
PNC Bank’s receivership proceeding.

¶5             After full briefing, the superior court determined that a
statutory landlord’s lien attached at the beginning of the lease term to all
property “placed upon or used on” the Premises and that the lien remained
“in effect since [that time].” Based on this determination, and citing A.R.S.
§ 33-362, the court found Red Cityscape’s landlord’s lien superior to PNC
Bank’s perfected security lien for all property “placed upon or used on” the
Premises. Applying a statutory definition for personal property, the court
concluded that while accounts receivable lack a “physical, tangible
presence” and therefore cannot be placed upon leased premises, A.R.S.
§ 33-362, they may be used on leased premises to the extent the lessee’s
“accounting functions . . . occurred at the leased premises.” Accordingly,
the court declared that Red Cityscape’s “landlord’s lien has priority to all
other liens, including PNC [Bank]’s perfected lien on general intangibles,
for the Firm’s general intangibles (including accounts receivable),”
implicitly denying PNC Bank’s motion for summary judgment on the
superiority of its lien, and the court ordered the parties to submit
“additional briefing on the factual issue of whether the Firm’s accounts

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              PNC BANK v. HON COURY/JENNINGS et al.
                        Opinion of the Court

receivable were ‘used on’ the Firm’s leased premises.” PNC Bank petitioned
this court for special action relief.

                    SPECIAL ACTION JURISDICTION

¶6             “Special action jurisdiction is discretionary, but appropriate
when no ‘equally plain, speedy, and adequate remedy by appeal’ exists.”
Gutierrez v. Fox, 242 Ariz. 259, 264, ¶ 12 (App. 2017) (quoting Ariz. R. P.
Spec. Act. 1(a)). We also have the discretion to accept special action
jurisdiction when a statute requires interpretation “and a petition presents
a purely legal issue of first impression that is of statewide importance.” Id.
at ¶ 13 (internal quotation and citation omitted).

¶7            Here, the petition for special action raises an issue of first
impression concerning the scope of a statutory landlord’s lien. And given
the apparent insufficiency of the Firm’s resources to satisfy the liens of both
PNC Bank and Red Cityscape and the prospective distribution of accounts
receivable funds based on a determination of lien priority, in the exercise of
our discretion, we accept special action jurisdiction.

                                DISCUSSION

¶8             PNC Bank argues that a statutory landlord’s lien cannot
attach to intangible property, such as accounts receivable. This special
action presents an issue of statutory interpretation, which we review de
novo. Am. C.L. Union of Ariz. v. Ariz. Dep’t of Child Safety, 251 Ariz. 458, 461,
¶ 11 (2021). In interpreting a statutory provision, “[a]bsent ambiguity or
absurdity, our inquiry begins and ends with the plain meaning of the
legislature’s chosen words, read within the overall statutory context.” Welch
v. Cochise Cnty. Bd. of Supervisors, 251 Ariz. 519, 523, ¶ 11 (2021) (internal
quotation and citation omitted). When statutes relate to the “same subject
or general purpose,” we read them together. Stambaugh v. Killian, 242 Ariz.
508, 509, ¶ 7 (2017). “A cardinal principle of statutory interpretation is to
give meaning, if possible, to every word and provision so that no word or
provision is rendered superfluous.” Nicaise v. Sundaram, 245 Ariz. 566, 568,
¶ 11 (2019). Accordingly, we “strive to construe a statute and its subsections
as a consistent and harmonious whole.” Hoffman v. Chandler, 231 Ariz. 362,
363, ¶ 7 (2013) (quotation and citation omitted).

¶9             We begin by examining A.R.S. §§ 33-361 and -362, which
outline landlord remedies in the event of a tenant default. Section 33-361
states, in relevant part:

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              PNC BANK v. HON COURY/JENNINGS et al.
                        Opinion of the Court

   A. When a tenant neglects or refuses to pay rent when due . . .,
      the landlord . . . may reenter and take possession or . . .
      commence an action for recovery of possession of the
      premises.

       ...

   D. If the tenant refuses or fails to pay rent owing and due, the
      landlord shall have a lien on and may seize as much personal
      property of the tenant located on the premises and not
      exempted by law as is necessary to secure payment of the
      rent. If the rent is not paid and satisfied within sixty days after
      seizure . . ., the landlord may sell the seized personal property[.]

(Emphasis added.) Section 33-362 provides, in relevant part:

   A. The landlord shall have a lien on all property of his tenant
      . . . placed upon or used on the leased premises, until the rent is
      paid.

