Opinion
No. 1 CA-CV 14-0042
11-25-2014
BANNER FEDERAL CREDIT UNION, Plaintiff/Appellant, v. CHRIS MCBANE, Defendant/Appellee.
COUNSEL Skarecky & Holder, PA, Phoenix By William W. Holder Counsel for Plaintiff/Appellant Lawrence Law Offices, PLLC, Scottsdale By Donald J. Lawrence, Jr. Counsel for Defendant/Appellee
NOTICE: NOT FOR PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.
Appeal from the Superior Court in Maricopa County
No. CV2013-002159
The Honorable Sally Schneider Duncan, Judge
AFFIRMED IN PART; REVERSED IN PART; REMANDED
COUNSEL Skarecky & Holder, PA, Phoenix
By William W. Holder
Counsel for Plaintiff/Appellant
Lawrence Law Offices, PLLC, Scottsdale
By Donald J. Lawrence, Jr.
Counsel for Defendant/Appellee
MEMORANDUM DECISION
Presiding Judge Margaret H. Downie delivered the decision of the Court, in which Judge Andrew W. Gould and Judge Samuel A. Thumma joined. DOWNIE, Judge:
¶1 Banner Federal Credit Union ("Banner") appeals from the superior court's determination that Chris McBane is entitled to anti-deficiency protection for sums characterized as purchase money. For the following reasons, we affirm in part and reverse and remand in part.
FACTS AND PROCEDURAL HISTORY
¶2 McBane bought a house ("the Property") in 2004 and partially funded the purchase with a $28,400 loan from Chase Manhattan Bank ("Chase"). The Chase loan was secured by a deed of trust on the Property.
¶3 In 2005, McBane borrowed $50,000 from Banner. The Banner loan paid the balance due on the Chase loan — $28,342.51. McBane used $7000 of the remaining loan proceeds to make repairs and improvements to the Property.
¶4 McBane borrowed an additional $91,000 from Banner in 2007. This 2007 Banner loan paid the balance due on the 2005 Banner loan — $48,903.69. McBane used $7500 of the remaining loan proceeds to make repairs and improvements to the Property.
¶5 In 2012, McBane defaulted on the 2007 Banner loan, leaving a principal balance due of $64,070.70. Banner did not notice a trustee's sale. Instead, it sued McBane for breach of contract, seeking to recover the principal balance plus interest, late charges, and attorneys' fees. In his answer, McBane asserted Banner was "barred from recovery of any alleged deficiency pursuant to Arizona Revised Statute § 33-814(G)."
¶6 The parties filed cross-motions for summary judgment. McBane contended he was entitled to anti-deficiency protection in the sum of $28,342.51 because that amount constituted purchase money traceable to his acquisition of the Property. He also claimed anti-deficiency protection for the $14,500 in loan proceeds he used for repairs and improvements to the Property.
¶7 The superior court granted summary judgment to McBane, ruling that the $28,342.51 and $14,500 amounts he claimed were entitled to anti-deficiency protection. After deducting those sums from the principal balance due, the court ruled that Banner could recover the principal sum of $21,228.19. Banner filed a timely appeal.
DISCUSSION
¶8 Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Ariz. R. Civ. P. 56(a). In reviewing a grant of summary judgment, we determine de novo whether any genuine issues of material fact exist and whether the superior court properly applied the law. Eller Media Co. v. City of Tucson, 198 Ariz. 127, 130, ¶ 4, 7 P.3d 136, 139 (App. 2000). We review issues of law de novo. Corbett v. Manorcare of Am., Inc., 213 Ariz. 618, 623, ¶ 10, 146 P.3d 1027, 1032 (App. 2006). We will affirm the judgment if it is correct for any reason. See Ariz. Bd. of Regents v. State ex rel. State of Ariz. Pub. Safety Ret. Fund Manager Adm'r, 160 Ariz. 150, 154, 771 P.2d 880, 884 (App. 1989).
¶9 The superior court relied on Arizona Revised Statutes ("A.R.S.") section 33-814(G) in granting summary judgment to McBane. That statute, however, applies only after a trustee's sale, which did not occur here. The applicable statute is A.R.S. § 33-729(A), which offers anti-deficiency protection if the underlying real property falls within certain statutory size and use parameters and the obligation at issue qualifies as purchase money.
Banner does not contend the Property falls outside the statutorily designated size and use categories.
