Fallacy:
There are no published appellate cases in Arizona that change the
Bank One v. Beauvais case as far as what "all or part" of the purchase price means.
You stated:
Quote:
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In October 2006, we received an offer from GMAC to refinance into a conventional loan. Their offer was to refinance $170,000 as a 30 year fixed, and to take out a 2nd mortgage to cover the remaining $5,000 plus anything extra if we wanted to make home improvements.
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If you were facing a lawsuit and had to defend the loan's purchase money status, the unpublished decision below seems to support the position you would argue--that
part of the loan was for the purchase price.
In finding that the loan in the case below was
not purchase money, the court stated:
Quote:
The record here contains no evidence suggesting that any
part of this loan was used to purchase the property at issue.
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I am presuming that you could offer evidence that $5,000 of your loan was used to purchase your property.
Moreover, the court also reaffirmed its position of following North Carolina law that a contemporaneous transaction was a requirement (bolded in case below):
Quote:
only if it is “made as part of the same transaction
in which the debtor purchases land, embraces the land so purchased,
and secures all or part of its purchase price.”
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I'm presuming your second was made as one transaction and was not bifurcated into purchase money and non-purchase money.
Judge Hall, a conservative Republican judge (pro-big money) in Division One of the Arizona Court of Appeals decided this case in February 2008. Hopefully, it will shed some light on the issue.
IN THE COURT OF APPEALS
STATE OF ARIZONA
DIVISION ONE
AMERICAN GENERAL FINANCIAL SERVICES,
Plaintiff/Appellee,
v.
DONALD L. DINWIDDIE and LYDIA A.
DINWIDDIE, husband and wife,
Defendants/Appellants.
)))))))))))
1 CA-CV 07-0427
DEPARTMENT A
MEMORANDUM DECISION
(Not for Publication -
Rule 28, Arizona Rules
of Civil Appellate
Procedure)
FILED 2-26-08
Appeal from the Superior Court in Yuma County
Cause No. S1400CV0200600261
The Honorable Tom C. Cole, Judge
AFFIRMED
Renaud Cook Drury Mesaros, PA Phoenix
By James L. Blair
Denise J. Wachholz
Attorneys for Plaintiff/Appellee
Gregory T. Torok Yuma
Attorney for Defendants/Appellants
H A L L, Judge
¶1 Defendants-appellants Donald and Lydia Dinwiddie appeal
the trial court’s decision granting summary judgment to plaintiffappellee
American General Financial Services (American General).
The trial court found that a loan from American General to the
Dinwiddies was not a purchase money loan and therefore American
¶5 American General filed suit against the Dinwiddies on
March 16, 2006, claiming an outstanding debt on the promissory note
of $25,507.10. American General filed a motion for summary
judgment, and the Dinwiddies filed a cross-motion. The Dinwiddies
2
General was not precluded by Arizona’s anti-deficiency statutes
from maintaining an action on the note for repayment of the debt.
For the following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 In June 1999, the Dinwiddies obtained a six-month
construction loan from Aztec Funding to construct a residence on
certain property. On December 3, 1999, the Dinwiddies obtained a
long-term loan from Downey Savings and Loan (Downey) secured by a
deed of trust on the property; they paid off the Aztec loan with
the proceeds from the Downey loan.
¶3 On January 27, 2000, the Dinwiddies obtained a loan from
American General for $19,728.71, secured by a second lien deed of
trust on the property. The Dinwiddies had previously taken out a
loan from American General for the purchase of consumer goods, and
that loan was consolidated with the second loan.
The money was
used to pay off the earlier loan, pay off several credit cards, and
buy insurance. A balance of $9,408.00 was paid in cash to the
Dinwiddies.
¶4 The Dinwiddies defaulted on the Downey loan, and Downey
foreclosed on the first deed of trust on August 2, 2002. The
Dinwiddies subsequently defaulted on the American General loan.
3
argued that the American General loan was a purchase money deed of
trust and that therefore, by statute, American General could not
sue on its note. Donald Dinwiddie submitted an affidavit in
support in which he avowed:
4. Downey Savings advised me that I
needed to arrange for financing through
another company in order to pay the cost
needed to finish the house. Otherwise, Downey
would not give me the long term financing to
pay Aztec.
5. I arranged for the financing to
finish the house with American General, the
plaintiff herein. . . . Without the financing
from American General I would not have been
able to keep the house, as I then would not be
able to obtain the long term financing.
Without that long term financing I could not
pay Aztec and Aztec would have foreclosed
against the house. About $9,480.00 of that
money was delivered to me to pay the
contractor for completion. The remainder was
paid to creditors who also funded completion
of the house.
6. I was able to retain this house and
the land upon which it was being built only
because I obtained the financing from American
General.
