Arizona Court of Appeals Division One Refuses to Apply Equitable Subrogation to Allow Foreclosure on a Tax Lien.

Sun Valley purchased a 2002 tax lien on a piece of property that was also subject to a 1999 tax lien. Sun Valley paid the amounts necessary to redeem the 1999 tax lien and subsequently filed a complaint to foreclose the property owner’s right to redeem the 1999 tax lien. Sun Valley claimed that because it had purchased the 2002 tax lien, it had become “equitably subrogated” to the rights of the original purchaser of the 1999 tax lien and was entitled to foreclose on the property owner’s right to redeem. The trial court agreed and ordered the county treasurer to execute and delivery a deed conveying the property to Sun Valley. This appeal followed.

Judge Norris’ opinion addressed whether, by redeeming a prior tax lien, a subsequent tax lien purchaser will become “equitably subrogated” to the rights of the original holder of the prior tax lien, including the right to foreclose the property owner’s rights to redeem. Applying Arizona’s real property tax lien statutes, A.R.S. §§ 42-17153(A) and 42-18001, et seq., and the Arizona Supreme Court’s decision in Mosher v. Conway, 45 Ariz. 463, 46 P.2d 1110 (1935), the court held that equitable subrogation did not apply because: (1) the two liens were in parity and Sun Valley redeemed the 1999 tax lien obtain an advantage (i.e., speed up the time for foreclosure), not to protect its rights in the 2002 lien; (2) application of equitable subrogation would render superfluous the statutory language allowing for assignment of a tax lien; and (3) there is no unjust enrichment because Sun Valley voluntarily chose to pay the 1999 tax lien to obtain an advantage rather than to protect its interests. The court held that Sun Valley’s redemption of the 1999 tax lien gave it nothing to foreclose on with respect to the 1999 lien and vacated the superior court’s judgment foreclosing on the 1999 tax lien because it had already been redeemed.

Jude Patricia Norris authored the opinion; Judges Sult and Orozco joined.