Arizona Supreme Court Rules Promissory Note Sufficient for Notice of Trustee's Sale - Vasquez v. Saxon Mortgage

November 30, 2011

Our Chino foreclosure defense attorneys were interested to see a rare state Supreme Court case involving a bankruptcy. In the Arizona Supreme Court's Vazquez v. Saxon Mortgage Inc., the Arizona bankruptcy court certified the following question to the high court: Does Arizona law require an assignee of a mortgage to record the assignment before filing a notice of trustee's sale, when the assignee holds a promissory note payable to the bearer? In a decision with a long list of amici curiae, the high court ultimately said no. That situation arose when Julia Vazquez challenged a foreclosure against her by Tiffany and Bosco, an assignee of an assignee of her original lender. The assignment was not recorded in at least one step in the chain of title, but the high court declined to stop the sale because [WHO] owned a promissory note payable to "bearer."

Vasquez refinanced in 2005, executing a promissory note in favor of Saxon Mortgage and a deed of trust with Saxon as beneficiary and title company Ticor Title as trustee. About two weeks later, Saxon assigned the note to Deutsche Bank as a trustee for a Saxon "asset securities trust," endorsing the note in blank. This assignment was not recorded. After Vasquez defaulted in 2008, Deutsche Bank removed Ticor Title as trustee under the deed of trust and substituted Tiffany and Bosco. This was duly recorded on the same date that Tiffany and Bosco filed a notice of trustee's sale on behalf of Deutsche Bank as trustee for Saxon. Two months later, Saxon assigned the deed of trust to Deutsche Bank, retroactively to about three months earlier. When Vasquez later challenged her foreclosure, she argued that the deed of trust should have been assigned before the notice was filed.

In the very first paragraph of its analysis, the Arizona Supreme Court disagreed. The court emphasized that its job was to construe statutes as they currently exist, not to determine whether a law to protect people like Vasquez should exist. However sympathetic the court might have been, it found nothing in Arizona law to support her case. The statute on recording a notice of trustee's sale is silent on any requirement to first assign the deed of trust. While failing to record an assignment could make the assignee vulnerable to challengers from others with interest in the property, the court said, Arizona law expressly says unrecorded instruments are binding. Furthermore, state law also says that transferring a contract secured by a deed of trust should operate as a transfer of the security for the contract as well. The Supreme Court then declined to answer a second certified question, finding that it was not determinative of the outcome.

As Fullerton foreclosure defense lawyers, we're disappointed by this ruling. Arizona is one of the states hit hardest by the foreclosure crisis, and just like with other states, this has led to sloppy paperwork and incomplete chains of title between lenders who securitize and trade mortgages back and forth. We found it telling that the high court took time early in its opinion to emphasize that it was finding what the law says, not what might be best for Arizonans, because it suggests that the court would rather have seen a different outcome as well. In other cases around the country, courts have had to work chains of ownership out for themselves, sometimes with judge-angering results. Arizona's set of laws is unique to Arizona, of course, but many of these cases have stopped or restarted foreclosures. As Downey foreclosure defense attorneys, we wouldn't mind seeing these standards applied nationwide.

If you're facing foreclosure or will be soon and you can't get a straight answer out of your loan servicer, stop calling them and call Howard Law, P.C., instead. To discuss your case and learn more about your legal rights, send us an email or call 1-800-872-5925.

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