Arizona Supreme Court holds that a property owner can clear title when the deadline to sue on the property’s underlying debt has passed.

After the statute of limitations had run on a “Note Secured by Deed of Trust” in real property issued by an investment company, the debtor brought an action to quiet title the property in their favor. The investment company argued that the statute of limitations barring recovery on the Note did not bar enforcement of the Deed of Trust, which has a much longer statute of limitations.

The Arizona Supreme Court disagreed, citing the plain language of A.R.S. § 12-1104, which mandates quiet title judgment in the plaintiff’s favor anytime the statute of limitations has run on the remedy to enforce the lien or interest in the real property. The Court also held that quiet title judgment is appropriate even when the plaintiff has unpaid debts on the property, overruling Provident Mut. Bldg.-Loan Ass’n v. Schwertner, 15 Ariz. 517, 518–20 (1914) and its progeny. In this instance, because the statute of limitations had run on the investment company’s enforcement of the debt secured by the Note, Section 12-1104 permanently barred the company’s assertion of an interest in or lien against the property. Thus, quite title judgment in the plaintiff’s favor was required.

Justice King authored the unanimous opinion.

Posted by: Gloria Farrisi