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What is the Effect of an Untimely Challenge to the Timeliness of a Trustee’s Sale?

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By: Ben Reeves

Ever wonder what happens if a person challenges the timeliness of a trustee’s sale after the sale already occurred? Waiver of the argument of course!  And, in the case of Wells Fargo Bank, N.A. v. Waltner, the affirmance of an eviction judgment.

In the Waltner case, Wells Fargo Bank, N.A., as Trustee for WaMu Mortgage Pass-Through Certificates, Series 2005-PR4 Trust (the “Bank”), purchased a residential property at a trustee’s sale in September 2015.  The Bank gave the occupant of the house, Sarah Waltner (“Waltner”), notice to vacate the property, but she did not do so.  Accordingly, the Bank filed a summary action to evict Waltner, which the trial court ultimately granted.

After the trial court granted the Bank relief, Waltner filed a motion to dismiss and a motion to vacate the eviction judgment arguing, among other things, that the judgment was void because the Bank conducted the trustee’s sale after the statute of limitations expired. Both motions were denied, and Waltner appealed.

In a Memorandum Decision, the Arizona Court of Appeals easily rejected Waltner’s argument regarding the timeliness of the trustee’s sale, holding as follows: “If Waltner wished to challenge the trustee’s sale as being barred by the statute of limitations, the time for that claim was at the time of the sale.”  The appellate court cited both A.R.S. § 811(C) and BT Capital, LLC v. TD Serv. Co. of Arizona, 229 Ariz. 299, 301, 275 P.3d 598, 600 (2012) to support its holding.  The statute provides that a borrower waives all defenses and objections to a trustee’s sale that are not raised in an action that results in the issuance of an injunction prior to the date of the sale, and the BT Capital case (which we previously blogged about here) confirmed that a person objecting to a trustee’s sale must seek and obtain injunctive relief to preserve those objections for appeal.  Relying on this clear precedent, the Court of Appeals found that Waltner waived the statute of limitations argument, and affirmed the eviction judgment on that basis.

The ease with which the Court of Appeals disregarded Waltner’s challenge to the trustee’s sale should please purchasers of foreclosed properties. In 2014, Morgan AZ Financial, LLC v. Gotses, 235 Ariz. 21 (Ct. App. 2014) somewhat reduced the protections afforded under A.R.S. § 811(C), by holding that common law defenses to liability on a note survive a trustee’s sale notwithstanding the statute and the BT Capital case.  In Waltner, the Court of Appeals did not even give lip service to the Morgan AZ Financial case, and—instead—simply concluded that Waltner waived her untimely challenge to the timeliness of the trustee’s sale.