Sterling Fiduciaries LLC v. JPMorgan Chase Bank NA

2017 UT App 135THE UTAH COURT OF APPEALS
STERLING FIDUCIARIES LLC, STONE UNTURNED TRUST,
DM BUNKER LLC, 4MACBOYS LLC, CRAIG VAN LEEUWEN,
AND NEW LANDS DEVELOPMENT LLC,
Appellants,
v.
JPMORGAN CHASE BANK NA AND BENJAMIN WOOLF,
Appellees.
Opinion
No. 20150928-CA
Filed August 3, 2017
Third District Court, Salt Lake Department
The Honorable Andrew H. Stone
No. 130900470
Dwight J. Epperson, Attorney for Appellants
James D. Gilson and J. Tayler Fox, Attorneys for
Appellee JPMorgan Chase Bank NA
Jonathan R. Rudd and Meagan Rudd, Attorneys for
Appellee Benjamin Woolf
JUDGE DAVID N. MORTENSEN authored this Opinion, in which
JUDGES GREGORY K. ORME and STEPHEN L. ROTH concurred. 1
MORTENSEN, Judge:
¶1 Sterling Fiduciaries LLC for a second time appeals to this
court, raising issues with a lower court’s disposition of questions
surrounding competing interests in certain real property (the
1. Judge Stephen L. Roth participated in this case as a member of
the Utah Court of Appeals. He retired from the court before this
decision issued.
Sterling Fiduciaries v. JPMorgan Chase Bank
Property). 2 Because we determine that the issues raised here
were previously decided by this court in Sterling Fiduciaries LLC
v. JPMorgan Chase Bank NA, 2016 UT App 107, 372 P.3d 741, lack
merit, are issues over which we lack jurisdiction, or are
unpreserved, we affirm.
BACKGROUND
¶2 In 2007, L. Kip McRae and Kimberly A. McRae (the
McRaes) obtained a loan for the Property. They executed a
$900,000 promissory note in favor of Taylor, Bean & Whitaker
Mortgage Corp. (Lender), who recorded a deed of trust in Salt
Lake County. The deed named Mortgage Electronic Registration
Systems Inc. (MERS) as the beneficiary on behalf of “Lender and
Lender’s successors and assigns.” Lender thereafter sold the
note, “which was subsequently transferred multiple times to
other lenders.” MERS tracked these transfers in its internal
database, although the individual transfers were not part of the
public record. Eventually, JPMorgan Chase Bank NA (Chase)
became servicer—and, ultimately, owner—of the note. 3 The
McRaes made their monthly mortgage payments to Chase
beginning around April 2009 and continued to do so until they
stopped paying on the note in October 2012.
¶3 In October 2010, the McRaes filed a quiet title action,
naming Lender as the sole defendant. They did not name or
serve MERS or any successor, including Chase. While the action
2. As will be discussed in greater detail, this case involves many
parties and a variety of claims. We use “Sterling” to refer to
Sterling Fiduciaries LLC and “Appellants” where we refer to
multiple appellants collectively.
3. In February 2013, MERS assigned the trust deed to Chase. Up
until that point, MERS remained the beneficiary of record.
20150928-CA 2 2017 UT App 135Sterling Fiduciaries v. JPMorgan Chase Bank
was pending, the McRaes transferred the Property to Sterling.
Sterling subsequently recorded a deed of trust in favor of
4MACBOYS LLC in Salt Lake County. Lender never answered
the McRaes’ complaint, and the district court granted default
judgment quieting title against Lender. The default judgment
was recorded in January 2012.
¶4 In November 2012, Benjamin Woolf entered into a
contract to purchase the Property from Sterling. In December
2012, DM Bunker LLC filed a notice of financial interest in the
Property in Salt Lake County. 4 In January 2013, Woolf filed the
present suit against Sterling and the McRaes, alleging breach of
the parties’ real estate purchase contract. 5 Chase—who was, and
currently is, “in possession of the original endorsed-in-blank
Note”—eventually intervened in the action.
¶5 During discovery, DM Bunker served Bank of America
NA with a subpoena seeking “documents related to its prior
ownership of th[e] loan.” 6 Bank of America was “unable to locate
any of the records requested with the information provided.”
