BT Capital, LLC v. TD Serv. Co. of Arizona

• Decision Date: 28 September 2011
• Docket Number: No. 1 CA–CV 10–0450.,1 CA–CV 10–0450.
• Citation: BT Capital, LLC v. TD Serv. Co. of Arizona, 228 Ariz. 188, 265 P.3d 370, 618 Ariz. Adv. Rep. 18 (Ariz. App. 2011)
• Parties: BT CAPITAL, LLC, an Arizona limited liability corporation, Plaintiff/Appellant/Cross–Appellee, v. TD SERVICE COMPANY OF ARIZONA, an Arizona corporation; and RCS–Chandler, LLC, an Arizona limited liability company, Defendants/Appellees,andPoint Center Financial, Inc., a foreign corporation, Defendant/Appellee/Cross–Appellant.
• Court: Arizona Court of Appeals

228 Ariz. 188

265 P.3d 370

618 Ariz. Adv. Rep. 18

BT CAPITAL, LLC, an Arizona limited liability corporation, Plaintiff/Appellant/Cross–Appellee,

v.TD SERVICE COMPANY OF ARIZONA, an Arizona corporation; and RCS–Chandler, LLC, an Arizona limited liability company, Defendants/Appellees,andPoint Center Financial, Inc., a foreign corporation, Defendant/Appellee/Cross–Appellant.

No. 1 CA–CV 10–0450.

Court of Appeals of Arizona, Division 1, Department D.

Sept. 27, 2011.As Amended Sept. 28, 2011.

The Doyle Law Firm, P.C. by William H. Doyle, Robert J. Lord, Phoenix, Attorneys for Plaintiff/Appellant/Cross–Appellee.

Jaburg & Wilk, P.C. by Kathi Mann Sandweiss, Roger L. Cohen, Phoenix, Attorneys for Defendants/Appellees.

Gallagher & Kennedy, P.A. by Thomas A. Maraz, Joseph E. Cotterman, Phoenix, Attorneys

for Defendant/Appellee/Cross–Appellant.

OPINION

IRVINE, Presiding Judge.

¶ 1 BT Capital, LLC (“BT”) appeals the trial court's judgment granting motions to dismiss filed by TD Service Company of Arizona (“TD”) and Point Center Financial, Inc. (“PCF”). PCF cross-appeals the trial court's denial of its request for attorneys' fees. In this opinion we consider whether TD, serving as PCF's trustee and bidding agent, may invalidate a nonjudicial deed of trust sale based upon its own failure to comply with statutory requirements in noticing the sale although there were no timely objections to the sale pursuant to Arizona Revised Statute (“A.R.S.”) section 33–811(C) (2007). For the reasons that follow, we hold that a trustee's statutory power to postpone or continue a sale pursuant to A.R.S. § 33–810(B) (2007), does not extend to voiding a completed bidding process. Objections to the sale that are not timely raised pursuant to A.R.S. § 33–811(C) may not be grounds for setting aside the sale. Therefore, we reverse the trial court's judgment granting PCF and TD's motions to dismiss. Upon remand, the trial court should consider whether PCF can prove BT's bid was grossly inadequate.

FACTS AND PROCEDURAL HISTORY

¶ 2 Because the motions to dismiss discussed matters outside of BT's complaint, the parties stipulated to treat the motions as motions for summary judgment. Ariz.R.Civ.P. 12(b). On appeal we view the evidence and inferences drawn from the evidence in a light most favorable to BT, as it was the party opposing the motions. Sonoran Desert Investigations, Inc. v. Miller, 213 Ariz. 274, 276, ¶ 5, 141 P.3d 754, 756 (App.2006).

¶ 3 In December 2006, PCF made a loan to RCS Chandler LLC (“RCS”) to develop a property known as Elevation Chandler (the “Property”). The loan was secured by a deed of trust on the Property, with PCF as the beneficiary. After RCS defaulted on the loan, PCF appointed TD as trustee for the purpose of conducting a non-judicial trustee sale of the Property.

¶ 4 On January 11, 2008, TD recorded a notice of trustee's sale with the Maricopa County Recorder. The notice was published in the Arizona Capitol Times, posted at the Maricopa County courthouse and at an address believed to be the location of the Property. RCS filed for bankruptcy in April 2008, which delayed the sale. After several postponements, the sale was held on June 15, 2009. At the sale, TD served as bidding agent for PCF, auctioneer and trustee. Allegedly, a sale took place at noon that day with PCF acquiring the Property for a credit bid of $1,000,000. After a representative from BT showed the auctioneer a notice indicating the sale was to take place at 2:00 p.m., the auctioneer was directed by TD to re-cry the auction (“2009 sale”). TD had instructions from PCF to make an opening credit bid of $1,000,000 and continue making credit bids up to $25,000,000 if competing bids were placed. At the re-cried sale, an opening bid of $1,000,000 was made by TD on PCF's behalf. BT then bid $1,000,001. No further bids were placed, and TD announced BT as the winning bidder. BT had placed a $10,000 deposit in accordance with A.R.S. § 33–810(A). The next day, BT tendered the remaining balance of its bid price to TD. TD refused to accept the balance owed and informed BT that the sale was void because “there had been a mistake in communicating the correct bid instructions.” TD attempted to return BT's $10,000 deposit, but BT refused to accept it.

