Hechter v. Overage Refund Specialists LLC (In re Excess Proceeds from the Foreclosure of Prop. Located at 1107 Snowberry St.)

Citation474 P.3d 481
Decision Date02 April 2020
Docket NumberNo. 20190257-CA,20190257-CA
Parties IN RE EXCESS PROCEEDS FROM the FORECLOSURE OF PROPERTY LOCATED AT 1107 SNOWBERRY STREET, PARK CITY, Utah Ocean 18 LLC; and Amir Hechter, Appellants, v. Overage Refund Specialists LLC; and Brian Dowd, Appellees.
CourtCourt of Appeals of Utah

Troy L. Booher, Beth E. Kennedy, Salt Lake City, and Kenyon D. Dove, Attorneys, Ogden, for Appellants

R. Spencer MacDonald, Provo and Elizabeth M. Peck, Salt Lake City, Attorneys, for Appellees

Judge Ryan M. Harris authored this Opinion, in which Judges Kate Appleby and Diana Hagen concurred.


HARRIS, Judge:

¶1 In 2006, a property owner (Owner) borrowed $500,000 from Instant Mortgage Lending, Inc. (IML); the loan was memorialized in a promissory note in favor of IML. The parties intended the loan to be secured by a deed of trust on Owner's home (the Property), but on the first page of the deed (Trust Deed), Instant Funding, L.L.C. (Instant Funding)—and not IML—was listed as the "Beneficiary," even though the Trust Deed later defined the term "Beneficiary" as the "owner and holder ... of the note secured hereby."

¶2 Several years later, in 2018, the Property was sold, and after certain priority lienholders were paid, more than $273,000 of excess proceeds remain to be distributed. Appellants Ocean 18 LLC and Amir Hechter (collectively, Ocean 18) purport to be the successors-in-interest to IML, and claim an entitlement to those proceeds. Ocean 18's claim is contested by two other lower-priority claimants, who assert that—due to Instant Funding being listed as the beneficiary on the first page of the Trust Deed—IML never had any claim to the Property to begin with, and therefore could not have conveyed anything to Ocean 18. The district court, after considering briefing and holding oral argument, agreed with the lower-priority claimants. It determined as a matter of law that Instant Funding was the beneficiary of the Trust Deed, declared Ocean 18's claim invalid, and awarded the proceeds to the lower-priority claimants. Ocean 18 now appeals.

¶3 We conclude that the Trust Deed is ambiguous regarding the identity of its beneficiary, but determine that we can resolve at least some of that ambiguity on the record before us. As a matter of law and undisputed fact, Instant Funding was never intended to be the beneficiary of the Trust Deed and, further, at the time the deed was created the parties intended for IML to be the beneficiary. Beyond that, however, the record before us does not permit resolution of this case as a matter of law, and we therefore reverse and remand for further proceedings in order to, among other things, determine whether Ocean 18 is the valid successor-in-interest to the actual beneficiary of the Trust Deed.


¶4 In early 2006, IML loaned $500,000 to Owner, who executed a promissory note (the Note) promising to repay the loan; the Note lists "Instant Mortgage Lending, Inc." as the lender and holder of the Note. In connection with the loan transaction, Owner also executed the Trust Deed, granting a security interest in the Property—a home located in the Glenwild area near Park City, Utah—to an entity. On February 24, 2006, just a few days after its execution, the Trust Deed was duly recorded with the Summit County Recorder's Office. At issue in this case, among other things, is the identity of the entity to whom Owner granted this security interest.

¶5 In its first paragraph, the Trust Deed proclaims that Owner is granting the security interest to "Instant Funding, L.L.C., a Nevada limited liability company, as Beneficiary, whose mailing address is Instant Mortgage Lending, a California corporation, 5415 Oberlin Drive, San Diego, CA 92121." However, on its last page, in paragraph 16, the Trust Deed states that "[t]he term ‘Beneficiary’ shall mean the owner and holder, including any pledgee, of the note secured hereby."

¶6 The original Note indicates that its holder is "Instant Mortgage Lending, Inc." But the Note was amended on seven future occasions, beginning on August 28, 2006, and never again did the drafters indicate that the holder was "Instant Mortgage Lending, Inc." Instead, the holder is listed, variably, as "Instant Mortgage Lending," "Instant Mortgage Lending Corp.," and "Nationwide Servicing Center, Inc." It is undisputed that the "owner and holder" of the Note secured by the Trust Deed was never Instant Funding, and that Instant Funding was not the entity that loaned $500,000 to Owner. But the parties do not agree that the Note (and its seven amendments) makes clear who the "owner and holder" actually is.