4. According to DM Bunker, the company had provided
professional services to the McRaes. As part of the agreement for
those services, DM Bunker “reserve[d] the right to record an
Attorney’s Lien and or a Trust Deed against the Property to
secure payment of the contingent fee.” The notice of financial
interest that DM Bunker recorded in Salt Lake County related to
that agreement for services.
5. Also named as defendants were Craig Van Leeuwen, who had
apparently met with Woolf and held himself out as the McRaes’
attorney, and various parties claiming to have an interest in the
Property, including DM Bunker, 4MACBOYS, and others.
6. Bank of America had preceded Chase as a transferee of the
deed of trust.
20150928-CA 3 2017 UT App 135Sterling Fiduciaries v. JPMorgan Chase Bank
¶6 Chase filed a motion for summary judgment in April
2014. The district court granted summary judgment on Chase’s
claim for declaratory relief that the McRaes’ default judgment
had not quieted title as to Chase or extinguished the deed of
trust. It also granted summary judgment on Chase’s breach of
contract claim against the McRaes for defaulting under the note.
The district court denied summary judgment on Chase’s claim
against all defendants for judicial foreclosure of the deed of
trust. But after Chase filed a motion to reconsider that denial, on
October 2, 2015, the district court granted summary judgment on
the judicial foreclosure claim, entered a decree of foreclosure,
and entered an order of sale to allow foreclosure of the trust
deed. Appellants sought review of the summary judgment in
Chase’s favor, and on temporary remand from this court, the
district court clarified that “its October 2, 2015 [summary
judgment] Order constitutes the final, appealable order of the
Court, in accordance with Rule 54(b) of the Utah Rules of Civil
Procedure.” Accordingly, only the issues connected with the
October 2, 2015 order are before us on appeal.
¶7 Some of the parties involved in this appeal were
contemporaneously fighting over the Property in another case.
When MERS assigned its interest in the trust deed to Chase,
Sterling filed suit against Chase, “asserting that the assignment
to Chase was void because no document evidencing Chase’s
interest was recorded in the county records” and “because title
to the property had been quieted in December 2011.” Sterling
Fiduciaries LLC v. JPMorgan Chase Bank NA, 2016 UT App 107,
¶ 6, 372 P.3d 741. The district court in that case concluded “that
the [McRaes’] default judgment did not quiet title as to Chase’s
or MERS’s interests in the property.” Id. ¶ 7. Sterling appealed,
and we affirmed. Id. ¶¶ 8, 21. Our decision was based on the
determination “that the trust deed provided constructive notice
of both MERS’s and Chase’s interests in the property.” Id. ¶ 21.
Accordingly, we concluded in Sterling Fiduciaries that the
20150928-CA 4 2017 UT App 135Sterling Fiduciaries v. JPMorgan Chase Bank
McRaes’ “default judgment did not quiet title as to Chase” and
“Sterling was not a bona fide purchaser.” Id.ISSUES AND STANDARDS OF REVIEW
¶8 Appellants raise five issues on appeal. 7 First, they argue
that Chase’s beneficial interest was void “as against a
subsequent purchaser like [Sterling]” because the interest was
not recorded prior to Sterling’s purchase of the Property. Second,
Appellants argue that the McRaes’ default judgment quieted title
against Chase. Third, Appellants argue that DM Bunker’s
interest, having been recorded in December 2012—before Chase
recorded the assignment of the deed of trust in January 2013—
has priority over Chase’s claimed interest. Fourth, Appellants
argue that the district court erroneously granted default
judgment against Van Leeuwen. Fifth, Appellants argue that the
contract underlying Woolf’s complaint expired and, upon
expiration, became unenforceable.
¶9 The first three issues call into question the district court’s
grant of summary judgment. “We review a district court’s grant
of summary judgment for correctness and afford no deference to
the court’s legal conclusions.” Salt Lake City Corp. v. Big Ditch
Irrigation Co., 2011 UT 33, ¶ 18, 258 P.3d 539.
¶10 The standard of review applicable to the fourth and fifth
issues is irrelevant because we determine that we lack
jurisdiction to consider the issues or that Appellants failed to
properly preserve them for our review.
