Stenquist v. JMG Holdings

2016 UT App 180
THE UTAH COURT OF APPEALS
R OSS S TENQUIST AND C AROLYN HEATH S TENQUIST,
Appellees,
v.
JMG HOLDINGS LLC, LAVON M CBRIDE,
AND JEFFREY A. WENGREEN ,
Appellants.
Opinion
No. 20150505-CA
Filed August 25, 2016
First District Court, Logan Department
The Honorable Brian G. Cannell
No. 120100556
Brandon J. Baxter, Attorney for Appellants
Ronald G. Russell and Royce B. Covington,
Attorneys for Appellees
JUDGE K ATE A. TOOMEY authored this Opinion, in which J UDGE
M ICHELE M. C HRISTIANSEN and S ENIOR JUDGE PAMELA T.
GREENWOOD concurred.1
TOOMEY, Judge:
¶1 	This appeal concerns the priority of Ross Stenquist and
Carolyn Heath Stenquist’s secured interest in real property (the
Property) in Cache County, Utah. We must determine whether
the district court properly granted summary judgment in the
Stenquists’ favor when it determined that, as a matter of law,
Lavon McBride’s senior trust deed was extinguished when he
1. Senior Judge Pamela T. Greenwood sat by special assignment
as authorized by law. See generally Utah R. Jud. Admin. 11-
201(6).

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accepted title to the Property in lieu of foreclosure. We conclude
that it did and therefore affirm.
¶2 	The underlying facts of this case are undisputed. Before
2006, Lavon McBride, owner of McBride Construction, owned
the Property and developed it into a residential neighborhood.
In June 2006, McBride sold and conveyed the Property to Golden
Crest 	Homes, 	Inc. 	Golden 	Crest 	executed 	a 	trust 	deed 	in
McBride’s 	favor 	(the 	McBride 	Trust 	Deed), 	securing 	the
repayment of a $240,000 promissory note (the McBride Note).
¶3 	In September 2006, Golden Crest conveyed the Property
to JMG Holdings LLC.2 JMG later executed a trust deed in favor
of 	the 	Stenquists, 	securing 	the 	repayment 	of 	a 	$300,000
promissory note by June 30, 2008 (the Stenquist Trust Deed and
Note). JMG eventually defaulted on its obligations to McBride
and the Stenquists.
¶4 	In lieu of foreclosure, in January 2011, McBride accepted
title to the Property via a quitclaim deed as satisfaction of the
McBride 	Note. 	Specifically, 	in 	a 	document 	titled 	“Estoppel
Affidavit,” JMG and McBride agreed that “the consideration for
said [quitclaim deed] was and is the full cancellation of that
certain Note signed by [JMG] to [McBride] secured by that
certain [McBride] Trust Deed signed by [JMG] and recorded
against the Property.”
¶5 	In December 2012, the Stenquists filed an action seeking
foreclosure of the Stenquist Trust Deed 	and Note. In their
amended 	complaint, 	the 	Stenquists 	asserted, 	among 	other
things, that the McBride Trust Deed “had been extinguished . . .
by virtue of the Quit Claim Deed.” They also contended that any
security interest in the Property claimed by McBride was inferior
2. Golden Crest and JMG Holdings are owned by some of the
same principals.

