336 P.3d 1274
Ariz. Ct. App.2014Background
- Ronnie and Wanda Owens took a $252,000 loan in 2005 secured by a recorded deed of trust that misidentified the recorded plat slide number (listed as “168” instead of the correct “166”) but included the correct street address and trustor names.
- The Owens later recorded a second deed of trust in 2006 that correctly described the property; that second loan was paid off and a release recorded before later sales.
- Robert Whyte purchased the property, paid off the second loan, then sold the property to Michele and Donald Manicom in May 2012; the Manicoms had no actual notice of the first deed of trust.
- CitiMortgage (Citi), successor to the lender under the first deed, later served a trustee sale notice under the first deed, prompting the Manicoms to sue to quiet title and seek declaratory relief; cross-motions for summary judgment followed.
- The trial court granted summary judgment for the Manicoms, ruling the first deed of trust was invalid (due to the erroneous legal description), treating them as bona fide purchasers without notice and clearing title; Citi appealed.
Issues
| Issue | Manicom's Argument | Citi's Argument | Held |
|---|---|---|---|
| Whether a deed of trust with a minor error in the legal description (wrong slide number) is invalid and fails to give constructive notice | The defective legal description prevented constructive notice; therefore Manicoms are bona fide purchasers without notice and take free of the lien | The deed was recorded, indexed by trustor, included correct street address and largely accurate description — under Bisbee it sufficiently apprised third parties and gave constructive notice | Court reversed: the deed, considered as a whole, provided constructive notice and was not invalidated by the single-number error |
| Whether purchasers have a duty to search grantor/grantee indices for recorded deeds of trust | Manicoms asserted no duty to search grantor index beyond checking seller or deed chain | Citi argued statute requires indexing by trustor and constructive notice runs to those who are bound to search records; purchasers are charged with knowledge a proper search would reveal | Court held purchasers are charged with constructive notice through record indexing; a duty to search grantor/grantee indices exists for relevant periods |
| Whether equitable doctrines (laches, estoppel, waiver, innocent party equity) bar enforcement of the recorded deed | Manicoms argued equity should protect them as innocent purchasers who could not reasonably discover the lien | Citi argued recorded constructive notice removes equitable relief that would defeat statutory rights; factual disputes preclude estoppel/waiver on summary judgment | Court held equity cannot overcome statutory constructive notice; laches and estoppel not available as matter of law; waiver remained a fact question precluding summary judgment on some counts |
| Whether summary judgment for Manicoms should be entered on counts declaring them bona fide purchasers and clearing title | Manicoms sought summary judgment on multiple counts including quiet title and recording a release under §33‑420(B) | Citi sought reversal, arguing deed provided constructive notice and factual issues (waiver) remained | Court reversed trial court: directed summary judgment for Citi on the bona fide purchaser count; remanded for remaining factual issues (e.g., waiver) |
Key Cases Cited
- In re Bisbee, 157 Ariz. 31 (Ariz. 1988) (recorded instrument need only sufficiently apprise third parties of rights claimed to provide constructive notice)
- Main I Ltd. P’ship v. Venture Cap. Constr. & Dev. Corp., 154 Ariz. 256 (App. 1987) (recorded deed of trust provides constructive notice)
- Watson Constr. Co. v. Amfac Mortg. Corp., 124 Ariz. 570 (App. 1979) (defective deed of trust can still impart constructive notice)
- Hall v. World Sav. & Loan Ass’n, 189 Ariz. 495 (App. 1997) (duty to inquire: facts putting a prudent person on inquiry equivalent to notice of what a diligent inquiry would reveal)
- Valley Nat’l Bank of Ariz. v. Educ. Credit Bureau, Inc., 23 Ariz. App. 148 (1975) (property must be identified with sufficient certainty in the public record)
- Provident Mut. Building-Loan Ass’n v. Schwertner, 15 Ariz. 517 (1914) (equity will not quiet title against an unpaid mortgage absent payment or tender of the debt)