Blalak v. Mid Valley Transportation, Inc. , 175 Ariz. 538 ( 1993 )

GARBARINO, Judge,

dissenting.

I respectfully disagree with my colleagues. Hard cases make for bad law. It’s distasteful when the law creates a windfall as it appears to do in this case. However, when A.R.S. section 33-404 was enacted, the legislature intended to void as to all creditors and subsequent purchasers an unrecorded beneficial interest in real property. A.R.S. section 33-404(A) specifically provides that every deed in which the grantee holds title as a trustee shall disclose the names of the beneficiaries. A.R.S. section 33-412, which has been the law for many years, provides that all conveyances of property are void as to creditors unless recorded. When read together, it seems clear that the legislative intent was to prevent parties to a conveyance from engaging in deceit by the use of "silence” which is exactly what Willsie and Blalak were doing in this case.

A.R.S. section 33-411(A) bolsters this position by providing that no instrument affecting real property is valid against a subsequent purchaser for valuable consideration without notice unless recorded as provided by law. Certainly a recorded lien in existence at the time of the conveyance and known to Willsie should not receive a lesser status than a lien recorded subsequent to the conveyance. The situation would have been no different had Mid Valley been a subsequent lienholder.

The majority relies on Valley National Bank v. Hay, 13 Ariz.App. 39, 474 P.2d 46 (1970), which was decided before A.R.S. section 33-404 was enacted. Hay was a difficult case which involved the failure of a judgment debtor to record her minor children’s interest in real property purchased in her name with their funds. Because the interest not recorded was an “equitable” interest, the court held that the failure to record did not render such interest unenforceable as to a judgment creditor. In doing so, the court relied heavily upon the fact that Arizona confined the operation of A.R.S. section 33-412 to legal interests in land. In 1987, the Arizona legislature passed A.R.S. section 33-404 which mandated the recording of equitable interests in real property, effective August 18, 1987, for all interests executed after June 22, 1976.

The majority directs us to A.R.S. section 33-404(E) which they believe provides the exclusive remedy for a breach of A.R.S. section 33-404(A). Again I disagree. Section 33-404(E) merely provides a remedy against the grantee should, for any reason, it become desirable to the grantor to void the transaction. It could well be the situation that the grantor, the grantee, and the undisclosed beneficiary wish to conceal the transaction. A.R.S. section 33-404 would then be without application and there would never, under those circumstances, be a necessity to record the names of the beneficiaries as required by section 33-404(A). I cannot believe this to be the legislative intent.

A.R.S. section 33-404(F) is of no help to the majority’s position. It merely provides that a subsequent interest acquired for value is unaffected by the failure of any of the original parties to comply with the statute. The interest that section 33-404(F) seeks to protect is an interest acquired by an innocent party from the grantee referred to in section 33-404(A) who is acting as a trustee but who has failed to comply with the disclosure provisions of that statute. Section 33-404(F) does not provide protection to an undisclosed party to the original transaction. If anything, A.R.S. section 33-404(F) provides protection to Mid Valley.

The legislative intent appears crystal clear to me. If you allow another to hold title to real property for you without disclosing the relationship as required by A.R.S. section 33-404, you do so at your peril. The law does not condone secretive arrangements used to deceive others. The Arizona legislature certainly has the power to determine the effect and priorities of land conveyances within the borders of this state. They have determined that it is in the best interests of the citizens of this state, where real property is concerned, for trustees holding title to disclose the names and addresses of the beneficiaries. The recording statutes are intended to be a means of preventing wrongdoers from depriving innocent purchasers, creditors and lienholders of their interests in real property and to give parties a higher level of transactional awareness. It is in this light I believe we should interpret section 33-