7. The fourth and fifth issues raised rest on facts not set forth
above. This is because, as will be explained in greater detail
below, these issues have nothing to do with the summary
judgment order that has been appealed.
20150928-CA 5 2017 UT App 135Sterling Fiduciaries v. JPMorgan Chase Bank
ANALYSIS
I. Validity of Chase’s Beneficial Interest
¶11 Appellants first claim that Chase’s “failure to record its
alleged beneficial interest in the property . . . until it recorded a
Corporate Assignment of Deed of Trust dated January 31, 2013,”
rendered that interest “void as against a subsequent purchaser
like [Sterling] . . . which purchased the Property for value and
without notice in 2011.” Appellants acknowledge that this
argument rests on the fact that “Sterling Fiduciaries has claimed
it is a bona fide purchaser, and relies upon a multitude of Utah
law which protects those recording interests in real property,
and reveals the consequences of not recording such interests.”
¶12 However, Sterling was not a bona fide purchaser. See
Sterling Fiduciaries LLC v. JPMorgan Chase Bank NA, 2016 UT App
107, ¶ 20, 372 P.3d 741. Our conclusion on this point has
preclusive effect on the present action and is determinative of
this issue. See Krofcheck v. Downey State Bank, 580 P.2d 243, 244
(Utah 1978) (“The doctrine of res judicata will bar a subsequent
action if the following requirements are met: (1) the two cases
must be between the same parties or their privies; (2) there must
have been a final judgment on the merits of the prior case; and
(3) the prior adjudication must have involved the same issue or
an issue that could or should have been raised therein.”).
¶13 Appellants do not dispute that our earlier decision
operates as res judicata. They do not claim that the opinion left
unanswered the question they now raise—nor could they, given
our explicit determination in Sterling Fiduciaries that “Sterling
could not have been considered a good faith purchaser and
cannot establish its priority over Chase.” Sterling Fiduciaries, 2016
UT App 107, ¶ 20. Instead, their only response is that “the prior
case . . . should be reconsidered.”
20150928-CA 6 2017 UT App 135Sterling Fiduciaries v. JPMorgan Chase Bank
¶14 Of course, we are bound by horizontal stare decisis and
Appellants provide no analysis that overcomes this obstacle.
“Horizontal stare decisis . . . requires that a court of appeals
follow its own prior decisions. This doctrine applies with equal
force to courts comprised of multiple panels, requiring each
panel to observe the prior decisions of another.” State v. Menzies,
889 P.2d 393, 399 n.3 (Utah 1994). Accordingly, we are in no
position to simply reconsider this court’s prior decision. Any
desire by Sterling for reconsideration should have been pursued
by way of a petition for rehearing or a petition for certiorari in
Sterling Fiduciaries.
¶15 Because Appellants provide no reasoned basis for us to
reconsider an opinion decided by another panel of this same
court on the same facts before us here, we reject the argument
that Sterling was a bona fide purchaser and affirm the district
court’s grant of summary judgment in this regard.
II. The McRaes’ Default Judgment
¶16 Appellants next contend that the McRaes’ default
judgment quieted title as to Chase. They cite cases from other
jurisdictions in which, they claim, “courts have flirted with Wall
Street’s latest attempts to conduct business more efficiently by
ignoring local recording laws and long standing consequences
by giving MERS a pass when it comes to document recording.”
Appellants specifically direct our attention to a case from the
Tennessee Supreme Court, Mortgage Electronic Registration
Systems, Inc. v. Ditto, 488 S.W.3d 265 (Tenn. 2015), which,
according to Appellants, “called MERS’ bluff.”
¶17 But we have already considered challenges to the validity
of MERS’s approach and upheld “the validity of MERS’s
beneficial interest in the trust deed and acknowledg[ed] the
parties’ right to appoint MERS to act on behalf of the lender.”
Sterling Fiduciaries LLC v. JPMorgan Chase Bank NA, 2016 UT App
107, ¶ 16, 372 P.3d 741. And even if we were inclined to revisit
20150928-CA 7 2017 UT App 135Sterling Fiduciaries v. JPMorgan Chase Bank
our earlier rulings regarding the validity of MERS’s interests—
which we are not—we have already specifically decided the
issue as it relates to the present parties and the default judgment
at issue.
