LIEN HELD VALID DESPITE DEFECT IN TITLE

By Kent Berk on June 21st, 2013 in BLOG, Probate, PROBATE LITIGATION

The Arizona Court of Appeals ruled in Beck v. Deem that even though the Affidavit for Transfer of Real Property was technically defective, the subsequent lender on the property did receive a valid lien.

Olson died and left behind three adult children, Shannon, Sherry and Todd. Ultimately, Sherry decided that she wanted to receive one of the assets of the Estate, a home. Shannon and Todd agreed to relinquish their interest in the property, but Shannon insisted on receiving $25,000 from Sherry in order to do so. Sherry never paid Shannon the full $25,000, but still executed and recorded an Affidavit stating that, among other things, she was entitled to the property. After recording the Affidavit, Sherry obtained a loan against the property. A dispute arose as to whether the loan against the property was valid.

The Court held that the Affidavit was technically invalid. But, since the lender did not know that the Affidavit was defective, its lien was nonetheless valid and it was entitled to enforce its deed of trust against the property. The Court relied on Arizona statutes that entitles a transferee (including a lender) to rely on an Affidavit of Transfer when certain conditions are satisfied. The Court further held that Shannon’s claim was against Sherry for the balance of the $25,000, rather than invalidating the loan.