Articles Posted in Arizona Supreme Court

by
Canadian Imperial Bank of Commerce loaned Dobson Bay Club II DD, LLC and related entities (Dobson Bay) $28.6 million for Dobson Bay’s purchase of commercial properties. The loan was secured by a deed of trust encumbering the properties. Under the terms of a promissory note, as a consequence for any delay in payment, Dobson Bay was required to pay, in addition to regular interest, default interest and collection costs and a five percent late fee assessed on the payment amount. When Dobson Bay failed to make the required payments, La Sonrisa de Siena, LLC, which bought the note and deed of trust, noticed a trustee’s sale of the secured properties, arguing that Dobson Bay owed more than $30 million, including a nearly $1.4 million late fee. At issue during the ensuing trial was whether the note was an enforceable liquidated damages provision. The superior court concluded that the late fee was enforceable as liquidated damages. The court of appeals reversed. The Supreme Court vacated the court of appeals’ opinion and reversed the trial court’s partial summary judgment in favor of La Sonrisa on the liquidated damages claim, holding that an approximately $1.4 million late fee is unreasonable and an unenforceable penalty. View "Dobson Bay Club II DD, LLC v. La Sonrisa De Siena, LLC" on Justia Law

by
First American Title Insurance Company issued two title insurance policies to Johnson Bank for two properties that secured the Bank’s loans. The policies failed to disclose encumbrances that allegedly affected the value of the property and thwarted its intended use. The property owners defaulted on their loan obligations to the Bank. Based on the undisclosed encumbrances, the owners successfully sued First American to recover damages under their owners’ title insurance policies. Johnson Bank purchased the properties and notified First American of claims under its lender’s title insurance policies. The parties disagreed on the date for calculating the diminution in value of the two properties - whether the date of the loans or the foreclosure date. The superior court granted summary judgment for First American, concluding that the foreclosure date should be used to calculate damages. The Supreme Court reversed, holding (1) when an undisclosed title defect prevents the known, intended use of the property and causes the borrower to default on the loan, the lender’s diminution-in-value loss should be calculated as of the policy-issuance date; and (2) because the record in this case did not establish that the title defect caused the borrowers’ default and the Bank’s subsequent foreclosure, the cause must be remanded for further proceedings on that issue. View "First Am. Title Ins. Co. v. Johnson Bank" on Justia Law

by
First American Title Insurance Company issued title insurance policies to Johnson Bank for properties that secured the Bank’s loans. The policies failed to list covenants, conditions, and restrictions (CC&Rs) that prohibited commercial development on the properties. When the property owners defaulted on their loan obligations to the Bank, they sued First American, alleging that they had intended to develop the properties and were prevented from doing so by the CC&Rs. Judgment was entered in favor of the owners, and the properties were sold at a trustee’s sale. Johnson purchased the parcels and notified First American of claims under its lender’s title insurance policies. The superior court ruled that the parcels should be valued as of the foreclosure date. The court of appeals reversed, concluding that the policy was breached when the loans were made. The Supreme Court vacated the court of appeals’ opinion and reversed the superior court's judgment, holding (1) when an undisclosed title defect prevents the intended use of the property and causes the borrower to default on the loan, the lender’s diminution-in-value loss should be calculated as of the date the title policy was issued; and (2) the record here did not establish that the title defect caused the borrowers’ default and resulting foreclosure. Remanded. View "First Am. Title Ins. Co. v. Johnson Bank" on Justia Law

by
At issue in this case was an abandoned easement on property that DOS Land Holdings, LLC purchased. The closing documents omitted the easement from the property’s legal description. DOS filed claims for breach of contract and breach of the covenant of good faith and fair dealing against Empire West Title Agency, alleging that DOS “reasonably believed” that the easement was represented in documents used at the closing. Empire filed a motion to compel DOS to disclose any attorney-client communications indicating whether DOS knew before closing that the easement had been abandoned. The superior court denied the motion, concluding that the documents were protected by the attorney-client privilege. Empire filed a petition for special action in the court of appeals, arguing that DOS had impliedly waived the attorney-client privilege by alleging that it “reasonably believed” that Empire had met its contractual obligations. The court of appeals ordered the disclosure of attorney-client communications found relevant to the “reasonableness of DOS’s expectation of coverage.” The Supreme Court vacated the court of appeals’ decision, holding that the court erred in ruling that DOS impliedly waived the privilege by pleading its “reasonable belief” in the litigation. View "Empire West Title Agency, LLC v. Hon. Talamante" on Justia Law

by
In 2006, the City of Phoenix started installing light rail tracks along Jefferson Street, which abutted Appellant’s property. As part of the installation, the City erected a permanent concrete barrier between the tracks and Appellant’s property, thus blocking two driveways providing vehicular access from Jefferson Street to Appellant’s property. The property, however, still had access via Madison Street. The City subsequently filed an eminent domain action to determine the compensation it owed to Appellant for a temporary construction easement Appellant granted the City. Appellant counterclaimed, seeking damages for his permanent loss of access to Jefferson Street. The superior court granted summary judgment to the City on that claim, concluding that a property owner is not entitled to compensation for loss of access if he retains “free and convenient access” to the property. The court of appeals vacated the superior court’s ruling, concluding that the government may not eliminate a property owner’s established access to an abutting roadway without providing just compensation to the property owner. The Supreme Court affirmed, holding that, under these circumstances, an owner may claim compensable damage to private property within the meaning of Ariz. Const. art. II, 17, even if other streets provide access to the property. View "City of Phoenix v. Garretson" on Justia Law