¶18 In Sterling Fiduciaries, we answered the question of
whether title to the property had been quieted as to Chase. Id.
¶ 10. We said unequivocally that the McRaes’ “default judgment
cannot be read as quieting title as to Chase.” Id. Just as our
earlier opinion had preclusive effect on the issue of Sterling’s
status as a bona fide purchaser, it also precludes reconsideration
of whether the default judgment operated to quiet title against
Chase. We therefore affirm the court’s judgment on this issue.
III. DM Bunker’s Interest
¶19 The third issue Appellants raise centers on DM Bunker’s
notice of financial interest in the Property, which it recorded in
December 2012. Specifically, Appellants contend that the district
court erred in granting summary judgment because there were
“obvious gaps in Chase Bank’s purported chain of title to a
beneficial interest in the Trust Deed.” These gaps, Appellants
contend, are the result of “problems with Chase Bank’s
Declaration, and Bank of America’s failure to find any
information related to McRae, their Property, or the relevant
Trust Deed.” In essence, Appellants rely on the alleged
deficiencies in Chase’s chain of title to argue that DM Bunker
had an interest superior to Chase.
¶20 The declaration to which Appellants refer was filed by
Chase in support of its motion for summary judgment. Chase
used the declaration to help establish the chain of title between
Lender and Chase. The district court struck part of the
declaration because it was not based on personal knowledge of
the declarant. Appellants now contend that with the relevant
portion stricken, there is no proof that Bank of America received
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the beneficial interest, making it impossible to prove that Bank of
America properly transferred that interest to Chase.
¶21 Chase counters that chain-of-title evidence is irrelevant
because “[t]here is no dispute that Chase physically possesses
the endorsed-in-blank Note executed by the McRaes.” It further
asserts that “[e]ven if the underlying chain-of-title was relevant,
the undisputed evidence establishes that Chase has valid title to
both the Note and Trust Deed.” We agree with Chase.
¶22 Under Utah law, an endorsed-in-blank “instrument
becomes payable to bearer and may be negotiated by transfer of
possession alone until specially indorsed.” Utah Code Ann.
§ 70A-3-205(2) (LexisNexis 2009); see Commonwealth Prop.
Advocates, LLC v. JP Morgan Chase Bank, 2012 UT App 126, ¶ 2,
278 P.3d 618 (“Because it is undisputed that Chase was in
possession or held the indorsed in blank note, as a matter of law
Chase was entitled to enforce that note.”).
¶23 Like Commonwealth, there is no dispute that Chase is in
possession of the note. Appellants do not address this except to
say that somehow Chase’s possession of the note creates “a
genuine issue of material fact, which should have prevented”
summary judgment. Even that response comes only in
connection with Appellants’ argument that the McRaes’ default
judgment should operate against Chase. We are unable to
identify any actual dispute of fact over whether Chase is in
possession of the note. Accordingly, Chase is entitled to enforce
the note and the district court did not err by entering orders
allowing Chase to do so.
¶24 In any event, as Chase points out, it adequately
established its chain of title, making summary judgment
appropriate on that basis as well. Chase provided evidence
demonstrating that “MERS was the beneficiary of the Trust Deed
from its inception until MERS assigned its rights thereunder to
Chase on February 6, 2013, thus creating an unbroken chain-of-
20150928-CA 9 2017 UT App 135Sterling Fiduciaries v. JPMorgan Chase Bank
title of the beneficial interest in favor of Chase.” Bank of America
had been a transferee of the deed of trust before Chase. See supra
¶ 5 and note 5. Because of its connection to the deed of trust, DM
Bunker had served Bank of America with a subpoena, and
Appellants now rely heavily on that subpoena response—that
Bank of America was “unable to locate any of the records
requested with the information provided”—to counter this and
argue that there was a dispute of fact over Chase’s chain of title.
¶25 But Bank of America’s response really establishes little.
Being unable to locate records with the information provided is a
far cry from saying such records do not exist or never existed.
Furthermore, while the stricken portions of Chase’s declaration
spoke to the transfer of certain interests to Bank of America and
then from Bank of America to Chase, such transfers are
unnecessary to demonstrate Chase’s chain of title, given the
direct transfer of rights from MERS to Chase in 2013.
