Bt Capital v. Td Service Co. of Arizona

SUPREME COURT OF ARIZONA
En Banc

BT CAPITAL, LLC, an Arizona ) Arizona Supreme Court
limited liability corporation, ) No. CV-11-0308-PR
)
Plaintiff/Appellant/ ) Court of Appeals
Cross-Appellee, ) Division One
) No. 1 CA-CV 10-0450
v. )
) Maricopa County
TD SERVICE COMPANY OF ARIZONA, ) Superior Court
an Arizona corporation; and ) No. CV2009-022982
RCS-CHANDLER, LLC, an Arizona )
limited liability company, )
)
Defendants/Appellees, ) O P I N I O N
and )
)
POINT CENTER FINANCIAL, INC., a )
foreign corporation, )
)
Defendant/Appellee/ )
Cross-Appellant. )
__________________________________)

Appeal from the Superior Court in Maricopa County
The Honorable Bethany G. Hicks, Judge

AFFIRMED
________________________________________________________________

Opinion of the Court of Appeals, Division One
228 Ariz. 188, 265 P.3d 370 (App. 2011)

VACATED
________________________________________________________________

THE DOYLE FIRM, P.C. Phoenix
By William H. Doyle
Brian R. Hauser
Robert J. Lord
D. Andrew Bell
Nathaniel J. Odle
Attorneys for BT Capital, LLC
JABURG & WILK, P.C. Phoenix
By Kathi Mann Sandweiss
Roger L. Cohen
Attorneys for TD Service Company of Arizona
and RCS-Chandler LLC

GALLAGHER & KENNEDY, P.A. Phoenix
By Thomas A. Maraz
Joseph E. Cotterman
Attorneys for Point Center Financial, Inc.
________________________________________________________________

B A L E S, Justice

¶1 This case concerns commercial property that was

subject to a deed of trust and auctioned at trustee’s sales

twice in 2009. Alleging it was the successful bidder at the

second sale, BT Capital, LLC (“BT”) sued the trustee and the

trust beneficiary seeking title to the property and damages. We

hold that this case was rendered moot when the property was

purchased by the beneficiary at a third trustee’s sale in 2010.

I.

¶2 Point Center Financial, Inc. (“PCF”) was the

beneficiary of a deed of trust for commercial property in

Chandler, Arizona, securing PCF’s loan for $32 million. TD

Service Company of Arizona (“TD”) was the trustee. At noon on

June 15, 2009, TD allegedly held a trustee’s sale. PCF contends

it then purchased the property when TD made a $1 million credit

bid (TD was authorized to make credit bids on PCF’s behalf up to

$25 million if competing bids were placed). After a

representative of BT told the auctioneer that the sale had been

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noticed for 2 p.m., TD directed the auctioneer to redo the

auction, and a second sale occurred around 3:30 p.m. that same

day. TD made an opening bid of $1 million on PCF’s behalf. BT

bid $1,000,001. TD mistakenly failed to make a further bid on

behalf of PCF, instead announcing BT as the winning bidder.

When BT tendered the balance of its bid price the next day, TD

rejected it, contending that the second auction was void because

there had been a mistake in communicating correct bid

instructions.

¶3 In July 2009, BT filed a complaint seeking title to

the property and damages from TD and PCF for failure to complete

the sale. BT also filed a notice of lis pendens. TD noticed

another trustee’s sale, which the trial court preliminarily

enjoined. In February 2010, the trial court granted summary

judgment in favor of PCF and TD. The court found the 3:30 p.m.

sale on June 15 void for procedural irregularities, which

defeated BT’s claims based on TD’s alleged wrongful refusal to

deliver a trustee’s deed. The trial court also dismissed BT’s

tort claims, ruling that TD did not owe any duty to BT.

¶4 On June 1, the trial court issued an order clarifying

that its summary judgment ruling terminated the preliminary

injunction. That same day, BT filed a notice of appeal. On

June 25, BT filed an “Emergency Motion to Reinstate Preliminary

Injunction” with the court of appeals. On July 6, the court of

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appeals denied that motion but noted BT could apply to the trial

court for an order staying its ruling and setting the amount of

a supersedeas bond. BT did not file such an application.

¶5 While BT’s “Emergency Motion” was pending, on July 1,

2010, TD conducted another trustee’s sale, in which PCF acquired

the property. On July 9, a trustee’s deed conveying the

property to PCF was recorded.

