Wells Fargo Bank v. Noerring

• Decision Date: 20 December 2018
• Docket Number: No. 20160837-CA,20160837-CA
• Citation: 438 P.3d 90
• Parties: WELLS FARGO BANK, NA, Appellee, v. Justine NOERRING and Darwin Long, Appellants.
• Court: Utah Court of Appeals

438 P.3d 90

WELLS FARGO BANK, NA, Appellee,

v.Justine NOERRING and Darwin Long, Appellants.

No. 20160837-CA

Court of Appeals of Utah.

Filed December 20, 2018

Karra J. Porter, Salt Lake City, Kristen C. Kiburtz, Edward T. Wells, Murray, and David D. Bennett, Attorneys for Appellants

Brett N. Anderson, Salt Lake City, and Scott R. Taylor, Attorneys for Appellee

Judge Michele M. Christiansen Forster authored this Opinion, in which Judges David N. Mortensen and Jill M. Pohlman concurred.

Opinion

CHRISTIANSEN FORSTER, Judge:

¶1 After Lynnette Noerring and Justine Noerring (collectively, the Noerrings) defaulted on a loan, Wells Fargo Bank, NA (Wells Fargo) prepared to foreclose on the real property that secured that loan.¹ A title search revealed, however, that, due to some missing words, the security interest in the property had not been effectively conveyed. Wells Fargo filed this action seeking, among other things, reformation of a vesting deed. Following a bench trial, the court amended the deed of trust entered into by the parties to reflect what all parties believed they were doing at the time—creating and conveying an enforceable deed of trust to secure the loan. Appellants challenge that decision. We affirm.

BACKGROUND

¶2 On March 15, 2003, Lynnette created the OMI Trust, designating herself as the trustee and her daughter, Justine, as the sole beneficiary. The only asset placed into the trust was the real property (the Property) at issue in this action.

¶3 Lynnette refinanced the Property several times. In each instance, she transferred the Property by quitclaim deed from herself, as trustee of the OMI Trust, to herself as an individual. After executing a deed of trust on the Property and closing the refinance, Lynnette typically conveyed the Property back to herself, as the trustee of the OMI Trust, by quitclaim deed.

¶4 Lynnette broke from this pattern in one such iteration. In February 2006, Lynnette executed a quitclaim deed (the 2006 Quitclaim Deed), purportedly transferring the Property to Lynnette and Justine as individuals, which was recorded on March 3, 2006.² Instead of identifying the grantor as the trustee of the OMI Trust—the record owner of the Property at the time—the 2006 Quitclaim Deed instead listed the grantor as "Lynnette Noerring, a married woman." Following the recording of that quitclaim deed, the Noerrings refinanced the mortgage on the Property with a loan from WMC Mortgage Corp., which loan was secured by a trust deed, also recorded on March 3, 2006.

¶5 Five months later, the Noerrings obtained a loan (the New Century Note) from New Century Mortgage Corp. (New Century). This loan satisfied the WMC loan and was, by its terms, to be secured by a trust deed on the Property. In executing the New Century Note, the Noerrings represented that they were title owners of the Property. Along with the note, the Noerrings executed several other documents at the closing, acknowledging that the purpose of the transaction was for a "residential mortgage loan," which entailed providing the lender a security interest in the Property. The New Century Trust Deed was signed by both Lynnette and Justine and recorded on August 29, 2006. The New Century Note was ultimately assigned to Wells Fargo as trustee.³

¶6 The Noerrings later applied for and received two modifications to the New Century Note and made payments for approximately five years.⁴ On February 25, 2010, Lynnette passed away.⁵ A little over a year later, Justine defaulted on the New Century Note. A few months after the default, Wells Fargo conducted a title search on the Property in anticipation of foreclosure. The search revealed that the title owner of the Property was Lynnette Noerring, as trustee for the OMI Trust, and not Lynnette as an individual or Lynnette and Justine as individuals.

¶7 Wells Fargo then initiated this action seeking, among other things, reformation of the 2006 Quitclaim Deed. Specifically, Wells Fargo sought "[a] judgment reforming the [2006 Quitclaim Deed] to reflect that Lynnette Noerring, as trustee of the OMI Trust , conveyed the Property as the grantor to the Noerrings, so that the Noerrings will be the correct owner and grantor/trustor of the Property under the [New Century Trust Deed]." (Emphasis added.) Wells Fargo also sought an order declaring the New Century Trust Deed to be valid and that it "encumbers and constitutes a first priority lien against the entire Property." Subsequently, Wells Fargo also requested that the New Century Trust Deed be reformed to reflect that Lynnette, as trustee of the OMI Trust, conveyed the security interest in the Property.

