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Johnson v. Nationstar Mortgage LLC

Court of Appeals of Utah

December 12, 2019

Neil Alan Johnson and Jodi Lyn Johnson, Appellants,
v.
Nationstar Mortgage LLC, Appellee.

          Fourth District Court, Provo Department The Honorable Christine S. Johnson No. 180400119

          Judson T. Pitts, Attorney for Appellants

          Robert H. Scott and Jason T. Baker, Attorneys for Appellee

          Judge Jill M. Pohlman authored this Opinion, in which Judges David N. Mortensen and Ryan M. Harris concurred.

          POHLMAN, JUDGE

         ¶1 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.

         BACKGROUND

         ¶2 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.

         ¶3 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.

         ¶4 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 September 2010.

         The First Suit

         ¶5 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.

         ¶6 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.

         ¶7 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 ...


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