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State Case in NINTH CIRCUIT parties may not waive fair market value in deficiency judgments post-foreclosure

justia.com | January 2, 2015

CSA 13-101 Loop, LLC v. Loop 101, LLC

Court: Arizona Supreme Court
Docket: CV-14-0029
Opinion Date: December 31, 2014
Areas of Law: Banking, Real Estate & Property 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).

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Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager

 

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