Justia Arizona Supreme Court Opinion Summaries

A policy exclusion for personal liability “under any contract or agreement” does not apply to relieve an insurer of its duty to defend its insured, an alleged builder-vendor, against a claim for negligent excavation brought by the home buyer because the negligence claim arose from the common law duty to construct the home as a reasonable builder would.After rockslides damaged his property, the home buyer sued the alleged builder-vendor, asserting breach of contract, negligence, and fraud-based claims and alleging that the rockslides were the result of improper excavation during construction. The builder-vendor’s insurer declined the tender of defense on grounds that there was no coverage under the relevant insurance policies. The builder-vendor sought damages and declaratory relief. The superior court granted summary judgment in favor of the insurer. The court of appeals reversed, concluding that the policy’s “contractual liability” exclusion did not apply. The Supreme Court affirmed, holding that the contractual liability exclusion did not relieve the insurer of its duty to defend the builder-vendor against the home buyer’s negligence claim. View "Teufel v. American Family Mutual Insurance Co." on Justia Law

A homeowner’s failure to obtain injunctive relief under Ariz. Rev. Stat. 33-811(C) before a trustee’s sale results in the waiver of the homeowner’s damages claims dependent on the validity of the sale.After a trustee’s sale, Plaintiff filed this complaint seeking damages and to quiet title to the property in her name, alleging that the trustee’s deed resulting from the sale was invalidly recorded and that the sale was invalid. The trial court dismissed the complaint under Ariz. R. Civ. P. 12(b)(6), concluding that under section 33-811(C), Plaintiff had waived her claims by not obtaining injunctive relief before the trustee’s sale. The court of appeals affirmed, concluding that section 33-811(C) bars claims dependent on the trustee’s sale unless an injunction is obtained before the sale. The Supreme Court agreed, holding that Plaintiff’s failure to seek injunctive relief under section 33-811(C) resulted in a waiver of her damages claims resulting from the allegedly fraudulent trustee’s sale. View "Zubia v. Shapiro" on Justia Law

To obtain an area variance, an applicant must show that strictly applying a zoning ordinance will cause “peculiar and exceptional practical difficulties” that deprive a property of privileges enjoyed by other similarly zoned properties.This dispute arose from the City of Phoenix Board of Adjustment’s grant of a variance on a parcel of land in Phoenix. The superior court upheld the variance, finding that the variance was an area variance and not a use variance, that the Board was authorized to consider area variances, and that sufficient evidence supported the Board’s decision. The court of appeals reversed, concluding that the Board did not act within its authority in granting the variance. The Supreme Court vacated the court of appeals’ opinion and affirmed the judgment of the superior court, holding (1) the Board acted within its discretion in finding that special circumstances applied to the property; (2) the property owner did not create the special circumstances; (3) the variance required was an area variance that was necessary for the preservation and enjoyment of substantial property rights; and (4) the variance would not be materially detrimental to the surrounding area. View "Pawn 1st, LLC v. City of Phoenix" on Justia Law

Canadian Imperial Bank of Commerce loaned Dobson Bay Club II DD, LLC and related entities (Dobson Bay) $28.6 million for Dobson Bay’s purchase of commercial properties. The loan was secured by a deed of trust encumbering the properties. Under the terms of a promissory note, as a consequence for any delay in payment, Dobson Bay was required to pay, in addition to regular interest, default interest and collection costs and a five percent late fee assessed on the payment amount. When Dobson Bay failed to make the required payments, La Sonrisa de Siena, LLC, which bought the note and deed of trust, noticed a trustee’s sale of the secured properties, arguing that Dobson Bay owed more than $30 million, including a nearly $1.4 million late fee. At issue during the ensuing trial was whether the note was an enforceable liquidated damages provision. The superior court concluded that the late fee was enforceable as liquidated damages. The court of appeals reversed. The Supreme Court vacated the court of appeals’ opinion and reversed the trial court’s partial summary judgment in favor of La Sonrisa on the liquidated damages claim, holding that an approximately $1.4 million late fee is unreasonable and an unenforceable penalty. View "Dobson Bay Club II DD, LLC v. La Sonrisa De Siena, LLC" on Justia Law

