ARS 33-420 Interpretation
In Wyatt v. Wehmueller, 167 Ariz. 281, 284-85, 806 P.2d 870, 873-74 (1991) the Arizona Supreme Court considered whether a client could be liable under A.R.S. 33-420 for filing a groundless lis pendens when the client's attorney knew the document was groundless, but filed it without informing the client of the filing. Id. at 283, 806 P.2d at 872.
The supreme court concluded that the statute imposes liability only if the person causing the filing of the invalid document knows or has reason to know that the document is invalid, thereby mandating a finding of scienter on the part of the person causing the filing. Id. at 284, 806 P.2d at 873.
The supreme court reasoned that although an attorney is generally authorized to act on behalf of a client, the lawyer's knowledge as to the groundlessness of the document filed could not be imputed to the client to impose liability under the statute when the client was not aware that the lawyer had filed the lis pendens. Id. at 284-85, 806 P.2d at 873-74.
Trustors who have not paid off their loan obligations are neither owners nor beneficial title holders under A.R.S. 33-420.
In Hatch Cos. Contracting, Inc. v. Arizona Bank, 170 Ariz. 553, 826 P.2d 1179 (App. 1991), the Court determined that a bank, as beneficiary under the deed of trust, was the beneficial title holder, 170 Ariz. at 555-56, 826 P.2d at 1181-82, while the court in Richey v. Western Pacific Development Corp., 140 Ariz. 597, 684 P.2d 169 (App. 1984) held that beneficial title holder referred to a beneficiary who appears on the title and owner meant "record title holder," or the trustee. 140 Ariz. at 601, 684 P.2d at 173.
However, the situation in Richey is markedly different than the situation in this case, as Richey dealt with a dual beneficiary trust between a trustee and beneficiaries, rather than a deed of trust between a trustor, trustee, and beneficiary. See id. at 598, 684 P.2d at 170.
Furthermore, in making its determination, the court in Richey was not asked to consider whether "owner" included trustors or mortgagors. Rather, it simply agreed with the appellants' contention that owner meant "record title holder." Id. at 601, 684 P.2d at 173.