The Arizona Court of Appeals recently ruled on Compass v. Bennett, holding that second-position lenders are not required to “affirmatively and expressly” release a deeds of trust in order to “elect to waive the security” as a prerequisite to suing on a note.

The case arose when the Bennetts obtained a $1 million home equity loan from Compass, which was not “purchase money” or used to build any improvement or structure at their Paradise Valley home.  The loan transaction included a note, a security agreement, and a second-position deed of trust against the house.  The Bennetts had already obtained a couple of other loans to finance the home, including a first-position loan from Bank of America.  When the Bennetts defaulted on loan payments, Bank of America issued a notice of a trustee’s sale on its first-position loan.  After receiving notice of the trustee’s sale, but prior to the sale taking place, Compass filed a lawsuit against the Bennetts, seeking to enforce the note for the second-position $1 million home equity loan.

Both parties moved for summary judgment.  The Bennetts argued that Compass should have expressly waived its rights under the second-position deed of trust before suing and that failure to do so barred the lawsuit.  Compass cross-moved for summary judgment based on the Bennett’s admitted failure to repay the $1 million home equity loan.

The superior court entered judgment in favor of Compass, holding that Compass’s failure to exercise the rights it possessed to foreclose on its deed of trust constituted a waiver of such rights.  The court noted that not only did Compass fail to exercise its rights, but the rights were extinguished by the trustee’s sale on the first position loan.

The Court of Appeals affirmed.  The court found no precedent to support the Bennetts’ argument that Compass was required to “affirmatively and expressly” waive its rights under the deed of trust.  Moreover, the Bennetts conceded that had Compass served them with the lawsuit even a mere day after the trustee’s sale on the first-position deed of trust, such a delay would have constituted a proper waiver.  Basically, the fact that Compass might have “sued a few weeks too early” was irrelevant.

Additionally, the court found that Bank of America’s decision to execute a trustee’s sale did not constitute a choice by Compass to exercise its nonjudicial foreclosure rights.  Both the junior lender and senior lender have a choice of remedy, and that choice does not have to be the same.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.

It seems obvious.  Employees should be paid the wages they have earned, whether those wages be from hours worked, commissions, bonuses, et cetera.  But, what happens when an employer fails to compensate an employee for his or her labor?  In Arizona, this hypothetical is governed by ARS Title 23, Article 7.

A.R.S. § 23-351(C) states that “each employer shall, on each of the regular paydays, pay to the employees all wages due the employees up to such date.”  Further, § 23-355(A) states that “if an employer . . . fails to pay wages due any employee, the employee may recover in a civil action against an employer or former employer an amount that is treble the amount of the unpaid wages.”  Simply put, whether you are still working for an employer or not, an employer is required by law to pay you what you have earned.  If the employer fails to do so, you could take them to court and potentially recover triple the wages you are owed.

How to Recover Your Unpaid Wages

If the amount of unpaid wages is less than $5,000, an employee may either launch a civil action against his employer or file a written claim with the department for unpaid wages.  If the unpaid wages totals more than $5,000, the employee’s only option for recovery is a civil action against the employer.

An employee has one year from the date wages were earned to file an unpaid wages claim.  To file a claim for unpaid wages with the Labor Department, an employee should go to http://www.ica.state.az.us/Labor/Labor_WagClm_main.aspx.  Here, the employee will find a wage claim form and frequently asked questions about wage claims.  The form will need to be completely filled out; incomplete forms will not be accepted.  The employee should also submit any documents that could support his claim (i.e., pay stubs, company policies).

If an employee chooses to file a civil action against the employer for the unpaid wages, they may do so “no later than two years after a violation last occurs, or three years in the case of a willful violation.” A.R.S. § 23-364(H).

What Will You Be Able to Recover?

Because they are a punitive measure, treble damages are only appropriate “when an employer withholds wages unreasonably and in bad faith.” Swanson v. Image Bank, Inc., 43 P.3d 174, 183 (Ariz. Ct. App. 2002).  If there is a reasonable good-faith dispute about how much an employee is owed, a court is not likely going to award the employee punitive damages.  The “imposition of treble damages . . . is permissive, not mandatory.” Id.  This “element of discretion merely reflects that such an award may be inappropriate when a wage dispute ‘involves a valid close question of law or fact which should be properly decided by the courts,’ or when failure to pay wages was due to an inadvertent mistake.” Id.  Even if the court finds an employee is not entitled to treble damages, an employee is still entitled to the wages he actually earned.

