IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

FIRST FINANCIAL BANK, N.A., as Successor in Interest to the Federal 

Deposit Insurance Corporation, as Receiver of Irwin Union Bank F.S.B., 

Plaintiff/Appellee,

v.

THEODORE F. CLAASSEN, an unmarried man, Defendant/Appellant.

No. 1 CA-CV 14-0123

FILED 8-13-2015

Appeal from the Superior Court in Maricopa County

No. CV2010-032991

The Honorable John Rea, Judge

REVERSED IN PART; AFFIRMED IN PART; REMANDED

COUNSEL

Minkin & Harnisch, PLLC, Phoenix

By Ethan B. Minkin, Sara V. Ransom, Andrew A. Harnisch

Counsel for Plaintiff/Appellee

Brooks & Affiliates, PLC, Mesa

By David P. Brooks, Spenser W. Call

Counsel for Defendant/Appellant

OPINION

Judge Jon W. Thompson delivered the Opinion of the Court, in which 

Presiding Judge Andrew W. Gould and Judge Maurice Portley joined.
FIRST FINANCIAL v. CLAASSEN

Opinion of the Court

2

T H O M P S O N, Judge:

¶1 This appeal follows a bench trial on a deficiency action 

following a judicial foreclosure. Appellant Theodore F. Claassen (Claassen) 

asserts that the trial court erred in determining that there was a nonpurchase, non-construction, money deficiency of $1,119,676.67 under 

Arizona Revised Statutes (A.R.S.) § 33-729(A) (2014) which successorlender First Financial Bank, N.A. (Bank) was entitled to pursue.

1 We agree 

as to $914,403.33 of the damages and, therefore, reverse in part and remand. 

FACTUAL AND PROCEDURAL HISTORY

¶2 The real property at issue is in a planned community in 

Paradise Valley. In April 2008, Claassen was extended credit in an original 

principal amount not to exceed $5,500,000 (loan) for the construction of a 

single family dwelling. Of that $5,500,000 approximately $1.7 million was 

used to satisfy the original purchase money loan and the balance was 

placed into a construction loan account from which draws were to be made. 

The total amount Bank loaned Claassen was over $3,000,000. A promissory 

note was executed and the loan was secured by a deed of trust. In October 

2008, the loan was modified to change the payment terms and completion 

date. Construction on the property was never completed. After October 

2009, Claassen failed to make any payments and the Bank notified Claassen 

of the default in April 2010. Bank filed a complaint for breach and judicial 

foreclosure in December 20102; the debt at that time was at least 

$3,056,144.59 plus accruing interest, costs, fees, and attorneys’ fees. Bank 

further alleged other material actions, or inactions, by Claassen that

likewise put him in default including his failure to provide current 

financials as requested by the FDIC. Claassen in his answer asserted 

counterclaims against Bank for breach of contract, breach of covenant of 

good faith and fair dealing, and fraud. 

 

1 The original lender was Irwin Union Bank, F.S.B., however, herein we will 

refer to the successor-lender First Financial.

 

2 Other junior lienholders, including the homeowner’s association, 

contractors, and the Arizona Department of Revenue, were also named in 

the complaint.
FIRST FINANCIAL v. CLAASSEN

Opinion of the Court

3

¶3 A trial date was set for July 2013. Claassen did not participate 

in the preparation of the joint pretrial statement.3 In the pretrial statement,

Bank asserted that if the property were allowed to be sold at a trustee’s sale, 

based on the appraisal of the fair market value of $750,000, there would be 

a remaining deficiency in excess of $3,000,000. The Bank sought a 

deficiency judgment in the amount of $1,119,676.67. Specifically:

a. $205,273.43 in interest-only payments paid out of a reserve 

account during the construction period;

b. $50,000 mandatory construction deposit paid to the 

homeowner’s association before building commenced; 

c. $706,270.78 of accrued interest; and 

d. $158,132.46 in late fees on the loan. 

¶4 A bench trial proceeded without Claassen or his counsel. The 

court found that Claassen had had appropriate notice of the proceedings 

“and has chosen not to participate.” After receiving evidence, the trial court 

dismissed Claassen’s counterclaims for lack of proof and entered a 

judgment of judicial foreclosure. The court additionally stated “The Court 

finds that based on the total amount owed, there is a non-purchase, nonconstruction money deficiency in the amount of $1,119,676.67. Upon 

conclusion of the foreclosure sale, any amount in excess of $710,000 [the fair 

market value] shall be credited to Defendant against the deficiency 

judgment.“ The trial court awarded Bank attorneys’ fees and costs in the 

amount of $255,753.72. 

