How does Utah's statute of limitations apply to nonjudicial foreclosure proceedings? Johnson v. Nationstar Mortgage Explained

Background and Facts

The Johnsons financed their Lehi home with a loan secured by a trust deed in 2007. When they defaulted, a notice of default was recorded in October 2009, accelerating the entire loan obligation. After filing multiple unsuccessful lawsuits and bankruptcies, the Johnsons challenged a 2017 foreclosure sale, arguing the six-year statute of limitations under Utah Code section 70A-3-118 had expired and that their 2010 Truth in Lending Act (TILA) rescission notice voided the loan.

Key Legal Issues

The case presented two primary issues: (1) whether recording a notice of default satisfies the statute of limitations for nonjudicial foreclosure under Utah Code section 57-1-34, or if the actual trustee’s sale must occur within the limitations period, and (2) whether the Johnsons’ TILA rescission claims were barred by claim preclusion based on their earlier dismissed lawsuit raising identical TILA arguments.

Court’s Analysis and Holding

The Utah Court of Appeals applied correctness review to both statutory interpretation and res judicata issues. The court interpreted Utah Code section 57-1-34’s plain language, which allows lenders to satisfy the limitations period by “fil[ing] for record a notice of default.” The court rejected the Johnsons’ argument that the trustee’s sale itself must occur within six years, finding no statutory language supporting independent timing requirements for the sale. Regarding TILA claims, the court applied its previous decision in Johnson I, concluding that the 2011 dismissal of their first lawsuit created claim preclusion because the district court had “plainly resolved their requested entitlement to relief based on the fact of the TILA rescission.”

Practice Implications

This decision clarifies Utah’s approach to nonjudicial foreclosure timing requirements and reinforces the finality of claim preclusion. Practitioners should note that Utah Code section 57-1-34 ties satisfaction of the statute of limitations to recording the notice of default, not completing the sale. The court emphasized that lenders have “more control over recording a notice of default than they do over the actual sale,” making this approach practical and consistent with judicial foreclosure procedures. For borrowers challenging foreclosures, previously litigated TILA rescission arguments cannot be relitigated in subsequent suits involving the same property and parties.