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Jeppesen v. Bank of Utah

Court of Appeals of Utah

December 20, 2018

Luke D. Jeppesen, Appellee,
v.
Bank of Utah, Harry McMurdie, and Shira McMurdie, Appellants.

          Fourth District Court, Provo Department The Honorable Christine S. Johnson No. 150401095

          John D. Luthy and Marty E. Moore, Attorneys for Appellants

          Bryan H. Booth and John W. Mann, Attorneys for Appellee

          Judge Diana Hagen authored this Opinion, in which Judges Gregory K. Orme and Ryan M. Harris concurred.

          OPINION

          HAGEN, JUDGE

         ¶1 Bank of Utah, Harry McMurdie, and Shira McMurdie (collectively, the McMurdies) appeal the district court's grant of summary judgment in favor of Luke D. Jeppesen (Jeppesen). In 2001, Jeppesen's father, Zane Jeppesen (Zane), persuaded Harry McMurdie (Harry) to invest $500, 000 in a real estate project in exchange for a promissory note secured by a trust deed to real property Zane owned in Utah County (the Alpine Property). Zane defaulted on the note in 2003, but negotiated three subsequent agreements promising to pay the McMurdies by an extended due date. Many years later, the McMurdies foreclosed on the Alpine Property, which Zane had since conveyed to his son through a quitclaim deed.

         ¶2 Jeppesen brought a quiet title action. On cross-motions for summary judgment, the district court ruled that the six-year statute of limitations barred the nonjudicial foreclosure sale of the Alpine Property. Because we determine that there were genuine issues of material fact as to whether (1) the 2001 Note was extended or superseded by the subsequent agreements, and (2) Jeppesen was estopped from asserting the statute of limitations as a defense, we conclude the district court erred in granting summary judgment. Accordingly, we reverse and remand.

         BACKGROUND

         ¶3 Between 1998 and 2004, Zane worked as an agent of Beverly Hills Development Corporation, a real estate development company engaged in a widespread fraud scheme (the Beverly Hills project). During that time, Zane acquired a total of 134 Utah investors for the Beverly Hills project, raised approximately $8 million, and earned nearly $1 million in compensation. Most of the investments offered or sold by Zane took the form of unsecured promissory notes. In some cases, however, the promissory notes sold to investors were secured by trust deeds recorded against the Alpine Property. This case concerns the nonjudicial foreclosure sale of the Alpine Property by one of those investors.

         ¶4 Harry had known Zane for several decades. In 2001, Zane approached Harry about investing in the Beverly Hills project. Zane assured him that his investment would be secured by a first-position trust deed on the Alpine Property, a five-acre parcel which Zane claimed was worth $500, 000 per acre.

         ¶5 Harry agreed to invest some of his retirement funds held by the Bank of Utah (the McMurdie IRA) in the project. On September 24, 2001, Zane personally executed a promissory note for a $500, 000 loan from the McMurdie IRA, secured by two trust deeds[1] recorded against the Alpine Property (collectively, the 2001 Note). The 2001 Note required Zane to make monthly payments of $5, 000, with the entire unpaid principal and twelve percent interest due on March 24, 2003. The 2001 Note provided that "the makers, sureties, guarantors and endorsers hereof . . . consent to any and all extensions of time, renewals, . . . or modifications that may be granted by the holder hereof with respect to the payment or other provisions of this note."

         ¶6 From October 2001 through March 2003, Zane made regular payments of $5, 000 per month to the McMurdie IRA. But on the maturity date of the 2001 Note, Zane executed a new promissory note (the 2003 Note). The 2003 Note stated that the full principal and interest would be due on March 24, 2004. Zane did not create a new trust deed, but the 2003 Note listed the Alpine Property as the "Property Address."

         ¶7 From April 2003 through March 2004, Zane made payments to the McMurdie IRA. When the maturity date on the 2003 Note arrived, Zane executed two new promissory notes, one for the original $500, 000 investment and a second for $200, 271.11 in interest already due and owing on the original debt (collectively, the 2004 Notes). The 2004 Notes stated that "a Mortgage, Deed of Trust or Security Deed . . . 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 the Note." Again, Zane did not record a new trust deed, but the 2004 Notes listed the Alpine Property as the "Property Address." The 2004 Notes stated that the full principal and interest would be due on March 24, 2005.

         ¶8 In early 2005, Zane was charged with two counts of securities fraud, two counts of dealing unregistered securities, and two counts of sale by an unauthorized agent based on his work for the Beverly Hills project. He pled no contest and entered into a Stipulation and Consent Order with the Utah Division of Securities, restricting his ability to deal in securities, prohibiting further fraudulent conduct, and requiring him to pay a fine.

         ¶9 In September 2005, Zane filed for bankruptcy. The McMurdies were aware of the bankruptcy filing, but they did not challenge the discharge of Zane's underlying debt and did not seek relief from the automatic stay so as to commence foreclosure proceedings at that time. See generally 11 U.S.C. § 362 (2012). Zane assured Harry that "he had gone to considerable expense with an attorney to carve . . . [the Alpine Property] and [the McMurdies'] note out of the bankruptcy" so the McMurdies were still "safe with these instruments" and could "plan on being repaid." On December 14, 2005, the bankruptcy court entered an order of discharge for Zane, extinguishing his personal liability for the debt.[2] Although not evident from the record, the bankruptcy trustee apparently abandoned the bankruptcy estate's interest in the Alpine Property, presumably because the secured interests exceeded the value of the property.[3]

         ¶10 Several years later, unbeknownst to the McMurdies, Zane executed and recorded a quitclaim deed, conveying his interest in the Alpine Property to his son, Jeppesen.

         ¶11 In 2011, aware that the repayment deadline under the 2004 Notes had passed on March 24, 2005 and that a six-year statute of limitations had begun to run from that date, Harry approached Zane to discuss the outstanding debt. The parties executed two documents extending the maturity date of the 2004 Notes to March 24, 2013 (collectively, the 2011 Modification Agreement). These documents indicate that the "Start Date of [the] Original Contract" was "24 September 2001," the date of the 2001 Note. The recitals explain that the 2001 Note was secured by two trust deeds, which "remain liens of record against" the Alpine Property, and that "the parties hereto desire to enter into this Modification Agreement for the purpose of . . . memorializing the terms by which the [trust deeds] will be released." The 2011 Modification Agreements include an "Extension of the Maturity Date" to March 24, 2013. The parties signed the agreements on March 22, 2011, two days before the statute of limitations was to run on the McMurdies' claims.

         ¶12 When the maturity date of the 2011 Modification Agreements approached, Zane and Harry agreed to extend the maturity date by another three months (the 2013 Extension Agreements). The 2013 Extension Agreements again list the start date of the original contract as "24 September 2001" and set a new maturity date of June 24, 2013. Zane testified that the purpose of the document was "[t]o keep Harry McMurdie from foreclosing for three more months."

         ¶13 When Zane failed to pay the principal and accrued interest by June 24, 2013, the McMurdies initiated nonjudicial foreclosure proceedings against the Alpine Property. A foreclosure sale was held on July 23, 2015, and a trustee's deed conveying the property to the McMurdie IRA was recorded on July 28, 2015. Jeppesen filed this quiet title action one day before the foreclosure sale.

         ¶14 Jeppesen argued that the six-year statute of limitations barred the nonjudicial foreclosure sale because the last payment on the 2001 Note was received on March 18, 2004. On cross-motions for summary judgment, the district court ruled that the statute of limitations barred the McMurdies' ...


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