389 P.3d 867
Ariz. Ct. App.2017Background
- In 2006 Helvetica loaned the Pasquans $3.4M secured by a deed of trust on a Paradise Valley home; in 2007 Giraudo recorded a junior deed of trust for $200,000.
- Pasquans defaulted; Helvetica obtained a foreclosure judgment and bought the property at sheriff’s sale for $400,000 (sole bidder).
- Michael Pasquan requested a fair-market-value determination under A.R.S. § 12-1566, and the superior court later found fair market value ~$2.2M, reducing Helvetica’s deficiency judgment.
- Giraudo timely filed a notice of intent to redeem and tendered a cashier’s check; Helvetica moved to quash, arguing a redeemer must pay the full value of the senior lien (not just the sale price).
- Superior court quashed Giraudo’s redemption and dismissed Helvetica’s counterclaim alleging Giraudo’s redemption filing was groundless; both sides appealed (Helvetica cross-appealed the dismissal).
- The court affirmed dismissal of the counterclaim but held the redemption price must be recalculated and remanded to determine the portion of the senior lien still enforceable when Giraudo’s redemption right ripened.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Giraudo have a statutory right to redeem as a junior lienholder? | Helvetica: deed wording (MERS as beneficiary) means Giraudo lacked redemption rights. | Giraudo: deed grants lender/creditor rights, including redemption. | Giraudo had a right to redeem; counterclaim dismissed. |
| Must a junior redeemer pay the foreclosing senior lien's full face value or only the sale price? | Helvetica: redeemer must pay the senior lien’s full amount (surviving lien) in addition to sale price. | Giraudo: redeemer need only pay sale price (plus statutory add-ons). | Redeemer must pay sale price + 8% and any portion of the senior lien that remains enforceable when the junior’s right to redeem ripens. |
| Effect of debtor’s fair-market-value determination on redemption price? | Helvetica: redemption price based on sale price and full lien survives. | Giraudo: fair-market-value reduction should reduce what redeemer must pay. | Fair-market-value proceedings reduce the deficiency; the redemption price is reduced to the extent the deficiency is reduced before the junior’s redemption right ripens. |
| Effect of anti-deficiency statutes on a junior redeemer’s obligation? | Helvetica: lien value survives sale; anti-deficiency inapplicable to redeemer. | Giraudo: anti-deficiency protections reduce the lien amount a redeemer must pay. | Anti-deficiency protection that renders portions of the debt unenforceable against the judgment debtor also reduces what the junior redeemer must pay; remand required to quantify enforceable portion. |
Key Cases Cited
- Helvetica Servicing, Inc. v. Pasquan, 229 Ariz. 493 (App. 2012) (prior appellate decision addressing portions of the foreclosure/deficiency issues)
- Gold v. Helvetica Servicing, Inc., 229 Ariz. 328 (App. 2012) (prior panel ruling on redemption/fair-market-value procedural issues)
- Kries v. Allen Carpet, Inc., 146 Ariz. 348 (1985) (discussing effect of sale and redemption on creditor’s debt and legislative purpose discouraging low bids)
- Bank One, Arizona, N.A. v. Beauvais, 188 Ariz. 245 (App. 1997) (discussing creditor’s election to foreclose judicially and remedies on the note)
- Sitton v. Deutsche Bank Nat’l Trust Co., 233 Ariz. 215 (App. 2013) (addressing material misrepresentation challenges where MERS was beneficiary)