by
Relatives of Bradford Lund (collectively, Miller) sought the appointment of a guardian and conservator to manage Bradford's assets. Bradford, his father, and his stepfather (collectively, the Lunds) opposed the appointment. Miller's counsel subsequently served a law firm that previously represented Bradford (JS&S) with a subpoena requesting all non-privileged information relating to Bradford. JS&S mistakenly delivered the entire client file to counsel without reviewing it for privileged information. Eventually, the trial court decided to review the documents in camera before ruling on whether each document was privileged. The Supreme Court vacated the trial court's order, holding (1) before reviewing a particular document, a trial court must first determine that an in camera review is necessary to resolve the privilege claim; and (2) the trial court in this case erred by ruling that it would review all the documents to determine whether they were privileged without considering the parties' arguments regarding privilege and waiver to determine whether in camera review was warranted for particular documents before reviewing them. Remanded. View "Lund v. Myers" on Justia Law

by
Defendant constructed a home that it sold to its initial purchaser. The initial purchaser, in turn, sold the home to Plaintiffs. Plaintiffs later learned the home's hillside retaining wall and home site had been constructed in a dangerously defective manner. Plaintiffs requested that Defendant cover the cost of repair, but Defendant claimed it was no longer responsible for any construction defects. Plaintiffs then filed an action against Defendant to force Defendant to cover the cost of repair. The trial court dismissed all of the claims, concluding, among other things, that Plaintiffs' negligence claims were barred by Arizona's economic loss doctrine. The court of appeals remanded for resolution of Plaintiffs' various negligence claims, concluding that, because Plaintiffs had no contract with Defendant, the economic loss doctrine did not bar their tort claims. The Supreme Court affirmed, holding that the economic loss doctrine did not bar Plaintiffs' negligence claims to recover damages resulting from the construction defects. Remanded. View "Sullivan v. Pulte Home Corp." on Justia Law

by
Plaintiffs leased state trust land and owned all structures and improvements on the land. Under the terms of the lease, the improvements that existed on the land would become the state's property upon lease termination. After the leases were entered into, the legislature created a property tax classification ("Class Nine") in which property was taxed at a lower rate than that applicable to commercial property. For certain years, Maricopa County classified the improvements under the classification applicable to general commercial property and taxed Plaintiffs accordingly. The State Board of Equalization denied Plaintiffs' request for Class Nine classification. Plaintiffs then filed a declaratory judgment action in the tax court. The tax court granted summary judgment for the County based on Plaintiffs' failure to meet the requirements of Ariz. Rev. Stat. 42-12009(A)(1)(a), which provides that improvements on land leased from the state qualify for a reduced ad valorem tax rate if they become the property of the state on termination of the leasehold interest in the property. The Supreme Court remanded, holding that section 42-12009(A)(1)(a) applies when, at the time of taxation, improvements exist on the land that, under the terms of the lease, would become the state's property upon lease termination. View "CNL Hotels & Resorts, Inc. v. Maricopa County" on Justia Law

by
These consolidated cases involved two properties purchased by John Hogan. Each parcel became subject to a deed of trust when Hogan took out loans from Long Beach Mortgage Company. Hogan was delinquent on both loans, which triggered foreclosure proceedings. A notice of trustee's sale recorded for the first parcel identified Washington Mutual Bank as the beneficiary and Deutsche Bank as the beneficiary for the second parcel. Hogan filed lawsuits seeking to enjoin the trustees' sales unless the beneficiaries proved they were entitled to collect on the respective notes. The superior court dismissed the cases. The court of appeals affirmed, holding that Arizona's non-judicial foreclosure statute (Statute) does not require presentation of the original note before commencing foreclosure proceedings. The Supreme Court affirmed the superior court's orders dismissing Hogan's complaints and vacated the court of appeals, holding that the Statute does not require the beneficiary to prove its authority or show the note before the trustee may commence a non-judicial foreclosure. View "Hogan v. Washington Mut. Bank, N.A." on Justia Law

by
These consolidated cases involved two properties purchased by John Hogan. Each parcel became subject to a deed of trust when Hogan took out loans from Long Beach Mortgage Company. Hogan was delinquent on both loans, which triggered foreclosure proceedings. The trustee recorded a notice of sale for the first parcel, naming Washington Mutual Bank (WaMu) as the beneficiary. A notice of trustee's sale recorded for the second parcel identified Deutsche Bank as the beneficiary. Hogan filed lawsuits seeking to enjoin the trustees' sales unless the beneficiaries proved they were entitled to collect on the respective notes. The superior court granted the defendants' motions to dismiss. The court of appeals affirmed, holding that Arizona's non-judicial foreclosure statute did not require presentation of the original note before commencing foreclosure proceedings. The Supreme Court vacated the court of appeals and affirmed the superior court's orders, holding that Hogan was not entitled to relief because the deed of trust statutes impose no obligation on the beneficiary to "show the note" before the trustee conducts a non-judicial foreclosure.