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to 	their 	security 	interest. 	McBride 	answered 	the 	Stenquists’
complaint and filed a counterclaim, arguing that his interest in
the Property “has never been subordinated to [the Stenquist
Trust Deed].”
¶6 	After discovery was completed and a bench trial had been
scheduled, the Stenquists filed a motion for summary judgment,
arguing that because the “McBride Note was satisfied in full by
execution and delivery of the Quitclaim Deeds,” the “McBride
Trust Deed no longer secures any obligation and it no longer
encumbers the Property.” “Accordingly,” they argued, “[the
Stenquists] are entitled to judgment declaring that the McBride
Trust Deed no longer encumbers the Property and [any of
McBride’s security] interests in the Property are junior to [the
Stenquist Trust Deed and Note].” Alternatively, the Stenquists
argued “[e]ven assuming the McBride Note was not satisfied in
full, because of the merger doctrine, the McBride Trust Deed was
merged into McBride’s fee title ownership of the Property.”
¶7 	In June 2014, the court granted the Stenquists’ summary
judgment 	motion. 	In 	its 	memorandum 	decision, 	the 	court
concluded, “These facts, when applied to the law . . . , establish
the McBride Trust Deed was extinguished by virtue of JMG’s
satisfaction of the debt secured by the property in question.”
Further, it concluded, “As there is no additional debt left payable
under the terms of the McBride Note having been fully satisfied,
. . . the McBride Trust Deed was extinguished and that [the
Stenquist Trust Deed and Note] is superior to any identified
claims of [McBride].” Finally, the court determined that, because
it “decided this motion based on the issue of satisfaction, it need
not address the issues concerning merger.”
¶8 	McBride then sought to have the district court revise its
decision, arguing that JMG’s obligation to repay the McBride
Note was not the only obligation secured by the McBride Trust
Deed. Particularly, McBride argued JMG’s “[t]ax obligations,”

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“maintenance obligations,” and “duty to defend claims against
the property [are] ongoing.” The court denied McBride’s motion,
concluding that “nothing therein justifies further modification”
of the June 2014 memorandum decision.
¶9 	McBride appealed.
ISSUE AND STANDARD OF REVIEW
¶10 	The issue on appeal is whether the court erred in granting
the 	Stenquists’ 	summary judgment 	motion. 	A 	district 	court
properly grants a summary judgment motion when “‘there is no
genuine issue as to any material fact and . . . the moving party is
entitled to a judgment as a matter of law.’” WebBank v. American
Gen. Annuity Service Corp., 2002 UT 88, ¶ 10, 54 P.3d 1139
(omission in original) (quoting Utah R. Civ. P. 56(c)).3 “An
appellate court reviews a trial court’s legal conclusions and
ultimate grant or denial of summary judgment for correctness,
and 	views 	the 	facts 	and 	all 	reasonable 	inferences 	drawn
therefrom in the light most favorable to the nonmoving party.”
Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (citations and
internal quotation marks omitted).
ANALYSIS
¶11 	At the heart of McBride’s appeal is the assertion that the
McBride Trust Deed was not extinguished when the McBride
Note was satisfied. Rather, McBride argues, under an exception
to the merger doctrine, that its legal and equitable interests in the
Property did not merge and that a “trust deed cannot expire
automatically if it is against [McBride’s] interests.” Thus, he
asserts, the court “must consider the parties’ intent”—a question
3. The current version of rule 56(c) is now 56(a).

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of fact—“before declaring that a trust deed has been satisfied.”
Finally, McBride argues that, based on the plain language of the
McBride Trust Deed, it contemplated the satisfaction of multiple
obligations, not just the satisfaction of the note.
¶12 	McBride has not provided any support for the proposition
that a trust deed can survive the satisfaction of the note or the
debt it secures. Rather, he relies heavily on cases from our
appellate courts and courts in other jurisdictions that consider
the merger doctrine, which generally provides that whenever a
greater interest and a lesser interest in the same property are
held by the same person, without an intermediate interest or
estate, the lesser interest generally merges into the greater. See,
e.g., O’Reilly v. McLean, 37 P.2d 770, 773 (Utah 1934); Miller v.
Martineau & Co., 1999 UT App 216, ¶ 30, 983 P.2d 1107; see also,
e.g., Federal Land Bank of Wichita v. Colorado Nat’l Bank of Denver,
786 	P.2d 	514, 	515–16 	(Colo. 	App. 	1989); 	Altabet 	v. 	Monroe
Methodist Church, 777 P.2d 544, 545–46 (Wash. Ct. App. 1989).
But, as McBride points out, these cases also demonstrate that
“mergers are presumed only when equity demands.” Federal
Land Bank of Wichita, 786 P.2d at 515; accord O’Reilly, 37 P.2d at
773; Miller, 1999 UT App 216, ¶¶ 32–33. Accordingly, “a merger
will not be held to take place if it [is] apparent that it was not the
intention of the owner, or if, in the absence of any intention, the
merger would be against his manifest interest.” O’Reilly, 37 P.2d
at 773 (citation and internal quotation marks omitted). Thus,
McBride argues, under this case law, his legal and equitable
interests in the Property did not merge because “the continued
existence of 	the McBride Trust 	Deed 	is necessary to allow
[McBride] to defend his rights against the [Stenquists] and other
possible 	claimants.” 	Further, 	although 	he 	concedes 	that 	he
intended to accept the quitclaim deed in full satisfaction of the
debt secured by the McBride Trust Deed, he argues he did not
intend to extinguish the McBride Trust Deed.

