Advanced Prop. Tax Liens, Inc. v. Othon – 10/25/2021

January 3, 2022

Arizona Court of Appeals Division Two holds that tax lien company’s tax lien judgment and default judgment were void for failure to serve notice.

A buyer purchased commercial property from a seller, knowing that taxes were outstanding on the property.  The buyer also failed to record a deed, which would have given tax lien holders notice of his ownership and address.  A tax lien company sent letters seeking to provide notice to the seller (not the buyer) of the property, but the letters were returned by the Postal Service as “unclaimed.”  The tax lien company then instituted foreclosure proceedings and eventually secured a default judgment based on an affidavit that the seller had been properly served notice but failed to answer.  The tax lien company then filed a separate action, seeking to quiet title against the buyer.  The buyer moved for summary judgment, seeking to vacate the default judgment on grounds that the tax company failed to provide adequate notice to even the seller under A.R.S. § 42-18202 (the notice statute for tax lien foreclosure actions).  The trial court granted summary judgment to the buyer and vacated the default judgment.  

The tax lien company appealed, asserting (1) the buyer did not have standing to challenge the default judgment for inadequate service because he failed to record his deed and was not a party to the default judgment action and (2) the default judgment was valid.  The Court of Appeals rejected these arguments and affirmed.  First, the Court of Appeals held the buyer had standing to seek to vacate the default judgment because the buyer had a “definite and substantial interest,” even if it was not a party to the default judgment case.  The Court of Appeals further held that the default judgment was invalid for inadequate service under A.R.S. § 42-18202 because the tax lien company failed to investigate further after learning its letters attempting notice to the seller were returned.

Judge Eckerstrom authored the opinion in which Judges Espinosa and Staring joined.