Biel Props., LLC v. CRG Partners, Ii, LLC
| Decision Date | 09 April 2015 |
| Docket Number | No. 1 CA-CV 14-0186,1 CA-CV 14-0186 |
| Parties | BIEL PROPERTIES, LLC, an Arizona limited liability company; JONATHA A. BROWN, LLC, an Arizona limited liability company; BUNNY MONEY, LLC, an Arizona limited liability company; CATHY DANIELS, Trustee of THE LUTHER JAY DANIELS AND CATHY ANN DANIELS REVOCABLE TRUST DATED AUGUST 28, 1996, a trust; ENTRUST FBO TIM KOLACNY IRA # 11384; JOHN HICKS and TROY STINE, individuals; DIANA ROBERTS KAY, Trustee of the NICHOLAS L. KAY TRUST DATED AUGUST 14, 1996, a trust; PENSCO TRUST COMPANY CUSTODIAN FBO KAREN L. WENGER IRA 'PENSCO ACCOUNT # WEIEG'; CONSTANCE M. QUICKLE, Trustee of THE QUICKLE FAMILY TRUST, a Trust; SCHRIER INVESTMENTS, LLC, an Arizona limited liability company; RICHARD and CINDI SCHUSTER, husband and wife; MAUREEN SEIFERT, an individual; SUZIE L. STRADER, an individual; SWEET RETIREMENT FUND, LLC, an Arizona limited liability company; THE FAST TRACK VENTURE, LLC, an Arizona limited liability company; and ROBERT A. VIDEAN FAMILY REVOCABLE TRUST, a trust, Plaintiffs/Appellants, v. CRG PARTNERS, II, LLC, an Arizona limited liability company; MONTE VISTA PARTNERS, LLC fka CRG PARTNERS III, LLC, an Arizona limited liability company; RDP INVESTMENT GROUP, LLC, a Nevada limited liability company; and KELLY FREEMAN, an individual, Defendants/Appellees. |
| Court | Arizona Court of Appeals |
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
Appeal from the Superior Court in Maricopa County
No. CV2010-081179, CV2012-017698
The Honorable David M. Talamante, Judge
AFFIRMED
Stratman Law Firm, PLC, Phoenix
By Troy B. Stratman, Emily H. Mann
Wilenchik & Bartness PC, Phoenix
By Dennis I. Wilenchik, Brian Hembd
Judge Kenton D. Jones delivered the decision of the Court, in which Presiding Judge John C. Gemmill and Judge Donn Kessler joined.
¶1 Appellants (Biel) appeal the dismissal of their complaint, which sought to quiet title to a parcel of real property located in Maricopa County, Arizona (the Property). For the following reasons, we affirm.
¶2 In September 2007, RDP Investment Group, L.L.C. (RDP) entered into a Loan Agreement with Foundations Commercial, L.L.C. (Foundations), whereby Foundations agreed to provide RDP with a term loan of an amount up to $3 million, with an option for an additional $7 million, for the purpose of establishing a commercial sand and gravel operation. The loan was to be secured by a Deed of Trust on the Property that named Foundations as the beneficiary. The Deed of Trust was not tobecome effective, however, until "after [RDP]'s receipt of 2.5 million dollars" from Foundations.
¶3 Thereafter, in January 2008, in a separate but related transaction, Biel loaned Foundations $1.75 million to fund a portion of its loan to RDP. As part of the lending agreement with Biel, Foundations assigned to Biel a portion of its "rights to repayment" of the principal and interest due to Foundations under the Loan Agreement with RDP, its "rights of recourse against [RDP]," and its "rights to any collateral under the Loan Agreement" between Foundations and RDP. No document memorializing this arrangement was ever recorded.
¶4 In April 2009, Foundations recorded the Deed of Trust, listing itself as both the trustee and beneficiary. When RDP ultimately defaulted on the loan, Foundations effectuated an uncontested trustee's sale, and receiving no objection and no outside bids, obtained a Trustee's Deed that indicated it was the owner of the Property. The remaining Appellees claim an interest in title to the Property pursuant to deeds recorded between August 2009 and February 2011.
