Arizona Court of Appeals Division One holds that the phrase “may be foreclosed” in A.R.S. § 33-1807 refers to the commencement of a civil action seeking foreclosure rather than the issuance of a judgment of foreclosure and, therefore, partial payment of a lien does not entitle one to relief under Arizona Rule of Civil Procedure 60(b).

A homeowners association (“HOA”) instituted foreclosure proceedings on its lien for unpaid assessments against a homeowner.  The homeowner failed to timely respond to the complaint and the HOA moved for a default judgment.  The homeowner moved to set aside the entry of default and tendered a check to the HOA in the amount asserted to cover the past-due assessments.  The trial court declined to set aside the default and, after a damages hearing, entered a judgment of foreclosure.  The homeowner moved to set aside the default judgment, arguing he was entitled to relief under Arizona Rule of Civil Procedure 60(b)(1), (2), (4), and/or (6).  The trial court denied the motion, and the Court of Appeals affirmed.

The Court quickly dispensed with the Homeowner’s arguments under Rule 60(b)(1), (2), and (6), and focused primarily on the interplay between Rule 60(b)(4) and A.R.S. § 33-1807, Arizona’s statute pertaining to liens and foreclosures.

At the time of this action, § 33-1807 stated that an association’s lien “may be foreclosed only if the owner has been delinquent in the payment of monies secured by the lien . . . for a period of one year or in the amount of $1,200 or more, whichever occurs first.”  (The statute has since been amended.)  The homeowner argued that because he paid off the assessments before the trial court entered the judgment of foreclosure, the court lacked jurisdiction and therefore he was entitled to relief under Rule 60(b)(4), which allows relief to be granted where a judgment is void. 

The Court examined whether the phrase “may be foreclosed” referred to (a) the commencement of a civil action seeking foreclosure or (b) the issuance of a judgment of foreclosure.  The Court found that it referred to the former.  First, it reasoned that the plain language supports its finding because the phrase “whichever occurs first” would be irrelevant if a court could not even consider the triggering events until it was ready to enter a judgment.  The Court also reasoned that the homeowner’s interpretation of the statute would allow associations to sue to foreclose before a triggering event, under the assumption one or both events would occur before the judgment is ordered.  Last, the Court found that if the Arizona Legislature had intended a partial or full payment of an assessment to extinguish a lien, it would have drafted a specific provision allowing such—as California has.

Consequently, the Court held that the trial court had jurisdiction under § 33-1807 to enter the judgment of foreclosure and thus the Homeowner was not entitled to relief under Rule 60(b).

Judge Cattani dissented, explaining his view that “may be foreclosed” under § 33-1807 refers instead to the issuance of a judgment of foreclosure.  He would hold that a lien may not be foreclosed “unless the homeowner owes—as of the date of the foreclosure order—at least $1,200 (excluding related collection fees, attorney’s fees, and charges for late payments) or the assessments (in any amount) are delinquent for a period of one year as of the date of the order.”  Judge Cattani’s dissent reasoned that once a homeowner pays the full amount due, there is no triggering event for a judgment of foreclosure; he would have found that the homeowner was entitled to relief under Rule 60(b)(6).

Judge Cruz authored the opinion, in which Judge Kenton joined; Judge Cattani dissented.