¶6 In reply, American General argued that the long-term
financing from Downey could not have depended on the Dinwiddies’
obtaining the loan from American General because the Dinwiddies
obtained the Downey loan almost two months before obtaining the
American General loan. American General also submitted the
affidavit of Maribel Rodriguez, the branch manager of the Yuma
Branch of American General. Her affidavit stated that the second
loan agreement with the Dinwiddies was intended to consolidate
4
consumer debts, including the prior American General loan, pay for
insurance, and provide for some cash, but was not for the purchase
of real property. The application for insurance from American
General dated January 27, 2000, includes as a comment: RVR CUST
WITH US WANTS TO CONSOL SOME BILLS.
¶7 Donald Dinwiddie submitted a second affidavit in which he
stated that in March 2000 he filed pleadings in Somerton Justice
Court demonstrating that he was in need of money to complete
construction of the house. He avowed that he completed that
construction with those funds. The attached pleading concerned a
dispute between the Dinwiddies and Aztec Funding. In Donald
Dinwiddie’s answer in that dispute, he stated that, when the first
construction loan ran out, Aztec Funding would not help.
This left me in a jam because no one would do
the long term financing unless the
construction was complete. This did mean that
if I could not keep making the payments of
$1,937.50 per month (and I couldn’t) and was
unable to finish the construction that Mr.
Holcom could foreclose on the loan. I had to
get the subcontractors to finish the
construction without payment until I was able
to get the long term financing.
In his affidavit, Dinwiddie also claimed that when he requested the
second loan from American General to complete construction of the
house, “they forced me to obtain a loan at a higher amount to
include the washer, dryer etc. They said I could not get any loan
for the construction without including the prior loan.”
5
¶8 At the oral argument on the cross-motions, the trial
court granted American General’s motion for summary judgment, as
follows:
The Court finds that the loan which is
the subject matter of this lawsuit is, in
fact, not a purchase money loan; that it was
for consumer items. It was for a number of
things but was not for purposes of a purchase
money obligation; it was not for purposes of a
construction loan.
The -- And I don’t think that that
applies under these circumstances because of
the delayed time in which the loan was
obtained, the matters that were included to be
paid by the loan, et cetera. I simply find
that the facts are not sufficiently in dispute
to cause this matter to go to trial and find
that the American General loan was not a
purchase money loan, and as a consequence,
plaintiff may sue on the underlying debt which
is the subject of this matter and that the
lawsuit is not subject to the anti-deficiency
statutes cited.
¶9 The trial court entered judgment in favor of American
General in the principal amount of $25,507.00 plus interest, costs
and attorneys’ fees. The Dinwiddies filed a timely notice of
appeal.
We have jurisdiction pursuant to Arizona Revised Statutes
(A.R.S.) section 12-2101(B) (2003).
DISCUSSION
¶10 Summary judgment must be granted when “there is no
genuine issue as to any material fact and [] the moving party is
entitled to judgment as a matter of law.” Ariz. R. Civ. P. 56(c).
Summary judgment should be granted “if the facts produced in
support of the claim or defense have so little probative value,
6
given the quantum of evidence required, that reasonable people
could not agree with the conclusion advanced by the proponent of
the claim or defense.” Orme School v. Reeves, 166 Ariz. 301, 309,
802 P.2d 1000, 1008 (1990). Consequently, a “scintilla” of
evidence or evidence creating the “slightest doubt” about the facts
may still be insufficient to withstand a motion for summary
judgment. Id. We view the facts and the inferences to be drawn
from those facts in the light most favorable to the party against
whom judgment was entered. Prince v. City of Apache Junction, 185
Ariz. 43, 45, 912 P.2d 47, 49 (App. 1996). In reviewing a motion
for summary judgment, we determine de novo whether any genuine
issues of material fact exist and whether the trial court properly
applied the law. Eller Media Co. v. City of Tucson, 198 Ariz. 127,
130, ¶ 4, 7 P.3d 136, 139 (App. 2000).
¶11 A creditor holding a deed of trust may choose to pursue a
nonjudicial foreclosure. If the trust property is up to two and
one-half acres and used for a one-family or two-family dwelling,
the creditor may not seek to recover the difference between the
amount of the debt and the amount paid at the sale. A.R.S. § 33-
814(G) (2007). Alternatively, the creditor holding a deed of trust
may choose to proceed judicially as with a mortgage either by a
judicial foreclosure or by waiving the security and suing on the
underlying promissory note. A.R.S. § 33-722 (2007); A.R.S. § 33-
814(E); Baker v. Gardner, 160 Ariz. 98, 106-07, 770 P.2d 766, 774-
75 (1988); Wells Fargo Credit Corp. v. Tolliver, 183 Ariz. 343,
7
345, 903 P.2d 1101, 1103 (App. 1995); Resolution Trust Corp. v.