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¶13 	McBride’s argument misses the mark. It conflates two
related yet distinct principles: (1) merger and (2) satisfaction of
the obligation(s) secured by a trust deed. Oddly, he argues that
the merger doctrine applies only insofar as an exception to the
doctrine prevents his interests from merging. But under his
theory there would be neither a security interest to merge, nor an
interest to defend against a junior lien, if his security interest
were extinguished when the McBride Note was satisfied. We
must therefore determine as a matter of law whether McBride’s
Trust Deed was extinguished when the McBride Note was
satisfied.
¶14 	“‘Trust deed’ means a deed . . . conveying real property to
a trustee in trust to secure the performance of an obligation of
the trustor or other person named in the deed to a beneficiary.”
Utah Code Ann. § 57-1-19(3) (LexisNexis 2010); see also Deed of
Trust, Black’s Law Dictionary (9th ed. 2009) (“A deed conveying
title to real property to a trustee as security until the grantor
repays a loan. This type of deed resembles a mortgage.”). “All
right, title, interest and claim in and to the trust property
acquired by the trustor, or the trustor’s successors in interest . . .
shall 	inure 	to 	the 	trustee 	as 	security 	for 	the 	obligation 	or
obligations 	for 	which 	the 	trust 	property 	is 	conveyed 	as 	if
acquired before execution of the trust deed.” Utah Code Ann.
§ 57-1-20 (LexisNexis 2010). By the statute’s plain language, a
trust deed can secure one or more obligations from the trustor.
See id. If the trustor “breach[es] an obligation for which the trust
property 	is 	conveyed 	as 	security,” 	“at 	the 	option 	of 	the
beneficiary, a trust deed may be foreclosed.” Id. § 57-1-23.
¶15 	“The general rule is that payment of the secured debt
extinguishes the lien of the mortgage or deed of trust by itself
and instantaneously.” 55 Am. Jur. 2d Mortgages § 318 (2016); see
also Jones v. Sturgis, 199 P.2d 645, 646–47 (Colo. 1948) (concluding
that “the deed of trust securing [repayment of a loan] ceased to
be a lien on the property” when the note “was in fact fully

