The firm began leasing the premises from the landlord in 2010 under a written lease agreement. The lease outlined remedies in the event of the firm’s default but did not expressly grant the landlord a contractual landlord’s lien on the firm’s property. In May 2023, the firm obtained a loan from the bank and executed a security agreement granting the bank a security interest in its property as collateral. The agreement specifically defined the collateral to include “general intangibles…including payment intangibles.” A month later, the bank perfected its security interest in the collateral. Shortly afterward, the firm defaulted on the loan. The bank sued the firm for breach of contract and requested the appointment of a receiver. In response, the landlord wrote to the bank asserting it possessed a superior landlord’s lien over the firm’s accounts receivable. Following the superior court’s order, both the landlord and the bank filed briefs asserting the priority of their respective liens on the firm’s accounts receivable. The superior court found in favor of the landlord’s lien, ruling it had priority over the bank’s perfected security interest in “all property… placed upon or used on” the premises, which extended to the firm’s general intangibles, including accounts receivable, and denied the bank’s motion for summary judgment on the priority of its lien. The bank petitioned for special action relief and “argued that a statutory landlord’s lien cannot attach to intangible property, such as accounts receivable.”
In PNC Bank, N.A. v. Coury, 544 P.3d 88 (Ariz. Ct. App. 2024), the court held that the landlord’s statutory landlord’s lien could not attach to intangible property, specifically the firm’s accounts receivable. The court interpreted Arizona’s statutory landlord lien provisions in Ariz. Rev. Stat. Ann. §§ 33-361 and 33-362 by looking at the text's plain meaning. § 33-361 provides that if a tenant fails to pay rent, “the landlord shall have a lien on and may seize as much personal property located on the premises and not exempted by law” to secure payment of rent due. Ariz. Rev. Stat. Ann. § 33-361(D) (emphasis added). Section 33-362 provides that if a tenant fails to pay rent, the landlord “shall have a lien on all property of his tenant . . . placed upon or used on the leased premises, until the rent is paid.” Ariz. Rev. Stat. Ann. § 33-362(A) (emphasis added). To determine the scope of the property subject to the landlord’s lien, the court considered several definitions of terms used in the statutes beginning with “personal property,” which it found may include intangible items such as “things in action” and evidences of debt. “Things in action" falls under the definition of a general intangible, as it is considered “an in personam right to recover debt, money or a thing,” and “‘historically refers to chattels or goods.’" Hawkland, Uniform Commercial Code Series, § 2-105:2 (Oct. 2023 Update). The court agreed with the superior court “that accounts receivable constitute ‘things in action,’" a form of personal property, and, therefore, accounts receivable would be included in the term “property” as used in the statutes. However, the court found that additional language in § 33-362 limited the scope of the landlord’s lien to only tangible property. Under Ariz. Rev. Stat. Ann. § 33-362, a landlord’s lien attaches only “to property ‘placed upon or used on’ the leased premises.” The court agreed with the bank’s argument that the accounts receivable were never “placed upon” the leased premises. It explained that a statutory landlord’s lien will only attach to property when it is “‘first brought on the leased premises,’” and because accounts receivable have no “physical location” and can never be “‘placed upon’” the leased premises a statutory landlord’s lien will never attach to them. Ex-Cell-O Corp. v. Lincor Properties of Ariz., 762 P.2d 594, 596 (Ariz. Ct. App. 1988). The court went on to disagree with the superior court’s finding that the firm’s accounts receivable was “used on” the leased premises because the firm’s “‘accounting functions…occurred at the leased premises.’” It explained that even though it is arguable that the firm "used” the accounts receivable on the premises, when read in the entirety of the statutory context, “used” does not include such a financial transaction. Rather, when looking at the broader context, “the scope of a landlord's lien is unambiguously limited to property ‘located on the premises’—that which can be ‘found’ and ‘seize[d].’" Ariz. Rev. Stat. Ann. § 33-361(D), -362(B). The court ultimately found that because accounts receivables were not physically present on the lease premises, they were not subject to the statutory landlord’s lien under Arizona law.
By Callighan Ard [email protected]
Edited By Kristin Meurer [email protected]
Edited By Ashley Boyce [email protected]
Edited By Hayden Mariott [email protected]