First Credit Union v. Courtney
233 Ariz. 105
| Ariz. Ct. App. | 2013Background
- In 2006 Orange Grove I, LLC borrowed $3.56M from First Credit and granted a deed of trust on Appian Estates; the Courtneys guaranteed the Borrower’s indebtedness via a Commercial Guaranty containing broad waiver provisions.
- In 2009 the parties signed a Change in Terms that added the Citrine Property (a <2.5 acre residential parcel) as additional security and lowered the stated principal; the Courtneys signed that amendment.
- Borrower defaulted; First Credit bought Appian Estates at a trustee’s sale (credit bid $2.4M) and then sued the Courtneys for a deficiency without foreclosing on the Citrine Property.
- The trial court granted partial summary judgment on liability for the guaranty, found fair market value below sale price, entered a deficiency judgment and awarded contractual interest and attorney fees.
- On appeal the Courtneys argued (1) the deficiency action was premature because First Credit did not foreclose on the Citrine Property, (2) the anti-deficiency statute barred recovery, and (3) the borrower’s indebtedness was extinguished under A.R.S. § 33-814, discharging the guarantors. The Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument (First Credit) | Defendant's Argument (Courtneys) | Held |
|---|---|---|---|
| Prematurity of action for deficiency | Guaranty waives requirement to exhaust collateral; § 33-814(C) allows suit without trustee’s sale | Action premature because creditor failed to sell Citrine Property and § 33-814(B) starts 90-day clock after sale of last trust property | First Credit’s suit was not premature; § 33-814(C) permits suit without foreclosing and guaranty waived exhaustion rights |
| Applicability of anti-deficiency protection (§ 33-814(G)) | Statute does not apply because Citrine Property was never sold at trustee’s sale and Appian Estates is commercial | § 33-814(G) bars any deficiency recovery for qualifying residential parcels | § 33-814(G) does not apply here because it applies only when the qualifying residential property is sold in a trustee’s sale (or when loan is purchase-money) |
| Whether borrower’s indebtedness was extinguished under § 33-814(D) so guarantors discharged | Action against guarantors timely under § 33-814(A); guaranty waived defenses; § 33-814(D) is a time limitation, not a bar requiring suit against borrower | Because creditor did not sue Borrower within 90 days, Borrower’s debt was extinguished and guarantors discharged | § 33-814(D) does not require a suit against Borrower; an action against guarantors within the statutory period preserves recovery; guaranty waivers prevail |
| Attorney fees on appeal | Seeks fees under guaranty and rules | Courtneys sought fees on appeal | Court awards First Credit appellate fees under the guaranty; Courtneys’ fee request denied |
Key Cases Cited
- Gen. Elec. Capital Corp. v. Osterkamp, 172 Ariz. 191 (App. 1992) (appellate review principle — affirm if correct for any reason)
- Tenet Healthsystem TGH, Inc. v. Silver, 203 Ariz. 217 (App. 2002) (contract interpretation; ambiguities construed for guarantor)
- Data Sales Co. v. Diamond Z Mfg., 205 Ariz. 594 (App. 2003) (suretyship defenses apply to guarantors; such defenses can be waived)
- Provident Nat’l Assur. Co. v. Sbrocca, 180 Ariz. 464 (App. 1994) (guaranty enforcement and interpretation principles)
- Baker v. Gardner, 160 Ariz. 98 (1989) (scope of anti-deficiency statutes; creditor may sue on note except where statute applies)
- Mid Kansas Fed. Sav. & Loan Ass’n v. Dynamic Dev. Corp., 167 Ariz. 122 (App. 1991) (anti-deficiency statute only bars deficiency where it applies; otherwise lender may waive security and sue on note)