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The Weitz Co. L.L.C. v. Heth

Court of Appeals of Arizona, First Division

November 26, 2013

THE WEITZ COMPANY L.L.C., an Iowa limited liability company, Plaintiff/Appellee,
v.
NICHOLAS HETH, a single man; BARRY SCHWARTZ, a married man; JEFFREY TEMPLIN, a married man; KEN PERLMUTTER, a married man; SHELLY MALKIN, a married woman; JODY STORM GALE and CHRISTIE BAUER GALE, husband and wife; JEFF TEMPLIN and TERRI TEMPLIN, husband and wife; GREGG TEMPLIN and SUZANNE W. TEMPLIN, husband and wife; MICHAEL J. HAASCH and LAURA S. HAASCH, husband and wife; JEFFREY M. LEZAK and CAROL E. LEZAK, husband and wife; RICHARD H. FOX, a married man; BRAD BLOCK, an unmarried man; GREGORIO MEZA AYON, a married man; SIGLIFREDO LOPEZ, a married man; EDWARD C. RAMOS and TAMARA C. RAMOS, husband and wife; SCOTT ROSE and NICOLLE ROSE, husband and wife; SCOTT MATTHEW ROSE and NICOLLE CLAUDINE ROSE FAMILY TRUST DATED AUGUST 28, 2008; DARRYL GOLDSTEIN, an unmarried man; KEN ADELSON; CARY E. FRUMES, an unmarried man; ARI SILVASTI, a married man; BEN YORK III, an unmarried man; CHICAGO SUMMIT, LLC; FRANC W. BRODAR and JENNIFER A. BRODAR, husband and wife; ROSS KERIEVSKY, an unmarried man; MICHAEL SCHWARTZ, a married man; WILLIAM SCHWARTZ, a married man; MICHAEL CASTILLO, a married man; H. DENNIS PETERSON and CAROL A. PETERSON, TRUSTEES OF THE PETERSON LIVING TRUST DATED MARCH 6, 2006; PATRICK ESTFAN and SALLY ESTFAN, husband and wife; TINA ROSPOND, a single woman; L. KENNETH BROOKS, an unmarried man; PATRICK H. WALSH and MELISSA R. WALSH, husband and wife; AFARIN RADJAEI-BOKHARAI, an unmarried person; MICHAEL DAVEY, a married man; JEFFREY A. HART, an unmarried man; VINCENZO COSTA, an unmarried man; JOSHUA POPE, an unmarried man; CARL L. FAIRCLOTH and PATRICIA S. FAIRCLOTH, husband and wife; ART GARTENBERG, an unmarried man; MARK F. RUDINSKY and CHRISTINA J. RUDINSKY, husband and wife; PITRE PROPERTIES LIMITED PARTNERSHIP, an Arizona limited liability partnership; ON-CALL SOLUTIONS, LLC, an Arizona limited liability company; MICHAEL L. MCCARTNEY, trustee of the MICHAEL L. MCCARTNEY REVOCABLE LIVING TRUST DATED DECEMBER 27, 2005; DAVID HOCHBERG and ELYSE HOCHBERG, husband and wife; JORDAN GREEN and STEPHANIE GREEN, husband and wife; LAWRENCE R. KUSHNER and EILEEN S. KUSHNER, husband and wife; DEBRA J. GOODWIN, a single woman; LYNDA L. GIBSON, an unmarried woman; TING AND LING DEVELOPMENT GROUP, LLC, an Arizona limited liability company; FIRST NATIONAL BANK OF ARIZONA, a national banking association; ING BANK, FSB, a federal savings bank; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., a Delaware corporation; WASHINGTON MUTUAL BANK, F.A., a federal savings bank; WELLS FARGO BANK, N.A., a national association; COLE TAYLOR BANK, a foreign corporation; BANK OF AMERICA, N.A., a national banking association; M&I BANK, FSB, a federal savings bank; NATIONAL CITY MORTGAGE, a division of NATIONAL CITY BANK, a national banking association; ABN AMRO MORTGAGE GROUP, INC., a Delaware corporation; HARRIS BANK, N.A., a national banking association; CITIMORTGAGE, INC., a New York corporation; PERL MORTGAGE, INC., an Illinois corporation; CHARLES SCHWAB BANK, N.A., a national banking association; COUNTRYWIDE BANK, FSB, a federal savings bank; FIRST HORIZON HOME LOANS, a division of FIRST TENNESSEE BANK, a national banking association; PREMIER FINANCIAL SERVICES, INC., an Arizona corporation, Defendants/Appellants.

