Justia.com Opinion Summary: Plaintiff refinanced her home by executing a promissory note in favor of Saxon Mortgage and a deed of trust (DOT) naming Saxon as beneficiary and a title company as trustee. Saxon assigned the note to Deutsche Bank National Trust Company as trustee for Saxon Asset Securities Trust 2005-3 by endorsing the note in blank. The assignment was not recorded. Plaintiff defaulted under the note. Deutsche Bank then executed a substitution of trustee, removing the title company as trustee and appointing Tiffany and Bosco as the substituting trustee. Tiffany and Bosco recorded a notice of trustee's sale, naming "Deutsche Bank/2005-3" as the current beneficiary in care of Saxon Mortgage Services. An agent of Saxon then executed an assignment of the DOT, assigning all its beneficial interest to Deutsche Bank. The Supreme Court accepted jurisdiction of questions certified by the United State Bankruptcy Court, answering that the recording of an assignment of deed of trust is not required prior to the filing of a notice of trustee's sale under Ariz. Rev. Stat. 33-808 when the assignee holds a promissory note payable to bearer.
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SUPREME COURT OF ARIZONA
En Banc
JULIA V. VASQUEZ,
)
)
Debtor, )
)
)
)
JULIA V. VASQUEZ,
)
)
Plaintiff, )
)
)
v.
)
)
)
SAXON MORTGAGE, INC.; SAXON
)
MORTGAGE SERVICES INC.; DEUTSCHE )
BANK NATIONAL TRUST COMPANY AS
)
TRUSTEE FOR SAXON ASSET
)
SECURITIES TRUST 2005-3,
)
)
Defendants. )
)
__________________________________)
Arizona Supreme Court
No. CV-11-0091-CQ
United States
Bankruptcy Court
No. 4:08-bk-15510-EWH
O P I N I O N
Certified Questions from the United States Bankruptcy Court
The Honorable Eileen W. Hollowell, Judge
FIRST QUESTION ANSWERED; SECOND QUESTION NOT ANSWERED
________________________________________________________________
SOUTHERN ARIZONA LEGAL AID, INC.
By
Beverly B. Parker
Anthony L. Young
Attorneys for Julia V. Vasquez
GREENBERG TRAURIG LLP
By
Robert A. Mandel
Gil Rudolph
E. Jeffrey Walsh
Julie Barton
Attorneys for Saxon Mortgage, Inc., Saxon Mortgage
Services Inc. and Deutsche Bank National Trust Company
as Trustee for Saxon Asset Securities Trust 2005-3
Tucson
Phoenix
LORI ANGUS WILSON, ESQ.
By
Lori Angus Wilson
Tucson
And
VINCE RABAGO, ESQ.
By
Vincent L. Rabago
Attorneys for Amici Curiae Southwest Fair
Housing Council, The National Association of Consumer
Bankruptcy Attorneys, and The National Consumer
Law Center
GORDON SILVER
By
Ronald E. Warnicke
Tucson
Phoenix
And
JOHNSON, FINDSEN & KINNEY PLLC
By
Beth K. Findsen
Attorneys for Amici Curiae Karl Stauffer,
Fabiana Stauffer, Mariusz Buchna, and Julita Buchna
KOELLER NEBEKER CARLSON & HALUCK, LLP
By
William A. Nebeker
Valerie R. Edwards
Attorneys for Amicus Curiae Arizona
Multi-District Litigation
Scottsdale
Phoenix
THOMAS C. HORNE, ARIZONA ATTORNEY GENERAL
Phoenix
By
Carolyn R. Matthews, Assistant Attorney General
Dena R. Epstein, Assistant Attorney General
Donnelly A. Dybus, Assistant Attorney General
Attorneys for Amicus Curiae State of Arizona
QUARLES & BRADY LLP
By
C. Bradley Vynalek
Brian A. Howie
Michael S. Catlett
Susan G. Boswell
Attorneys for Amici Curiae Arizona Bankers Association
and The Greater Phoenix Chamber of Commerce
Phoenix
MCCARTHY HOLTHUS LEVINE
Scottsdale
By
Paul M. Levine
Attorney for Amicus Curiae United Trustees Association
2
FENNEMORE CRAIG, P.C.