Conclusion

Keep track of your hours worked and your paystubs.  If things are not matching up, there is a remedy out there for you.  Address things with your employer first and if they are uncooperative you may be able to file a claim with the Labor Department or commence a civil action.  Whether you are making minimum wage or much more, your time is valuable and your employer is required by law to pay you for it.

If you need assistance with the process of obtaining a judgment, or if you want help collecting a judgment, contact an attorney who is familiar with those areas of law.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.

The United States Supreme Court issued its decision in Husky International Electronics, Inc. v. Ritz, eliminating some ambiguity behind what constitutes “actual fraud” in the bankruptcy context.  The issue in this case was whether “actual fraud” requires a false representation or whether it encompasses other traditional forms of fraud that can be accomplished without a false representation.

Between 2003 and 2007, Husky sold its products to Chrysalis.  As a result, Chrysalis incurred a debt to Husky of almost $164,000.  During the same period, Ritz, the director of Chrysalis, drained the company of assets it could have used to pay its debts to creditors like Husky by transferring large sums of Chrysalis’ funds to other entities under his control.  In May 2009, Husky filed a lawsuit against Ritz seeking to hold him personally responsible for the entire debt.  Six months later, Ritz filed for bankruptcy which incited Husky to initiate an adversarial proceeding in Ritz’ bankruptcy case again seeking to hold Ritz personally liable for Chrysalis’ debt.  Husky contended Ritz could not discharge the debt in bankruptcy because this type of inter-company-transfer scheme constituted “actual fraud” under 11 U.S.C. §523(a)(2)(A).  The Fifth Circuit held that a necessary element of “actual fraud” is a misrepresentation from the debtor to the creditor and found that Ritz did not make any false representations to Husky regarding those assets or transfers and therefore did not commit “actual fraud.”

In making its decision, the Supreme Court first looked back into the history of U.S. bankruptcy law and found that from the beginning of English bankruptcy practice, courts and legislatures have used the term “fraud” to describe schemes similar to Ritz’, in which a debtor’s transfer of assets impairs a creditor’s ability to collect the debt.  The court also looked at the legislative history of §523(a)(2)(A) and found that Congress amended the statute in 1978 to add “actual fraud” to a list that already included “false pretenses or false representations.”  Acting under the presumption that when Congress amends a statute, it intends its amendment to have real and substantial effect, the court concluded that Congress did not intend “actual fraud” to mean the same thing as “a false representation.”

11 U.S.C. §523(a)(2)(A) provides for an exception to discharge of bankruptcy debt where the debt is obtained by the false pretenses, actual fraud, etc.  Traditionally, “obtained by” described the initial time the debt was incurred.  But while this case did not consist of misrepresentation from a debtor to a creditor at the time the debt was incurred, the court held that fraudulent conveyances are not entirely incompatible with the “obtained by” requirement in the statute.  Although the transferor does not “obtain” debts in a fraudulent conveyance, the recipient would “obtain” assets by his participation in the fraud.  If that recipient later filed for bankruptcy, his debts would be nondischargable under the statute.  It follows that at least sometimes a debt “obtained by a fraudulent conveyance scheme could be nondischargable under §523(a)(2)(A).”

In a 7-1 ruling, the Supreme Court reversed the Fifth Circuit, but remanded the case to for a decision of whether the debt to Husky was “obtained by” Ritz’ asset-transfer scheme.  The main takeaway from this case is that “actual fraud” in §523(a)(2)(A) of the Bankruptcy Code could encompass a fraudulent conveyance scheme.  As a result, SCOTUS closed up a large loophole that allowed debtors to discharge debts under the Bankruptcy Code.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.

Arizona law gives Judgment Creditors a remedy to aid in the collection of a judgment when the Judgment Debtor holds stock. The Judgment Creditor can ask the court to enter an order in aid of collection and authorize the execution upon stock interests of Judgment Debtor.

