Rcbt v. Cit Bank

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

RCBT HOLDINGS, LLC., Plaintiff/Appellant,

v.

CIT BANK, N.A., and MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS,
Defendants/Appellees.

No. 1 CA-CV 16-0177
FILED 5-4-2017

Appeal from the Superior Court in Maricopa County
No. CV2015-091236
The Honorable David M. Talamante, Judge

AFFIRMED

COUNSEL

Kessler Law Offices, Mesa
By Eric W. Kessler
Counsel for Plaintiff/Appellant

Quarles & Brady LLP, Phoenix
By John Matson O’Neal and Coree E. Neumeyer
Counsel for Defendants/Appellees
 RCBT v. CIT BANK et al.
Decision of the Court

MEMORANDUM DECISION

Acting Presiding Judge Michael J. Brown delivered the decision of the
Court, in which Judge Patricia A. Orozco and Judge Maurice Portley1
joined.

B R O W N, Judge:

¶1 Plaintiff RCBT Holdings, LLC (“RCBT”) challenges the trial
court’s judgment in favor of defendants CIT Bank, N.A. and Mortgage
Electronic Registration Systems, Inc. (collectively “CIT”) based on RCBT’s
successful motion for judgment on the pleadings. RCBT argues the court
erred in denying its motion to compel discovery. Because discovery would
not have affected the judgment, we affirm.

BACKGROUND

¶2 In 2011, RCBT purchased a tax lien assessed against real
property owned by Myrtha Santillano.2 In February 2015, RCBT filed a tax
lien foreclosure complaint against several defendants, including CIT as the
beneficiary of a 2007 deed of trust encumbering Santillano’s property in the
amount of $161,600. In its answer, CIT asserted the right to redeem all
delinquent tax liens against the subject property under Arizona Revised
Statutes (“A.R.S.”) section 42-18151 et seq.

¶3 After CIT redeemed the tax lien by paying the Maricopa
County Treasurer the outstanding taxes, interests, and costs, RCBT
contested CIT’s redemption rights. RCBT also sought discovery from CIT
relating to its records evidencing the validity of the deed of trust and
underlying debt. CIT refused such request and instead moved for
judgment on the pleadings under Arizona Rule of Civil Procedure 12(c).
After briefing and oral argument, the trial court granted CIT’s motion,

1 The Honorable Patricia A. Orozco and the Honorable Maurice
Portley, Retired Judges of the Court of Appeals, Division One, have been
authorized to sit in this matter pursuant to Article VI, Section 3 of the
Arizona Constitution.

2 Santillano and other defendants were dismissed from the complaint
and are not parties to this appeal.

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 RCBT v. CIT BANK et al.
Decision of the Court

finding that CIT has a “redeemable interest in the property”
notwithstanding RCBT’s statute of limitations’ defense and thus RCBT’s
motion to compel discovery was moot. After RCBT failed to timely submit
an application for attorneys’ fees, the trial court entered judgment in favor
of CIT, with each side to bear its own attorneys’ fees and costs. This timely
appeal followed.

DISCUSSION

¶4 A Rule 12(c) motion for judgment on the pleadings “tests the
sufficiency of the complaint, and judgment should be entered for the
defendant if the complaint fails to state a claim for relief.” Giles v. Hill Lewis
Marce, 195 Ariz. 358, 359, ¶ 2 (App. 1999). On appeal, we assume the
complaint’s well-pleaded factual allegations are true but review legal
rulings de novo. Mobile Cmty. Council for Progress, Inc. v. Brock, 211 Ariz.
196, 198, ¶ 5 (App. 2005).

¶5 A real property tax lien may be redeemed by “[a]ny person
who has a legal or equitable claim in the property.” A.R.S. § 42-18151(A).
RCBT does not dispute that CIT is the beneficiary of the deed of trust and
admits its rights are “subject only to the rights of [CIT] to redeem the
property.” RCBT asserts under the present tense of the statute (has), CIT
could only redeem the lien if it had a current legal or equitable claim. Thus,
RCBT argues it should have been permitted to conduct discovery into
whether CIT’s rights to enforce the deed of trust were barred by the
applicable six-year statute of limitations. See A.R.S. § 12-548. And, if so
barred, the deed of trust was “null and void” and CIT lacked redemption
rights. We disagree.

