Helvetica Servicing, Inc. v. PasquanAnnotate this Case
The Supreme Court held that a trial court should consider the totality of the circumstances surrounding a residential purchase loan and identify certain factors in determining whether a loan is a construction loan entitled to anti-deficiency protection or a home improvement loan not entitled to anti-deficiency protection.
Homeowners borrowed money from Desert Hills Bank to renovate and expand their property. Later, Homeowners borrowed money from Helvetica Servicing Inc. to pay off the Desert Hills loan. Homeowners' property secured the deed of trust. After Homeowners defaulted on the Helvetica loan, Helvetica sued to judicially foreclose. The trial court entered judgment for Helvetica and entered a deficiency judgment. Homeowners appealed, arguing that the Helvetica loan was entitled to anti-deficiency protection. The trial court ultimately found that the Desert Hills loan was a home improvement loan not entitled to anti-deficiency protection because Homeowners did not build a new home from scratch. The Supreme Court remanded the matter, holding (1) the "built from scratch" standard does not further the legislative objectives of Arizona's anti-deficiency statutes; (2) courts should consider the totality of the circumstances surrounding a loan when determining whether it is a home improvement or construction loan; and (3) the trial court did not make an independent factual determination as to whether the Desert Hills loan was a construction loan or a home improvement loan.