Weitz Co. v. Heth
235 Ariz. 405
| Ariz. | 2014Background
- First National Bank loaned about $62 million to Summit at Copper Square to construct a high-rise project in Phoenix; initial $44 million deed of trust recorded in April 2005 with an eight-million-dollar modification later; a second deed of trust for about $10 million recorded February 2007; release prices for units were set in loan agreements and units released upon payment; The Weitz Company began construction in November 2005 and paid subcontractors for nearly two years; Summit sold 91 completed units starting September 2007 and releases of units reduced the secured properties; a $4 million principal amount remained unpaid by Summit, leading to a mechanics’ lien by Weitz in May 2008; foreclosure suit followed against Summit, unit owners, and lenders; trial court granted partial summary judgment favoring Weitz’s lien priority; court of appeals affirmed but on different grounds; Arizona Supreme Court granted review to resolve the priority between mechanics’ liens and equitable subrogation under ARS § 33-992(A).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does ARS § 33-992(A) preclude equitable subrogation? | Owners and Lenders: subrogation is precluded by the statute. | Weitz: statute does not preclude subrogation. | No; § 33-992(A) does not preclude equitable subrogation. |
| Can equitable subrogation occur when a single mortgage covers multiple parcels and the payor discharges only the portion allocated to a parcel with a release? | Weitz: discretionary subrogation should be barred if it would divide security. | Owners and Lenders: partial discharge is permissible when release of parcel occurs. | Yes; partial discharge with release of the parcel permits subrogation. |
| Is equitable subrogation barred when it would prejudice an intervening lienholder, and was that issue preserved for review? | Weitz contends subrogation prejudices its interests. | Owners and Lenders argue no prejudice if release occurs; Weitz waived some arguments. | Weitz waived this argument for review; remand possible for prejudice assessment. |
Key Cases Cited
- Sourcecorp, Inc. v. Norcutt, 229 Ariz. 270 (Ariz. 2012) (adopts Restatement approach to equitable subrogation and priority)
- Weitz Co. v. Heth, 233 Ariz. 442 (Ariz. App. 2013) ( Court of Appeals on subrogation and mechanics’ lien priority)
- Northwest Federal Sav. & Loan v. Tiffany Constr. Co., 158 Ariz. 100 (Ariz. 1988) (recognizes equitable subrogation in mechanics’ lien context)
- Cont’l Lighting & Contracting, Inc. v. Premier Grading & Utils., LLC, 227 Ariz. 382 (Ariz. App. 2011) (addresses viability of equitable subrogation in this context)
- Lamb Excavation, Inc. v. Chase Manhattan Mortg. Corp., 208 Ariz. 478 (Ariz. App. 2004) (recognizes equitable subrogation principles for lien priority)
- Peterman-Donnelly Eng’rs & Contractors Corp. v. First Nat’l Bank of Ariz., 2 Ariz. App. 321 (Ariz. App. 1965) (early authority on liens and subrogation)