Norton et al v. Wells Fargo Bank NA
MEMORANDUM DECISION AND ORDER granting 9 Defendant's Motion to Dismiss Complaint; denying 15 Plaintiff's Motion for Reconsideration. The Clerk of Court is directed to enter judgment in favor of Defendant and close the case. Signed by Judge Dale A. Kimball on 3/28/17. (dla)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
RAY E. NORTON, LARUE NORTON,
and DIANA NORTON NAYLOR,
Case No. 2:16CV1185DAK
Judge Dale A. Kimball
WELLS FARGO BANK, N.A.,
This matter is before the court on Defendant Wells Fargo Bank, N.A.’s Motion to
Dismiss and Plaintiffs Ray E. Norton, LaRue Norton, and Diana Norton Naylor’s Motion for
Reconsideration. On March 8, 2017, the court held a hearing on the motions. At the hearing,
Plaintiffs were represented by Dwight Epperson and Defendant was represented by Alan M.
Hurst. The court took the motions under advisement. Based on the briefing filed by the parties
and the law and facts relevant to the pending motions, the court issues the following
Memorandum Decision and Order.
On or about December 3, 2004, Plaintiff Diana Norton Naylor obtained a loan from North
County Real Estate, Inc., dba HMC Funding, in the original principal amount of $186,900.00,
represented in a Note she signed that same date. The Note is secured by a Trust Deed, also dated
December 3, 2004, in which Naylor, as borrower and grantor, granted to HMC, as beneficiary, a
lien on and security interest in property located at 210 South 200 East, in Midway, Utah. On
September 26, 2007, Diana Norton Naylor transferred the property to Ray E. Norton.
After February 2010, Plaintiffs were unable to make a payment on the Note. On June 22,
2010, Naylor entered into a loan modification agreement that brought the loan current through
August 1, 2010. Naylor defaulted under the Note and loan modification agreement by failing to
pay as of September, 2010.
The Note Naylor signed provided, in relevant part: “If I do not pay the full amount of
each monthly payment on the date it is due, I will be in default.” Note ¶ 7(B). “If I am in
default, the Note Holder may send me a written notice telling me that if I do not pay the overdue
amount by a certain date, the Note Holder may require me to pay immediately the full amount of
Principal which has not been paid and all the interest that I owe on that amount.” Id. ¶ 7(C).
“Even if, at the time when I am in default, the Note Holder does not require me to pay
immediately in full as described above, the Note Holder will still have the right to do so if I am in
default at a later time.” Id. ¶ 7(D). The Note further explained to Naylor that “[t]his Note is a
uniform instrument with limited variations in some jurisdictions. In addition to the protections to
the Note Holder under this Note, a . . . Deed of Trust . . . , dated the same date as this Note,
protects the Note Holder from possible losses which might result if I do not keep the promises
which I make in this Note. That Security Instrument describes how and under what conditions I
may be required to make immediate payment in full of all amounts I owe under this Note.” Id. ¶
The Trust Deed was assigned to Wells Fargo on March 19, 2012. On April 19, 2012,
First American Title Co. of Utah, trustee under the Trust Deed, recorded a notice of default and
accelerated the remaining payments under the loan. This Notice of Default states that Naylor
was in default of her obligation under the loan by failing to make the monthly payment that was
due September 1, 2010. The Trustee issued a Notice of Trustee’s Sale, setting a foreclosure sale
of the property on November 16, 2016.
Plaintiffs filed the instant action in state court on November 15, 2016. Defendants
removed the case to federal court. Plaintiffs sought a temporary restraining order enjoining
Defendant from foreclosing. However, this court denied the motion for preliminary injunction.
Motion to Dismiss
Defendant filed this motion to dismiss after the court denied Plaintiffs’ motion for
preliminary injunction. Defendant contends that Plaintiff’s Complaint fails to state a claim upon
which relief can be granted because the applicable statute of limitations does not preclude
Defendant’s foreclosure of Plaintiff’s property. Plaintiffs’ claims for injunctive relief, quiet title,
and declaratory judgment are all based on the argument that the Utah statute of limitations on
foreclosure has already run.
The current version of Utah Code Annotated Section 57-1-34, which went into effect on
May 10, 2016, 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.” Under
the pre-May 10, 2016 version of Utah Code Annotated Section 57-1-34, “[t]he Trustee’s sale of
property under a trust deed, 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.”
In this action, the parties dispute which “period prescribed by law,” i.e. statute of
limitation, applies to Defendant’s proposed foreclosure of Plaintiffs’ property. Plaintiffs
appeared to originally assert that six-year statute of limitation under Utah Code Annotated
Section 78B-2-309 for an action on a written agreement should apply and run from the date that
Plaintiffs first failed to make a monthly mortgage payment in February 2010. Plaintiffs then
appear to have agreed with Defendant that because the Note obligation secured by the Trust Deed
is a negotiable instrument, the statute of limitations in Utah’s Uniform Commercial Code applies.
