## Facts

- Loop 101, LLC borrowed \$15.6 million from MidFirst Bank in February 2007 to construct an office building.
- The loan was secured by a deed of trust, and four individuals (including trustees of a family trust) guaranteed payment.
- The promissory note, deed of trust, and guarantees contained provisions purporting to waive the statutory fair-market-value credit in A.R.S. § 33-814(A).
- Loop defaulted in June 2009 with nearly \$11.2 million outstanding.
- MidFirst assigned its rights under the loan documents to CSA 13-101 Loop, LLC.
- At the trustee’s sale, CSA purchased the property with a \$6.15 million credit bid.
- CSA sued Loop and the guarantors for an alleged deficiency of about \$5 million plus interest.
- Loop and the guarantors asserted claims against CSA and brought a third-party claim against MidFirst for breach of the implied covenant of good faith and fair dealing.
- After an evidentiary hearing, the superior court determined the property’s fair market value was \$12.5 million.

## Issues

1. Whether parties may prospectively waive the right under A.R.S. § 33-814(A) to have the trust property’s fair market value credited against the debt in a deficiency action after a trustee’s sale.
2. Whether the statutory fair-market-value protection applies to guarantors as “judgment debtors” under A.R.S. § 33-814(A).

## Decision

- The Arizona Supreme Court held that parties may not prospectively waive the fair-market-value provision of A.R.S. § 33-814(A).
- The Court ruled the waiver provisions in the note, deed of trust, and guarantees were unenforceable as contrary to Arizona public policy embodied in the statute.
- Because the fair market value found by the superior court (\$12.5 million) exceeded the debt, no deficiency existed and CSA was not entitled to a deficiency judgment.
- The Court vacated the court of appeals’ decision in part and affirmed the superior court’s judgment.

## Legal Principles

- A.R.S. § 33-814(A) requires that, in a deficiency action following a trustee’s sale, the debtor is entitled to a credit equal to the greater of the sale price or the property’s fair market value.
- The statutory fair-market-value credit under A.R.S. § 33-814(A) applies to guarantors as well as primary obligors when they are “judgment debtors” in the deficiency action.
- Contract terms are generally enforceable unless prohibited by law or contrary to public policy; A.R.S. § 33-814(A) reflects a public policy against inflated deficiencies and limits private agreements that would eliminate the statutory protection in advance.
- Statutory silence on advance waiver, considered in context with related statutes that expressly permit waiver, supported treating A.R.S. § 33-814(A) as nonwaivable prospectively.

## Conclusion

Arizona law does not permit advance contractual waivers of the fair-market-value credit in A.R.S. § 33-814(A) in deficiency actions after trustee’s sales, and applying that mandatory credit here eliminated any deficiency.


CSA 13-101 Loop, LLC v. Loop 101, LLC, 236 Ariz. 410, 341 P.3d 452 (Ariz. 2014)