Deleeuw v. Nationstar Mortg. LLC

• Decision Date: 12 April 2018
• Docket Number: No. 20170034-CA,20170034-CA
• Citation: 424 P.3d 1075
• Court: Utah Court of Appeals
• Parties: Brad DELEEUW, Appellant, v. NATIONSTAR MORTGAGE LLC and Nationstar Mortgage Properties LLC, Appellees.

424 P.3d 1075

Brad DELEEUW, Appellant,

v.NATIONSTAR MORTGAGE LLC and Nationstar Mortgage Properties LLC, Appellees.

No. 20170034-CA

Court of Appeals of Utah.

Filed April 12, 2018

Steven R. Sumsion, Provo, Attorney for Appellant

Robert H. Scott and Jason T. Baker, Salt Lake City, Attorneys for Appellees

Judge David N. Mortensen authored this Opinion, in which Judges Michele M. Christiansen and Ryan M. Harris concurred.

Opinion

MORTENSEN, Judge:

¶ 1 Having not made any payment since 2008, Appellant Brad Deleeuw faults the holder of the trust deed note on his home for not foreclosing faster. The district court dismissed his complaint, which asserted that the statute of limitations for foreclosure had expired and that the note holder should be stuck with the debt. The district court ruled that the statute of limitations did not start running until the note was accelerated in 2016 and that even now the statute of limitations has not expired. Deleeuw asserts on appeal that the district court erred, arguing that the statute of limitations started to run when he first failed to make a payment and defaulted in 2008, and that the statute of limitations expired in 2014. We disagree and affirm.

BACKGROUND

¶ 2 SCME Mortgage Inc. (SCME) loaned $224,000 to Deleeuw in November 2003 in exchange for Deleeuw's promise to repay the loan in full, plus interest. This agreement was reduced to writing by way of a signed note (the Note). The Note was secured by a deed of trust (the Deed of Trust) on Deleeuw's residence in American Fork, Utah (the Property), and it placed no conditions on his obligation to repay the debt. The Deed of Trust designated SCME as the lender, Mortgage Electronic Registration Systems Inc. as the beneficiary, and Precision Title Insurance Agency of Utah Inc. as the trustee. The Note was later assigned to and is currently in the possession of the successor-in-interest, Nationstar Mortgage LLC (Nationstar).

¶ 3 In the Note, Deleeuw agreed to pay principal and interest each month. He further agreed that if he had not repaid the loan in full by the maturity date, December 1, 2033, he would pay the Note in full at that time. Additionally, the Note stipulated that if Deleeuw missed his monthly payment when due, he would be in default. In the event of a default, the note holder (Note Holder) would be permitted to "send [Deleeuw] a written notice telling [Deleeuw] that if [he did] not pay the overdue amount by a certain date, the Note Holder may require [him] to pay immediately the full amount of Principal which has not been paid and all the interest [owed] on that amount."

¶ 4 Further, the Note provided that "[e]ven if, at a time when [Deleeuw is] in default, the Note Holder does not require [him] to pay immediately in full as described above, the Note Holder will still have the right to do so if [Deleeuw is] in default at a later time." The Note also specified "how and under what conditions [Deleeuw] may be required to make immediate payment in full of all amounts [owed] under this Note."

¶ 5 Under the Deed of Trust, additional protections were given to the Note Holder and the following acceleration clause was agreed upon:

Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument.... [which] shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by the Security Instrument and the sale of the Property.... If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument.

¶ 6 Deleeuw has not made a payment on the Note since August 2008 and has been in default under the terms of the Note since September 2008. Orange Title Insurance Agency Inc. (Orange Title) was substituted as trustee under the Deed of Trust on April 2, 2013, and again on July 10, 2014.¹ As trustee, Orange Title filed three notices of default against Deleeuw: one in April 2014, which was cancelled; one in July 2014, which was cancelled; and one in February 2016, which accelerated the remaining payments under the Note.

¶ 7 In July 2016, Nationstar, through Orange Title, attempted to foreclose on the Property. Deleeuw brought an action to prevent foreclosure, arguing that Nationstar's efforts to foreclose were barred by a six-year statute of limitations that had expired. In his complaint, Deleeuw alleged causes of action for injunctive relief barring foreclosure, quiet title to the Property, and declaratory relief stating that the statute of limitations for foreclosure had expired. All of Deleeuw's claims were premised on the argument that the general statute of limitations for written contracts, Utah Code section 78B-2-309, applied to the foreclosure and that the statute of limitations had expired.

