Court Opinion

ID: 9534190
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:37:27.188587+00
Date Added: 2024-06-11T13:27:32.487627
License: Public Domain

CAMERON, Justice,
dissenting.
I regret that I must dissent. The majority believes A.R.S. § 33-722 conflicts with *105A.R.S. § 33-729(A) and § 33-814(E). I disagree. A.R.S. §§ 33-729(A) and 33-814(E) apply only when the creditor elects to foreclose on the property while A.R.S. § 33-722 allows a creditor to choose whether to sue on the note or on the deed of trust, but prohibits the creditor from proceeding on both. Neither A.R.S. § 33-729(A) nor § 33-814(E) prohibits a mortgagee from electing to proceed at law to collect its debt. These statutes merely prohibit an action to recover any deficiency remaining after a mortgage foreclosure action. See Southwest Savings and Loan Association v. Ludi, 122 Ariz. 226, 228, 594 P.2d 92, 94 (1979) (A.R.S. § 33-729(A) is only applicable to deficiencies remaining after the foreclosure of a mortgage). A.R.S. § 33-729(A) states in part:
[I]f 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 one-half 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.
(Emphasis added).
A.R.S. § 33-814(E) states:
If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, 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.
(Emphasis added).
In this case, the Bakers never commenced foreclosure proceedings; thus, A.R.S. §§ 33-814(E) and 33-729(A) do not apply. The Bakers filed a complaint to recover the unpaid balance of the promissory note and never exercised their rights under the second deed of trust. At the time they filed their complaint, the first lienholder (ICA) had not yet foreclosed on the trust property. The fact that ICA did eventually foreclose on the property should not deprive the Bakers of their right to choose whether to sue on the promissory note or proceed with foreclosure. A.R.S. § 33-722 gives creditors this option:
If separate actions are brought on the debt and to foreclose the mortgage given to secure it, the plaintiff shall elect which to prosecute and the other shall be dismissed.
(Emphasis added).
This section establishes that a mortgagee has the right to bring an action on the debt rather than on the mortgage if the mortgagee desires. The statute does not limit this right to apply only when the deed of trust is on property not described in the anti-deficiency statutes, i.e. less than two and one-half acres and a single one or two-family dwelling.
The majority states that they have done no damage to A.R.S. § 33-722. This is a euphemism at best and questionable at least given the fact that they have completely eliminated a creditor’s right to elect his or her remedy any time a deed of trust is taken on property described in the anti-deficiency statutes.
Some might consider it good policy to prevent those creditors with a deed of trust on a family home from electing their remedy. However, it is not the function of the courts to amend statutes and deprive certain creditors of their statutory right in order to make good policy. This should be left to the legislature.
SUPPLEMENTAL OPINION
FELDMAN, Vice Chief Justice.
The Bakers and several amici have moved for reconsideration under Rule 22, *106Ariz.R.Civ.App.P., 17B A.R.S. Because the amici’s briefs raise serious concerns that there may be some misunderstanding about the scope of Baker, we granted the reconsideration motion to clarify and, hopefully, obviate any confusion in the lending industry. We also consider amici’s argument that the opinion should have only prospective application.
DISCUSSION
A. Scope of the Anti-Deficiency Statutes and Baker v. Gardner
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 Í0Í, 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 *107that, 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.
B. Summary and Application
Where the creditor chooses non-judicial foreclosure, he cannot obtain a deficiency judgment if the collateral is within the class protected by the deed of trust anti-deficiency statute. Where, however, the creditor chooses judicial foreclosure, he can obtain a deficiency judgment in all cases except those involving purchase money loans on the type of real property that the mortgage foreclosure statute describes. Therefore, where the creditor can obtain a deficiency judgment he can also elect to waive the security under A.R.S. § 33-722 and sue on the note. By choosing judicial foreclosure, the creditor can obtain a deficiency judgment in all cases except those dealing with purchase money collateral on the residential property described in § 33-729(A). He may, therefore, proceed under § 33-722 in all cases that do not fall within § 33-729(A).
We reject the contention that Baker be given only prospective effect. Unless three conditions are present, an Arizona civil appellate decision will normally have both retroactive and prospective effect. Law v. Superior Court, 157 Ariz. 147, 160, 755 P.2d 1135, 1148 (1988) (supplemental opinion). Law describes those conditions as
1. The opinion establishes a new legal principle by overruling clear and reliable precedent or by deciding an issue whose resolution was not foreshadowed;
2. Retroactive application would adversely affect the purpose behind the new rule; and
3. Retroactive application would produce substantially inequitable results.
Id. We find that these three conditions are not present here.
Baker did not overrule any clear and reliable Arizona precedents, and our holding was foreseeable. See supra at 101, 770 P.2d at 769 (citing Catchpole).
Here, retroactive application of Baker advances the legislature’s objective of protecting home purchasers from economic hardships. Supra at 102-103, 770 P.2d at 770-771. Thus, retroactive application would not adversely affect the purpose behind the new rule.
Finally, as to any inequities that Baker may visit on some lenders, giving home purchasers the full benefit of legislative protection outweighs the hardships to lenders. Even assuming, arguendo, that this balance may upset some leaders, we believe it preferable to follow the clear legislative objective of protecting home buyers.
GORDON, C.J. and MOELLER, J., concur.
ORDER
The pending motions were considered by the court, Justice Corcoran did not participate.
IT IS ORDERED as follows:
1. The Motion for Reconsideration was granted for the purpose of filing a supplemental opinion. The opinion is ordered filed this date. Justice Cameron does not join in the supplemental opinion and would grant the Motion for Reconsideration for the reasons set forth in his dissent.
2. The Application for Award of Attorneys’ Fees and Costs is granted, allowing fees in the amount of $7,500 and costs in the amount of $250.79.