HAGEN, Judge
Opinion Fourth District Court, Provo Department
The Honorable Christine S. Johnson
No. 150401095 John D. Luthy and Marty E. Moore, Attorneys for Appellants Bryan H. Booth and John W. Mann, Attorneys for Appellee JUDGE DIANA HAGEN authored this Opinion, in which JUDGES GREGORY K. ORME and RYAN M. HARRIS concurred. HAGEN, Judge: ¶1 Bank of Utah, Harry McMurdie, and Shira McMurdie (collectively, the McMurdies) appeal the district court's grant of summary judgment in favor of Luke D. Jeppesen (Jeppesen). In 2001, Jeppesen's father, Zane Jeppesen (Zane), persuaded Harry McMurdie (Harry) to invest $500,000 in a real estate project in exchange for a promissory note secured by a trust deed to real property Zane owned in Utah County (the Alpine Property). Zane defaulted on the note in 2003, but negotiated three subsequent agreements promising to pay the McMurdies by an extended due date. Many years later, the McMurdies foreclosed on the Alpine Property, which Zane had since conveyed to his son through a quitclaim deed. ¶2 Jeppesen brought a quiet title action. On cross-motions for summary judgment, the district court ruled that the six-year statute of limitations barred the nonjudicial foreclosure sale of the Alpine Property. Because we determine that there were genuine issues of material fact as to whether (1) the 2001 Note was extended or superseded by the subsequent agreements, and (2) Jeppesen was estopped from asserting the statute of limitations as a defense, we conclude the district court erred in granting summary judgment. Accordingly, we reverse and remand.
BACKGROUND
¶3 Between 1998 and 2004, Zane worked as an agent of Beverly Hills Development Corporation, a real estate development company engaged in a widespread fraud scheme (the Beverly Hills project). During that time, Zane acquired a total of 134 Utah investors for the Beverly Hills project, raised approximately $8 million, and earned nearly $1 million in compensation. Most of the investments offered or sold by Zane took the form of unsecured promissory notes. In some cases, however, the promissory notes sold to investors were secured by trust deeds recorded against the Alpine Property. This case concerns the nonjudicial foreclosure sale of the Alpine Property by one of those investors. ¶4 Harry had known Zane for several decades. In 2001, Zane approached Harry about investing in the Beverly Hills project. Zane assured him that his investment would be secured by a first-position trust deed on the Alpine Property, a five-acre parcel which Zane claimed was worth $500,000 per acre. the agreements on March 22, 2011, two days before the statute of limitations was to run on the McMurdies' claims. ¶12 When the maturity date of the 2011 Modification Agreements approached, Zane and Harry agreed to extend the maturity date by another three months (the 2013 Extension Agreements). The 2013 Extension Agreements again list the start date of the original contract as "24 September 2001" and set a new maturity date of June 24, 2013. Zane testified that the purpose of the document was "[t]o keep Harry McMurdie from foreclosing for three more months." ¶13 When Zane failed to pay the principal and accrued interest by June 24, 2013, the McMurdies initiated nonjudicial foreclosure proceedings against the Alpine Property. A foreclosure sale was held on July 23, 2015, and a trustee's deed conveying the property to the McMurdie IRA was recorded on July 28, 2015. Jeppesen filed this quiet title action one day before the foreclosure sale. ¶14 Jeppesen argued that the six-year statute of limitations barred the nonjudicial foreclosure sale because the last payment on the 2001 Note was received on March 18, 2004. On cross-motions for summary judgment, the district court ruled that the statute of limitations barred the McMurdies' foreclosure sale and granted summary judgment in favor of Jeppesen. The McMurdies appeal.
The second trust deed is identical to the first and appears to have been inadvertently recorded.
Ordinarily, a secured creditor "is not limited to foreclosure on the mortgaged property should the debtor default on his obligation; rather, the creditor may in addition sue to establish the debtor's in personam liability for any deficiency on the debt and may enforce any judgment against the debtor's assets generally." Johnson v. Home State Bank, 501 U.S. 78, 82 (1991) (italics omitted). A discharge in bankruptcy "extinguishes only 'the personal liability of the debtor.'" Id. at 83 (quoting 11 U.S.C. § 524(a)(1) (2012)). But "a creditor's right to foreclose on the mortgage survives or passes through the bankruptcy." Id.
