MidFirst Bank v. Chase
230 Ariz. 366
| Ariz. Ct. App. | 2012Background
- MidFirst loaned Palo Desert, LLC $1,620,000 in 2007 secured by a deed of trust; Chases provided unconditional guaranties and agreed to cover enforcement costs.
- Palo Desert defaulted and MidFirst sued Palo Desert and the Chases for breach of contract and guaranty in December 2008; the principal and interest owing were approximately $1,449,330.74 and $152,243.54 respectively.
- Palo Desert filed for bankruptcy; MidFirst obtained relief and a trustee’s sale occurred in March 2010, with MidFirst credit-bidding $486,000 and purchasing the property.
- MidFirst moved for summary judgment seeking a deficiency judgment of $1,325,044.09 against the Chases; the Chases argued the property value exceeded the debt.
- The trial court granted summary judgment to MidFirst, adopting the credit bid as proof of value and awarding attorneys’ fees of $80,550.91.
- The Arizona Court of Appeals reversed and remanded, holding that (i) FMV must be determined by the court, (ii) the credit bid is inadmissible as FMV evidence, and (iii) attorneys’ fees could not be awarded until a prevailing party is determined.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a deficiency judgment can rely solely on a credit bid. | MidFirst contends the credit bid reflects the amount owed. | Chases contend FMV must be determined; credit bid alone is not FMV. | Deficiency must be based on FMV or sale price, not credit bid. |
| Whether FMV of the property must be determined before granting a deficiency judgment. | MidFirst argues sale price reflects FMV for purpose of calculation. | Chases argue FMV requires court determination as of the sale date. | FMV must be determined by the court; summary judgment based only on credit bid improper. |
| Whether the trial court’s attorneys’ fees award was proper. | MidFirst seeks fees incurred enforcing the guaranties. | Chases contend fees should not be awarded pending outcome of final prevailing party. | Reversed; no award of attorneys’ fees on remand. |
Key Cases Cited
- First Interstate Bank of Ariz., N.A. v. Tatum & Bell Ctr. Assoc., 170 Ariz. 99 (App. 1991) (deficiency statute purpose to avoid windfall at trustee’s sale)
- Dewey v. Arnold, 159 Ariz. 65 (App. 1988) (FMV cannot be based on coerced sale price; sale must reflect fair exposure)
- Honeywell Information Sys., Inc. v. Maricopa Cnty., 118 Ariz. 171 (App. 1977) (FMV defined as arms-length sale value)
- TCC Enters. v. Estate of Erny, 149 Ariz. 257 (App. 1986) (FMV described as price a willing buyer/seller would agree to)
- Palo Desert v. MidFirst (implied citation in opinion), — (App. 2011) (deficiency framework under A.R.S. § 33-814(A))