In accordance with A.R.S. § 47-8112(E) and § 12-1559(5), the Judgment Creditor applies for an injunction and order to aid in the collection of, and the execution upon, stock certificates. The Judgment Creditor can enjoin the Judgment Debtor from hiding or transferring the stock certificates that so that the certificates can be seized.

In the Application the Judgment Creditor must allege it holds a money judgment against Judgment Debtor that has not been satisfied, and that the Judgment Debtor refused to satisfy the Judgment upon demand.  The Judgment Creditor will then establish for the court the stock interests at issue and the remaining amounts owing on the Judgment. Once these items are established, the Judgment Creditor is entitled to supplementary relief in aid of collection of the judgment.

A.R.S. § 12-1559(5) provides that to execute upon the stock of a corporation, the Judgment Creditor shall follow the procedure set forth in A.R.S. § 47-8112. The procedure set forth in A.R.S. § 47-8112 requires the creditor to establish the Judgment Debtor owns stock, and the Judgment Creditor is seeking to execute upon that stock to satisfy the judgment.  To help the Judgment Creditors, A.R.S. § 47-8112(E) provides for injunctive relief:

1. A creditor whose debtor is the owner of a certificated security, uncertificated security or security entitlement is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security, uncertificated security or security entitlement or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process. (emphasis added).

Judgment Creditor is entitled to an injunction, pursuant to A.R.S. § 47-8112(E), to prevent Judgment Debtor from hiding or transferring his stock certificates, or from otherwise interfering with Judgment Creditors’ legal rights to attach the certificates.  Under the same statute, Judgment Creditor is also entitled to an order of the court that requires Judgment Debtor to deliver the stock certificates to counsel for the Judgment Creditor.  Finally, Judgment Creditor is entitled to an order that requires Judgment Debtor, to turn over any of Judgment Debtor’s stock certificates, or uncertificated interests.

Arizona law provides the mechanism and authority for a Court to order an injunction and require the Judgment Debtor to deliver the stock to Judgment Creditor’s attorney.  This is a valuable tool for a Judgment Creditor.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.

The United States Supreme Court issued its decision in Bank of America v. Caulkett, which is a solid guidepost in the bankruptcy journey for both creditors and debtors alike.  The issue confronted by the Supreme Court was whether a wholly unsecured junior mortgage lien may be stripped off pursuant to §506(d) in a Chapter 7 bankruptcy.

This case was a “consolidated case where both debtors had two mortgage liens on their respective homes with the junior lien on each being held by Bank of America. In each instance, the amount owed on debtor’s senior mortgage was greater than each home’s current market value and therefore Bank of America’s junior liens were wholly ‘underwater’ or unsecured. In each case, the Debtors moved to “strip off” the junior liens under section 506(d) of the Bankruptcy Code, claiming that the Bank’s claims were not “secured” within the meaning of §506(d).

The Debtors urged the Court to adopt a straightforward reading of the term “secured claim” from section 506(a)(1) in conjunction with 506(d) to void the Bank’s claims. However, a straightforward reading would directly conflict with the Supreme Court’s 1992 ruling in Dewsnup v. Timm where the Court refused to allow a debtor to “strip down” her debt of $120,000 to the value of the collateral securing the claim, $39,000. Dewsnup v. Timm 502 U.S. 410, 413 (1992). The Dewsnup Court concluded that the term “secured claim” means a claim supported by a security interest in property, regardless of whether the value of that property would be sufficient to cover the claim.

“Section 506(a)(1) provides that ‘[a]n allowed claim of a creditor secured by a lien on property…is a secured claim to the extent of the value of such creditor’s interest in…such property,’ and ‘an unsecured claim to the extent that the value of such creditor’s interest…is less than the amount of such allowed claim.”

