Harris v. Deparment of Health and Human Services ( 2024 )

2024 UT App 97THE UTAH COURT OF APPEALS
TODD HARRIS,
Appellant,
v.
DEPARTMENT OF HEALTH AND HUMAN SERVICES,
OFFICE OF RECOVERY SERVICES,
Appellee.
Opinion
No. 20220252-CA
Filed July 18, 2024
Third District Court, Salt Lake Department
The Honorable Kara Pettit
No. 210903461
Edward T. Wells, Attorney for Appellant
Sean D. Reyes, Erin T. Middleton, and William W.
Miller, Attorneys for Appellee
JUDGE DAVID N. MORTENSEN authored this Opinion, in which
JUDGES RYAN D. TENNEY and AMY J. OLIVER concurred.
MORTENSEN, Judge:
¶1 When Tyrone Boyd Webber didn’t pay his child support,
Utah’s Office of Recovery Services (ORS) obtained a lien against
Webber’s then-existing real property interests. The property was
held in two revocable trusts; Webber was the settlor of one of the
trusts. Webber used the property as collateral for a personal loan,
and he defaulted. Todd Harris, who was on notice of ORS’s lien,
subsequently purchased the property at a sale. Harris then
claimed that the ORS lien was unenforceable and sought to quiet
title. The district court rejected Harris’s claim. We do too and
affirm the district court’s grant of ORS’s motion for summary
judgment.
Harris v. DHHS
BACKGROUND 1
¶2 In 2011, ORS, 2 a division of the Utah Department of Health
and Human Services, obtained a “properly recorded” lien against
Webber for unpaid child support. At that time the lien was “upon
real property” Webber “owned in the county where it was
recorded,” which was Salt Lake County. Then in 2012, a divorce
decree was formally entered between Webber and Mary Ann
Lauritzen, formerly Webber. The divorce decree included a
judgment for payment of Webber’s past-due child support.
Lauritzen renewed that judgment in 2019.
¶3 This appeal centers on whether the judgment lien obtained
by ORS attached to land (the Property) owned by Webber prior to
his divorce. At the time ORS obtained the judgment lien in
2011, the Tyrone Boyd Webber Trust and the Mary Ann
Webber Trust held legal title to the Property. Webber was both a
trustee and settlor of his trust and a trustee of Lauritzen’s trust.
The trusts retained legal title, but as part of the divorce decree,
Lauritzen “transferred her beneficial interest in the [P]roperty” to
Webber.
¶4 In 2016, Webber entered into a trust deed note on the
Property to secure a personal loan from a lender (Lender). Lender
1. “In reviewing a district court’s grant of summary judgment, we
view the facts and all reasonable inferences drawn therefrom in
the light most favorable to the nonmoving party and recite the
facts accordingly.” Ockey v. Club Jam, 2014 UT App 126, ¶ 2 n.2,
328 P.3d 880 (cleaned up).
2. Among other services, ORS collects child support and enforces
support orders. Utah Code § 78B-12-113(1)(a); Child Support
Services, Utah Dep’t of Health & Human Services, https://ors.uta
h.gov/child-support/#ubermenu-column [https://perma.cc/586A-
BC26].
20220252-CA 2 2024 UT App 97Harris v. DHHS
foreclosed on the Property and held a trustee sale in 2019. Harris
purchased the Property at that sale.
¶5 In 2021, Harris filed a complaint seeking to quiet title and
obtain a declaratory judgment that he was “the sole owner to all
rights, title, and interest” in the Property and that ORS’s judgment
lien therefore had “no legal effect” as to his rights as sole owner.
He argued that the lien was unenforceable because the statute of
limitations had run on the claim without a renewal. Subsequently,
Webber and Lauritzen, individually and as trustees of the trusts,
disclaimed any interest in the Property. ORS filed a motion for
summary judgment, arguing that the statute of limitations had
not run, making a declaratory judgment or an order quieting title
inappropriate because ORS’s “right to a judgment lien” against
the Property was “unconditional.” In his opposition, and again in
his own motion for summary judgment that he later filed, Harris
argued for the first time that the Property was owned by the
trusts, rather than by Webber as an individual, and therefore was
not subject to ORS’s judgment lien. Harris conceded that the
statute of limitations had not run.
¶6 The district court granted ORS’s motion for summary
judgment, and it denied Harris’s. The court quieted title in the
Property to Harris, “subject to [ORS’s] lien.” The court
determined that Webber held beneficial interest in the Property as
the settlor of his trust. Therefore, citing a Utah statute, the court
concluded that the Property was “subject to [ORS’s] judgment lien
regardless of the naked paper title.” See Utah Code § 75-7-505(1)
(“During the lifetime of the settlor, the property of a revocable
trust is subject to the claims of the settlor’s creditors.”). The court
determined that no “other step was needed” for ORS’s judgment
lien to attach to the Property. Harris appeals.
