Main I Ltd. Partnership v. Venture Capital Const. and Development Corp.

• Decision Date: 07 July 1987
• Docket Number: No. 1,CA-CIV,1
• Parties: MAIN I LIMITED PARTNERSHIP, an Arizona limited partnership, Plaintiff- Appellant, v. VENTURE CAPITAL CONSTRUCTION AND DEVELOPMENT CORPORATION, Defendant-Appellee, SECURITY TITLE AGENCY, INC., an Arizona corporation, Plaintiff-Appellee, v. MAIN I LIMITED PARTNERSHIP, an Arizona limited partnership, Defendant- Appellant. 9271.
• Court: Arizona Court of Appeals

Page 1234

741 P.2d 1234

154 Ariz. 256

MAIN I LIMITED PARTNERSHIP, an Arizona limited partnership, Plaintiff- Appellant, v. VENTURE CAPITAL CONSTRUCTION AND DEVELOPMENT CORPORATION, Defendant-Appellee, SECURITY TITLE AGENCY, INC., an Arizona corporation, Plaintiff-Appellee, v. MAIN I LIMITED PARTNERSHIP, an Arizona limited partnership, Defendant- Appellant.

No. 1 CA-CIV 9271.

Court of Appeals of Arizona,

Division 1, Department B.

July 7, 1987.

[154 Ariz. 257] Campana, Vieh & Strohm by James E. Vieh, Scottsdale, for defendant-appellee Venture Capital Const. and Development Corp.

Mariscal, Weeks, McIntyre & Friedlander by Michael S. Rubin and Donald N. McIntyre, Phoenix, for plaintiff-appellee Security Title.

Shull, Wortman & Watland by Dwight O. Watland and Mark E. Lasee, Phoenix, for plaintiffs-appellants Main I Ltd. Partnership.

OPINION

GREER, Judge.

The main issue in this appeal is whether the trustor under a deed of trust, who received proper and timely notice of the trustee's sale, may set aside the trustee's deed to the purchaser because notice to third parties who had an interest of record in the property was provided by the trustee one day later than is specified in A.R.S. § 33-809(B).

FACTS

Prior to March 19, 1985, Main I, Limited Partnership (Main I) was the owner of a parcel of commercial real estate in Scottsdale, Arizona. Venture Capital Construction and Development Corporation (Venture Capital) was the beneficiary under a deed of trust on the property that had been executed by Main I as security for a promissory note. Security Title Agency (Security Title) was trustee under the deed of trust.

Main I defaulted in paying the promissory note and Venture Capital instructed Security Title to conduct a trustee's sale. On December 18, 1984, Security Title caused a notice of trustee's sale to be recorded with the Maricopa County Recorder as required by A.R.S. § 33-808, setting the trustee's sale for March 19, 1985, 91 days after the recording. The trustee mailed notice to the parties to the trust deed, including Main I, the trustor, within 5 days as required by A.R.S. § 33-809(C). The trustee then mailed 8 notices to those entities appearing of record to have an interest in the property as required by A.R.S. § 33-809(B). These notices, however, were mailed on January 18, 1985, 31 days after the recording of the notice of trustee's sale, despite the statutory requirement that the notice be mailed within 30 days. Three of these 8 entities were Main I, Main I's general partner, and Venture Capital who had received the 5-day notice and an additional timely notice on January 15, 1985. Therefore, it was only the other 5 entities, none of them parties to the deed of trust, who failed to receive notice within 30 days.

The sale proceeded at the time and on the date scheduled. Kevin Keenan, Esquire, attended the sale on behalf of Main I. Venture Capital was the only bidder, purchasing the property with its credit bid of $120,000. Security Title executed and delivered a trustee's deed to Venture Capital on March 19, 1985.

On April 2, 1985, Main I filed this suit in Maricopa County Superior Court cause C-540789 against Venture Capital claiming a right to redeem the property. Subsequently, Main I was granted leave to amend its complaint to add a claim that the trustee's sale and the trustee's deed issued as a result of the sale were void. The amended complaint added Security Title as a defendant in the suit, but Main I then chose to dismiss Security Title pursuant to Rule 41(a), Arizona Rules of Civil Procedure, without having served it. Security Title moved to intervene in the action, but withdrew the motion and filed a separate suit under Maricopa County Superior Court cause C-553657. Security Title sought declaratory relief in that action that the manner in which Security Title noticed and conducted the trustee sale was valid and in accordance with Arizona law.

Main I sought summary judgment in C-540789 on its claim that the trustee's sale had been defective. Security Title sought summary judgment in its suit for declaratory judgment in C-553657. The two cases were consolidated and the motions for summary judgment were heard together.

