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Arizona Supreme Court Rules That “Show Me The Note” Defense Is Not A Valid Defense To A Foreclosure

By Platt & Westby, P.C. | October 11, 2012

In the recent Arizona Supreme Court case of Hogan v. Washington Mutual Bank, the Arizona Supreme Court ruled that Arizona’s non-judicial foreclosure statutes do not require the beneficiary to prove its authority or “show the note” before the trustee may commence a non-judicial foreclosure.

In Hogan, the borrower, John Hogan, borrowed money to purchase two properties. Each of the loans was secured by a deed of trust. Hogan defaulted on both loans, which triggered non-judicial foreclosure proceedings. After receiving a notice of trustee’s sale for each of the properties, Hogan sued to stop the trustee’s sales. Hogan asserted that the lenders could not proceed with the trustees sales until they “showed the promissory notes” signed by Hogan and the lender in connection with the underlying transaction.

The Superior Court dismissed Hogan’s lawsuit and the Court of Appeals affirmed the trial court’s decision. The Arizona Supreme Court decided to hear the issue because it presented a recurring issue of first impression and statewide importance.

Increase In Postnuptial Agreements

By Platt & Westby, P.C. | October 5, 2012

Most people are familiar with the concept of prenuptial agreements. Prenuptial agreements are contracts that are entered into prior to marriage which set forth how property will be divided between the parties in the event of a divorce. Even if a married couple has not entered into a prenuptial agreement, they can still enter into a contract while they are married to decide what happens in the event of a divorce. This type of contract is called a postnuptial agreement,…


By Platt & Westby, P.C. | September 27, 2012

Boundary disputes, which are disagreements regarding who owns a piece of property, can be quite common. Boundary questions often arise when a property owner makes an improvement, such as building a fence.

For example, when you are raising a fence outside of your house, you may unknowingly be placing your fence on your neighbor’s property. On the other hand, you may be erecting the fence entirely on your property, but your neighbor may argue that the fence is encroaching on his property. It is important that any issues concerning boundary disputes get resolved in a timely manner.

There are a number of factors that can be reviewed to determine who has rightful ownership of the land. If a survey was prepared at the time of purchase, it will show the actual boundary lines. Otherwise, the property description in the deed, which is usually recorded with the county, includes a description of the boundary lines of the property. However, if the property description was originally recorded many years ago, it may not be entirely accurate. Therefore, you may want to have a survey done if no survey was done at the time of purchase.

Duty To Disclose Defects In Arizona Real Property Transactions

By Platt & Westby, P.C. | September 20, 2012

The seller of real property must disclose to the buyer any fact concerning the property that materially affects the value of the property. In determining whether a matter is material, Arizona courts have indicated that a matter is material if it is one to which a reasonable person would attach importance in purchasing the property in question.

Most defects in a home are considered to be “latent” defects. So what is a latent defect? A latent defect is defined as “[a] hidden or concealed defect. One which would not be discovered by reasonable and customary observation or inspection…” Black’s Law Dictionary 611 (Abridged 6th ed. 1991).

Anyone selling real property in Arizona must provide the buyer with a Seller Property Disclosure Statement (“SPDS”). Any latent defects that are material must be disclosed by the seller in the SPDS. Where a seller of real property knows of facts materially affecting the value of the property that are not readily observable and are not known to the buyer, the seller is under a duty to disclose those facts to the buyer. Hill v. Jones, 151 Ariz. 81, 725 P.2d 1115 (App. 1986).

Good News For Homeowners Regarding Arizona’s Anti-deficiency Laws

By Platt & Westby, P.C. | September 13, 2012

On August 28, 2012, the Arizona Supreme Court denied the request of more than a dozen banks to overturn the Arizona Court of Appeals decision in the 2011 case of M&I Marshall & Ilsley Bank v. Mueller, 1 CA-CV 10-804.

In the Mueller case, the Arizona Court of Appeals expanded Arizona’s anti-deficiency protection (under A.R.S. § 33-814(G)) to protect borrowers whose property is foreclosed upon even while it is under construction, so long as they intend to occupy the home upon completion. A.R.S. § 33-814(G), protects certain borrowers from liability for a deficiency in the event of a foreclosure.

According to A.R.S. § 33-814(G), If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses. (Emphasis added) The court in Mueller analyzed whether the Mueller’s property qualified as a property that was being utilized as a dwelling under the statute.

Arizona Tax Liens

By Platt & Westby, P.C. | September 7, 2012

In Arizona, one half of the property taxes become due October 1, and the second half the following March 1. By the following December, the treasurer in every Arizona county prepares a list of properties with delinquent taxes. Delinquent property taxes accrue interest at an annual rate of 16%.