Segel, 173 Ariz. 42, 43, 839 P.2d 462, 463 (App. 1992). In such a
case, the anti-deficiency statute for mortgages applies. Baker,
160 Ariz. at 106, 770 P.2d 774; Resolution Trust, 173 Ariz. at 44,
839 P.2d at 464. When the anti-deficiency statute applies, a
creditor may not elect to sue on the note because to allow a
creditor to obtain a judgment for the full amount of the debt would
eviscerate the legislative objective in enacting the antideficiency
statutes “to protect certain homeowners from the
financial disaster of losing their homes to foreclosure plus all
their other nonexempt property on execution of a judgment for the
balance of the purchase price.” Baker, 160 Ariz. at 101, 770 P.2d
at 769.
¶12 The anti-deficiency statute for mortgages, A.R.S. § 33-
729(A) (2007), states:
[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.
8
A.R.S. § 33-729(A). Therefore, if a deed of trust represents a
purchase money obligation for real property up to two and one-half
acres used for a one- or two-family dwelling, then the creditor may
not elect to sue on the note, but must rely on the security only.
A.R.S. § 33-729(A); Mid Kansas Fed. Sav. & Loan Ass’n of Wichita v.
Dynamic Dev. Corp., 167 Ariz. 122, 125-26, 804 P.2d 1310, 1313-14
(1991); Baker, 160 Ariz. at 106, 770 P.2d at 774.
¶13 In this case, the property securing American General’s
deed of trust has already been foreclosed by Downey, leaving
American General without the option of relying on the security.
Its only option to recover the debt owed is to sue on the
underlying promissory note. If, however, as the Dinwiddies’ claim,
the loan was a purchase money obligation, American General is
precluded from suing on the note by A.R.S. § 33-729.
¶14 The Dinwiddies argue that the loan fits the statutory
definition of purchase money in A.R.S. § 33-729(A) because it was
the third step of a three-step series of financial transactions by
which they obtained funds to purchase the real property and
construct a residence on the land. They further argue that their
use of part of the funds to pay personal debt does not alter the
purchase money nature of the funds.
¶15 Our goal in interpreting a statute is to find and give
effect to the intent of the legislature. Mail Boxes, Etc., U.S.A.
v. Indus. Comm’n, 181 Ariz. 119, 121, 888 P.2d 777, 779 (1995). In
determining legislative intent, we look first to the language of
9
the statute. Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., 177
Ariz. 526, 529, 869 P.2d 500, 503 (1994). If the statutory
language is unambiguous, we must give effect to the language and do
not use other rules of statutory construction in its
interpretation. Janson v. Christensen, 167 Ariz. 470, 471, 808
P.2d 1222, 1223 (1991).
¶16 A mortgage falls within the protection of A.R.S. § 33-
729(A) if it is “given . . . to secure a loan to pay all or part of
the purchase price, of a parcel of real property . . . .” The
plain language of the statue indicates that, to be a purchase money
security interest, the loan would have to have been used to pay all
or part of the purchase price of the property. We have previously
cited as supportive North Carolina’s view that a purchase money
interest exists
only if it is “made as part of the same transaction
in which the debtor purchases land, embraces the land so purchased,
and secures all or part of its purchase price.” Cely v. DeConcini,
McDonald, Brammer, Yetwin & Lacy, P.C., 166 Ariz. 500, 505, 803
P.2d 911, 916 (App. 1990) (quoting Dobias v. White, 80 S.E.2d 23,
26 (1954)). “Purchase money” has been defined as the “actual money
paid in cash or check initially for the property while the balance
may be secured by a mortgage and note calling for periodic
payments.” Black’s Law Dictionary 1235 (6th ed. 1990). “Purchase
money mortgage” has been defined as a “mortgage or security device
taken back to secure the performance of an obligation incurred in
the purchase of the property.” Id.
10
¶17
The record here contains no evidence suggesting that any
part of this loan was used to purchase the property at issue.1 The
Dinwiddies contend that the loan was for the purpose of finishing
construction of the residence, but assert that the loan qualifies
as a purchase money transaction because the loan was necessary to
complete the construction as part of the process of purchasing the
property and building their home. In support, they cite Bank One,
Arizona, N.A. v. Beauvais, 188 Ariz. 245, 934 P.2d 809 (App. 1997).
¶18 In Beauvais, the Beauvais obtained a $75,000.00 loan from
Bank One to exercise stock options, which were pledged as
collateral. Id. at 246, 934 P.2d at 810. The following year, they
applied to Bank One for a loan to purchase a new home. Id. They
obtained a loan that consolidated the loan for the home purchase
with the existing loan for the stock. Id. The consolidated loan
was secured by the stock and a deed of trust on the new residence.
Id. The Beauvais were unable to pay off the note when due and so
executed a third promissory note, the workout note, for the
balance; the consolidated loan was paid off with the new note. Id.
