Another Homeowner Win in Arizona! False Recordings Huff v. Flagstar Bank

And here’s another homeowner win!  Reversed and remanded back to trial court on false documents recorded in connection with a non-judicial foreclosure:

8 22 13 – 1CA-CV12-0399 – Memorandum Decision – Huff

Defendants argue that liability under the statute exists only for recorded documents that purport to create an interest in real property. They cite Schayes v. Orion Financial Group, Inc., CV-10-02658-PHX-NVW, 2011 WL 3156303 (D. Ariz. July 27, 2011), which held that a notice of trustee’s sale is not covered by the false recording statute because “Arizona courts interpret subsection A’s ‘document assert[ing] an . . . interest” as the same sort of “document which purports to create an interest’ described in subsection C.” Id. at *6.
¶15 The District Court’s analysis of A.R.S. § 33-420(A), however, ignores the statute’s plain and unambiguous language. Had the legislature intended to limit the application of A.R.S. § 33-420(A) to recorded instruments that “create” an interest in real property, it could easily have said so in subsection A, just as it did in subsection C. See Padilla v. Indus. Comm’n, 113 Ariz. 104, 106, 546 P.2d 1135, 1137 (1976) (a fundamental rule of statutory construction is the presumption that what the legislature means, it will say). Consequently, the Defendants’ reliance on Schayes is misplaced, and we are not bound by it given the plain language of the statute. See Dube v. Likins, 216 Ariz. 406, 417, ¶ 37, 167 P.3d 93, 104 (App. 2007) (stating that we are not bound by federal decisions deciding state law issues).

Even if the statute only applied to documents creating an interest in real property, a notice of substitution of trustee arguably creates such an interest. Stauffer, 1 CA-CV 12-0073, 1 CA-CV 12-0123, slip op. at *8-9, ¶ 12. Without a notice of substitution of trustee, the successor trustee has no power of sale under A.R.S. § 33-807(A), has no authority to notice the trustee’s sale under A.R.S. § 33-808, has no right to conduct the sale under A.R.S. § 33-810, or to collect the funds and issue a trustee’s deed under A.R.S. § 33-811. The notice of substitution of trustee and notice of trustee’s sale must create an interest in real property or those identified therein could not non-judicially foreclose on a borrower’s property. Id. Because a successor trustee has such sweeping power over such an important interest as one’s ownership interest in a home, A.R.S. § 33-420 necessarily applies to notices of substitution of trustee and notices of trustee’s sale to provide a remedy for the recording of false instruments.
¶17 Because A.R.S. § 33-420 applies to the recorded notice of successive trustee as alleged in the amended complaint, Huff stated a claim upon which relief might be granted. Consequently, her false recording claims should not have dismissed pursuant to Rule 12(b)(6). See Stauffer, 1 CA-CV 12-0073, 1 CA-CV 12-0123, slip op. at *8-9, *11, ¶¶ 12, 15.

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