By
Timothy Berg
Carrie Pixler Ryerson
Theresa Dwyer-Federhar
Phoenix
And
K&L GATES LLP
By
Phoebe S. Winder
Amy Pritchard Williams
Robert W. Sparkes, III
Attorneys for Amicus Curiae Mortgage
Bankers Association
Charlotte, NC
GUST ROSENFELD P.L.C.
Phoenix
By
Richard A. Segal
Kent E. Cammack
Scott A. Malm
Attorneys for Amicus Curiae Land Title
Association of Arizona
________________________________________________________________
H U R W I T Z, Vice Chief Justice
¶1
Pursuant
to
A.R.S.
§§
12-1861
to
-1867
(2003)
and
Supreme Court Rule 27, we accepted jurisdiction of two questions
certified by the United States Bankruptcy Court for the District
of Arizona:
1. Is the recording of an assignment of deed of trust
required prior to the filing of a notice of
trustee’s sale under A.R.S. § 33-808 when the
assignee holds a promissory note payable to bearer?
2. Must the beneficiary of a deed of trust being
foreclosed pursuant to A.R.S. § 33-807 have the
right to enforce the secured obligation?
¶2
The Bankruptcy Court’s certification order stated the
relevant facts as follows:
3
In September 2005,
refinanced her home
(“Note”) (Ex. A) in
(“Saxon”) and a deed
DOT named Saxon as
trustee. The DOT was
Plaintiff [Julia V. Vasquez]
by executing a promissory note
favor of Saxon Mortgage, Inc.
of trust (“DOT”) (Ex. B).
The
beneficiary and Ticor Title as
recorded on September 16, 2005.
On September 29, 2005, Saxon assigned the Note to
Deutsche Bank National Trust Company as Trustee for
Saxon Asset Securities Trust 2005-3 (“Deutsche Bank”)
(the “Assignment”) by endorsing the Note in blank and
without recourse to Saxon.
The Assignment was not
recorded.
The Plaintiff defaulted under the Note. On August 29,
2008, Deutsche Bank executed a substitution of trustee
pursuant to A.R.S. § 33-804 removing the title company
as trustee under the DOT and appointing Michael A.
Bosco, Jr. of Tiffany and Bosco (“Tiffany and Bosco”)
as the substituting trustee (Ex. C). The substitution
was recorded on September 12, 2008. On the same date,
Tiffany and Bosco recorded a notice of trustee’s sale
naming
“Deutsche
Bank/2005-3”
as
the
current
beneficiary in “care of” Saxon Mortgage Services, Inc.
c/o Fidelity National Foreclosure Solutions of Mendota
Heights, Minnesota (Ex. D).
On October 29, 2008, an agent of Saxon executed an
assignment of the DOT, assigning all its beneficial
interest to Deutsche Bank (Ex. E). The assignment of
the DOT was recorded on November 7, 2008 and indicated
it was retroactive to August 11, 2008.
(footnote omitted).
See A.R.S. § 12-1863(2); Ariz. R. Sup. Ct.
27(a)(3)(B) (requiring certification order to state the facts
relevant to the presented questions).
I.
A.
¶3
The first certified question is whether “the recording
of an assignment of deed of trust [is] required prior to the
4
filing of a notice of trustee’s sale under A.R.S. § 33-808 when
the assignee holds a promissory note payable to bearer.”
The
answer is no; Arizona law imposes no such requirement.
¶4
We are mindful of the human costs attendant to home
foreclosures.
Our task today, however, is simply to answer two
purely legal questions certified to us by the Bankruptcy Court.
Because the “deed of trust scheme is a creature of statutes,” In
re Krohn, 203 Ariz. 205, 208 ¶ 9, 52 P.3d 774, 777 (2002), our
role
is
entirely
one
of
statutory
construction.1
Put
differently, we are called upon not to determine whether there
ought to be a law providing relief to Vasquez, but what current
Arizona statutes provide regarding the certified questions.
¶5
Trustee’s sales are governed by A.R.S. § 33-808.
That
statute expressly requires that a notice of trustee’s sale be
recorded.
