Tax Lien Investor Asks AZ Supreme Court To Restore Right To Nogales Property

January 2, 2022

By Terri Jo Neff |

A Maricopa County company that pays back taxes on properties across Arizona in hopes of one day securing deeds to the properties is asking the Arizona Supreme Court to restore its deed to a commercial property in Nogales.

It is estimated more than 2,000 investors hold nearly 90,000 back tax liens in Arizona. In Maricopa County alone, tax liens could be issued for more than 10,000 parcels during the county’s next auction on Feb. 8, 2022.

By law, Arizona property taxes have the highest lien priority, and about 98 percent of liens are eventually paid off by property owners within the three-year redemption period. But sometimes an investor is able to go through the lengthy legal process to foreclose on a property and obtain the deed.  

That is what Advanced Property Tax Liens Inc. did in 2019 on a tax lien it obtained from the Santa Cruz County Treasurer’s Office in February 2015 for a commercial property in Nogales. Now, the company is hoping the Arizona Supreme Court will reverse a local judge’s ruling which voided the deed issued to APTL when the property owner did not redeem the tax lien.

Court records show the material facts of the APTL case are undisputed, such as the verbal agreement between Victalina Carreon and Jorge Othon in late 2014 or early 2015 for Othon to purchase a vacant building Carreon owned in Nogales. The property’s purchase price was $450,000 minus an amount Carreon owed for unpaid property taxes.

The sales agreement was never put into writing, but Othon made payments to Carreon using money “on which he had avoided paying taxes,” according to court records. Soon after the commercial property was “a fully occupied commercial property” with normal business hours, according to court records.   

But Carreon never applied any of Othon’s payments to the delinquent property taxes. As a result, APTL purchased a tax lien on the property during a February 2015 auction by Santa Cruz County and paid the outstanding property taxes and accrued interest.

Fast forward to September 2017 when Othon finished paying Carreon and received a notarized deed listing himself as the new property owner. He chose to not record the deed with the Santa Cruz County Recorder, nor did he inform the county’s assessor or treasurer of his ownership of the property. Othon also failed to provide county officials a mailing address for tax bills or valuation notices.

Instead, Othon allowed the property to remain in Carreon’s name.

In January 2018, and with the three-year tax lien redemption period near expiration, APTL mailed Carreon two notices that the company intended to foreclose on its 2015 tax lien. The 30-day notices, one mailed to the physical address of the commercial property and one to Carreon’s last known residence, were returned by the U.S. Postal Service as unclaimed.

Eventually APTL filed a foreclosure action in Santa Cruz County Superior Court naming Carreon as the property owner. A process server hired by APTL attested that service was attempted at Carreon’s last known address, an empty residence.

With no forwarding address from the post office, APTL published a notice of its tax lien foreclosure action in a Nogales newspaper. The company then filed a court notice in December 2018 allegedly Carreon had been properly served via the newspaper and had failed to answer.

A default judgment was entered by the court against Carreon, allowing the county to issue a treasurer’s deed conveying the Nogales property to APTL in March 2019. The company immediately recorded the deed as the new owner, but there was a sticking point – Othon and his 2017 unrecorded deed.

APTL filed a complaint for quiet title of the property while Othon filed a counterclaim seeking to void the treasurer’s deed and have his deed from Carreon recorded. In the end, Judge Denneen Peterson voided the default judgment but not because of Othon.

Instead, she ruled APTL failed to adequately comply with state law when notifying Carreon, as the property owner of record, that the company intended to pursue foreclosure of the 2015 tax lien. APTL attempted to serve the notices on particular addresses instead of a specific person as required by state law, Peterson ruled.

The judge’s ruling voiding APTL’s deed to the property was recently affirmed by the Arizona Court of Appeals. The appellate opinion described APTL’s deficiency: 

“After both notices were returned unopened and unclaimed, APTL never approached personnel at the Property—the situs address—or at neighboring buildings to seek additional information regarding Carreon’s whereabouts,” the opinion states.

Now the company has filed a petition for review to the Arizona Supreme Court.

It could be weeks or months before the Arizona Supreme Court decides whether to consider APTL’s petition for review. If Peterson’s ruling holds up, APT still owns the original 2015 tax lien and can begin the process again to assert its interest.

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