¶5 Claassen filed a Motion for New Trial or to Alter or Amend 

the Judgment. The basis for the motion was that the damages were not 

recoverable under the anti-deficiency statute and/or that the trial court 

erred in concluding that the majority of the damages were not purchase 

money sums. Claassen did not claim in that motion that the $205,273.43 in 

reserve interest payments was awarded in error.4 

 

3 The joint pretrial statement was submitted by Bank and the homeowner’s 

association. The two parties settled prior to trial.

4 Claassen does not challenge the interest reserve amount on appeal, 

therefore we need not decide it. 
FIRST FINANCIAL v. CLAASSEN

Opinion of the Court

4

¶6 The trial court denied Claassen’s Motion for New Trial. In its 

minute entry, the trial court mentioned Claassen’s appearances at early 

court proceedings, and that Claassen’s counsel withdrew in August 2012. 

After that point Claassen did not appear or participate in litigation, he did 

not participate in the hearing setting the trial date, in the trial management 

conference or in the preparation of the pretrial statement.5 On the legal 

question, the court stated it was aware of the “factual and legal issues 

concerning what amount of the deficiency was and what amount of the 

deficiency was within the scope of the anti-deficiency statute and what 

amount was not.” The court went on to say: “Mr. Claassen’s motion argues 

that amounts included in the judgment were for purchase money or 

construction. These arguments raise evidentiary and legal issues that Mr. 

Claassen did not present at trial.” The court found his arguments waived 

for failure to raise them previously. Claassen filed a timely notice of appeal 

and we have jurisdiction. 

DISCUSSION

¶7 Claassen raises two issues on appeal from the denial of his 

motion for a new trial:

a. Whether the trial court erred in ruling that accrued interest, 

late fees, and the construction deposit paid to the 

homeowner’s association were non-purchase money sums as 

a matter of law; and 

b. Whether the trial court erred in finding Claassen waived any 

argument regarding the deficiency because he did not raise it 

prior to the motion for new trial.

¶8 Our standard of review for denial of a motion for new trial is 

abuse of discretion. Suciu v. Amfac Distributing Corp., 138 Ariz. 514, 520, 675 

P.2d 1333, 1339 (App. 1983). We defer to the trial court's factual findings

unless clearly erroneous. See Ahwatukee Custom Estates Mgmt. Ass'n v. 

Turner, 196 Ariz. 631, 634, ¶ 5, 2 P.3d 1276, 1279 (App. 2000). We review the

interpretation and application of statutes de novo. Schwarz v. City of 

Glendale, 190 Ariz. 508, 510, 950 P.2d 167, 169 (App. 1997) (citation omitted). 

A trial court abuses its discretion if it commits an error of law. Flying 

 

5 The court noted three minute entries from November 2012 to late January 

2013 were mailed to Claassen at the address on file and had not been 

returned.
FIRST FINANCIAL v. CLAASSEN

Opinion of the Court

5

Diamond Airpark, LLC v. Meienberg, 215 Ariz. 44, 50, ¶ 27, 156 P.3d 1149, 1155 

(App. 2007).

¶9 The anti-deficiency statute, A.R.S. § 33-729, reads in relevant 

part:

A. Except as provided in subsections B and C of this section, 

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, of a parcel of real property of two and onehalf acres or less which is limited to and utilized for either a 

single one-family or single two-family dwelling, the lien of 

judgment in an action to foreclose such mortgage shall not 

extend to any other property of the judgment debtor, nor may 

general execution be issued against the judgment debtor to 

enforce such judgment, and if the proceeds of the mortgaged 

real property sold under special execution are insufficient to 

satisfy the judgment, the judgment may not otherwise be 

satisfied out of other property of the judgment debtor, 

notwithstanding any agreement to the contrary.

¶10 At issue is what constitutes purchase money subject to 

protection under the statute. We considered what is purchase money and 

non-purchase money under the statute for purposes of a deficiency 

judgment in Helvetica Servicing, Inc. v. Pasquan, 229 Ariz. 493, 277 P.3d 198 

(App. 2012). Helvetica was a judicial foreclosure involving the refinancing 

of a loan for the tear-down and construction of a new luxury residence. Id.

at 495, ¶¶ 3-5, 277 P.3d at 200. Following the new construction, some loan 

proceeds remained which the homeowners used to pay interest on the loan 

as well as “landscaping, maintenance, taxes, utilities and marketing fees.” 