¶5 In November 2010, RDP filed suit against Foundations, alleging Foundations never provided the $2.5 million required to trigger the attachment of the security interest in the Property, and thereby challenged the validity of the Deed of Trust and subsequent trustee's sale. Foundations failed to appear and defend the action, and the trial court ultimately entered a default judgment in favor of RDP and against Foundations, expressly finding Foundations "never held a valid deed of trust or other security interest in the Property," and both the Deed of Trust and Trustee's Deed were "void and create[d] no valid interest in the Property."2
¶6 In December 2012, Biel filed a separate suit against Appellees,3 alleging Biel had become a beneficiary under the Deed of Trust through the assignment of the right to repayment from Foundations, and sought (1) a judicial declaration of ownership of the Property, and (2) quiet title to the Property.4 Appellees immediately filed a motion to dismiss Biel's complaint, arguing Biel lacked standing because it failed to establish an interest in title to the Property. The trial court agreed and granted the motion to dismiss Biel's complaint against Appellees in a signed Rule 54(b) judgment on January 21, 2014. Biel timely appealed. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1)5 and -2101(A)(1).
¶7 We review the dismissal of a complaint for failure to state a claim de novo. Blankenbaker v. Marks, 231 Ariz. 575, 577, ¶ 6, 299 P.3d 747, 749 (App. 2013). To maintain a quiet title action, a plaintiff must necessarily establish the nature and extent of his estate or interest in the subject property. A.R.S. § 12-1101(A) (); Saxman v. Christmann, 52 Ariz. 149, 154, 79 P.2d 520, 522 (1938) ( ), criticized on other grounds by Rundle v. Republic Cement Corp., 86 Ariz. 96, 101, 341 P.2d 226, 229 (1959). A mere avowal of title is insufficient to sustain a claim to title, and a complaint which sets forth facts that fail to establish the plaintiff's right to title fails to state a claim. Verde Water & Power Co. v. Salt River Valley Water Users' Ass'n, 22 Ariz. 305, 307, 197 P. 227, 228 (1921).
¶8 Biel claims its interest in title arose through the assignment from Foundations of a portion of its security interest in the Property. Wedisagree that the facts, as alleged by Biel, confer standing to assert a claim to quiet title.
¶9 A deed of trust conveys legal title in real property to a third party — the trustee — to secure the performance of a contract. A.R.S. §§ 33-801(8), -805; Snyder v. HSBC Bank, USA, N.A., 873 F. Supp. 2d 1139, 1153 (D. Ariz. 2012). The trustee holds legal title until the loan balance is paid or the security reclaimed. See A.R.S. § 33-801(8), (10); Hatch Cos. Contracting, Inc. v. Ariz. Bank, 170 Ariz. 553, 556, 826 P.2d 1179, 1182 (App. 1991) (). In the interim, the trustee holds only "bare legal title — sufficient only to permit him to convey the property at the out of court sale." Eardley v. Greenberg, 164 Ariz. 261, 264, 792 P.2d 724, 727 (1990) (quoting Brant v. Hargrove, 129 Ariz. 475, 480 n.6, 632 P.2d 978, 983 n.6 (App. 1981) (internal quotations omitted). A deed of trust is therefore "'[i]n practical effect . . . little more than a mortgage with a power to convey upon default,'" id. (quoting In re Bisbee, 157 Ariz. 31, 34, 754 P.2d 1135, 1138 (1988)), and the two are treated similarly. See Brant, 129 Ariz. at 480, 632 P.2d at 983 ().
¶10 Although the beneficiary under a deed of trust, like a mortgagee, may have an interest in the property itself, the fact remains he has no interest in the title. See Saxman, 52 Ariz. at 154, 79 P.2d at 522. "Such encumbrancers cannot maintain an action to quiet title, for they have no title." Id.; see also Berryhill v. Moore, 180 Ariz. 77, 88, 881 P.2d 1182, 1193 (App. 1994) ( ) (internal citations omitted).
¶11 Moreover, even had Foundations rightfully acquired title to the Property as the beneficiary of the Deed of Trust, this still would not have transferred to Biel any interest in the title. Rather, when the assignor of an interest in a deed of trust later acquires title through a foreclosure action, he does so for the benefit of the assignee, and only to the extent necessary to protect the assignment. Metcalf v. Phx. Title & Trust Co., 33 Ariz. 13, 21, 261 P. 633, 636 (1927); cf. Read v. Ariz. Dep't of Rev., 166 Ariz. 533, 537-38, 803 P.2d 944, 948-49 (Tax Ct. 1991) (), superseded by statute on other grounds as stated in Hing v. Maricopa Cnty., 224 Ariz. 421, 423, 231 P.3d 953, 955 (Tax Ct. 2010). The taking "for the benefit of" the assignee does not equate to the transfer of title to the assignee. See Metcalf, 33 Ariz. at 21, 261 P. at 636; cf. A.R.S. § 33-703(B) (). Instead, it subjects the property to a lien, in favor of the assignee, in the amount of the note secured by the deed of trust. Metcalf, 33 Ariz. at 21, 261 P. at 636. Therefore, Biel, at most, had a right to claim a lien against the Property in the amount...
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