Fed. Nat'l Mortg. Ass'n v. Sundquist

• Decision Date: 16 September 2013
• Docket Number: No. 20110575.,20110575.
• Citation: 311 P.3d 1004,739 Utah Adv. Rep. 22
• Parties: FEDERAL NATIONAL MORTGAGE ASSOCIATION, Plaintiff and Appellee, v. Loraine SUNDQUIST, Defendant and Appellant.
• Court: Utah Supreme Court

311 P.3d 1004

739 Utah Adv. Rep. 22

FEDERAL NATIONAL MORTGAGE ASSOCIATION, Plaintiff and Appellee,

v.Loraine SUNDQUIST, Defendant and Appellant.

No. 20110575.

Supreme Court of Utah.

July 23, 2013.

Rehearing Denied Sept. 16, 2013.

Maria–Nicholle Beringer, Robert H. Scott, Chandler P. Thompson, Salt Lake City, for appellee.

J. Kent Holland, Daniel J. Morse, Sandy, Douglas R. Short, Midvale, for appellant.

Jerrold S. Jensen, Wade Farraway, Salt Lake City, amicus curiae for State of Utah.

Justice PARRISH, opinion of the Court:

INTRODUCTION

¶ 1 Appellant Loraine Sundquist appeals from an interlocutory order requiring her to vacate her home during the pendency of an unlawful detainer action. Appellee Federal National Mortgage Association (FNMA) initiated the unlawful detainer action, claiming ownership of Sundquist's home. FNMA claimed ownership pursuant to a trustee's deed that it obtained from ReconTrust. ReconTrust is a national bank that conducted a nonjudicial foreclosure sale in its capacity as trustee of the trust deed that Sundquist had executed to secure her mortgage.

¶ 2 The interlocutory order at issue was entered at the conclusion of an immediate occupancy hearing held just two weeks after FNMA initiated the unlawful detainer action. At that hearing, Sundquist argued that ReconTrust lacked authority to conduct the foreclosure sale and convey her home to FNMA. Specifically, she argued that sections 57-1-21 and 57-1-23 of the Utah Code limit the power of sale to trustees who are either members of the Utah State Bar or title insurance companies with an office in Utah. In response, FNMA argued that ReconTrust, as a national bank, was authorized to conduct the sale under federal law and that federal law preempted the Utah statute. The district court agreed with FNMA and entered an order of restitution, requiring that Sundquist vacate her home.

¶ 3 We reverse. Utah Code sections 57-1-21 and 57-1-23 are not preempted by federal law. A national bank seeking to foreclose real property in Utah must comply with Utah law. We therefore vacate the district court's order of restitution and remand for additional proceedings.

¶ 4 Because our ruling in this matter is limited to the preemption issue, the parties may, on remand, raise any additional issues they may see fit with respect to FNMA's claim for immediate occupancy.¹ Similarly, the parties remain free to raise any additional arguments they may have regarding the validity of the trustee's deed in connection with the final resolution of the unlawful detainer action.

FACTUAL & PROCEDURAL BACKGROUND

¶ 5 In 2006, Sundquist executed a deed of trust as security for the loan on her Utah home (Property). In 2009, Sundquist stopped making payments on her mortgage. The beneficiary under the deed of trust appointed ReconTrust, a wholly owned subsidiary of Bank of America, as the successor trustee. In January 2011, ReconTrust placed a notice of trustee's sale on Sundquist's door. In May 2011, ReconTrust conducted a nonjudicial foreclosure of Sundquist's home and thereafter deeded it to FNMA.

¶ 6 In June 2011, FNMA filed an unlawful detainer action. Pursuant to Utah Code section 78B–6–810, the district court conducted an evidentiary hearing to determine which party would have possession of the Property during the pendency of the litigation. At the hearing, Sundquist argued that Utah law regarding the qualification of trustees did not authorize ReconTrust to conduct a nonjudicial foreclosure. In response, FNMA asserted that Utah law was preempted by federal law, which authorized ReconTrust to conduct the foreclosure sale. The district court sided with FNMA and awarded it possession of the Property during the pendency of the litigation.

¶ 7 Sundquist filed a petition for interlocutory appeal, which was granted. The order of restitution was stayed pending appeal. We have jurisdiction under Utah Code section 78A–3–102(3).

¶ 8 Sundquist argues that ReconTrust lacked authority to conduct a nonjudicial foreclosure of her home because such authority is granted only to members of the Utah State Bar or title insurance companies with an office in Utah. Utah Code § 57-1-21, -23. She asserts that it necessarily follows that ReconTrust's deed is “null and void,” that FNMA lacks title to the Property, and that FNMA is without standing to bring an unlawful detainer action. She concludes that the district court lacked subject matter jurisdiction to entertain the eviction action brought by FNMA.