¶26 For these reasons, we reject Appellants’ attempts to attack
Chase’s chain of title. And because Appellants rely on the
alleged deficiencies in the chain of title to argue that DM Bunker
had an interest superior to Chase’s, we reject that argument as
well. We therefore affirm the district court’s summary judgment
on this point.
IV. Default Judgment Against Van Leeuwen
¶27 In an order separate from the summary judgment order
just affirmed, the district court granted Woolf a default
judgment against Van Leeuwen. The court granted default
under rule 37(d) of the Utah Rules of Civil Procedure, as a
sanction for Van Leeuwen’s failure to respond to Woolf’s
discovery requests. Appellants now argue that the entry of
default was improper. We are unable to consider this issue,
20150928-CA 10 2017 UT App 135Sterling Fiduciaries v. JPMorgan Chase Bank
however, because it is not within the issues certified as final
under rule 54(b) of the Utah Rules of Civil Procedure. 8
¶28 When this court directed the parties to obtain an order
from the district court clarifying whether and what issues were
ripe for appellate review, the district court clarified only that its
October 2, 2015 order was final and appealable. That order (1)
struck portions of Chase’s declaration, see supra ¶ 20; (2) denied a
rule 56(f) 9 motion filed by a defendant, which is not relevant to
this appeal; (3) granted Chase’s motion to reconsider the court’s
ruling on Chase’s motion for summary judgment, see supra ¶ 6;
(4) granted Chase’s motion for summary judgment on another
issue not relevant to this appeal; and (5) denied Sterling’s cross-
motion to reconsider the district court’s summary judgment
ruling. It made no mention of Van Leeuwen and decided no
issues related to him. Only those issues certified as final are
subject to appellate review at this juncture. All other issues
remain in their non-final state and are currently beyond the
jurisdiction of this court.
8. Woolf asserts that “there is no written order” granting default
against Van Leeuwen and that rule 7 of the Utah Rules of Civil
Procedure is thus unsatisfied. Appellants do not respond to this
assertion, and our review of the record reveals that Woolf is
correct. On July 21, 2014, the district court noted in a minute
entry, “The Court grants the Default against Defendant Craig
Van Leeuwen.” The next day, before any order was submitted or
signed, Appellants filed their notice of appeal. But whether a
final order under rule 7 was entered is not the real issue here,
because this issue was not part of the district court’s rule 54(b)
certification.
9. This provision is now found in subsection (d) of rule 56. See
Utah R. Civ. P. 56(d).
20150928-CA 11 2017 UT App 135Sterling Fiduciaries v. JPMorgan Chase Bank
¶29 Because this issue was not part of the district court’s rule
54(b) certification, we lack jurisdiction to consider it. See Preston
& Chambers, PC v. Koller, 943 P.2d 260, 264 n.4 (Utah Ct. App.
1997) (explaining that issues dealing with claims of “alleged
accounting errors and overbilling” were “not appropriately
before this court, as the Rule 54(b) certification was only granted
as to the legal malpractice counterclaims”). We therefore dismiss
without prejudice, for lack of jurisdiction, Appellants’ challenge
to the default judgment against Van Leeuwen.
V. The Real Estate Purchase Contract
¶30 The final issue on appeal centers on the contract for sale of
the Property between Woolf and Sterling. Appellants claim that
the contract “was never fully executed” and that, therefore,
“there can be no breach of contract.” Woolf argues that this issue
was not preserved. We agree.
¶31 We require appellants to include in their briefs “citation to
the record showing that the issue was preserved in the trial
court” or “a statement of grounds for seeking review of an issue
not preserved in the trial court.” Utah R. App. P. 24(a)(5).
Appellants’ brief contains neither. There is no statement of
preservation, nor is there a request that we review this issue
under some exception to our preservation requirement. We
therefore decline to consider this issue.
CONCLUSION
¶32 The district court’s grant of summary judgment in
Chase’s favor is affirmed. We dismiss Appellants’ claim that the
district court erroneously granted default judgment against Van
Leeuwen because we lack jurisdiction to consider it. And we will
not review Appellants’ unpreserved claim that the underlying
contract in this case was unenforceable.
20150928-CA 12 2017 UT App 135