Daniels v. Deutsche Bank Nat'l Trust & Ocwen Loan Servicing LLC

• Citation: 500 P.3d 891
• Decision Date: 07 October 2021
• Docket Number: No. 20190693-CA,20190693-CA
• Parties: Greg DANIELS and Sharon K. Daniels, Appellees and Cross-appellants, v. DEUTSCHE BANK NATIONAL TRUST AND OCWEN LOAN SERVICING LLC, Appellants and Cross-appellees.
• Court: Utah Court of Appeals

500 P.3d 891

Greg DANIELS and Sharon K. Daniels, Appellees and Cross-appellants,

v.DEUTSCHE BANK NATIONAL TRUST AND OCWEN LOAN SERVICING LLC, Appellants and Cross-appellees.

No. 20190693-CA

Court of Appeals of Utah.

Filed October 7, 2021

Steven W. Dougherty and Jason E. Greene, Attorneys, Salt Lake City, for Appellees and Cross-appellants

R. Spencer Macdonald, Provo and Benjamin J. Mann, Attorneys, for Appellants and Cross-appellees

Judge Michele M. Christiansen Forster authored this Opinion, in which Judges Ryan M. Harris and Diana Hagen concurred.

Opinion

CHRISTIANSEN FORSTER, Judge:

¶1 Deutsche Bank National Trust and Ocwen Loan Servicing LLC (individually, Deutsche and Ocwen; collectively, Bank) attempted to foreclose on a house owned by Greg and Sharon K. Daniels (Homeowners) years after Homeowners defaulted on their mortgage obligations. Homeowners brought suit, contending that the statute of limitations had run on Bank's right to foreclose on the trust deed securing Homeowners’ loan. The district court agreed with Homeowners, ruling that Bank's right to foreclose had been extinguished, quieting title in favor of Homeowners, and awarding them attorney fees and costs. We affirm and remand for the calculation of fees and costs Homeowners incurred on appeal.

BACKGROUND

¶2 In January 2007, Homeowners purchased a newly constructed house (the Property) in Kamas, Utah. Homeowners procured a loan of $333,000 (the Debt) from New Century Mortgage Corporation (New Century) to finance their purchase. The Debt was secured by a deed of trust (the Trust Deed) naming Mortgage Electronic Registration Systems Inc. as the beneficiary.

¶3 Greg Daniels, who was a real estate professional, experienced a reduction in income due to the housing market downturn, and by mid-2007, Homeowners had failed to make some of the monthly payments on the Debt. Although Homeowners had defaulted on the Debt, they continued to make some full and partial payments between April 2007 and November 2009. On September 25, 2008, the trustee recorded a "Notice of Default & Election to Sell" on the Property. As a result of the default notice, the Debt was accelerated and immediately due in full. Despite the acceleration, New Century did not schedule a trustee's sale and undertook no immediate further action to advance the foreclosure process.

¶4 Homeowners filed a bankruptcy petition on September 25, 2009, an action that stayed foreclosure proceedings. Saxon Mortgage Services Inc. (Saxon), which in 2009 had been assigned the servicing rights for the Debt, requested and was granted relief from the automatic stay on October 21, 2009. Saxon then assigned its right to service the Debt to Ocwen.

¶5 Homeowners’ obligation to pay the Debt was discharged through bankruptcy in April 2010, resulting in Ocwen no longer being able to enforce the Debt personally against Homeowners. See National Fin. Co. of Utah v. Valdez , 11 Utah 2d 339, 359 P.2d 9, 10 (1961) ("[A] discharge in bankruptcy is neither a payment nor the extinguishment of debts. It is simply a bar to their enforcement by legal proceedings.").

¶6 After receiving notice of the change of servicers, Homeowners wrote a letter to Ocwen on November 20, 2009, explaining their financial hardship and requesting a modification of the Debt. Along with the letter, Homeowners submitted a hardship affidavit and additional financial information on a form provided to them by Ocwen.

¶7 On February 16, 2010, Homeowners sought modification of their Debt obligations through the federal Home Affordable Modification Program (HAMP Plan). In documentation they submitted in connection with the HAMP Plan, Homeowners represented that they could not afford the mortgage payments and were in default. The submitted documentation clearly indicated that it concerned the mortgage and promissory note on the Property; it contained repeated references to mortgage payments, monthly loan payments, and delinquent amounts as they concerned the Debt. Ocwen agreed to modify Homeowners’ Debt obligations upon Homeowners’ compliance with several conditions. Under the proposed modification, Homeowners agreed to a trial period during which they would be required to make three monthly payments, which were about a thousand dollars less than their original monthly payments, by February 1, March 1, and April 1, 2010.

