Julia Vasquez v. Saxon Mortgage Inc ( 2011 )

SUPREME COURT OF ARIZONA
En Banc
JULIA V. VASQUEZ, ) Arizona Supreme Court
) No. CV-11-0091-CQ
Debtor, )
) United States
) Bankruptcy Court
) No. 4:08-bk-15510-EWH
JULIA V. VASQUEZ, )
)
Plaintiff, )
) O P I N I O N
)
v. )
)
)
SAXON MORTGAGE, INC.; SAXON )
MORTGAGE SERVICES INC.; DEUTSCHE )
BANK NATIONAL TRUST COMPANY AS )
TRUSTEE FOR SAXON ASSET )
SECURITIES TRUST 2005-3, )
)
Defendants. )
)
__________________________________)
Certified Questions from the United States Bankruptcy Court
The Honorable Eileen W. Hollowell, Judge
FIRST QUESTION ANSWERED; SECOND QUESTION NOT ANSWERED
________________________________________________________________
SOUTHERN ARIZONA LEGAL AID, INC. Tucson
By Beverly B. Parker
Anthony L. Young
Attorneys for Julia V. Vasquez
GREENBERG TRAURIG LLP Phoenix
By Robert A. Mandel
Gil Rudolph
E. Jeffrey Walsh
Julie Barton
Attorneys for Saxon Mortgage, Inc., Saxon Mortgage
Services Inc. and Deutsche Bank National Trust Company
as Trustee for Saxon Asset Securities Trust 2005-3
LORI ANGUS WILSON, ESQ. Tucson
By Lori Angus Wilson
And
VINCE RABAGO, ESQ. Tucson
By Vincent L. Rabago
Attorneys for Amici Curiae Southwest Fair
Housing Council, The National Association of Consumer
Bankruptcy Attorneys, and The National Consumer
Law Center
GORDON SILVER Phoenix
By Ronald E. Warnicke
And
JOHNSON, FINDSEN & KINNEY PLLC Scottsdale
By Beth K. Findsen
Attorneys for Amici Curiae Karl Stauffer,
Fabiana Stauffer, Mariusz Buchna, and Julita Buchna
KOELLER NEBEKER CARLSON & HALUCK, LLP Phoenix
By William A. Nebeker
Valerie R. Edwards
Attorneys for Amicus Curiae Arizona
Multi-District Litigation
THOMAS C. HORNE, ARIZONA ATTORNEY GENERAL Phoenix
By Carolyn R. Matthews, Assistant Attorney General
Dena R. Epstein, Assistant Attorney General
Donnelly A. Dybus, Assistant Attorney General
Attorneys for Amicus Curiae State of Arizona
QUARLES & BRADY LLP Phoenix
By C. Bradley Vynalek
Brian A. Howie
Michael S. Catlett
Susan G. Boswell
Attorneys for Amici Curiae Arizona Bankers Association
and The Greater Phoenix Chamber of Commerce
MCCARTHY HOLTHUS LEVINE Scottsdale
By Paul M. Levine
Attorney for Amicus Curiae United Trustees Association
2
FENNEMORE CRAIG, P.C. Phoenix
By Timothy Berg
Carrie Pixler Ryerson
Theresa Dwyer-Federhar
And
K&L GATES LLP Charlotte, NC
By Phoebe S. Winder
Amy Pritchard Williams
Robert W. Sparkes, III
Attorneys for Amicus Curiae Mortgage
Bankers Association
GUST ROSENFELD P.L.C. Phoenix
By Richard A. Segal
Kent E. Cammack
Scott A. Malm
Attorneys for Amicus Curiae Land Title
Association of Arizona
________________________________________________________________
H U R W I T Z, Vice Chief Justice
¶1 Pursuant to A.R.S. §§ 12-1861 to -1867 (2003) and
Supreme Court Rule 27, we accepted jurisdiction of two questions
certified by the United States Bankruptcy Court for the District
of Arizona:
1. Is the recording of an assignment of deed of trust
required prior to the filing of a notice of
trustee’s sale under A.R.S. § 33-808 when the
assignee holds a promissory note payable to bearer?
2. Must the beneficiary of a deed of trust being
foreclosed pursuant to A.R.S. § 33-807 have the
right to enforce the secured obligation?
¶2 The Bankruptcy Court’s certification order stated the
relevant facts as follows:
3
In September 2005, Plaintiff [Julia V. Vasquez]
refinanced her home by executing a promissory note
(“Note”) (Ex. A) in favor of Saxon Mortgage, Inc.
(“Saxon”) and a deed of trust (“DOT”) (Ex. B). The
DOT named Saxon as beneficiary and Ticor Title as
trustee. The DOT was recorded on September 16, 2005.
On September 29, 2005, Saxon assigned the Note to
Deutsche Bank National Trust Company as Trustee for
Saxon Asset Securities Trust 2005-3 (“Deutsche Bank”)
(the “Assignment”) by endorsing the Note in blank and
without recourse to Saxon. The Assignment was not
recorded.