¶7 Soon after the Trust Deed was recorded, interested parties recognized that it had not been drafted with precision. In late May 2006, the trustee recorded a document entitled "Notice of Correction of Beneficiary Address in Trust Deed." In that document, Instant Funding was again listed as beneficiary in the opening paragraph, but its mailing address was changed to eliminate all reference to "Instant Mortgage Lending, a California corporation." This time, the "correct mailing address for Beneficiary" was listed simply as "Instant Funding, LLC, 5415 Oberlin Drive, San Diego, CA 92121."

¶8 A little more than two months later, on August 3, 2006, the trustee recorded another document, this one entitled "Notice of Clerical Correction to Trust Deed to Conform with Record." In this document, the trustee purported to amend both the name and the mailing address of the beneficiary. The document proclaims that "[n]otice is hereby given of the correct name and mailing address for Beneficiary, Instant Mortgage Lending Corp., a California corporation, also known as Instant Mortgage Lending, Inc.," whose mailing address is "3830 Valley Centre Dr., Ste 705, Pmb 182, San Diego CA 92130." The document states that "[t]he incorrect reference in said Deed of Trust to Instant Funding, LLC, as Beneficiary ... is hereby deleted and corrected by this Notice." The document was executed only by the trustee and not by Instant Funding; in fact, the record submitted to us on appeal does not contain any document signed by Instant Funding in which it purported to give up any interest it might have had in the original Trust Deed.

¶9 Several years later, in 2012, IML assigned its interest in the Note and Trust Deed to Ocean 18 and three other individuals; in 2013, the three individuals assigned their interest to Ocean 18 and Amir Hechter, who now purport to own all of IML's interest—whatever that interest might be—in the Note and Trust Deed.

¶10 In 2018, a priority lienholder foreclosed on the Property, which was then sold at a trustee's sale. After the priority lienholder was paid, the sale trustee deposited the excess proceeds—over $286,000—with the district court pursuant to Utah law, which allows a trustee the "discretion" to "deposit the balance of the proceeds with the clerk of the district court of the county in which the sale took place." See Utah Code Ann. § 57-1-29(1)(a)(iii)(B) (LexisNexis 2017).

¶11 Following deposit of the funds, the district court sent notice to all individuals and entities known to possess a possible interest in the excess proceeds. Five claimants submitted claims, two of which were relatively small and unquestionably had priority. After payment of the two smaller claims, over $273,000 of proceeds remained, and three claimants sought the money:

• Ocean 18, claiming to be the successor-in-interest to IML, made a claim dating to 2006 in the amount of over $396,000.
Brian Dowd, a judgment creditor of Owner dating to 2018, made a claim in the amount of $125,000.
• Overage Refund Specialists (Overage), successor-in-interest to Owner, made a claim for any proceeds left over once all of the other valid claims are paid.

If Ocean 18's claim is valid, its claim has priority over the other two remaining claims, and is of sufficient size to use up all of the remaining excess proceeds, leaving Dowd and Overage with nothing. On the other hand, if Ocean 18's claim is not valid, it will receive nothing, Dowd will be fully paid, and Overage will receive whatever remains, something on the order of $148,000. It thus became important for the district court to determine whether Ocean 18's claim is valid.

¶12 To that end, the district court invited the parties to submit briefs on, among other issues, the question of the validity of Ocean 18's claim. Dowd and Overage opposed Ocean 18's claim, asserting that Ocean 18's chain of title was "rife with inconsistencies," and pointing out that Instant Funding—and not IML, Ocean 18's predecessor-in-interest—was the listed beneficiary on the first page of the original Trust Deed. They further asserted that the inconsistencies could not have been corrected by the two post-transaction documents purporting to correct the record, because those documents were not signed by Instant Funding, and because the problem the documents were trying to fix was no mere "clerical" error. Dowd and Overage also claimed that the later conveyances that purportedly passed IML's interest on to Ocean 18 were defective.

¶13 In response, Ocean 18 asserted that the mistake in setting forth the identity of the beneficiary on the Trust Deed had been a "minor scrivener error," and submitted a sworn declaration from its president—an individual who was formerly the president of IML, and who also once "originated loans with a group named Instant Funding, LLC"—who averred that Instant Funding was "mistakenly listed as the beneficiary" on the Trust Deed, and that this "identification was erroneous and was subsequently corrected" by the August 2006 recording of the "Notice of Clerical Correction." Other than this declaration, no party submitted any extrinsic evidence of what the parties to the Note and Trust Deed may have intended. And no party expressly claimed that the Trust Deed was ambiguous.

¶14 After full briefing, the district court heard oral argument from counsel. Although...

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