Thomas and Aubuchon Disbarred

Former Maricopa County Attorney Andrew Thomas and his former deputy, Lisa  Aubuchon, face disbarment as a disciplinary panel  handed down the toughest sanctions possible for ethical violations today amidst accusations of abuse of power for going after political foes with criminal prosecutions and investigations.  Sanctions will take place 30 days from today, but Thomas and Aubuchon are expected to appeal the decision.  Read more…

Texas Hospital (Legally?) Bans Obese Workers, But the Tide May Be Turning on This Weighty Issue

In a move sure to set off red-alarms for employment attorneys, a Texas hospital has banned obese workers with a body-mass index of 35 or more.  The body-mass index analysis has been used for more than 100 years, praised for its simplicity. While it may be an outdated and lenient way of measuring health, this means of screening potential hires is legal, for now, in Texas and most other states.  Still, you should expect a discrimination case to be brought against the hospital.  The tide is likely going to turn on this sensitive issue, as more and more Americans are considered obese these days.  In 2010, no state in the union had an obesity rate of less than 20%, and many had obesity rates of upwards of 30%.  Consider that in 1996, only sixteen years ago, no US state’s population of obese people was over 19%.  Canada recently held its first-ever conference on “weight-based” discrimination, calling “weight-ism” the last socially acceptable basis for discrimination.  If our neighbors to the North are any indication, the United States may soon be taking a different approach with employers who refuse to hire, or discriminate in more minute ways, based on obesity.

Arizona Immigration Law Challenge Is Set For Hearing June 4

ktar.com:  “The judge presiding over lawsuits challenging Arizona’s immigration enforcement law has set a hearing to consider a request by the law’s opponents to grant class-action status in their lawsuit that seeks to declare the law unconstitutional.”

For more information on the June 4 hearing, click here.

Department of Justice to Sue Sheriff Joe Arpaio

CNN.com:  The Justice Department is preparing to sue Arizona Sheriff Joe Arpaio, known internationally as “America’s toughest sheriff,” saying talks between the two sides have fallen through.

The Obama administration and Arpaio’s Maricopa County Sheriff’s Office had been in the midst of settlement talks, after the Justice Department accused it of systematically discriminating against Latinos.

As part of the settlement, the department wanted Arpaio to allow an independent monitor to oversee reforms at his office. The Justice Department called it a “key, non-negotiable requirement.”

To read the rest of the article, click here.

Update on Recent Developments in Arizona’s Foreclosure and Short Sale Laws

If you have been following my Real Estate Law Blog posts you may have already read about some of the recent legal developments related to foreclosures and short sales in Arizona.  However, in light of a new Court of Appeals case just decided last month, I felt it was time for a summary of these recent developments.

Construction Loans and Home Improvement Loans:

A ruling last month by the Arizona Court of Appeals  in the case of Helvetica Servicing Inc. v. Pasquan answers important questions in the law and may impact anti-deficiency protections for some people.  This case involved the refinance of an original purchase money loan, in which the borrower was loaned additional funds.  The additional funds were primarily used by the borrower: (1) to reconstruct a large portion of the home, and (2) for home improvements and related purposes.

The Court of Appeals ruled on several key issues that have been in dispute in Arizona. The Court laid out the following rules to follow when determining whether a refinanced loan or construction loan will be given purchase money status under Arizona law in certain situations and thus, afforded anti-deficiency protection in the judicial foreclosure context:

  • A refinance of a purchase money loan, whether by the original lender or a new lender, does NOT destroy purchase money protection to the extent the loan proceeds from the refinance are used to satisfy the underlying purchase money loan.
  • A construction loan given to borrower that is (1) secured by a deed of trust that covers both the land and the dwelling to be constructed on the land (provided the dwelling is a qualifying property under the anti-deficiency statute), and (2) actually used to construct the dwelling, will be afforded purchase money status and anti-deficiency protection under Arizona law.
  • Loan proceeds given to a borrower in a refinance that are clearly not used to satisfy an underlying purchase money loan may be traced, segregated and recovered in a deficiency action.  In other words, the lender can sue on the cash out portion of the loan.

The Court’s ruling in this particular case was in a judicial foreclosure deficiency context, but it provides guidance to borrowers and authority to lenders dealing with deficiency actions or actions on the junior note by junior lenders before or after a foreclosure sale by the senior lender. In other words, in cash out refinances or combined purchase money/HELOC loans in which the junior lender can trace the underlying purchase money and cash out components of the loan, the junior lender can sue on the cash out portion, but only on the cash out portion, of the loan.

As far as the Court’s treatment of home improvement loans, pool loans, and the like, the Court suggested that those loans would not get purchase money protection.  The Court noted that the lender’s right to sue on these types of loans will be determined on a case by case basis.