The Plaintiff defaulted under the Note. On August 29,
2008, Deutsche Bank executed a substitution of trustee
pursuant to A.R.S. § 33-804 removing the title company
as trustee under the DOT and appointing Michael A.
Bosco, Jr. of Tiffany and Bosco (“Tiffany and Bosco”)
as the substituting trustee (Ex. C). The substitution
was recorded on September 12, 2008. On the same date,
Tiffany and Bosco recorded a notice of trustee’s sale
naming “Deutsche Bank/2005-3” as the current
beneficiary in “care of” Saxon Mortgage Services, Inc.
c/o Fidelity National Foreclosure Solutions of Mendota
Heights, Minnesota (Ex. D).
On October 29, 2008, an agent of Saxon executed an
assignment of the DOT, assigning all its beneficial
interest to Deutsche Bank (Ex. E). The assignment of
the DOT was recorded on November 7, 2008 and indicated
it was retroactive to August 11, 2008.
(footnote omitted). See A.R.S. § 12-1863(2); Ariz. R. Sup. Ct.
27(a)(3)(B) (requiring certification order to state the facts
relevant to the presented questions).
I.
A.
¶3 The first certified question is whether “the recording
of an assignment of deed of trust [is] required prior to the
4
filing of a notice of trustee’s sale under A.R.S. § 33-808 when
the assignee holds a promissory note payable to bearer.” The
answer is no; Arizona law imposes no such requirement.
¶4 We are mindful of the human costs attendant to home
foreclosures. Our task today, however, is simply to answer two
purely legal questions certified to us by the Bankruptcy Court.
Because the “deed of trust scheme is a creature of statutes,” In
re Krohn, 203 Ariz. 205, 208 ¶ 9, 52 P.3d 774, 777 (2002), our
role is entirely one of statutory construction.1 Put
differently, we are called upon not to determine whether there
ought to be a law providing relief to Vasquez, but what current
Arizona statutes provide regarding the certified questions.
¶5 Trustee’s sales are governed by A.R.S. § 33-808. That
statute expressly requires that a notice of trustee’s sale be
recorded. A.R.S. § 33-808(A)(1). The statute, however, does
not require that an assignment of a deed of trust be recorded
before recording the notice of trustee’s sale.2
1
Until 1971, Arizona law did not provide for deeds of trust,
and loans on real property were routinely secured by mortgages.
After receiving complaints that the mortgage foreclosure process
was too “time-consuming and expensive,” the legislature created
the deed of trust, under which there is no right of redemption
and foreclosure occurs outside of the judicial process through a
trustee’s sale. See Gary E. Lawyer, Note, The Deed of Trust:
Arizona’s Alternative to the Real Property Mortgage, 15 Ariz. L.
Rev. 194, 194 (1973).
2
The legislature recently considered a bill that would have
required that when a trustee’s sale is noticed, the current
5
¶6 The recording statutes are designed to protect
interests in property against claims of subsequent purchasers or
creditors without notice. See, e.g., Buerger Bros. Supply Co.
v. El Rey Furniture Co., 45 Ariz. 1, 6, 40 P.2d 81, 83 (1935)
(“[I]t is the policy of the law of this state ‘that assignments
of mortgages must be recorded as instruments affecting real
estate in order to protect the holder of such assignment against
subsequent purchasers without notice.’” (quoting Newman v.
Fidelity Sav. & Loan Ass’n, 14 Ariz. 354, 358-59, 128 P. 53, 55
(1912))); Eardley v. Greenberg, 164 Ariz. 261, 265, 792 P.2d
724, 728 (1990) (“[A]ny person who receives an assignment of
beneficial interest and does not record it is in jeopardy of
having the assignment declared invalid as against a subsequent
purchaser for value without notice.”).
¶7 Consistent with this general purpose, Arizona law
expressly provides that “[u]nrecorded instruments, as between
the parties and their heirs . . . shall be valid and binding.”
A.R.S. § 33-412(B). Thus, while the failure to record an
assignment of a deed of trust might leave an assignee
unprotected against claims by some purchasers or creditors, it
does not affect a deed’s validity as to the obligor. In light
____________________________
beneficiary (if not the original beneficiary) concurrently
record a document identifying all past and current
beneficiaries. See S.B. 1259, 50th Leg., 1st Reg. Sess. (2011).
That bill, however, was not enacted into law.
6
of § 33-412(B), it would be anomalous to read § 33-808 as
preventing foreclosure of a valid deed of trust simply because
an assignment has not been recorded.
¶8 Arizona law also expressly provides that the transfer
of a contract secured by a deed of trust “shall operate as a
transfer of the security for such contract.” A.R.S. § 33-817.
When the note signed by Vasquez was assigned to Deutsche Bank in
2005, the deed of trust was therefore also transferred by
operation of law. Because § 33-817 does not require separate
documentation of an assignment of the deed of trust when the
secured note is transferred, it would make no sense to imply
into § 33-808 a requirement that the assignment be recorded.
