BMO Harris Bank, N.A. v. Wildwood Creek Ranch, LLC
236 Ariz. 363
| Ariz. | 2015Background
- In 2006 Wildwood Creek Ranch, LLC (owned by Shaun and Kristina Rudgear) borrowed $260,200 to fund construction of a home on a 2.26-acre vacant lot; the loan was secured by a deed of trust and personally guaranteed by the Rudgears.
- Construction never began; the lot remained undeveloped. Wildwood renewed the note in 2009 and defaulted in 2011. A trustee’s sale produced a $31,100 third‑party bid.
- BMO Harris (successor to the original lender) sued Wildwood and the Rudgears for a deficiency after the trustee’s sale.
- The Rudgears argued they intended the completed home to be their primary residence and thus were protected from deficiency under A.R.S. § 33-814(G) and by the appellate decision in M&I Marshall & Ilsley Bank v. Mueller.
- The superior court granted summary judgment for the Rudgears; the court of appeals reversed, holding vacant land is not “utilized for” a dwelling regardless of intent. The Arizona Supreme Court granted review.
- The Supreme Court reversed the superior court, held the anti‑deficiency statute does not protect owners of vacant lots (a completed residential structure is required), and overruled Mueller to the extent it conflicted.
Issues
| Issue | Plaintiff's Argument (BMO) | Defendant's Argument (Rudgear/Wildwood) | Held |
|---|---|---|---|
| Whether A.R.S. § 33-814(G) bars a deficiency judgment on undeveloped vacant trust property | § 33-814(G) does not apply because no dwelling was completed or utilized on the property | § 33-814(G) should bar deficiency because borrowers intended to build and occupy a residence | Held: No. The statute requires that a residential structure be completed and the property be utilized for a dwelling; vacant land is not covered |
| Whether borrower intent to construct and occupy a future dwelling suffices to trigger § 33-814(G) protection | Intent alone is insufficient; the statute’s present‑tense “is … utilized for” requires a completed dwelling | Intent to occupy upon completion should suffice (as applied in Mueller to partially completed homes) | Held: Intent alone does not suffice; property must contain a completed dwelling. Mueller is overruled insofar as it conflicts with this rule |
Key Cases Cited
- Mid Kan. Fed. Sav. & Loan Ass’n of Wichita v. Dynamic Dev. Corp., 167 Ariz. 122 (explains when property is “utilized for” a dwelling and distinguishes intended future use from present utilization)
- M & I Marshall & Ilsley Bank v. Mueller, 228 Ariz. 478 (appellate decision applying anti‑deficiency protection to a partially completed home; overruled insofar as inconsistent with this opinion)
- Northern Ariz. Props. v. Pinetop Props. Grp., 151 Ariz. 9 (supports that property can be “utilized for” a dwelling even if not owner’s primary residence)
- Smith v. Second Church of Christ, Scientist, 87 Ariz. 400 (defines a dwelling as a building suitable for residential purposes)