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First Credit Union v. Courtney

Court of Appeals of Arizona, Second Division, Department A

September 12, 2013

FIRST CREDIT UNION, an Arizona corporation, Plaintiff/Appellee,
CRAIG R. COURTNEY and JANINE C. COURTNEY, a married couple, Defendants/Appellants.

APPEAL FROM THE SUPERIOR COURT OF PIMA COUNTY Cause No. C20111505 Honorable Ted B. Borek, Judge Honorable Jan E. Kearney, Judge

Lewis and Roca LLP, D. Douglas Metcalf and Jeffrey L. Sklar, Attorneys for Plaintiff/Appellee

Stubbs & Schubart, P.C., G. Lawrence Schubart, Attorneys for Defendants/Appellants



¶1 Appellants Craig and Janine Courtney ("the Courtneys") appeal from the trial court's grant of partial summary judgment and from its entry of a deficiency judgment against them. On appeal, they argue the court erred by not dismissing First Credit Union's ("First Credit ") complaint as premature, by not finding that an anti-deficiency statute barred a deficiency judgment, and by entering a deficiency judgment against them when the underlying indebtedness had been extinguished. Because we find no error, we affirm.

Factual and Procedural History

¶2 The parties largely agree on the underlying facts but dispute their legal effect. In December 2006, Orange Grove I, L.L.C. ("Borrower") entered into a construction loan agreement with First Credit for the principal amount of $3.56 million. Borrower executed a promissory note and a deed of trust in First Credit's favor, secured by real property in northwest Tucson known as the Appian Estates at Casas Adobes ("Appian Estates"). First Credit also required the Courtneys to sign a "Commercial Guaranty" that made them personally liable for the "Indebtedness." The Commercial Guaranty contained numerous waivers of legal defenses to its enforcement.

¶3 In May 2009, Borrower and First Credit executed a "Change in Terms Agreement" that provided additional security for the loan, stipulated to a lower principal amount due, and granted an extension of time for payment of the loan. The Courtneys also signed the agreement. The new security consisted of a residential home on less than 2.5 acres of land, also in northwest Tucson, which the parties refer to as the "Citrine Property." The Citrine Property was subject to preexisting liens totaling about $52, 000.

¶4 Borrower subsequently defaulted on the construction loan. First Credit then requested a trustee's sale of the Appian Estates property. At the sale held on February 16, 2011, First Credit acquired the Appian Estates property for a credit bid of $2.4 million. Nine days later, on February 25, 2011, First Credit sued the Courtneys, based on the Commercial Guaranty, for a deficiency judgment on the loan. It chose to forgo suing Borrower or requesting a sale of the Citrine Property.

¶5 The trial court granted partial summary judgment to First Credit on the issue of liability and proceeded to trial on the fair market value of the Appian Estates property and the amount of any deficiency. At trial, the Courtneys raised additional defenses to liability based on A.R.S. § 33-814. First Credit responded, contending the Courtneys had misinterpreted the statute and had, in any event, waived defenses based on § 33-814.

¶6 After taking the case under advisement, the trial court found that the waivers in the guaranty precluded the Courtneys' liability defenses. The court also found that the fair market value of the property was less than its sale price, and therefore based the deficiency award on the difference between the sale price and the debt. It entered a deficiency judgment in favor of First Credit in the amount of $1, 355, 039.28 plus interest at the rate of eighteen percent per year, which was the amount agreed upon in the Change in Terms Agreement. The court also awarded First Credit attorney fees of $95, 342.25. The Courtneys appeal. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).

¶7 We will uphold the trial court if it is legally correct for any reason. Gen. Elec. Capital Corp. v. Osterkamp, 172 Ariz. 191, 193, 836 P.2d 404, 406 (App. 1992). Although the trial court decided this case based on the validity of the waivers in the Guaranty, the parties fully briefed below and here the Courtneys' proposed interpretation of § 33-814. We resolve this case by interpreting § 33-814 and the Guaranty without deciding whether, in general, a guarantor can waive protections afforded under that statute. [1]


¶8 The Courtneys initially argue First Credit brought its action for deficiency prematurely because it did not subject the Citrine Property to a trustee sale. They rely on § 33-814(B), which gives the creditor ninety days after the sale of the final piece of trust property to bring its action. The Courtneys also rely on "general legal principles" that they claim make First Credit's action for deficiency premature as merely speculative. First Credit responds that the waivers contained in the ...

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