Transamerica Financial Services, Inc. v. Lafferty
| Decision Date | 20 July 1993 |
| Docket Number | No. 1,CA-CV,1 |
| Citation | 856 P.2d 1188,175 Ariz. 310 |
| Parties | TRANSAMERICA FINANCIAL SERVICES, INC., Plaintiff-Appellee, v. Carl LAFFERTY, an unmarried man, Defendant-Appellant. 91-0173. |
| Court | Arizona Court of Appeals |
This appeal presents two major issues: (1) whether the trustee of a real estate trust is required to take steps to give notice of a trustee's sale to a second beneficiary, beyond sending notice to the address of that beneficiary as reflected in the deed of trust; and (2) if the sale is valid as to the second beneficiary, whether that beneficiary's lien revived when the original debtor reacquires the property, and, if so, whether that lien acquired preference to other liens on the property.
In 1972, Robert and Rosalinda Guerrero ("the Guerreros") executed a deed of trust covering a parcel of real property in Phoenix, and recorded it with the Maricopa County Recorder. In 1987, the Guerreros executed a second deed of trust on the same property, in which appellee Transamerica Financial Services, Inc. ("Transamerica") was the beneficiary.
The body of Transamerica's 1987 deed of trust contained the following:
BENEFICIARY:
TRANSAMERICA FINANCIAL SERVICES, INC.
Additionally, the upper left corner of the deed of trust stated:
WHEN RECORDED MAIL TO:
Transamerica Financial
P.O. Box 2L
On September 19, 1989, Transamerica relocated its Tempe office to 1400 East Southern, Suite 925. Transamerica did not record a request for notice reflecting its new address as permitted by A.R.S. § 33-809(A). It continued to receive mail at the post office box indicated in the upper left corner of the deed of trust.
Defendant Mickey Magness ("Magness"), not a party to this appeal, was the trustee under the first deed of trust. On October 11, 1989, she caused copies of a notice of trustee's sale and notice of breach to be mailed to Transamerica at 4025 S. McClintock in Tempe, the address reflected for "Beneficiary" in the second deed of trust. One copy was sent by certified mail with return receipt requested and another by first class mail. Transamerica has no record of receiving either mailing. The envelopes, including the return receipt attached to the certified mailing, were returned to Magness's office by the U.S. Postal Service. The certified envelope was marked: "RETURN TO SENDER/NO FORWARD ORDER ON FILE/UNABLE TO FORWARD." Magness made no further effort to contact Transamerica.
A trustee's sale under the first deed of trust was conducted on January 10, 1990. Appellant Carl Lafferty ("Lafferty") was the highest bidder at the sum of $12,500.00. Lafferty received a trustee's deed, which was recorded on January 23, 1990.
Lafferty's business partner contacted the Guerreros after the sale, and the Guerreros and Lafferty agreed that the Guerreros would buy the property back. Lafferty executed a joint tenancy deed to the Guerreros on January 24, 1990, and the Guerreros executed two deeds of trust in favor of Lafferty for $15,000.00 and $13,000.00, respectively, on the same day. The joint tenancy deed and the two deeds of trust were recorded sequentially on January 25, 1990. According to Lafferty's uncontested affidavit, he was not acquainted with the Guerreros and had not met them before the trustee's sale.
Transamerica brought this action for declaratory relief against Lafferty, the Guerreros, and Magness. Lafferty counterclaimed for a decree of quiet title. On cross-motions for summary judgment, the trial court ruled in pertinent part:
If notice had been sent subsequently or even originally to the P.O. Box 2L, Tempe address notice would have been received as Transamerica has maintained such an address throughout such a period of time.
It is basically the position of [Lafferty] that having sent notice to the address at 4025 South McClintock that was all that [Magness] had to do, and when the notice was not received, it was simply too bad for [Transamerica]....
* * * * * *
In our case [Magness] had actual knowledge of an address for [Transamerica] (from the post office address shown on the face of the document) as well as a duty to inquire concerning the whereabouts of [Transamerica]. Any such inquiry would quickly have shown that Transamerica maintained an office a few blocks from the McClintock address, had a telephone number in operation, and was qualified to do business in Arizona, with a statutory agent on file with the Arizona Corporation Commission.
