On January 13, 2022, Windrose Estates Homeowners Association (the “Association”) filed a complaint in Maricopa County Superior Court to foreclose upon its assessment lien against a property located at 12937 N. 94th Place, Scottsdale, Arizona 85260 (the “Property”) and named the record owner, Justin T. Wright.
The Association filed a Motion for Service by Alternative Method after its process server initially attempted to serve Mr. Wright seven times, during one month at the Property, but service was never completed. The server noted “Each time server was at residence there was no answer at the door. House lights on, TV on and people home but refused to answer door…”
By Order entered on June 14, 2022, the Maricopa County Superior Court authorized service by alternative method, specifically by mail to Mr. Wright’s last known address, the Property, and by posting the Summons and Complaint at, or near, the front door of the Property. On or about June 27, 2022, the process server filed a “Proof of Service” affidavit confirming that the Summons and Complaint were posted near the front door of Mr. Wright’s home and a copy was sent to the Property by U.S. Mail.
The Association obtained a default foreclosure judgment and the Property was sold to a third party, Sunstate Acquisitions, LLC (“Sunstate”) at Sheriff’s Sale on February 9, 2023 for a price of $20,100. Sunstate received a Sheriff’s Certificate Upon Sale that was duly recorded on or about March 8, 2023. Mr. Wright’s six-month redemption period expired on or about August 9, 2023. After Mr. Wright did not redeem the title to the Property by the deadline, the Maricopa Sheriff’s Office issued a Sheriff’s Deed vesting title to Sunstate that was recorded on or about August 24, 2023. Sunstate thereafter deeded its interest to another investor company, SV 1, LLC (“SV 1”).
SV 1 posted a 5-day notice demanding possession of the Property to Mr. Wright’s door in early October 2023. On October 12, 2023, Mr. Wright filed a lawsuit against Sunstate and SV 1 in Maricopa County Superior Court. (the “Quiet Title Action.”)
In the Quiet Title Action, he asked the Superior Court to declare the Sheriff’s Sale void, due to the gross inadequacy of the sale price compared to the fair market value, and to set aside the Sheriff’s Deed.
Mr. Wright simultaneously sought Rule 60 relief in the Foreclosure Action, claiming that service of the lawsuit was improper and the Association failed to join a necessary party, namely the first mortgage holder. On January 26, 2024, Maricopa County Superior Court Commissioner Brian Kaiser denied Mr. Wright’s Rule 60 Motion to vacate the default judgment. On February 2, 2024, Mr. Wright filed a notice of appeal.
On August 2, 2024, the Superior Court held an evidentiary hearing in the Quiet Title Action. In his Minute Entry entered on October 24, 2024, Judge Timothy Ryan made several findings of fact, including the following:
- As of February 10, 2023, the outstanding principal balance due and owing on the senior lien held by US Bank was $382,319.09.
- At the time of the Sheriff’s Sale, the IRS Lien on the Property was $427,484.37.
- At the time of the Sheriff’s Sale, the fair market value of the Property was $1.2 million.
In the same Minute Entry Judge Ryan included the following Conclusions of Law: “Sunstate’s Bid of $20,100 was so grossly inadequate as to shock the conscience because it was less than 20% of the fair market value of the Property…” The Superior Court declared the sale void and set it aside. On January 7, 2024, the Superior Court entered a judgment against Sunstate and SV 1. Sunstate and SV 1 filed a notice of appeal on the same day. The appeals in the Foreclosure Action and in the Quiet Title Action were consolidated by the stipulation of the parties.
This case is bad for Arizona homeowners’ associations and homeowners alike. If this case is an example, the homeowners’ associations could almost never legally foreclose based upon unpaid dues alone. The Association charged assessments of $145 per month for each Lot. The statute of limitations on contracts and foreclosures is six years in Arizona. Given that there are 72 months in 6 years the Association charges $10,440 in assessments during 6 years (72 x $145 = $10,440). After applying the novel “surviving equity” analysis endorsed by the Superior Court, Mr. Wright’s equity was approximately $300,000 at the time of the sale (21% is $63,000). The Association (or third-party bidder would have to be willing and able to come out of pocket an additional $52,650 in cash and be willing to forgo its $10,440 debt.
Under this logic, foreclosure becomes a practically unavailable remedy to collect unpaid assessments for Arizona homeowners’ associations. Homeowners who pay their bills will be left to subsidize the shortfall caused by the owners who fail to pay assessments with little to no recourse.
Court: Arizona Court of Appeals, Division Two
Topic: Foreclosure
Brief Author: Chad Gallacher, Esq., CCAL, Charles Sellers, Esq., and Austin Baillio, Esq., at Maxwell & Morgan, P.C.
Filed: September 10, 2025
CAI Amicus Review Panel:
Mr. Robert Diamond, Esq., CCAL, Co-Chair of Amicus Committee (VA)
Mr. Edmund Allcock, Esq., CCAL, Co-Chair of Amicus Committee (MA)
Ms. Lisa Magill, Esq., CCAL, Co-Chair of Amicus Committee (FL)
Mr. Scott Weiss, Esq., CCAL, CCAL BOG Liaison (TN)
Mr. Bruce Jenkins, Esq., CCAL (UT)
Mr. Todd Sinkins, Esq., CCAL (VA)
Mr. Nicolas Barnes, Esq. (OH)
Ms. Karyn Kennedy Branco, Esq. (NJ)