Stenquist v. JMG Holdings
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satisfied” even though the parties agreed to satisfy the note for
less than the amount the note indicated). In other words, when
the 	obligations 	secured 	by 	a 	trust 	deed 	are 	satisfied, 	the
beneficiary “no longer has a legitimate interest in the security.”
See Hector, Inc. v. United Sav. & Loan Ass’n, 741 P.2d 542, 545
(Utah 1987); see also JP Morgan Chase Bank, NA v. Wright, 2015 UT
App 301, ¶ 14, 365 P.3d 708; 55 Am. Jur. 2d Mortgages § 318
(2016). Further, “[i]n the case of a payment and discharge of a
first mortgage, the next encumbrance junior thereto becomes by
operation of law a first lien on the property.” 55 Am. Jur. 2d
Mortgages § 323 (2016).
¶16 	Because the McBride Note secured by the McBride Trust
Deed was undisputedly cancelled or satisfied when McBride
accepted the quitclaim deed in lieu of foreclosure, we must then
construe the trust deed and the estoppel affidavit to determine
as a 	matter of 	law whether 	all 	obligations secured 	by 	the
McBride Trust Deed were satisfied.
¶17 	In construing an agreement or contract, “[w]e look to the
writing itself to ascertain the parties’ intentions, and we consider
each contract provision . . . in relation to all of the others, with a
view toward giving effect to all and ignoring none.” WebBank v.
American Gen. Annuity Service Corp., 2002 UT 88, ¶ 18, 54 P.3d
1139 (alteration and omission in original) (citation and internal
quotation marks omitted).
¶18 	The McBride Trust Deed describes the Property and states
that the deed is
FOR 	THE 	PURPOSE 	OF 	SECURING 	(1)
payment of the indebtedness evidenced by [the
McBride Note], in the principal sum of $240,000.00
made 	by 	Trustor, 	payable 	to 	the 	order 	of
Beneficiary at the times, in the manner and with
interest as therein set forth, and any extensions
and/or renewals or modifications thereof; (2) the

Stenquist v. JMG Holdings
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performance of each agreement of Trustor herein
contained; (3) the payment of such additional loans
or advances as hereafter may be made to Trustor,
or his successors or assigns, when evidenced by a
promissory note or notes reciting that they are
secured by this Trust Deed; and (4) the payment of
all 	sums 	extended 	or 	advanced 	by 	Beneficiary
under or pursuant to the terms hereof, together
with interest thereon as herein provided.
To protect the security of the trust deed, the McBride Trust Deed
also secured the performance of other ancillary obligations,
including the following:
TO PROTECT THE SECURITY OF THIS TRUST
DEED, TRUSTOR AGREES:
1. 	To keep said property in good condition and
repair, 	not 	remove 	or 	demolish 	any 	building
thereon, to complete or restore promptly and in
good 	and 	workmanlike 	manner 	any 	building
which may be constructed, damaged or destroyed
thereon; to comply with all laws, covenants and
restrictions affecting said property; not to commit
or permit waste thereof; not to commit, suffer or
permit any act upon said property in violation of
law; to do all other acts which from the character or
use of said property may be reasonably necessary;
the specific enumerations herein not excluding the
general; and, if the loan secured hereby or any part
thereof 	is 	being 	obtained 	for 	the 	purpose 	of
financing construction of improvements on said
property.
Trustee, upon presentation to it of an affidavit,
signed by Beneficiary, setting forth facts showing a
default 	by 	Trustor 	under 	this 	numbered

Stenquist v. JMG Holdings
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paragraph, is authorized to accept as true and
conclusive all facts and statements therein, and to
act thereon hereunder.
2. 	To provide and maintain insurance, of such
type or types and amounts as Beneficiary may
require, 	on 	the 	improvements 	now 	existing 	or
hereafter erected or placed on said property. . . .
3. 	To 	deliver 	to, 	pay 	for 	and 	maintain 	with
Beneficiary until the indebtedness secured hereby is
paid in full, such evidence of title as Beneficiary
may require, including abstracts of title or policies
of title insurance and any extensions or renewals
thereof or supplements thereto.
4. 	To 	appear 	in 	and 	defend 	any 	action 	or
proceeding purporting to affect the security hereof,
the title to said property, or the rights or powers of
Beneficiary or Trustee; and should Beneficiary or
Trustee elect to also appear in or defend any such
action or proceeding, to pay all costs and expenses,
including cost of evidence of title and attorney’s
fees in a reasonable sum incurred by Beneficiary or
Trustee.
5. 	To pay at least 10 days before delinquency all
taxes 	and 	assessments 	affecting 	said 	property,
including all assessments upon water company
stock and all rents, assessments and charges for
water, appurtenant to or used in connection with
said property; to pay, when due, all encumbrances,
charges and liens with interest, on said property or
any part thereof, which at any time appear to be
prior or superior hereto; to pay all costs, fees, and
expenses of this Trust.

