Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-02075/USCOURTS-azd-2_10-cv-02075-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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WO

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Daniel Lee Liniger, 

 Debtor/Appellant. 

vs. 

BAC Home Loans Servicing LP, f/k/a 

Countrywide Home Loans Servicing, LP, 

Appellee. 

No. 2:10-cv-02075-PHX-DGC

No. 2:09-ap-01706-GBN 

No. 2:09-bk-03241-GBN 

BAP No. AZ-10-1349 

 Daniel Liniger appeals from the final judgment entered by the bankruptcy court in 

favor of BAC Home Loans Servicing, LP (“BAC”) on September 9, 2010. Doc. 1 at 

10-11. The appeal is fully briefed. Docs. 8, 10, 11. No party has requested oral 

argument. For reasons that follow, the bankruptcy court’s judgment will be affirmed. 

 The key issue on appeal is whether, under A.R.S. § 33-806(A), BAC’s junior lien 

on real property was revived following foreclosure by the senior lienholder where the 

trustor subsequently reacquired the property. The bankruptcy court’s findings of fact are 

reviewed for clear error, and conclusions of law, de novo. In re Lazar, 83 F.3d 306, 308 

(9th Cir. 1996). The Court agrees with the bankruptcy court (Doc. 8-1 at 55-56) that as 

interpreted by Transamerica Financial Services, Inc. v. Lafferty, 856 P.2d 1188 (Ariz. Ct. 

App. 1993), A.R.S. § 33-806(A) operated to revive BAC’s lien. 

 Section 33-806(A) provides, in pertinent part, that “[a]n interest in the trust 

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property acquired by the trustor subsequent to the execution of the trust deed shall inure 

to the trustee as security for the contract or contracts for which the trust property is 

conveyed[.]” In Lafferty, Robert and Rosalinda Guerrero had first and second deeds of 

trust on their real property, the second being held by Transamerica Financial Services. 

Carl Lafferty purchased the property at a trustee’s sale under the first deed and then sold 

the property back to the Guerreros. Transamerica argued that even if its junior lien was 

extinguished by the trustee’s sale, see A.R.S. § 33-811(E), the reacquisition of the 

property by the Guerreros revived the lien under A.R.S. § 33-806(A). The court of 

appeals agreed: 

The Guerreros, as trustors under Transamerica’s [second] deed of trust, 

bought the property from Lafferty after the trustee’s sale. Thus, they 

acquired an interest in the trust property subsequent to the execution of the 

[second] trust deed. See A.R.S. § 33-806(A). Pursuant to this statute, that 

interest “inured to the trustee as security for the contract.” 

856 P.2d at 1193. 

 In this case, Liniger owned real property located in Gilbert, Arizona. Doc. 8 at 6. 

When Maria Lopez de Horn (“Horn”) purchased the property from Liniger in May 2006, 

she executed a promissory note for a $492,000 mortgage loan from BAC’s predecessor, 

which was secured by a deed of trust against the property (the “BAC deed of trust”). See 

id., ¶¶ 1-2. That deed was extinguished when the senior lienholder, Mazuma 

Investments, Inc. (“Mazuma”), purchased the property at a trustee’s sale on September 7, 

2007. See id. at 8, ¶¶ 11-12. Mazuma thereafter transferred the property back to Horn by 

way of quit claim deed in December 2007. See id. at 10; Doc. 8-1 at 51-54. Because 

Horn reacquired the property subsequent to the execution of the BAC deed of trust, her 

interest in the property, under A.R.S. § 33-806(A), inured to BAC as security for the 

promissory note Horn executed to obtain the mortgage loan. See Lafferty, 856 P.2d at 

1193. This valid lien against the property continues to exist after the transfer of the 

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property back to Liniger in December 2008. See Doc. 8-1 at 54. In short, Liniger does 

not own the property free and clear of any interest claimed by BAC. 

 Liniger contends that in order for § 33-806(A) to apply in this case, the BAC deed 

of trust “must be exactly as described in the Lafferty case.” Doc. 11 at 4. But the holding 

in Lafferty was not dependent on the specifics of the deed of trust revived under 

§ 33-806(A). The factual differences between this case and Lafferty are immaterial. 

 Liniger asserts that the bankruptcy court failed to consider the legislative intent 

behind § 33-806(A). Doc. 8 at 12. He is incorrect. 

 In Lafferty, the plaintiff argued that § 33-806(A) was not intended to revive liens 

extinguished by foreclosure sale, but instead was meant to codify the common law rule of 

after-acquired title, that is, a situation where a purchaser of property grants a deed of trust 

shortly before acquiring title to the trust property. 856 P.2d at 1193. The court of 

appeals noted that “[a]lthough this may be true, the literal terms of the statute are not so 

restrictive.” Id. The bankruptcy court found, correctly, that the “court of appeals is 

saying whatever the argument would be for what the legislature intended in 

[§] 33-806(A), courts are to follow the literal wording of the statute[.]” Doc. 8-1 at 56. 

