FIRST FINANCIAL BANK, N.A., as Successor in Interest to the Federal Deposit Insurance Corporation, as Receiver of Irwin Union Bank F.S.B., Plaintiff/Appellee,
THEODORE F. CLAASSEN, an unmarried man, Defendant/Appellant
Appeal from the Superior Court in Maricopa County. No. CV2010-032991. The Honorable John Rea, Judge.
For Plaintiff/Appellee: Ethan B. Minkin, Sara V. Ransom, Andrew A. Harnisch, Minkin & Harnisch, PLLC, Phoenix.
For Defendant/Appellant: David P. Brooks, Spenser W. Call, Brooks & Affiliates, PLC, Mesa.
Judge Jon W. Thompson delivered the Opinion of the Court, in which Presiding Judge Andrew W. Gould and Judge Maurice Portley joined.
Jon W. Thompson, Judge:
[¶1] This appeal follows a bench trial on a deficiency action following a judicial foreclosure. Appellant Theodore F. Claassen (Claassen) asserts that the trial court erred in determining that there was a non-purchase, non-construction, money deficiency of $1,119,676.67 under Arizona Revised Statutes (A.R.S.) § 33-729(A) (2014) which successor-lender First Financial Bank, N.A. (Bank) was entitled to pursue. We agree as to $914,403.33 of the damages and, therefore, reverse in part and remand.
FACTUAL AND PROCEDURAL HISTORY
[¶2] The real property at issue is in a planned community in Paradise Valley. In April 2008, Claassen was extended credit in an original principal amount not to exceed $5,500,000 (loan) for the construction of a single family dwelling. Of that $5,500,000 approximately $1.7 million was used to satisfy the original purchase money loan and the balance was placed into a construction loan account from which draws were to be made. The total amount Bank loaned Claassen was over $3,000,000. A promissory note was executed and the loan was secured by a deed of trust. In October 2008, the loan was modified to change the payment terms and completion date. Construction on the property was never completed. After October 2009, Claassen failed to make any payments and the Bank notified Claassen of the default in April 2010. Bank filed a complaint for breach and judicial foreclosure in December 2010 the debt at that time was at least $3,056,144.59 plus accruing interest, costs, fees, and attorneys' fees. Bank further alleged other material actions, or inactions, by Claassen that likewise put him in default including his failure to provide current financials as requested by the FDIC. Claassen in his answer asserted counterclaims against Bank for breach of contract, breach of covenant of good faith and fair dealing, and fraud.
[¶3] A trial date was set for July 2013. Claassen did not participate in the preparation of the joint pretrial statement. In the pretrial statement, Bank asserted that if the property were allowed to be sold at a trustee's sale, based on the appraisal of the fair market value of $750,000, there would be a remaining deficiency in excess of $3,000,000. The Bank sought a deficiency judgment in the amount of $1,119,676.67. Specifically:
a. $205,273.43 in interest-only payments paid out of a reserve account during the construction period;
b. $50,000 mandatory construction deposit paid to the homeowner's association before building commenced;
c. $706,270.78 of accrued interest; and
d. $158,132.46 in late fees on ...