¶10 Banner does not dispute that the 2004 Chase loan was a purchase money obligation used to acquire the Property. That loan did not lose its status as a purchase money obligation by extension, renewal, or refinancing. See Bank One, Ariz., N.A. v. Beauvais, 188 Ariz. 245, 249-50, 934 P.2d 809, 813-14 (App. 1997). Therefore, Banner's 2005 payoff of the Chase loan did not extinguish anti-deficiency protection. See Helvetica Servicing, Inc. v. Pasquan, 229 Ariz. 493, 498, ¶ 17, 277 P.3d 198, 203 (App. 2012) ("Section 33-729(A) does not mandate that the lender remain the same or that the deed of trust of record at the time of foreclosure be the same one recorded when the property was purchased. The statute instead accords protection if a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price."). Similarly, the 2007 Banner loan paid off the 2005 Banner loan, which included the $28,342.51 in purchase money funds. Those funds, traceable to the 2004 Chase acquisition loan, remained protected under the anti-deficiency statutes. See id.
¶11 The inclusion of non-purchase money sums in the 2005 and 2007 Banner loans does not convert the entirety of those loans into recourse obligations. When a loan includes both purchase money and non-purchase money amounts, a lender may obtain a deficiency judgment to the extent of the non-purchase money portion of the loan. Id. at 496, ¶ 9, 277 P.3d at 201.
¶12 Without analysis or citation to legal authority, Banner asserted in the superior court that only $1413.21 of purchase money funds remained once the $26,929.30 McBane had paid on the loan was applied. Banner cited no authority for this argument and never mentioned the so-called "United States Rule" it asserts for the first time on appeal. We decline to address this newly-raised contention. See Winters v. Ariz. Bd. of Educ, 207 Ariz. 173, 177, ¶ 13, 83 P.3d 1114, 1118 (App. 2004) (when a challenge is not raised with specificity and addressed in trial court, appellate court will not generally consider it); Richter v. Dairy Queen of S. Ariz., Inc., 131 Ariz. 595, 596, 643 P.2d 508, 509 (App. 1982) (appellate courts do not consider issues and theories not presented below).
¶13 Finally, Banner contends the superior court incorrectly ruled that loan proceeds McBane used for home improvement and repairs were the "equivalent of monies used for construction" and were therefore entitled to anti-deficiency protection. We agree with Banner.
¶14 In Helvetica, this Court held that construction loans qualify as purchase money obligations if the deed of trust securing the loan covers the land and the dwelling constructed on the property. Helvetica, 229 Ariz, at 501, ¶ 32, 277 P.3d at 206. In reaching that conclusion, we relied on Prunty v. Bank of America, which held that a property owner who builds a dwelling obtains that dwelling for a price "in no less than a sense" than a person who purchases an existing dwelling. 112 Cal. Rptr. 370, 376-77 (Cal. Ct. App. 1974). Moreover, both the borrower and lender knew and intended that the loan would be used to build a home for the borrower, and the lender's collateral encompassed both the land and the new dwelling. See id. at 372. ¶15 Although the issue was not squarely presented in Helvetica, we nonetheless noted "significant differences" between construction loans and loan proceeds used to improve existing homes, stating:
Considering the policies behind Arizona's anti-deficiency legislation, we perceive significant differences between construction loans used to build residences and loans obtained to improve existing homes. Cf. Allstate Sav. & Loan Ass'n v. Murphy, 98 Cal. App. 3d 761, 159 Cal. Rptr. 663, 664 (1979) (construing an analogous California statute and holding that "construction loans for improvements or repairs of the type involved in this case [construction of a swimming pool and block wall] are not within the description of loans protected by the purchase-money deficiency prohibition").Helvetica, 229 Ariz. at 499 n.6, ¶ 25, 277 P.3d at 204 n.6. We further held it would be "inappropriate to shield borrowers from deficiencies for loan disbursements unrelated to the acquisition or construction of a qualifying residence." Id. at 502, ¶ 37, 277 P.3d at 207.
¶16 McBane used $14,500 from the two Banner loans for repairs and improvements to the Property, such as tile upgrades and repairs, pool equipment and repairs, sunscreens, ceiling fans, carpet, a new cooling system, and painting. These funds were unrelated to construction of a dwelling and, unlike a newly-constructed residence, did not create additional collateral for the underlying loan. They do not qualify for anti-deficiency protection, and we therefore reverse that portion of the superior court's order subtracting $14,500 from the amount that Banner may recover from McBane.
CONCLUSION
¶17 We affirm the ruling that $28,342.51 of the principal balance Banner seeks to recover is entitled to anti-deficiency protection. We reverse the determination that an additional $14,500 is similarly protected and conclude that amount is a recourse obligation that Banner may pursue. We remand to the superior court with instructions to issue an amended judgment and for any further proceedings consistent with this decision.
¶18 Both parties seek attorneys' fees under A.R.S. § 12-341.01(A), which authorizes a fee award to the successful party in a contested action arising out of contract. In the exercise of our discretion, we deny both requests. Banner also seeks a fee award based on "the contract between the parties." However, Banner has identified no attorneys' fees provision in any of the documents of record, and our independent review has disclosed none. Moreover, both parties have partially prevailed. We therefore deny Banner's request. We also decline to award appellate costs to either party, as each has prevailed in part.