“To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void.” 11 U.S.C. §506(d)(emphasis added by the Court). “Subject to some exceptions not relevant here, a claim filed by a creditor is deemed ‘allowed’ under §502 if no interested party objects, or if, in the case of an objection, the Bankruptcy Court determines that the claim should be allowed under the Code.” §§502(a)-(b)

Here, the Bank’s claims were secured by liens and allowed under §502 so they cannot be voided under the definition given to the term “allowed secured claim” in Dewsnup. The Court’s ruling is Dewsnup was not dependent on whether a lien is partially or wholly underwater. So long as a claim in a Chapter 7 bankruptcy is secured by a lien and allowed under §502, it may not be “stripped off” even if the lien is wholly underwater.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.

The Arizona Court of appeals issued its opinion in SQPR Venture, Inc. v. Robertson addressing the issue of whether a non-debtor spouse’s income can be used to satisfy a separate pre-existing debt of the debtor spouse (“Judgment Debtor”) when the Judgment Debtor provides non-financial support to the family as a stay at home spouse and parent.

The underlying facts are that the Judgment Debtor had a default judgment entered against her in 2003. The Judgment was timely renewed. Years later, after she re-married, the judgment creditor, filed an earnings garnishment against the community property. The non-debtor spouse provided all of the income while the debtor was a full-time stay at home mother. The Judgment Creditor argued that the Judgment Debtor’s non-financial contribution to community property was a quantifiable value that should open the non-debtor’s community income to garnishment.

Arizona law provides “[t]he community property is liable for the premarital separate debts or other liabilities of a spouse, incurred after September 1, 1973 but only to the extent of the value of that spouse’s contribution to community property which would have been such spouse’s separate property if single” A.R.S. § 25-215(B).

The Judgment Creditor also argued that the transfer of the non-debtor spouse’s income into the Judgment Debtor’s account of funds that fell just short of the threshold for garnishment was a fraudulent transfer under the UFTA. The Judgment Creditor argued for a UFTA violation if the court found that the non-debtor spouse’s community property was liable on the judgment. The flaw with the Judgment Creditor’s argument is that the Judgment Debtor was not making any transfers. Rather, the non-debtor spouse transferred funds to the Judgment Debtor. The Judgment Creditor’s arguments did not satisfy UFTA.

The court of appeals court held that the trial court correctly found that the income of the non-debtor spouse was protected against liability for the Judgment Debtor’s premarital debt, when the Judgment Debtor provides a non-financial service to the family that has value and for which the community would otherwise have to pay. The court affirmed the trial court’s finding that the non-debtor spouse’s property was immune from garnishment since the Judgment Debtor was not making a financial contribution to the marital community.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.

Many times debtors will purchase a vehicle on the eve of a bankruptcy, and often the bankruptcy happens within thirty days following the purchase. The creditor in Arizona that finances the purchase has a statutory safe harbor period to perfect its lien interest on the vehicle. The timing of a how and when a lien gets placed on a motor vehicle many times is the question in preference actions filed by chapter 7 trustees. Two recent cases in the District of Arizona offer guidance debtors, creditors, and trustees.

Judge Ballinger recently issued a minute entry opinion addressing the mechanics of perfection of a lien on a motor vehicle. This is the second opinion from this district in recent months. (See In re Lloyd 2:13-bk-21588-DPC).  The case was S. William Manera, Trustee v. AmeriCredit Financial Services, Inc., 14-bk-06920-EPB. The timeline in this case was as follows:

– The Debtors purchased a vehicle on February 24, 2014, GM mailed the Title Application to the Motor Vehicle Department (the “MVD”) on March 6, 2014.

– The MVD logged receipt on March 11, 2014 but did not process and endorse the title documents until March 20, 2014.

– On May 8, 2014 the debtors filed their bankruptcy petition.

The sole question presented is whether GM’s lien interest was perfected on March 11 when the title application was received and logged by MVD, or on March 20 when it was processed and endorsed by MVD.

Until 2013, A.R.S. § 28-2133 (B) provided retroactive perfection only if it was both received and endorsed within 30 business days of execution. In 2013, the Arizona legislature amended A.R.S. § 28-2133 (B) to read “if the documents referred to in this article are delivered to a registering office or an authorized third party provider of the department within 30 days after the date of their execution, the constructive notice dates from the time of execution.”

The former statute read in part, “if the documents referred to in this article are received and filed.”

