Arizona’s law does not require the recording of an assignment of a deed of trust before recording a notice of trustee’s sale where the beneficiary holds a promissory note that was endorsed and payable to bearer.
In Vasquez v. Saxon Mortgage, Inc., the borrower, Julia Vasquez, refinanced her home loan by signing a promissory note and deed of trust in favor of Saxon Mortgage, Inc. (“Saxon”). Later, Saxon transferred the Note to Deutsche Bank National Trust Company as Trustee for Saxon Asset Securities Trust 2005-3 (“Deutsche Bank”). Saxon simply endorsed the Note in blank, but the assignment of the Note was not recorded, and an assignment of the Deed of Trust was not recorded. After Vasquez defaulted on the loan, Deutsche Bank appointed a new trustee under the Deed of Trust. The new trustee then recorded a notice of trustee’s sale. Thereafter, Saxon recorded an assignment of the Deed of Trust to Deutsche Bank.
The Arizona Supreme Court was called upon to answer the question of whether “’the recording of an assignment of deed of trust [is] required prior to the filing of a notice of trustee’s sale under A.R.S. § 33-808 when the assignee holds a promissory note payable to bearer.’” The Court answered “no; Arizona law imposes no such requirement.”
The Court noted that it was ”mindful of the human costs attendant to home foreclosures. Our task today, however, is simply to answer two purely legal questions . . . Because the ‘deed of trust scheme is a creature of statutes,’ our role is entirely one of statutory construction. Put differently, we are called upon not to determine whether there ought to be a law providing relief to Vasquez, but what current Arizona statutes provide.” (Citation omitted.) The Court held that “trustee’s sales are governed by A.R.S. § 33-808. That statute expressly requires that a notice of trustee’s sale be recorded. A.R.S. § 33-808(A)(1). The statute, however, does not require that an assignment of a deed of trust be recorded before recording the notice of trustee’s sale.”
The Court explained that the recording statutes are designed to protect subsequent transferees and creditors who do not have actual notice of the lien or transfer. But, “consistent with this general purpose, Arizona law expressly provides that ‘[u]nrecorded instruments, as between the parties and their heirs . . . shall be valid and binding.’ A.R.S. § 33-412(B). Thus, while the failure to record an assignment of a deed of trust might leave an assignee unprotected against claims by some purchasers or creditors, it does not affect a deed’s validity as to the obligor.”
The Court supported its decision with “Arizona law [that] expressly provides that the transfer of a contract secured by a deed of trust ‘shall operate as a transfer of the security for such contract.’ A.R.S. § 33-817. When the note signed by Vasquez was assigned to Deutsche Bank in 2005, the deed of trust was therefore also transferred by operation of law. Because § 33-817 does not require separate documentation of an assignment of the deed of trust when the secured note is transferred, it would make no sense to imply into § 33-808 a requirement that the assignment be recorded.”