Michele MANICOM and Donald Conrad Manicom, wife and husband, Plaintiffs/Appellees, v. CITIMORTGAGE, INC., successor in interest by merger to ABN Amro Mortgage Group, Inc.; Defendant/Appellant.
No. 2 CA-CV 2014-0049
Court of Appeals of Arizona, Division 2.
Oct. 28, 2014.
As Corrected Nov. 19, 2014.
336 P.3d 1274
Gust Rosenfeld P.L.C., By Scott A. Malm, Phoenix, Counsel for Defendant/Appellant.
Chief Judge ECKERSTROM authored the opinion of the Court, in which Presiding Judge MILLER and Judge ESPINOSA concurred.
OPINION
ECKERSTROM, Chief Judge:
¶ 1 This appeal concerns a deed of trust in favor of the defendant/appellant CitiMortgage, Inc. (Citi). The trial court determined that an error in the legal description of the
Factual and Procedural Background
¶ 2 We view the record in the light most favorable to Citi, the party against whom summary judgment was entered. See Hill-Shafer P‘ship v. Chilson Family Trust, 165 Ariz. 469, 472, 799 P.2d 810, 813 (1990). The subject property previously wаs owned by Ronnie and Wanda Owens before they sold it to Robert Whyte, who in turn sold it to the Manicoms. When the Owens purchased the property, in 2005, they received a $252,000 loan that was secured by a recorded deed of trust. That deed described the property as follows:
LOT 027, PHASE II PARCEL 26A AT RANCHO EL DORADO, ACCORDING TO THE PLAT OF RECORD IN THE OFFICE OF THE COUNTY RECORDER OF PINAL COUNTY, ARIZONA, RECORDED IN CABINET D, SLIDE 168 ... which currently has the address of 21943 NORTH BACKUS DRIVE, MARICOPA, Arizona 85239
(emphasis added). The correct legal description of the property is slide “166,” not slide “168.”
¶ 3 In 2006, the Owens obtained a second loan and recorded a second deed of trust that correctly described the subject property. When Whyte purchased the property, in March 2012, he discovered and satisfied the second loan. A deed of release and reconveyance was subsequently recorded for the second deed of trust.
¶ 4 In May 2012, the Manicoms purchased the property from Whyte without actual notice of the first deed of trust. When Citi later provided the Manicoms with a notice of trustee sale pursuant to the first deed of trust, they commenced the present action. The parties then filed cross-motions for summary judgment.
¶ 5 The trial court denied Citi‘s motion but granted the Manicoms’ requests for declara-
Summary Judgment
¶ 6 A trial court is required to grant summary judgment when “there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law.” Ariz. R. Civ. P. 56(a); see Orme Sch. v. Reeves, 166 Ariz. 301, 309, 802 P.2d 1000, 1008 (1990). “We independently determine whether questions of material fact exist and whether the superior court properly applied the law.” DeSilva v. Baker, 208 Ariz. 597, ¶ 10, 96 P.3d 1084, 1087 (App.2004).
Deed of Trust: Validity, Notice, BFP
¶ 7 As noted, the trial court found the first deed of trust invalid because it erroneously described the property and therefоre failed to provide notice to the Manicoms, making them bona fide purchasers without notice who took the property free of the lien pursuant to
¶ 8 Arizona‘s Deeds of Trust Act,
¶ 9 As the trial court correctly observed below, a deed of trust is a creature of statute, Binder v. Fruth, 150 Ariz. 21, 22, 721 P.2d 679, 680 (App.1986), and must contain “the legal description of trust property.”
¶ 10 Instead, the court in Bisbee reiterated the rule that “an instrument is constructive notiсe of the rights claimed thereunder if it is of a character which the recording statutes permit to be recorded and if it sufficiently apprises third parties of the rights claimed by it.” 157 Ariz. at 35, 754 P.2d at 1139; see Carley v. Lee, 58 Ariz. 268, 272, 119 P.2d 236, 238 (1941); cf.
¶ 11 In this case, the deed of trust contained an incorrect legal description insofar as it referred to slide “168” rather than slide “166.” Otherwise, however, the legal description of the trust property was accurate. The deed also correctly identified the subject property by its street address, and it correctly listed the trustors’ names.
¶ 12 The Deeds of Trust Act clearly contemplates that legal descriptions sometimes will be incorrect and that information such as street addresses may then assist in identifying the property at issue, even though such addresses ordinarily are not an acceptable substitute. See
¶ 13 Here, the correct address was sufficient to identify the trust property in question. And, as in Bisbee, 157 Ariz. at 35, 754 P.2d at 1139, the erroneous legal description did not affect the indexing of the deed of trust by the trustor. Such proper indexing gives “constructive notice to the world” of the substance of a recorded deed. Watson, 124 Ariz. at 576, 606 P.2d at 427.
