Pi'ikea, LLC v. Williamson
234 Ariz. 284
| Ariz. Ct. App. | 2014Background
- In 2004 TBM Equities, LLC borrowed $5,922,000 secured by a deed of trust on a Tucson apartment property; William and Marianne Williamson (the Williamsons) executed a Continuing Guaranty (the Guaranty) for the debt.
- The note was amended and restated; payment ceased after October 1, 2008 and the note went into default at maturity December 31, 2008.
- The note passed by assignment to Pi’Ikea, LLC, which sued the Williamsons in 2012 under their guaranty and sought summary judgment for approximately $9.17 million plus fees and interest.
- The Williamsons argued Pi’Ikea (and predecessors) had a duty to mitigate damages (e.g., by foreclosing in 2008 when the property was reportedly worth more than the loan) and that failure to mitigate allowed the debt to balloon.
- The Guaranty contained explicit waiver language: the guarantors waived A.R.S. § 47-3605 and "any similar or analogous other statutory or common law" protections and agreed lender had no obligation to proceed against collateral or exhaust remedies before pursuing guarantors.
- The trial court granted Pi’Ikea summary judgment; the Court of Appeals affirmed, holding the guaranty’s waiver bars the mitigation/impairment-of-collateral defense.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pi’Ikea had a duty to mitigate damages or avoid impairing collateral after borrower default | Pi’Ikea: guaranty language is clear; no mitigation duty and waiver enforceable | Williamsons: bank/prospective lender should have foreclosed or otherwise protected collateral in 2008 to avoid increasing the guaranty exposure | Waiver in guaranty (explicitly waiving §47-3605 and similar common-law defenses and disclaiming any obligation to proceed against collateral) bars mitigation/impairment defense; summary judgment affirmed |
| Whether common-law suretyship defenses (impairment of collateral) apply despite UCC inapplicability to the guaranty | Pi’Ikea: guaranty waived both statutory and common-law defenses; Restatement supports waiver | Williamsons: common-law mitigation principle requires reasonable steps to limit damages | Court: common-law rules parallel UCC protections but were expressly waived by the guaranty; waiver enforceable |
| Whether the guaranty’s terms are ambiguous and should be construed for guarantors | Pi’Ikea: terms are clear and unambiguous | Williamsons: ambiguities should be construed in their favor to preserve mitigation defense | Court: language is unambiguous and effectuate d as written — waiver effective |
| Entitlement to attorney fees on appeal | Pi’Ikea: contract provides for fees when lender brings judicial proceeding to enforce guaranty | Williamsons: opposed | Court: Pi’Ikea prevailed and is entitled to reasonable appellate fees per guaranty; award conditioned on compliance with appellate rules |
Key Cases Cited
- Warne Inv., Ltd. v. Higgins, 219 Ariz. 186 (discussing summary-judgment review standard and viewing evidence in favor of nonmoving party)
- Tenet Healthsystem TGH, Inc. v. Silver, 203 Ariz. 217 (contract interpretation principles; guaranty scope governed by its terms)
- Data Sales Co. v. Diamond Z Mfg., 205 Ariz. 594 (suretyship defenses can be waived by contract)
- First Credit Union v. Courtney, 233 Ariz. 105 (recognizing availability of surety defenses and construing guaranties)
- Universal Inv. Co. v. Sahara Motor Inn, Inc., 127 Ariz. 213 (discussing mitigation principle relative to absolute promises to pay)
- Austad v. United States, 386 F.2d 147 (example where contractual waiver of foreclosure timing/discretion precluded mitigation claim)