What is the name of your state (only U.S. law)? Arizona
Not sure this is the right forum, but I'll start here.
Long story, short. Financial advisor put me in a Deed of Trust, secured by a Promissory Note. I have the right to foreclose on the property per the Deed of Trust. However, the Promissory Note is invalid due to the Arizona laws concerning property less than 2 acres and residential use.
My question is whether or not I might have a case against the Financial Advisor for failing to understand the Arizona real estate laws, thus failing in his fiduciary(?)/ professional(?) duties and putting me in a situation where I was not protected as led to believe?
Invalid how? I have a Promissory Note secured by a Deed of Trust on a property less than 2 acres and residential in Arizona.
I think I know what you are referring to--the anti-defiency statute?
A.R.S. §33-729(A) in 1971 to limit the right of certain purchase money mortgagees to obtain a deficiency judgment if the security does not exceed two and one-half acres and is utilized as either a one-family or single two-family dwelling. For the purposes of A.R.S. §33-729(A), a "purchase money mortgage" is one given concurrently with a conveyance of real estate between the seller and the buyer, or given to secure a loan to pay all or part of the purchase price of the dwelling. When such a purchase money mortgage exists, A.R.S. §33-729(A) provides the following limitation:
…[T]he lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment…
This anti-deficiency statute expressly limits the purchase money mortgagee who initiates foreclosure to only those proceeds of the foreclosure sale. By its express terms, the statute applies only to actual foreclosure situations; it does not expressly bar the right of a purchase money mortgagee to elect under A.R.S. §33-722 to waive the security and sue on the debt.
Did your borrower use the money to purchase the property?
What it means is that if your borrower used the money to pay all or some of the purchase price of the property, then defaults and you are forced to foreclose, you can cannot sue him for the difference of what you recovered from the foreclosure and value of the Promissory Note.
This is where it would be wise for you to forget the Deed of Trust and sue him on the Promissory Note.
However, if your borrower did not use the money to pay all or some of the purchase price of the property, but instead purchased a boat--you are entitled to sue him for the deficiency of the foreclosure and the value of the Promissory Note.
Your Promissory Note secured by a Deed of Trust is not invalid.
