Russell v. Lundberg

• Decision Date: 08 July 2005
• Docket Number: No. 20030938-CA.,20030938-CA.
• Citation: 2005 UT App 315,120 P.3d 541
• Parties: James R. RUSSELL and Raylene Russell, for themselves and for all other similarly situated individuals and entities, Plaintiffs and Appellants, v. J. Scott LUNDBERG; Lundberg & Associates, a professional corporation; Backman Title Company, a Utah corporation; Backman-Stewart Title Services, Ltd., a Utah limited partnership; Canyon Anderson; Rodney Services Company, a Utah corporation; and John Does 1 through 10, Defendants and Appellees.
• Court: Utah Supreme Court

Page 541

120 P.3d 541

2005 UT App 315

James R. RUSSELL and Raylene Russell, for themselves and for all other similarly situated individuals and entities, Plaintiffs and Appellants, v. J. Scott LUNDBERG; Lundberg & Associates, a professional corporation; Backman Title Company, a Utah corporation; Backman-Stewart Title Services, Ltd., a Utah limited partnership; Canyon Anderson; Rodney Services Company, a Utah corporation; and John Does 1 through 10, Defendants and Appellees.

No. 20030938-CA.

Court of Appeals of Utah.

July 8, 2005.

Lester A. Perry, Hoole & King LC, Salt Lake City, for Appellants.

Richard M. Hymas, Gary A. Weston, Nielsen & Senior PC, R. Willis Orton, Alexander Dushku, and Romaine C. Marshall, Kirton & McConkie, Salt Lake City, for Appellees.

Before Judges DAVIS, JACKSON, and THORNE.

OPINION

THORNE, Judge:

¶1 James R. and Raylene Russell sued J. Scott Lundberg, the law firm of Lundberg & Associates, and others, alleging improprieties in the manner in which the defendants conducted foreclosure sales pursuant to the Russells' trust deeds. The trial court dismissed or granted summary judgment against each of the Russells' claims as to all defendants. We affirm in part and reverse in part.

BACKGROUND

¶2 The Russells are Utah homeowners who purchased their property through a mortgage and trust deed in 1997. J. Scott Lundberg acted as trustee under the trust deed at all times relevant to this matter. Aside from being designated in the trust deed, Lundberg was not involved in the property transaction and had no relationship with the Russells.

¶3 The Russells' property went into foreclosure on three separate occasions between 1997 and 2001, and on each occasion the foreclosure was handled by Lundberg and his firm, Lundberg & Associates (collectively, the Lundberg defendants). On each occasion, the Russells cured their default and were charged the actual costs of the foreclosure by the Lundberg defendants. The gravamen of the Russells' lawsuit is that the Lundberg defendants acted with their codefendants to illegally inflate these costs, resulting in increased profits for themselves at the expense of the Russells and other similarly situated foreclosees.

¶4 In 2002, the Russells filed suit against the Lundberg defendants and various other entities involved in the foreclosure process. These defendants included Rodney Services Co. (Rodney), a property services company allegedly owned by Lundberg's son and operated for the purpose of inflating foreclosure costs; Backman Title Company, Backman Stewart Title Services, Ltd., and Canyon Anderson (collectively the Backman defendants), who provided title reports and trustee sale guarantees to the Lundberg defendants; and ten John Doe defendants. The Russells' suit purported to be a class action on behalf of themselves and those similarly situated.

¶5 The Russells' complaint alleged that state and federal law limited the fees that the Lundberg defendants could charge for a foreclosure. In addition to this amount, the Lundberg defendants were permitted to charge foreclosees the actual costs associated with foreclosures, including such items as publishing and recording costs, mailing costs, and the cost of a trustee's sale guarantee. The Russells alleged that the Lundberg defendants used various methods to artificially inflate costs and thereby unlawfully charge foreclosees more than the actual costs of these various services.

¶6 The Russells alleged that the Lundberg defendants set up Rodney as a front company for the purpose of inflating foreclosure costs. According to the Russells' allegations, the Lundberg defendants delegated various aspects of the foreclosure process to Rodney. For each service it performed, Rodney charged an administrative fee that was ultimately passed on to the Russells. Aggregated over multiple services for each of thousands of foreclosures performed by the Lundberg defendants, these fees allegedly resulted in the extraction of thousands of dollars in illegally inflated costs.