Even the most cursory examination of a Phoenix telephone book, which would take no more than fifteen seconds, would have revealed to [Magness] that [Transamerica] then and now maintained at least nine different offices in the metropolitan Phoenix area. To fail to make such an effort as to a nationally known company is, in the Court's opinion, a gross error.
Based on all of the above, the Court must conclude that proper notice was not given, the foreclosure was void as to [Transamerica] and that its lien remains as a first lien on the property.
The trial court entered an amended judgment determining that Transamerica's interest "was not affected by the trustee's sale of January 10, 1990." Lafferty and Magness moved unsuccessfully for a new trial.
Lafferty timely appealed from the amended judgment and the order denying the motion for new trial. This court has jurisdiction pursuant to A.R.S. § 12-2101(B) and (F)(1).
Under A.R.S. § 33-808, a trustee who, after default under a deed of trust, wishes to exercise the power of sale granted by A.R.S. § 33-807, is required to record and post a notice of trustee's sale. Furthermore, A.R.S. § 33-809(B)(2) requires the trustee to give notice of the proposed sale, by certified or registered mail:
To each person who, at the time of recording of the notice of sale, appears on the records of the county recorder in the county in which any part of the trust property is situated to have an interest in any of the trust property. Such copy of the notice shall be addressed to the person whose interest so appears at the address set forth in the document. If no address for the person is set forth in the document, the copy of the notice may be addressed in care of the person to whom the recorded document evidencing such interest was directed to be mailed at the time of its recording or to any other address of the person known or ascertained by the trustee. If the interest which appears on the records of the county recorder is a deed of trust, a copy of the notice need only be mailed to the beneficiary under the deed of trust. If any person having such an interest or the trustor, or any person who has recorded a request for notice, desires to change the address to which notice shall be mailed, such change shall be accomplished by a request as provided under this section. 1
(Emphasis added.)
In addition to the notice of sale required by A.R.S. § 33-809(B)(2), the trustee is also compelled by subsection C to mail a statement of breach of the trust deed and election of sale. A.R.S. § 33-809(C) provides in part:
A copy of such additional notice shall also be sent with the notice provided for in subsection B, paragraph 2 to all persons whose interest in the trust property is subordinate in priority to that of the deed of trust along with a written statement that the interest may be subject to being terminated by the trustee's sale. The written statement may be contained in the statement of breach or nonperformance.
Lafferty contends that because Magness complied with A.R.S. § 33-809(B)(2) by sending notice to the address contained in the body of Transamerica's second deed of trust, the resulting sale of the property pursuant to that notice was valid. Amicus curiae Arizona Trustee Association supports this view. 2 Transamerica, on the other hand, although not embracing the extensive duty to search for the whereabouts of inferior lien holders espoused by the trial court, argues that, under A.R.S. § 33-809(B)(2), once the notice to a beneficiary is returned undelivered, it is as if "no address for the person is set forth in the document" and, therefore, Magness was required to send additional notice to "any other address of the person known or ascertained by the trustee." Because Transamerica's post office box address was clearly set forth in the left-hand corner of the deed of trust itself, Transamerica argues that the address could have been ascertained, and the failure to send notice of the sale to that address invalidated the subsequent trustee's sale.
This issue is one of statutory construction. Helping in this resolution is the history of this statute. The notice requirement of A.R.S. § 33-809(B)(2) was amended in 1984. The prior version of the statute provided in part:
Such copy of the notice shall be addressed to the person whose interest so appears at the address and in care of the person to whom the recorded document evidencing such interest was directed to be mailed at the time of its recording.
(Emphasis added.)
The 1984 amendment changed the notice requirement in two significant aspects. First, it provided that notice be sent to "the address set forth in the document." Second, it provided that "if no address is set forth in the document," then notice should be sent in the manner provided by the prior statute, i.e., "in care of the person to whom the recorded document evidencing such interest was directed to be mailed at the time of its recording." Further, it placed an affirmative duty on a person having an interest in the...
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