The bank loaned $10 million to the business under a loan agreement. The loan was secured by the business’s assets under a security agreement. The loan agreement required full repayment within five years or upon an uncured “event of default.” Further, the two founders (the “guarantors”) signed a guaranty agreement, in which they guaranteed full payment of the amount due under the loan agreement. When the business later filed for bankruptcy, the guarantors became liable under the personal guaranty agreements. The creditor sued the guarantors in state court to recover the amount due, while also filing a claim against the business’s assets in bankruptcy. In the state action, the creditor applied for prejudgment remedies of attachment and garnishment and sought discovery of the guarantors’ financial condition. The superior court granted the application, allowing attachment, garnishment, and prejudgment discovery. The guarantors sought review by special action.
In Yauck v. W. Town Bank & Trust, 568 P.3d 386 (Ariz. Ct. App. 2025), the court accepted special action jurisdiction and vacated the trial court’s orders. The court exercised jurisdiction because the trial court’s prejudgment orders risked irreparable harm by depriving the guarantors of property without due process. The court held that the application did not satisfy Ariz. Rev. Stat. § 12-1522, which governs attachments, because the supporting affidavit was conclusory and lacked facts based on personal knowledge that showed the debt was unsecured, as required for attachment. The application also failed to comply with Ariz. Rev. Stat. §§ 12-1572 and 12-2410 governing garnishments, because it did not identify any garnishee holding non-exempt property, thereby depriving the guarantors of an opportunity to claim exemptions. Finally, the court clarified that Rule 26 discovery is distinct from provisional remedies under Rules 64 and 69 and that seeking a provisional remedy does not, by itself, authorize discovery into a party’s finances. Accordingly, the court held that prejudgment discovery into the guarantors’ financial condition was improper because such discovery is permitted only in narrow circumstances in which financial information is relevant to a claim or defense. Here, the request was based solely on the contention that the guarantors owed an unsecured debt, which was insufficient to justify financial discovery.
By Shannon Vazquez [email protected]
Edited By Jace Brown [email protected]
Edited By Callighan Ard [email protected]
Edited By Hayden Mariott [email protected]