"Property of the debtor in which a creditor has a security interest becomes property of the debtor's bankruptcy estate subject to the lien or encumbrance, even where the lien or encumbrance equals or exceeds the fair market value of the property and the debtor, therefore, lacks equity in the property." 9A Am. Jur. 2d Bankruptcy § 1243 (2018). "Encumbered property remains in the estate until the secured creditor obtains relief from the automatic stay to proceed against the property or until the property is abandoned from the estate by the trustee." Id.
STANDARD OF REVIEW
¶15 In reviewing a grant of summary judgment, "we accord no deference to the [district] court, but review its conclusions for correctness." McNair v. Farris, 944 P.2d 392, 394 (Utah Ct. App. 1997) (quotation simplified).
ANALYSIS
¶16 On appeal, the McMurdies argue that the district court erred in granting summary judgment in favor of Jeppesen on the basis of the statute of limitations. Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Utah R. Civ. P. 56(a). At the summary judgment stage, the district court must "view all facts and reasonable inferences in the light most favorable to the nonmoving party." Pugh v. Dozzo-Hughes, 2005 UT App 203, ¶ 26, 112 P.3d 1247. Under this standard, "a district court is precluded from granting summary judgment if the facts shown by the evidence on a summary judgment motion support more than one plausible but conflicting inference on a pivotal issue in the case," especially if the inferences depend upon the parties' intent. Telegraph Tower LLC v. Century Mortg. LLC, 2016 UT App 102, ¶ 24, 376 P.3d 333 (quotation simplified). ¶17 The McMurdies advance two alternative arguments for reversal. First, the McMurdies claim that there is a material issue of fact as to whether the parties' subsequent agreements extended the maturity date of the 2001 Note to June 24, 2013, so that the statute of limitations did not begin to run until that date. Alternatively, the McMurdies contend that there is a genuine issue of material fact as to whether Zane induced Harry to forgo initiating the foreclosure within the limitation period and whether Jeppesen should be estopped from asserting the statute of limitations based on his father's actions. We agree that there are material issues of fact on both issues that preclude summary judgment.
I. Issues of Fact Regarding Extension of the 2001 Note
¶18 The first issue on appeal is whether there are material questions of fact as to when the statute of limitations began to Extension Agreement was intended to "continue" that extension before the statute of limitations elapsed. ¶27 There are material issues of fact precluding summary judgment in this case. If the parties intended the subsequent agreements to extend—rather than supersede—the 2001 Note secured by the trust deeds, the statute of limitations would have been triggered when Zane failed to pay the debt by the extended maturity date of March 24, 2013, in which case the 2015 foreclosure action would be timely. Because the parties' intent is a disputed and material question of fact, the application of the statute of limitations cannot be resolved on summary judgment. Accordingly, we vacate the district court's order and remand for trial or such other proceedings that may now be appropriate.
Neither side has argued that the six-year statute of limitations for negotiable instruments under the Uniform Commercial Code applies, which has potentially different triggering dates. Cf. Deleeuw v. Nationstar Mortgage LLC, 2018 UT App 59, ¶ 12, 424 P.3d 1075.
The McMurdies did not raise this argument initially because they had elected to void all agreements that followed the 2001 Note on the basis of fraud, thereby avoiding a provision in the 2011 Modification Agreements that might have released any securities fraud claims against Zane. In a motion to revise or vacate the court's summary judgment ruling, the McMurdies reversed their prior position and elected to ratify the 2003 Note, 2004 Notes, and the 2011 Modification Agreement. Although it would have been well within the district court's discretion to refuse to entertain the argument based on the McMurdies' belated change of heart, the court chose to address it on the merits. The court declined to revisit its summary judgment ruling only after concluding that the McMurdies could not prevail on the merits of their alternative argument.
It is unnecessary to consider the effect of the 2013 Extension Agreements because the foreclosure sale occurred within six years of the maturity date set in the 2011 Modification Agreement. But the 2013 Extension Agreements, which also listed the original contract date as "24 September 2001," as well as Zane's testimony that the purpose of that agreement was "[t]o keep Harry McMurdie from foreclosing for three more months," may provide additional evidence of the parties' intent to extend the original obligation.
II. Issues of Fact Regarding Equitable Estoppel
¶28 The McMurdies separately contend that the district court erred in granting summary judgment because a question of fact remains concerning whether Jeppesen is estopped from asserting the statute of limitations. Specifically, the McMurdies argue that genuine issues of material fact exist as to whether Zane fraudulently induced Harry to forego timely initiating a foreclosure sale and whether that conduct can be imputed to Jeppesen. could not make the initial showing that they "did not know and could not reasonably have known of the existence of a cause of action in time to file a claim within the limitation period," the court ruled that neither the concealment prong nor the exceptional circumstances prong of the discovery rule tolled the statute of limitations. ¶32 In reaching this conclusion, the district court did not apply the related doctrine of equitable estoppel. The doctrine provides:
Unlike equitable tolling, which is invoked in cases where the plaintiff is ignorant of his cause of action because of the defendant's fraudulent concealment, equitable estoppel is invoked in cases where the plaintiff knew of the existence of his cause of action but the defendant's conduct caused him to delay in bringing his lawsuit.