¶ 14 Thus, when we consider the present circumstаnces together with these features of the overall act, see Bisbee, 157 Ariz. at 33, 754 P.2d at 1137, we cannot agree that the deed of trust in this case was invalid or failed to provide constructive notice. Given the totality of the information in the deed, it adequately identified the subject property and alerted a reasonably prudent person to the erroneous legal description. Cf. Hamilton v. Wash. Mut. Bank FA (In re Colon), 563 F.3d 1171, 1173 (10th Cir.2009) (concluding incorrect lot number in description of otherwise accurate mortgage did not invalidate instrument); Valley Nat‘l Bank of Ariz. v. Educ. Credit Bureau, Inc., 23 Ariz.App. 148, 151-52, 531 P.2d 193, 196-97 (1975) (finding writ gave constructive nоtice of property subject to lien, notwithstanding incorrect lot number in otherwise accurate description). Despite the single-digit error in the legal description, the deed of trust “sufficiently apprise[d] third parties of the rights claimed by it.” Bisbee, 157 Ariz. at 35, 754 P.2d at 1139. Accordingly, the recorded deed provided constructive notice of the lien and thereby denied the Manicoms the status of bona fide purchasers without notice pursuant to
¶ 15 In reaching the opposite conclusion, the trial court determined the Manicoms had no constructive notice of the deed of trust because they had no duty to search the grantor index for any lien created by an owner before their immediate predecessor. The court further concluded that even had they engaged in such an undertaking, a reasonably diligent search “would not put a person on notice of anything” due to the defective legal description in the deed. The Manicoms urge these same conclusions on appeal, asserting more broadly that they had no duty to sеarch the grantor index. We reject this argument and disagree with the court‘s legal determinations.
¶ 16 The specific requirement in
¶ 17 Although an alphabetical list of grantors or mortgagors is admittedly “not as efficient or accurate as a tract index,” it nevertheless allows a chain of title to be traced from a known owner, with “mortgages and other encumbrances” then ascertained through an examination of “the grantor indices ... for the period that said party owned the premises.” Palomar, supra, § 67. Sections
¶ 18 Here, the alphabetical grantor index maintained by the county recorder contained an entry for the trustor, Ronnie R. Owеns, and a reference to the 2005 deed of trust, which was identified by its specific “fee number.” The deed of trust available through that index, in turn, identified the lien on the Manicoms’ property through its street address and a mostly accurate legal description, as noted above. Under
¶ 19 In its written ruling, the trial court did not address Bisbee or utilize its “sufficiently apprises” standard. 157 Ariz. at 35, 754 P.2d at 1139.3 Rather, the court relied on a pair of cases from this court—3502 Lending, LLC v. CTC Real Estate Serv., 224 Ariz. 274, 229 P.3d 1016 (App.2010), and Phipps v. CW Leasing, Inc., 186 Ariz. 397, 923 P.2d 863 (App.1996)—to conclude the deed of trust was invalid and “must be” treated as unrecorded.
¶ 20 While those decisions do not cite Bisbee, they neither conflict with our supreme court‘s precedent nor alter our conclusion here. See Myers v. Reeb, 190 Ariz. 341, 342, 947 P.2d 915, 916 (App.1997) (recognizing court of appeals cannot ignore, overrule, or modify supreme court‘s decisions). In fact, we recognized in 3502 Lending the principle that a defective deed of trust nonetheless provides constructive notice if it sufficiently apprises third parties of the nature and substance of the rights claimed therein. 224 Ariz. 274, ¶ 17, 229 P.3d at 1019. Our fur-
¶ 21 Phipps, which concerned a right of first refusal, is similarly distinguishable. 186 Ariz. at 399, 923 P.2d at 865. In that case, we observed that such an instrument is required by
¶ 22 The Manicoms nevertheless suggest that a correct legal description should be an essential element of a deed of trust, because
¶ 23 Bisbee instructs us, moreover, that we do not strictly enforce every element of a deed of trust; rather, we examine the Deeds of Trust Act “as a whole” to determine whether the legislature intended for a defect to be fatal. 157 Ariz. at 33, 754 P.2d at 1137; see Phipps, 186 Ariz. at 401, 923 P.2d at 867 (“Statutes must be given a sensible construction which accomplishes the legislative intent behind them and which avoids absurd results.“). As indicated above, we can find no language in the Deed of Trusts Act suggesting the legislature intended a relatively minor error in a legal desсription to destroy the constructive notice imparted to “all persons” of the “content” of a recorded deed of trust.