ISSUE AND STANDARD OF REVIEW
¶7 The issue before us on appeal is whether the district court
correctly granted ORS’s motion for summary judgment. When
20220252-CA 3 2024 UT App 97Harris v. DHHS
reviewing a district court’s grant of summary judgment, we
review the court’s “legal conclusions and ultimate grant or denial
of summary judgment for correctness,” and we view “the facts
and all reasonable inferences drawn therefrom in the light most
favorable to the nonmoving party.” JENCO LC v. Perkins Coie LLP,
2016 UT App 140, ¶ 10, 378 P.3d 131 (cleaned up). In so doing, “we
grant no deference to the district court’s legal conclusions.” Id.(cleaned up).
ANALYSIS
¶8 Harris argues that the district court erred in granting ORS’s
motion for summary judgment because the child support
judgment lien did not automatically attach to the Property. Harris
contends that, instead, ORS was required to sue the trusts prior to
the Property being sold. We disagree.
¶9 With one exception not applicable here, “on and after the
date it is due” a missed child support payment becomes “a
judgment with the same attributes and effect of any judgment of
a district court.” Utah Code § 78B-12-112(3)(a); see also id. § 26B-9-
214(1). 3 That judgment “constitute[s] a lien against the real
property of the obligor upon the filing of a notice of judgment-lien
in the district court where the obligor’s real property is located.”
Id. § 26B-9-214(2)(a). Notice must specify the “amount of past-due
support” and comply with the procedural requirements of section
78B-5-202, see id. § 26B-9-214(2)(a)(i)–(ii), which governs all
judgment liens, see id. § 78B-5-202. State agencies, such as ORS, are
“exempt from the recording requirement.” Id. § 78B-5-202(7)(d).
“After receiving notice that a support lien has been filed” by ORS,
“no person in possession of any property which may be subject to
that lien may pay over, release, sell, transfer, encumber, or convey
3. The Utah Code has been renumbered since the litigation in this
case began. For convenience, we cite the current code as no
changes to the statutes are determinative in this case.
20220252-CA 4 2024 UT App 97Harris v. DHHS
that property to any person other than” ORS without a release,
waiver, or court order. Id. § 26B-9-215(1). However, if the property
is transferred, a child support judgment received by ORS becomes
“effective and enforceable as a lien against the real property
interest of any third party relying on the public record,” such as
Harris in this case, as soon as the judgment is “docketed in the
district court.” Id. § 78B-12-112(5).
¶10 Here, the district court determined that ORS properly filed
a lien against Webber in January 2011, which the court later
docketed. Harris did not dispute this fact below or on appeal.
Furthermore, Harris has not disputed that any property owned
by Webber in Salt Lake County was subject to the lien. Therefore,
our threshold question in determining whether summary
judgment was properly granted is whether Webber had a
real property interest in the Property at the time Harris purchased
it.
¶11 As discussed, real property subject to a judgment lien
includes all real property in the county where the judgment was
recorded that is “owned or acquired at any time by the judgment
debtor during the time the judgment is effective.” Id. § 78B-5-
202(7)(c)(ii). Because the judgment lien statutes do not provide a
definition for “real property,” our supreme court has looked to
the real estate title of the Utah Code, which defines “real
property” as “any right, title, estate, or interest in land.” Capital
Assets Fin. Services v. Maxwell, 2000 UT 9, ¶ 14, 994 P.2d 201(quoting Utah Code § 57-1-1(3)). Thus, for purposes of the
judgment lien statutes, a “lien attaches to a debtor’s beneficial and
equitable property interests, even if the debtor has no record
title.” Id. ¶ 15 (cleaned up). Such interests are so essential that
where equitable and beneficial property interests are absent
when a debtor merely holds bare legal title in property, a
judgment lien does “not attach to a debtor’s bare legal title in
property.” Id. (cleaned up); see also Lund v. Donihue, 674 P.2d 107,
109 (Utah 1983) (per curiam) (“Whenever one holds the naked
legal title, having no beneficial interest, there is nothing to which
20220252-CA 5 2024 UT App 97Harris v. DHHS
the judgment lien can attach.” (cleaned up)); Belnap v. Blain, 575
P.2d 696, 699 (Utah 1978).
¶12 In Butler v. Wilkinson, 740 P.2d 1244 (Utah 1987), our
supreme court determined that though a seller retains legal title
for security under an installment land sale contract, a purchaser’s
equitable interest in that property is still subject to a judgment lien
because the purchaser “may mortgage his or her equity in the
land, assign it to a third party as security for a loan, or sell the
interest by way of an assignment.” Id. at 1254 (cleaned up); accord
Bill Nay & Sons Excavating v. Neeley Constr. Co., 677 P.2d 1120, 1121
(Utah 1984) (“The interest of a purchaser under a real estate
contract is an interest in real property that can be mortgaged.
