Vasquez v. Saxon Mortgage, Inc.

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Justia 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