District Court, Provo Department The Honorable Christine S.
Johnson No. 180400119
T. Pitts, Attorney for Appellants
H. Scott and Jason T. Baker, Attorneys for Appellee
Jill M. Pohlman authored this Opinion, in which Judges David
N. Mortensen and Ryan M. Harris concurred.
Appellants Neil Alan Johnson and Jodi Lyn Johnson
(collectively, the Johnsons) appeal the district court's
dismissal of their claims against Nationstar Mortgage LLC,
with respect to the Johnsons' mortgage on a home in Lehi,
Utah (the Property). The Johnsons contend that the court
erred in concluding that their claims under the Truth in
Lending Act are barred by the doctrine of res judicata. We
disagree with the Johnsons and affirm.
In April 2007, the Johnsons financed ownership of the
Property through a loan evidenced by a promissory note (the
Note) and secured by a trust deed on the Property. 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 Nationstar Mortgage LLC
and U.S. Bank NA.
The Note required the Johnsons to make payments on the first
day of each month and 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 of the Property in the event of default.
The Johnsons defaulted on the Note, and a notice of default
was recorded in the Utah County recorder's office on
October 30, 2009. The default notice accelerated the loan,
making the entire obligation "immediately due and
payable." A trustee's sale was scheduled for
The Johnsons filed suit in September 2010 (the First Suit),
naming as defendants, among others, Varent's former CEO,
MERS, and the foreclosure trustee. The Johnsons sought relief
from the nonjudicial foreclosure proceedings that had been
initiated against them, alleging that it appeared "no
entity exists today with the right to commence a non-judicial
foreclosure on [the Property]" and that there was a
controversy over "whether or not any of the Defendants
are qualified or 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 [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."
As relief, among other requests, the Johnsons asked the court
to enjoin the defendants from exercising their remedies under
the trust deed.
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), stating that they wanted to
file their complaint in federal court.
In January 2011, the district court granted the
defendants' motion to dismiss with prejudice. In so
doing, it specifically addressed the Johnsons' TILA
allegations. The court adopted the reasoning set forth in the
cases cited by the defendants and 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." For ...