AHCCCS v. Allen (In re Stephenson) – 11/27/2007
Arizona Court Of Appeals Division One Holds That a Secured Creditor Need Not Seek Permission From the Superior Court or the Personal Representative of an Estate to Enforce Its Security Even Though Probate Has Been Opened.
Petitioner, American Savings Life Insurance Company (“Petitioner”) held a properly recorded deed of trust on the real property of a decedent securing a loan made prior to the decedent’s death. At the time of her death, the decedent was also indebted to AHCCCS for medical benefits provided, and AHCCCS recorded a Notice of Medical Assistance Lien against the decedent’s real property. AHCCCS then filed a petition for Formal Probate of Will and Appointment of Personal Representative and was appointed personal representative of the Decedent’s estate five months later. Before AHCCCS was appointed personal representative, Petitioner caused a notice of trustee’s sale to be recorded and obtained the real property at the subsequent public trustee’s sale through a credit bid. AHCCCS then filed a Petition to Recover Assets claiming that Petitioner could not conduct a trustee’s sale on estate property without first obtaining permission from the personal representative or the court. The trial court granted summary judgment in favor of AHCCCS and petitioner timely appealed.
The Court of Appeals reversed, holding that under the common law and the Arizona Probate Code, secured creditors have the power to choose a remedy after a debtor dies, either by foreclosing on their security or by filing a claim in probate. The Court also rejected AHCCCS’ argument that even if secured creditors may elect to foreclose on their security, where the estate is subject to an open probate proceeding, the enforcement proceedings of the secured creditor must be supervised by the court. Although the probate court has general jurisdiction over the decedent’s estate, AHCCCS cited no authority for the proposition that the court should also have supervisory authority over a deed of trust sale governed by a separate statutory scheme.
Judge Portley authored the opinion; Presiding Judge Hall and Judge Snow concurred.