DiMeo v. Nupetco Associates, LLC
2013 UT App 188
| Utah Ct. App. | 2013Background
- In 1982 a note for $373,909.13 was executed and secured by a trust deed on real property owned by Vern and Eleanor Strand; Michael Strand was a co‑obligor.
- Vern and Eleanor died in 1987; Michael made occasional payments thereafter and waived any defenses in 1990; their estates never paid.
- The note changed hands and was ultimately owned by Nupetco; Michael defaulted on the note now held by Nupetco.
- In 2006 Diane DiMeo (Eleanor’s personal representative) sued to quiet title, arguing the trust deed was unenforceable because the statute of limitations barred collection from Vern and Eleanor and, the district court concluded, they had become sureties whose security was exonerated by later modifications.
- The district court granted partial summary judgment for DiMeo, denied Nupetco’s cross‑motion, dismissed Nupetco’s counterclaim to foreclose and obtain a deficiency; Nupetco appealed.
Issues
| Issue | Plaintiff's Argument (DiMeo) | Defendant's Argument (Nupetco) | Held |
|---|---|---|---|
| Whether the statute of limitations barred personal claims against Vern and Eleanor | Statute of limitations (six years) ran as to Vern and Eleanor because they never paid; thus no personal liability | Agreed that personal deficiency claims against Vern/Eleanor are time barred | Court: Statute barred personal deficiency claims against Vern and Eleanor |
| Whether running of the statute of limitations converted Vern and Eleanor from obligors to sureties, invalidating the trust deed | Running SOL changed their status to sureties; sureties are exonerated by material modifications, so trust deed unenforceable | No legal basis that SOL converts obligors to sureties; trust deed’s plain terms control; SOL only bars remedy, not obligation or security | Court: Rejected conversion to suretyship; trust deed remains enforceable |
| Whether later modifications (extension of time; interest‑only payments) discharged any secondary obligation or the security | Modifications were material and exonerated sureties/security | Even if suretyship existed, routine extensions/interest‑only payments fall within modification clause and do not discharge security | Court: Modifications not sufficiently material to discharge security; trust deed remains effective |
| Whether Nupetco’s counterclaim (foreclosure and deficiency against Michael) should have been dismissed | DiMeo treated Michael’s liability as irrelevant once trust deed unenforceable | Foreclosure must be pursued first under the one‑action/security‑first rule; counterclaim and amendment to add Michael were necessary | Court: Dismissal of counterclaim was error; counterclaim should be reinstated and amendment permitted |
Key Cases Cited
- Orvis v. Johnson, 177 P.3d 600 (Utah 2008) (standard of review for summary judgment)
- First Sec. Bank of Utah, NA v. Banberry Crossing, 780 P.2d 1253 (Utah 1989) (trust deeds create security interests enforceable by foreclosure)
- Machock v. Fink, 137 P.3d 779 (Utah 2006) (one‑action/security‑first doctrine requires exhausting security before personal judgment)
- Holloway v. Wetzel, 45 P.2d 565 (Utah 1935) (part payment by one co‑obligor does not stop SOL running against others)
- Kamas Sec. Co. v. Taylor, 226 P.2d 111 (Utah 1950) (statute of limitations bars remedy but does not discharge underlying obligation)
- Nature’s Sunshine Prods., Inc. v. Watson, 174 P.3d 647 (Utah Ct. App. 2007) (modification clauses in trust deeds permit routine payment modifications without impairing security)