ARIZONA STATE SENATE
Phoenix, Arizona
trustee’s sale; excess proceeds
Establishes new procedures and notification requirements for trustees and lien-holders when disbursing excess proceeds from a trustee’s sale of property.
The Deed of Trust Act, enacted in 1971, was intended as a means for lenders to recover the balance of a foreclosed loan in a more timely fashion than the traditional mortgage. Under the current system a trustee is entitled to sell the property and recover the balance of the loan. Any proceeds from the sale can either be disbursed to other lien-holders by the trustee, or deposited with a county treasurer for deposition. Interested parties must individually file suit to recover additional profits for proceeds deposited with the County Treasurer. Complications arise when corresponding suits result in conflicting court orders on the dispensation of the proceeds. Additionally, it may be the current system encounters or encourages some fraud by individuals who seek out potential claimants to the proceeds for a fee.
This measure establishes new procedures where a plaintiff files a single civil cause of action to recover excess proceeds. Then, within 30 days, all other claimants must be notified, sent supporting documentation and given the opportunity to join the lawsuit. The intended result is a reduction in the number of court proceedings, and to expedite those foreclosures tied up in litigation.
There is no anticipated fiscal impact to the state general fund associated with this measure.
1. Stipulates that the trustee, as plaintiff, shall file a civil action in the superior court in the county where the sale occurred for excess proceeds, with the county treasurer as defendant.
2. Requires the trustee to notify all interested parties about the suit and include either:
a) the trustee sale guarantee,
b) a title search used by the trustee relating to the sale, or,
c) a detailed description of all liens and encumbrances in connection with the sale of the property.
3. Provides that individuals with legal interest in the property may apply to join the civil suit and must notify potential claimants and provide proof of notice upon filing suit with the court.
4. Establishes a thirty-day period for interested parties to respond to any application submitted by a co-claimant.
5. Allows the court to hold hearings for competing claims to determine entitlement of proceeds.
6. Requires a 180-day suspension of judgement if the court deems entities other than the applicant hold superior right to the proceeds.
7. Allows an applicant to move for a hearing, within the 180-day period, to determine whether the claims of superior rights is valid.
8. Provides that the trustee will be compensated for reasonable trustee fees and reasonable attorney's fees actually incurred and associated filing costs in carrying out the class action suit.
9. Clarifies that once the trustee has fulfilled its statutory obligation in filing suit and notifying potential claimants, they are discharged without prejudice from the proceeding.
10. Makes technical changes.
11. Provides for a general effective date.
FII 2/06/02 DPA 8-0-0-2
JUD 2/12/02 DP 9-0-0-1
3rd Read 3/26/02 57-1-2-0
Prepared by Senate Staff
April 2, 2002