Foreclosure Judgment Vacated; AZ Appeals Court: Law Firm "Harmed The Integrity Of The Judicial Process & The Administration Of Justice"

A a 3-judge panel of the Arizona Court of Appeals recently vacated a judgment in a foreclosure action, pointing to the improper handiwork of Mesa, Arizona law firm Maxwell & Morgan in obtaining the judgment on behalf of its client, a homeowners' association, as one reason for its ruling.(1)

An excerpt:

• ¶44 Here, the HOA's attorneys committed a fraud upon the court that justified setting aside the default judgment under Rule 60(c)(6).
  
  First, the lien foreclosure complaint stated that there were two deeds of trust on the property but did not disclose that one of them was a first deed of trust. The complaint referred to § 33-1807(A) regarding creation of an assessment lien, and § 33-1807(H) regarding attorneys' fees but did not refer to § 33-1807(B)(2) which plainly subordinates the assessment lien to a first deed of trust. The complaint falsely stated that the assessment lien had priority over all other liens.
  
  Second, the judgment of foreclosure that the HOA lawyers presented to Commissioner McCoy to enter did not reflect that there was a first deed of trust on the property, nor did it refer to § 33-1807(B)(2) but merely stated that the assessment lien had priority over all other liens and falsely stated that the default judgment foreclosed all other liens, including the first deed of trust.
  
  Third, although the complaint alleged that the CC&Rs gave the HOA a lien on the property which was perfected upon recordation, it did not refer to section 7.9 of the CC&Rs, which gave the first deed of trust priority over the assessment lien.
  
  Finally, to obtain the default judgment, the attorney representing the HOA at the default hearing avowed to the court that the allegations set forth in the complaint and the proffered judgment of foreclosure were true and correct.
  
  These material omissions and misrepresentations made in an ex parte proceeding prevented the commissioner from reaching an informed and impartial decision regarding entry of the default judgment, made it impossible for the court to properly perform its function of adjudicating the case in a fair and lawful manner, and harmed the integrity of the judicial process and the administration of justice.

For the entire ruling, see Cypress On Sunland Homeowners Association v. Orlandini, Nos. 1 CA-CV 10-0142, 1 CA-CV 10-0235 (Consolidated) (Az. App. Div.1 Dept. B, May 19, 2011).

(1) According to footnote 3 of the ruling, the record reflected that the lower court judge provided a copy of his ruling to the State Bar of Arizona for consideration of possible ethical violations. Pursuant to their ethical obligations, the 3-judge appellate panel similarly are providing the State Bar with a copy of this opinion.