ARIZONA REVISED STATUTES, CHAPTER 6.1, ARTICLE 1

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ARTICLE - Trustee Sales, Foreclosure, Deed in Lieu, Deficiency:

◙  Selected Real Property Foreclosure Issues, Micheal McGrath

TRUSTEE SALE CASE LAW

◙  AHCCCS v Allen (In re Stephenson) 1-CA-CV 06-0785 (11/27/07) A secured creditor does not need to seek permission from the Superior Court or the Personal Representative of an estate to enforce its secured even though probate has been opened.  Under common law and Arizona Probate Code the secured creditors have the power to choose a remedy after a debtor dies, either by foreclosing on their secured or by filing a claim in probate.  The Probate court does not have automatic supervisory authority over a deed of trust sale governed by a separate statutory scheme.

◙  Baker v. Gardner Ariz.,1988.  770 P.2d 766  Holder of purchase money note and trust deed on premises sought to bring suit to collect on note and waived security deed of trust.   The Superior Court, Maricopa County, No. C-587681, Michael J. O'Melia, J., found action precluded by anti-deficiency statute.   On appeal, the Court of Appeals reversed in a memorandum decision.   The Supreme Court, Feldman, V.C.J., held that:  (1) holders of purchase money note and security device could not hold maker liable for entire unpaid balance by waiving security, and (2) election of remedies could occur except where anti-deficiency statute applied. Full Case (includes supplemental opinion)

◙  Kelly vs. Nationsbanc, 12/26/2000 No. 1 CA-CV 99-0642 (Ct.App 1st Div): Chapter 13 case filed after trustee's sale noticed.  Four postponements, bankruptcy case dismissed, sale completed.  Kellys argue that they failed to receive detailed accounting of payments and failed to receive actual notice of continued sales.  Court upheld lower court's granting of summary judgment.  Good review of In re Acosta, 181 B.R. 477 (Bankr.D.Ariz. 1995) (DR's to receive actual notice of postponed trustee's sale while in bankruptcy), see also In re Duncan, 211 B.R. 42 (Bankr.D.Ariz. 1997)  In re Stober, 193 B.R. 5 (Bankr.D.Ariz. 1996) (did not follow Acosta and Duncan); In re Nagel, 245 B.R. 657 (D.Ariz. 1999) (dismissal of BK returns parties to the status quo prior to the filing of the BK.  Once returned they are subject to the laws of Arizona). 

◙  In re Bebensee, 248 BR. 820 (9th Cir. BAP 2000) (Calif).  Interpreting California’s Civil Code regarding perfection of a buyer’s interest in property purchased at a trustee’s sale, the BAP found that recordation of a trustee's deed within the fifteen-day time period after the sale perfected the buyer’s interest in property although that recordation occurred post-petition. 

Arizona recently amended its statutes, effective July 1, 2000, to mirror California law In the Bebensee case, a buyer had purchased a debtor’s home at a trustee’s sale. Twelve days later, the debtor filed for Chapter 13. Two days after the petition was filed, the buyer recorded the trustee's deed. Under California law recordation of a trustee's deed within fifteen days after a trustee sale is a ministerial act, and perfection relates back to the date of the trustee sale. Because the sale was deemed perfected pre-petition, the debtor had no interest in the home at the lime of filing. 

Section 5 of Ariz. Rev, Stat, § 33-810(A) has been amended to read, in pertinent part: “The sale shall be completed on payment by the purchaser of the price bid in a form satisfactory to the trustee. The subsequent execution, delivery and recordation of the trustee’s deed as prescribed by § 33-811 are ministerial acts.  If the trustee’s deed is recorded in the county In which the trust property is located within fifteen business days after the date of the sale, the trustee’s sale is deemed perfected at the appointed date and time of the trustee’s sale.”  Arizona’s statute was amended to add the “retroactive perfection” provision. Because of the similarity between Arizona’s amended statute and the language in the California Civil Code, consumer practitioners may find this case instructional in interpreting Arizona law

◙  Krohn vs Sweetheart Properties (AZ Supreme Ct) CV 01-0246-CQ, BK 00-10623-PHX-RTB Krohn filed a chapter 13 bankruptcy that was dismissed.  After the dismissal her home was sold through a trustee's sale.  Krohn then filed a second chapter 13 and sought to have the sale of the house vacated for gross inadequacy of price.  The court found that a trustee's sale could be set aside solely on the basis that the bid price was grossly inadequate (see Restatement (Third) of Property: Mortgages Section 8.3).

