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Kitches v. Msni Benefit, LLC

United States District Court, D. Utah, Central Division

September 15, 2017

DAN KITCHES, Plaintiff,



         This matter is before the court on Defendant MSNI Benefit LLC's (MSNI) Motion to Dismiss. On September 13, 2017, the court held a hearing on the motion. At the hearing, the Plaintiff Dan Kitches (Kitches) was represented by Brett W. Hastings and MSNI was represented by Hillary R. McCormack. The court took the motion under advisement. Based on the briefing filed by the parties and the law and facts relevant to the pending motion, the court issues the following Memorandum Decision and Order GRANTING MSNI's Motion to Dismiss.


         On or about August 2007, Kitches obtained a loan from JPMorgan Chase Bank on his personal residence. The note was assigned multiple times and is now owned by MSNI. The note is subordinate to a first position promissory note held by a party that is undisclosed and not subject to this case. The Note is secured by a Trust Deed on Kitches' personal residence.

         Around May 2008, Kitches failed to make payments on both the first and second position promissory notes. Shortly thereafter, the holder of the first position promissory note commenced foreclosure proceedings and gave notice to Kitches that a sale was scheduled on May 29, 2009. The sale was subsequently canceled because the first priority promissory note was restructured through the Home Affordable Modification Program.

         Kitches has not made payments on the subordinate note since May 2008. On or about July 5, 2016, Kitches received a letter from Lunberg & Associates law firm notifying Kitches that he is in default on the second position promissory note and must pay $236, 917.95 to MSNI to cure the default.

         Kitches refused to cure the default because he claims that the six year statute of limitations for collecting on the debt has expired. Lundberg responded by asserting that the statute of limitations did not commence until the loan was accelerated pursuant to its July 5, 2016 letter.

         The Trust Deed states that the Trustor is in default if he does not meet the repayment terms, and the Lender has the right, at its option, to declare the entire indebtedness immediately due and payable. The Note provides that the maturity date on the principal amount of $235, 000 is August 17, 2037.

         On September 16, 2016, MSNI recorded a notice of Default and Election to Sell in the Salt Lake County Recorder's Office. The Notice of Default states, “The monthly payment obligation set forth in the promissory note is in default. All delinquent monthly payments, together with all unpaid taxes, insurance and other obligations under the promissory note and trust deed are due. Under the provisions of the promissory note and trust deed, the unpaid principal balance is accelerated and now due, together with accruing interest, late charges, costs, and trustees' and attorneys' fees…”

         Kitches argues that the statute of limitations has passed and therefore his complaint seeks: 1. A temporary restraining order enjoining the sale of the property that was previously scheduled on April 14, 2017; 2. Declaratory relief to quiet title; and 3. An award of damages, including attorneys' fees.


         Dismissal is appropriate under Rule 12(b)(6) of the Federal Rules of Civil Procedure when the complaint, standing alone, is legally insufficient to state a claim on which relief may be granted. Sutton v. Utah State Sch. For the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999). When considering a motion to dismiss for failure to state a claim, all well-pleaded facts are presumed to be true, but conclusory allegations need not be considered. Cory v. Allstate Ins., 583 F.3d 1240, 1244 (10th Cir. 2009).


         MSNI filed this motion to dismiss asserting it has a legal right to foreclose on the property because the statute of limitations has not expired. Kitches contends that the statute of limitations expired pursuant to Utah Code Ann. § 78B-2-309(2) which holds “An action may be brought within six years upon any contract, obligation, or liability founded upon an instrument in writing.” Utah Code Ann. § 57-1-34 further 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.” ...

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