Delo v. GMAC Mortgage, LLC – 5/8/2013

May 28, 2013

Arizona Court of Appeals Division Two Holds that Foreclosure Action Must Name All Parties with Interests in the Property.

The Anderson family purchased a residential property with a loan from EquiFirst.  The Deed of Trust on the property listed EquiFirst as the lender and MERS (Mortgage Electronic Registration Systems, Inc.) as the nominee and beneficiary.  Various subsidiaries of GMAC later acquired the note, took over servicing it, and became the trustee of a trust into which the note was transferred.

Property taxes became delinquent and the Andersons defaulted on the note.  William Delo acquired a tax lien on the property, initiated foreclosure proceedings, and recorded a lis pendens.  Delo’s foreclosure action listed as defendants the Andersons, EquiFirst, and a homeowners association, but not MERS or the GMAC entities.  The defendants failed to respond and Delo obtained a Treasurer’s Deed to the property after a default judgment.  In the meantime, MERS had initiated non-judicial foreclosure proceedings on the property.  A GMAC entity was the only bidder at the trustee’s sale.

After those proceedings, Delo filed a lawsuit against the GMAC entities seeking to quiet title to the property.  After cross-motions for summary judgment, the Superior Court granted summary judgment in favor of Delo. 

The Court of Appeals reversed and remanded for entry of summary judgment in favor of the GMAC entities.  The court explained that MERS had acquired and recorded interests in the property long before Delo had acquired his interest, and a notice of trustee’s sale had been recorded before Delo filed his foreclosure lawsuit.  As a result, the GMAC entities’ interests were protected by MERS’s recorded interests and Delo could have identified those interests through a reasonably diligent inquiry.  The court held that Delo was not a bona fide purchaser with priority over the interests of the GMAC entities. 

Judge Vásquez authored the opinion.  Judges Kelly and Espinosa concurred.