¶ 9 FNMA counters that ReconTrust is a national bank exercising fiduciary powers subject to § 92a of the National Banking Act (NBA), which preempts Utah law regarding qualification of trustees. Id.12 U.S.C. § 92a. Specifically, FNMA claims that ReconTrust is subject to the laws of Texas because that is where ReconTrust is “located” and where it conducts its fiduciary business, and that ReconTrust is authorized to conduct nonjudicial foreclosures under Texas law. FNMA also argues that the order of restitution was proper because Sundquist suffered no prejudice by virtue of ReconTrust's role as a trustee inasmuch as she was unable to demonstrate an ability to make up her missed mortgage payments or post a bond. FNMA further argues that the other issues raised by Sundquist are not ripe for appeal inasmuch as the district court has yet to determine whether Sundquist's challenge to ReconTrust's authority has any effect on the validity of the trust deed.

STANDARD OF REVIEW

¶ 10 We generally will not disturb a district court's order of restitution unless it abuses its discretion. State v. Snyder, 747 P.2d 417, 422 (Utah 1987). However, when the validity of an order of restitution turns on interpretation of a statute, it presents issues of law. State v. Garcia, 866 P.2d 5, 6 (Utah Ct.App.1993). “We accord a lower court's statutory interpretations no particular deference but assess them for correctness, as we do any other conclusion of law.” State v. Rio Vista Oil, Ltd., 786 P.2d 1343, 1347 (Utah 1990).

ANALYSIS

I. SECTION 92a OF THE NATIONAL BANKING ACT DOES NOT PREEMPT SECTIONS 57-1-21 AND 57-1-23 OF THE UTAH CODE, AND A NATIONAL BANK SEEKING TO FORECLOSE REAL PROPERTY IN UTAH MUST THEREFORE COMPLY WITH UTAH LAW

¶ 11 Sundquist appeals the order of restitution directing her to vacate the Property during the pendency of the unlawful detainer action. In an unlawful detainer action, a court may hold an evidentiary hearing under section 78B-6-810(2)(b)(i) of the Utah Code to “determine who has the right of occupancy during the litigation's pendency.” The district court held such a hearing in this case.² At this hearing, Sundquist argued that ReconTrust was not qualified to conduct the foreclosure because Utah law establishing the qualifications of trustees is not preempted by the NBA. The district court rejected this argument and ordered Sundquist to vacate the Property.

¶ 12 Under section 57-1-23 of the Utah Code, a qualified trustee “is given the power of sale by which the trustee may ... cause the trust property to be sold.” Section 57-l-21( l )(a) defines qualified trustee as:

(i) any active member of the Utah State Bar who maintains a place within the state where the trustor or other interested parties may meet with the trustee [or]

...

(iv) any title insurance company or agency that:

(A) holds a certificate of authority or license ... to conduct insurance business in the state;

(B) is actually doing business in the state; and

(C) maintains a bona fide office in the state.³

¶ 13 ReconTrust is neither a member of the Utah State Bar nor a title insurance company or agency with an office in the State of Utah. ReconTrust was therefore not a qualified trustee with the power of sale under Utah Code sections 57-1-21 and 57-1-23. However, FNMA argues that Utah law does not apply to ReconTrust because, as a national bank, ReconTrust is subject to the laws of Texas, not Utah. Under Texas law, ReconTrust is arguably authorized to conduct a nonjudicial foreclosure sale. SeeTex. Fin.Code §§ 32.001, 182.001.

¶ 14 Whether ReconTrust is subject to the laws of Utah or Texas depends on where it is “located.” As a national bank, ReconTrust operates under the National Banking Act, 12 U.S.C. § 1 et seq., and is regulated by the Office of the Comptroller of Currency (Comptroller). The NBA gives the Comptrollerauthority “to grant ... to national banks ... the right to act as trustee ... under the laws of the State in which the national bank is located.” 12 U.S.C. § 92a(a) (emphasis added). And section 92a(b) of the NBA provides that “exercise of such powers by national banks shall not be deemed to be in contravention of State or local law.”

¶ 15 The Comptroller's current interpretation of § 92a is contained in the Code of Federal Regulations. 12 C.F.R. § 9.7. The applicable regulation provides that a national bank is “located” in “the state in which the bank acts in a fiduciary capacity.” Id. And the regulations define the state in which the bank acts in a fiduciary capacity as “the state in which it accepts the fiduciary appointment, executes the documents that create the fiduciary relationship, and makes discretionary decisions regarding the investment or distribution of fiduciary assets.” Id.

¶ 16 Despite the fact that the Property at issue is located in Utah, FNMA argues that ReconTrust acted in a fiduciary capacity in Texas because the substitution of trustee, notice of default, and trustee's deed all were executed and notarized in Texas. It therefore concludes that the laws of Texas apply and that, under Texas law, ReconTrust has the authority to conduct a nonjudicial foreclosure of property located in Utah.

¶ 17 The issue of whether the NBA preempts Utah law governing the qualification of trustees has been addressed by the Utah federal district courts, with differing results. In three cases, the federal district courts have found that federal law preempts Utah law and have therefore concluded that the laws of...