The Beauvais defaulted. Id. Bank One sued on the workout note,
arguing that it was not a purchase-money obligation because the
1 In fact,
the record contains no evidence that any of the
three loans was used in the purchase of the property. Donald
Dinwiddie’s declaration states that the Aztec Funding and the
Downey loans were construction loans; he makes no mention of the
purchase of the property. American General, however, appears to
concede in its reply to its motion for summary judgment that the
Downey loan was a purchase money loan. American General also
11
note evidenced a new loan made three years after the Beauvais
purchased their home and the loan was used to pay off existing
obligations. Id. at 247, 934 P.2d at 811. The trial court found
that the workout loan was an extension of the consolidated loan and
so it was a purchase money note and Bank One was precluded from
suing on the note. Id. Bank One appealed and this court affirmed.
Id. at 250, 934 P.2d at 814. After considering the purpose of the
anti-deficiency statutes, this court expressed the belief that “the
legislature did not intend that a loan would lose its character as
a purchase-money obligation when, as here, it is extended, renewed,
or the remaining portion of the original loan is refinanced and the
deed of trust on the property that was bought with the original
loan continues or is renewed.” Id. We found the workout note to
be a purchase money obligation. Id. at 251, 934 at 815.
¶19 Beauvais does not help the Dinwiddies. The American
General loan at issue was not a consolidation, extension, or
renewal of an earlier purchase money loan; it is independent of the
Aztec Funding and Downey loans. The earlier loan from American
General was used to pay for consumer goods. Consequently, the
current American General loan could be a purchase money loan only
if the loan itself meets that definition. The Dinwiddies claim
that the loan was used to pay for construction. They do not,
however, cite any authority that a construction loan constitutes a
states on appeal that the Dinwiddies obtained the Aztec Funding
loan for the purpose of acquiring the land.
12
purchase money obligation. We have previously noted that loans for
property improvement are not purchase money loans. Southwest Sav.
& Loan Ass’n v. Ludi, 122 Ariz. 226, 228, 594 P.2d 92, 94 (1979).
We therefore find that this loan is not a purchase money obligation
under A.R.S. § 33-729(A).
¶20 Even if funds used to construct a residence could qualify
as a purchase money obligation, the evidence submitted by the
Dinwiddies to show that the funds were used for that purpose was
insufficient to withstand summary judgment. An opponent to a
motion for summary judgment cannot merely state in an affidavit
that an issue of fact exists but must affirmatively show that
evidence is available to warrant a trial on that issue. Feuchter
A. v. Bazurto, 22 Ariz.App. 427, 429, 528 P.2d 178, 180 (1974).
¶21 With respect to the loan proceeds paid to the Dinwiddies,
Donald Dinwiddie avowed that the funds were given to him to pay the
contractor for completion of the house and to pay other creditors
“who also funded completion of the house.” Mr. Dinwiddie does not
actually state that he paid the funds to the contractor nor does he
identify the contractor or any other creditor to whom he asserts
the funds were given. He offers no receipts or statements in
support of his claim, and the record contains no indication that
any evidence is available to demonstrate that the funds were in
fact used to complete construction of the residence.
¶22 Mr. Dinwiddie also submitted as evidence his answer to a
small claims court complaint against him filed by Aztec Funding,
13
which he asserts supports his claim that he was in need of funds to
complete construction at the time he obtained the American General
loan. In the answer, Mr. Dinwiddie states that he had to have the
subcontractors complete construction without payment until he
obtained long-term financing. He obtained that financing through
the Downey loan on December 3, 1999. The answer is dated March 21,
2000, after the Dinwiddies obtained the American General loan. The
answer, however, does not refer to the American General loan and
does not suggest that further financing was necessary to complete
the residence after the Dinwiddies obtained the long-term
financing.
¶23 Thus, even if a construction loan could be construed as a
purchase money transaction within the protection of A.R.S. § 33-
729, the Dinwiddies have not presented evidence or shown evidence
is available sufficient to withstand summary judgment.
¶24 American General requests an award of attorneys’ fees on
appeal pursuant to A.R.S. § 12-341.01(A) (2003), which permits the
court to make a discretionary award of reasonable attorneys’ fees
to the successful party in any action arising out of contract.
After considering the factors outlined in Associated Indemnity
Corp. v. Warner, 143 Ariz. 567, 570, 694 P.2d 1181, 1184 (1985), we
grant American General’s request for reasonable attorneys’ fees
upon its compliance with Rule 21(a), Arizona Rules of Civil
Appellate Procedure.
CONCLUSION
14
¶25 The decision of the trial court is affirmed.
PHILIP HALL, Judge
CONCURRING:
SUSAN A. EHRLICH, Presiding Judge
G. MURRAY SNOW, Judge
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