A.R.S. § 33-808(A)(1).
The statute, however, does
not require that an assignment of a deed of trust be recorded
before recording the notice of trustee’s sale.2
1
Until 1971, Arizona law did not provide for deeds of trust,
and loans on real property were routinely secured by mortgages.
After receiving complaints that the mortgage foreclosure process
was too “time-consuming and expensive,” the legislature created
the deed of trust, under which there is no right of redemption
and foreclosure occurs outside of the judicial process through a
trustee’s sale.
See Gary E. Lawyer, Note, The Deed of Trust:
Arizona’s Alternative to the Real Property Mortgage, 15 Ariz. L.
Rev. 194, 194 (1973).
2
The legislature recently considered a bill that would have
required that when a trustee’s sale is noticed, the current
5
¶6
The
recording
statutes
are
designed
to
protect
interests in property against claims of subsequent purchasers or
creditors without notice.
See, e.g., Buerger Bros. Supply Co.
v. El Rey Furniture Co., 45 Ariz. 1, 6, 40 P.2d 81, 83 (1935)
(“[I]t is the policy of the law of this state ‘that assignments
of
mortgages
must
be
recorded
as
instruments
affecting
real
estate in order to protect the holder of such assignment against
subsequent
purchasers
without
notice.’”
(quoting
Newman
v.
Fidelity Sav. & Loan Ass’n, 14 Ariz. 354, 358-59, 128 P. 53, 55
(1912))); Eardley v. Greenberg, 164 Ariz. 261, 265, 792 P.2d
724, 728 (1990) (“[A]ny person who receives an assignment of
beneficial interest and does not record it is in jeopardy of
having the assignment declared invalid as against a subsequent
purchaser for value without notice.”).
¶7
Consistent
with
this
general
purpose,
Arizona
law
expressly provides that “[u]nrecorded instruments, as between
the parties and their heirs . . . shall be valid and binding.”
A.R.S.
§
assignment
33-412(B).
of
a
deed
Thus,
of
while
the
failure
trust
might
leave
to
an
record
an
assignee
unprotected against claims by some purchasers or creditors, it
does not affect a deed’s validity as to the obligor.
In light
____________________________
beneficiary (if not the original beneficiary) concurrently
record
a
document
identifying
all
past
and
current
beneficiaries. See S.B. 1259, 50th Leg., 1st Reg. Sess. (2011).
That bill, however, was not enacted into law.
6
of
§
33-412(B),
it
would
be
anomalous
to
read
§
33-808
as
preventing foreclosure of a valid deed of trust simply because
an assignment has not been recorded.
¶8
Arizona law also expressly provides that the transfer
of a contract secured by a deed of trust “shall operate as a
transfer of the security for such contract.”
A.R.S. § 33-817.
When the note signed by Vasquez was assigned to Deutsche Bank in
2005,
the
deed
of
operation of law.
trust
was
therefore
also
transferred
by
Because § 33-817 does not require separate
documentation of an assignment of the deed of trust when the
secured note is transferred, it would make no sense to imply
into § 33-808 a requirement that the assignment be recorded.
¶9
Vasquez nonetheless argues that this Court implicitly
required recording of assignments of deeds of trust in Newman,
by stating that parties have “the right to presume that public
records
speak
the
truth
and
to
act
thereon
in
all
matters
affected by instruments required by law to be recorded.”
Ariz. at 357, 128 P. at 54.
14
But Newman imposed no recording
requirement beyond those set forth in our statutes.
Rather, the
Court simply announced the consequences of failing to record an
instrument that is “required by law to be recorded.”
Id.
B.
¶10
an
Vasquez asserts that even if § 33-808 does not require
assignment
of
a
deed
of
trust
7
to
be
recorded
as
a
prerequisite to a trustee’s sale, A.R.S. § 33-411.01 imposes
such a requirement.
That statute states:
Any document evidencing the sale, or other transfer of
real estate or any legal or equitable interest
therein, excluding leases, shall be recorded by the
transferor in the county in which the property is
located and within sixty days of the transfer.
