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VT Holdings LLC v. My Investing Place LLC

Court of Appeals of Utah

March 14, 2019

VT Holdings LLC, Matthew D. Scott, and Nelson Moak, Appellants,
My Investing Place LLC, First American Title Insurance Agency LLC, Karen Ogden, and Real Capital Funding LTD, Appellees.

          Fifth District Court, St. George Department The Honorable Thomas M. Higbee No. 100503684

          Gary W. Pendleton, Attorney for Appellants

          Erik A. Olson, Bruce R. Baird, David C. Castleberry, Ronald G. Russell, and Matthew J. Ball, Attorneys for Appellees

          Judge Diana Hagen authored this Opinion, in which Judges Michele M. Christiansen Forster and Jill M. Pohlman concurred.


          HAGEN, JUDGE.

         ¶1 This appeal stems from a judicial foreclosure action brought by lenders VT Holdings LLC, Matthew D. Scott, and Nelson Moak (collectively, VT Holdings) against property owner My Investing Place LLC (MIP) and lenders Karen Ogden and Real Capital Funding LTD (collectively, RCF). Although VT Holdings had previously executed a document reconveying its fourth-position trust deed to RCF, it claimed that the reconveyance was ineffective because it never provided RCF with an original copy of the document. VT Holdings also sought damages against First American Title Insurance Agency LLC (First American) for wrongfully recording the reconveyance based on an electronically transmitted document. Following a bench trial, the district court determined that the reconveyance was effective because the parties had agreed to conduct business electronically. The court dismissed VT Holdings' claims and quieted title to the property at issue in favor of RCF. We affirm.


         ¶2 MIP purchased real property (the Property) from VT Holdings, which MIP financed through several sources. RCF provided a bridge loan[2] of $2.8 million[3] to MIP in exchange for a promissory note secured by a first deed of trust with assignment of rents to RCF as the beneficiary and First American as the trustee. MIP intended to obtain permanent financing from other sources and to repay RCF's bridge loan within ninety days. First American recorded the RCF trust deed, and, as intended by the parties, the RCF trust deed was in first priority position. MIP also obtained financing from two other outside sources and those loans were secured by trust deeds recorded in second and third positions. Finally, VT Holdings provided $450, 000 in seller financing secured by a trust deed in fourth position.

         ¶3 Ultimately, MIP defaulted on all four loans secured by the four trust deeds. RCF, based on its first priority position, had two options: it could foreclose its trust deed or "it could take back deeds in lieu of foreclosure." Although taking the deeds in lieu of foreclosure was a "riskier" choice, RCF determined it was the "most viable" option because the value of the Property was less than the value of the RCF trust deed.

         ¶4 The lenders in second and third positions reconveyed their trust deeds to RCF. RCF also requested a reconveyance from VT Holdings. Two of RCF's partners, Brady Boman and Ray Zoll, contacted Moak, the majority owner of VT Holdings, and asked him to authorize a request for reconveyance (the Request for Reconveyance). Without a reconveyance, Boman and Zoll told Moak that RCF would foreclose the RCF trust deed, which would "wipe out" VT Holdings' interest. Boman testified that during this time "there were some discussions about [Moak] being involved with [developing the Property] in the future, but they were very general and very limited."

         ¶5 Three of RCF's representatives testified that Moak agreed to the reconveyance. Because Boman's practice was to deliver the originals of the documents to the title company for recording, he told Moak that he would need the original copy of the Request for Reconveyance. According to Boman, Moak would sign the Request for Reconveyance, "fax it to Zoll's office, and then deliver the original in due time." After the conversations with Moak, Zoll emailed Moak the Request for Reconveyance. Moak and his business partner, Scott, signed and notarized it. Moak then faxed the Request for Reconveyance back to RCF.

         ¶6 According to Moak, he signed, notarized, and faxed the Request for Reconveyance "only as a showing of good faith to demonstrate that he would be willing to deliver the original if some sort of agreement could be reached regarding his future participation" in developing the Property. But he did not communicate that intent or place any conditions on the Request for Reconveyance when he faxed it to RCF. RCF's paralegal testified that when she followed up with Moak, he agreed to sign and return the Request for Reconveyance without providing any conditions or asking her to wait to send it to First American for recording. A few days after he faxed the Request for Reconveyance back to RCF, Moak met with one of RCF's representatives who "was not impressed with anything [Moak] had to offer" regarding future participation in developing the Property. That representative did not ask Moak for the original copy of the Request for Reconveyance and Moak "did not volunteer it."

         ¶7 RCF delivered the Request for Reconveyance to First American via email. First American recorded the reconveyance (the Full Reconveyance) and mailed a copy of the Full Reconveyance to VT Holdings' business address, which released VT Holdings' trust deed and gave RCF clear title to the Property. According to Moak, he did not receive the copy of the Full Reconveyance and was not made aware of it until one year later. After waiting a few months, Moak attempted to contact RCF about the Full Reconveyance, but was unsuccessful. Moak then contacted First American and requested that it rescind the Full Reconveyance because Moak never gave RCF an original copy of the Request for Reconveyance and had never intended VT Holdings' trust deed to be reconveyed. After Moak complied with the requirement for requesting a rescission of a recorded reconveyance, First American recorded a Rescission and Notice of Erroneous Recordation (the Rescission).

         ¶8 Following the Rescission, VT Holdings initiated this lawsuit, seeking judicial foreclosure of its trust deed and naming MIP and RCF as defendants.[4] VT Holdings sought judgment in the amount of $472, 500, "plus interest at the rate of fifteen percent" and an order "extinguishing any interest of [the named defendants] in [the Property]." In the same lawsuit, VT Holdings sued First American for erroneously reconveying VT Holdings' trust deed without authorization and for the expenses VT Holdings would "reasonably incur in successfully defending [its] interest and priority in [the Property]" and "the diminution ...

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