Conflicts of Laws, Deficiency Actions, and Statutes of Limitations – Oh My!

By: Ben Reeves

What law governs a deficiency action if the choice-of-law provisions in the note and deed of trust conflict? The Arizona Court of Appeals answered that very question in ZB, N.A. v. Hoeller, No. 1 CA-CV 16-0071 (Ct. App. April 15, 2017).  It turns out, the note controls.

The Facts

In ZB, ZB, N.A. (ZB), a Utah bank, lent money to the Hoellers to purchase a commercial property in Missouri.  The note included a choice-of-law provision stating that Utah law governed the debt.  The deed of trust securing the commercial property, however, provided that Missouri law controlled “procedural matters related to the perfection and enforcement of [ZB’s] rights and remedies against the [p]roperty.”  In 2012, the Hoellers defaulted, and the bank recovered the property through a trustee’s sale.… Read More »

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Guarantors’ “Lost Profits” Completely Offset Lender’s Deficiency Claim

By: Ben Reeves

Believe it or not, lenders can breach loan agreements too…and when they do, there can be significant consequences. In Great Western Bank v. LJC Dev., LLC, 726 Ariz. Adv. Rep. 21 (Ariz. Ct. App. Nov. 10, 2015), the Court of Appeals affirmed that guarantors’ “lost profits” resulting from the lender’s breach of a loan agreement completely offset the amount owed under the guaranty. Much can be learned from this unusual outcome, so please continue reading for an analysis of the facts and legal principles of this case.

The Loan Agreements

In Great Western Bank, the bank entered into an acquisition and development loan (the “A&D Loan”) with Cedar Ridge Investments, LLC (“Borrower”) to allow Borrower to acquire and begin the development of infrastructure for a fifty-home subdivision in Flagstaff, AZ to be known as Cedar Ridge.… Read More »

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