Plaintiffs agree that the Note is a negotiable instrument, but continue to contend that the statute
of limitations provided in the UCC statute of limitations should run from the date of Plaintiff’s
first missed payment.
The UCC statute of limitations, Utah Code Annotated Section 70A-3-118(1), 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.” Id. When two statutory provisions
conflict, the more specific provision governs over the more general one. Millett v. Clark Clinic
Corp., 609 P.2d 934, 936 (Utah 1980). “[W]here 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).
The specific UCC statute of limitation period applies to the Note and Trust Deed at issue
in this case rather than the more general statute of limitation applicable to written contracts. The
obligation secured by the Trust Deed is a negotiable instrument. The Note in question is
ultimately due January 1, 2035, and was accelerated on April 19, 2012.
In Van Leeuwen v. Bank of America, 2015 WL 5618048, at *3 (D. Utah Sept. 24, 2015),
the court applied the more specific UCC statute of limitations in similar circumstances. The
court concluded that the statute of limitations had not run because six years had not elapsed since
the date of the acceleration. Id.
Plaintiffs, however, cite Tasila v. Isbell, 2015 WL 1467589, *2 (D. Utah March 27,
2015), in support of their argument that Defendant’s non-judicial foreclosure should be barred as
untimely. But in Tasila, the court ran the six-year statute of limitations from the date the trust
deed matured, not the date the party failed to make payments. Therefore, Tasila does not support
Plaintiffs also rely on Wells Fargo Bank N.A. v. Temple View Investments, 2003 UT App
441, 82 P.3d 655, in which the Utah Court of Appeals concluded that “Wells Fargo has made no
legitimate legal argument that its own delay in declaring default resulted in a unilateral extension
of the note’s due date. . . . Thus, Wells Fargo’s action, brought more than six years after its cause
of action accrued, was barred by the statute of limitations.” Id. at 658-59. But in Temple View,
the plaintiff was a lender who did not file suit until almost seven years after the promissory
note’s maturity date. Id. at 656. In order to survive the UCC’s six-year statute of limitations, the
lender argued that it had unilaterally extended the maturity date of the note by refusing to declare
a default. Id. at 657. The Utah Court of Appeals rejected the lender’s argument, holding that the
note did not permit such unilateral extensions. Id.
The Temple View case is inapplicable to the present case because it did not involve the
acceleration of the note. Rather, the case involved a lender who filed suit more than six years
after the maturity date of the note. The court did not consider when the statute of limitations
begins to run on a note that has not yet matured.
In First Nat’l Bank v. Lahm, 86 Conn. App. 403, 408-09, 861 A.2d 545, the Appellate
Court of Connecticut, applying a similar UCC provision, found that the limitations period does
not commence until the final installment payment becomes due or the loan is accelerated.
Acknowledging the difference between a note with a single due date and an installment loan with
many due dates, the court held “[t]he fact that a cause of action may have accrued with respect to
an installment in default does not necessarily mean that a cause of action has also accrued against
future installments that are not even due.” Id.
In this case, the statute of limitations began running in April 2012, when Wells Fargo
accelerated the debt. There is no basis under the UCC statute of limitations for finding that the
statute of limitations began to run with the first defaulted payment. The UCC statute of
limitations clearly refers to the date of acceleration or the date of maturity. Six years have not
run from either of those dates. Moreover, the Note does not require the Note Holder to accelerate
the loan with the first missed payment. Such a provision is to the borrower’s benefit. As in this
case, such a provision allowed Naylor to do a loan modification and get the loan current after an
initial default. Thus, the fact that the Note gives the Note Holder discretion in determining when
to accelerate the loan is not contrary to the public interest.
Under either version of Utah Code Ann. Section 57-1-34, Defendants actions in this case
are proper. Both the notice of default and notice of sale were timely made within the six-year
UCC statute of limitations from the date the Note was accelerated. Because the statute of
limitations has not run and does not bar Defendant from conducting a non-judicial foreclosure,
Plaintiff’s Complaint fails to state a claim upon which relief may be granted. All of Plaintiffs’
claims are tied to the statute of limitations argument. Therefore, the court grants Defendant’s
motion to dismiss and denies Plaintiffs’ Motion for Reconsideration.
Based on the above reasoning, Defendant’s Motion to Dismiss Complaint [Docket No. 9]
is GRANTED and Plaintiffs’ Motion for Reconsideration [Docket No. 15] is DENIED. The
Clerk of Court is directed to enter judgment in favor of Defendant and close the case.
DATED this 28th day of March, 2017.
BY THE COURT:
DALE A. KIMBALL,
United States District Judge
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