As acknowledged by the Bankruptcy Court, the 2013 statutory amendment was deemed to be substantial and served to distinguish any decision made under the previous statue. When there is no legitimate, material dispute that the MVD received a non-defective title application within thirty days of execution of the document creating the security interest referenced in an application, the applicant is entitled to the retroactive constructive notice granted by A.R.S. § 28-2133(B).

Windtberg & Zdancewicz, PLC provides clients with experienced legal representation in all litigation and bankruptcy matters. We represent creditors, trustee’s and interested parties in bankruptcy court and state court prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, and the domestication of foreign judgments.. If you need assistance with your collection matters, please contact us at (480) 584-5660.

In the case of Rachael Anne Earl, 13-bk-18751-EPB, Judge Ballinger issued a detailed minute entry order addressing whether it is permissible for a debtor to amend their bankruptcy schedules to claim a different property under the homestead exemption than the one originally claimed.

Judge Ballinger ruled that for a property to qualify for the homestead exemption after amending the schedules, that property must have been able to qualify under the homestead exemption as of the petition date, not a date thereafter, because exemptions are fixed as of the petition date (citing In re Jacobson 9th Cir. 2012).

In this case the Debtor had two properties: Sunnyvale and Claiborne. On Debtor’s schedules she listed the Claiborne residence under the homestead exemption and that was the location where debtor kept her personal property. As of the petition date, the Sunnyvale residence was used solely to generate rental income. When the case was converted to Chapter 7, the Court sustained the trustee’s objection that the Debtor could not claim an exemption in the Claiborne property. When Debtor realized she could not defeat the Trustee’s objection, she amended her bankruptcy schedules to assert her homestead exemption on the Sunnyvale property instead.

Debtor did not show the requisite intent on the petition date to make the Sunnyvale property her homestead, but rather intended the Claiborne residence to be her homestead. Debtor would not be permitted to claim the Claiborne property as her exempt property on her schedules and then amend them to change her homestead exemption to the Sunnyvale property if the Sunnyvale property would not have met the homestead exemption standard as of the petition date. The Debtor had previously received the benefit of the homestead exemption on the Claiborne property and the court would not allow the Debtor to receive a “second bite at the apple”.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.

The Arizona Supreme Court issued an opinion relating to the anti-deficiency statute, A.R.S. § 33-814(G). This was the second opinion in less than 30 days dealing with certain aspects of the anti-deficiency statute. The significance of this case is that it overruled a related case interpreting the anti-deficiency statute, and it further clarified the law.

The court accepted review of the case because cases involving the anti-deficiency statutes are creating reoccurring issues with statewide importance. The Supreme Court issued the opinion to give guidance to the trial courts on how to rule on these issues.
Wildwood Creek Ranch, LLC (“Borrower”) borrowed $260,200 from a lender (“Lender”) to construct a home on a vacant 2.26 acre lot. The loan was guaranteed by the Mr. and Mrs. Rudgear (the “Rudgears” or “Guarantors”). The loan was secured by a deed of trust. The Rudgears intended to build a home, but construction never started and the lot was undeveloped. The Borrower defaulted and the property was sold at a trustee’s sale for $31,100. The Lender then sued the borrowers for a deficiency.

The trial court judge granted summary judgment in favor of the Borrower/Guarantors because the Rudgears argued they “intended” to build and use their home, once it was completed, as their primary residence. Thus, the trial court granted the Rudgears anti-deficiency protection. The trial court relied on a M & I Marshall Ilsley Bank v. Mueller, 228 Ariz. 478, 268 P.3d 1135 (App 2011) a case that applied the anti-deficiency statute when the borrower “intended” to eventually occupy a partially constructed home.

The Lender appealed and the Court of Appeals reversed the trial court. The Court of Appeals held the anti-deficiency statute did not apply because the lot was vacant and never utilized for a dwelling. The Court of Appeals came to the correct conclusion, nonetheless, the Supreme Court took review of the case to clarify the statutory language “utilized for either a single one-family or single two-family dwelling”. The two key terms in this sentence the Supreme Court wanted to clarify are ‘utilized’ and ‘dwelling’.

The statute in question is A.R.S. 33-814(G) , which 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.