Ellul v.
Congregation of Christian Bros.,
774 F.3d 791, 802 (2d Cir. 2014) (quotation simplified). Equitable estoppel prevents a party from "lull[ing] an adversary into a false sense of security thereby subjecting his claim to the bar of limitations, and then be heard to plead that very delay as a defense to the action when brought."
Rice v.
Granite Sch.
Dist.,
456 P.2d 159, 163 (Utah 1969). In other words, "where the delay in commencing an action is induced by the conduct of [one party], or his privies . . . [the delay] cannot be availed of by [that party or his privies] as a defense."
Id. ¶33 To estop a defendant from asserting the statute of limitations as a defense, a plaintiff must establish three elements:
(1) a statement, admission, act, or failure to act by one party inconsistent with a claim later asserted; (2) reasonable action or inaction by the other party
taken on the basis of the first party's statement, admission, act, or failure to act; and (3) injury to the second party that would result from allowing the first party to contradict or repudiate such statement, admission, act, or failure to act.
Travelers Ins.
Co.
v.
Kearl, 896 P.2d 644, 647 (Utah Ct. App. 1995) (quotation simplified). The McMurdies have presented sufficient evidence to demonstrate material issues of fact concerning each of these elements. Viewing the evidence in the light most favorable to the McMurdies, a reasonable fact-finder could conclude that Zane acted inconsistently with a later assertion of a statute of limitations defense and that the McMurdies reasonably relied on those actions to their detriment. ¶34 First, based on Harry's testimony, Zane's testimony, and the documents in this case, a jury could reasonably conclude that Zane made "a statement, admission, act, or failure to act" that was "inconsistent with a claim later asserted."
Id. (quotation simplified). Specifically, the evidence could support a finding that Jeppesen's assertion of the statute of limitations is inconsistent with Zane's assurances to Harry that his investment remained secured by the trust deed and that the subsequent instruments merely extended the maturity date of the 2001 Note. ¶35 Second, the McMurdies produced evidence of "reasonable action or inaction by [Harry], taken on the basis of [Zane's] statement, admission, act, or failure to act."
Id. (quotation simplified). To that end, Harry testified that he was aware he was nearing the end of the six-year limitation period in 2011 and approached Zane about the debt before the statute of limitations had run. A jury could find that Harry had reasonably delayed in initiating a foreclosure sale at that time based on Zane's assurances. More importantly, a jury could find that it was reasonable for Harry to do so in light of the 2011
Alpine Property, does not know where it is located, and knows nothing about it other than "[i]t's 5 acres up on a hill." When asked why he was suing the McMurdies, Jeppesen responded, "For my dad's sake. He claims it's his property. . . ." He testified that it was Zane who asked him to file the lawsuit, and that he was not personally involved in making the arrangements. ¶41 When viewed in the light most favorable to the McMurdies as the nonmoving parties, this evidence was sufficient to create a genuine issue of material fact as to whether Zane's delaying tactics should be imputed to Jeppesen. The disputed issues of fact on the question of equitable estoppel precluded the entry of summary judgment.
Zane's underlying debt to the McMurdies was discharged in bankruptcy. As a result, the McMurdies' only recourse was foreclosure on the Alpine Property. See Johnson v. Home State Bank, 501 U.S. 78, 82-83 (1991) (explaining that a bankruptcy discharge does not affect a secured creditor's right to foreclose on a lien, but does extinguish the right to sue the debtor personally for any deficiency).
Jeppesen claims that the McMurdies did not preserve the argument that Zane's conduct can be imputed to Jeppesen. We disagree. In the district court, the McMurdies moved the court to treat Jeppesen as Zane's agent, citing the same evidence upon which they rely on appeal. --------
CONCLUSION
¶42 Because there were genuine issues of material fact as to whether (1) the 2001 Note was extended or superseded, and (2) Jeppesen was estopped from asserting the statute of limitations, the district court erred in granting summary judgment. We therefore reverse the district court's summary judgment order and remand the case to the district court for further proceedings consistent with this opinion.