Johnson v. Nationstar Mortgage

2020 UT App 127

THE UTAH COURT OF APPEALS

NEIL ALAN JOHNSON AND JODI LYN JOHNSON,
Appellants,
v.
NATIONSTAR MORTGAGE LLC AND U.S. BANK NA,
Appellees.

Opinion
No. 20200012-CA
Filed September 11, 2020

Fourth District Court, Spanish Fork Department
The Honorable Jared Eldridge
No. 170300085

David L. Fisher, Attorney for Appellants
Robert H. Scott and Jason T. Baker,
Attorneys for Appellees

JUDGE JILL M. POHLMAN authored this Opinion, in which
JUDGES DAVID N. MORTENSEN and RYAN M. HARRIS concurred.

POHLMAN, Judge:

¶1 Neil Alan Johnson and Jodi Lyn Johnson (collectively, the
Johnsons) appeal the district court’s dismissal of their claims
against Nationstar Mortgage LLC and U.S. Bank NA
(collectively, Appellees) with respect to the Johnsons’ mortgage
on a home they purchased in Lehi, Utah (the Property). The
Johnsons contend that the court erred by concluding that
Appellees satisfied the statute of limitations applicable to their
nonjudicial foreclosure of the Johnsons’ property and that the
Johnsons’ claims under the Truth in Lending Act were barred by
the doctrine of res judicata. We affirm.
Johnson v. Nationstar Mortgage

BACKGROUND

¶2 In April 2007, the Johnsons financed ownership of the
Property by a loan evidenced by a promissory note (the Note)
and secured by a trust deed. The trust deed, duly recorded in the
Utah County recorder’s office, named Varent Inc. as the lender
and Mortgage Electronic Registration Systems Inc. (MERS) as the
nominal beneficiary. The trust deed was later assigned to
Appellees.

¶3 The Note required the Johnsons to make payments on the
first day of each month and provided that any amounts still
owing under the Note as of the maturity date in May 2037 would
be due at that time. Additionally, the Johnsons agreed to
nonjudicial foreclosure in the event of default.

¶4 A notice of default was recorded in the Utah County
recorder’s office on October 30, 2009 (the Default Notice). The
Default Notice accelerated the loan, making the entire obligation
“immediately due and payable.” A trustee’s sale was scheduled
for September 2010.

The First Suit

¶5 The Johnsons filed suit in September 2010 (the First Suit),
naming as defendants, among others, Varent’s former CEO,
MERS, and the foreclosure trustee. In the First Suit, the Johnsons
sought relief from the nonjudicial foreclosure that had been
initiated against them, generally alleging that it appeared that
“no entity exists today with the right to commence a non-judicial
foreclosure on [the Property]” and that a controversy existed
over “whether or not any of the Defendants are qualified and
entitled to sell [the Property].” Among the factual bases
allegedly entitling them to relief, the Johnsons claimed that “[o]n
or about March 17, 2010, [they] executed and recorded their
Notice of Right to Cancel” pursuant to the Truth in Lending Act
(TILA), see generally 15 U.S.C. § 1635 (2018), and that “[c]opies of

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[the Johnsons’] executed and recorded Notice of Right to Cancel
was delivered to all known Defendants by same Process on or
about March 26, 2010.” In terms of relief, the Johnsons asked,
among other things, that the court enjoin the defendants from
exercising their remedies under the trust deed.

¶6 Several of the defendants—including the trustee and the
beneficiary under the trust deed at the time—filed a motion to
dismiss the First Suit with prejudice pursuant to rule 12(b)(6) of
the Utah Rules of Civil Procedure. In their motion, the
defendants addressed the TILA allegations and argued that the
Johnsons had failed to state a claim for relief under TILA where
“multiple courts have rejected the [Johnsons’] premise” that
“mere declaration of rescission of a loan for purported TILA
violations” automatically cancels “the security interest
represented by the recorded deed of trust so as to terminate any
right to proceed with nonjudicial foreclosure.” (Citing Large v.
Conseco Fin. Servicing Corp., 292 F.3d 49, 54–55 (1st Cir. 2002).) In
response, the Johnsons filed their own motion to dismiss
(without prejudice), claiming that their complaint “should have
been filed in the Federal Court” because the defendants had
violated several federal laws, including TILA.

