Opinion
1 CA-CV 21-0213
03-08-2022
TAX LIEN SERVICES LLC, Plaintiff/Appellant/Cross-Appellee, v. JIM ALLEN STEAGALL, Defendant/Appellee/Cross-Appellant.
The Hendrix Law Office, Gilbert By Heather M. Hendrix Counsel for Plaintiff/Appellant/Cross-Appellee Holland Law Group, Flagstaff By Jared E. Holland Counsel for Defendant/Appellee/Cross-Appellant
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Navajo County No. S0900CV202000104 The Honorable Jon H. Saline, Judge Pro Tempore
The Hendrix Law Office, Gilbert
By Heather M. Hendrix
Counsel for Plaintiff/Appellant/Cross-Appellee
Holland Law Group, Flagstaff
By Jared E. Holland
Counsel for Defendant/Appellee/Cross-Appellant
Judge Peter B. Swann delivered the decision of the court, in which Presiding Judge Cynthia J. Bailey and Judge D. Steven Williams joined.
MEMORANDUM DECISION
SWANN, JUDGE:
¶1 When a property owner redeems a tax lien after being served in a foreclosure action, the lienholder is entitled under A.R.S. § 42-18206 to be made whole by a judgment for its expenses, including reasonable attorney's fees. We hold, contrary to the superior court in this case, that Leveraged Land Co. v. Hodges, 226 Ariz. 382 (2011), does not prevent the lienholder from recovering reasonable post-redemption expenses related to its efforts within the foreclosure action to enforce its right to pre-redemption expenses. We therefore reverse and remand in part. We affirm with respect to the superior court's ruling that a scrivener's error did not prevent the lienholder from bringing the foreclosure action, and we affirm the superior court's award of pre-redemption expenses except to the extent it included the cost of a title report.
We note that our supreme court recently accepted review of TFLTC, LLC v. Ford, 2 CA-CV 2020-0122, 2 CA-CV 2020-0123, 2 CA-CV 2020-0124, 2 CA-CV 2020-0128, 2 CA-CV 2020-0137 (consolidated), 2021 WL 1571819 (Ariz. App. Apr. 22, 2021) (mem. decision), in which a different division of this court reached the opposite conclusion.
FACTS AND PROCEDURAL HISTORY
¶2 A private entity purchased a tax lien against Jim Allen Steagall's real property in 2017, and in 2019 sold the lien certificate to Tax Lien Services, LLC. Tax Lien Services, LLC, paid the purchase price, its general manager signed the purchase agreement, and it was considered the new owner by the county treasurer's office. The purchase agreement, however, misidentified the buyer as "Tax Lien Services I, LLC"-a nonexistent entity. Though both "Tax Lien Services, LLC" and "Tax Lien Services II, LLC," are incorporated in Arizona, there is no entity named "Tax Lien Services I, LLC."
¶3 Tax Lien Services, LLC, brought a tax lien foreclosure action against Steagall in March 2020, and served him in April 2020. Steagall thereafter redeemed the lien.
¶4 After the redemption, Tax Lien Services, LLC, demanded that Steagall pay its pre-redemption expenses under § 42-18206. Steagall refused on the ground that the amount sought was excessive, and extensive unsuccessful negotiations ensued. Tax Lien Services, LLC, thereafter applied for default, Steagall filed an answer, and the parties filed cross-motions for summary judgment. By its motion, Tax Lien Services, LLC, sought to recover post- as well as pre-redemption expenses. By his motion, Steagall contended that he was entitled to judgment- and costs and fees-because Tax Lien Services, LLC, lacked standing to bring the foreclosure action in view of the purchase agreement's misidentification of the buyer. Tax Lien Services, LLC, moved under Ariz. R. Civ. P. ("Rule") 11(c) to recover its costs and fees incurred in responding to Steagall's motion.
¶5 After oral argument, the superior court denied Steagall's summary judgment motion and partially granted Tax Lien Services, LLC's motion. The court awarded Tax Lien Services, LLC, approximately $6,000 in pre-redemption expenses, but held that Leveraged Land precluded recovery for post-redemption expenses, which by that time totaled more than $15,000. The court did not expressly address the Rule 11 motion.
