First Fin. Bank, N.A. v. Claassen, 1 CA–CV 14–0123.

• Court: Court of Appeals of Arizona
• Citation: 357 P.3d 1216,719 Ariz. Adv. Rep. 30,238 Ariz. 160
• Docket Number: No. 1 CA–CV 14–0123.,1 CA–CV 14–0123.
• Parties: FIRST FINANCIAL BANK, N.A., as successor in interest to the Federal Deposit Insurance Corporation, as receiver of Irwin Union Bank F.S.B., Plaintiff/Appellee, v. Theodore F. CLAASSEN, an unmarried man, Defendant/Appellant.
• Decision Date: 13 August 2015

238 Ariz. 160
357 P.3d 1216
719 Ariz. Adv. Rep. 30

FIRST FINANCIAL BANK, N.A., as successor in interest to the Federal Deposit Insurance Corporation, as receiver of Irwin Union Bank F.S.B., Plaintiff/Appellee
v.
Theodore F. CLAASSEN, an unmarried man, Defendant/Appellant.

No. 1 CA–CV 14–0123.

Court of Appeals of Arizona, Division 1.

Aug. 13, 2015.

357 P.3d 1217

Minkin & Harnisch, PLLC, Phoenix By Ethan B. Minkin, Sara V. Ransom, Andrew A. Harnisch, Counsel for Plaintiff/Appellee.

Brooks & Affiliates, PLC, Mesa By David P. Brooks, Spenser W. Call, Counsel for Defendant/Appellant.

Judge JON W. THOMPSON delivered the Opinion of the Court, in which Presiding Judge ANDREW W. GOULD and Judge MAURICE PORTLEY joined.

OPINION

THOMPSON, Judge:

238 Ariz. 161

¶ 1 This appeal follows a bench trial on a deficiency action following a judicial foreclosure. Appellant Theodore F. Claassen (Claassen) asserts that the trial court erred in determining that there was a nonpurchase, non-construction, money deficiency of $1,119,676.67 under Arizona Revised Statutes (A.R.S.) § 33–729(A) (2014) which successor-lender First Financial Bank, N.A. (Bank) was entitled to pursue.¹ We agree as to $914,403.33 of the damages and, therefore, reverse in part and remand.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 The real property at issue is in a planned community in Paradise Valley. In April 2008, Claassen was extended credit in an original principal amount not to exceed $5,500,000 (loan) for the construction of a single family dwelling. Of that $5,500,000 approximately $1.7 million was used to satisfy the original purchase money loan and the balance was placed into a construction loan account from which draws were to be made. The total amount Bank loaned Claassen was over $3,000,000. A promissory note was executed and the loan was secured by a deed of trust. In October 2008, the loan was modified to change the payment terms and completion date. Construction on the property was never completed. After October 2009, Claassen failed to make any payments and the Bank notified Claassen of the default in April 2010. Bank filed a complaint for breach and judicial foreclosure in December 2010² ; the debt at that time was at least $3,056,144.59 plus accruing interest, costs, fees, and attorneys' fees. Bank further alleged other material actions, or inactions, by Claassen that likewise put him in default including his failure to provide current financials as requested by the FDIC. Claassen in his answer asserted counterclaims against Bank for breach of contract, breach of covenant of good faith and fair dealing, and fraud.

¶ 3 A trial date was set for July 2013. Claassen did not participate in the preparation of the joint pretrial statement.³ In the pretrial statement, Bank asserted that if the property were allowed to be sold at a trustee's sale, based on the appraisal of the fair market value of $750,000, there would be a remaining deficiency in excess of $3,000,000. The Bank sought a deficiency judgment in the amount of $1,119,676.67. Specifically:

a. $205,273.43 in interest-only payments paid out of a reserve account during the construction period;

b. $50,000 mandatory construction deposit paid to the homeowner's association before building commenced;

c. $706,270.78 of accrued interest; and

d. $158,132.46 in late fees on the loan.

¶ 4 A bench trial proceeded without Claassen or his counsel. The court found that Claassen had had appropriate notice of the proceedings “and has chosen not to participate.” After receiving evidence, the trial court dismissed Claassen's counterclaims for

238 Ariz. 162

357 P.3d 1218

lack of proof and entered a judgment of judicial foreclosure. The court additionally stated “The Court finds that based on the total amount owed, there is a non-purchase, non-construction money deficiency in the amount of $1,119,676.67. Upon conclusion of the foreclosure sale, any amount in excess of $710,000 [the fair market value] shall be credited to Defendant against the deficiency judgment.” The trial court awarded Bank attorneys' fees and costs in the amount of $255,753.72.

¶ 5 Claassen filed a Motion for New Trial or to Alter or Amend the Judgment. The basis for the motion was that the damages were not recoverable under the anti-deficiency statute and/or that the trial court erred in concluding that the majority of the damages were not purchase money sums. Claassen did not claim in that motion that the $205,273.43 in reserve interest payments was awarded in error.⁴

¶ 6 The trial court denied Claassen's Motion for New Trial. In its minute entry, the trial court mentioned Claassen's appearances at early court proceedings, and that Claassen's counsel withdrew in August 2012. After that point Claassen did not appear or participate in litigation, he did not participate in the hearing setting the trial date, in the trial management conference or in the preparation of the pretrial statement.⁵ On the legal question, the court stated it was aware of the “factual and legal issues concerning what amount of the deficiency was and what amount of the deficiency was within the scope of the anti-deficiency statute and what amount was not.” The court went on to say: “Mr. Claassen's motion argues that amounts included in the judgment were for purchase money or construction. These arguments raise evidentiary and legal issues that Mr. Claassen did not present at trial.” The court found his arguments waived for failure to raise them previously. Claassen filed a timely notice of appeal and we have jurisdiction.

DISCUSSION

¶ 7 Claassen raises two issues on appeal from the denial of his motion for a new trial:

a. Whether the trial court erred in ruling that accrued interest, late fees, and the construction deposit paid to the homeowner's association were non-purchase money sums as a matter of law; and

b. Whether the trial court erred in finding Claassen waived any argument regarding the deficiency because he did not raise it prior to the motion for new trial.

¶ 8 Our standard of review for denial of a motion for new trial is abuse of discretion. Suciu v. Amfac Distributing Corp., 138 Ariz. 514, 520, 675 P.2d 1333, 1339 (App.1983). We defer to the trial court's factual findings unless clearly erroneous.See Ahwatukee Custom Estates Mgmt. Ass'n v. Turner, 196 Ariz. 631, 634, ¶ 5, 2 P.3d 1276, 1279 (App.2000). We review the interpretation and application of statutes de novo. Schwarz v. City of Glendale, 190 Ariz. 508, 510, 950 P.2d 167, 169 (App.1997) (citation omitted). A trial court abuses its discretion if it commits an error of law. Flying Diamond Airpark, LLC v. Meienberg, 215 Ariz. 44, 50, ¶ 27, 156 P.3d 1149, 1155 (App.2007).

¶ 9 The anti-deficiency statute, A.R.S. § 33–729, reads in relevant part:

A. Except as provided in subsections B and C of this section, if 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

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