HSBC Bank United States, N.A. v. Cluff
| Decision Date | 18 October 2018 |
| Docket Number | No. 1 CA-CV 17-0627,1 CA-CV 17-0627 |
| Parties | HSBC BANK USA, N.A., Plaintiff/Appellee, v. JOSHUA CLUFF, et al., Defendants/Appellants. |
| 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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.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 Navajo County
The Honorable Dale P. Nielson, Judge
AFFIRMED
Fidelity National Law Group, Phoenix
By Patrick J. Davis, Jamey A. Thompson
Ramras Legal, PLC, Phoenix
Counsel for Defendants/Appellants Joshua and Jennifer Cluff The Shumway Group, Scottsdale
Judge Lawrence F. Winthrop delivered the decision of the Court, in which Presiding Judge Jennifer M. Perkins and Judge Jon W. Thompson joined.
¶1 Co-defendants Curtis Cluff ("Curtis") and Susan Cluff (collectively the "Cluffs"), Joshua Cluff ("Joshua") and Jennifer Cluff (collectively the "Cluff Children"), and the Cluff Family Trust (collectively "Appellants") appeal the superior court's grant of summary judgment in favor of plaintiff HSBC Bank USA, N.A. ("HSBC"). HSBC is the trustee for Wells Fargo Asset Securities Corporation, Mortgage Pass-Through Certificates Series 2006-AR7 ("Wells Fargo").
¶2 After the Cluffs defaulted on payments due under a promissory note secured by a deed of trust encumbering their vacation home ("Bank DOT"), HSBC as trustee for the Bank DOT ordered a trustee's sale on the property. After the sale, HSBC discovered a mistake in the Bank DOT's legal description that omitted a majority of the land intended to secure the underlying note. In the time between the recognition of the mistake and the filing of this lawsuit, a second note and deed of trust were executed against the property. After the filing of this lawsuit to reform the Bank DOT and quiet title, the Cluff Children obtained an assignment of the second note and deed of trust. This assignment introduced issues of seniority in lien status as to the property, hindering HSBC from reforming the Bank DOT and taking the remaining property free and clear.
¶3 Appellants raise numerous issues, arguing they were entitled to summary judgment in their favor and the superior court committedvarious errors warranting reversal. We agree with the superior court, however, that HSBC was entitled to take the entire Cluff property at the time of the trustee's sale, and the trustee's deed and the Bank DOT should be reformed and title quieted in HSBC's favor. Furthermore, Joshua Cluff's recordation of the second lien constituted a groundless recordation in violation of Arizona Revised Statutes ("A.R.S.") section 33-420(A), and he is precluded from protection under the shelter doctrine. Finally, we find no abuse of discretion in the superior court's grant of attorneys' fees. Consequently, we affirm.
¶4 On February 23, 2006, Curtis and Susan Cluff executed a promissory note in favor of Wells Fargo in the amount of $926,500. The note was secured by a deed of trust encumbering their vacation property located in Pinedale, Arizona (the "Pinedale Property"), for the same amount. The property consists of five parcels covering fourteen acres of land, including one parcel with a main house and a guest house. An appraisal by Wells Fargo indicated that all five parcels together were worth $1,425,000 in 2006. The bank's land appraiser never assessed each parcel individually, but instead made one valuation including all five parcels. Although prior communication between Wells Fargo and the Cluffs indicated that all five parcels would be required to secure the loan, the Bank DOT only contained the legal description for one, unimproved parcel of land ("Parcel #1"). The legal description, prepared by Wells Fargo, was written in a "metes and bounds" form, so it was not apparent from the text that any particular part of the Pinedale Property was left out of the description.