¶6 The court of appeals rejected arguments by PCF and TD

that the 2010 sale mooted BT’s appeal. BT Capital, LLC v. TD

Serv. Co., 228 Ariz. 188, 191-92 ¶¶ 11-14, 265 P.3d 370, 373-74

(App. 2011). On the merits, the court ruled that TD could not

void the sale to BT resulting from the 3:30 p.m. auction in June

2009, reversed the superior court’s entry of summary judgment

for PCF and TD, and remanded the case for further proceedings.

Id. at 196-97 ¶ 39, 265 P.3d at 378-79.

¶7 We granted review to consider the proper application

of the statutes governing deeds of trust, an issue of statewide

importance. Jurisdiction exists under Article 6, Section 5(3)

of the Arizona Constitution and A.R.S. § 12-120.24 (2009).

II.

¶8 At its core, this litigation turns on whether PCF or

BT became the rightful owner of the property as a result of the

trustee’s sales. BT argues that it purchased the property at

the 3:30 p.m. auction in June 2009, that TD wrongfully refused

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to deliver a trustee’s deed when BT tendered the balance of the

purchase price, and that BT is entitled at least to seek damages

from TD and PCF.

¶9 The “deed of trust scheme is a creature of statutes.”

In re Vasquez, 228 Ariz. 357, 359 ¶ 4, 266 P.3d 1053, 1055

(2011) (citing In re Krohn, 203 Ariz. 205, 208 ¶ 9, 52 P.3d 774,

777 (2002)). BT’s rights related to the trustee’s sale, and

thus any claims it may have against the trustee TD or the

beneficiary PCF, are defined by the statutes governing deeds of

trust. Under those statutes, this case became moot as a result

of the lawfully conducted trustee’s sale in July 2010. See

Sedona Private Prop. Owners Assoc. v. City of Sedona, 192 Ariz.

126, 127, 961 P.2d 1074, 1075 (App. 1998) (noting that “[a] case

becomes moot when an event occurs which would cause the outcome

of the appeal to have no practical effect on the parties”).

¶10 Objections to a trustee’s sale are governed by A.R.S.

§ 33-811, which provides:

The trustor, its successors or assigns, and all
persons to whom the trustee mails a notice of sale
under a trust deed pursuant to section 33-809 shall
waive all defenses and objections to the sale not
raised in an action that results in the issuance of a
court order granting relief pursuant to rule 65,
Arizona rules of civil procedure, entered before 5:00
p.m. mountain standard time on the last business day
before the scheduled date of the sale . . . .

A.R.S. § 33-811(C). Under this statute, a person who has

defenses or objections to a properly noticed trustee’s sale has

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one avenue for challenging the sale: filing for injunctive

relief. Cf. In re Krohn, 203 Ariz. at 214 ¶ 38, 52 P.3d at 783

(allowing debtor to challenge completed trustee’s sale based on

grossly inadequate bid price).

¶11 Where, as here, a trustee’s sale is completed, a

person subject to § 33-811(C) cannot later challenge the sale

based on pre-sale defenses or objections. In that circumstance,

the rights of the successful bidder – PCF in this case – are

also specified in the statute:

The trustee’s deed shall operate to convey to the
purchaser the title, interest and claim of the
trustee, the trustor, the beneficiary, their
respective successors in interest and all persons
claiming the trust property sold by or through them,
including all interest or claim in the trust property
acquired subsequent to the recording of the deed of
trust and prior to the delivery of the trustee’s deed.
That conveyance shall be absolute without right of
redemption and clear of all liens, claims or interests
that have a priority subordinate to the deed of trust
and shall be subject to all liens, claims or interests
that have a priority senior to the deed of trust.

A.R.S. § 33-811(E).

¶12 BT does not dispute that it received notice of, and in

fact attended, the July 2010 sale. After the trial court

dissolved its preliminary injunction, BT unsuccessfully

requested the court of appeals to reinstate it. BT then did not

seek a stay in the trial court. Under §§ 33-811(C) and (E), BT

thus waived “all defenses and objections to the [2010] sale,”

and the resulting trustee’s deed conveyed the property to PCF

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“clear of all . . . claims or interests that have a priority

subordinate to the deed of trust.”

¶13 BT makes two arguments in attempting to salvage its

claims. It first contends that PCF’s title under the 2010

trustee’s deed remains subject to its claims because BT filed a

lis pendens in 2009. In an “action affecting title to real

property,” a plaintiff may record a notice of the action – a lis

pendens – pursuant to A.R.S. § 12-1191. “[T]hereafter a

purchaser or encumbrancer of the property affected shall be held

to have constructive notice of the pendency of the action and

the claims therein made . . . .” Id. § 12-1191(B).

