Court Opinion

ID: 6479461
Source: CourtListenerOpinion
Date Created: 2022-06-26 22:51:49.217209+00
Date Added: 2024-06-11T14:59:25.799301
License: Public Domain

McGREGOR, Vice Chief Justice.
¶ 39 I respectfully dissent. I am not certain whether the procedure the majority approves today represents wise public policy; it may well. I am certain that today’s opinion places this court in the position of adding to, not interpreting, a statutory procedure. That process should be left to the legislature.
¶ 40 The defects in the majority’s approach stem from its insistence upon treating the court’s authority over trustee’s sales, which are non-judicial foreclosures, in the same manner as we treat our authority over judicial foreclosures. Our authority to set aside a judicial sale arises from the court’s “inherent power to control [our] own processes].” Nussbaumer v. Superior Court, 107 Ariz. 504, 506, 489 P.2d 843, 845 (1971); Wiesel v. Ashcraft, 26 Ariz.App. 490, 493, 549 P.2d 585, 588 (1976). That authority, however, does not extend to sales pursuant to deeds of trust, which, as the opinion recognizes, are entirely creatures of statute. Op. ¶ 9. By extending our authority to this statutory creation, we commit error.
A.
¶ 41 I disagree with the majority’s conclusion for several reasons. The first involves the difficulty in understanding just what cause of action today’s opinion creates. The action approved today is a legal action without parameters, for it has no common law antecedent and finds no authority in statute. We now know that a trustor can move to set aside a trustee’s sale of property under a deed of trust solely on the basis that the bid price was grossly inadequate, even if the successful bidder is a bona fide purchaser for value. But when must the action be brought? Certainly not within a redemption period, for no redemption period exists under the statutes governing deeds of trust. If the limitations period for this action falls within Arizona’s general limitations period, a purchaser at a trustee’s sale must wait four years to know whether the sale will be challenged. See Ariz.Rev.Stat. (A.R.S.) § 12-550 *215(Supp.2001). If this action is in the nature of an equitable action, as the majority suggests, does the right to trial by jury attach? And what of the majority’s statement that the comment to Restatement (Third) of Property: Mortgages section 8.3 (1997) provides “guidance” as to what constitutes a grossly inadequate price? Op. ¶ 29. Should litigants and trial courts now understand that a comment to the Restatement has established a presumptive level of gross inadequacy? Are the parties free to argue that, under the facts of a particular sale, a sale price of less than twenty percent of fair market value is not grossly inadequate?
¶42 I will not further belabor the point. When the court creates a new cause of action out of whole cloth, litigants may justly question how to establish or defend against the vaguely-described claim created.
B.
¶43 As the majority notes, we tend to follow the Restatement unless its views do not represent good legal policy or conflict with legislative enactments or our prior decisions. In my view, adopting the view expressed in Restatement section 8.3 falls within both the exceptions.
¶ 44 Arizona’s Deed of Trust Act (the Act), A.R.S. §§ 33-801 to 33-821, first authorizes deeds of trust and then provides a detailed and comprehensive framework for carrying out non-judicial foreclosures. Essential to this action, the Act omits any requirement that the bidder at a trustee’s sale make a minimum bid. Instead, the Act requires that the trustee “determine which conditional sale or sales result in the highest total price bid for all of the trust property.” A.R.S. § 33-810.A (Supp.2001). The sale “shall be completed” when the purchaser makes payment in a form satisfactory to the trustee. Id. The trustee’s deed, once issued, “shall raise the presumption of compliance with the requirements” of the Act. A.R.S. § 33-811.B (Supp. 2001). The Act also makes provision, in some instances, for obtaining a deficiency judgment. If a deficiency action is not timely filed, however, the proceeds of the sale are deemed to be in full satisfaction of the obligation, “regardless of the amount.” A.R.S. § 33-814.D (2000). Although the Act refers to fair market value with respect to determining the amount of a deficiency judgment, A.R.S § 33-814A, it pointedly does not refer to fair market value as a measuring point for the amount of a purchaser’s bid, which the Act does not limit in any manner.
¶ 45 If the legislature had intended to require a minimum bid, whether related to fair market value or some other measure, it surely would have done so. See, e.g., Ark.Code. Ann. § 18-50-107(b) (Michie Supp.2001) (requiring bids of at least two-thirds the amount of the indebtedness due). I see no basis for regarding the absence of a minimum bid requirement as an oversight. Instead, the legislature quite clearly intended that the trustee determine the highest bid made and issue a trustee’s deed on that basis. The view of the Restatement thus conflicts with Arizona’s statutory law, and we should not adopt that approach.
¶ 46 Today’s opinion does not simply permit “a court to use its equity powers to intervene in a trustee’s sale.” Op. ¶ 30. Rather, the opinion writes a new statutory section that defines and requires a minimum bid, if the bidder wishes to avoid a challenge to the trustee’s sale at some undefined future time. It may well be wise policy for the legislature to add a minimum bid requirement to the Act, but the legislature, not this court, should make that decision. The answer to the question why the rule for a trustee’s sale should be different than that for judicial foreclosures, Op. ¶ 31, thus is simply that the trustee’s sale proceeds under statutory authority, which we lack authority to amend.
C.
¶ 47 We also do not adopt the Restatement view if it does not reflect good legal policy. So far as I can determine, only one other state has adopted the Restatement position that we accept today. See Rife v. Woolfolk, 169 W.Va. 660, 289 S.E.2d 220, 223 (1982). Although we are not bound by the decisions of other courts, the fact that other jurisdictions do not permit setting aside a trustee’s sale solely on the basis of grossly inadequate *216price reveals much about the validity of the Restatement view.
