                                  IN THE

    SUPREME COURT OF THE STATE OF ARIZONA
  BMO HARRIS BANK, N.A., AS SUCCESSOR TO M&I MARSHALL & ILSLEY
                              BANK,
                        Plaintiff/Appellant,

                                     v.

  WILDWOOD CREEK RANCH, LLC; SHAUN F. RUDGEAR AND KRISTINA B.
                RUDGEAR, AS HUSBAND AND WIFE,
                     Defendants/Appellees.

                            No. CV-14-0101-PR
                           Filed January 23, 2015

          Appeal from the Superior Court in Maricopa County
          The Honorable Colleen L. French, Judge Pro Tempore
                         No. CV2011-021586
                   REVERSED AND REMANDED

              Opinion of the Court of Appeals, Division One
                 234 Ariz. 100, 317 P.3d 641 (App. 2014)
                               VACATED

COUNSEL:

Jeffrey J. Goulder (argued), James E. Holland, Jr., Stefan M. Palys, Stinson
Leonard Street LLP, Phoenix, for BMO Harris Bank, N.A.

Geoffrey S. Kercsmar (argued), Julia A. Guinane, Kercsmar & Feltus PLLC,
Scottsdale, for Wildwood Creek Ranch, LLC and Shaun and Kristina
Rudgear

CHIEF JUSTICE BALES authored the opinion of the Court, in which VICE
CHIEF JUSTICE PELANDER and JUSTICES BERCH, BRUTINEL, and
TIMMER joined.

CHIEF JUSTICE BALES, opinion of the Court:

¶1            Arizona’s residential anti-deficiency statute, A.R.S. § 33-
814(G), applies to certain property utilized for a dwelling. We hold that the
                  BMO V. WILDWOOD CREEK RANCH
                         Opinion of the Court

statute does not bar a deficiency judgment against an owner of vacant
property. For § 33-814(G) to apply, a dwelling must have been completed.

                                         I.

¶2            Shaun and Kristina Rudgear own Wildwood Creek Ranch,
LLC. In 2006, the Rudgears, through Wildwood, borrowed $260,200 from
the predecessor to BMO Harris Bank to fund construction of a home on a
vacant 2.26-acre lot. The loan was secured by a deed of trust and personally
guaranteed by the Rudgears. Construction of the home never began and
the lot remained undeveloped.

¶3           Wildwood renewed the note in 2009 and then defaulted in
2011. BMO foreclosed on the property via a trustee’s sale. A third party
successfully bid $31,100 for the property, and BMO thereafter sued
Wildwood and the Rudgears for the deficiency.

¶4           The parties cross-moved for partial summary judgment. The
Rudgears argued that they intended to use the completed home as their
primary residence and were thus protected from deficiency liability under
§ 33-814(G) and M & I Marshall & Ilsley Bank v. Mueller, 228 Ariz. 478, 268
P.3d 1135 (App. 2011) (applying anti-deficiency statute when borrower
intended to eventually occupy a partially constructed home on the
property). BMO countered by noting that the Rudgears (through
Wildwood) indicated in the 2009 loan renewal documents that the loan’s
primary purpose was real estate investment. BMO also pointed out that the
Rudgears had purchased other lots for development and that the related
loan documents indicated that each property would be the Rudgears’
primary residence.

¶5            The superior court granted summary judgment in favor of
Wildwood and the Rudgears, finding that the Rudgears intended to use the
property for a single-family residence and thus qualified for anti-deficiency
protection. The court of appeals reversed, holding that the anti-deficiency
protection did not apply because, irrespective of the Rudgears’ intent, the
lot was vacant and thus was not being utilized for a dwelling. BMO Harris
Bank, N.A. v. Wildwood Creek Ranch, LLC, 234 Ariz. 100, 102 - 03 ¶ 11, 317
P.3d 641, 643 - 44 (App. 2014).



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                   BMO V. WILDWOOD CREEK RANCH
                          Opinion of the Court

¶6            We granted review because the applicability of § 33-814(G)’s
anti-deficiency provision is a recurring issue of statewide importance. We
have jurisdiction pursuant to Article 6, Section 5(3) of the Arizona
Constitution and A.R.S. § 12-120.24.

                                       II.