¶14 BT’s argument misapprehends the interplay of §§ 12-

1191 and 33-811. BT had a “claim” that it was entitled to the

property as a result of the 2009 sale, and its lawsuit was “an

action affecting title to real property.” Id. § 12-1191(A).

Although filing the lis pendens provided constructive notice of

the lawsuit, it did not establish the validity of BT’s claim or

give it priority over the pre-existing deed of trust for

purposes of § 33-811(E). See Kelly v. Perry, 111 Ariz. 382,

385, 531 P.2d 139, 142 (1975) (noting that, as “a statutory

substitute for notice of a legal proceeding which affects the

title to realty,” a lis pendens “is fundamentally procedural”

and does not “confer[] any additional substantive right”). To

conclude otherwise would render § 33-811(C) ineffective, because

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a party that failed to obtain an injunction preventing the sale

– like BT here – could nonetheless preserve its objections

merely by filing a lawsuit and lis pendens.

¶15 BT also argues that the court of appeals correctly

relied on Vinson v. Marton & Assocs., 159 Ariz. 1, 764 P.2d 736

(App. 1988), to conclude that BT’s claims for money damages

survived the sale of the property. In Vinson, the plaintiff

unsuccessfully sought specific performance of a contract for the

sale of land; while an appeal was pending, the defendant sold

the land to someone else. Rejecting the argument that the sale

mooted the appeal, the court of appeals held that, although

specific performance was no longer available, the plaintiff

could still seek damages. Id. at 5, 764 P.2d at 740.

¶16 Vinson is inapposite because BT cannot state a viable

claim for money damages against TD or PCF. BT did not appeal

the trial court’s dismissal of its tort claims. Nor has BT

identified any other basis for a damages claim.

¶17 BT argues that it was the successful bidder at the

3:30 p.m. auction in June 2009, and it has viable breach of

contract claims based on case law recognizing such claims by

bidders against auctioneers. At common law, the highest bidder

at an auction can be said to have entered into a contract for

the sale of land on acceptance of the offeree’s bid. See

Restatement (Second) of Contracts § 28 (1981) (“auctioneer

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invites offers from successive bidders which he may accept or

reject”); Id. § 30 illus. 4 (“A makes a bid at an auction sale.

By the usual custom at auctions, the auctioneer may accept by

letting the hammer fall, by saying ‘Sold’, or by any words

manifesting acceptance.”).

¶18 BT’s rights, however, are determined by the statutes

governing deeds of trust, not the common law. The statutes

provide that “[e]very bid shall be deemed an irrevocable offer

until the sale is completed,” A.R.S. § 33-810(A), and “[t]he

sale shall be completed on payment by the purchaser of the price

bid in a form satisfactory to the trustee.” Id. No sale was

completed because TD rejected BT’s payment.

¶19 If TD’s refusal to accept payment was improper (an

issue we do not decide), BT might have brought an action seeking

to compel TD to complete the sale consistent with its statutory

obligations. See A.R.S. §§ 33-801(10) (providing that “[t]he

trustee’s obligations to the trustor, beneficiary and other

persons are as specified in this chapter, together with any

other obligations specified in the trust deed”); 33-807(E)

(“[t]he trustee need only be joined as a party in legal actions

pertaining to a breach of the trustee’s obligations under this

chapter or under the deed of trust”). But that statutory claim

was mooted by the 2010 trustee’s sale at which PCF acquired the

property. Moreover, because the statutes do not recognize any

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right to recover damages in these circumstances, they preclude a

third party like BT from asserting claims for common law breach

of contract against the trustee or beneficiary.

¶20 In short, the 2010 trustee’s sale establishes that BT

has no claim to title to the property. BT did not appeal the

dismissal of its tort claims and has no viable statutory or

contract claim for damages.

III.

¶21 For the foregoing reasons we vacate the court of

appeals’ opinion, affirm the superior court’s entry of summary

judgment in favor of PCF and TD, and grant PCF’s request for

attorney’s fees.

_____________________________________
W. Scott Bales, Justice

CONCURRING:

_____________________________________
Rebecca White Berch, Chief Justice

_____________________________________
Andrew D. Hurwitz, Vice Chief Justice

_____________________________________
A. John Pelander, Justice

_____________________________________
Robert M. Brutinel, Justice

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