Arizona Court of Appeals Division One holds that a creditor need not expressly waive a security interest under a deed of trust before suing to enforce a note.

Under Arizona law, when a creditor holds a security interest under a deed of trust, she must waive the security in order to seek a deficiency judgment on the underlying note.  Here, the creditor held a second-position deed of trust on debtors’ home.  After the holder of the first-position deed of trust noticed a trustee’s sale, but before the sale took place, creditor brought suit against debtors to enforce its second-position note. 

The Court of Appeals affirmed the Superior Court’s entry of summary judgment in favor of the creditor, reasoning that the creditor had impliedly waived its security interest by suing on the note instead of electing to enforce the security agreement.  Creditor was under no obligation to affirmatively waive any security interest before suing to enforce the note.  The Court also held that the election by the more senior lender to enforce its security agreement did not bind the more junior lender to that remedy.

Judge Thumma delivered the unanimous opinion; Judges Cattani and Howe concurred.