¶6 On appeal, Tax Lien Services, LLC, challenges the denial of post-redemption expenses under Leveraged Land. On cross-appeal, Steagall challenges the denial of his summary judgment motion and, alternatively, the reasonableness of the award for pre-redemption expenses.
DISCUSSION
I. STEAGALL WAS NOT ENTITLED TO SUMMARY JUDGMENT BASED ON A SCRIVENER'S ERROR.
¶7 We first address the denial of Steagall's summary judgment motion. Steagall contends that Tax Lien Services, LLC, could not bring the foreclosure action, and he was entitled to recover costs and fees, because the purchase agreement identified the buyer as "Tax Lien Services I, LLC." We review summary judgment rulings de novo. Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12 (2003). Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Rule 56(a).
¶8 Steagall relies on A.R.S. §§ 42-18114 and -18118. Section 42-18114 provides that a party acquires a tax lien upon payment of the "delinquent taxes, interest, penalties, and charges due on the property," and § 42-18118 provides that all purchasers or assignees shall receive a certificate that recites the purchaser's name. The purpose of the certificate is to establish that its holder is entitled to take title to the property if certain statutory conditions are met. Sun Valley Fin. Servs. of Phx., L.L.C. v. Guzman, 212 Ariz. 495, 496, ¶ 3 (App. 2006).
¶9 There is no dispute that Tax Lien Services, LLC, paid for the tax lien and the provisional right to take title to the property, and that any reference, in any relevant document, to Tax Lien Services I, LLC, as the purchaser was nothing more than a scrivener's error. Steagall describes no prejudice from the error. Instead, he claims that the error is fatal because taxation and government-taking statutes demand strict compliance. Section 42-18101(B)(3), however, specifies that "[a]n insubstantial failure to comply with these provisions [governing the sale and foreclosure of tax liens] does not affect the validity of . . . [t]he sale of a tax lien or the foreclosure of the right to redeem by which tax collection is enforced." Here, we have no difficulty concluding that the scrivener's error was insubstantial and did not preclude Tax Lien Services, LLC, from pursuing its rights. Cf. Restatement (Second) of Contracts § 155 (providing that where a writing fails to express the agreement because of a mutual mistake as to the writing's content or effect, the court may, on request, reform the writing to express the agreement so long as third parties' rights are not unfairly affected). To hold otherwise would be to deprive an undisputed purchaser of its rights in favor of a non-existent party. The superior court correctly rejected such an absurd result by denying Steagall's summary judgment motion and attendant request for costs and fees.
II. LEVERAGED LAND DOES NOT BAR TAX LIEN SERVICES, LLC, FROM RECOVERING REASONABLE POST-REDEMPTION EXPENSES INCURRED WITHIN THE FORECLOSURE ACTION IN PURSUIT OF ITS RIGHT TO RECOVER PRE-REDEMPTION EXPENSES.
¶10 We next address the superior court's ruling that Tax Lien Services, LLC, was ineligible for post-redemption expenses. Under A.R.S. § 42-18206, a person entitled to redeem a tax lien may do so "any time before judgment is entered, notwithstanding that an action to foreclose has been commenced." If the person was served in the action, however, the statute provides that "judgment shall be entered in favor of the plaintiff against the person for the costs incurred by the plaintiff, including reasonable attorney fees to be determined by the court." The purpose of that provision is to make the lienholder whole in the event of a redemption. Leveraged Land, 226 Ariz. at 385, ¶ 11.
¶11 In Leveraged Land, the lienholder brought a foreclosure action and effected service. Id. at 384, ¶ 2. Thereafter, the lien was redeemed. Id. at ¶ 3. The lienholder then filed an amended complaint challenging the validity of the redemption, against which challenge the redeeming parties prevailed. Id. The lienholder sought under § 42-18206 to recover not only the expenses it incurred before the redemption, but also the substantial expenses it incurred after the redemption. Id. at ¶ 4. The supreme court concluded that the lienholder's recovery under the statute was limited to the pre-redemption expenses. See id. at ¶ 1. Critical to our resolution of this case is whether in so holding, the supreme court established a rule that lienholders may never recover post-redemption expenses, regardless of the nature of the post-redemption litigation. We hold that the answer to that question is no.