At this point, we must wait to see whether the Court of Appeals’ decision is appealed to Arizona’s Supreme Court, but this ruling does clear up some of the uncertainty and confusion regarding lender rights to pursue a borrower for a deficiency on a non-purchase money loan.

Note that the Court’s decision does not affect a lender’s or borrower’s rights in a trustee’s sale foreclosure — a lender that forecloses its deed of trust at a trustee’s sale will be barred from seeking a deficiency against the borrower as long as the property is a qualifying dwelling under the statute — the loan does NOT have to be a purchase money loan.

Occupancy Requirement Under Arizona’s Anti-Deficiency Law:

The rule in Arizona has been that if the property had not been occupied and used as a dwelling, the borrower would not get anti-deficiency protection.  As a result, lenders could pursue borrowers for a deficiency after a trustee’s sale or judicial foreclosure on homes under construction that had not been completed or occupied.  However, late last year, the Arizona Court of Appeals in M&I Marshall & Ilsley Bank v. Mueller expanded protections to borrowers who intended to occupy their new home, but were unable to do so.

In this case, a borrower took a construction loan to build a residence that, if it had been completed and actually utilized as a dwelling, would have received anti-deficiency protections after a trustee’s sale.  The borrower was unable to complete construction, however, and no one ever actually moved into the home.  The Court distinguished a prior holding of the Arizona Supreme Court and held that here, the borrower was a homeowner (as opposed to a commercial builder of residential properties as in the prior case), and the borrower had intended to occupy the dwelling upon completion of construction. This holding expands anti-deficiency protection to certain constructions loans and will be applied on a case by case basis.

Short Sales:

While short sale results have been improving, the law has not been clear regarding short sales and, therefore, which has led to a veritable minefield for the homeowner/borrower. However, a bill recently introduced in the Arizona House of Representatives, House Bill 2584, would bar lenders from seeking a deficiency against certain borrowers following completion of a short sale. The bill is intended to cover loans that would get anti-deficiency protection if the property were to go into foreclosure.  While some questions as to how the law will be applied need to be addressed, this law is a big step in the right direction.

Arizona Bill Reintroduced – Auto-glass Bill May Change The Direction Insureds Can Be “Steered”

A game-changing auto-glass bill under consideration by the Arizona Legislature is re-igniting a fresh wave of debate in that industry.  HB 2197 has been re-introduced to a new wave of resistance from Arizona’s largest auto glass repair and services provider.  HB 2197 was re-introduced because:

Abex.com: Currently, if motorists need auto-glass repair, they call their insurance companies and, depending on the insurer, may be referred to Safelite where a third-party administrator will send out an inspector. The vehicle owner then has a choice of shops to do the repair.

The Arizona bill would create a rotating list of repair shops, and the consumer would be given a choice of three providers to use. If the bill becomes law, Arizona would be the only state with a rotating list.

(for the full article, see the Arizona Builders Exchange)

One aspect of this development for consumers is that Chandler, which houses 600 Safelite employees, may see one of its major local business sources downsized.  While 600 is a large number, Arizona is sustaining an economic recovery despite a recent similarly-sized General Dynamics layoff and a number of other such reductions in force recently in Arizona.  Proponents of HB 2197 include the Arizona Auto Glass Association and say it would preserve consumer choice, level the playing field and increase competition in the state’s industry.  Safelite contends that the bill amounts to industry meddling.

Read more about the debate in the Arizona auto-glass industry here.

 

Amnesty International Finds Arizona Prisons Abuse Solitary Confinement as Punishment

AZCentral.com: Arizona’s state prisons overuse solitary confinement in cruel, inhumane and illegal ways, particularly for mentally ill prisoners and juveniles as young as 14, the human-rights group Amnesty International charges in a report to be released today.

According to the report, which is to be delivered to the governor and state lawmakers, Arizona prisons use solitary confinement as a punishment more than most other states or the federal government.

Read more about this issue here.

Arizona Court of Appeals Case Extends Arizona Home Buyers Deficiency Judgment Protection

Arizona Republic:  “Homeowners do not lose their legal protections against being sued for debt after foreclosure just because they have refinanced a mortgage, the state Court of Appeals has ruled.  In a unanimous decision, the judges overturned a lower- court ruling that said Michael and Kelly Pasquan are liable for more than $1.9 million. That is the difference between what they owed on their mortgage and the value of the home when sold.”

Arizona Bills Target Landlord Tenant Laws

Arizona Republic:  “The Arizona Legislature this year is changing laws regulating landlords.  Gov. Jan Brewer signed one of the bills into law this week. The Legislature is expected to pass two others in coming weeks. Supporters say the measures are intended to fix problems with the Arizona Residential Landlord and Tenant Act. Opponents say they benefit landlords and hurt tenants. . . . Brewer signed HB 2129 into law Tuesday. It says that if a tenant has notified a landlord of needed repairs and for some reason the landlord has to come back to the unit a second time”

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