Weitz Co., LLC v. Heth

Developer obtained a loan from Bank to construct a commercial and condominium project. Bank secured its loan with two deeds of trust, the first of which attached before construction began on the project. Developer failed to pay the general contractor (Contractor) several million dollars for the project, and after Developer had sold many of the units, Contractor recorded a mechanics’ lien against the project. Contractor then sought to foreclose on its lien against Developer, the unit owners, and their lenders. The Owners and Lenders contested the foreclosure, arguing that they were equitably subrogated to Bank’s first deed of trust and thus had priority over Contractor’s mechanics’ lien. The trial court concluded that Contractor’s lien had priority. The Supreme Court reversed, holding (1) Ariz. Rev. Stat. 33-992(A), which gives mechanics’ liens priority over liens recorded after construction begins on real property, does not preclude assignment by equitable subrogation of lien that attached before construction began on the project; and (2) when a single mortgage burdens multiple parcels, a third party may be entitled to equitable subrogation when that party has paid a pro rata amount of the obligation and obtained a full release of the parcel at issue from the mortgage. Remanded. View "Weitz Co., LLC v. Heth" on Justia Law