¶7 In January 2011, the district court granted the defendants’
motion to dismiss with prejudice. In so doing, the court
specifically addressed the Johnsons’ TILA allegations. The court
adopted the reasoning set forth in the cases cited by the
defendants and rejected the premise that “mere declaration of
rescission of a loan for purported TILA violations” automatically
cancels “the security interest represented by the recorded deed
of trust so as to terminate any right to proceed with nonjudicial
foreclosure.” For this reason (and others not relevant to this
appeal), the court concluded that the Johnsons’ complaint failed
to state a claim.

¶8 The Johnsons did not appeal the dismissal of the First
Suit. Instead, between September 2010 and June 2017, they filed

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seven bankruptcies, all of which were dismissed. No trustee’s
sale occurred during that time period.

The Second Suit

¶9 The Property was again scheduled for a trustee’s sale in
June 2017, and the Johnsons filed another complaint (the Second
Suit) before the sale was set to occur. In the Second Suit, the
Johnsons alleged that the trustee’s sale could not go forward
because the relevant statute of limitations had expired. They
asserted that the six-year limitations period applicable to written
contracts under Utah Code section 78B-2-309 applied to actions
enforcing the note secured by the trust deed. And,
acknowledging that the limitations period runs six years after
the acceleration of the defaulted loan, the Johnsons alleged that
even with the tolling due to the bankruptcies, the limitations
period expired in January 2017—well before the nonjudicial
foreclosure sale set in June 2017.

¶10 Additionally, the Johnsons alleged that they were entitled
to relief pursuant to TILA, because TILA afforded “a
borrower . . . three years after the date of the consummation of
the transaction to provide notice of rescission” and “[o]n March
17, 2010, [the Johnsons] served Creditors with and recorded a
notice rescinding the note and trust deed on the [Property].” The
Johnsons contended that their notice “effectively rescinded the
Note and Mortgage, thereby relieving [them] of any obligation to
pay the Note secured by the Deed of Trust and voiding both
documents.”

¶11 In response, Appellees moved for partial judgment on the
pleadings. 1 Appellees argued that the Johnsons could not
“maintain any claim based on” their statute of limitations or

1. The Second Suit also involved claims for relief regarding
another property that is not the subject of this appeal.

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TILA rescission theories. As to the statute of limitations theory,
Appellees disagreed with the Johnsons about the applicable
statute of limitations, contending that the six-year limitations
period for negotiable instruments under Utah Code section
70A-3-118, not the limitations period for written contracts,
applied. To that end, they acknowledged that the limitations
period began running as of the date the debt was accelerated in
October 2009. But Appellees asserted that under Utah Code
section 57-1-34, which addresses how the limitations period is
satisfied with respect to judicial and nonjudicial foreclosures, see
generally Utah Code Ann. § 57-1-34 (LexisNexis Supp. 2019), the
foreclosure sale was not time-barred because the appropriate
action—recording the notice of default—took place within six
years of the loan’s acceleration.

¶12 With respect to the TILA theory, Appellees argued that
the claim preclusion branch of res judicata barred relitigation of
the Johnsons’ TILA rescission claim. They asserted that all three
elements of claim preclusion were met: they were in privity with
the defendants in the First Suit, the TILA right-to-cancel claim
was litigated and decided in that suit, and the First Suit’s
dismissal constituted a final judgment on the merits.

¶13 The district court agreed with Appellees. As to the statute
of limitations argument, the court concluded that the limitations
period for negotiable instruments under section 70A-3-118 was
the “controlling statute of limitations to enforce the note” and
that the Default Notice recorded in October 2009 “satisfied the
statute of limitations to enforce the deed of trust” pursuant to
section 57-1-34. In so deciding, the court determined that the
plain language of section 57-1-34 dictated that the Default Notice
“both accelerated the loan and satisfied the statute of limitations
simultaneously.” The court also concluded that the Johnsons’
rescission claim under TILA was barred by claim preclusion,
determining that each element of claim preclusion had been met
and that “the court in the [First Suit] considered and rejected [the
Johnsons’] alleged TILA rescission and held it did not bar

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foreclosure.” On this basis, the court granted Appellees’ motion
for partial judgment on the pleadings and dismissed the claims
applicable to the Property.