¶7            We review de novo a grant of summary judgment, viewing
the facts and reasonable inferences in the light most favorable to the non-
prevailing party. Engler v. Gulf Interstate Eng’g, Inc., 230 Ariz. 55, 57 ¶ 8, 280
P.3d 599, 601 (2012). We also review de novo issues of statutory
interpretation. Ariz. Citizens Clean Elections Comm’n v. Brain, 234 Ariz. 322,
325 ¶ 11, 322 P.3d 139, 142 (2014).

¶8            Our legislature adopted the deed of trust framework in 1971
as an alternative to judicial foreclosures. In re Krohn, 203 Ariz. 205, 208
¶ 10, 52 P.3d 774, 777 (2002). Under the deed of trust statutes, foreclosure
occurs extra-judicially, through the trustee’s power of sale. A.R.S. § 33-807.
Once trust property is sold at a trustee’s sale, the statutes limit the lender’s
ability to recover a deficiency judgment against the borrower. Id. § 33-
814(G); cf. § 33-729 (providing anti-deficiency protection for purchase
money mortgages). Our anti-deficiency laws serve to prevent artificial
deficiencies resulting from forced sales and to protect borrowers from
losing other assets to foreclosure. CSA 13-101 Loop, LLC v. Loop 101, LLC,
703 Ariz. Adv. Rep. 32 at ¶ 13 (Dec. 31, 2014).

¶9           Section 33-814(G) bars deficiency judgments altogether for
most residential properties. The statute provides:

             If trust property of two and one-half acres or less which
             is limited to and utilized for either a single one-family or a
             single two-family dwelling is sold pursuant to the
             trustee’s power of sale, no action may be maintained to
             recover any difference between the amount obtained by
             sale and the amount of the indebtedness and any
             interest, costs and expenses.

A.R.S. § 33-814(G) (emphasis added).



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                   BMO V. WILDWOOD CREEK RANCH
                          Opinion of the Court

¶10           By its terms, the statute applies only to property that is
“utilized for either a single one-family or a single two-family dwelling.”1
The statute does not define “dwelling,” though we have recognized that the
word “is susceptible to several interpretations, depending on the context of
its use.” Mid Kan. Fed. Sav. & Loan Ass’n of Wichita v. Dynamic Dev. Corp.,
167 Ariz. 122, 128, 804 P.2d 1310, 1316 (1991).

¶11           In Mid Kansas, we addressed whether § 33-814(G) applied to
a residential developer whose encumbered trust properties had each been
improved by “a substantially finished residence.” Id. at 124, 804 P.3d at
1312. We held first that, so long as the subject property fits within the
statutory definition, the mortgagor’s identity is irrelevant. Id. at 128, 804
P.2d at 1316.

¶12            We observed that the “principal element” in the varied
definitions of “dwelling” is “the purpose or use of a building for human
abode, meaning that the structure is wholly or partially occupied by
persons lodging therein at night or intended for such use.” Id. (emphasis in
original) (internal quotation marks omitted). The structure must also be
suitable for residential use. See Smith v. Second Church of Christ, Scientist, 87
Ariz. 400, 405, 351 P.2d 1104, 1107 (1960) (“A dwelling is, of course, a
building suitable for residential purposes.”).

¶13            Mid Kansas then considered whether the property was
“utilized for” a single one- or two-family home. 167 Ariz. at 128 - 29, 804
P.2d at 1316 - 17. We approvingly cited a court of appeals decision holding
that the statute applied to an investment condominium that was used
occasionally both by the owners and third-party renters. Id. (citing N. Ariz.
Props. v. Pinetop Props. Grp., 151 Ariz. 9, 12, 725 P.2d 501, 504 (App. 1986)).
Thus, a property can be “utilized for” a dwelling even when the structure
is not the borrower’s primary residence.




1The legislature recently amended A.R.S. § 33-814 to clarify that subsection
(G) does not apply to trust property that was (1) developed for commercial
resale to a third party, (2) never substantially completed, or (3) never used
as a dwelling. A.R.S. § 33-814(H). The amendment, however, does not
apply to deeds of trust that originated on or before December 31, 2014, id.,
and so does not guide our analysis here.
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                   BMO V. WILDWOOD CREEK RANCH
                          Opinion of the Court

¶14           But the property in Mid Kansas was not “utilized for” a
dwelling:

               In contrast to the Northern Arizona Properties case, the
       property in question here had never been used as a dwelling,
       and was in fact not yet susceptible of being used as a dwelling.
       There is a difference between property intended for eventual
       use as a dwelling and property utilized as a dwelling. We
       hold that commercial residential properties held by the
       mortgagor for construction and eventual resale as dwellings
       are not within the definition of properties “limited to” and
       “utilized for” single-family dwellings.