¶9 Vasquez nonetheless argues that this Court implicitly
required recording of assignments of deeds of trust in Newman,
by stating that parties have “the right to presume that public
records speak the truth and to act thereon in all matters
affected by instruments required by law to be recorded.” 14
Ariz. at 357, 128 P. at 54. But Newman imposed no recording
requirement beyond those set forth in our statutes. Rather, the
Court simply announced the consequences of failing to record an
instrument that is “required by law to be recorded.” Id.
B.
¶10 Vasquez asserts that even if § 33-808 does not require
an assignment of a deed of trust to be recorded as a
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prerequisite to a trustee’s sale, A.R.S. § 33-411.01 imposes
such a requirement. That statute states:
Any document evidencing the sale, or other transfer of
real estate or any legal or equitable interest
therein, excluding leases, shall be recorded by the
transferor in the county in which the property is
located and within sixty days of the transfer. In
lieu thereof, the transferor shall indemnify the
transferee in any action in which the transferee’s
interest in such property is at issue, including
costs, attorney’s fees and punitive damages.
¶11 Vasquez argues that the first sentence of § 33-411.01
mandates recording an assignment of the beneficial interest in a
deed of trust. But this argument ignores the second sentence of
the statute.
¶12 Read in its entirety, § 33-411.01 does not impose a
recording requirement. Nor does § 33-411.01 suggest that notice
of a trustee’s sale on a previously assigned deed of trust is
valid only if the assignment was recorded. Rather, the statute
presents a transferor of a real property interest with options
and consequences — either record a document evidencing the
transfer or indemnify the transferee in any action in which the
transferee’s interest is at issue. The statute is not designed
to shield the original obligor on a deed of trust from a
trustee’s sale, but rather to protect transferees from
subsequently arising claims.3
3
Vasquez’s reliance on A.R.S. § 33-818 is also unavailing.
That statute only provides that although recording an assignment
8
¶13 The Attorney General argues as amicus curiae that
recording of an assignment of the beneficial interest in a deed
of trust is necessary to give effect to A.R.S. § 33-807.01,
which requires lenders to “explore options” with borrowers at
least thirty days before recording a notice of trustee’s sale.
The Attorney General concedes that § 33-807.01 does not
expressly require recording of assignments, but argues that
unless we so interpret the statute, homeowners will not know
with whom to “explore options.”
¶14 The argument is not persuasive; § 33-807.01 requires
the lender to contact the homeowner, not the other way around.
Thus, the identity of the party who can negotiate modification
of the loan will be clear to an obligor before the trustee’s
sale is noticed.4 And, because the notice of sale must identify
the current beneficiary of the deed of trust, see A.R.S. § 33-
808(C)(5), the obligor will receive additional notice before the
scheduled sale of the identity of that beneficiary.
¶15 It may well be, as the Attorney General argues, that
an obligor would benefit from the additional assurance, provided
____________________________
of the beneficial interest in a trust deed generally imparts
notice of its “content to all persons,” recording alone does not
invalidate subsequent payments made to a previous holder of the
instrument secured by the trust deed.
4
In any event, § 33-807.01 is not applicable to this case
because the statute was not enacted until after the notice of
trustee’s sale was recorded. See 2010 Ariz. Sess. Laws, ch.
325, § 1 (2d Reg. Sess.).
9
through the recording of an assignment, that the lender who is
contacting the obligor to explore options under § 33-807.01 is
the current beneficiary of the deed of trust. The wisdom of
such an additional statutory requirement, however, is for the
legislature, not the courts, to consider.5 We decline the
Attorney General’s invitation to amend the statute judicially.6
III.
¶16 The second certified question requires only brief
discussion. We answer only questions “which may be
determinative of the cause then pending in the certifying
court.” A.R.S. § 12-1861. The Bankruptcy Court’s order states
that the promissory note was assigned to Deutsche Bank well
before the notice of trustee’s sale was recorded. Because
Deutsche Bank had the right to enforce the note when the notice
of trustee’s sale was recorded in 2008, the answer to the second
question is not determinative of this case and we decline to
answer it.
5
When urged by the Attorney General in 2011 to adopt such a
requirement through S.B. 1259, the legislature declined to do
so. See supra note 2.
6
The assignment of the deed of trust in this case occurred
before a 2009 amendment to the federal Truth in Lending Act,
which now requires that a homeowner be informed within thirty
days after a note is transferred. 15 U.S.C. § 1641(g) (2009).
10
IV.
¶17 For the reasons above, we answer the first certified
question in the negative and decline to answer the second.
_____________________________________
Andrew D. Hurwitz, Vice Chief Justice
CONCURRING:
_____________________________________
Rebecca White Berch, Chief Justice
_____________________________________
W. Scott Bales, Justice
_____________________________________
A. John Pelander, Justice
_____________________________________
Robert M. Brutinel, Justice
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