JP Morgan Chase Bank, NA v. Wright
365 P.3d 708
Utah Ct. App.2015Background
- In 2004 Shannon Wright sold her home to Daniel and Eden Ellingson. The settlement recited a $650,000 purchase price and two promissory notes/trust deeds: (1) a $341,000 promissory note secured by an all-inclusive trust deed (AITD) dated June 25, 2004, referencing and subordinating to an existing Countrywide mortgage for $341,000; and (2) a separate $309,000 note and trust deed dated August 11, 2004 (recorded October 2005) to secure the remainder of the purchase price.
- The Ellingsons obtained a $400,000 loan from Chase in August 2004 and Chase recorded a trust deed on August 12, 2004. Chase used $333,667.07 to pay off Countrywide and disbursed the remaining $7,332.93 to Wright.
- Chase treated its recorded trust deed as first priority and believed the AITD was satisfied by the Countrywide payoff; Wright later filed a notice of default and sought to foreclose the AITD.
- Chase sued Wright seeking (a) judicial declaration that the AITD be released or (b) equitable subrogation to its trust deed. Cross-motions for summary judgment were filed; the district court granted Chase’s motion, declared the AITD invalid, and awarded Chase attorney fees under Utah Code § 57-1-38.
- On appeal Wright argued (1) the AITD in substance secured $682,000 or (2) alternatively that the $341,000 note/AITD required payment to Wright (not directly to Countrywide) and thus was not satisfied by Chase’s payoff. She also challenged the attorney-fee award, asserting she acted in good faith in refusing to release the AITD.
Issues
| Issue | Plaintiff's Argument (Wright) | Defendant's Argument (Chase) | Held |
|---|---|---|---|
| Whether the AITD/first promissory note remained enforceable after Chase paid off the Countrywide mortgage | The AITD/note required the Ellingsons to pay Wright directly; Chase’s payoff to Countrywide did not extinguish Wright’s $341,000 debt | The AITD was an all-inclusive/wraparound instrument tied to the Countrywide mortgage; Countrywide’s payoff extinguished the secured debt and thus the AITD | The court held the AITD was extinguished when Chase paid Countrywide; summary judgment for Chase affirmed |
| Priority of Wright’s $309,000 trust deed recorded after Chase | Wright implied the Countrywide payoff should have been credited to the later $309,000 obligation | The later $309,000 deed was recorded after Chase and indicates the parties intended subordination; it remains subordinate to Chase | Court treated the $309,000 deed as junior to Chase’s recorded trust deed |
| Whether Wright waived a good-faith defense to attorney fees under Utah Code § 57-1-38 | Wright claimed she acted in good faith and should not be penalized with fees | Chase argued Wright failed to plead good faith as an affirmative defense and thus waived it | Court held Wright waived the good-faith defense by not pleading it; award of attorney fees to Chase affirmed |
| Whether Chase is entitled to attorneys’ fees on appeal | Not separately argued by Wright on appeal | Chase requested appellate fees because it prevailed below and on appeal | Court remanded for calculation and award of appellate fees to Chase |
Key Cases Cited
- Salt Lake City Corp. v. Big Ditch Irrigation Co., 258 P.3d 539 (Utah 2011) (standard of review for summary judgment)
- Hector, Inc. v. United Sav. & Loan Ass’n, 741 P.2d 542 (Utah 1987) (mortgage/trust deed release and fee-award principles; good-faith defense)
- Shibata v. Bear River State Bank, 205 P.2d 251 (Utah 1949) (awarding fees for failure to release mortgage is penal; good-faith misbelief is defense)
- Adams v. George, 812 P.2d 280 (Idaho 1991) (defining wraparound/all-inclusive mortgage mechanics)
- Pack v. Case, 30 P.3d 436 (Utah Ct. App. 2001) (prevailing party awarded appellate attorney fees when fees were awarded below)