DAYSTAR INVESTMENTS, LLC v. Maricopa County Treasurer

• Decision Date: 06 May 2004
• Docket Number: No. 1 CA-CV 03-0458.,1 CA-CV 03-0458.
• Citation: DAYSTAR INVESTMENTS, LLC v. Maricopa County Treasurer, 88 P.3d 1181, 207 Ariz. 569 (Ariz. App. 2004)
• Parties: DAYSTAR INVESTMENTS, L.L.C., an Arizona limited liability company, Plaintiff-Appellant, v. MARICOPA COUNTY TREASURER; Adam Sandoval and Ofilia Sandoval; City of Phoenix, Neighborhood Maint & Zoning Enf., and City Treasurer; Federal National Mortgage Assoc.; J.D.W. Enterprises, Inc.; Internal Revenue Service; Ford Motor Credit Co., Defendants-Appellees.
• Court: Arizona Court of Appeals

88 P.3d 1181

207 Ariz. 569

DAYSTAR INVESTMENTS, L.L.C., an Arizona limited liability company, Plaintiff-Appellant, v.MARICOPA COUNTY TREASURER; Adam Sandoval and Ofilia Sandoval; City of Phoenix, Neighborhood Maint & Zoning Enf., and City Treasurer; Federal National Mortgage Assoc.; J.D.W. Enterprises, Inc.; Internal Revenue Service; Ford Motor Credit Co., Defendants-Appellees.

No. -0458.

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

May 6, 2004.

Review Denied June 29, 2004.

Sterling R. Threet, Mesa, Attorney for Plaintiff-Appellant.

Richard M. Romley, Maricopa County Attorney ByJohn W. Paulsen, Deputy County Attorney, Phoenix, Attorneys for Defendants-Appellees Maricopa County Treasurer.

OPINION

NORRIS, Judge.

¶ 1 Daystar Investments, L.L.C. purchased a tax lien on real property located in Maricopa County, Arizona.Subsequently, it obtained a default judgment foreclosing the redemption rights of the record owners and several others who may have had an interest in the property.The judgment also ordered the Treasurer of Maricopa County to execute and deliver a deed conveying the property to Daystar.The Treasurer, who was not a party to the foreclosure action, refused to issue the deed, asserting Daystar's judgment had been obtained in violation of state law.

¶ 2 The fundamental issue presented in this appeal is whether the Treasurer was required to comply with the court's order directing him to issue the deed to Daystar.Under the facts presented, we hold that the Treasurer was not bound by the court's order and could question the propriety of Daystar's foreclosure action and the court's order directing issuance of the deed.

BACKGROUND

¶ 3 On April 18, 2002, Daystar sued the owners of the property and several others ("defendants") to foreclose their rights to redeem a tax lien which Daystar had purchased from the Treasurer ("foreclosure action").Under state law, to secure payment of delinquent taxes on real property, county treasurers are authorized to sell tax liens, which are interest-bearing investments.Arizona Revised Statutes("A.R.S.")Section 42-18101(1999);see generallyBauza Holdings, L.L.C. v. Primeco, Inc.,199 Ariz. 338, 339, ¶ 2, 18 P.3d 132, 133(App.2001).The purchaser of a tax lien receives a certificate of purchase, known as a tax lien certificate, which recites, among other matters, the name of the purchaser and the date of the sale.A.R.S. § 42-18118(A) and (B)(Supp.2003).The tax lien certificate serves as evidence entitling the holder to a deed if certain statutory conditions are met ¶ 4 In its amended complaint Daystar alleged that in February 1999, the Treasurer had sold the "[p]roperty ... at a tax sale," that "Certificate of PurchaseNo. 99002279[had been] assigned to the sale" and that on February 5, 2001, this certificate had been sold and issued to Daystar.Because the defendants had three years from the date of the tax lien sale to redeem the lien, A.R.S. § 42-18151(A)(1999),A.R.S. § 42-18152(1999)andA.R.S. § 42-18201(Supp.2003), Daystar also alleged that more than three years had elapsed since the date of the tax lien sale.¹Daystar did not name the Treasurer as a defendant in the action.

¶ 5 Daystar obtained a default judgment on January 8, 2003.The judgment recited several "findings," two of which are at issue in this appeal:

[i]n February, 1999, the Treasurer of Maricopa County, Arizona, sold the Property, which is located in Maricopa County, Arizona, in order to pay for the delinquent taxes legally levied and assessed against the Property, together with interest, penalties and other charges.The sale was valid and the taxes due and owing on the Property were delinquent at the time of the sale.The Certificate of PurchaseNo. 99002279, was issued to DAYSTAR INVESTMENTS, L.L.C.

* * *

Pursuant to A.R.S. § 42-451[now A.R.S. § 42-18201] because more than three years have elapsed since the date of the sale set forth above and none of the Property has been redeemed from the sale, Plaintiff is entitled to foreclose the rights of the Defendants.

