Arizona Court of Appeals Division One holds that A.R.S. § 33-812(J) does not impose a 180-day deadline for applying for excess proceeds from trustee’s sale such that a court may not issue an order releasing excess proceeds if it has reason to know of a senior claim to those proceeds.

Homeowners executed deeds of trust against their property in 2003 and 2007, with a bank as the beneficiary of the 2007 deed.  A trustee sold the homeowner’s property based on the 2003 deed of trust, which resulted in excess proceeds that were in a smaller amount to the outstanding balance of the 2007 deed.  The trustee deposited the excess proceeds with the county treasurer, filed a civil complaint and was discharged from the proceedings.  Homeowners applied for release of the excess proceeds, and, shortly thereafter, the bank also applied for release of the excess proceeds as the holder of the 2007 deed.  The homeowners claimed the bank had not timely moved for release of the proceeds because it had applied more than 180 days after filing of the complaint, the bank moved for entry of judgment, and the superior court concluded the bank had a superior claim based on the 2007 deed.

On appeal, the homeowners claimed that the bank did not have a superior claim because A.R.S. § 33-812(J) required that the bank file its application within 180 days of the complaint and the bank failed to do so.  The Court of Appeals held that Section 812(J) does not mandate a 180-day deadline for applying for excess proceeds and affirmed the superior court.  The court concluded that the 180-day period referenced in Section 812(J) is not a deadline, but rather the earliest date on which the superior court could issue an order releasing the proceeds if it has information of a claim superior to that of an applicant.  Where there is a potential senior claimant to excess funds, Section 812(J) requires that the superior court permit applications for 45 days, even if the response time extends beyond 180 days from the date of filing.  The bank’s application was timely because it was filed within 45 days after the homeowner’s application.

Judge McMurdie authored the opinion; Judges Howe and Campbell joined.