¶7 The Russells also alleged that the Lundberg defendants were involved in illegal kickback schemes with the Backman defendants and the Intermountain Commercial Record (the Record), a private publication specializing in business and legal notices. According to the Russells, the Lundberg defendants would pay the Backman defendants for a trustee's sale guarantee, and would recoup that entire amount from the Russells. Lundberg would then receive money back from the Backman defendants both as a percentage kickback and pursuant to a partial ownership interest in one of the Backman entities. Similarly, the Lundberg defendants would pay the Record, and charge the Russells, $143 for each published notice, but would then receive $30 back from the Record. The Russells alleged that the Lundberg defendants' failure to deduct these kickback amounts from the fees charged to the Russells constituted unlawful overcharging.

¶8 The Russells' complaint contained fifteen causes of actions based on these allegations, all of which were asserted against the Lundberg defendants and Rodney, and some of which were asserted against the Backman defendants. In a series of orders beginning in October 2002, the trial court dismissed or granted summary judgment against each of the Russells' claims against every defendant. Based on the dismissal of all of the Russells' claims, the trial court also declined to certify the Russells' action as a class action. The Russells appeal.

ISSUES AND STANDARDS OF REVIEW

¶9 "The propriety of a trial court's summary judgment order is a matter of law." West Valley City v. Martin, 2004 UT App 327,¶ 11, 100 P.3d 248. "In deciding whether summary judgment is appropriate, the appellate court reviews whether the trial court erred in applying the relevant law and whether a material fact was in dispute." Id.

¶10 A trial court's decision on a motion to dismiss presents a question of law that we review for correctness, treating the factual allegations in the complaint as true and drawing all reasonable inferences in favor of the plaintiffs. See Russell/Packard Dev., Inc. v. Carson, 2003 UT App. 316,¶ 10, 78 P.3d 616, aff'd, 2005 UT 14, 108 P.3d 741.

ANALYSIS

¶11 The Russells' complaint states multiple causes of action, but all of their complaints ultimately turn on whether Lundberg charged them more than his actual costs of foreclosure and what duty, if any, Lundberg owed them as a trustee. We agree with the trial court that Lundberg charged the Russells only his actual costs and fees and that he owed the Russells no fiduciary duties. We determine, however, that Lundberg did owe the Russells a general trustee's duty, and reverse and remand this matter for further proceedings as stated herein.

1. Lundberg Charged the Russells Actual Costs and Fees

¶12 Many of the Russells' causes of action are based on the allegation that Lundberg charged them more than his "actual costs and fees" of foreclosure. We agree with the trial court that Lundberg only charged the Russells the actual fees that he was charged for the services provided by Rodney and others, and that in doing so Lundberg complied with the "actual cost" requirements of applicable state and federal laws and contract provisions.

¶13 The Russells do not allege that Lundberg directly padded the fees and costs of foreclosure. Rather, their accusation is that Lundberg manipulated the provision of third-party services such that the amount that he was charged on paper was greater than the net amount he ultimately paid. The Russells allege that Lundberg employed Rodney to perform tasks that Lundberg could have performed himself at no extra cost, and that Rodney's involvement in the process resulted in the creation of increased administration costs that were subsequently returned to Lundberg or his family through their interests in Rodney. As to the Backman defendants and the Record, the Russells allege that the costs of services charged to Lundberg must be reduced pro rata to reflect commissions paid to the Lundberg defendants because of the volume of business they provided.

¶14 As to Lundberg's use of Rodney, the Russells have provided no authority for the proposition that a trustee is precluded from engaging a third party to perform activities attendant to a foreclosure, nor is this court aware of any. To the contrary, it appears to be accepted practice for trustees to use third parties to perform foreclosure activities. In this case, the Russells' complaint implicitly approves Lundberg's use of the title company and publication services provided by the Backman defendants and the Record. Like the Backman defendants and the Record, Rodney is entitled to charge what it sees fit for its services and Lundberg is entitled to treat those charges as his actual costs.

¶15 Similarly, the Russells have not established that the actual cost of a trustees sale guarantee from the Backman defendants, or publication of notice in the Record, must reflect a discount for commissions paid back to the Lundberg defendants based on their volume of business. As the trial court noted, the commissions were paid periodically and had no correlation to any particular foreclosure, and the Russells paid no more for these services through Lundberg than they would have had they purchased these services directly.

¶16 In sum, the "actual costs and fees" requirement cannot be interpreted as requiring a trustee to personally perform all services related to foreclosure, to refrain from engaging third-party service providers, or to seek out and employ the lowest cost options available. Neither can it be interpreted as requiring a discount to reflect volume of business commissions that the trustee may be able to obtain from third-party providers. On its face, the Russells' complaint alleges that Lundberg only charged them what Rodney, the Backman defendants, and the Record charged him for any particular service. Accordingly, the Russells...