¶ 24 Finally, although the trial court correctly observed that constructive notice is a policy-based imputation of knowledge, see Main I, 154 Ariz. at 259, 741 P.2d at 1237, the constructive notice given by a recorded deed is given to “all persons.”
Alternative Grounds
¶ 25 The trial court also granted summary judgment to the Manicоms on a variety of alternative grounds, namely laches, waiver, equitable estoppel, and the equitable theory that, as between two innocent parties who have suffered a loss from the wrongdoing of a third, the one who made the loss possible should bear it. See Newman v. Fid. Sav. & Loan Ass‘n, 14 Ariz. 354, 360, 128 P. 53, 55 (1912). Again, we review de novo the trial court‘s granting of summary judgment. See DeSilva, 208 Ariz. 597, ¶ 10, 96 P.3d at 1087. “Similarly, the determination of whether equitable relief is available and appropriate is subject to our de novo review.” Andrews v. Blake, 205 Ariz. 236, ¶ 12, 69 P.3d 7, 11 (2003).
¶ 26 Preliminarily, we agree with Citi that the trial court “erroneously relied on equity to circumvent constructive noticе” insofar as the court found the Manicoms were “unsuspecting purchasers” who could not have discovered the deed of trust and were not responsible for knowing its contents. The court was not authorized to grant the Manicoms the relief they would be entitled to as bona fide purchasers without notice, pursuant to
¶ 27 The theory of equitable estoppel is similarly unavailing. To be entitled to summary judgment on the question of estoppel, the Manicoms “had to show the absence of any factual conflict and the right to judgment as a matter of law.” Villas at Hidden Lakes Condos. Ass‘n v. Geupel Constr. Co., 174 Ariz. 72, 78, 847 P.2d 117, 123 (App.1992). “The three elements of equitable estoppel are ... (1) the party to be estopped commits acts inconsistent with a pоsition it later adopts; (2) reliance by the other party; and (3) injury to the latter resulting from the former‘s repudiation of its prior conduct.” Valencia Energy Co. v. Ariz. Dep‘t of Rev., 191 Ariz. 565, ¶ 35, 959 P.2d 1256, 1267-68 (1998). The party seeking estoppel must establish both its actual reliance on the other party‘s act and “that such reliance was reasonable under the circumstances.” Id. ¶ 37.
¶ 28 The record does not show any inconsistent acts on Citi‘s part that are “absolute and unequivocal” in establishing equitable estoppel. Knight v. Rice, 83 Ariz. 379, 381, 321 P.2d 1037, 1038 (1958). Nor does the record establish any actual reliance by the Manicoms. As Citi points out, the record reveals that it received a payoff request for the second mortgage on the subject property and that Citi subsequently transmitted a payoff statement for a “Second Mortgage” in March 2012 to the Manicoms’ immediate predecessor during his transaction with the Owens. See
¶ 29 Moreover, equitable estoppel is unavailable here given that it was unreasonable, as a matter of law, for the Manicoms to rely on Citi‘s earlier actions as disclaiming all its interests in the subject property. Reliance is not reasonable or justified when a person is on notice to make further inquiries. See Valencia, 191 Ariz. 565, ¶ 37, 959 P.2d at 1268. As we explained above, the information available in the public record gave the Manicoms constructive notice of the first deed of trust. Hence, they cannot invoke equitable estoppel here.
¶ 30 To support its conclusions regarding both estoppel and waiver, the trial court found that Citi had made a “decision that it was not going to pursue whatever lien
¶ 31 A trier of fact nonetheless could conclude, as the Manicoms insist, that Citi‘s acceptance of money from Whyte designated as payment for the “first mortgage” indicated that all debts on the property were deemed satisfied and that Citi intended at that time to waive its interests from the first deed of trust, which Citi might have viewed as invalid. But the question of waiver involves disputed matters of fact and inference thаt preclude the entry of summary judgment. See Santiago v. Phx. Newspapers, Inc., 164 Ariz. 505, 508, 794 P.2d 138, 141 (1990) (“The court may grant summary judgment only if no dispute exists as to any material facts, if only one inference can be drawn from those facts, and if the moving party is entitled to judgment as a matter of law.“).