       ...

   B. The landlord may seize for rent any personal property of his
      tenant found on the premises[.]

(Emphasis added.)

¶10            Given a plain reading, A.R.S. § 33-361 encompasses a
temporal component, such that a landlord’s right to “seize” a tenant’s
“personal property” does not arise until the tenant “neglects or refuses to
pay rent when due.” Section 33-362, by contrast, includes no temporal
limitation, meaning a landlord’s lien immediately “attach[es] when
[property is] placed upon the [leased] premises,” and it remains in place
“until all rent for the term has been paid.” Murphey v. Brown, 12 Ariz. 268,
274 (1909); see also Ex-Cell-O Corp. v. Lincor Properties of Ariz., 158 Ariz. 307,
309 (App. 1988) (“The general rule is that a landlord’s lien attaches at the
commencement of the term or when the property is first brought on the
leased premises.”).

¶11           To determine the scope of property subject to a statutory
landlord’s lien under A.R.S. § 33-362, the superior court first looked to
A.R.S. § 1-215(30), which defines “personal property” as “includ[ing]
money, goods, chattels, things in action and evidences of debt.” A “thing in
action” is statutorily defined elsewhere to mean something other than a

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              PNC BANK v. HON COURY/JENNINGS et al.
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good. See A.R.S. § 44-6001(3) (under a portion of Arizona’s retail installment
sales transaction statute, “’Goods’” means all tangible chattels, except motor
vehicles, money, things in action or intangible personal property other than
merchandise certificates or coupons as described in this chapter”)
(emphasis added). And under Article 9 of Arizona’s version of the UCC a
“thing in action” is included in the definition of a “general intangible.” See
A.R.S. § 47-9102(A)(42) (“’General intangible’” means any personal
property, including things in action, other than accounts, chattel paper,
commercial tort claims, deposit accounts, documents, goods, instruments,
investment property, letter-of-credit rights, letters of credit, money and oil,
gas or other minerals before extraction. General intangible includes
payment intangibles and software.”). 1 “’Things in action’” is another
expression for ‘chose in action’ which is defined as an in personam right to
recover debt, money or a thing, and is in contrast to the term ‘thing
movable’ which historically refers to chattels or goods.” Hawkland,
Uniform Commercial Code Series, § 2-105:2 (“Goods-Exclusions”)
(footnotes and citations omitted) (Oct. 2023 Update); see also Chose in Action,
Black’s Law Dictionary (11th ed. 2019) (“[A] known legal expression used
to describe all personal rights of property which can only be claimed or
enforced by action, and not by taking physical possession.”) (quoting
William R. Anson, Principles of the Law of Contract 362 n.(b) (Arthur L.
Corbin ed., 3d Am. Ed. 1919)); see also Am. C.L. Union of Ariz., 251 Ariz. at
461, ¶ 13 (“In the absence of a statutory definition, courts may reference
dictionaries.”). Applying these definitions within the context of A.R.S.
§ 33-362, we agree with the superior court that accounts receivable
constitute “things in action,” falling within the ambit of “property” for
purposes of statutory landlord’s liens.

¶12            But a landlord’s lien arising under A.R.S. § 33-362 attaches
only to property “placed upon or used on” the leased premises. Although
A.R.S. § 33-362 is remedial and should be liberally construed to effectuate
its purposes, we cannot extend the scope of a landlord’s lien arising under
A.R.S. § 33-362 beyond the statute’s express terms. Murphey, 12 Ariz. at 274
(“[C]ourts must carefully refrain from extending beyond the[] expressed
terms [] of legislative enactments whereunder liens may be created.”). The
question presented here is whether subsection A’s qualifying phrase

1      PNC Bank seemingly questions the application of A.R.S.
§ 1-215(30)’s broad definition of personal property within the context of
statutory landlord’s liens, noting that the UCC definition of “general
intangible” expressly excludes “accounts.” See A.R.S. § 47-9102(A)(42). As
PNC Bank acknowledges, however, the UCC does not govern statutory
landlord’s liens. See Ex-Cell-O Corp., 158 Ariz. at 308.

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               PNC BANK v. HON COURY/JENNINGS et al.
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“placed upon or used on,” together with other related statutory terms
within the provision, limit the scope of A.R.S. § 33-362 to physical, tangible
property.

