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CSA 13-101 Loop, LLC v. Loop 101, LLC
Arizona Supreme Court
341 P.3d 452, 236 Ariz. 410 (2014)
MidFirst Bank loaned Loop 101, LLC (Loop) (defendant) $15.6 million to build an office building. The promissory note was secured by a deed of trust and guaranteed by four individuals. Loop and the guarantors expressly waived their statutory right to have the fair market value of the property credited against the amount owed on the note if a deficiency judgment occurred. When $11.2 million was owed on the loan, Loop defaulted, and MidFirst initiated a nonjudicial foreclosure. CSA 13-101 Loop, LLC (CSA) (plaintiff) was assigned MidFirst Bank’s rights under the loan and purchased the property at the foreclosure sale for $6.15 million although the property’s fair market value was $12.5 million. CSA then sued Loop and the guarantors for a $5 million deficiency judgment that equaled the amount remaining on the loan minus the purchase price. Loop and the guarantors counterclaimed against CSA for breach of the duty of good faith and fair dealing. CSA moved to dismiss because the note expressly waived the right to offset the amount owed with the fair market value. The superior court denied this motion, holding that parties may not waive this right, and ruled that no deficiency existed because the property’s fair market value was greater than the amount owed on the loan. The court of appeals affirmed this holding. CSA appealed.
Rule of Law
Holding and Reasoning (Bales, C.J.)
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