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Rigoli v. 44 Monroe Mktg., LLC

Court of Appeals of Arizona, First Division

October 9, 2014

JOHN I. RIGOLI and DELPHINE D. RIGOLI, husband and wife; JULIAN BLUM, and FLEETA BLUM, husband and wife; DENNIS FARRELL and ALBERTA FARRELL, husband and wife; ZENEPE KOCI; PHUONG PHAN and HOANG PHAN, husband and wife; MT & TE NELSON, LTD. aka MT NELSON, LTD, an Iowa corporation; KEVIN DANEY and BARBARA DANEY, husband and wife; JOSEPH CHARTERS and MARY CHARTERS, husband and wife; KNOT OAKS HOLDING, LLC, a Delaware limited liability company; JOHN CARPENTER, Plaintiffs/ Appellees,
44 MONROE MARKETING, LLC, a Delaware limited liability company, Defendant/Appellant

Appeal from the Superior Court in Maricopa County. No. CV2010-016766. The Honorable George H. Foster, Judge.

Page 746

For Plaintiffs/Appellees: Moyes Sellers & Hendricks, Phoenix.

For Defendant/Appellant: Dickinson Wright PLLC, Phoenix.

GEMMILL, Judge. Judge John C. Gemmill delivered the opinion of the Court, in which Presiding Judge Maurice Portley and Judge Kent E. Cattani joined.


Page 747

[236 Ariz. 114] John C. Gemmill, Judge.

[¶1] This appeal arises from an unsuccessful project to construct and sell condominium units in Phoenix. Defendant/Appellant 44 Monroe Marketing, LLC (" Marketing" ) challenges the summary judgment granted to Plaintiffs/Appellees - condominium purchasers - that recognized the validity and priority of Plaintiffs' vendees' liens. Several questions are presented. Did Plaintiffs acquire equitable vendees' liens -- to secure the return of their earnest money and down payments in the event of default -- by entering into purchase contracts with the developer-seller and making initial payments on the contracts? Did these vendees' liens arise at the time of payment of money to the developer? Are the vendees' liens superior in priority to the interests of a lender who thereafter provided a construction loan to the developer? These questions are answered in the affirmative, and the trial court's judgment in favor of Plaintiffs is therefore affirmed.


[¶2] 44 Monroe, LLC (" Developer" ) wanted to build a condominium project at 44 West

Page 748

[236 Ariz. 115] Monroe Street (" the Property" ).[2] During 2005 and 2006, " Plaintiffs" entered into purchase contracts with Developer and made corresponding down payments for individual units. All Plaintiffs had entered into binding purchase contracts and paid down payments before September 2006.

[¶3] To obtain construction financing, Developer contacted Corus Bank, N.A. In April 2006, Corus Bank sent Developer a loan commitment letter that imposed a requirement that Developer obtain valid sales contracts for at least 100 units with a gross sales amount of $66,500,000 before Corus Bank would fund a construction loan. The letter also required Developer to have at least $4,406,000 of earnest money deposits from valid sales contracts on deposit with Corus Bank and available to fund project costs before Corus Bank would fund the construction loan. In addition to requiring all sales contracts to be executed on a form pre-approved by Corus Bank, the commitment letter further directed that the sales contracts inform the purchaser that earnest money deposits would be used for costs of construction.

[¶4] Corus Bank then loaned Developer $86,829,000 for construction and secured the loan with a deed of trust against the Property (" Corus Bank deed of trust" ) that was recorded on September 1, 2006.

[¶5] Developer defaulted on the construction loan in March 2009 when it failed to pay the balance at the loan's maturity date. By September 2009, Corus Bank was closed and the Federal Deposit Insurance Corporation (" FDIC" ) was appointed as receiver. The FDIC assigned the Corus Bank deed of trust and other loan documents to Corus Construction Venture, LLC (" Corus Construction" ). The assignment was recorded in December 2009. Five months later, the Property was sold at a trustee's sale at which Corus Construction was the highest bidder. Corus Construction made a credit bid toward the obligations secured by the Corus Bank deed of trust and directed that title to the Property be issued to Marketing. The trustee's deed conveying the Property to Marketing was recorded on June 1, 2010.

[¶6] Plaintiffs then filed this action to quiet title and foreclose against Marketing, asserting purchasers' (vendees') lien rights in the Property. Marketing filed an answer and counterclaim asserting that Plaintiffs' equitable lien interests were invalid because federal law controlled and Marketing, as a successor to the FDIC, was entitled to the benefit of the D'Oench, Duhme doctrine and 12 U.S.C. § 1823(e).[3]

[¶7] Marketing filed a motion for summary judgment arguing that federal law controlled and precluded Plaintiffs' interests in the Property. Plaintiffs responded that they had vested interests in the Property through vendees' liens and that the D'Oench, Duhme doctrine and 12 U.S.C. § 1823(e) did not apply to bar their claims. After briefing, the trial court denied Marketing's motion for summary judgment, finding that Plaintiffs had valid vendees' liens and federal law did not bar Plaintiffs' claims.

[¶8] In a subsequent motion for summary judgment, Plaintiffs argued that their equitable vendees' liens had priority over Marketing's interest in the Property. Plaintiffs asserted that their interests had priority over the Corus Bank deed of trust because the bank had notice, before making the construction loan, of Plaintiffs' purchase contracts and deposits on the Property. Thus, according to Plaintiffs, " the priority of the construction loan was subject to Plaintiffs' vendee liens and [was] not extinguished by [Corus Bank's] credit bid at the trustee's sale." At oral argument before the trial court, ...

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