First American Title Insurance Company issued two title insurance policies to Johnson Bank for two properties that secured the Bank’s loans. The policies failed to disclose encumbrances that allegedly affected the value of the property and thwarted its intended use. The property owners defaulted on their loan obligations to the Bank. Based on the undisclosed encumbrances, the owners successfully sued First American to recover damages under their owners’ title insurance policies. Johnson Bank purchased the properties and notified First American of claims under its lender’s title insurance policies. The parties disagreed on the date for calculating the diminution in value of the two properties - whether the date of the loans or the foreclosure date. The superior court granted summary judgment for First American, concluding that the foreclosure date should be used to calculate damages. The Supreme Court reversed, holding (1) when an undisclosed title defect prevents the known, intended use of the property and causes the borrower to default on the loan, the lender’s diminution-in-value loss should be calculated as of the policy-issuance date; and (2) because the record in this case did not establish that the title defect caused the borrowers’ default and the Bank’s subsequent foreclosure, the cause must be remanded for further proceedings on that issue. View "First Am. Title Ins. Co. v. Johnson Bank" on Justia Law

First American Title Insurance Company issued title insurance policies to Johnson Bank for properties that secured the Bank’s loans. The policies failed to list covenants, conditions, and restrictions (CC&Rs) that prohibited commercial development on the properties. When the property owners defaulted on their loan obligations to the Bank, they sued First American, alleging that they had intended to develop the properties and were prevented from doing so by the CC&Rs. Judgment was entered in favor of the owners, and the properties were sold at a trustee’s sale. Johnson purchased the parcels and notified First American of claims under its lender’s title insurance policies. The superior court ruled that the parcels should be valued as of the foreclosure date. The court of appeals reversed, concluding that the policy was breached when the loans were made. The Supreme Court vacated the court of appeals’ opinion and reversed the superior court's judgment, holding (1) when an undisclosed title defect prevents the intended use of the property and causes the borrower to default on the loan, the lender’s diminution-in-value loss should be calculated as of the date the title policy was issued; and (2) the record here did not establish that the title defect caused the borrowers’ default and resulting foreclosure. Remanded. View "First Am. Title Ins. Co. v. Johnson Bank" on Justia Law

The Lewises obtained a default money judgment against the MacKeans and recorded their judgment, attempting to create a lien on the MacKeans’ real property. Neither the initial recording nor the renewal affidavit subsequently filed by the MacKeans was accompanied by a separate information statement as required by Ariz. Rev. Stat. 33-961(C) and 33-967(A). The Debords, the defendants in this case, later bought the property. One month later, the Lewises attempted to foreclose their lien against the property. The trial court entered summary judgment for the Debords, concluding that the Lewises could not execute against the property due to their failure to file an information statement, which rendered their judgment lien invalid. The Supreme Court reversed, holding (1) failing to attach an information statement to a certified copy of the judgment does not invalidate an otherwise valid lien, but instead, the judgment lien lacks priority against competing creditors who record liens against the property before the information statement is filed; and (2) because the Debords had constructive notice of the certified judgment that the Lewises recorded, the Debords took the property subject to the lien, and the Lewises’ failure to file an information statement did not preclude them from executing against the property. View "Lewis v. Debord" on Justia Law

The Rudgears, the owners of Wildwood Creek Ranch, LLC, borrowed money, through Wildwood, from the predecessor to BMO Harris Bank to finance construction of a home on a vacant lot. The loan was secured by a deed of trust. The home was never built, and the property remained undeveloped. Wildwood later defaulted on its loan, and BMO foreclosed on the property. A third party successfully bid for the property. BMO subsequently sued Wildwood and the Rudgears for the deficiency. The superior court granted summary judgment in favor of Defendants, concluding that the Rudgears intended to use the property for a single-family residence and therefore qualified for anti-deficiency protection. The Supreme Court reversed, holding that Arizona’s residential anti-deficiency statute does not bar a deficiency judgment against an owner of vacant property. Remanded for entry of partial summary judgment in favor of BMO. View "BMO Harris Bank, N.A. v. Wildwood Creek Ranch, LLC" on Justia Law

Loop 101, LLC (“Loop”) borrowed money from MidFirst Bank to construct an office building. The promissory note was secured by a deed of trust, and four individuals guaranteed payment. The note, deed of trust, and gurantees expressly waived the fair market value provision of Ariz. Rev. Stat. 33-814(A). MidFirst assigned its rights under the loan and deed of trust to CSA 13-101 Loop, LLC (“CSA”). After Loop defaulted on the loan, CSA bought the property at a trustee’s sale for a credit bid of $6.15 million. CSA then sued Loop and the guarantors for a deficiency judgment. Loop and the guarantors counterclaimed and filed a third-party claim against MidFirst for breach of the implied covenant of good faith and fair dealing. MidFirst and CSA moved to dismiss, arguing that Loop and the guarantors had waived their right to a fair market value determination. The superior court ruled that parties may not prospectively waive this provision, determined the fair market value of the property to be $12.5 million, and concluded that no deficiency existed. The Supreme Court affirmed, holding that parties may not prospectively waive the fair market value provision of section 33-814(A). View "CSA 13-101 Loop, LLC v. Loop 101, LLC" on Justia Law

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