Mid Kansas Federal Savings and Loan Association v. Dynamic Development Corporation
Supreme Court of Arizona
804 P.2d 1310 (1991)
Dynamic Development Corporation (Dynamic) (defendant) took two loans from Mid Kansas Federal Savings and Loan (Mid Kansas) (plaintiff) to build spec houses; Mid Kansas foreclosed on the second, junior loan and purchased four unsold, unoccupied houses with a credit bid equal to the roughly $102,000 balance on that loan, worth far less than the houses' $556,000 market value. Rather than foreclose separately on the first, senior loan, Mid Kansas sued to recover the approximately $425,000 balance still owed on it directly from Dynamic. The trial court granted Mid Kansas summary judgment, but the court of appeals reversed based on Arizona's anti-deficiency statute, and Mid Kansas appealed.
Whether, if a mortgagee holding both junior and senior mortgages on a property forecloses on the junior mortgage and purchases the property at the foreclosure sale, the mortgagor's personal liability for the debt secured by the senior mortgage is discharged.