Two years ago, in Parkway Bank
& Trust Co. v. Zivkovic, the Arizona Court of Appeals held that borrowers
cannot prospectively waive Arizona’s antideficiency protections. In doing so, however, the Court expressly
declined to consider whether guarantors receive similar protection.
On May 28, 2015, the Arizona Court of
Appeals answered this decades-old question in Arizona
Bank & Trust v. James R. Barrons Trust, et al., holding that
guarantors, unlike borrowers, can waive the antideficiency protections of A.R.S.
§ 33-814(G). The decision is
consistent with the stated purpose of Arizona’s antideficiency statutes—“to
protect ‘homeowners’ from deficiency judgments,” not guarantors of business
loans, Long
v. Corbet, and brings further clarity to the real-estate lending
industry.
But questions remain. For example, what about guarantors who haven’t
waived antideficiency protections? Can
lenders pursue deficiency judgments against them? Barrons
Trust doesn’t answer those questions. In its analysis, the Barrons Trust court assumed, without deciding, that guarantors
qualify for antideficiency protections under A.R.S. § 33-814(G). And what about the “resident guarantor” scenario,
i.e., where an LLC acts as borrower, but its sole member (or members) guarantee
the loan to the LLC and then reside in the house that serves as the collateral
for the loan? Barrons Trust doesn’t address this potential scenario. Would it make a difference? In light of these and other unanswered
questions, there is little doubt that Arizona’s antideficiency statutes, and
the cases interpreting them, will continue to generate litigation in the years
to come.
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