Stenquist v. JMG Holdings
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6. 	Should Trustor fail to make any payment or to
do any act as herein provided, then Beneficiary or
Trustee, 	but 	without 	obligation 	so 	to 	do 	and
without notice to or demand upon Trustor and
without 	releasing 	Trustor 	from 	any 	obligation
hereof, may: Make or do the same in such manner
and to such extent as either may deem necessary to
protect the security hereof, Beneficiary or Trustee
being authorized to enter upon said property for
such purposes; commence, appear in and defend
any action or proceeding purporting to affect the
security 	hereof 	or 	the 	rights 	of 	powers 	of
Beneficiary or Trustee; pay, purchase, contest, or
compromise 	any 	encumbrance, 	change 	or 	lien
which the judgment of either appears to be prior or
superior hereto; and in exercising any such powers,
incur any liability, expend whatever amounts in its
absolute discretion it may deem necessary therefor,
including cost of evidence of title, employ counsel,
and pay his reasonable fees.
7. 	To pay immediately and without demand all
sums 	expended 	hereunder 	by 	Beneficiary 	or
Trustee, with interest from date of expenditure at
the rate of ten percent (10.0%) per annum until
paid, and the repayment thereof shall be secured
hereby.
(Emphases added.)
¶19 	By the deed’s plain language, it secured four obligations.
Specifically, it secured the repayment of the McBride Note, the
performance of each agreement contained in the deed, repayment
of any additional notes connected to this specific deed, and
payment of all sums expended or advanced by McBride as
required by any terms of this deed.

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¶20 	By 	McBride’s 	own 	account, 	the 	McBride 	Note 	was
satisfied or “fully cancel[ed]” when it accepted the quitclaim
deed to the Property in lieu of foreclosure. In relevant part, the
estoppel affidavit specifically states,
That aforesaid Quit Claim Deed is intended
to be and is an absolute conveyance of all interest
that [JMG] has in said premises to [McBride], and
is not intended as a mortgage, trust conveyance, or
security of any kind. It is the intention of the
Affiant as agent for [JMG] in said [Quit Claim]
Deed to convey all [JMG’s] right, title and interest
in and to said premises to [McBride]. [JMG] has
received 	valuable 	consideration 	for 	this
conveyance.
That the consideration for said [Quit Claim]
Deed was and is the full cancellation of that certain
[McBride] 	Note 	signed 	by 	[JMG] 	to 	[McBride]
secured 	by 	that 	certain 	[McBride] 	Trust 	Deed
signed by [JMG] and recorded against the Property
on June 14, 2006.
Essentially, in exchange for the “full cancellation” of the McBride
Note, JMG conveyed all rights, obligations, and interests to the
Property to McBride. Thus, the exchange of the Property’s title
satisfied the first obligation secured by the McBride Trust Deed.
But McBride has not provided evidence that there were any
other notes (other than the McBride Note) associated with the
McBride Trust Deed nor any other debts expended under the
terms of this deed. Thus, the third and fourth obligations were
merely 	hypothetical 	or 	contingent 	on 	McBride 	incurring
additional expenses under the terms of the deed.
¶21 	Nevertheless, 	McBride 	asserts 	the 	second 	obligation
secured by the McBride Trust Deed—the Trustor’s agreement to

