Trustee of Subordinate Deed of Trust Lien Is Exempt

Robert P. Lindfors

Judicial foreclosure reports are being issued in increasing volume. Lenders and contractors rely upon these reports to enforce their realty mortgages and claims of lien. The title reports disclose the owners and lien claimants who are entitled to notice/service of process in the foreclosure proceedings.

The beneficiary who is holding a subordinate deed of trust must be identified in Schedule C of the title reports. The beneficiary is the lien claimant who is entitled to notice/service. See A.R.S. §§ 33-721, 33-809, 33-981, et seq.

The trustee of the junior deed of trust is not to be identified in Schedule C of the litigation guaranty as a junior lien claimant. The trustee of the deed of trust is exempt from being served by statute. A.R.S. § 33-807(E) provides:

The trustee need only be joined as a party in legal actions pertaining to a breach of the trustee's obligation under this chapter or under the deed of trust. Any order of the court entered against the beneficiary is binding upon the trustee with respect to any actions that the trustee is authorized to take by the trust deed or by this chapter. If the trustee is joined as a party in any other action, the trustee is entitled to be immediately dismissed and to recover costs and reasonable attorney fees from the person joining the trustee.

In the event of wrongful service of process upon the trustee, this statute authorizes the trustee to recover its attorney’s fees and court costs incurred to compel its dismissal. The foreclosing creditor is then subjecting itself to liability. Rather than risk causing a foreclosing customer to sustain a loss, do not require the trustee of the junior deed of trust be served when issuing the litigation guaranty.

This article is made available with the understanding that it is informational only, and it has not been prepared to provide specific legal advice that may be relied on by a reader. The author is under no obligation to update the information in the event of a change in the law.