¶ 48 The majority cites little authority to support its decision to adopt the Restatement view. The reason may be that authority supporting today’s decision is lacking. Although Restatement section 8.3 applies to both judicial and non-judicial foreclosures, the numerous cases the Restatement cites in support of the position taken in fact apply, with one exception, to judicial foreclosures. Certainly considerable authority exists for the proposition that courts may set aside judicial sales that, although lacking other defects, involve a grossly inadequate sales price. E.g., Moody v. Glendale Fed. Bank, 643 So.2d 1149, 1149 (Fla.Dist.Ct.App.1994); Union Nat’l Bank v. Johnson, 209 A.D.2d 775, 617 N.Y.S.2d 993, 995 (1994); United Okla. Bank v. Moss, 793 P.2d 1359, 1364 (Okla.1990); Vend-A-Matic, Inc. v. Frankford Trust Co., 296 Pa.Super. 492, 442 A.2d 1158, 1162 (1982). Still other judicial sale cases support setting aside a sale if the price is so low “as to shock the conscience of the Court or to amount to fraud.” Allied Steel Corp. v. Cooper, 607 So.2d 113, 118 (Miss. 1992) (quoting Wansley v. First Nat’l Bank of Vicksburg, 566 So.2d 1218, 1224 (Miss. 1990)) (quotation marks omitted); see also Burge v. Fidelity Bond & Mortgage Co., 648 A.2d 414, 419 (Del.1994); Bascom Constr., Inc. v. City Bank & Trust, 137 N.H. 472, 629 A.2d 797, 800 (1993); Armstrong v. Csurilla, 112 N.M. 579, 817 P.2d 1221, 1233 (1991); Crown Life Ins. Co. v. Candlewood, Ltd., 112 N.M. 633, 818 P.2d 411, 414 (1991); Trustco Bank New York v. Collins, 213 A.D.2d 819, 623 N.Y.S.2d 642, 642 (1995); Crossland Mortgage Corp. v. Frankel, 192 A.D.2d 571, 596 N.Y.S.2d 130, 131 (1993); Verex Assurance, Inc. v. AABREC, Inc., 148 Wis.2d 730, 436 N.W.2d 876, 879 (Ct.App.1989). I agree with the holdings of those decisions, which are consistent with Arizona law, but they shed no light on the issue considered here.
¶ 49 Those states that permit setting aside a trustee’s sale almost uniformly require something more than a grossly inadequate price to invalidate a sale. E.g., Savers Fed. Sav. & Loan Ass’n v. Reetz, 888 F.2d 1497, 1503 (5th Cir.1989) (concluding that under Texas law, in order for inadequacy of price to invalidate a trustee’s sale, “there must also be some irregularity in the foreclosure” leading to the inadequate price); Moeller v. Lien, 25 Cal.App.4th 822, 30 Cal.Rptr.2d 777, 784 (1994) (“Where there is no irregularity in a nonjudicial foreclosure sale and the purchaser is a bona fide purchaser for value, a great disparity between the sales price and the value of the property is not a sufficient ground for setting aside the sale.”); Aikens v. Wagner, 231 Ga.App. 178, 498 S.E.2d 766, 768 (1998) (requiring a grossly inadequate price and additional circumstances that bring about the inadequate price); Brunzell v. Woodbury, 85 Nev. 29, 449 P.2d 158, 159 (1969) (same).
¶ 50 In addition to the dearth of legal authority supporting the Restatement rule for non-judicial sales, the policies underlying Restatement section 8.3 do not apply in this ease. The comments to section 8.3 describe two intertwined policy considerations that support the rule: protecting debtors from large deficiency judgments and preventing lenders from being unjustly enriched. Restatement § 8.3 cmt. a. We further neither of these considerations by applying the Restatement rule here. Our deficiency statute addresses the first concern, by limiting deficiencies to the difference between the amount owed and the fair market value of the property. A.R.S. § 33-814.A. While the second consideration may apply generally, it does not apply to this case because the purchaser was not the lender, but a third party.
¶ 51 Only one and, as of today, two jurisdictions have adopted the Restatement view for non-judicial sales. The reason, I think, is clear: courts have no inherent power to control the processes selected by the legislature to govern non-judicial foreclosures.
D.
¶ 52 The public policy considerations raised by the situation presented deserve careful consideration. The majority may be right in stating that its decision will benefit both lenders and borrowers, Op. ¶ 17, and may be right in stating that setting aside deeds of trust will cause no adverse effect on the market. Op. ¶ 20. The majority may also be *217correct in concluding that judicial oversight on the ground of gross inadequacy -will result in higher prices being paid at non-judicial foreclosures. Op. ¶ 23. It may be accurate to conclude that today’s decision will protect debtors without affecting the rights of lenders and trustees or “throwing into disorder the well-established procedures” of trustee’s sales. Op. ¶ 37.
¶ 53 On the other hand, amicus Arizona Trustee Association, Inc. (the Association), may be correct in asserting that imposing a burden on trustees to determine fairness of bids will have far-reaching economic consequences, will have a chilling effect at sales, and will make third party bidders reluctant to participate, knowing a sale can be set aside at some later date. The Association also may be correct in arguing that the absence of competitive bidding will reduce sales prices and result in more deficiency judgments, which will in turn harm debtors. It may be trae that today’s holding will make property purchased at trustee’s sales much less marketable.
¶ 54 I do not pretend to know which of these arguments should carry the day. Presumably, these are the types of concerns that the legislature took into consideration and balanced before adopting the Act. Any further balancing of these competing interests should be undertaken by the legislature.
E.
¶ 55 For the foregoing reasons, I respectfully dissent.