Kelly v. Nationsbanc Mortgage Corp.

Citations: 199 Ariz. 284; 17 P.3d 790; 342 Ariz. Adv. Rep. 32; 2000 Ariz. App. LEXIS 184Docket: No. 1 CA-CV 99-0642

Court: Court of Appeals of Arizona; December 26, 2000; Arizona; State Appellate Court

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After NationsBanc Mortgage Corporation initiated a trustee's sale for the Kellys' property, the Kellys filed for bankruptcy, resulting in multiple postponements of the sale. Following the dismissal of their bankruptcy on September 14, 1998, the property was sold at a trustee's sale on September 29, 1998. The Kellys subsequently sued NationsBanc, claiming the sale was invalid due to inadequate accounting of their payments and lack of actual notice regarding the rescheduled sale date. 

The trial court granted summary judgment to NationsBanc, determining the Kellys failed to present evidence demonstrating a genuine issue of material fact regarding the accounting. Additionally, it ruled that NationsBanc was not obligated to provide renewed notice for the postponed sale. NationsBanc had documented compliance with statutory requirements for the foreclosure process, including providing prior notice through multiple channels. The Kellys contested the sufficiency of NationsBanc’s payment documentation and referenced a bankruptcy case that suggested renewed notice was necessary after an automatic stay. However, the trial court did not address NationsBanc's motion to dismiss and allowed the Kellys to respond to the summary judgment motion, but they did not do so after their attorney withdrew. Consequently, the court awarded summary judgment to NationsBanc, and the Kellys appealed.

The Kellys contended that the trial court erred in granting summary judgment on their request for an accounting in Count III of their complaint. They argued that NationsBanc failed to address this count in its briefing and did not prove that an accounting was provided or that no genuine factual issues existed. NationsBanc, in its motion, referenced Arizona Revised Statutes Annotated Section 33-813(C), which requires it to provide a good faith estimate of the sums needed to reinstate the trust deed, including costs and unpaid balances. NationsBanc asserted compliance by supplying the Kellys with the necessary information twice and introducing an accounting of payments made by the Kellys from 1995 to 1998.

The court found that NationsBanc met the statutory requirements before the trustee's sale and noted that the Kellys had not cited any authority necessitating a complete accounting. After the lawsuit was initiated, NationsBanc provided an accounting for the last thirty-six months of payments to support its reinstatement figures. The Kellys claimed there was a factual dispute regarding the accuracy of these reinstatement quotes, but the court determined that NationsBanc had established a prima facie case of no genuine issue of material fact, shifting the burden to the Kellys to provide counter-evidence.

The Kellys failed to present evidence disputing NationsBanc's accounting. Their reliance on sworn testimony in their verified complaint was insufficient, as opposing parties must provide specific facts to show a genuine issue for trial. Without records to contest NationsBanc's figures, the Kellys could not demonstrate the inaccuracies of the reinstatement amount or the impact of having a full accounting prior to the trustee's sale. Consequently, the court concluded that no genuine issue existed regarding the request for an accounting.

The Kellys, after responding to a motion to dismiss and for summary judgment, were given two additional chances to respond but did not do so, despite being unrepresented by counsel during these periods. The court stated that parties without legal representation are held to the same standards as those with counsel. Consequently, the Kellys' failure to provide evidence against NationsBanc's accounting led to the proper granting of summary judgment in favor of NationsBanc on Count III.

Regarding their second argument, the Kellys contended that the trial court erred in granting summary judgment because they had been making mortgage payments, NationsBanc had not provided detailed accounting, and they did not receive actual notice of a trustee’s sale scheduled after their bankruptcy dismissal. The requirements for notifying a trustee’s sale are outlined in A.R.S. section 33-808, which allows for the postponement of a sale with public notice but does not mandate additional notice unless specified in subsection C, which pertains to sales postponed due to undisclosed bankruptcy.

The excerpt notes that U.S. Bankruptcy Court judges in Arizona have differing views on whether post-bankruptcy notice to debtors is necessary, referencing a case where a trustee's sale occurred without the debtors receiving notice after their bankruptcy petition was dismissed.

A.R.S. section 33-810(B) allows postponed sales to occur without direct notice to interested parties after an initial sale notification. However, the Acosta court found this provision insufficient when a bankruptcy filing intervenes, as it may prevent debtors from being aware of impending foreclosures. The court ruled that actual notice of a rescheduled sale must be provided post-bankruptcy dismissal to protect the debtor's rights, emphasizing the importance of due process under the U.S. Constitution. This ruling was later challenged by the Stober court, which argued that Acosta improperly imposed additional notice requirements beyond existing Arizona law and that the Bankruptcy Code does not mandate such requirements. Stober concluded that if creditors fail to meet Arizona's notice and sale requirements, debtors should seek remedies through state courts. The Nagel court, which reviewed the matter later, sided with Stober, stating that bankruptcy dismissal restores parties to their pre-bankruptcy status and that Acosta's additional notice requirements incorrectly alter established law. The Nagel court also dismissed Acosta's due process concerns, asserting that debtors can keep informed about sale statuses once initial notices are issued.

The Nagel court found that the Acosta court incorrectly relied on Mullane v. Central Hanover Bank for its due process analysis, emphasizing that Mullane involved a trust under state regulatory control, which represented state action. In contrast, the Arizona statute governing trustee sales lacks a significant state nexus, as deeds of trust are private contracts linking debts to property, with remedies being private. Therefore, the Nagel court concluded that due process requirements do not apply to private deed of trust sales. The court affirmed that the initial notice of the trustee’s sale for the Kellys’ property complied with Arizona law, and the Kellys had the responsibility to stay informed of new sale dates after a bankruptcy filing did not necessitate additional notice when a sale was postponed. Upon bankruptcy dismissal, the law reverted to Arizona's deed of trust statutes. Consequently, the trial court correctly granted summary judgment on the Kellys' claim that the sale was invalid. NationsBanc was awarded costs for the appeal, but its request for attorneys' fees was denied due to a lack of cited authority. The trial court also correctly granted summary judgment in favor of NationsBanc regarding the accounting presented. The ruling was affirmed by the judges.