257 P.3d 1168
Ariz. Ct. App.2011Background
- HOA Cypress on Sunland recorded CC&Rs in 2003 creating an assessment lien on Spearman's Phoenix property.
- Spearman defaulted on HOA assessments; HOA foreclosed with a default judgment in 2007 after ex parte hearing, despite some liens (first deed of trust) not being reflected in the judgment.
- Bank/First American held a first deed of trust (June 8, 2006); other liens included a second deed of trust and various assignments.
- Subsequent trustee’s sale and transfers occurred; Jacoby purchased subject to the Bank's valid first lien; Orlandini later acquired the property.
- Jacoby filed a quiet title action; Intervenors (Orlandini and First American) intervened to challenge the foreclosure and seek relief including setting aside the default judgment.
- Courts consolidated the lien foreclosure and quiet title actions, denied a notice of change of judge, and later reinstated the default judgment nunc pro tunc; the court then awarded fees to HOA, which were reversed on appeal and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether consolidation was proper | Intervenors contended no pending related action warranted consolidation | HOA asserted common questions of law and fact justified consolidation | Consolidation proper |
| Whether the change of judge was properly denied | Intervenors argued timely notice should have been honored as a matter of right | Trial court could deny under Rule 42(f) and parties did not pursue proper special action challenge | No reversible error; denial affirmed |
| Whether the default judgment on foreclosure was properly reinstated after finding fraud on the court | Intervenors argued no fraud; Judge Burke’s ruling should stand | HOA attorneys committed fraud on the court by misrepresenting lien priorities | Fraud established; reversed reinstatement of default judgment |
| Whether attorneys' fees were properly awarded to HOA | Fees improper as Rule 11 sanctions and statutory grounds do not support | HOA entitlement under CC&Rs or statutory provisions for sanctions | Fees reversed; no award of fees to HOA or Intervenors on appeal; costs awarded to Intervenors |
Key Cases Cited
- Villa De Jardines Ass'n v. Flagstar Bank, FSB, 227 Ariz. 91, 253 P.3d 288 (App. 2011) (interprets priority of first deed of trust over HOA lien)
- Hancock v. McCarroll, 188 Ariz. 492, 937 P.2d 682 (App. 1996) (consolidation proper where common questions of fact and law exist)
- Hibbs v. Calcot, Ltd., 166 Ariz. 210, 801 P.2d 445 (App. 1990) (horizontal appeals discouraged absent new circumstances)
- Cooper v. Commonwealth Title of Ariz., 15 Ariz. App. 560, 489 P.2d 1262 (App. 1971) (necessary parties and joinder in declaratory actions)
- Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 64 S. Ct. 997 (Supreme Court 1944) (fraud on the court justifies relief from judgments)