Late this summer, the Arizona Court of Appeals in Bank of America, N.A. v. Felco Business Services, Inc. ruled that a claim of senior priority under the doctrine of equitable subrogation is not waived for failure to object to a trustee’s sale.

Two owners took out a loan and deed of trust from Countrywide. Months later, they took out another loan and deed of trust from a different lender. Then they refinanced the first loan and deed of trust with a new bank. The owners used the refinanced loan (secured with a third deed of trust) to pay off and release the original loan from Countrywide.

Then they defaulted on their loan to the second lender. The second lender noticed a trustee’s sale and notified Countrywide. Countrywide, a poster child for fraud and incompetence, did nothing. After the sale, Bank of America acquired all Countrywide assets in a bailout. Bank of America sued saying the third deed of trust for the refinanced loan had priority over the second lender’s deed of trust under the doctrine of equitable subrogation, which allows a deed of trust to assume the priority position of an earlier deed. The trial court held that A.R.S. § 33-811(C) required that a senior lien be asserted as a defense or objection to the trustee’s sale, such that the failure to object to the sale waived Plaintiffs’ claim of senior priority under the doctrine of equitable subrogation.

The Arizona Court of Appeals ruled that equitable subrogation is not a defense to a trustee’s sale and does not constitute a waiver under A.R.S. § 33-811(C) because lien priority is a separate matter from the validity of a trustee’s sale. Defendants could have conducted the sale even if Plaintiffs had asserted that it had a senior lien before the sale. A.R.S. § 33-811(C)’s express language does not preclude assertions of equitable subrogation. This law remained available to Bank of America after the trustee’s sale. Because equitable subrogation is an equitable remedy and its application depends on the particular facts of each case, the Arizona Court of Appeals remanded the matter back to determine whether applying the doctrine is applicable.

The card deck is very stacked in Arizona for the lender/bank/note holder. You must be very careful when borrowing and twice as careful when a default occurs under a loan. Feel free to give Arizona attorney Bill Miller a call (602-319-6899) if you are in a situation with a bank or lender that requires a second set of eyes.

We also handle, Breach of contract, Non-compete agreements, Non-disclosure agreements, Employee theft and embezzlement, Insurance purchases and enforcement of policy coverage, Negotiation and/or enforcement of commercial leases, Negligence and gross negligence resulting in losses, Intentional acts causing a company to suffer damages, Tortious interference with contractual relationships, Unjust enrichment, Real Estate fraud, Consumer fraud, Conversion/Theft, Intentional and/or negligent misrepresentation, Business torts and Real estate title and escrow.

We recently represented a prestigious Phoenix doctor in a complex commercial jury trial. The Plaintiff was represented by the venerable law firm of Dickenson Wright. With law offices in many States and over 350 lawyers, these are the ‘big dogs’. Yet, at the end of the day we won and here is what the good doctor said…
“My original lawyer told me to settle a $3,000,000 claim against me for $xxx,xxx.xx. I asked Bill Miller for a second opinion and he agreed with me. I hired him and he went right to work filing paperwork with the Court. Because the Plaintiff would not agree to anything, unfortunately it went to trial. The jury found in my favor and reduced the claim against me to only $30,000. Bill was personally invested in my case and I am grateful to him.” Dr. J.A.R.
At the law firm of William A. Miller, PLLC in Scottsdale we thrive on this type of litigation. We are happy to look over your case. Call us at 602-319-6899 or stop by at 8170 North 86th Place, suite 208 Scottsdale, AZ 85258 for coffee and a chat. We also handle, Breach of contract, Non-compete agreements, Non-disclosure agreements, Employee theft and embezzlement, Insurance purchases and enforcement of policy coverage, Negotiation and/or enforcement of commercial leases, Negligence and gross negligence resulting in losses, Intentional acts causing a company to suffer damages, Tortious interference with contractual relationships, Unjust enrichment, Real Estate fraud, Consumer fraud, Conversion/Theft, Intentional and/or negligent misrepresentation, Business torts and Real estate title & escrow.

Back in late 2013, we closely follow a title dispute where, First American issued title insurance policies for two parcels for which Johnson Bank was the lender. After the purchase, the owners of the land discovered undisclosed covenants, conditions, and restrictions (“CC&Rs”), which prevented development. After the owners defaulted, Johnson Bank foreclosed and made claims…

The Kansas Supreme Court just issued an opinion that hundreds of truck drivers who delivered packages were employees and not independent contractors. This has huge tax, benefit and healthcare repercussions for FedEx. According to the court, the drivers sued FedEx alleging they were improperly classified as independent contractors under the law. The drivers are seeking…

The Supreme Court made it harder for investors to band together to pursue class action claims that they were misled when they bought or sold securities. But the justices did not accept a broader challenge, one that could have put an end to most class actions for securities fraud. So, as we say, class actions…