¶5 The Cluffs1 made timely payments on the loan from 2006 to 2012. In June 2012, the Cluffs defaulted on the loan and requested a loan modification through Wells Fargo's home mortgage department. Throughout the process, the Cluffs communicated their understanding to Wells Fargo that, if the bank were to order a trustee's sale, they would lose all five parcels, including the parcel with the main house. Efforts to modify the loan failed, and the Cluffs prepared to "short sell" the parcel of landcontaining the main house ("Parcel #2") to repay the outstanding loan balance. During the preparation for the short sale, however, the Cluffs discovered that the Bank DOT only encumbered Parcel #1. The Cluffs then cancelled the short sale so that Wells Fargo could execute a trustee's sale pursuant to the Bank DOT. The Cluffs attempted to alert Wells Fargo about the discrepancy, but they did not sufficiently explain the error to the bank in time to stop the trustee's sale. Throughout this process, Wells Fargo believed it was selling the entire Pinedale Property. At the December 2012 trustee's sale, HSBC2 as trustee for Wells Fargo entered a successful credit bid for the full amount outstanding on the loan and costs associated with the sale. The trustee's deed delivered upon the sale, however, transferred title to HSBC as to Parcel #1 only. At the time of the trustee's sale, Parcel #1 was worth $70,000 and the Cluffs owed more than $900,000 on the loan. After the trustee's sale, HSBC realized the mistake in the legal description. On October 3, 2013, HSBC issued a claim on Wells Fargo's title insurance policy.
¶6 After HSBC discovered the mistake but before it initiated this litigation, Joshua Cluff and his wife Jennifer Cluff were attempting to purchase a new home. Joshua is the son of Curtis and Susan Cluff. The Cluff Children found their "dream home" but could not finance the purchase through a bank. Curtis agreed to help the Cluff Children finance the purchase. The seller of the home, Castle Property Investments, LLC ("Castle") agreed to a financing deal with the Cluff Children and Curtis. As a part of the deal, Curtis agreed to secure a bridge home loan for the property using Parcel #2 of the Pinedale Property as collateral. Joshua and Curtis assured Castle that once the Cluff Children's former home sold, they would use those proceeds to pay off the Castle bridge loan. Castle agreed to give Curtis and Joshua 180 days to sell the former residence and pay the loan. In November 2013, a promissory note and deed of trust were executed in the amount of $183,000. The note ("Castle Note") and the deed of trust ("Castle DOT") were in Curtis' name alone.
¶7 In April 2014, Fidelity National Law Group ("Fidelity"),3 as trustee for Wells Fargo, filed an action on behalf of HSBC in the NavajoCounty Superior Court to reform the Bank DOT and trustee's deed (Count 1), to quiet title against the Cluffs and the Cluff Family Trust as to Parcel #2 and the remaining three parcels of land (Count 2), and, in the alternative, to create an equitable lien on the four parcels of land (Count 3). HSBC filed a notice of lis pendens in April 2014.
¶8 A few months later in August 2014, the Cluff Children sold their former residence. Curtis then emailed Castle to indicate that, instead of Joshua paying off the loan in full, Curtis would have a "friend" pay for an assignment of the loan. The "friend" taking the assignment was really just Joshua Cluff. Joshua used the proceeds of his home sale to pay Castle the outstanding balance on the loan, and Castle executed an assignment of the Castle DOT and underlying note. This transaction perpetuated the lien encumbering Parcel #2, and thus continued to frustrate HSBC's efforts to reform the original Bank DOT and obtain quiet title. HSBC ultimately amended its complaint to add a fourth claim against the Cluff Children for "recording a wrongful lien" pursuant to A.R.S. § 33-420 (Count 4).
¶9 In September 2016, the Cluffs moved for summary judgment, asserting that HSBC's claims were barred by the statute of limitations. HSBC cross-moved on the same issue, and the superior court granted HSBC's motion. In a separate motion, the Cluffs also moved for summary judgment as to Counts 1-3 in the amended complaint. Again, HSBC cross-moved on the same issue and the superior court granted HSBC's motion. In the same motion, HSBC also requested entry of summary judgment as to Count 4 against Joshua and Jennifer Cluff.4 Joshua and Jennifer cross-moved on the same issue, and the superior court granted HSBC's motion.
¶10 The superior court entered judgment in HSBC's favor on August 23, 2017. The Appellants' timely appeal followed. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(1).
¶11 We review the grant of summary judgment de novo, viewing the evidence and reasonable inferences in the light most favorable to the party opposing the motion. Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Tr. Fund, 201 Ariz. 474, 482, ¶ 13 (2002) (citation omitted). Summary judgment is appropriate if no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(a); Orme Sch. v. Reeves, 166 Ariz. 301, 309 (1990). While a party may present "genuine" issues of fact in opposition to summary judgment, disputes as to those issues may still be insufficient to preclude summary judgment if the facts are not material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To be material, a fact must "affect the outcome of the suit under the...
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