Vista v. Millan/patterson

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
VISTA SANTA FE HOMEOWNERS ASSOCIATION, Plaintiff/Appellee,
v.
MALAYA MATIC MILLAN, et al., Defendants/Appellees.
PATTERSON COMMERCIAL LAND ACQUISITON
& DEVELOPMENT LLC, Appellant.
No. 1 CA-CV 18-0609
FILED 10-15-2019
Appeal from the Superior Court in Maricopa County
No. CV 2017-000134
The Honorable David W. Garbarino, Judge Pro Tempore
AFFIRMED
COUNSEL
Rusing Lopez & Lizardi PLLC, Scottsdale
By Patricia A. Premeau
Counsel for Appellant
ZBS Law, LLP, Phoenix
By Kim R. Lepore, Eric L. Cook, Joseph J. Tirello
Counsel for Defendant/Appellee, The Bank of New York Mellon
VISTA v. MILLAN, et al./PATTERSON
Decision of the Court
MEMORANDUM DECISION
Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Jennifer B. Campbell and Judge Lawrence F. Winthrop
joined.
B R O W N, Judge:
¶1 Patterson Commercial Land Acquisition & Development,
LLC (“Patterson”) appeals the superior’s courts denial of its motion to
intervene under Arizona Rule of Civil Procedure 24(a). For the following
reasons, we affirm.
BACKGROUND
¶2 In 2000, Malaya Millan purchased real property subject to
certain covenants, conditions, and restrictions of the Vista Santa Fe
Homeowners Association. The property was also subject to both a first and
second deed of trust. By January 2017, Millan was deficient in her HOA
assessment obligations, and the HOA filed an action to foreclose on its
assessment lien. The HOA eventually filed a motion for summary
judgment; Millan never responded, and the court granted judgment for the
HOA and authorized a sheriff’s sale of her property.
¶3 On December 7, 2017, Patterson purchased the property at the
sheriff’s sale for $42,000. The HOA’s judgment was satisfied, and the excess
proceeds from the sale in the amount of $28,719.33 were deposited with the
clerk of the court. The same day, the holder of the first deed of trust
commenced a trustee’s sale, and the property was sold to a third party on
March 13, 2018.
¶4 Shortly thereafter, the Bank of New York Mellon, holder of
the second deed of trust, was permitted to intervene as of right in the still
pending HOA foreclosure action. As holder of the second deed of trust, the
bank requested the excess proceeds from the sheriff’s sale in partial
satisfaction of its lien. Patterson then moved to intervene as of right under
Arizona Rule of Civil Procedure 24(a), seeking the excess proceeds from the
December sale—the proceeds from Patterson’s own purchase of the
property. The court denied Patterson’s motion to intervene, finding no
statute granted Patterson an interest in the property before the sheriff’s sale,
2
VISTA v. MILLAN, et al./PATTERSON
Decision of the Court
which was the relevant time to examine Patterson’s claim. Patterson timely
appealed.
DISCUSSION
¶5 This court reviews de novo the superior court’s denial of a
request for intervention as of right under Rule 24(a)(2). Woodbridge
Structured Funding, LLC v. Arizona Lottery, 235 Ariz. 25, 28, ¶ 11 (App. 2014).
“It is well settled in Arizona that Rule 24 ‘is remedial and should be liberally
construed with the view of assisting parties in obtaining justice and
protecting their rights’ . . . .” Heritage Vill. II Homeowners Ass’n v. Norman,
246 Ariz. 567, 573, ¶22 (App. 2019) (citation omitted).
¶6 We apply the following test to determine whether
intervention as of right is proper:
(1) the applicant’s motion must be timely; (2) the applicant
must assert an interest relating to the property or transaction
which is the subject of the action; (3) the applicant must be so
situated that without intervention the disposition of the
action may, as a practical matter, impair or impede his ability
to protect that interest; and (4) the applicant’s interest must be
inadequately represented by the other parties.
Planned Parenthood Arizona, Inc. v. Am. Ass’n of Pro-Life Obstetricians &
Gynecologists, 227 Ariz. 262, 280, ¶60 (App. 2011). Further, the party seeking
intervention must prove a “direct legal effect upon its rights,” as opposed
to a “possible or contingent equitable effect.” Woodbridge, 235 Ariz. at 28,
¶15.
