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Matthew Foley

Matthew Foley

Esq. & MBA

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The Arizona Perspective on the “Show Me the Note” Theory

Arizona courts have rejected the concept that a non-judicial foreclosure cannot commence if the lender cannot produce the note (e.g., a Deed of Trust). This concept has been referred to as the “show me the note” theory. Plaintiff debtors who have cited out-of-state authority to support the “show me the note” theory have been admonished by the court because over thirty cases in the United States District Court for the District of Arizona have openly rejected the theory.  Levi v. U.S. Bank Home Mortgage, (D. Ariz. November 16, 2011) (NO. CV 2011-003595) at 4-5.  

Any argument by a debtor that posits that lenders must produce the underlying note for a non-judicial foreclosure to continue is a “show me the note” argument and cannot be re-classified as a “property rights protection” argument. Nichols v. Bosco, 2010 WL 4716757 (D. Ariz. November 15, 2010) (NO. CV-10-10872-PHX-FJM); Levi, NO. CV 2011-003595 at 6. For example, the Arizona Superior Court has rejected the idea that a plaintiff is merely trying to protect his or her property rights by requiring the lender to produce the assignment of the note for a trustee’s sale to commence. Levi, NO. CV 2011-003595 at 6.

A 2012 Arizona Supreme Court case affirmed that nothing in Arizona’s non-judicial foreclosure statutory law supports the “show me the note” theory. Hogan v. Washington Mut. Bank, 277 P.3d 781, 782, ¶ 1 (Aiz. 2012).  The “show me the note” theory simply will not work to prevent a beneficiary from proceeding with a non-judicial foreclosure. Id. at ¶ 5. Specifically, a beneficiary doesn’t need to provide proof of possession of documents showing its right to commence with a trustee’s sale to actually commence with the sale. Id. at 782-83. The only thing a trustee’s sale requires is a statement showing the basis for the trustee’s authority for the sale. Hogan v. Washington Mut. Bank, 277 P.3d 781, 783 (Aiz. 2012); A.R.S. § 33-808(C)(5).

Policy

The “show me the note” theory works against the purpose of non-judicial foreclosure sales being quick and efficient because it adds time and expense to the process through litigation and other judicial costs. Hogan v. Washington Mut. Bank, 277 P.3d 781, 784 (Aiz. 2012).

“Show Me the Assignment”

The modified argument that a trustee’s sale to property must be enjoined unless a lender can produce the assignment of a Note has been rejected in Arizona as well. Levi, NO. CV 2011-003595 at 7. The Arizona Superior Court found this modification “no different in legal analysis from the ‘show me the note’ theory.” Id. at 6. In Levi v. U.S. Bank Home Mortgage, the Arizona Superior Court case denied a plaintiff’s Application for Issuance of a Temporary Restraining Order based on this “show me the assignment” argument. Id. Further, the court found that Arizona law does not require a note assignment by an FDIC employee before a trustee sale. Id.

Conclusion

Arizona has rejected the “show me the note” theory in multiple cases both recently and in the past. The “show me the note” theory claims that a lender cannot pursue a non-judicial foreclosure on a defaulted property without producing the underlying note or assignment of that note. Nothing in the Arizona non-judicial foreclosure statutes supports this theory and the theory works against the fast and efficient nature of a non-judicial foreclosure.