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protect the security—remains to be satisfied, and this unfulfilled
obligation keeps the deed alive. We are not convinced.
¶22 	Based 	on 	the 	nature 	of 	a 	trust 	deed 	and 	the 	plain
language of the McBride Trust Deed and Note, the principal
obligation 	secured 	by 	the 	McBride 	Trust 	Deed 	was 	the
repayment of the $240,000 loan. See Deed of Trust, Black’s Law
Dictionary (9th ed. 2009); see also DiMeo v. Nupetco Assocs., LLC,
2013 UT App 188, ¶ 7, 309 P.3d 251 (explaining that “[a] trust
deed secures the obligations due under a note by transferring a
security interest in real property to a trustee to be held until the
debt is repaid”). In the western states, it has been held that
where “the parties intended that . . . a pre-existing indebtedness
should be extinguished by [a] conveyance, no mortgage can
exist.” Merryweather v. Pendleton, 372 P.2d 335, 339 (Ariz. 1962).
Thus, contrary to McBride’s arguments, a trust deed, like a
mortgage, cannot exist without the debt. See, e.g., Merryweather v.
Pendleton, 367 P.2d 251, 254 (Ariz. 1961) (“The very essence of a
mortgage 	is 	a 	subsisting 	obligation 	to 	pay. 	It 	matters 	not
whether the debt existed before or was created by the transaction
in question. But debt there must be.”); Hill v. Favour, 84 P.2d 575,
578 (Ariz. 1938) (“The law seems to be well settled that the
mortgage is a mere incident to the debt and that its transfer or
assignment does not transfer or assign the debt or the note. The
mortgage goes with the note. If the latter is transferred or
assigned, 	the 	mortgage 	automatically 	goes 	along 	with 	the
assignment or transfer.”); First Nat’l Bank of Saco v. Vagg, 212 P.
509, 511 (Mont. 1922) (“The mortgage, being a mere incident of
the debt, cannot be assigned separately from it, so as to give any
beneficial 	interest.”). 	Accordingly, 	the 	trust 	deed, 	although
independent of the debt, is only a mere incident—a security—to
the note. See Vagg, 212 P. at 511. “[T]he mortgage alone, without
the debt, is nugatory, and confers no rights whatever.” Id. Thus,
“[t]he mortgage can have no separate existence. When the note is
paid, the mortgage expires. It cannot survive for a moment

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[without] the debt which the note represents.” Id. Without the
debt obligations, a trust deed is a mere nullity.
¶23 	We agree with McBride that a trust deed may secure more
than one obligation, but in this case the McBride Trust Deed did
not. 	We 	cannot 	agree 	that 	the 	deed’s 	ancillary 	obligations
remained in place to protect some hypothetical security interest
from substantial depreciation after the primary obligation—
repayment of the McBride Note—was satisfied. Thus, McBride’s
legal and equitable interests did not merge; rather his security
interest 	simply 	did 	not 	exist 	after 	the 	McBride 	Note 	was
satisfied. Furthermore, whether satisfaction of the McBride Note
fulfilled the obligations the McBride Trust Deed secured is a
question of law—extinguishment or the release of a trust deed is
the legal consequence of satisfaction or performance of the
primary obligations secured by that trust deed. So, although
McBride did not intend to extinguish the McBride Trust Deed,
his intent is not relevant to determine whether satisfaction of the
McBride Note did indeed extinguish the McBride Trust Deed.
When read together, the McBride Trust Deed, the McBride Note,
and the estoppel affidavit make clear that the primary obligation
the McBride Trust Deed secured was the repayment of the
McBride 	Note. 	All 	other 	obligations 	were 	contingent 	upon
McBride paying the debt or were ancillary to the repayment of
the Note, existing only to protect the security during the period
of repayment. Consequently, when the McBride Note was fully
cancelled, the ancillary obligations evaporated along with the
security interest they protected.
CONCLUSION
¶24 	In sum, McBride has not demonstrated that the district
court erred when it granted the Stenquists’ summary judgment
motion 	and 	determined 	that 	the 	McBride 	Trust 	Deed 	was
extinguished when McBride accepted title to the Property in
exchange for full cancellation of the McBride Note. The ancillary

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obligations 	inherent 	in 	a 	trust 	deed 	cannot 	survive 	the
satisfaction of the note because the beneficiary no longer has a
legitimate interest in the security once the debt or loan has been
repaid. Finally, McBride has not demonstrated that there is a
dispute in fact that would prevent summary judgment; the
release 	or 	extinguishment 	of 	the 	trust 	deed 	is 	the 	legal
consequence of satisfaction of the note. We therefore affirm.