¶ 5 BT filed a complaint, alleging contractual and tort claims against RCS, PCF and TD. TD filed a motion to dismiss, arguing lack of duty for the tort claims and impossibility of the contract claims. In addition to its failure to properly bid on PCF's behalf, TD also argued that it had made various errors in noticing the sale, including: (1) listing the incorrect address for the Property; (2) posting notice of trustee's sale at the incorrect location for the Property; (3) erroneously including land that was not a part of the Property; and (4) failing to provide notice to the holders of an easement across the Property, Propcor Associates and Propcor II Associates, LLC (collectively, “Propcor”). PCF joined TD's motion to dismiss and filed its own motion to dismiss. RCS did not participate in the motion to dismiss proceedings.

¶ 6 BT filed a response and cross-motion for summary judgment as to TD and a response to PCF's motion to dismiss. Among other arguments, it alleged that any procedural irregularities were waived under A.R.S. § 33–811(C) because no one obtained an injunction to bar the trustee's sale before 5:00 p.m. the day before the sale. In a supplemental reply PCF further argued that the sale was void because the purchase price was grossly inadequate, citing In re Krohn, 203 Ariz. 205, 52 P.3d 774 (2002) and Millennium Rock Mortg. Inc. v. T.D. Serv. Co., 179 Cal.App.4th 804, 102 Cal.Rptr.3d 544 (2009).

¶ 7 After oral argument, the trial court granted TD and PCF's motions to dismiss BT's complaint. In its ruling, the court discussed the procedural defects in the statutorily required notice and A.R.S. § 33–811(C). The court reasoned that because the deed of trust statutes mandate strict compliance, any trustee's sale that does not adhere to the statutory notice requirements is void. The court did not make a finding that BT's bid was inadequate. Nevertheless, citing Millennium as instructive, the court noted that “inadequacy in the sales price, coupled with irregularities in [the] sales process, may justify setting aside a foreclosure sale as a matter of equity.”

¶ 8 As for A.R.S. § 33–811(C), the court concluded that the statute did not apply to TD and it therefore would not be prevented from “discovering and correcting an irregularity in the sale process prior to completion of the sale.” The court did not address why or if A.R.S. § 33–811(C) applied to either RCS or PCF. The court also noted that Propcor, by virtue of its ownership of an easement over and across the Property, was required to be given notice of the sale. Because the court determined the sale was “void, or voided by the trustee” due to procedural irregularities, the court reasoned that there was no basis for BT's contractual claims. Further, the court noted that TD owed no duty to BT, which rendered BT's tort claims ineffective. The court concluded that “it would appear that procedural irregularities which occurred in the course of a statutorily mandated process, and thereby voided the process, prevented [BT] from obtaining an inequitable windfall at the expense of the trustor and the beneficiary of the deed of trust.”

¶ 9 BT timely appealed the trial court's judgment in favor of PCF and TD on its breach of contract, declaratory relief and specific performance claims. BT makes no argument on appeal regarding the dismissal of its tort claims, so that issue is not before us. PCF timely cross appealed the trial court's ruling denying its request for attorneys' fees. After the notices of appeal, another trustee's sale took place, at which PCF purchased the Property (“2010 sale”).

DISCUSSION

¶ 10 We review a grant of summary judgment de novo. Simon v. Maricopa Med. Ctr., 225 Ariz. 55, 59, ¶ 9, 234 P.3d 623, 627 (App.2010). We will affirm a grant of summary judgment only if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Id.

I. Mootness.

¶ 11 PCF filed a motion to dismiss this appeal, arguing that BT's appeal was moot. PCF urges us to consider the issue again, arguing that BT's appeal is moot because BT failed to obtain an injunction blocking the 2010 sale and because the Property was sold to PCF itself during the pendency of this appeal. We have addressed an analogous argument previously and rejected it.

¶ 12 “A case becomes moot when an event occurs which would cause the outcome of the appeal to have no practical effect on the parties.” Arpaio v. Maricopa Cnty. Bd. of Supervisors, 225 Ariz. 358, 361, ¶ 7, 238 P.3d 626, 629 (App.2010) (quoting Sedona Private Prop. Owners Ass'n v. City of Sedona, 192 Ariz. 126, 127, ¶ 5, 961 P.2d 1074, 1075 (App.1998)). In Vinson v. Marton & Assocs., Vinson contracted to purchase a parcel of land owned by a partnership. 159 Ariz. 1, 3, 764 P.2d 736, 738 (App.1988). The partnership refused to convey the land to Vinson once it received an offer of a higher purchase price. Id. Vinson filed suit, alleging breach of contract and requested specific performance. Id. The partnership argued that Vinson's appeal was moot because the subject property had been sold to a third party during the pendency of the appeal. Id. The court rejected this argument, noting that although specific performance may not be available because the property was sold to a third party, Vinson could request damages. Id. at 4–5, 764 P.2d at 739–40. Despite the fact that Vinson had listed only the remedy of specific performance in his complaint, the court stated he had not yet elected remedies and could move to amend his complaint pursuant to Arizona Rule of Civil Procedure (“Rule”) 15(b) to assert a claim for damages instead of specific performance. Id.

¶ 13 Here, BT requested...