¶14 The Johnsons timely appeal. 2

ISSUES AND STANDARDS OF REVIEW

¶15 The Johnsons raise two issues on appeal. First, they argue
that the district court erred by determining that recording the
Default Notice in October 2009 pursuant to Utah Code section
57-1-34 satisfied the applicable statute of limitations. “We review
questions of statutory interpretation for correctness, affording no
deference to the district court’s legal conclusions.” Marion
Energy, Inc. v. KFJ Ranch P’ship, 2011 UT 50, ¶ 12, 267 P.3d 863
(cleaned up).

¶16 Second, the Johnsons argue, in the alternative, that the
district court erred in concluding that their TILA rescission claim
was barred under the claim preclusion branch of res judicata.
“Whether a claim is barred by res judicata is a question of law
that we review for correctness.” Gillmor v. Family Link, LLC, 2012
UT 38, ¶ 9, 284 P.3d 622.

2. The Johnsons originally sought review of the district court’s
order in an appeal we dismissed without prejudice for lack of
finality. The jurisdictional defect was remedied, and the
Johnsons then filed the present appeal. In doing so, Appellees
asked us to decide the present appeal on the briefs and
arguments submitted in the previously dismissed appeal, which
we agreed to do after receiving no response from the Johnsons.
Accordingly, we resolve the present appeal based on the
arguments and briefs previously filed.

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ANALYSIS

I. Statute of Limitations

¶17 The Johnsons argue that the district court incorrectly
concluded that recording the Default Notice satisfied the statute
of limitations applicable to enforcing the Note secured by the
trust deed. The Johnsons concede that Utah Code section
70A-3-118, which provides a six-year limitations period for
actions enforcing a party’s obligation to pay on a note, governs
the timing for commencing the nonjudicial foreclosure against
them. See generally Utah Code Ann. § 70A-3-118(1) (LexisNexis
2009). And they acknowledge that Utah Code section 57-1-34(2)
requires a trustee seeking to pursue a nonjudicial foreclosure to
record a default notice within the six-year period prescribed
under section 70A-3-118. See generally id. § 57-1-34(2) (Supp.
2019). But they assert that a trustee’s sale is a separate action
from the recording of a notice of default within the overall
nonjudicial foreclosure proceedings, independently subject to its
own six-year limitations period under section 70A-3-118(1). On
that basis, they claim that recording the Default Notice cannot
satisfy the limitations period applicable to the actual trustee’s
sale and that, under section 70A-3-118(1), the trustee’s sale itself
must occur within six years of the loan’s acceleration. We
conclude that the plain language of sections 57-1-34 and
70A-3-118 does not support the Johnsons’ preferred
interpretation.

¶18 Our primary goal in resolving a question of statutory
interpretation “is to evince the true intent and purpose of the
Legislature,” and “the best evidence of the legislature’s intent is
the plain language of the statute itself.” Marion Energy, Inc. v. KFJ
Ranch P’ship, 2011 UT 50, ¶ 14, 267 P.3d 863 (cleaned up).
“Absent a contrary indication, we assume that the legislature
used each term advisedly according to its ordinary and usually
accepted meaning.” Nielsen v. Retirement Board, 2019 UT App 89,
¶ 17, 443 P.3d 1264 (cleaned up). We also “seek to give effect to

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omissions in statutory language by presuming all omissions to
be purposeful.” Marion Energy, 2011 UT 50, ¶ 14. And “when the
plain meaning of the statute can be discerned from its language,
no other interpretive tools are needed,” and our task is typically
at an end. Hertzske v. Snyder, 2017 UT 4, ¶ 10, 390 P.3d 307
(cleaned up); Bagley v. Bagley, 2016 UT 48, ¶ 10, 387 P.3d 1000.

¶19 At issue in this case is the nonjudicial foreclosure of the
trust deed on the Property. Utah Code section 57-1-34 addresses
the limitations of actions for both judicial and nonjudicial
foreclosures of trust property. It provides,

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. § 57-1-34.3 This court has recently explained, as
the parties concede, that the “period prescribed by law”

3. This wording reflects the statutory language as amended
effective May 10, 2016. Before that date, section 57-1-34
provided,
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). On appeal, the
Johnsons do not challenge the district court’s determination that
the May 10, 2016 amended version, rather than the pre-
amendment version, applies here. We accordingly accept that
(continued…)

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applicable to nonjudicial foreclosures under a trust deed is that
set forth in Utah Code section 70A-3-118(1), see Deleeuw v.
Nationstar Mortgage LLC, 2018 UT App 59, ¶¶ 11–16, 424 P.3d
1075 (cleaned up), which provides 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).