Upon the same reasoning, this equitable interest is also subject to
[a] judgment lien . . . .” (cleaned up)).
¶13 Here, while the trusts held legal title to the Property,
Webber, as settlor of his trust, held a beneficial interest in the
Property. And, as part of the divorce decree, Lauritzen, as settlor
of her trust and trustee of both trusts, transferred any beneficial
interest she had in the Property to Webber. Furthermore, Webber
then used that beneficial interest to secure a personal loan by
issuing a trust deed note on the Property. All these actions reflect
that Webber and his creditor understood that the Property was
his to encumber. Harris does not dispute these facts.
¶14 The Utah Uniform Trust Code states that “[d]uring the
lifetime of the settlor, the property of a revocable trust is subject
to the claims of the settlor’s creditors.” Utah Code § 75-7-505(1). 4
This principle is “based on the sound public policy of basing the
rights of creditors on the substance rather than the form of the
debtor’s property rights.” Restatement (Third) of Trusts § 25
4. Given that the record does not include any trust documents, we
will assume that the trusts are revocable because neither party
argues otherwise and both cite this section of the code in their
briefing.
20220252-CA 6 2024 UT App 97Harris v. DHHS
cmt. e (Am. L. Inst. 2003). Policies of this nature prevent debtors
from “using a trust as a device by which [they] can retain for
[themselves] and enjoy substantially all of the advantages of
ownership and at the same time place it beyond the legitimate
claims of [their] creditors.” Leach v. Anderson, 535 P.2d 1241, 1243
(Utah 1975).
¶15 Because Webber was the settlor of his revocable trust and
held the sole beneficial interest in the Property after the divorce,
the Property was subject to Webber’s creditors. His beneficial
interest was the effective equivalent of ownership, as evidenced
by his use of the Property as collateral to secure a personal loan.
Webber cannot use the trusts for his personal benefit with one
hand while using them as a shield against his creditors with the
other hand in an effort to avoid his child support obligations. The
reason that Harris was even able to purchase the Property at the
trustee sale is that Webber used the Property as collateral to obtain
a personal loan and fell behind on the payments.
¶16 While Harris does not dispute that ORS has a valid and
enforceable judgment lien against Webber, he argues that the lien
did not automatically attach to the Property as the Property was
partially owned by the trust rather than by Webber as an
individual. He argues that in order for the lien to attach to the
Property, ORS was required to bring a claim directly against the
Tyrone Boyd Webber Trust yet Harris provides no authority
supporting this contention—in fact, the authority he does provide
cuts against his argument. 5 Harris begins with a brief citation to
5. Harris provides additional authority and argument that ORS’s
judgment lien did not automatically attach to the Property as
owned by the trusts because Webber was the trustee. While it is
true that under Utah law “[t]rust property is not subject to
personal obligations of the trustee,” Utah Code § 75-7-507,
Webber was also the settlor of his trust, and property held in a
“revocable trust is subject to the claims of the settlor’s creditors”
(continued…)
20220252-CA 7 2024 UT App 97Harris v. DHHS
spendthrift trust statutes before moving on to acknowledge that
the trusts at issue here are revocable trusts and citing Utah Code
section 75-7-505(1). Throughout his argument, he vacillates
between authority discussing spendthrift and authority
discussing revocable trusts without explaining or even
acknowledging that there is an important difference between the
two. Not only does his argument misconstrue section 75-7-505(1),
but it also ignores the remaining body of relevant child-support
and judgment-lien statutes we have outlined above. Nothing in
either the child-support or judgment-lien statutes requires ORS, a
government-agency creditor, to file separate litigation in order for
its child-support lien to attach to the Property. In fact, section 78B-
5-202(7)(d) removes the requirement for state agencies to fulfill
the notice requirement, making it even easier—indeed
automatic—for the judgment lien to attach.
¶17 Section 75-7-505(1) explains that property in a revocable
trust is “subject to the claims of the settlor’s creditors.” Harris
argues that this statutory language merely grants “ORS the right
to make a claim against the trust property” but it “does not create
a lien” in and of itself. (Emphasis added.) However, the statute
does not mention creditors of the trust or claims against the trust;
instead, it explicitly mentions the settlor’s creditors, and a party
with a judgment lien against the settlor is exactly that. And,
despite the Property being held in a revocable trust, under Utah
law Webber’s beneficial interest in that property is still subject to
the valid and enforceable lien, without ORS directly suing either
trust. This reading of the statute—that a judgment lien attaches
automatically to a debtor’s interest in a revocable trust—has been
followed by other courts interpreting similar statutes. See Bank
One Tex., NA v. Pollack, 29 Cal. Rptr. 2d 510, 513 (Ct. App. 1994)
(holding that a judgment lien against the deceased settlor of a
during the lifetime of the settlor, id. § 75-7-505(1) (emphasis
added). Because Webber is the settlor and holds all the beneficial
interest of his trust, Harris’s argument against attachment due to
Webber’s other role as trustee carries no weight.
