Lewis v. Debord – 8/25/2015
Arizona Supreme Court holds that failure to attach an information statement to a certified copy of a judgment when seeking to create a judgment lien does not invalidate an otherwise valid lien but does affect the priority of the lienholder.
This appeal arose out of the Lewises’ attempt to foreclose on property owned by the Debords. The Lewises claimed to have a lien on the property based on a 2003 judgment against the property’s prior owners. The Lewises recorded their judgment in Pima County in 2006 and renewed it in 2008 to attempt to create a lien on the former property owner’s real property in Pima County. The Lewises did not include a separate information statement, as required by A.R.S. §§ 33-961(C) and 33-967(A), in either instance.
The trial court granted summary judgment in favor of the Debord’s in the foreclosure action, accepting the Debords’ argument that the Lewises’ failure to file an information statement rendered their lien invalid. The Court of Appeals affirmed on different grounds, holding that failure to include an information statement when recording a judgment does not affect the validity of the lien, but rather “affects the lien’s priority among competing creditors and fee title holders[.]” The Court of Appeals held that the information statement requirement was a “narrow exception to the principle that a subsequent purchaser who has notice of a judgment lien takes the property subject to it,” and that “the Lewises’ lien lacked priority against the Debords’ subsequent fee interest and the Lewises could not execute against the property.”
The Arizona Supreme Court reversed. As to the validity of the Lewises’ lien, the court concluded that “compliance with § 33-961(A) alone suffices to create a valid lien on a judgment debtor’s property.” A.R.S. § 33-961(C) provides that a “judgment or decree or any renewal that requires the payment of money shall also be accompanied by an information statement “as prescribed by § 33-967,” which sets forth the requirements for information statements. Although the language of § 33-961(C) could be validly read to require compliance with § 33-967 before a judgment became a lien, the court noted that § 33-961(A) requires only that a creditor file and record a certified copy of a judgment “in the office of the county recorder in each county where the judgment creditor desires the judgment to become a lien . . . before the judgment shall become a lien upon or in any manner affect or encumber the real property of the judgment debtor[.]” In support of this conclusion, the court noted that the legislature did not modify § 33-961(A) when it added § 33-961(C), implying “that the legislature intended that omitting the mandatory information statement would only modify a lien’s position and not its validity.” The court further observed that it could not condition a lien’s existence on compliance with § 33-967 “when the legislature did not include language requiring such a result, particularly because it has used such language elsewhere.” For example, the court noted that § 33-963, which deals with lien based judgments obtained in federal court, explicitly requires compliance with § 33-967, unlike § 33-961(A). Although the Debords argued that requiring compliance with § 33-967 for federal judgment liens but not state judgment liens created an absurd result, the court disagreed and noted that “[t]here are several other examples in Title 33 where the legislature has conditioned instrument validity on compliance with a statutory mandate.” The court declined to impose such a requirement where “the legislature did not see fit to do so.”
As to the priority of the Lewises’ lien, the court also concluded that the Court of Appeals erred in its analysis of priority. The Court of Appeals held that “where a subsequent purchaser acquires an interest in a judgment debtor’s real property after a judgment creditor records a judgment but before attaching an information statement, the resulting judgment lien loses its priority and the judgment creditor cannot satisfy his or her judgment by executing on that property.” This conclusion was incorrect, the court held, because it ignored the “well-settled” rule under Arizona law “that a subsequent purchaser with notice takes subject to an existing judgment lien.” Because the Debords had at least constructive notice of the Lewises’ lien, they took the property subject to the lien and the Lewises could therefore execute against the property.
The court vacated the Court of Appeals opinion, reversed the trial court’s entry of summary judgment in favor of the Debords, and remanded for further proceedings.
Justice Brutinel authored the unanimous opinion of the court.