Id. This court held that refinancing a purchase money loan did not change 

its character and the anti-deficiency protections still applied. Id. at 499, ¶ 

23, 277 P.3d at 204 (citing Bank One, Arizona v. Beauvais, 188 Ariz. 245, 250, 

934 P.2d 809, 814 (App. 1997)). We further found that construction loans

for construction of a qualifying residence merited anti-deficiency 

protection. Id. at 501, ¶ 32, 277 P.3d at 206. Most pertinent to this matter, 

however, we also found “to the extent a judicially foreclosed mortgage 

includes both purchase money and non-purchase money sums, a lender 

may pursue a deficiency judgment for the latter amounts” where the nonpurchase money sums could be traced and segregated. Id. at 501-02, ¶¶ 34, 

37, 277 P.3d at 206-07. Bank asserts, and the trial court agreed, that this is 

such a case. We disagree.
FIRST FINANCIAL v. CLAASSEN

Opinion of the Court

6

¶11 In Helvetica, we outlined the policy arguments and the three 

possible outcomes when a mortgage secures both purchase money and 

non-purchase money sums and we need not repeat them here. In Helvetica, 

however, we noted there were “payments that clearly [were] not purchase 

money in nature, including sums for maintenance, utilities, marketing fees, 

and penalties.” 229 Ariz. at 501, ¶ 34, 277 P.3d at 206. This case does not 

involve items that are “clearly not” purchase money items. 

¶12 Here, Bank asserts that costs typically associated with a loan, 

such as interest and late fees, constitute non-purchase money. Two of the 

line items are for costs accrued once the loan was funded (interest and late 

fees) and one is for the $50,000 spent to fund the deposit the homeowner’s 

association required prior to any construction being undertaken on the 

property.

¶13 In Helvetica, we consulted the commentary of Charles 

Sheppard in concluding that a refinanced purchase money obligation 

should be a protected purchase money obligation. Charles B. Sheppard, 

California Code of Civil Procedure Section 580B, Anti–Deficiency Protection 

Regarding Purchase Money Debts: Arguments for the Inclusion of Refinanced 

Purchase Money Obligations Within the Anti–Deficiency Protection of Section 

580B, 6 S. Cal. Interdisc. L.J. 245, 269 (1997) (examining California’s 

statutory anti-deficiency scheme). That same commentator included 

interest on a refinanced loan as part of the purchase money obligation. 

Sheppard, 6 S. Cal. Interdisc. L.J. at 271 “Hence, to the extent of the principal 

amount [] and any interest which may have accrued thereon, it should have 

been concluded by the court that the [] loan was a purchase money 

obligation.”). 

¶14 We find the reasoning that allows a refinancing to be deemed 

a purchase money obligation allows the costs commonly associated with a 

loan to likewise be considered purchase money sums. When a home loan 

is being refinanced those types of charges are routinely rolled into the new 

loan.

¶15 In Helvetica, we did not reach the question whether interest 

payments on a refinanced loan would be a purchase money item.6 We do 

 

6 “The Helvetica Loan likely includes additional non-purchase money 

sums, including interest payments to Helvetica of $32,555 per month. 

However, the record on appeal is not sufficiently developed for us to opine 

further regarding this issue.” 229 Ariz. at 501, ¶ 34, fn7, 277 P.3d at 206. 
FIRST FINANCIAL v. CLAASSEN

Opinion of the Court

7

reach that question now and conclude that interest, late fees, and the 

mandatory construction deposit are properly considered purchase money 

obligations.

¶16 Next, we must determine whether Claassen waived his 

arguments by first raising them in his post-trial motion. In ruling on the 

motion for a new trial the trial court specifically found Claassen had waived 

any claim that any of the charges should have been found to be nonpurchase money sums. The minute entry stated the court was aware of the 

“factual and legal issues concerning what amount of the deficiency was and 

what amount of the deficiency was within the scope of the anti-deficiency 

statute and what amount was not.” The court went on to say “Mr. 

Claassen’s motion argues that amounts included in the judgment were for 

purchase money or construction. These arguments raise evidentiary and 

legal issues that Mr. Claassen did not present at trial.” 

¶17 The record on appeal does not include transcripts of either the 

bench trial or the oral argument, a situation which commonly results in our 

assumption that the trial court’s factual determinations would have been 

supported. See Baker v. Baker, 183 Ariz. 70, 73, 900 P.2d 764, 767 (App. 1995). 

Below, however, the facts as to the type of charges and the amounts sought 

by Bank were undisputed. The amounts found by the trial court are exactly 

as enumerated in the Bank’s Joint Pretrial Statement and are not challenged

on appeal. The factual issues not being in dispute, we proceed to the legal 

issue. 

