853 F.3d 508
9th Cir.2017Background
- Larry and Kari Miller, Arizona domiciliaries, jointly owned a San Francisco co-op; under Arizona law that could be community property.
- First Community Bank (FCB), a California creditor, obtained a $6.373M federal judgment against Larry on a commercial guaranty signed only by him.
- The loan documents (note, loan agreement, guaranty) selected California law; the guaranty expressly allowed recourse against community property.
- FCB registered the Arizona judgment in the Northern District of California and recorded it in San Francisco, creating a judgment lien under California recording rules.
- Bankruptcy trustee sold the co-op; FCB sought declaration that its registered judgment lien attached to Larry’s interest in the co-op. District court held Arizona law governed and protected the Millers’ community property; Ninth Circuit reversed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether registration under 28 U.S.C. §1963 alone makes the Arizona judgment enforceable against the co-op in California | §1963 makes the registered judgment have same effect as a California judgment, creating an enforceable lien | §1963 does not override choice-of-law; situs law and choice-of-law rules still control whether property is subject to enforcement | Registration invokes California lien rules but does not eliminate choice-of-law analysis; California law governs whether property is subject to enforcement |
| Choice of law: whether Arizona community-property rule (requiring both spouses’ signature on guaranty to bind community property) or California law (treating co-op as tenancy-in-common) applies | Arizona law should control because Millers are Arizona domiciliaries and Arizona policy protects non-signing spouse | California law applies because the property situs is California, parties chose California law in contracts, and California has a strong interest in enforcing rights of its creditors | California choice-of-law rules apply; California law governs and treats the co-op as tenancy-in-common, so Larry’s share is subject to enforcement |
| Effect of parties’ contractual choice of California law on enforceability | Choice-of-law clause selecting California should not bind non-signing spouse | Choice-of-law is effective against Miller and governs the principal obligation; Restatement §187 principles support enforcing the chosen law | The parties’ selection of California law is respected; it does not bind Kari but binds Larry and permits enforcement against his tenancy-in-common interest |
| Whether Arizona’s dual-signature statute would be applied by California courts to defeat the lien | Arizona’s policy should yield because it protects spouses against undisclosed guaranties | California’s interest in creditor enforcement and the parties’ choice of California law outweigh Arizona’s policy, particularly given lack of evidence Kari lacked knowledge/consent | Even if a true conflict existed, California’s interest is more impaired if its law is subordinated; apply California law and allow enforcement against Larry’s interest |
Key Cases Cited
- United States v. Craft, 535 U.S. 274 (recognizing that tenants in common may unilaterally encumber their shares)
- Lezine v. Sec. Pac. Fin. Servs., 14 Cal. 4th 56 (California rule that all property of judgment debtor is subject to enforcement unless otherwise provided by law)
- Kearney v. Salomon Smith Barney, 39 Cal. 4th 95 (California governmental‑interest choice‑of‑law analysis framework)
- Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459 (recognition of Restatement §187 and enforceability of parties’ contractual choice of law)
- Baker v. General Motors Corp., 522 U.S. 222 (enforcement measures of sister‑state judgments remain subject to forum law)