¶8 Homeowners made the first two payments on January 28 and February 25, but before they made the third, Ocwen notified Homeowners that the trial plan was canceled and that they would not be able to receive the HAMP Plan modification due to tax-lien issues with the "mortgage title that prevent[ed] acceptance into the program." After being so notified, Homeowners made no additional payments for the mortgage modification. Thus, their last payment was made on February 25, 2010.

¶9 Homeowners sent three additional letters (dated November 2010, April 2011, and October 2011) to Ocwen explaining their financial hardship and seeking a mortgage modification.

¶10The November 2010 letter expressed that Homeowners "want[ed] to keep [their] home" and "work with Ocwen" to that end. Homeowners stated, "[W]e have been through bankruptcy ... and have been discharged from our debts, including Ocwen." Homeowners noted that the discharge of their debts would "now make it easier to afford a modified mortgage." They requested of Ocwen, "Please review the information we have provided, and help us stay in our home. We would welcome an opportunity to mediate a new mortgage, and would be willing to have an appraisal done, to help us both arrive at a fair value." New signed copies of the hardship affidavit and an Ocwen financial form accompanied the letter.

¶11 The April 2011 letter recounted Homeowners’ financial situation. Homeowners reiterated that while the Debt had been "discharged in bankruptcy," they hoped that "this attempt to modify [their] mortgage" would allow them to stay in their home. Homeowners also stated that this submission would be their "last attempt" "for a mortgage modification." Copies of paystubs, financial statements, and income tax returns accompanied the letter. An April 27, 2011 fax, only the cover of which is in the record, purported to contain Homeowners’ recent paystubs and was apparently submitted in connection with the application for mortgage modification referenced in the April 2011 letter.

¶12 The October 2011 letter largely repeated what had been set out in the April 2011 letter. Once again, Homeowners noted that their mortgage obligation had been discharged in bankruptcy. They further expressed that they had "submitted multiple applications for a mortgage modification to Ocwen, with no success so far," but they nevertheless expressed hope that "this attempt to modify" the mortgage would allow them "to stay in [their] home."

¶13 In January 2012, the beneficial interest in the Trust Deed was transferred to Deutsche. In June 2014, Homeowners appealed the denial of their mortgage modification. Ocwen responded and explained (1) the reasons for the denial, (2) that the Property had "a confirmed foreclosure sale date," and (3) that the "loan [was] not eligible for foreclosure suspension because [Ocwen had] not received a recent application." Homeowners also formally requested and received various documents so that they could conduct an audit of the loan. Homeowners spoke with an Ocwen representative in early July 2014 and said that Ocwen should "not be able" to foreclose because of the bankruptcy and that they would be open to a settlement for $80,000. On September 29, 2015, the trustee recorded a new notice of default. This time, however, the trustee recorded notice of a trustee's sale. The notice was published on April 5, 2016, and the sale was scheduled for May 6, 2016.

¶14 In April 2016, Homeowners filed a complaint, followed by an amended complaint a few days later, in which they sought a declaratory judgment that the six-year statute of limitations had run on Bank's right to foreclose against the Property. Homeowners also sought a decree quieting title to the Property in their favor.

¶15 After a period of discovery, Homeowners filed a motion for summary judgment (1) seeking a declaration that the statute of limitations had run preventing foreclosure, (2) quieting title in their favor, (3) directing Deutsche and Ocwen to reconvey the Trust Deed to Homeowners, and (4) awarding Homeowners attorney fees and costs. Bank filed its own motion for summary judgment requesting that the district court determine that the statute of limitations had not run and that it could foreclose on the Property.

¶16 On May 3, 2016, the parties stipulated that any "unexpired ... statute of limitations or statute of repose applicable to claims relating to the enforcement" of the Trust Deed as identified in Homeowners’ amended complaint was "tolled as of the date of filing" the complaint.

¶17 In May 2017, after full briefing and oral argument, the district court entered an order granting in part Homeowners’ motion for summary judgment. The court concluded that the "statute of limitations applicable" to Bank's right to foreclose was "established by the version of Utah Code Ann. § 57-1-34 that was in effect at the time this action was commenced." That statute read as follows:

The trustee's sale of property under a trust deed shall be made, or an action to foreclose a trust deed as provided by law for the foreclosure of mortgages on real property shall be commenced, within the period prescribed by law for the commencement of an action on the obligation secured by the trust deed.

Utah Code Ann. § 57-1-34 (LexisNexis 2010).¹ Thus, the court concluded that to timely foreclose on the Property, Bank needed to take the necessary foreclosure action—either completion of a nonjudicial foreclosure sale or initiation of a judicial foreclosure action—within the time period provided by the statute of limitations applicable to enforcement of the Debt. And there was no doubt—based on either one...