Delo v. Gmac Mortg., L.L.C.

• Decision Date: 08 May 2013
• Docket Number: 2 CA–CV 2012–0086.,Nos. 2 CA–CV 2012–0085,s. 2 CA–CV 2012–0085
• Citation: 660 Ariz. Adv. Rep. 18,302 P.3d 658,232 Ariz. 133
• Parties: William DELO, an individual, Plaintiff/Appellee, v. GMAC MORTGAGE, L.L.C., fka GMAC Mortgage Corporation, a Virginia corporation; U.S. Bank, N.A., as trustee for Ramp 2005EFC7, Defendants/Appellants, Mortgage Electronic Registration Systems, Inc., Intervenor/Appellant.
• Court: Arizona Court of Appeals

232 Ariz. 133

302 P.3d 658

660 Ariz. Adv. Rep. 18

William DELO, an individual, Plaintiff/Appellee,

v. GMAC MORTGAGE, L.L.C., fka GMAC Mortgage Corporation, a Virginia corporation; U.S. Bank, N.A., as trustee for Ramp 2005EFC7, Defendants/Appellants,Mortgage Electronic Registration Systems, Inc., Intervenor/Appellant.

Nos. 2 CA–CV 2012–0085, 2 CA–CV 2012–0086.

Court of Appeals of Arizona, Division 2, Department B.

May 8, 2013.

The Frutkin Law Firm, PLC By C. Adam Buck, Phoenix, Attorneys for Plaintiff/Appellee.

Ryley Carlock & Applewhite By Kara A. Ricupero and Kevin R. Heaphy, Phoenix, Attorneys for Defendants/Appellants.

Snell & Wilmer L.L.P. By Andrew M. Jacobs, Tucson, Attorneys for Intervenor/Appellant.

OPINION

VÁSQUEZ, Presiding Judge.

[232 Ariz. 134]¶ 1 In this quiet title action, GMAC Mortgage, L.L.C. and U.S. Bank, N.A. (the GMAC Parties), and Mortgage Electronic Registration Systems, Inc. (MERS), appeal from the trial court's grant of summary judgment quieting title in favor of appellee William Delo to real property located in Queen Creek. ¹ The GMAC Parties and MERS argue the court erred by concluding their interests in the property had been foreclosed in a prior tax-lien foreclosure lawsuit. For the reasons that follow, we reverse and remand for entry of summary judgment in favor of the GMAC Parties.

Factual Background and Procedural History

¶ 2 On appeal from the entry of summary judgment, we view the facts and all reasonable inferences drawn from them in the light most favorable to the party opposing the motion. Robinson v. Kay, 225 Ariz. 191, ¶ 2, 236 P.3d 418, 419 (App.2010). Here, the underlying material facts are undisputed. In September 2005, Robert and Carri Anderson obtained a $200,000 loan from EquiFirst Corporation to purchase a residence in Queen Creek (the Property). The Andersons signed an Adjustable Rate Note (the Note) and executed a Deed of Trust on the property as security for the loan. The Deed of Trust designated EquiFirst as lender and MERS “as a nominee for Lender and Lender's successors and assigns,” as “the beneficiary under the Security Instrument,” and as legal title holder.

[232 Ariz. 135]¶ 3 EquiFirst endorsed the Note “Without Recourse, Pay to the Order of,” thereby transferring it to Wells Fargo in November 2005. EquiFirst also transferred the Note's servicing rights to Homecomings Financial, LLC, a subsidiary of GMAC. GMAC subsequently became the holder of the Note, placed it in a trust entitled “RAMP 2005EFC7,” and appointed U.S. Bank as trustee.

¶ 4 In February 2007, the Pinal County Treasurer sold a tax lien on the Property for delinquent 2005 property taxes. Pinal County purchased the tax lien and assigned it to Delo when he paid the outstanding taxes. After the statutory three-year waiting period, seeA.R.S. § 42–18201, Delo initiated foreclosure proceedings in June 2010, when the Andersons failed to redeem the tax lien. Delo named as defendants the Andersons, EquiFirst, and the San Tan Heights Homeowners Association, all of whom had been identified in a Limited Search Report prepared by Security Title Agency as having interests in the Property. Delo did not name the GMAC Parties or MERS as defendants in the lawsuit. He did, however, record a lis pendens indicating the foreclosure complaint had been filed.

¶ 5 After the defendants failed to respond to Delo's foreclosure complaint, the trial court entered a default judgment on September 15, 2010. Delo obtained a Treasurer's Deed to the Property on October 7, 2010. In the meantime, after the Andersons had defaulted on the Note, MERS instructed Executive Trustee Services, LLC (ETS) to institute non-judicial foreclosure proceedings on the Property.² In May 2010, ETS recorded a Notice of Trustee's Sale of the Property, setting August 31, 2010, as the date of the sale. GMAC, represented by U.S. Bank, was the highest and only bidder at the trustee's sale. ETS executed a deed in favor of U.S. Bank, as Trustee for RAMP 2005EFC7 (Trustee's Deed), and recorded it on September 10, 2010.

¶ 6 In December 2010, Delo filed this lawsuit against the GMAC Parties, seeking to quiet title to the Property. The parties filed cross-motions for summary judgment. After hearing oral argument, the trial court granted Delo's motion and entered judgment in his favor. The GMAC Parties and MERS filed separate notices of appeal, which we have consolidated. We have jurisdiction pursuant to A.R.S. §§ 12–120.21(A)(1) and 12–2101(A)(1).

