An Arizona Supreme Court’s ruling in January 2018 upheld a decision affirming the finality of trustee’s sales. Zubia v. Shapiro et al., CV-16-0255-PR (2018). A primary purpose of a deed of trust, instead of a mortgage, is to expedite the lender’s recovery when the borrower defaults. Under the statutes for deeds of trust (A.R.S. §33-801 et seq.), rather than litigation for the borrower’s failure to make timely mortgage payments, the lender can take possession of the real property without going to court. When the borrower is in default, notice of a sale of the property is recorded at least 90 days prior to the sale and notice is provided to the borrower and anyone else with a recorded lien on the property. If the borrower or junior lienholders do not reinstate the loan by paying past due payments plus allowable interest and fees, the property is sold at auction on the date and time set for the trustee’s sale. The statutes provide that, if the borrower does not obtain an injunction to prevent the trustee’s sale, the defenses are waived and the sale is final. A.R.S. §33-811(C). Only claims relating to the distribution of the trustee’s sales proceeds remain. The exceptions to this finality of trustee’s sales are intentionally limited to such rarities as the failure to notify the borrower that a promised continuation of trustee sale was not going to take place. Snyder v. HSBC Bank, USA, N.A., 913 F. Supp. 2d 755, 776 (D. Ariz. 2012).
In Zubia, the plaintiff claims she did not know of the note and deed of trust until receiving notice that it was in default. She claimed her then-husband forged her name. Representing herself, she sought to prevent the trustee’s sale, but it was dismissed for lack of prosecution. The trustee’s sale took place, and then Zubia sued for damages for forgery and for title to the property in her name, claiming the security interest in the property wasn’t valid against her. The courts held that her failure to obtain an injunction prior to the trustee’s sale was fatal to her damage claims against the trustee or lender. “This result is consistent with the purpose of §33-811(C) and other statutes governing trustee’s sales – namely, to provide for expeditious foreclosures.” (Zubia ¶28). However, Zubia may still sue the purported forger for damages arising from the forgery.
While the tidal wave of trustee’s sales from the housing bubble has passed, there will continue to be people in financial crises who face trustee’s sales. Be aware that preventative action must be taken before the trustee’s sale!