Ashton Ranch v. jones/patterson ( 2020 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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
ASHTON RANCH COMMUNITY HOMEOWNERS
ASSOCIATION, INC., Plaintiff/Appellee,
v.
BERNADINE JONES, Defendant/Appellee.
PATTERSON COMMERCIAL LAND ACQUISITION
& DEVELOPMENT LLC, Intervenor/Appellant.
No. 1 CA-CV 19-0299
FILED 2-6-2020
Appeal from the Superior Court in Maricopa County
No. CV 2016-016178
The Honorable Lindsay P. Abramson, Judge Pro Tempore
AFFIRMED
COUNSEL
Rusing Lopez & Lizardi PLLC, Scottsdale
By Patricia A. Premeau
Counsel for Intervenor/Appellant
ASHTON RANCH v. JONES/PATTERSON
Decision of the Court
MEMORANDUM DECISION
Presiding Judge Michael J. Brown delivered the decision of the Court, in
which Judge D. Steven Williams and Chief Judge Peter B. Swann joined.
B R O W N, Judge:
¶1 Patterson Commercial Land Acquisition Development LLC
(“Patterson”) appeals the superior court’s denial of Patterson’s request for
the payment of the excess proceeds from a judicial foreclosure. For the
following reasons, we affirm.
BACKGROUND
¶2 Bernadine Jones owned property subject to certain covenants,
conditions, and restrictions of the Ashton Ranch Community Homeowners
Association, Inc. (“HOA”). The property was also subject to a recorded first
deed of trust. Jones failed to pay her HOA assessments in a timely manner
and the HOA filed an action to foreclose the lien. See A.R.S. § 33-1807 (“The
association’s lien for assessments . . . may be foreclosed in the same manner
as a mortgage on real estate . . . .”). After Jones failed to respond, the
superior court granted judgment in favor of the HOA and ordered the
property be sold by the sheriff.
¶3 On January 11, 2018, Patterson purchased the property at the
sheriff’s sale for $52,000. The HOA’s judgment was satisfied in full, and the
excess proceeds from the sale in the amount of $37,970.04 were deposited
with the clerk of court. Patterson, however, failed to make payments to the
holder of the first deed of trust, and the property was sold at a trustee’s sale
on August 20, 2018.
¶4 Patterson moved to intervene in this action under Arizona
Rule of Civil Procedure 24(a), seeking the excess proceeds from the sheriff’s
sale. The superior court granted the motion to intervene. Patterson and
Jones later filed competing requests for payment of the excess proceeds.
The court granted Jones’ request, concluding that no statute supported
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ASHTON RANCH v. JONES/PATTERSON
Decision of the Court
Patterson’s assertion that it had the right to the excess proceeds. Patterson
timely appealed.1
DISCUSSION
¶5 We review issues of law and of statutory interpretation de
novo. Bank of America, N.A. v. Felco Bus. Servs., Inc. 401(K) Profit Sharing
Plan, 243 Ariz. 150, 154, ¶ 11 (App. 2017).
¶6 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 sale. Section 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 . . . and if there are no
other liens the balance shall be paid to the mortgagor.”
¶7 Patterson contends 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
holder of a first deed of trust.2 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 absurd results and would
1 Jones did not file an answering brief, which we could treat as a
concession of reversible error. See Nydam v. Crawford, 181 Ariz. 101, 101
(App. 1994). In the exercise of our discretion, however, we consider the
merits of the issues Patterson raises on appeal. See Bugh v. Bugh, 125 Ariz.
190, 191 (App. 1980).
2 In Vista Santa Fe Homeowners Association v. Millan, 2019 WL 5152257
(Oct. 15, 2019), we rejected this same argument, also raised by Patterson,
under very similar circumstances.
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ASHTON RANCH v. JONES/PATTERSON
Decision of the Court
not flow logically from the statute itself; liens that do not exist at the time
of sale cannot be “paid in their order.”
¶8 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. Cabinetry By Karman, Inc., 230 Ariz. 363,
365, ¶ 8 (App. 2012). Although 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 entities or persons
whose liens or other interests were “terminated by the foreclosure.”
¶9 Patterson also suggests that upon paying $52,000 at the
sheriff’s sale, it became a creditor of Jones, with the sheriff’s certificate of
sale creating a lien against the property. But whatever interest Patterson
acquired after the sale is irrelevant, and Patterson cites no contrary
authority. Because no lienholder made a claim to the proceeds, the superior
court properly concluded that Jones, the mortgagor of the HOA lien, was
entitled to the excess proceeds.3 See A.R.S. § 33-727(B).
¶10 Finally, Patterson’s reliance on Steinmetz is misplaced. In that
case, this court found that the original owner of the property had no right
to the excess proceeds. Steinmetz, PLLC v. Everyone Wins, LLC,
1 CA–CV 17–0549, 2018 WL 3028964 (Ariz. App. June 19, 2018). Instead, the
priority lienholder was entitled to the proceeds. Id. at *1, ¶¶ 2, 4. Even
assuming the analysis in Steinmetz applies here, it would not help Patterson
3 The record is silent as to the senior lienholder’s involvement, if any,
in the sheriff’s sale, or whether the senior lienholder was made whole as a
result of the trustee’s sale.
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ASHTON RANCH v. JONES/PATTERSON
Decision of the Court
because it was neither the original owner nor a lienholder at the time of the
sheriff’s sale.
CONCLUSION
¶11 We affirm the super court’s denial of granting excess proceeds
from the judicial foreclosure to Patterson.
AMY M. WOOD • Clerk of the Court
FILED: AA
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