Opinion ID: 1129544
Heading Depth: 2
Heading Rank: 1

Heading: Scope of the Anti-Deficiency Statutes and Baker v. Gardner

Text: The amici argue that even in cases that do not involve purchase money deeds of trust Baker may be read to prohibit creditors from waiving the security and electing to sue on the note as permitted by A.R.S. § 33-722. They contend that our holding should apply only to purchase money deeds of trust securing the type of real property described by the deed of trust antideficiency statute. See A.R.S. § 33-814(E) (now numbered A.R.S. § 33-814(F)). This follows, they argue, because we based the opinion on policy considerations relevant only to purchase money collateral. Thus, when the loan was not made to finance the purchase of residential real estate, the lender should have the option to either waive the security and sue on the note, as § 33-722 allows, or foreclose on the collateral and obtain a judgment for any deficiency. The Gardners disagree, claiming that it would be better policy if lenders holding collateral on homes were limited to foreclosure without being able to execute on the borrower's other assets. The better social policy, however, was not our focus. We attempted, rather, to effect legislative objectives. Supra at 101, 770 P.2d at 769. In pursuing that objective, we held that permitting the creditor to avoid the anti-deficiency statute by waiving the security and suing on the note would effectively destroy the anti-deficiency legislation. Consequently, the scope of Baker is defined by the scope of the two anti-deficiency statutes: A.R.S. § 33-729(A) (mortgages) and 33-814(E) (deeds of trust). Where the statutes forbid the creditor from obtaining a deficiency judgment, the election statute is inapplicable. Supra at 103, 770 P.2d at 771. The converse, of course, is that under § 33-722 a creditor can elect to forego foreclosure and sue on the note in all cases except those involving the mortgages and deeds of trust to which the anti-deficiency statutes apply. Supra at 103, 770 P.2d at 771. The mortgage anti-deficiency statute, A.R.S. § 33-729(A), only applies to purchase money mortgages, but the deed of trust anti-deficiency statute is not limited to purchase money collateral. See, A.R.S. § 33-814(E). The conflict, however, is more apparent than real because a deed of trust beneficiary may choose to foreclose the deed of trust in the manner provided by law for the foreclosure of mortgages on real property. A.R.S. § 33-807(A); see also § 33-814(D). When the beneficiary so chooses, the action is one for the foreclosure of a deed of trust as a real property mortgage [and] the provisions of title 33, chapter 6, article 2 [which includes the mortgage anti-deficiency statute] are applicable. A.R.S. § 33-814(C). Thus, subsection (E) of § 33-814 prohibits deficiency judgments on the described residential property only when the property is sold pursuant to the trustee's power of sale. The creditor who holds a deed of trust on the described type of residential property and who chooses the advantages of non-judicial foreclosure cannot obtain a deficiency judgment even if he is not dealing with purchase money collateral. If, however, that creditor chooses to proceed by judicial foreclosure under § 33-814(D), the governing statute prohibits election to sue on the note only in cases involving purchase money collateral encumbering the residential property described in A.R.S. § 33-729(A). The essence of Baker was simply that A.R.S. § 33-722 (permitting an election of remedies) did not apply to security covered by the later enacted anti-deficiency statutes. Any other interpretation would have destroyed the policy of consumer protection that, in light of cases from California and this court, was our legislature's objective. See supra at 102, 770 P.2d at 770 (citing Catchpole v. Narramore, 102 Ariz. 248, 428 P.2d 105 (1967). That rationale has no application to situations in which the legislature has left the creditor power to obtain a deficiency judgment. In those cases, the election statute applies.