Arizona Court Says Anti-Deficiency Judgment Protections Cannot Be Waived by a Borrower

Arizona Appellate Court decision (August 13, 2015).

This case involved issues pertaining to a deficiency judgment awarded to a lender following a judicial foreclosure proceeding. The trial court ruled that the property owner was liable to the lender for a deficiency following the foreclosure sale of the owner’s property in an amount in excess of $1,119,000 under Arizona Revised Statutes. The trial court also awarded the lender attorneys’ fees and costs in an amount that exceeded $250,000. The owner appealed the trial court’s determinations that: (i) accrued interest, late fees, and a deposit paid to the owner’s homeowners association were not “purchase money” obligations and thus, were subject to a deficiency judgment in favor of the lender; and (ii) the owner had waived protections that would otherwise have been available to him under the applicable anti-deficiency statutes.

The appellate court ruled that the subject anti-deficiency protections that are contained in the Arizona Revised Statutes (A.R.S. §33-729(A)) cannot be waived for public policy reasons. Thus, the trial court erred in finding that the owner had waived those protections, and also erred in its determination of what constituted purchase money funds that were protected by the anti-deficiency statutes. Accordingly, the appellate court reversed the trial court’s judgment and further vacated the award of attorneys’ fees in favor of the lender.

See case decision: First_Fin._Bank,_N.A._v._Cla