In
lieu thereof, the transferor shall indemnify the
transferee in any action in which the transferee’s
interest in such property is at issue, including
costs, attorney’s fees and punitive damages.
¶11
Vasquez argues that the first sentence of § 33-411.01
mandates recording an assignment of the beneficial interest in a
deed of trust.
But this argument ignores the second sentence of
the statute.
¶12
Read in its entirety, § 33-411.01 does not impose a
recording requirement.
Nor does § 33-411.01 suggest that notice
of a trustee’s sale on a previously assigned deed of trust is
valid only if the assignment was recorded.
Rather, the statute
presents a transferor of a real property interest with options
and
consequences
—
either
record
a
document
evidencing
the
transfer or indemnify the transferee in any action in which the
transferee’s interest is at issue.
to
shield
trustee’s
the
original
sale,
but
obligor
rather
The statute is not designed
on
to
a
deed
protect
of
trust
from
transferees
a
from
subsequently arising claims.3
3
Vasquez’s reliance on A.R.S. § 33-818 is also unavailing.
That statute only provides that although recording an assignment
8
¶13
The
Attorney
General
argues
as
amicus
curiae
that
recording of an assignment of the beneficial interest in a deed
of trust is necessary to give effect to A.R.S. § 33-807.01,
which requires lenders to “explore options” with borrowers at
least thirty days before recording a notice of trustee’s sale.
The
Attorney
expressly
General
require
concedes
recording
of
that
§
33-807.01
assignments,
but
does
argues
not
that
unless we so interpret the statute, homeowners will not know
with whom to “explore options.”
¶14
The argument is not persuasive; § 33-807.01 requires
the lender to contact the homeowner, not the other way around.
Thus, the identity of the party who can negotiate modification
of the loan will be clear to an obligor before the trustee’s
sale is noticed.4
And, because the notice of sale must identify
the current beneficiary of the deed of trust, see A.R.S. § 33808(C)(5), the obligor will receive additional notice before the
scheduled sale of the identity of that beneficiary.
¶15
It may well be, as the Attorney General argues, that
an obligor would benefit from the additional assurance, provided
____________________________
of the beneficial interest in a trust deed generally imparts
notice of its “content to all persons,” recording alone does not
invalidate subsequent payments made to a previous holder of the
instrument secured by the trust deed.
4
In any event, § 33-807.01 is not applicable to this case
because the statute was not enacted until after the notice of
trustee’s sale was recorded.
See 2010 Ariz. Sess. Laws, ch.
325, § 1 (2d Reg. Sess.).
9
through the recording of an assignment, that the lender who is
contacting the obligor to explore options under § 33-807.01 is
the current beneficiary of the deed of trust.
The wisdom of
such an additional statutory requirement, however, is for the
legislature,
not
the
courts,
consider.5
to
We
decline
the
Attorney General’s invitation to amend the statute judicially.6
III.
¶16
The
discussion.
We
determinative
court.”
second
of
certified
answer
the
cause
A.R.S. § 12-1861.
question
only
requires
questions
then
pending
only
“which
in
the
brief
may
be
certifying
The Bankruptcy Court’s order states
that the promissory note was assigned to Deutsche Bank well
before
the
notice
of
trustee’s
sale
was
recorded.
Because
Deutsche Bank had the right to enforce the note when the notice
of trustee’s sale was recorded in 2008, the answer to the second
question is not determinative of this case and we decline to
answer it.
5
When urged by the Attorney General in 2011 to adopt such a
requirement through S.B. 1259, the legislature declined to do
so. See supra note 2.
6
The assignment of the deed of trust in this case occurred
before a 2009 amendment to the federal Truth in Lending Act,
which now requires that a homeowner be informed within thirty
days after a note is transferred. 15 U.S.C. § 1641(g) (2009).
10
IV.
¶17
For the reasons above, we answer the first certified
question in the negative and decline to answer the second.
_____________________________________
Andrew D. Hurwitz, Vice Chief Justice
CONCURRING:
_____________________________________
Rebecca White Berch, Chief Justice
_____________________________________
W. Scott Bales, Justice
_____________________________________
A. John Pelander, Justice
_____________________________________
Robert M. Brutinel, Justice
11
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