from the Superior Court in Maricopa County. Nos.
CV2008-050966, CV2009-029276 (Consolidated). The Honorable
John R. Hannah, Jr., Judge.
Buchalter, Scottsdale, By Roger W. Hall, Jason E. Goldstein,
Pro Hac Vice, Counsel for Plaintiff/Appellant.
Kloberdanz, PLC, Scottsdale, By Daniel L. Kloberdanz, Counsel
Maria Elena Cruz delivered the opinion of the Court, in which
Presiding Judge Diane M. Johnsen and Judge Randall M. Howe
Helvetica Servicing, Inc. (" Helvetica" ) appeals
the deficiency judgment the superior court entered in its
favor against Michael S. Pasquan (" Pasquan" ).
Helvetica argues the court erred in deciding that most of the
debt remaining after a judicial foreclosure was a
construction loan entitled to anti-deficiency protection
under Arizona Revised Statutes (" A.R.S." ) section
33-729(A). Its appeal raises issues that demand clarification
by the legislature.
We held in Helvetica Servicing, Inc. v. Pasquan, 229
Ariz. 493, 501, ¶ 32, 277 P.3d 198 (App. 2012) (hereinafter
Helvetica I ), that the anti-deficiency protections
of A.R.S. § 33-729(A) apply to a loan " used to
construct a residence" if a dwelling meets the size and
use requirements of the statute and the deed of trust secures
both the land and the dwelling. We also recognized that
" [i]n some cases, it will be a question of fact whether
a particular transaction is a construction loan or some
different type of obligation— e.g., a home improvement
loan." Id. at 499 n.6, ¶ 25. Here, the evidence
in the record shows that, aside from the $600,000 original
purchase money loan that was later refinanced as part of a
loan from Helvetica, Pasquan used the bulk of the loan
proceeds for the purpose of home improvement, not home
construction. Therefore, the anti-deficiency protections of
A.R.S. § 33-729(A) do not extend to the funds Pasquan
borrowed beyond the refinancing of the original purchase
money obligation. Accordingly, we vacate the judgment and
remand for further proceedings.
FACTS AND PROCEDURAL HISTORY
This is the fourth appeal stemming from a 2009 judicial
foreclosure sale of Pasquan's home. Helvetica I, 229
Ariz. at 495 ; Gold v. Helvetica Servicing,
Inc., 229 Ariz. 328, 275 P.3d 627 (App. 2012);
Helvetica Servicing, Inc. v. Giraudo, 241 Ariz. 498,
389 P.3d 867 (App. 2017). In May 2003, Michael and Kelly
Pasquan (the " Pasquans" ) purchased a 4,000
square-foot home in Paradise Valley (the "
Property" ) with a $600,000 loan from Hamilton Bank
(" Hamilton loan" ) and a cash payment. Over the
next several years, the Pasquans substantially renovated the
Property, expanding the home by 7,000 square feet. In
2004-2005, the Pasquans borrowed approximately $2.1 million
from Desert Hills Bank (" Desert Hills loan" ). The
Pasquans used a portion of the Desert Hills loan to refinance
the Hamilton loan, then applied the remainder of the proceeds
toward the renovation/expansion project. They also borrowed
$225,000 from Pasquan's father and put that money toward
the expansion and charged another $140,000 on credit cards
for the project.
In September 2006, the Pasquans borrowed $3.4 million from
Helvetica, secured by a deed of trust on the Property. The
Pasquans used the proceeds of the Helvetica loan to pay off
the Desert Hills loan, the loan from Pasquan's father,
the credit card debt, loan fees, and interest. They were left
with $357,172.72 in cash from the loan proceeds, from which
they made interest payments to Helvetica and paid for
landscaping, maintenance, taxes, utilities, and marketing.
The Pasquans defaulted on the Helvetica loan, and Helvetica
sued to judicially foreclose. On April 9, 2009, Helvetica