¶20 The meaning of sections 57-1-34 and 70A-3-118 in setting
forth the operation of the statute of limitations applicable to
nonjudicial foreclosures of trust deeds is clear. As decided by
this court in Deleeuw, 4 the limitations period for nonjudicial
foreclosures of trust deeds is six years, triggered either upon the
due date provided in the note or the accelerated due date. See
Utah Code Ann. § 70A-3-118(1); id. § 57-1-34(2); Deleeuw, 2018
UT App 59, ¶¶ 12–18. Once the limitations period is triggered,

(…continued)
the amended version is the relevant version for purposes of
resolving this appeal.

4. The Johnsons place much emphasis on our decision in Deleeuw
v. Nationstar Mortgage LLC, 2018 UT App 59, 424 P.3d 1075,
contending that in that case we decided that the trustee’s sale
must occur within six years after note acceleration. We did not.
In Deleeuw, the only question before us was which “period
prescribed by law” applied to section 57-1-34, and we
determined that the appropriate period was that prescribed in
section 70A-3-118(1), which provides a six-year period from the
due date of the note or the acceleration due date. Id. ¶¶ 11–16
(cleaned up). In other words, we decided in Deleeuw only what
event triggers the running of the limitations period for
nonjudicial foreclosures (i.e., the events described in section
70A-3-118(1)). We rendered no opinion on what event satisfies
the limitations period.

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section 57-1-34 plainly and unambiguously provides that a
lender pursuing a nonjudicial foreclosure of a trust deed
commences an action for nonjudicial foreclosure, and thereby
satisfies the limitations period, by “fil[ing] for record a notice of
default.” Utah Code Ann. § 57-1-34(2). And contrary to the
Johnsons’ preferred interpretation, there is no suggestion in
either section 70A-3-118 or section 57-1-34 that the trustee’s sale
itself must occur within any specified time period or that the
trustee’s sale carries independent significance with respect to the
applicable limitations period.

¶21 Here, applying the plain language described above, it is
readily apparent that Appellees (through their
predecessors-in-interest) satisfied the limitations period.
Appellees’ predecessors-in-interest accelerated the entire
underlying obligation secured by the trust deed by declaring the
obligation to be “immediately due and payable” on October 30,
2009. That acceleration event triggered the limitations period.
The Default Notice was also filed and recorded with the Utah
County recorder’s office on October 30, 2009. Under the plain
language of section 57-1-34(2), the timely recording of the
Default Notice satisfied the limitations period.

¶22 Nevertheless, the Johnsons suggest that even if the “literal
language” of section 57-1-34 dictates this result, we should reject
it because such an interpretation works an absurd result. They
contend that this interpretation has the practical effect of
allowing a trustee to “wait any indefinite number of years that it
desired before initiating the [trustee’s] sale” and that the
legislature cannot have intended that recording a notice of
default, which accelerates the due date of the note,
simultaneously triggers and satisfies the applicable statute of
limitations. But applying the absurdity doctrine “is a drastic
step, one [our supreme court has] described as strong medicine,
not to be administered lightly,” because it requires that we
“override the plain language” employed by the legislature by
“interpret[ing] the statute contrary to its plain meaning.” Utley v.

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Mill Man Steel, Inc., 2015 UT 75, ¶¶ 47–48, 357 P.3d 992 (Durrant,
C.J., concurring and dissenting) (cleaned up). In this respect, we
will “not apply the absurdity doctrine unless the operation of the
plain language is so overwhelmingly absurd that no rational
legislator could have intended the statute to operate in such a
manner.” Bagley, 2016 UT 48, ¶ 28 (cleaned up).

