Rigoli v. 44 Monroe Marketing, LLC – 10/9/2014

October 15, 2014

Arizona Court of Appeals Division One Holds That a Purchaser Who Has Made a Down Payment on Property Has a Vendee’s Lien with Priority Over a Subsequently Acquired Interest by One Who Has Actual or Inquiry Notice of the Facts Giving Rise to the Vendees’ Lien.

Before September 1, 2006, Plaintiffs entered into contracts and made down payments to purchase condominiums under development.  Corus Bank agreed to provide the developer of the property a construction loan contingent on the developer’s receipt of at least $4.4 million in earnest money deposits from purchasers.  Eventually, Corus Bank loaned the developer over $89 million secured by a deed of trust on the property, which was recorded on September 1, 2006.  In 2009, the developer defaulted on the loan, and the FDIC was appointed as receiver for Corus Bank.  After the FDIC assigned Corus Bank’s deed of trust to another entity, that entity acquired the property by making a credit bid at a trustee’s sale, and then conveyed the property to Defendant 44 Monroe Marketing, LLC (“Marketing”) via a trustee’s deed recorded June 1, 2010.  Plaintiffs then filed suit to quiet title and foreclose against Marketing, asserting vendees’ liens in the property.  After both sides filed summary judgment motions, the trial court granted Plaintiffs summary judgment.  Marketing timely appealed.

The Arizona Appeals Court affirmed.  The Court first held that Plaintiffs’ vendees’ liens had priority over the deed of trust.  Generally, a vendee of realty acquires an equitable interest in property and a vendee’s lien when it enters into a binding written contract and renders payment.  Tucson Fed. Sav. & Loan Ass’n v. Sundell, 106 Ariz. 137, 141, 472 P.2d 6, 10 (1970).  The holder of a vendee’s lien has priority over a purchaser with actual or inquiry notice of the facts upon which the equitable right to the lien depend.  In this case, Corus Bank had notice that individuals would be entering into purchase contracts and making down payments, given that those were its requirements for funding its loan to the developer.  Because Plaintiffs’ vendees’ liens arose when they made their down payments, and because Corus Bank had notice of those payments before recording the deed of trust, Plaintiffs’ vendees’ liens had priority.

The Court next held that neither the D’Oench, Duhme doctrine nor 12 U.S.C. § 1823(e) barred Plaintiffs’ assertion of equitable vendees’ liens rights.  In D’Oench, Duhme, the Supreme Court held that a receiver of a failed, FDIC-secured bank cannot be bound by a secret agreement between a borrower and a bank.  D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 460-61 (1942).  Congress codified that decision by enacting 12 U.S.C. § 1823(e), which states:  “No agreement which tends to diminish or defeat the interest of the [FDIC] in any asset acquired by it . . . either as security for a loan or by purchase . . . shall be valid against the [FDIC] unless such agreement [satisfies certain requirements].”  In this case, Plaintiffs’ vendees’ liens were not the result of side agreements between the developer and Corus Bank, and thus neither the D’Oench, Duhme doctrine nor 12 U.S.C. § 1823(e) applied.  See FDIC v. Adams, 187 Ariz. 585, 931 P.2d 1095 (App. 1996).

The Court rejected Marketing’s argument that the FDIC had an interest superior to Plaintiffs’ vendees’ liens as a holder in due course, finding that Marketing had waived this issue by failing to raise it below.  The Court also rejected Marketing’s argument that Plaintiffs had waived their ability to assert vendees’ liens as a remedy for breach of their purchase contracts because those contracts provided limited, exclusive remedies.  The Court explained that the remedies provisions were not sufficiently clear and unequivocal to evidence Plaintiffs’ intent to waive the right to assert vendees’ liens.  See Societe Jean Nicolas et Fils v. Mousseux, 123 Ariz. 59, 61, 597 P.2d 541, 543 (1979) (a “clear showing of an intent to waive” is required).  Likewise, the Court rejected Marketing’s argument that language in the loan contracts between the developer and Corus Bank required purchasers to disclaim lien rights, explaining that Plaintiffs were not parties to those loan contracts and the purchase contracts to which they were parties did not expressly disclaim any lien rights. 

Finally, the Court awarded Plaintiffs attorneys’ fees on appeal under A.R.S. § 12-341.01(A) because the parties agreed that the statute applied. 

Judge Gemmill authored the opinion; Presiding Judge Portley and Judge Cattani concurred.