The list is published, and delinquent notices are sent to the homeowners stating that a tax certificate will be auctioned on a specific date if the taxes are not paid. Each February the tax lien certificates are sold at a public auction called a Tax Lien Certificate Sale. Anybody can participate in the Tax Certificate Sale. In order to participate in the sale a bidder must register with the Treasurer’s office.

The tax certificate can be purchased from the County Treasurer by paying the total of the back taxes along with any accrued interest plus purchase fees. Tax certificates are a high priority lien against the property, which means that there are very few other claims against a property which would be paid before the tax certificate lien.

When you purchase a tax certificate, you do not own the property. Instead, you own a note on the property, and earn interest for each month the note remains outstanding. The tax liens will accrue interest at the rate agreed to in what is referred to as a reverse auction (i.e. the bidder offering the lowest interest rate wins).


By Platt & Westby, P.C. | August 30, 2012

Military members typically receive many benefits for their service to our country. These benefits may be counted as income when calculating child support in Arizona. For instance, a military member may receive money for a housing allowance or the military member may receive free housing rather than a housing allowance.

In the Arizona Court of Appeals case of Patterson v. Patterson, the Court ruled that the value of military-provided on-base housing might be included in a parent’s income for child support calculations, based on the court’s determination as to whether the value of that benefit is significant and reduces the parent’s living expenses.

The court’s opinion relied on the language in the Arizona Child Support Guidelines which states that “income from any source” is includable as gross income. These guidelines also require the cash value of “other non-cash benefits” be counted as gross income if they are significant and reduce personal living expenses.

Deciding What To Do With A Business In The Event Of A Divorce

By Platt & Westby, P.C. | August 9, 2012

If you and your spouse own a family business and you are considering divorce, then you will need to decide what happens to the business. The first issue is to determine whether the business is community property or sole and separate property.

Arizona is a community property state. This means that property acquired by a spouse during the marriage is considered community property unless the property was a gift. Most property acquired by a spouse prior to the marriage retains its character as sole and separate property of that spouse. However, even if you or your spouse owned the business prior to the marriage, there still could be a community interest if the value of the business increased during the marriage.

If a sole and separate asset has gone up in value during the marriage, it may be subject to a community lien, which is a reward to the marital community for contributing to the increased value. If an increase results partly from the efforts of either spouse during the marriage or partly from the expenditure of community funds, it may be partly community property.

Using LLC’s To Minimize Personal Liability

By Platt & Westby, P.C. | August 2, 2012

If you own Arizona investment real estate, it is prudent to consider transferring the real property into a limited liability company. Owning real estate for investment purposes can be extremely risky.

If someone gets injured on the property, then that individual may sue the property owner for damages. If you own the property in your name, you may be personally liable. This means that all your assets – not just the rental property – may be at risk. Instead, an LLC allows you to protect your personal assets in the event of a lawsuit.

In order to transfer real estate into an LLC, you must sign a deed conveying the real estate to the LLC and record the deed in the county in which the real property is located. In most instances, if the property is held in the name of the LLC, the person filing a lawsuit against you cannot sue you individually.

Instead, the plaintiff must name the LLC as the defendant. Therefore, any judgment awarded to the plaintiff must be collected solely from the LLC’s assets. You may lose your entire investment in the property owned by the LLC, but the rest of your assets should be safe.

Arizona Anti-Deficiency Protection For Construction Loans

By Platt & Westby, P.C. | July 26, 2012

In a previous blog titled “New Case Clarifies Lender Rights Under Arizona Anti-Deficiency Statutes” we discussed the implications of a recent appellate decision in regards to tracing taking cash out of a refinance to use for any number of purposes, but which were not used to purchase the home securing the loan.

However, Pasquan v. Helvetica also clarified another outstanding issue: Are construction loans taken out to pay for construction of a residence covered by the anti-deficiency provisions of A.R.S. 33-729(A)?

In Helvetica, the owners originally purchased a 4000 square foot home, and then refinanced the original purchase money loan. Later, they took out a construction loan to demolish the 4000 square foot home in favor of a new 11,500 square foot home. The proceeds from the last loan were used to pay off the prior existing refinanced purchase money loan, financed the construction of the new home, and then provided funds to the owner at closing which were used for things other than refinancing or construction of the home.

The court concluded that a construction loan does qualify as a purchase money obligation entitled to anti-deficiency protection if two conditions are met. First the deed of trust securing the loan must cover both the land and the dwelling being constructed thereon.