¶23 The Johnsons have not demonstrated that no rational
legislator could have intended a recorded notice of default to
satisfy the limitations period for nonjudicial foreclosures of trust
deeds—even in circumstances where the acceleration event
occurs simultaneously with the recording event. See id.
Appellees point out that the legislature might have sought to
recognize that lenders typically have “more control over
recording a notice of default than they do over the actual sale”
and that tethering the limitations period for nonjudicial
foreclosures of trust deeds to the event of recording the notice of
the default—an early step in the nonjudicial foreclosure
process—is consistent with the approach taken with judicial
foreclosure, where the lender satisfies the limitations period by
filing a complaint. See Utah Code Ann. § 57-1-34. See generally id.
§ 57-1-24 (2010) (outlining the process required to conduct a
trustee’s sale). The Johnsons do not engage in like reasoning, and
apart from labeling the district court’s interpretation absurd,
they do not explain why no rational legislator could have
intended the statutes to operate according to their plain
meaning. 5

¶24 In short, the Johnsons have not persuaded us that the
legislature intended their preferred interpretation of section

5. The Johnsons additionally suggest that the foreclosure on the
Property is barred by the doctrine of laches. This issue was not
raised below and is unpreserved. Accordingly, we decline to
reach it. See True v. Utah Dep’t of Transp., 2018 UT App 86, ¶¶ 29–
30, 427 P.3d 338.

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57-1-34, in conjunction with section 70A-3-118(1). Thus, we
affirm the district court’s decision on this issue.

II. Claim Preclusion

¶25 The Johnsons additionally argue that, in the alternative,
the district court erred in concluding that their claims with
respect to their TILA rescission are barred by the claim
preclusion branch of res judicata. While they make several
arguments with respect to the correct characterization of a TILA
rescission, they essentially argue that raising the TILA rescission
in the First Suit did not amount to raising a claim for claim
preclusion purposes. We disagree.

¶26 The Johnsons filed a third suit (the Third Suit) in January
2018, which was also dismissed. Like the First Suit, both suits
were connected, centering on the Johnsons’ related attempts to
attain relief from the foreclosure proceedings on the Property. In
their appeal of the Third Suit, Johnson v. Nationstar Mortgage LLC
(Johnson I), 2019 UT App 199, 455 P.3d 1120, the Johnsons raised
the same res judicata argument presently before us—that the
district court erred by concluding that their requests for relief
based on their TILA rescission were claims for purposes of the
claim preclusion branch of the doctrine of res judicata and that
they were accordingly barred. There, we affirmed the district
court’s determination that the Johnsons’ request for relief on the
basis of their TILA rescission was barred by res judicata,
concluding, among other things, that the district court in the
First Suit “plainly resolved their requested entitlement to relief
based on the fact of the TILA rescission” and that the Johnsons
had not otherwise explained why claim preclusion did not apply
under the circumstances. See id. ¶¶ 16–21.

¶27 This appeal likewise requires us to determine whether the
district court erred in concluding that the court in the First Suit
resolved the Johnsons’ entitlement to relief, given their TILA
rescission. And the Johnsons do not offer different grounds for

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granting the relief they seek from the district court’s claim
preclusion decision, based on the dismissal of the First Suit, than
they did in Johnson I. Thus, our reasoning in Johnson I applies
here with the same force. Accordingly, for the same reasons
articulated in Johnson I, we affirm the district court’s
determination that the Johnsons’ request for relief on the basis of
their TILA rescission is barred as res judicata by the district
court’s decision in the First Suit. See id.

CONCLUSION 6

¶28 We affirm the district court’s dismissal of the Johnsons’
claims. We conclude that the district court properly determined
that the statute of limitations applicable to enforcing the Note
secured by the trust deed on the Property had been met. And we
conclude that the district court properly dismissed the Johnsons’
TILA rescission claim on the basis of res judicata.

6. In a single sentence of their conclusion, Appellees ask this
court to award them fees incurred on appeal pursuant to rule 33
of the Utah Rules of Appellate Procedure. Rule 33 provides that
if an appellate court determines that an appeal taken is “either
frivolous or for delay, it shall award just damages, which may
include single or double costs, . . . and/or reasonable attorney
fees, to the prevailing party.” Utah R. App. P. 33(a). “[P]arties
seeking attorney fees under rule 33 face a high bar.” Porenta v.
Porenta, 2017 UT 78, ¶ 51, 416 P.3d 487. This is because the
“imposition of such a sanction is a serious matter and only to be
used in egregious cases, lest the threat of such sanctions should
chill litigants’ rights to appeal lower court decisions.” Id.
(cleaned up). Here, Appellees have not explained why the
Johnsons’ appeal meets this standard. Because Appellees have
not demonstrated that rule 33 fees are justified, we decline to
award them.

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