The court noted that the statute does not define a dwelling. It looked to prior decisions to get to the working definition of a dwelling. ‘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.”’ Wildwood, at ¶ 12. The structure must also be suitable for residential use. Id.

The Supreme Count went on to discuss the word ‘utilize’. In getting to a working definition of utilize, the court had to deal with the Mueller decision that emphasized the reliance on the borrower’s intent. With the Wildwood decision, the Supreme Court closed the door on the ‘intent’ theme that was created in Mueller. Rather the court looked at whether the residential structure was in a completed condition:

To clarify, we reaffirm the distinction noted in Mid Kansas between property that is 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.

Wildwood, at ¶ 17.

The crux of the holding is that there must be a completed structure on the property suitable for dwelling purposes. Even if a homeowner has not moved into the completed residence they would still qualify for anti-deficiency protection under the court’s interpretation of the statute. “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.” Wildwood, at ¶ 18. To qualify for anti-deficiency protection ‘ . . . there must be a completed structure on the property suitable for dwelling purposes. And . . . even the homeowner who has not yet moved into the completed residence would be entitled to anti-deficiency protection . . .” Wildwood, at ¶ 17.

The Supreme Court in Wildwood is giving guidance to the lower courts by telling them to eliminate the borrower’s intentions from the equation. The message is clear, look to the ‘trust property’ and determine if a ‘dwelling’ has been constructed that is completed and suitable for dwelling purposes. If these conditions are met, even if the homeowner has not moved in, the anti-deficiency protections are going to be afforded the homeowner.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.

In this ever-changing world that we live in, the use of paper checks is steadily decreasing. The use of paper checks is decreasing for a number of reasons. One of those reasons is that financial institutions discourage their use. There are handling costs for paper checks, and the risk of third-party fraud is higher. Another reason the use of paper checks is decreasing is because mobile banking is increasing, and institution sponsored bill pay is consumer friendly.

Moreover, if a customer using bill pay has insufficient funds in the bill pay account, no check will be issued. At some point, we will be in an all-digital-format financial world. Until that time comes, paper checks are still with us.

The main difference between the digital and paper worlds is time. Digital happens in a matter of seconds. Paper checks take days to process. Consider the amount of time that passes from when the issuer signs the check to when the paper is received, deposited, and cleared. Following the paper check, once received and deposited, the financial institution will electronically “send” the check to the collecting bank (the place where the issuer banks) usually within 24 hours. The collecting bank then transfers the money from the issuers account to the institution where the check was deposited.

Some check writers use the time delay to get the money in the account for a check that’s already issued. An issuer may write and mail a check on Monday, when the issuer knows there are insufficient funds in the account, in hopes that a deposit on Wednesday will cover the check. Despite the issuer’s intentions, if a check is written at a time when there are insufficient funds in the account, the issuer can face civil and criminal liability.

Putting aside the criminal repercussions, Arizona law severely punishes those who write a check with insufficient funds in the account. The civil “bad check statute” is found at Arizona Revised Statutes §12-671. Section A of the statute imposes liability on a person who “. . .for himself or for another, with intent to defraud. . . delivers to another person or persons a check or draft on a bank or depositary for payment of money, knowing at the time of such making, drawing, uttering or delivery, that he or his principal does not have an account or does not have sufficient funds in, or credit with, such bank . . . to meet the check or draft in full upon presentation . . .” The statute goes onto impose liability “ . . . for twice the amount of such check or draft or fifty dollars, whichever is greater, together with costs and reasonable attorney’s fees as allowed by the court on the basis of time and effort expended by such attorney on behalf of plaintiff.”

If there is proof that there were insufficient funds in the account at the time the check was presented, and that the issuer failed within twelve days after receiving notice of nonpayment or dishonor to pay the check or draft, that such evidence will establish the prima facie evidence of intent to defraud. Not only can the issuer be penalized for twice the amount of the face value of the check, the issuer may also be liable for attorneys’ fees incurred by the creditor who takes action to collect upon that check.

To take advantage of the enhanced civil penalties, the recipient of the bad check must provide notice to the issuer. Strict compliance with the statutory notice provision is required to lay claim to an entitlement to the enhanced penalties.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights prosecuting and defending garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.