Liniger cites no legal authority to the contrary. The bankruptcy court did not err in its 

literal application of § 33-806(A). 

 Liniger further asserts that statutes other than § 33-806(A) are more applicable, 

specifically A.R.S. §§ 33-811(E), 33-723, 33-801(4), 33-729(A), 33-814(G), and 33-705. 

Doc. 8 at 12-16. The Court does not agree. 

 Both the bankruptcy court and the court of appeals in Lafferty recognized that 

under § 33-811(E), junior liens are extinguished following a foreclosure sale by 

the senior lienholder. Doc. 8-1 at 52-53; Lafferty, 856 P.2d at 1192. The question in 

this case is not the effect of this general rule – everyone agrees that BAC’s lien 

was extinguished by the trustee’s sale – but whether that lien was revived under 

§ 33-806(A) when Horn reacquired the property. See Doc. 8-1 at 53. Contrary to 

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Liniger’s assertion (Doc. 8 at 13), § 33-811(E) is not controlling. 

 Section 33-723 provides a remedy for a junior lienholder before a foreclosure sale, 

that is, a junior lienholder “shall be entitled to an assignment of all the interest of the 

holder of the mortgage or deed of trust by paying him the amount secured, with interest 

and costs, together with the amount of any other superior liens of the same holder.” 

Nothing in this statute precludes application of § 33-806(A) after the foreclosure sale. 

 Section 33-801(4) sets forth the definition of a “contract.” Noting that § 

33-806(A) applies to transfers of trust property made to secure the performance of a 

contract, Liniger argued below that the statute does not apply because “[t]here was no 

contract that put the property back into Maria A. Lopez de Horn’s name.” Doc. 8-1 at 

44-45. But the bankruptcy court found, correctly, that the quitclaim deed between Horn 

and Mazuma constitutes a valid contract. Id. at 46. More important, however, are the 

promissory note and deed of trust between Horn and BAC. Those documents constitute 

contracts for purposes of § 33-806(A). See A.R.S. § 33-801(4) (a “contract” includes “a 

promissory note or provisions of any trust deed”); Lafferty, 856 P.2d at 1193. 

 Sections 33-729(A) and 33-814(G) are anti-deficiency statutes. The first one 

applies to purchase money mortgages and purchase money deeds of trust foreclosed 

judicially, while the other applies to deeds of trust foreclosed by trustee’s sale. See Mid 

Kan. Fed. Sav. & Loan Ass’n of Wichita v. Dynamic Dev. Corp., 804 P.2d 1310, 1313-14 

(Ariz. 1991). Because BAC has not foreclosed on its deed of trust, judicially or by 

trustee’s sale, the anti-deficiency statutes do not apply. 

 Finally, § 33-705 provides that a purchase money mortgage or deed of trust 

“has priority over all other liens and encumbrances that are incurred against the purchaser 

before acquiring title to the real property.” Liniger does not explain, and it is 

not otherwise clear to the Court, how this priority statute precludes application of 

§ 33-806(A). 

 The bankruptcy court erred, Liniger claims, in declining to resolve the effect of the 

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December 2007 quit claim deed between Horn and Mazuma. Docs. 8 at 16, 8-1 at 54. 

The stated purpose of that deed was to nullify the trustee’s sale held in September 2007. 

Doc. 8-1 at 54. Liniger notes, correctly, that if the trustee’s sale were to be nullified, 

Mazuma would have had no legal right to deed the property to Horn. Doc. 8 at 16-17. 

But this also would have rendered a nullity the subsequent quit claim deed transferring 

the property from Horn to Liniger. The bankruptcy court’s decision not to resolve the 

effect of the quit claim deed between Horn and Mazuma has not prejudiced Liniger. 

 In summary, the Court concludes that under A.R.S. § 33-806(A), the BAC deed of 

trust was revived when Horn reacquired the property after the trustee’s sale. See Lafferty, 

856 P.2d at 1193. The bankruptcy court’s judgment in favor of BAC and against Liniger 

(Doc. 1 at 10-11) will be affirmed. 

 BAC’s request for attorneys’ fees (Doc. 10 at 9-10) is denied. Liniger is not a 

party to the BAC deed of trust. Nor has he unreasonably and vexatiously multiplied the 

proceedings for purposes of 28 U.S.C. § 1927. 

IT IS ORDERED: 

 1. The final judgment entered by the bankruptcy court on September 9, 2010 

(Doc. 1 at 10-11) is affirmed. 

 2. The Clerk is directed to terminate this action. 

 Dated this 23rd day of March, 2011. 

 

 

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