¶ 32 Laches also is unavailable to the Manicoms. “Laches is the ‘equitable counterpart to the statute of limitations, designed to discourage dilatory conduct. Laches will generally bar a claim when the delay is unreasonable and results in prejudice to the opposing party’ even where the applicable statute of limitations has not yet expired.” In re Indenture of Trust Dated Jan. 13, 1964, 235 Ariz. 40, ¶ 22, 326 P.3d 307, 315 (App.2014), quoting Sotomayor v. Burns, 199 Ariz. 81, ¶ 6, 13 P.3d 1198, 1200 (2000) (citation omitted). The trial court found that Citi had “no excuse” for waiting to assert its lien rights until the Manicoms had purchased the property and that relief was appropriate to prevent prejudice to them and avoid an “unjust result.”
¶ 33 We note that the Manicoms have not provided any Arizona authority to directly support the proposition that laches may be used to prevent a sale under a valid deed of trust. In fact, there is some authority for the view that laches cannot be employed simply to avoid the constructive notice provided by a recorded instrument. See Warren v. Whitehall Income Fund 86, 170 Ariz. 241, 245, 823 P.2d 689, 693 (App.1991) (rejecting laches argument that would defeat purpose of lis pendens to provide constructive notice to potential buyers).
¶ 34 Ultimately, however, we are bound by our supreme court‘s decision in Provident Mutual Building-Loan Ass‘n v. Schwertner, 15 Ariz. 517, 140 P. 495 (1914). In that case, the court held that when a property owner brings suit to remove a cloud on his title caused by an unsatisfied mortgage from his predеcessor, he first must pay off the predecessor‘s debt. Id. at 517, 519, 140 P. at 495, 496. The court reasoned that “equity will not grant relief, except upon condition that the debtor pay or tender payment of the debt secured.” Id. at 519, 140 P. at 496. Thus, since our early statehood, we have followed the rule that “the statutory action to quiet title cannot be sustained as against a mortgage debt confessedly unpaid.” Id.; accord Farrell v. West, 57 Ariz. 490, 491, 114 P.2d 910, 911 (1941); Sec. Trust & Sav. Bank v. McClure, 29 Ariz. 325, 333, 241 P. 515, 517 (1925). While we may be inclined to qualify this statement, making an equitable exception for situations in which the successor to a mortgagоr has paid money for the property that could have satisfied the undiscovered debt, it is the role of our supreme court, not this court, to limit or modify the principle announced in Schwertner to accom-
Conclusion
¶ 35 In sum, we conclude the trial court erred as a matter of law in determining the first deed of trust was invalid, deeming it unrecorded, and designating the Manicoms as bona fide purchasers for value without notice. The first deed of trust is valid and provided constructive noticе of the lien to the Manicoms. The court also erred in granting summary judgment to the Manicoms on the basis of laches, equitable estoppel, and the equitable theory that they were innocent parties harmed by a third party‘s wrongdoing. The question of whether Citi waived its interests in the first deed of trust involves a disputed matter of fact and inference that remains to be resolved by the trier of fact.
¶ 36 The trial court erred in granting summary judgment to the Manicoms on counts one, four, and five of their complaint with respect to the first deed of trust. Although the disputed factual question of waiver precludes the entry of summary judgment on counts four and five, the court is directed to enter summary judgment in favor of Citi on count one of the Manicoms’ complaint with respect to the first deed of trust. See Hilb, Rogal & Hamilton Co. of Ariz. v. McKinney, 190 Ariz. 213, 215-16, 946 P.2d 464, 466-67 (App.1997) (recognizing ability of court of appeals to direct entry of summary judgment when facts uncontroverted).
¶ 37 We do not address the other claims raised in the Manicoms’ complaint, which the trial court dismissed as moot without discussion. Because the denial of a motiоn for summary judgment is not itself an appealable order, see In re 1996 Nissan Sentra, 201 Ariz. 114, ¶ 6, 32 P.3d 39, 44 (App.2001); Bothell v. Two Point Acres, Inc., 192 Ariz. 313, ¶ 7, 965 P.2d 47, 50 (App.1998), and because the trial court did not address these claims below, see Stewart v. Mut. of Omaha Ins. Co., 169 Ariz. 99, 108, 817 P.2d 44, 53 (App.1991), we decline to address them in the first instance on appeal. We further note that the record lacks a clear ruling on the Manicoms’ motion for leave to amend the complaint by adding another claim for relief.
Attorney Fees
¶ 38 Citi requests an award of its appellate attorney fees pursuant to
Disposition
¶ 39 For the foregoing reasons, we reverse the trial court‘s judgment, including its award of attorney fees and costs, and remand for further proceedings consistent with this opinion. We grant Citi‘s request for costs on appeal, subject to its compliance with Rule 21, Ariz. R. Civ. App. P.
PETER J. ECKERSTROM
CHIEF JUDGE