Discussion

¶ 7 The GMAC Parties contend the trial court erred by granting Delo's motion for summary judgment because the court “failed to adhere to Arizona law requiring that Delo name parties in a tax lien foreclosure lawsuit as a prerequisite of due process to foreclose their interest in the subject property.” MERS similarly contends the court's judgment quieting title in Delo is void and “should be reversed because it fails to recognize MERS's prior record interest in the property.” We review the court's summary judgment ruling de novo, “determin[ing] independently whether there are any genuine issues of material fact and whether the trial court erred in its application of the law.” Valder Law Offices v. Keenan Law Firm, 212 Ariz. 244, ¶ 14, 129 P.3d 966, 971 (App.2006).

¶ 8 Pursuant to A.R.S. § 42–17153(A), “a tax that is levied on real or personal property is a lien on the assessed property.” To secure the payment of the unpaid taxes, the county treasurer is authorized “to sell the tax liens ... and to foreclose the right to redeem,” A.R.S. § 42–18101(A), delivering to each purchaser or assignee a certificate of purchase, A.R.S. § 42–18118(A). A real property tax lien may be redeemed by a property owner; the owner's agent, assignee, or attorney; or “[a]ny person who has a legal or equitable claim in the property.” A.R.S. § 42–18151(A). If the lien is not redeemed within three years, the purchaser may bring an action to foreclose the right to redeem. A.R.S. § 42–18201. [232 Ariz. 136]¶ 9 In his motion for summary judgment, Delo first argued he “ha[d] priority over [the GMAC Parties] by virtue of the lis pendens he recorded.” Second, he maintained the GMAC Parties did not have legal authority to foreclose because there is no public record that EquiFirst ever assigned the Note to them. Finally, Delo argued “MERS [wa]s not a necessary party in [the] foreclosure action” because MERS is merely an agent for the lender. In their response and cross-motion, the GMAC Parties argued that, as the holder of the Note, GMAC was entitled to enforce it. They asserted that the lack of a recorded assignment of the Note had “no bearing” on this case, because MERS, as GMAC's agent, “held a valid legal interest in the Property well before initiation of the [tax-lien foreclosure l]awsuit and validly commenced a [non-judicial] foreclosure action prior to filing of the same.” And, they argued Delo's “lis pendens provide[d] no authority to foreclose” the interests of the GMAC Parties or MERS because their interests all had vested prior to the lis pendens and Delo failed to name them in the tax-lien foreclosure lawsuit.

¶ 10 The trial court agreed with Delo, concluding that because Delo had filed a lis pendens on August 12, 2010, before any recorded interest of the GMAC Parties,³ the GMAC Parties had received sufficient notice and an opportunity to intervene in Delo's tax-lien foreclosure action. The court concluded that having failed to intervene, the GMAC Parties “cannot now claim that their interests are prior in right to [Delo]'s interests.”

¶ 11 In reaching this conclusion, the trial court relied primarily on Ticktin v. Western Savings & Loan Ass'n, 8 Ariz.App. 63, 442 P.2d 886 (1968). In that case, this court was asked to decide “whether the assignees of a realty mortgage may prevail against a party who ha[d] previously foreclosed a prior realty mortgage on the same property after having duly recorded a notice of lis pendens.” Ticktin, 8 Ariz.App. at 64, 442 P.2d at 887. In ruling that the assignees of the second mortgage could not prevail, we noted that the second mortgage had been executed and assigned after the first mortgage foreclosure action had been filed and lis pendens recorded. Id. at 64–65, 442 P.2d at 887–88. Thus, because the lis pendens was recorded before the second mortgage came into existence and was assigned, the assignee lost whatever rights to the property he may have had by failing to intervene in the prior foreclosure action. Id. We explained:

[T]he doctrine of lis pendens does not apply to persons who acquire their interest in the subject land of the suit [p]rior to the commencement of the action and recording of lis pendens. [Rather], it has been held that the lis pendens statute is prospective in its action and is notice to those who thereafter acquire an interest in the real property after the filing of lis pendens.

Id. at 65, 442 P.2d at 888.

¶ 12 Here, the Deed of Trust designating MERS as nominee for the lender and its successors and assigns, beneficiary, and legal title holder, was recorded September 21, 2005. The Substitution of Trustee appointing ETS as trustee under the Deed of Trust was recorded December 5, 2008. Clearly, MERS's and ETS's interests in the Property were acquired long before Delo had acquired his interest. Moreover, ETS recorded the Notice of Trustee's Sale on May 27, 2010, setting a date for the sale of the Property on August 31. Delo did not file the tax-lien foreclosure lawsuit until June 10, 2010, and did not record the lis pendens until August 12. Accordingly, the trial court's reliance on Ticktin is misplaced. “[I]f the holderof a tax-lien certificate wants to foreclose the redemption right of an owner or a person who has a legal or equitable interest in the property, the holder must join those parties in the foreclosure action.” Roberts v. Robert, 215 Ariz. 176, ¶ 16, 158 P.3d 899, 903 (App.2007). Although the Limited Title Search obtained by Delo had attached to...