¶6 First, in pertinent part, RCBT’s complaint alleged that (1) CIT
“make[s] some claim to the subject real property adverse to [RCBT’s] claim”
and (2) “[RCBT] is now the owner of the lien on the property, subject only
to the rights of [CIT] to redeem the property.” In its answer, CIT asserted
it held “the right to redeem the property pursuant to Arizona statute,” that
its right was “currently senior and superior to any rights held” by RCBT,
and “reserve[d] the right to redeem any pertinent delinquent tax liens.”
Nothing in the complaint suggests that RCBT claimed that CIT’s right to
redeem was barred based on the statute of limitations and thus RCBT
cannot rely on a claim never asserted. See Black v. Perkins, 163 Ariz. 292, 293
(App. 1989) (“When the parties have framed the issues for resolution, they
may not change them absent an amendment of the pleadings or trial of the
issue by consent.”).

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 RCBT v. CIT BANK et al.
Decision of the Court

¶7 Second, even assuming the claim was properly framed in the
complaint, a statute of limitations defense is available only to the borrower
or one in privity, not to RCBT as a third-party tax lien purchaser. See Acad.
Life Ins. Co. v. Odiorne, 165 Ariz. 188, 190 (App. 1990) (“The defense of the
statute of limitations is a personal privilege that a debtor or one in privity
may elect to urge or waive.”); Provident Mut. Bldg.-Loan Ass’n v. Schwertner,
15 Ariz. 517, 518 (1914) (recognizing that the statute of limitations defense
“prevents a recovery when properly invoked by the debtor. It is a shield
and not a sword. It can be used for defense, but not for assault.”); Lake
Waterloo Corp. v. Kestenbaum, 92 A.2d 478, 479-80 (N.J. Sup. Ct. 1952)
(explaining that only the debtor, or one in privity, may take advantage of
the statute of limitations defense) (citing cases). No evidence in the record
suggests Santillano invoked this defense or that RCBT was in privity with
her or invoked it on her behalf. Thus, even if the six-year statute of
limitations accrued, CIT properly exercised its right to redeem the tax lien.

¶8 Third, CIT filed a copy of the recorded deed of trust with the
trial court. Although the deed of trust is a matter outside the pleadings, we
may consider it as a public record. See Ariz. R. Civ. P. 12(d); Workman v.
Verde Wellness Ctr., Inc., 240 Ariz. 597, 601, ¶ 10 (App. 2016) (public records
regarding matters referenced in a complaint are not considered matters
outside pleadings). The deed of trust states that Santillano’s loan
installment obligation under the deed of trust, and the promissory note it
secured, does not end until 2037; thus, the statute of limitations would not
preclude enforcement of the debt until six years after that date. See
Cheatham v. Sahuaro Collection Serv., Inc., 118 Ariz. 452, 454 (App. 1978) (“In
the case of a promissory note, the cause of action accrues and the statute of
limitations begins to run when the debt becomes due.”); Burney v. Citigroup
Glob. Mkts. Realty Corp., 244 S.W.3d 900, 903 (Tex. Ct. App. 2008) (“A cause
of action accrues and the statute of limitations begins to run from an
installment note’s maturity date or the date of acceleration.”). RCBT has
made no allegation, nor does the record reflect, that CIT had accelerated the
note or that it had been paid in full.

¶9 Fourth, RCBT cites no authority supporting its claim that if
the debt is barred by the statute of limitations, thereby precluding a
trustee’s sale as a remedy available to CIT, see A.R.S. § 33-816, the deed of
trust is rendered “null and void.” Indeed, the case law suggests otherwise.
See De Anza Land and Leisure Corp. v. Raineri, 137 Ariz. 262, 266 (App. 1983)
(recognizing that a statutory bar to enforcement of the debt is not equivalent
to its extinguishment); Schwertner, 15 Ariz. at 518 (explaining that running
of statutory period “affects the remedy and not the right”); cf. Best Fertilizers
of Ariz., Inc. v. Burns, 116 Ariz. 492, 493 (1977) (when debtor completely

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 RCBT v. CIT BANK et al.
Decision of the Court

satisfies the debt, it is extinguished and the mortgage discharged); Stewart
v. Underwood, 146 Ariz. 145, 148 (App. 1985) (rejecting debtor’s argument
that mortgage was rendered “null and void” because personal debt
discharged in bankruptcy; holding discharge did not extinguish debt, but
only barred subsequent actions against debtor personally).

CONCLUSION

¶10 Based on the foregoing, we affirm the trial court’s judgment
in favor of CIT. As the successful party, CIT is entitled to an award of costs
upon compliance with ARCAP 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

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