¶7 The nature of Patterson’s interest in the property is the
primary issue here. Patterson argues that because it obtained equitable—
but not legal—title to the property upon the sheriff’s sale, it was entitled to
the excess proceeds from the sheriff’s sale. However, as the superior court
correctly noted, the question is a matter of timing. A.R.S. § 33-727(B), which
addresses the order and priority of liens upon the sale of a mortgaged
property, controls what occurs if there are excess funds after payment of
the foreclosure judgment: “If there are other liens on the property sold, or
other payments secured by the same mortgage, they shall be paid in their
order.”
¶8 Patterson argues that § 33-727(B) supports its claim to the
excess proceeds because it obtained the HOA’s interest in the property after
the sale, and HOA liens have priority over all interest holders except the
3
VISTA v. MILLAN, et al./PATTERSON
Decision of the Court
holder of a first deed of trust. See A.R.S. § 33-1807(B). This argument fails,
however, for at least two reasons. First, even if Patterson succeeded to the
HOA’s interest, that lien was extinguished upon receipt of funds from the
sale because the HOA received enough to satisfy the judgment. See A.R.S.
§ 33-727(A). Second, Patterson’s argument is not supported by a reasonable
reading of A.R.S. § 33-727. Under subsection B, a lien, or some other interest
that might constitute a valid claim to the excess proceeds, must, of
necessity, already exist at the time of sale. See § 33-727(B). Though the
statute does not explicitly state that these interests must exist “at the time
of the sale,” any other conclusion would lead to uncertainty and does not
flow logically from the statute itself; liens that do not exist at the time of sale
cannot be “paid in their order.”
¶9 This construction is consistent with statutes and case law
governing trustee’s sales, where the relevant stage in the proceedings for
determining any party’s interest in excess proceeds is “at the time of the
sale.” A.R.S. § 33-812; PNC Bank v. Cabintry By Karman, Inc., 230 Ariz. 363,
365, ¶8 (App. 2012). Though the legislature has included the “at the time
of the sale” language in our trustee’s sale statutes and has not repeated the
same language in the sheriff’s sale statutes, the only reasonable application
of § 33-727(B) is that the interest in the proceeds must have existed at the
time of sale. The Restatement (Third) of Property also supports this
analysis: “[L]iens and other interests terminated by the foreclosure attach
to the surplus in order of the priority they enjoyed prior to the foreclosure.”
Restatement (Third) of Property (Mortgages) § 7.4 (1997) (emphasis added);
see Hanley v. Pearson, 204 Ariz. 147, 149, ¶10 (App. 2003) (citing Restatement
(Third) of Property (Mortgages) § 7.4 in construing Arizona statutes
regarding proceeds from foreclosure). Here, Patterson had no legal interest
in the property at the time of the sale and admits as much on appeal. Thus,
Patterson could not have been included among the potential creditors
having claims to the excess proceeds.
¶10 Patterson also suggests that upon paying $42,000 at the
sheriff’s sale, it became a creditor of Millan, with the sheriff’s certificate of
sale creating a lien against the property. Patterson cannot base its claim to
proceeds from its own purchase by claiming whichever interest seems to
yield the better result. In any case, whatever interest Patterson acquired
after the sale is irrelevant, and Patterson cites no contrary authority. As far
as the record reveals, the property was subject to only two liens at the time
of sale—the first and second deeds of trust.
¶11 Because Patterson failed to demonstrate it had any valid legal
claim to the excess proceeds, the superior court properly denied Patterson’s
4
VISTA v. MILLAN, et al./PATTERSON
Decision of the Court
motion to intervene. Accordingly, we need not address whether the motion
to intervene was timely, whether disposition of the action could have
impaired or impeded Patterson’s ability to protect its interest, or whether
other parties could protect Patterson’s interest. See, e.g., Woodbridge, 235
Ariz. at 29, ¶20.
CONCLUSION
¶12 We affirm the superior court’s denial of Patterson’s motion to
intervene. Because the Bank of New York Mellon is the successful party on
appeal, it is entitled to taxable costs upon compliance with ARCAP 21.
AMY M. WOOD • Clerk of the Court
FILED: AA
5