Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Sunrise Bank of Arizona v. Building Development System, L.P.

Court of Appeals of Arizona, First Division

December 26, 2013

SUNRISE BANK OF ARIZONA, Plaintiff/Counterdefendant/Appellee,
BUILDING DEVELOPMENT SYSTEM, L.P., an Arizona limited partnership; LANCE HERNDON and DONNIS J. HERNDON, individually and as husband and wife; RAY PALMER; ERIC NICHOLS and DANIELLE NICHOLS, individually and as husband and wife; FREDERICK G. JAMES and MARGARET L. JAMES, individually and as husband and wife; THOMAS R. FORD and TARA-LYN FORD, individually and as husband and wife, Defendants/Counterclaimants/Appellants.

Not for Publication – Rule 111(c), Rules of the Arizona Supreme Court

Appeal from the Superior Court in Maricopa County No. CV2008-024712 The Honorable John R. Ditsworth, Judge.


Jaburg & Wilk, PC, Phoenix By David L. Allen, Laura Rogal, Counsel for Plaintiff/Counterdefendant/Appellee.

The McBride Law Firm, PC, Scottsdale By Melanie G. McBride, Counsel for Defendants/Counterclaimants/Appellants.

Acting Presiding Judge Patricia K. Norris delivered the decision of the Court, in which Judge Kenton D. Jones and Chief Judge Diane M. Johnsen joined.


NORRIS, Judge.

¶1 This appeal arises out of an action for breach of contract and judicial foreclosure brought by Sunrise Bank of Arizona against its borrower Building Development System, L.P. and that company's partners and their spouses as personal guarantors (collectively, "BDS"). As we discuss, each side accused the other of nonperformance of their obligations under a series of agreements consisting of a construction loan agreement, promissory note, deed of trust, and commercial guaranties. After a 13-day bench trial, the superior court found in favor of Sunrise and rejected, as relevant here, BDS's arguments that Sunrise had anticipatorily repudiated the loan by wrongfully refusing to fund. On appeal, BDS argues the superior court "rewrote the terms" of the loan and ignored controlling precedent by ruling in favor of Sunrise. We disagree and affirm.


¶2 In January 2008, the parties entered into a construction loan agreement ("loan agreement") whereby Sunrise agreed to loan BDS $1, 774, 000 ("loan amount") for it to use to construct a commercial office building ("the project") with the loan proceeds to be disbursed based on draw requests submitted by BDS.

¶3 The loan, secured by a deed of trust on the property, closed on January 8, 2008. Shortly thereafter, on January 18, 2008, Sunrise asked BDS for an Assignment of Construction Contracts ("contractor assignment"). At trial, both parties presented evidence the contractor assignment is a common document in construction lending. If the borrower defaults, the contractor assignment allows the lender to require a borrower's general contractor to complete a project. Accordingly, Sunrise requested BDS to have its general contractor execute the assignment.

¶4 Sunrise funded early draw requests totaling $630, 978.16, which included the land payoff of $570, 000, during the month of January without delay. Sunrise's loan officer prepared a draw schedule using preliminary estimates for the project's cost provided to him by BDS. A draw schedule breaks up actual construction costs and other costs associated with a project and is an internal document a lender follows for funding as a project progresses.

¶5 On February 22, 2008, the loan officer met with Lance Herndon and other members of BDS.[1] During that meeting, the parties discussed three items "missing" from the draw schedule: the contractor's fee, foreman's fee, and sales tax. These three items totaled $160, 000. Although recollections from and testimony about the meeting differ, the loan officer testified at trial that before the loan closed, Herndon had told him the contractor's fee and foreman's fee could be deferred until later in the project. The loan officer admitted, however, that he inadvertently left off the sales tax when he prepared the draw schedule.

¶6 After the meeting, the loan officer revised the draw schedule to include the three items missing and made other adjustments.[2] The cost of constructing the project, as shown on the revised draw schedule, totaled $1, 869, 131. Shortly thereafter, Thomas Ford, another BDS partner, made minor changes to the draw schedule and returned it to the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.