Schayes Shows the Way: Federal District Court for the District of Arizona Holds That Notice of Trustee's Sales and Substitutions of Trustees are Not Actionable Under A.R.S. § 33-420.

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Defaulting homeowners continue to flood Arizona courts (federal and state) with foreclosure-delay lawsuits alleging a variety of legal theories while admitting their default on their promissory note(s). Plaintiffs have shown great versatility and alleged claims running the gamut from ancient claims – such as claims of champerty and barratry – to new claims such as seeking to establish a private-right of action under the Home Affordable Mortgage Program. Plaintiffs have sought to avoid foreclosure by alleging the "vapor money theory" – the claim that financial institutions do not loan "real money" – and the thoroughly debunked "show me the note" claim whereby plaintiffs contend that a trustee's sale may not proceed absent production of the "original, wetink signature" on the promissory note and deed of trust. Financial institutions' well-articulated defenses to these claims have allowed the courts to see such claims as frivolous.

Undeterred, plaintiffs have adapted and recently began filing foreclosure-delay lawsuits alleging that the recordation of the (1) assignment of the beneficial interest in a deed of trust, (2) notice of substitution of trustee, and/or (3) notice of trustee's sale itself violates A.R.S. § 33-420, Arizona's false recording statute. Frequently, plaintiffs attempt to find some typographical error in these documents and use it to claim that it is a "false" document subject to liability under A.R.S. § 33-420.

In a recent opinion dismissing a case from Federal District Court, Judge Neil Wake demonstrates that a strong defense to these claims is that none of the documents "assert" or "create" a "claim" of "interest in, or lien or encumbrance against, real property" as required by A.R.S. § 33-420 and, therefore, the allegations fail to state a claim upon which relief can be granted. See Schayes v. Orion Financial Group, Case No. CV-10-2658-PHX-NVW, 2011 U.S. Dist. LEXIS 82402 (D. Ariz. July 27, 2011).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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