TFLTC, LLC v. Ford – 8/8/2022

September 6, 2022

Arizona Supreme Court holds that post-redemption attorney fees and costs are recoverable when they are a direct and necessary result of the tax-lien redemption process.

A company purchased tax liens on several properties. The company sought to foreclose each owner’s redemption rights, but the owners eventually redeemed their respective liens and received certificates of redemption. Thereafter, the company sought recovery in each case under A.R.S. § 42-18206, which allows recovery of reasonable attorney fees and costs associated with redemption during pendency of a foreclosure action.

The trial courts found that under Leveraged Land Co. v. Hodges, 226 Ariz. 382 (2011), the company could not recover any fees or costs incurred after the redemption was complete. The Court of Appeals consolidated the cases and agreed with the lower courts.

The Arizona Supreme Court reversed, finding Leveraged Land did not categorically bar post-redemption recovery.  The attorney fees and costs at issue in Leveraged Land were denied not merely because they were incurred after the redemption, but because they were incurred during separate litigation challenging the validity of the redemption.  The Court explained that such litigation is a proceeding “wholly distinct” from the redemption process and not contemplated by § 42-18206, which aims to make tax lien purchasers whole, not to shield them from the financial risks of participating in separate litigation.

Unlike in Leveraged Land, the attorney fees and costs at issue here arose from work directly associated with the redemption process and were thus recoverable under § 42-18206 as a “direct and necessary result of completing the redemption.”

Chief Justice Brutinel authored the opinion of the Court, in which Vice Chief Justice Timmer and Justices Bolick, Lopez, Beene, Montgomery, and King joined.

Posted by: Payslie M. Bowman