Appeal from the Superior Court in Maricopa County No. CV2008-028378 The Honorable John A. Buttrick, Judge, Retired

Holden Willits PLC, Phoenix By Michael J. Holden and Barry A. Willits Jonathan Sternberg, Attorney, P.C., Kansas City, MO By Jonathan Sternberg, Pro Hac Vice Co-Counsel for Plaintiff/Appellee

Gust Rosenfeld P.L.C., Phoenix By Charles W. Wirken and Scott A. Malm Counsel for Defendants/Appellants

Dickinson Wright/Mariscal Weeks, PLLC, Phoenix By Michael R. Scheurich Counsel for Amicus Curiae Land Title Association of Arizona

Jennings, Haug & Cunningham, LLP, Phoenix By James L. Csontos Counsel for Amicus Curiae Arizona Builders' Alliance

Presiding Judge Michael J. Brown delivered the Opinion of the Court, in which Judge Andrew W. Gould and Judge Donn Kessler joined.

OPINION

BROWN, Judge

¶1 The question we address is whether Arizona's statutory provision governing the priority of mechanics' liens (Arizona Revised Statutes ("A.R.S.") section 33-992(A)) permits a court to shift lien priorities by applying the doctrine of equitable subrogation. Because § 33-992(A) expressly provides that mechanics' liens have priority over all subsequent encumbrances (subject to a narrow exception not applicable here), we hold that allowing a subsequent lienholder to equitably subrogate its loan to a position ahead of a mechanic's lien would contravene the plain statutory requirement. We therefore affirm the superior court's grant of summary judgment.

BACKGROUND

¶2 First National Bank of Arizona provided a $44, 000, 000 construction loan to Summit at Copper Square, LLC ("Summit") to build a 165-unit mixed-use commercial and residential condominium project in downtown Phoenix. The bank recorded a deed of trust on the project to secure Summit's payment obligations under the construction loan, which was later increased by approximately $10, 000, 000.

¶3 Summit contracted with The Weitz Company ("Weitz") to serve as the general contractor on the project. Construction commenced, and on January 18, 2006, Weitz served a preliminary twenty-day mechanic's lien notice. See A.R.S. § 33-992.01. The project continued according to the parties' agreement, with Summit paying Weitz on a monthly basis in response to Weitz's payment applications. As the project neared completion, however, Summit was unable to pay about $4, 000, 000 of Weitz's billed work.

¶4 Summit started selling individual condominium units in September 2007, before construction was completed. Ultimately, as relevant here, 92 units were sold. Most of the purchases were financed by various commercial lenders, but some units were sold for cash. Proceeds from the sales were applied to pay off allocated portions of the construction loan, but the outstanding balance of Weitz's construction contract remained unpaid.

¶5 Weitz recorded a mechanic's lien against the project in May 2008. In November, Weitz filed a complaint seeking to foreclose its lien against, inter alia, the purchasers of the units and the lenders who provided the funds used to finance the purchases (collectively "Lenders"). Lenders moved for partial summary judgment, arguing they were equitably subrogated to First National Bank's position, and thus had priority over Weitz's lien. In response, Weitz also sought partial summary judgment, asserting that its lien had priority under A.R.S. § 33-992(A) over all other liens or encumbrances attaching after commencement of the project.

¶6 Following oral argument on the motions, the superior court ruled in favor of Weitz, finding it would be improper to apply equitable subrogation because the construction loan had not been fully discharged. The court therefore concluded Weitz's lien was superior to Lenders' liens under A.R.S. ยง 33-992(A), which specifies the priority afforded to "mechanics' and materialmen's liens" ("mechanics' liens"). The parties agreed to a stipulated judgment lien amount of $2, 123, 000, subject to Lenders' right to appeal the ...


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