¶18 “Waiver is the intentional relinquishment of a known right.” 

Verma v. Stuhr, 223 Ariz. 144, 157, ¶ 68, 221 P.3d 23, 36 (App. 2009) (holding 

property buyers did not waive their statutory right to rescind). A statutory 

right may not be waived “where waiver is expressly or impliedly 

prohibited by the plain language of the statute.” Id.

¶19 Our legislature has expressly prohibited borrowers from 

agreeing to waive the protections of the anti-deficiency statutes in 

foreclosures on certain residential dwellings. In judicial foreclosures such 

as the one here, A.R.S. § 33–729(A) expressly prohibits such waivers by 

stating that if the proceeds of the execution sale “are insufficient to satisfy” 

the debt, it “may not otherwise be satisfied out of other property of the 

judgment debtor, notwithstanding any agreement to the contrary.” (Emphasis 

added.) In foreclosures under a deed of trust, such waivers are similarly 

prohibited. See A.R.S. § 33–814(G) (2014) (“no action may be maintained to 

recover any difference between the amount obtained by sale and the 

amount of the indebtedness and any interest, costs and expenses”).
FIRST FINANCIAL v. CLAASSEN

Opinion of the Court

8

¶20 For policy reasons, our courts have been expansive as to what 

other protections cannot be waived under anti-deficiency statutes. See CSA 

13-101 Loop, LLC v. Loop 101, LLC, 233 Ariz. 355, 362, ¶ 24, 312 P.3d 1121, 

1128 (App. 2013) (holding public policy prohibits waiver of fair market 

determination under A.R.S. § 33–814(A)); Parkway Bank and Trust Co. v. 

Zivkovic, 232 Ariz. 286, 290–91, ¶ 17, 304 P.3d 1109, 1113–14 (App. 2013) 

(borrowers cannot waive the statutory anti-deficiency protection of A.R.S. 

§ 33-814(G)).

¶21 “Parties cannot stipulate as to the law applicable to a given 

state of facts and bind the court” since the court has an independent duty 

to correctly apply the law. State Consol. Pub. Co. v. Hill, 39 Ariz. 163, 164, 4 

P.2d 668, 669 (1931). Because a party cannot waive the correct application 

of the law, the trial court should have granted Claassen’s motion. 

¶22 We thus hold that the statutory scheme does not permit the 

anti-deficiency protection of A.R.S. § 33–729(A) to be waived.

7 The trial 

court erred in finding that Claassen waived those protections, and therefore 

erred in applying the law as set out above interpreting what constitutes 

“purchase money” funds as a matter of law. We reverse that determination 

as to accrued interest on the principal ($706,270.78), late fees ($158,132.46), 

 

7 The Arizona Legislature has since amended A.R.S. §§ 33-729 and -814 to 

prevent borrowers from claiming anti-deficiency protection in certain 

situations. The new A.R.S. § 33-729 includes the following language:

C. For mortgages that are originated after December 31, 2014, 

subsection A of this section does not apply to real property as 

follows:

1. Real property owned by a person who is engaged in the 

business of constructing and selling dwellings that was 

acquired by the person in the course of that business and that 

is subject to a mortgage given to secure payment of a loan for 

construction of a dwelling on the property for sale to another 

person.

2. Real property that contains a dwelling that was never 

substantially completed.

3. Real property that contains a dwelling that is intended to 

be utilized as a dwelling but that is never actually utilized as 

a dwelling. 
FIRST FINANCIAL v. CLAASSEN

Opinion of the Court

9

and the $50,000 construction deposit. We, likewise, vacate the trial court’s 

award of attorneys’ fees and costs in the amount of $255,753.72 for 

reconsideration in light of our opinion. 

ATTORNEYS’ FEES AND COSTS

¶23 On appeal, both parties seek attorneys’ fees and costs. Bank 

seeks fees pursuant to A.R.S. §§ 12-341, -341.01 (2003) and asserts Claassen 

failed to indicate the statutory basis for his fee request. We agree. Neither 

party is awarded fees on appeal. As the prevailing party on appeal,

Claassen is entitled to his costs pursuant to A.R.C.A.P. 21.

CONCLUSION

¶24 For the proceeding reasons, we reverse the trial court’s 

determination that $914,403.33 of the $1,119,676.67 is non-purchase money 

obligations and remand for a judgment consistent with this determination. 

We reverse the award of fees and costs below. The balance of the judgment 

is affirmed.