◙  DMC, Inc. v Downey Savings & Loan Ass'n, 99 Cal.App.4th 190, 120 Cal.Rprt.2d 761 (2002)  PRIORITIES; PURCHASE MONEY MORTGAGE; REATTACHING LIEN.  After obtaining two loans secured by deeds of trust on her property, Henry transferred the property to her parents. When they defaulted on the first loan, the lender foreclosed and acquired title, extinguishing DMC's second mortgage.  Two months later, Henry repurchased the property from the foreclosure sale purchaser.  To do so, she obtained a new loan, secured by a trust deed on the property from Downey S & L.  A year later, DMC sued to foreclose judicially its second lien. The trial court granted Downey's motion for summary judgment, holding that even if DMC's second trust deed reattached to the property, it remained junior to Downey's new purchase money trust deed.

The court of appeal affirmed.   Despite California's "first in time, first in right" approach to lien priority, under an equitable analysis, "the new senior lien holder would not have advanced the substantial funds necessary for the repurchase if it was not assured that it would have the rights and remedies associated with lien priority." 99 Cal.App.4th at 199. The foreclosure extinguished DMC's lien, and without Downey's new loan DMC would have been left holding a wiped-out junior lien without any legal claim to repayment. It was only because of the money advanced by Downey, therefore, that DMC's lien was revived, thereby retaining its original place in the order of priority

◙  Busquets-Ivars v. Ashcroft, June 24, 2004 - No. 02-70643 - A notice which fails to include a proper zip code is not properly addressed under 8 U.S.C. section 1229(a)(1).

◙  Foresight Investments Group vs Leader Mortgage Company (LMC), CV 2003-000195, LMC permits a trustee's sale to go forwarding knowing it should not have been held.  Court decides that the trustee was effectively a seller of real estate and that the buyer at the sale had entered into a contract for the sale of the subject property.  In that LMC could not transfer the subject property because the debt had already been paid, the trustee's sale was a sale of realty and the buyer at the trustee's sale was entitle dot a benefit of the bargain measure of damages  the difference between the fair market value of the property and the price bid by the buyer.  (case was settled).

◙  Dagburg, LLC vs Nations Title Insurance of Arizona, CV 1999-016823 (unpublished)

◙  Bank One v Beauvais, 188 Ariz. 245, 934 (P2.d 809 (App. 1997) (consolidated loan including purchase money debt ($240,000) and non-purchase money ($75,000) still retains purchase money protection.  Later workout note retains character of purchase money for the purpose of anti-deficiency.  Note: the original and workout loans were with same lender and it appears that the original loan was modified, not released.). “In summary, we hold that regardless of whether the workout note was an extension, renewal, or refinancing of the 1989 consolidated loan, it retained its character as a purchase-money note. See Lucky Invs., Inc. v. Adams, 183 Cal.App.2d 462, 7 Cal. Rptr. 57 (1960) (Cancellation and replacement with new notes, secured by the same property, transfers purchase-money status to new notes.). Accordingly, the Bank is prohibited from waiving the security under the deed of trust and suing on the note. We affirm the trial court's dismissal of the Bank's complaint”, at 816. 

◙  Resolution Trust Corp. v. Segel, 173 Ariz. 42, 839 P.2d 462 (App.1992), we examined the impact of the Baker holding on non-purchase-money loans that were secured by second-position deeds of trust on residential property of less than two and one-half acres with a one- or two-family residence. In Segel, the court held that because the lender did not institute trustee's sale proceedings and the deeds of trust secured non-purchase-money obligations, the lender was entitled to waive its security and sue directly on the notes under A.R.S. section 33-722. Id. at 44-45, 839 P.2d at 464-65.

◙  Cely v. DeConcini, McDonald, Brammer, Yetwin & Lacy, P.C., 166 Ariz. 500, 505, 803 P.2d 911, 916 (App.1990).  A "purchase money mortgage" for purposes of Arizona's antideficiency statutes is one that encumbers the property being sold.