Id. at 129, 804 P.2d at 1317 (emphasis in original).

¶15            Our holding in Mid Kansas clarified, for purposes of the anti-
deficiency statute, both what constitutes a “dwelling” and when property
is “utilized for” a dwelling. A structure is a “dwelling” if it is suitable for
residential purposes and a person resides in the structure, or the structure
is intended for such use. Id. at 128, 804 P.2d at 1316. Thus, a property
contains a “dwelling” for purposes of the anti-deficiency statute when a
borrower has purchased but not yet occupied a home, given that the
structure is suitable and intended for human abode. See id.

¶16             Although the intended use of a completed building is relevant
in determining if it is a dwelling, an intent to eventually construct a
building does not determine whether property is being “utilized for” a
dwelling. We did state in Mid Kansas that “property is not utilized as a
dwelling when it is unfinished, has never been lived in, and is being held
for sale to its first occupant by an owner who has no intent to ever occupy
the property.” Id. at 129, 804 P.2d at 1317. But our noting the developer’s
lack of intent to occupy the property in Mid Kansas does not suggest that
property may be “utilized for” a dwelling merely because a borrower
intends to construct and occupy a home there. Indeed, Mid Kansas
expressly observed that “[t]here is a difference between property intended
for eventual use as a dwelling and property utilized as a dwelling.” Id.

¶17          Our comments in Mid Kansas regarding the role of intent
were somewhat imprecise and have caused some confusion. To clarify, we
reaffirm the distinction noted in Mid Kansas between property that is

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                  BMO V. WILDWOOD CREEK RANCH
                         Opinion of the Court

intended for eventual use as a dwelling and property utilized for a
dwelling. The latter requires that a residential structure have been
completed. Vacant property is not being utilized for a dwelling even if the
borrower intends someday to construct and occupy a home there. This
interpretation comports with both our analysis in Mid Kansas and the
statutory text, which speaks in the present tense (“is . . . utilized for”).
A.R.S. § 33-814(G).

¶18           For purposes of § 33-814(G), a residential structure may
qualify as a “dwelling” before it is occupied, see supra ¶ 15, but trust
property is not being “utilized for” a dwelling until a residential structure
is completed.

                                    III.

¶19         Under these principles, the Rudgears are not entitled to § 33-
814(G)’s anti-deficiency protection: the trust property remained
undeveloped and a dwelling was never completed.

¶20          This conclusion conflicts with language in Mueller. Relying
on Mid Kansas’s observation that the borrower there never intended to
occupy the property, the court of appeals in Mueller held that the anti-
deficiency statute applied to trust property containing a partially
completed home because the borrower intended to live in it upon its
completion. Mueller, 228 Ariz. at 480 ¶ 9, 268 P.3d at 1137. Mueller’s
emphasis on intent arguably would extend anti-deficiency protection to
owners of a vacant lot so long as they intend to build and eventually live in
a residence.

¶21           In applying the anti-deficiency statute to an unfinished
dwelling, the court in Mueller cited two policy concerns. First, the court
reasoned that if the statute’s protections turn on whether a structure is
occupied, borrowers facing foreclosure would be induced to camp out in
unfinished structures so they could claim to be “utilizing” the property as
a dwelling. Id. at 480 ¶ 10, 268 P.3d at 1137. Second, it seems unfair that a
borrower who lives in a completed dwelling for a day would be entitled to
anti-deficiency protection while a homeowner who has yet to move in
would not. Id.



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                  BMO V. WILDWOOD CREEK RANCH
                         Opinion of the Court

¶22           But neither of these concerns is warranted. The first scenario
cannot occur given our holding that there must be a completed structure on
the property suitable for dwelling purposes. And in the second scenario,
even the homeowner who has not yet moved into the completed residence
would be entitled to anti-deficiency protection under our interpretation of
the statute. See supra ¶¶ 15, 17. We overrule Mueller insofar as it conflicts
with our reasoning in this case.

                                    IV.

¶23           We reverse the judgment of the superior court and remand
the case to that court for entry of partial summary judgment in favor of
BMO, vacate the opinion of the court of appeals, and award attorney fees
to BMO pursuant to A.R.S. § 12-341.01.




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