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revocable trust attached to the assets of the trust without the need
to amend the judgment to include the trust as a debtor); Bluff
Ventures LP v. Chicago Title Ins. Co., 950 F.2d 139, 145 (4th Cir. 1991)
(holding, as an alternative ground, that because the debtors could
“reach the trust property,” the judgment lien attached to that
property and stating that “a judgment lien creditor should be
allowed to stand in the shoes of [a] judgment debtor so as to reach
all assets that could be reached by the debtor” (cleaned up)).
Facing a similar scenario, the Colorado Supreme Court rejected
the argument Harris now makes and determined that a bank
creditor is not required to file a separate action against a revocable
trust in order for its judgment lien to attach. Pandy v. Independent
Bank, 2016 CO 49, ¶ 21, 372 P.3d 1047 (en banc). The Colorado
court reasoned that because the debtor had the “functional
equivalent” of an ownership interest in the revocable trust’s
assets, the bank was not required to file a separate action in order
to subject the property to the lien. Id. ¶¶ 16, 30 (cleaned up).
¶18 Harris further argues that a trust creates a “distinct legal
entity,” which we presume he argues to support his contention
that a separate claim must be brought to access trust property.
However, this and other broad, often unexplained statements
made by Harris do not address the specific facts and
circumstances before us now. As we’ve demonstrated—and the
authority Harris cites supports—regardless of whether a trust
creates a separate entity, a settlor’s lack of legal title in the assets
of a revocable trust does not shield trust property from the
settlor’s creditors. See Jessup v. Five Star Franchising LLC, 2022 UT
App 86, ¶ 54 n.10, 515 P.3d 466 (explaining that a settlor of a
revocable trust is bound by the language of the trust instruments
but also acknowledging that “a settlor’s creditors can access
property held in a revocable trust—a fact established in Utah by
statute”).
¶19 Harris’s final argument is that an affirmance from us
“would turn property law on its head” and “overturn centuries of
common law which has recognized a trust as an entity separate
20220252-CA 9 2024 UT App 97Harris v. DHHS
from its settlors and beneficiaries and required an action against
a trust” before a creditor can access trust property. But neither
scenario in this doomsday argument is true, and it is instead
Harris’s argument that would upend the present state of the law.
Harris argues that our affirmance here would allow creditors
moving forward to “hold [a] trust’s property hostage” by
claiming that its judgment lien automatically attached. He
contends that “anytime a trust wished to sell property, the buyer
would need to be assured there were no existing claims or liens
against any settlor or beneficiary of the trust.” But his explanation
is an accurate description of how liens already work and the
purpose of the entire title insurance industry—to confirm for
buyers that there is no cloud on a property’s title. This does not
place an undue burden on buyers as Harris argues, because it is
already the buyer’s burden when on notice of adverse claims to
conduct an investigation into whether there are any defects in the
title. See Butler v. Wilkinson, 740 P.2d 1244, 1259 (Utah 1987)
(holding that buyers who were aware of a judgment, “[t]o be in
good faith, . . . had a duty to make a reasonable investigation as to
the existence of [the debtor’s] rights” to the property). That is
particularly true here considering Harris never argues that he was
unaware of the lien at the time of purchasing. A buyer who is a
good-faith purchaser without notice of the lien may very well
have a claim against the settlor of a trust, see Salt Lake County v.
Metro West Ready Mix, Inc., 2004 UT 23, ¶ 13, 89 P.3d 155, but that
issue is very different from the one before us—which is whether
the lien attached at all.
¶20 Furthermore, the idea that property will be held “hostage”
is unnecessarily pejorative as this is simply the way a lien
functions—exactly as it was intended to. When a lien attaches to
property, the creditor is not required to immediately act, but the
lien instead “reserve[s] a place in line for” the creditor “to satisfy
that judgment from any subsequent sale of any property
belonging to the person against whom the judgment was
obtained.” 46 Am. Jur. 2d Judgments § 328 (2024). While the
creditor may choose to immediately “pursue[] a writ of execution
20220252-CA 10 2024 UT App 97Harris v. DHHS
or a foreclosure action,” it is not required to do so, so long as the
judgment has not expired. Gildea v. Wells Fargo Bank, NA, 2015 UT
11, ¶ 30, 347 P.3d 385. Thus, we reject Harris’s argument.
CONCLUSION
¶21 The district court properly granted summary judgment in
favor of ORS because the Property purchased by Harris was
subject to the judgment lien. We accordingly affirm.
20220252-CA 11 2024 UT App 97