¶ 8 Nationstar moved to dismiss, arguing that the applicable statute of limitations was not the general statute for written contracts, but was instead the statute of limitations found in Article 3 of the Uniform Commercial Code (the UCC), which it asserted had not expired. The district court agreed and granted Nationstar's motion to dismiss with prejudice. Deleeuw now appeals.

ISSUE AND STANDARD OF REVIEW

¶ 9 Deleeuw challenges the district court's grant of Nationstar's motion to dismiss. We review a district court's decision to grant or deny a motion to dismiss for correctness, giving no deference to the decision of the lower court. See State v. Hamilton , 2003 UT 22, ¶ 17, 70 P.3d 111.

ANALYSIS

¶ 10 Deleeuw argues that the district court erred in granting Nationstar's motion to dismiss because it applied the wrong statute of limitations. Deleeuw contends that the statute of limitations period for foreclosure under a deed of trust is governed by Utah Code section 78B-2-309, not Article 3 of the Uniform Commercial Code. We disagree.

¶ 11 Utah Code section 57-1-34 provides that

[a] person shall, within the period prescribed by law for the commencement of an action on an obligation secured by a trust deed:

(1) commence an action to foreclose the trust deed; or

(2) file for record a notice of default under Section 57-1-24.

Utah Code Ann. § 57-1-34 (LexisNexis 2009) (emphasis added). The parties disagree on which "period prescribed by law" applies in this situation. Deleeuw asserts that the statute of limitations applicable here is Utah Code section 78B-2-309, the six-year statute of limitations for an action on an instrument in writing, and that the limitations period began to run on September 1, 2008—the date that he first failed to make a monthly mortgage payment. See id. § 78B-2-309 (2012). Nationstar, however, asserts that the applicable statute of limitations is found in Utah Code section 70A-3-118(1), the six-year statute of limitations for negotiable instruments under the UCC, which began to run on February 5, 2016, the date Nationstar accelerated the payments under the Note. See id. § 70A-3-104(1) (2009) (negotiable instrument); id. § 70A-3-118(1) (statute of limitations).

¶ 12 The statute of limitations for an action on an instrument in writing generally begins to run at the time of the breach —that is, the date of the first missed payment. See Goldenwest Fed. Credit Union v. Kenworthy , 2017 UT App 191, ¶¶ 3, 7 n.4, 406 P.3d 253 (running the statute of limitations from the time of breach, which is the time of the first missed payment or the maturity date). In contrast, the UCC statute of limitations states that "an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date ." Utah Code Ann. § 70A-3-118(1) (emphasis added). Thus, while both statutes prescribe six-year limitation periods, they contain potentially different triggering dates for the commencement of the six-year periods.

¶ 13 When two statutory provisions conflict, the more specific provision governs. Millett v. Clark Clinic Corp. , 609 P.2d 934, 936 (Utah 1980). Our supreme court has stated that "where the Uniform Commercial Code sets forth a limitation period for a specific type of action, this limitation controls over an older, more general statute of limitations." Perry v. Pioneer Wholesale Supply Co. , 681 P.2d 214, 216 (Utah 1984). As such, the more specific UCC statute of limitations applies to the Note and the Deed of Trust at issue here. The Note in question was accelerated in February 2016, and that event started the running of the limitations period. Because the six-year limitations period started running in February 2016, it will not expire until February 2022.

¶ 14 We draw support for our conclusion from a recent decision of Utah's federal district court, which offers persuasive, but not binding, interpretive guidance regarding the applicable statute of limitations period. In that decision, the plaintiffs executed a promissory note and deed of trust to secure a loan of $235,000. Lewis v. Caliber Home Loans, Inc. , No. 2:16-cv-01252, 2018 WL 485967, at *1 (D. Utah Jan. 18, 2018), appeal docketed , No. 18-4020 (10th Cir. Feb. 16, 2018). The plaintiffs defaulted on their loan in 2009, their debt was accelerated in 2014, and the trustee attempted to foreclose on the property in 2016. Id. The plaintiffs asserted the same argument that Deleeuw presents here—that is, the statute of limitations began to run from the date of the first failure to make payment. See id. at *1–2. The defendants asserted that the UCC applied and that the statute of limitations began to run on the date of acceleration. Id. at *2. Analogous to the present case before us,...