Arizona Court of Appeals Division One Holds That When a Party Moves for Summary Judgment, It Does Not have to Present Evidence Negating the Non-Moving Party’s Affirmative Defenses to Meet Its Initial Burden of Production, But It Must At Least “Point Out” to the Trial Court, by Reference to Relevant

National Bank of Arizona v. Thruston (1/10/2008): Arizona Court of Appeals Division One Holds That When a Party Moves for Summary Judgment, It Does Not have to Present Evidence Negating the Non-Moving Party’s Affirmative Defenses to Meet Its Initial Burden of Production, But It Must At Least “Point Out” to the Trial Court, by Reference to Relevant Evidentiary Materials, That the Non-Moving Party has no Evidence to Support Its Affirmative Defenses.

In 2001, the National Bank of Arizona (“the Bank”) made a residential construction loan to Morgen Thruston (“Thruston”). The Bank secured the loan with a deed of trust on the property and required that construction be completed by September 30, 2003. On April 13, 2005, the Bank notified Thruston that she was in default under the terms of the construction loan for failure to complete construction by the deadline and failure to timely pay real estate taxes and homeowner’s association assessments. Initially, the Bank recorded a notice of trustee’s sale but later canceled the sale after Thruston “reinstated” the construction loan. Then, on September 12, 2005, the Bank again notified Thruston that she was in default of the terms of the construction loan. Thereafter, the Bank sued Thruston to judicially foreclose the property. Thruston answered and asserted five affirmative defenses. The Bank then moved for summary judgment because it was undisputed that Thruston had failed to timely complete construction and to pay homeowner’s association assessments. Thruston argued that the court should not grant summary judgment because the Bank failed to present competent evidence to negate Thruston’s affirmative defenses. The trial court disagreed and granted summary judgment to the Bank. This appeal followed.

The Arizona Appeals Court began with a helpful explanation of the standard for summary judgment under Rule 56. Initially, the moving party must produce evidence demonstrating the absence of a genuine issue of material fact (the burden of production) and must explain why it is entitled to summary judgment (the burden of persuasion). What a moving party must do in order to discharge its burden of production depends on whether the moving party bears the ultimate burden of proof at trial. Where the moving party will not bear the ultimate burden of proof at trial, the moving party need only point out by reference to discovery materials that the non-moving party is missing evidence needed to support an essential element of its claim or defense. If the moving party is successful in discharging its initial burden of production, the non-moving party must produce sufficient evidence to create a genuine issue of material fact for trial. In this case, while the Bank did point out that the evidence indisputably established a prima facie case of breach of contract and foreclosure, the Bank failed to “point out” that Thruston possessed no evidence to support her affirmative defenses and thus the Bank failed to satisfy its burden of production. Finally, the court explained that a trustor must cure all defaults, both monetary and non-monetary, in order to achieve reinstatement pursuant to A.R.S. § 33-813. In the end, the Arizona Court of Appeals reversed and remanded to the trial court.

Judge Norris authored the opinion; Judges Irvine and Gemmill concurred.

PRACTICE NOTE: This case nicely summarizes the existing standards governing summary judgment, and serves as a reminder concerning several important points for civil practitioners, including that (1) obtaining judgment as a matter of law does not merely require proof establishing the elements of a claim, but rather also a showing that the opposing party is not entitled to the protection of an affirmative defense, (2) Rule 11’s sanction provisions, as noted in the Opinion, apply in the summary judgment context, (3) that summary judgment is not appropriate until the non-moving party has had a sufficient opportunity for discovery, and (4) summary judgment briefing requires calling the court’s attention with record citations to the specific evidence that supports or defeats the summary judgment motion.