Recording False Documents – Not All Misstatements Are Material

Minor errors in false documents should not result in liability under A.R.S §33-420.

Arizona law provides penalties in the form of substantial statutory damages plus awards of costs and legal fees for recording false documents under A.R.S. §33-420. Pertinent provisions of this statute are as follows:

  1. A person purporting to claim an interest in, or a lien or encumbrance against, real property, who causes a document asserting such claim to be recorded in the office of the county recorder, knowing or having reason to know that the document is forged, groundless, contains a material misstatement or false claim or is otherwise invalid is liable to the owner or beneficial title holder of the real property for the sum of not less than five thousand dollars, or for treble the actual damages caused by the recording, whichever is greater, and reasonable attorney fees and costs of the action.
  2. A person who is named in a document which purports to create an interest in, or a lien or encumbrance against, real property and who knows that the document is forged, groundless, contains a material misstatement or false claim or is otherwise invalid shall be liable to the owner or title holder for the sum of not less than one thousand dollars, or for treble actual damages, whichever is greater, and reasonable attorney fees and costs as provided in this section, if he willfully refuses to release or correct such document of record within twenty days from the date of a written request from the owner or beneficial title holder of the real property.
  3. A document purporting to create an interest in, or a lien or encumbrance against, real property not authorized by statute, judgment or other specific legal authority is presumed to be groundless and invalid.

A recent Arizona case, Stauffer v. Premier Service Mortgage, 1 CA-CV 15-0026, 9/20/16, points out that not all misstatements give rise to liability. To be actionable, the misstatements must be material and “material” is now defined as something that a reasonable person would attach importance to in determining his or her conduct. The Stauffer case dealt with assignments of liens.   The court found that minor inconsistencies about assignment dates and the identity of assignors were not material misstatements and did not trigger liability under the statute.

The result reached in Stauffer makes sense. Minor errors that make little difference should not result in liability under A.R.S. §33-420. It is most unlikely that the Arizona legislature intended this statute to penalize clerical errors.   However, the statute remains a powerful source of help when dealing with the types of situations it was intended to combat; items such as false liens, false deeds, refusal to release a lien after full payment is made, etc.

The lawyers at Platt and Westby, P.C. have been practicing in the area of Real Estate Law for over 40 years. Our partners are experienced real estate investors and landlords. Contact any of our Phoenix, Real Estate Lawyers at 602-277-4441 or use the e-mail contact utility on our website at www.plattwestby.com to schedule a no-fee initial conference concerning any matter involving Real Estate. We will answer your questions and, where appropriate, suggest potential solutions.

Platt and Westby, P.C. has offices in Phoenix, Arrowhead, Avondale, Scottsdale and Gilbert, Arizona.