Excerpted from Infobytes, a weekly electronic newsletter on developments in financial services law from BuckleySandler LLP. For the full issue of Infobytes, click here: http://www.buckleysandler.com/infobyte-detail/infobytes-June-1-2012
On May 18, the Arizona Supreme Court
held that the beneficiary under a deed of trust need not prove the right to
foreclose prior to initiating non-judicial foreclosure proceedings. Hogan v. Washington Mutual Bank, N.A., No.
2012 Ariz. LEXIS 126 (Ariz. May 18, 2012) (en banc). In Hogan,
the borrower argued that the beneficiary could not foreclose without first
proving the right to collect under the note. The court rejected this argument
and stated that Arizona's non-judicial foreclosure statute did not require the
beneficiary to prove ownership of the note prior to foreclosure. The court also
rejected the borrower's argument that the trustee was required to comply with
Arizona's codification of the UCC because the Arizona UCC does not apply to
liens on real property. Finally, the borrower claimed that the proper
note-holder could later pursue a second collection for the same debt if the
beneficiary was not entitled to prove ownership of the note. The court rejected
this reasoning because Arizona law does not permit deficiency judgments against
debtors with foreclosed residential property similar to that of the borrower (i.e.,
2.5 acres or less). The court concluded by noting that the "[Arizona]
legislature balanced the concerns of trustors, trustees, and beneficiaries in
arriving at the current statutory process," and to hold otherwise would
upset the legislature's purpose.
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