¶13            Pointing to Ex-Cell-O Corp., 158 Ariz. at 309, which holds that
a landlord’s lien does not attach until goods are “first brought on the leased
premises,” PNC Bank argues that a landlord’s lien cannot attach to accounts
receivable because they have no physical location and therefore are never
placed upon leased premises. Red Cityscape counters that, in this case, the
Firm placed the accounts receivable on the Premises when its accounting
department (located on the Premises) created the corresponding billing
statements for the Firm’s clients and recorded related account information
within the Firm’s “books and records,” whether in “paper form” or
electronically “maintained.” But contrary to Red Cityscape’s apparent
contention, bills, invoices, and other accounting records are not,
themselves, accounts receivable; rather, they document the existence of
accounts receivable. Indeed, an account receivable can exist without
documentation, and the inverse is also true; documentation purporting to
evidence an account receivable cannot, itself, create a right to payment.

¶14             Next, citing the principle that all property must have a “situs”
for purposes of determining jurisdiction, Hook v. Hoffman, 16 Ariz. 540, 547
(1915), Red Cityscape argues that the Firm’s principal place of business and
location for its accounting department—the Premises—most logically
qualifies as the situs for its accounts receivable. See State ex rel. Napolitano v.
Gravano, 204 Ariz. 106, 117, ¶ 45 (App. 2002) (“[T]he site of intangibles is
with the owner.”) (citation omitted). But Red Cityscape has not cited any
legal authority for the proposition that the “mere fiction” of ascribing an
intangible a situs for jurisdictional purposes also applies to landlord’s liens,
and our research reveals none. See State v. W. Union Fin. Servs., 220 Ariz.
567, 574, ¶ 34 (2009) (acknowledging the historical practice of “attempt[ing]
to assign a fictional situs to intangibles”) (quotation omitted); see also Kelly
v. Bastedo, 70 Ariz. 371, 377 (1950) (explaining that the term “situs,” in
relation to intangibles, “signifies power or jurisdiction” rather than
“location”); Gen. Motors Corp. v. Ariz. Dep’t of Revenue, 189 Ariz. 86, 101-02
(App. 1996) (rejecting notion that an intangible, which “ha[s] no physical
location . . . necessarily has a single discrete situs”).

¶15           Finally, Red Cityscape argues that the Firm used its accounts
receivable on the Premises when it offered them as collateral to secure the
Loan. Viewed in isolation, the term “used” in A.R.S. § 33-362 arguably
encompasses this financial transaction. But read within the broader
statutory context, the scope of a landlord’s lien is unambiguously limited

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              PNC BANK v. HON COURY/JENNINGS et al.
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to property “located on the premises”—that which can be “found” and
“seize[d].” A.R.S. §§ 33-361(D), -362(B). In other words, A.R.S. §§ 33-361(D)
and -362(B), together, make clear that for a landlord’s lien to attach, the
property must be physically present on leased premises when put to use. See
Stambaugh, 242 Ariz. at 510, ¶ 11 (concluding an arguably ambiguous
statutory term could reasonably be given “only” one meaning when
examined in the context of all the statute’s provisions). Had the legislature
intended for a statutory landlord’s lien to attach to all tenant property,
independent of its physical presence on the leased premises, it surely would
have said so. Because accounts receivable cannot be located, found, seized,
or used on leased premises, they are not subject to a statutory landlord’s
lien.2

                              CONCLUSION

¶16           For the foregoing reasons, we accept jurisdiction and grant
relief. Both parties request an award of their attorneys’ fees under A.R.S.
§ 12-341.01, which authorizes an award of attorney’s fees to the successful
party “[i]n any contested action arising out of contract.” In our discretion,
we award PNC Bank its reasonable attorney’s fees and taxable costs upon
compliance with ARCAP 21. 3

                             AMY M. WOOD • Clerk of the Court
                             FILED: AA

2      Because Red Cityscape has no statutory landlord’s lien on the Firm’s
accounts receivable, we need not address PNC Bank’s alternative argument
asserting the superiority of its lien.

3      On January 17, 2024, this court issued an order accepting special
action jurisdiction and granting relief “insofar that the landlord’s lien does
not attach to a tenant’s receivables and intangible property.” The order
stated that a written opinion would follow. On January 31, 2024, PNC Bank
moved this court to clarify “that the time for PNC [Bank] to file a statement
of attorneys’ fees and costs . . . will be 10 days from the issuance of the
Court’s forthcoming opinion,” rather than 10 days from the January 17th
order. Because no award of attorneys’ fees was made as part of the January
17th order, we decline to issue a separate order addressing PNC Bank’s
motion for clarification.

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