Lenders Are Not Required To Affirmatively “Waive” Security To Sue On A Note

Stripping Liens in Bankruptcy: Can my debtor do this?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.

The Ins and Outs of Unpaid Wages in Arizona

Man holding moneyIt 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.