On April 6, 1986, the trial court denied Main I's motion for summary judgment and granted Security Title's motion for summary judgment, thereby ruling that the trustee's sale and trustee's deed were valid. Formal written judgment corresponding to this ruling was entered on August 12, 1986. The judgment contained an attorney's fees award of $13,164.28 pursuant to A.R.S. § 12-341.01 for Security Title. The judgment also contained a finding of no just cause for delay in entry of judgment and direction of immediate entry of judgment pursuant to Rule 54(b), Arizona Rules of Civil Procedure. On appeal Main I seeks reversal of the summary judgment ruling and the award of attorney's fees.

DEFECTIVE NOTICE

Main I makes no allegation of defect in the notice provided to it as required by A.R.S. § 33-809, or in the notice provided to the public through publication, posting and recording as required by A.R.S. § 33-808. Its only claim of defect in the notice requirements is that the trustee provided notice one day late to other entities who appeared on the records of the Maricopa County Recorder's Office to have an interest in the property. Main I makes no claim that it was harmed or prejudiced in any way by the defect in the notice given to these other entities. Main I's position is that no showing of harm or prejudice is required because under Arizona law a sale held without strict compliance with the notice requirements provided in the deed of trust statutes is void. We do not agree, and conclude that no grounds exist for voiding the trustee's deed and sale.

Main I correctly states that strict compliance with the notice requirements of the deed of trust statutes is essential to a valid sale under Arizona law. Patton v. First Fed. Sav. & Loan Ass'n, 118 Ariz. 473, 476, 578 P.2d 152, 155 (1978); LeDesma v. Pioneer Nat'l Title Ins. Co., 129 Ariz. 171, 173, 629 P.2d 1007, 1009 (App.1981). Arizona law provides that where a statute details the method of giving notice, the requirements must be strictly followed. Yuma County v. Arizona Edison Co., 65 Ariz. 332, 180 P.2d 868 (1947). Any means of providing notice other than that prescribed is ineffective. Hart v. Bayless Instr. & Trading Co., 86 Ariz. 379, 346 P.2d 1101 (1959).

The Arizona Legislature, however, has provided that under certain circumstances, the sufficiency of the notice required is not subject to attack. Arizona Revised Statute § 33-811(A) provides:

The purchaser at the sale, other than the beneficiary to the extent of this credit bid, shall immediately pay the price bid. Upon receipt of payment, in form satisfactory to the trustee, the trustee shall execute and deliver his deed to the purchaser. The trustee's deed shall raise the presumption of compliance with the requirements of this chapter relating to the exercise of the power of sale and the sale of the trust property, including recording, mailing, publishing and posting of notice of sale and the conduct of sale. Such deed shall constitute conclusive evidence of the meeting of such requirements in favor of purchasers or encumbrancers for value and without actual notice. Knowledge of the trustee shall not be imputed to the beneficiary.

The pertinent portions of this statute are those providing that a trustee's deed executed and delivered after the sale constitutes "conclusive evidence of the meeting of such notice requirements in favor of purchasers or encumbrancers for value and without actual notice," and that the "[k]nowledge of the trustee shall not be imputed to the beneficiary."

Appellees Security Title and Venture Capital argue that Venture Capital was a purchaser for value and without actual notice. The record contains an affidavit of Venture Capital's president verifying that none of the agents, employees or representatives of Venture Capital had any knowledge of any deficiency in the sale procedure utilized by Security Title.

Main I disputes that this statute prevents it from attacking the sufficiency of notice given in this case. Main I first argues that Venture Capital had actual notice that late notice had been sent to the interested parties of record because Venture Capital received one of these late notices.

We fail to see how the 31 day notice sent to Main I would give it notice that late notices had been sent to other interested parties of record. Venture Capital had already received two timely notices. A mailing sent within 5 days to the parties to the trust deed constitutes full compliance with the 30 day mailing to "persons having an interest in the property." See LeDesma, 129 Ariz. at 173, 629 P.2d at 1009. Thus, the notice sent on the 31st day was merely a surplus notice. We find no indication in the record that anything within the late notice sent to Main I revealed that other notices had been sent on that date.

Next Main I argues that Venture Capital does not fit within the provisions of section 33-811(A) because A.R.S. § 33-818 provides that certain documents including "notice of sale ... if acknowledged as provided by law, shall from the time of being recorded impart notice of the content to all persons, including subsequent purchasers and encumbrances for value." Apparently, Main I is arguing that the notice of sale recorded in this case reveals who received copies of the notice and when the copies were mailed.

We disagree. We find nothing in the record demonstrating that the notice of sale recorded in this case would have shown that copies of the notice of sale were not timely mailed to interested parties of record. Furthermore, the notice imparted pursuant to section 33-818 is "constructive notice." "Constructive notice" is the inference of knowledge of the fact in question by operation of law, as under a recording statute....