This isn’t a fascinating opinion but it introduces law new to Arizona and also illustrates that it’s better late than never even if there’s really no excuse for late.

Lender financed the purchase of property and took a first deed of trust. Contractors then developed the property, noticing their mechanics’ liens appropriately. Lender then refinanced the loan twice (for the borrower’s LLC, to which he had by then transferred the property), taking new deeds of trust each time. Naturally, the L.L.C. then ran out of money to pay anybody. The question in this action to foreclose the mechanics’ liens is whether they have priority over the later deeds of trust.

Lender argued that they didn’t, under the doctrine of equitable subrogation. A perfectly good doctrine – except that it doesn’t apply here. You can’t be subrogated to yourself (the doctrine works when the refinancing comes from a new lender). Contractors presumably pointed that out in their responses to Lender’s motion for summary judgment, for its reply came up with a new argument: the doctrine of replacement. This is apparently not one Arizona appellate courts had dealt with yet. According to the Restatement, if lender and borrower modify or replace their agreement then the new mortgage/deed of trust can retain the priority of the old to the extent not materially prejudicial to junior lienholders. Why Lender hadn’t figured out what its case was before moving for summary judgment isn’t clear but the Court of Appeals accepted the reply as having raised the argument below. (It helped that Lender then moved for reconsideration, asking the trial court whether it had considered the replacement argument, and the court replied that it had considered everything.)

The opinion adopts the replacement doctrine. It holds that Lender has priority to the extent of the principal amount of the first loan (the refinancings were a little larger). Contractor’s argued that it couldn’t because the borrowers were technically different (borrower’s L.L.C. versus borrower himself); the court says that doesn’t make any difference, at least in this case.

(link to opinion)

The Court of Appeals holds that a school bus’s insurance covers students waiting to get on.

Two children were injured when a car ran into the back of the school bus they were in line to board. The Trust insures the school district, including the buses. Plaintiffs sought UIM coverage from the Trust policy. On cross motions for summary judgment, the trial court granted the Trust’s.

The Court of Appeals reverses, holding that waiting to board a school bus constitutes “using” the bus. By statute, all persons using, with permission, a vehicle are covered by its insurance.  “Using” has been held to include loading and unloading (no word on whether the Trust’s policy also said this, as most do). And the use of a specialized vehicle can depend on its purpose. One of the purposes of a school bus is to provide for the safety of students getting on and off  by using – as this one was at the time of the accident – its special lights; so, the students were using the bus’s specialized function of protecting them.

Though this isn’t the hardest issue in the world, this is a nice, clean opinion. The three footnotes are superfluous but short. It could have been done in fewer pages but we’ve learned to stop complaining about anything under ten.

(link to opinion)

An example of Rule 11 sanctions.

A homeowners’ association sued to foreclose its lien for, apparently, unpaid assessments on several lots. This appeal concerns banks that held first deeds of trust on some of the lots. The trial court granted them summary judgment because the statue specifically gives first deeds of trust priority over homeowners’ assessments. The court awarded Rule 11 sanctions. The homeowners filed motions for reconsideration and new trial, which the court denied. The homeowners appealed.

Substantively, they argued (again apparently; we never complain about terse opinions but since this one is sixteen pages long it’s hard to figure why the facts and issues are so briefly stated) that “first” deed of trust simply means recorded before their liens. The court says that it can’t mean that since the prior sentence of the statute already gives priority to all chronologically prior liens. The association then argued that the judgment was too broad because it covered lots the banks had no interest it. The court says that the argument is “confusing,” which may explain why the court’s explanation of it lacks crystalline clarity, but the court says that’s not what the judgment means.

In awarding sanctions the trial court found no basis for arguing that homeowners’ assessments took priority over first deeds of trust. The association argued that no precedent ruled out its statutory argument and that its title report said it had priority. As to the statute the court says that the argument was contrary to plain language; although the association’s brief used the “extend, modify, or reverse controlling law” argument the association had never suggested below that that’s what it was trying to do nor even, it seems, that the statute was uncertain enough to allow any such thing. And a title report does not “trump the law of the state.” (This is a useful reminder to those who don’t know or haven’t thought of it this way that title reports are a) not infrequently wrong and b) merely insurance policies against happenings that, as conditioned by policy language, occur with every third passing of Halley’s comet.)

Regarding the motion for new trial, the association had tried to amend it at oral argument. The trial court at first denied that, then told the association to file something in writing within five days, then – announcing that it had in the interim read the rule – ruled before the association could do so. The Rule (59) says that motions for new trial must be in writing and can be amended at any time before the ruling. The Court of Appeals says that allowing oral amendments would undermine the requirement of a writing. It also says that the trial court’s changing its mind wasn’t prejudicial because its minute entry said that the court had reviewed the entire file on its on initiative and found no error.

We were buying this opinion – until that last part. The trial court tells a guy he has five days to file, double-crosses him, but that’s okay, no error here – because the trial judge said so himself. On the other hand, context is everything; the association’s performance to that point hadn’t earned it the benefit of much doubt.

(link to opinion)