¶ 6 In addition to foreclosing the defendants' rights to redeem, in accordance with A.R.S. § 42-18204(A)(2)(Supp.2003), the judgment ordered the Treasurer to execute and deliver to Daystar a deed conveying the property.Section 42-18204(A)(1-2) states, in pertinent part, that in an action to foreclose the right to redeem "if the court finds that the sale is valid, and that the tax lien has not been redeemed, the court shall enter judgment" foreclosing the right of the defendant to redeem and "[d]irecting the county treasurer to expeditiously execute and deliver to the party in whose favor judgment is entered, including the state, a deed conveying the property described in the certificate of purchase."

¶ 7 After obtaining a buyer for the property, Daystar sent the Treasurer a certified copy of the judgment and requested the Treasurer to issue the deed.A.R.S. § 42-18205(1999) provides, in part, that "[o]n receiving a certified copy of a judgment foreclosing the right to redeem" along with the required fee, the "county treasurer shall execute and deliver to the party in whose favor the judgment was entered a deed conveying the property described in the judgment."The Treasurer refused to issue the deed, asserting Daystar had purchased the tax lien on February 5, 2001, and that its foreclosure action had been filed before expiration of the three year redemption period, in violation of A.R.S. § 42-18201.

¶ 8 Daystar then petitioned the court in the foreclosure action to order the Treasurer to show cause why he should not be held in contempt for not obeying the court's order directing him to execute and deliver the deed to Daystar.Daystar asserted that even if there had been an irregularity in the sale process, the judgment and the findings, were final and binding on the Treasurer.Daystar also asserted that the Treasurer was not an interested party and was without standing to object to the judgment.

¶ 9 The Treasurer responded to Daystar's petition with a motion to quash.The Treasurer argued that the Rules of Procedure for Special Actions governed enforcement of a public official's statutory obligations and that Daystar had failed to properly serve the Treasurer with process as required under those rules.On the merits, the Treasurer asserted Daystar was not entitled to any relief because the tax lien had not been offered for sale until February 2001, that Daystar had purchased the tax lien on February 5, 2001 and that the foreclosure action was premature in violation of A.R.S. § 42-18201.The Treasurer submitted several records to the court which the Treasurer contended showed that Daystar had purchased and paid for the tax lien, as well as several other tax liens, in February 2001.

¶ 10 Thereafter, by stipulation, Daystar withdrew its request for an order holding the Treasurer in contempt, the Treasurer withdrew its motion to dismiss and the parties agreed that Daystar would not have to seek relief through a special action.The parties requested the court to rule on the following issue as a question of law:

Whether the Treasurer must comply with a final and non-appealable judgment foreclosing a certificate of purchase as provided under A.R.S. § 42-18204, and directing him to issue a deed pursuant to A.R.S. § 42-18205, even if the Treasurer believes the foreclosure action was brought prematurely under A.R.S. § 42-18201?

The parties further stipulated that if the court decided this question in the affirmative, it should order the Treasurer to immediately issue the deed, but that if it decided this question in the negative, a question of fact still remained as to whether the foreclosure action was premature.

¶ 11 At the show cause hearing, the parties discussed the stipulation with the court and argued the merits of their respective positions.The trial court informed the parties that it would first rule on whether the Treasurer had "an interest in this matter" and then, depending on its resolution of this issue, would address the validity of the judgment.

¶ 12The trial court did not follow this sequence, and decided to reject the parties' stipulation.Implicitly finding the Treasurer had "an interest in this matter,"the court ruled on the validity of the default judgment.The court found that the records and materials submitted by the Treasurer demonstrated the tax lien had not been sold until February 2001 and that Daystar's foreclosure action had been filed before expiration of the three year period required by A.R.S. § 42-18201.In "the interest of justice,"the court then treated Daystar's petition as a motion for relief under Rule 60(c),Arizona Rules of Civil Procedure, and set aside the default judgment for "mistake, inequity and the need to correct manifest error."This appeal followed.

DISCUSSION

A.Standard of Review.

¶ 13 Generally, whether to set aside an entry of default is a decision within the discretion of the trial court and our review is limited to a finding of a clear abuse of discretion.Hirsch v. Nat'l Van Lines, Inc.,136 Ariz. 304, 308, 666 P.2d 49, 53(1983).If a trial court's decision is based upon "a determination of disputed questions of fact or credibility, a balancing of competing interests, pursuit of recognized judicial policy, or any other basis to which we should give deference,"we will not substitute our judgment for that of the trial court.Gen. Elec. Capital Corp. v. Osterkamp,172 Ariz. 185, 188, 836 P.2d 398, 401(App.1992).However, where the facts are not in dispute and "there are few or no conflicting procedural, factual or equitable considerations, the resolution of the question is one of law or logic."Id."In such cases, we must, if appropriate, substitute our judgment for that of the trial court, and if the trial court vacated entry of default without legal grounds, that constitutes an abuse of discretion."Id.

B.The Treasurer's Standing....