¶12 In concluding otherwise, the superior court relied on the absence of limiting language in Leveraged Land's statement that "[w]e hold that a tax lien purchaser is only entitled to reasonable attorney fees incurred before the lien is redeemed and a certificate of redemption issues." Id. at ¶ 1. We "have no authority to overrule, modify, or disregard" our supreme court's decisions. City of Phoenix v. Leroy's Liquors, Inc., 177 Ariz. 375, 378 (App. 1993). To faithfully give effect to those decisions, we must consider every part of them-so when the supreme court states its holding in a manner that is neither expressly limited nor expressly generalized, we must not view that statement in a vacuum. Cf. Wyatt v. Wehmueller, 167 Ariz. 281, 284 (1991) (holding that when statutory language does not disclose legislature's intent, "the court must read the statute as a whole, and give meaningful operation to all of its provisions"); Stewart v. Underwood, 146 Ariz. 145, 148 (App. 1985) (rejecting appellees' interpretation of court of appeals' articulation of rule as "inconsistent with the . . . opinion read as a whole"). To do otherwise would be to abdicate our duty to honor the precedent.
Similarly, the court used no limiting language when stating that "[t]he question before us is whether § 42-18206 permits recovery of attorney fees and costs for litigation that occurs after a taxpayer's redemption." Id. at ¶ 6.
¶13 Here, when viewed in isolation, Leveraged Land's statement of holding could be construed as stating a broad exception to § 42-18206's reach. But the statement does not command that interpretation. And the analysis supporting the statement makes clear that the supreme court's decision was predicated entirely on policy considerations specific to the character of the post-redemption litigation in that case-i.e., a lienholder's initiation of a new claim challenging a redemption. The court did not mention, much less consider, any other category of post-redemption expenses. The court explained that though a lienholder is entitled to "litigate the validity of a delinquent taxpayer's redemption," the legislature did not intend to "relieve the tax lien purchaser from the financial risk accompanying such litigation by awarding fees incurred after the redemption"-the statute "does not ensure a profit[, n]or should it subsidize unlimited litigation to contest redemption in pursuit of that profit." Leveraged Land, 226 Ariz. at 385, ¶¶ 7, 10. The court further emphasized that a post-redemption action challenge to the validity of the redemption "is not part of" and "is separate from" the redemption, and "[t]herefore it is not part of the legal action to which § 42-18206 refers." Id. at ¶ 9. The court recognized that because a lienholder who successfully challenges a redemption becomes ineligible for a judgment under the terms of the statute, awarding post-redemption expenses would necessarily result in an award to a losing party. Id. at ¶ 11. The court refused to interpret the statute in a manner that would "skew[ ] the statute to subsidize unsuccessful litigation" and "create[ ] an incentive for protracted and potentially meritless litigation" by "allowing] tax lien purchasers to coerce landowners otherwise able to redeem to forfeit their property by the threat of continued litigation conducted at the landowners' expense." Id. at 386, ¶ 12. In view of the foregoing, we cannot conclude that Leveraged Land foreclosed recovery of post-redemption expenses not implicating the same policy concerns.
¶14 Leveraged Land explained that "[t]he entitlement to costs and attorney fees under § 42-18206 arises at the time of redemption and relates to work performed before the treasurer's certificate of redemption issues." Id. at ¶ 13. Post-redemption expenses arising from efforts to enforce the entitlement that arises at redemption "relate[ ] to work performed before" the redemption. Further, the policy concerns justifying the denial of recovery in Leveraged Land are not present here. Here, the lienholder did not initiate new post-redemption litigation in an attempt to unwind the redemption and make a profit. And the lienholder did not engage in unsuccessful litigation. By contrast, the lienholder simply sought to realize its statutory, non-self-executing right to be made whole in view of the redemption- a claim that it had specifically pled in the original foreclosure complaint.
¶15 We conclude that the superior court erred when it deemed Tax Lien Services, LLC, categorically ineligible for post-redemption expenses, and we therefore reverse and remand as to that ruling. We hold that under § 42-18206, a lienholder may recover post-redemption expenses incurred in the foreclosure action related to efforts to recover the statutorily guaranteed pre-redemption expenses. Steagall contends that this rule will permit lienholders to make with impunity unreasonable demands for pre-redemption expenses, and then run up an unnecessary post-redemption bill that the redeeming party must pay. The statute, however, prevents such an unjust result by limiting a lienholder's recovery to "reasonable attorney fees to be determined by the court." A.R.S. § 42-18206. The superior court has "discretion . . . to determine how much of the plaintiff's costs and fees were reasonable" based on the facts of the case, Leveraged Land, 226 Ariz. at 386, ¶ 13, and therefore should not award expenses wastefully incurred.
