## Facts

- The Vonks sold 160 acres in Cochise County, Arizona, to the Dunns for $28,000; the Dunns paid $4,000 down and executed a $24,000 promissory note at 8% secured by a mortgage.
- The note required monthly payments due on the first of each month, with a 10-day grace period running without notice.
- The mortgage required the Dunns to pay property taxes and allowed the Vonks, at their election, to accelerate the debt and foreclose upon delinquency in installments or taxes; the documents also provided for attorney’s fees and costs in collection.
- After several years of timely payments, the Dunns made late payments in early 1986; the Vonks sent a letter demanding timely payments and payment of delinquent taxes, after which the Dunns paid the taxes and resumed timely payments.
- In February 1987, the Dunns’ bank mistakenly dishonored their monthly payment check as “insufficient funds.”
- The Vonks’ attorney discovered $66 in unpaid November 1986 property taxes and, without contacting the Dunns, filed a foreclosure action on February 27, 1987, alleging default based on the February installment and delinquent taxes.
- After suit was filed, the Dunns obtained confirmation from their bank that the dishonor was a bank error; they also learned of the tax delinquency only after the foreclosure action began.
- By the time of suit, the Dunns had paid nearly 35% of the purchase price.

## Issues

1. Whether enforcement of a mortgage acceleration clause is subject to equitable defenses, permitting a court to deny acceleration and foreclosure when enforcement would be unconscionable, oppressive, or inequitable.
2. Whether the record presented genuine disputes of material fact on unconscionability or oppression that precluded summary judgment for foreclosure.

## Decision

- The Arizona Supreme Court held that equitable principles apply to the enforcement of mortgage acceleration clauses.
- The Court held that genuine issues of material fact existed as to whether acceleration and foreclosure under these circumstances could be unconscionable or oppressive.
- The Court vacated the court of appeals’ decision, reversed the trial court’s summary judgment of foreclosure, and remanded for further proceedings.

## Legal Principles

- Foreclosure is an equitable remedy; even when a contractual default exists, a court may deny acceleration or foreclosure when enforcement would be unconscionable, oppressive, or otherwise inequitable under all the circumstances.
- Equitable defenses may limit a mortgagee’s ability to accelerate, including considerations such as the nature and extent of the default, the mortgagor’s accrued equity, the mortgagee’s conduct, and the relative hardship to the parties.
- Summary judgment is improper when reasonable fact-finders could differ on whether acceleration and foreclosure constitute unconscionable or oppressive enforcement, particularly where the alleged default is minor or readily curable and the borrower has substantially performed.

## Conclusion

The court reaffirmed that mortgage acceleration clauses are generally enforceable but remain subject to equitable control, and it required fact-finding on whether foreclosing based on a bank-caused dishonor and a small, undisclosed tax delinquency was unconscionable or oppressive.


Vonk v. Dunn, 775 P.2d 1088 (Ariz. 1989)