Seller Is Liable Under Arizona Consumer Fraud Act for Transmitting Other’s Misrepresentation to Buyer Despite Seller’s Ignorance That Representation Was False

Arizona’s Consumer Fraud Act prohibits, inter alia, the use of any misrepresentation in connection with the sale or advertisement of merchandise.  A.R.S. § 44-1522(A).  An automobile dealer who voluntarily forwards a misleading email from the manufacturer containing misrepresentations may be liable under the Act.  That the dealer is merely the “messenger” and not the original source of the misrepresentation is not a defense.  Powers v. Guaranty RV, Inc., 1 CA-CV 11-0062, 6/12/12.

A DEFICIENCY ACTION IS SUBJECT TO ARBITRATION CLAUSE IN A PROMISSORY NOTE

 

The Arizona Court of Appeals recently ruled that in Arizona the potential recovery in a deficiency action arises from the promissory note and not from the non-judicial foreclosure.  A deficiency action therefore is subject to an arbitration clause in a promissory note.  Nat’l Bank of Ariz. v. Schwartz, 1 CA-CV 10-0772, 6/26/12.

Arizona’s Consumer Fraud Act Requires Some Showing Of Intent

 

In a recent case, the State of Arizona sued AutoZone alleging that AutoZone had violated the Arizona Consumer Fraud Act (the “CFA”) by mispricing -- offering for sale goods that displayed a price different than the price scanned at the register -- and by non-pricing -- offering for sale goods not priced individually or at the point of display.  AutoZone argued that the CFA required an intent element and that its mispricing and non-pricing were unintentional.  The State argued that the CFA imposes strict liability.  The trial court entered summary judgment in favor of AutoZone and the State appealed.  The Arizona Court of Appeals rejected the State’s strict liability argument and found that the CFA requires a form of intent.  Because the State presented evidence that AutoZone had offered mispriced and non-priced goods for sale, the burden then shifted to AutoZone to rebut the State’s prima facie showing that it had acted with the requisite intent.  The Court found, based on the record before it, that AutoZone was not entitled to summary judgment and remanded the matter back for further proceedings.

Diminution Of Value Can Be Claimed For Damage To Property

 

The Arizona Court of Appeals recently concluded that Arizona law did not require the sale or transfer of a damaged vehicle in order to establish a claim for diminution of value.  Arizona law holds, therefore, that as long as a plaintiff is able to prove loss of value though competent means, such as an expert appraisal of the pre-loss and post-repair value, a diminished value claim can proceed even if the plaintiff does not suffer any actual loss.

Comparative Fault Is Not Applicable To Breach Of Contract Claims  

The Arizona Court of Appeals recently held that comparative fault principles are not applicable to breach of contract claims and that the trial court erred in allocating fault on plaintiff’s damages resulting from the breach of contract claim.

Borrowers Granted Greater Protection

 
The Arizona Court of Appeals has recently issued three opinions interpreting Arizona’s anti-deficiency statutes to afford debtors greater protection.  In December 2011, the Court held that Arizona’s anti-deficiency statute applies to debtors that purchase an undeveloped lot intending to occupy the lot upon building a house even if they do not actually build and occupy the house.  In a separate opinion, the Court held that even if a borrower refinances a purchase money mortgage, the refinancing does not destroy the borrower’s anti-deficiency protection.  Most recently, the Court determined that Arizona’s anti-deficiency law prevents a deficiency judgment after foreclosure of a fractional interest in a vacation accommodation.

Interest Rates

Previously, interest accrued at 10% per annum unless a different rate was contracted for in writing. Effective July 20, 2011, interest shall accrue at the lesser of 10% or 1% plus the prime rate. Therefore, judgments entered after July 20, 2011 currently bear interest at 4.25% (unless a different rate is agreed upon in writing).

Keep this revision to the law in mind in preparing and evaluating contracts going forward.