Glew v. Ohio Savings

2007 UT 56
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Jordan Glew, Maureen Glew, James 	No. 20051092
R. Nichol, and Joan P. Nichol,
Plaintiffs, Counterclaim
Defendants, and Appellees,
Superior Title Company of Utah,
Additional Counterclaim
Defendant,
v.
Ohio Savings Bank,
Defendant, Counterclaimant,
Third-Party Plaintiff, and
Appellant,
v.
F I L E D
Metro National Title Company,
Third-Party Defendant. 	July 17, 2007
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Third District, Salt Lake
The Honorable Tyrone E. Medley
No. 000902663
Attorneys: 	Richard A. Rappaport, Leslie Van Frank, Thomas J.
Burns, Salt Lake City, for plaintiffs
George A. Hunt, Salt Lake City, for defendant
---
NEHRING, Justice:
INTRODUCTION
¶1 	In this appeal, Ohio Savings Bank challenges the
outcome of a bench trial. 	Ohio Savings claims that it, as the
holder of a $271,000 bridge loan note, was entitled to full
payment of the note despite the fact that the makers of the note,
James and Joan Nichol, had already directed the payoff proceeds
to the soon-to-be-bankrupt FirstPlus Financial, Inc., which had
transferred the note to Ohio Savings after originating it. 	The

No. 20051092 	2
trial court, however, ruled that the doctrines of equitable
estoppel and apparent authority provided legal justification for
the Nichols’ decision to pay FirstPlus. 	We affirm.
BACKGROUND
¶2 	When the Nichols bought their Sandy, Utah home, they
had not yet found a buyer for the home in which they then
resided. 	Like many homebuyers, the Nichols anticipated financing
much of the purchase price of their new home with the proceeds
from the sale of their prior residence. 	Because the Nichols
could not realize these proceeds until their home was sold, they
acquired a bridge loan from FirstPlus for $271,000 (Bridge Loan
Note). 	To secure the Bridge Loan Note, the Nichols granted, in
favor of FirstPlus, a trust deed on the home from which they were
moving. 	With the funds from the Bridge Loan Note, the Nichols
completed the purchase of their new home. 	FirstPlus also
provided the financing for a first mortgage on their new home in
the form of a thirty-year note (Thirty-Year Note) secured by a
trust deed on the new home. 	The Nichols executed the notes and
trust deeds for the Thirty-Year Note and the Bridge Loan Note at
the closing on their new home held on July 14, 1998. 	At the
closing, FirstPlus also executed, in favor of Ohio Savings,
assignments of the trust deeds that secured the Bridge Loan Note
and the Thirty-Year Note. 	Ohio Savings is a secondary market
lender, which routinely purchases loans from correspondent
lenders, like FirstPlus, throughout the country. 	The assignments
were recorded with the Salt Lake County Recorder’s office on
August 4, 1998.
¶3 	FirstPlus gave the Nichols several notices that
explained how the assignments to Ohio Savings affected the
Nichols. 	First, FirstPlus provided the Nichols letters advising
them that Ohio Savings would be servicing both of the loans. 	The
letters mandated that all inquiries about the loans be made by
reference to the loan number. 	Each letter contained a space
designated for the appearance of the Ohio Savings loan number.
The spaces were blank.
¶4 	Second, the Nichols received a “Notice of Assignment,
Sale or Transfer of Servicing Rights” for each loan. 	Both
notices contained the representation that
[d]uring the 60-day period following the
effective date of the transfer of loan
servicing, a loan payment received by the
original mortgage lender in a timely fashion

3 	No. 20051092
may not be treated by the new loan servicer
as late, and a late fee may not be imposed.
However, the notices for the two loans differed in one respect:
the notice for the Bridge Loan Note stated that the transfer date
to Ohio Savings was September 1, 1999, while the transfer date
for the Thirty-Year Note was September 1, 1998.
¶5 	In addition, the Nichols received disclosure documents
for each loan, which similarly explained that a payment made to
the original servicer within sixty days of the effective date of
transfer of loan servicing would not be treated as late by the
new servicer.
¶6 	After the closing, Ohio Savings apparently discovered
the date error in the Bridge Loan Note transfer date and
requested that payment be directed to it under the assignment
commencing September 1, 1998. 	It returned the Bridge Loan Note
and the first of the three notifications--the one providing that
Ohio Savings would be servicing the loan--to FirstPlus on August
21, 1998, so that FirstPlus could obtain the Nichols’ signatures
to amend the documents. 	The Nichols complied with the request to
amend the transfer date, and Ohio Savings received the signed
amended documents on September 15.
¶7 	Around the first of September, Mrs. Nichol began
efforts to make her first payment on the Thirty-Year Note. 	Under
the terms of the notices the Nichols had received concerning the
assignment of the loan to Ohio Savings, the Nichols were to begin
sending payments to Ohio Savings in September. 	Mrs. Nichol began
her inquiries into where to direct her payment because Ohio
Savings had yet to provide the Nichols with a loan number.
Mrs. Nichol called Ohio Savings’ toll-free telephone number
several times in an attempt to obtain a loan number, but she was
unsuccessful. 	Ohio Savings representatives repeatedly told her
not to send any money without a loan number. 	On September 16,
1998, an Ohio Savings representative told Mrs. Nichol not to send
a payment without a loan number and that she should contact
FirstPlus and make the payment to it. 	On that same day,
Mrs. Nichol sent FirstPlus a payment on the Thirty-Year Note.
¶8 	During the summer of 1998, the Nichols found a buyer
for their prior home. 	A closing on the sale was scheduled for
September 17, 1998, at Metro National Title Company. 	The Bridge
Loan Note was to be paid off at the closing. 	On September 3,
1998, Metro National faxed a payoff request signed by Mrs. Nichol
to Ohio Savings that made reference to the fast-approaching
closing date. 	Following up on the payoff request, Metro