III. THE AWARD OF PRE-REDEMPTION EXPENSES WAS PROPER, EXCEPT TO THE EXTENT IT INCLUDED THE COST OF A TITLE SEARCH.
¶16 We finally examine Steagall's challenge to the superior court's award of pre-redemption expenses under § 42-18206.
A. The Superior Court Erroneously Ordered Steagall to Pay the Cost of a Title Search.
¶17 Steagall contends that certain of the pre-redemption costs awarded to Tax Lien Services, LLC, were unrecoverable: specifically, $800 for "Service of Process/Skip Tracing Fees" and $400 for a "Title Report/Litigation Guarantee." Costs recoverable under § 42-18206 are limited to those enumerated as taxable costs in § 12-332. See Hunt Inv. Co. v. Eliot, 154 Ariz. 357, 360-61 (App. 1987) (construing § 42-18206's predecessor statute). Whether an expenditure qualifies as a taxable cost under § 12-332 is a question of law that we review de novo. Reyes v. Frank's Serv. & Trucking, LLC, 235 Ariz. 605, 608, ¶ 6 (App. 2014).
¶18 With respect to the award for the cost of service of process, Steagall does not dispute that service by a private process server, as effected here, is a taxable cost under § 12-332(A). See A.R.S. §§ 12-332(A)(1) (defining "[f]ees of officers and witnesses" as a taxable cost), -3301(A) (stating that "[a] private process server is an officer of the court"). He objects, however, to having to pay for the cost of service on his judgment creditors. But because "[a]ny person who has a legal or equitable claim in the property" may redeem a tax lien, A.R.S. § 42-18151(A)(4), service on the judgment creditors was necessary and the superior court did not err by ordering Steagall to pay all service costs.
¶19 With respect to the cost of the title report, Tax Lien Services, LLC, concedes that the report "is technically not a taxable cost pursuant to A.R.S. § 12-332(A)," but nonetheless contends that the cost of such reports is "almost universally" recoverable as a stand-in for attorney's fees. Tax Lien Services, LLC, identifies no legal authority for its position, and we find none. We therefore hold that the superior court erred by awarding $400 for the title report, and we order that the error be corrected.
Coming closest is § 12-332(A)(4), which provides that the "cost of certified copies of papers or records" is a taxable cost. But "this provision refers to records of a public office for which a specific charge is made by the officer certifying to their correctness." Fowler v. Great Am. Ins. Co., 124 Ariz. 111, 114 (App. 1979). A title report does not satisfy that definition.
B. The Superior Court Did Not Abuse its Discretion in Calculating the Pre-Redemption Attorney's Fees Award.
¶20 Steagall contends that the pre-redemption attorney's fees award was excessive. He argues that the award included fees for clerical work and tasks relating to more than one case. He further contends that the nature of the pre-redemption litigation was form-driven, that counsel charged exorbitant rates, and that Tax Lien Services, LLC, should not be rewarded for "trickery" in styling its foreclosure notification and complaint.
¶21 We review the superior court's determination of reasonable fees under § 42-18206 for abuse of discretion. Cf. Vortex Corp. v. Denkewicz, 235 Ariz. 551, 562, ¶ 39 (App. 2014) (recognizing superior court's broad discretion to determine amount of reasonable attorney's fees under A.R.S. § 12-341.01). We detect no abuse of discretion here. Tax Lien Services, LLC, properly supported its request for fees, Steagall never specifically challenged any time entry or billing rate, and the court reasonably awarded $4,500.
CONCLUSION
¶22 We reverse the superior court's ruling that Leveraged Land precluded Tax Lien Services, LLC, from recovering post-redemption expenses under § 42-18206, and we remand for further proceedings consistent with this decision. We further order that the award of pre-redemption expenses be amended to excise the award of $400 for a title search. We otherwise affirm. In exercise of our discretion, we deny both parties' requests for attorney's fees on appeal.