¶8 Following a bench trial, the court concluded that Justine and Lynnette, individually, and Lynnette, as trustee for the OMI Trust, intended to grant a security interest in the Property to New Century in order to secure the New Century Note. The trial court found by clear and convincing evidence that the Noerrings and New Century made a mutual mistake regarding the New Century Trust Deed. Specifically, the court determined that the Noerrings and New Century intended to create a valid trust deed and convey a valid security interest in the Property.⁶ Consequently, the trial court ordered reformation of the New Century Trust Deed. The court changed the grantor of the Property from Lynnette and Justine, as individuals, to Lynnette, as trustee of the OMI Trust. Justine and Darwin Long (collectively, Appellants) challenge the trial court’s decision.

ISSUES AND STANDARDS OF REVIEW

¶9 Appellants raise three issues on appeal. First, they argue that Wells Fargo’s reformation claims are barred by the nonclaim provisions of the Utah Uniform Trust Code and the Utah Probate Code (collectively, the Nonclaim Statutes). See Utah Code Ann. § 75-3-803(1) (LexisNexis Supp. 2018); id. § 75-7-509(1).⁷ Appellants raise this issue for the first time on appeal but assert that the issue can be addressed despite the lack of preservation because application of the Nonclaim Statutes present a jurisdictional bar to Wells Fargo’s claims. "As a general rule, claims not raised before the trial court may not be raised on appeal." State v. Holgate , 2000 UT 74, ¶ 11, 10 P.3d 346. However, "because subject matter jurisdiction goes to the heart of a court’s authority to hear a case, it is not subject to waiver and may be raised at any time, even if first raised on appeal." In re adoption of Baby E.Z. , 2011 UT 38, ¶ 25, 266 P.3d 702 (quotation simplified). The applicability and interpretation of a statute is a question of law, which we review for correctness. Fuller v. Bohne , 2017 UT App 28, ¶ 9, 392 P.3d 898.

¶10 Second, Appellants argue that Wells Fargo’s claims are barred by the three-year statute of limitations applicable to claims for relief on the ground of fraud or mistake. Utah Code Ann. § 78B-2-305(3). Whether a statute of limitations applies and whether the limitations period is subject to tolling are questions of law. Shiozawa v. Duke , 2015 UT App 40, ¶ 14, 344 P.3d 1174. However, the determination of when a party reasonably should have known the facts constituting the fraud or mistake claim is a question of fact. Id. We will not disturb the fact-finder’s determination absent clear error. Sevy v. Security Title Co. of S. Utah , 902 P.2d 629, 634 (Utah 1995).

¶11 Third, Appellants contend that the trial court had no authority to reform a deed by substituting a third party as grantor, thereby creating a new deed. "Reformation of a deed is a proceeding in equity." RHN Corp. v. Veibell , 2004 UT 60, ¶ 35, 96 P.3d 935 (quotation simplified). In equity actions, we review the trial court’s factual findings for clear error and its conclusions of law for correctness. Id. We will not overturn a trial court’s formulation of an equitable remedy "unless it has abused its discretion." Ockey v. Lehmer , 2008 UT 37, ¶ 42, 189 P.3d 51 (quotation simplified).

ANALYSIS

I. Nonclaim Statutes

¶12 Appellants assert that the trial court lacked jurisdiction to determine Wells Fargo’s reformation claims because those claims were barred by Utah’s Nonclaim Statutes. See Utah Code Ann. § 75-3-803(1) (LexisNexis Supp. 2018); id. § 75-7-509(1). Particularly, Appellants argue that, based on the Nonclaim Statutes, Wells Fargo was required to present its claim for reformation of the deed within one year of Lynnette’s death.

Because Wells Fargo did not seek reformation within this one-year window, Appellants argue, any claim is barred "against the deceased settlor’s estate, the trustee, the trust estate, and the beneficiaries of the deceased settlor’s trust." (Quoting Utah Code Ann. § 75-7-509(1).) Wells Fargo argues in response that the Nonclaim Statutes are not applicable to this action because "any proceeding to enforce any mortgage, pledge, or other lien upon property of the deceased settlor’s estate" is exempt from the one-year presentment period. Utah Code Ann. § 75-7-509(4)(a). We first review the Nonclaim Statutes generally, then consider the applicability of the Nonclaim Statutes to Wells Fargo’s reformation claims.

¶13 The Nonclaim Statutes generally require creditors to present claims against a decedent’s estate or a deceased settlor within one year of the person’s death. See id. § 75-3-803(1) ; id. § 75-7-509(1). Failure to present a claim timely will likely result in that claim being barred as against the trust or estate because the purpose of the Nonclaim Statutes is "to promote a speedy and efficient system" for settling and distributing the estate or trust of the decedent. See In re Estate of Ostler , 2009 UT 82, ¶ 20, 227 P.3d 242 (quoting In re Estate of Daigle , 634 P.2d 71, 76 (Colo. 1981) (en banc) ). Indeed, the Utah Supreme Court has construed the Nonclaim Statutes "as a jurisdictional bar not subject to tolling." Id. ¶ 21. In reaching this conclusion, the supreme court adopted the reasoning employed by the Colorado Supreme Court in In re Estate of Randall , 166 Colo. 1, 441 P.2d 153 (1968) (en banc), a...