1 Ohio Savings contends that the trial court erred when it
found that Ohio Savings expressly instructed Metro National and
the Nichols to pay FirstPlus. 	Ohio Savings observes, plausibly,
that since Ohio Savings does business with many loan originators,
it would have been unlikely that the Ohio Savings representative
would have independent knowledge that FirstPlus was the
originator of the Bridge Loan Note and that, therefore, Ohio
Savings would have been unable to give instructions to pay
FirstPlus. 	However, even if FirstPlus were not identified by
name in any of the conversations with Ohio Savings, from the
point of view of Metro National and the Nichols, there was no
other reasonable inference to be drawn from Ohio Savings’
communication than that payment should be directed to FirstPlus.
Given the obvious and inescapable nature of this inference, we
see no reason to disturb the trial court’s finding that Ohio
Savings instructed the Nichols to pay FirstPlus.
No. 20051092 	4
National’s representative, Aaron Turner, called Ohio Savings. 	He
was told that the loan was not in Ohio Savings’ computer system
and that Ohio Savings could not help him. 	Mr. Turner pressed the
issue, insisting that the loan was with Ohio Savings and asked to
speak with a supervisor. 	A person then came to the phone,
identified himself as a manager, and told Mr. Turner that Ohio
Savings could not provide a payoff statement and that he should
contact FirstPlus. 1
¶9 	As the closing date approached, Metro National asked
Mrs. Nichol to renew her attempt to obtain the payoff information
from Ohio Savings. 	Mrs. Nichol called Ohio Savings on September
14 and was again told that Ohio Savings did not have the loan,
that she should not send any money to Ohio Savings without a loan
number, and that she should deal with the original lender.
Mrs. Nichol told Metro National’s escrow officer about her
conversation with Ohio Savings, saying that Ohio Savings had told
her to make the payoff to FirstPlus.
¶10 	On September 17, Metro National contacted FirstPlus and
requested a payoff statement for the Bridge Loan Note. 	FirstPlus
complied and faxed the statement to Metro National.
¶11 	The trial court found that, taken together, these
events warranted Metro National and the Nichols’ reliance and
justified them in directing the payoff for the Bridge Loan Note
to FirstPlus.
¶12 	The closing on the sale of the Nichols’ previous home
took place as scheduled on September 17, 1998. 	On September 18,
1998, Metro National sent the bridge loan payoff check to

5 	No. 20051092
FirstPlus and requested release of the trust deed that secured
the Bridge Loan Note.
¶13 	On either September 17 or 18, 1998, Ohio Savings wired
funds to FirstPlus to complete the purchase of the Thirty-Year
Note and the Bridge Loan Note. 	The Thirty-Year Note and the
Bridge Loan Note became active in Ohio Savings’ servicing
computer on September 21, 1998. 	Sometime after that date, Ohio
Savings sent the Nichols a letter containing a loan number for
the Thirty-Year Note and advising them that their first payment
to Ohio Savings would come due on November 1, 1998. 	At the same
time, the Nichols received a similar letter from Ohio Savings
providing them with the loan number for the Bridge Loan Note.
¶14 	Despite receiving payment from Ohio Savings for the
Bridge Loan Note, FirstPlus did not forward Ohio Savings the
final payment of the loan made by the Nichols. 	Instead, it kept
the money and filed for bankruptcy.
¶15 	Ohio Savings commenced a nonjudicial foreclosure of the
trust deed on the Bridge Loan Note against the Nichols’ former
home, which had been bought by Jordan and Maureen Glew. 	The
Glews demanded that Ohio Savings release the trust deed on the
Glew home from the Bridge Loan Note. 	Ohio Savings refused, and
the Glews and the Nichols sued.
¶16 	After a bench trial, the trial court entered extensive
findings of fact and conclusions of law. 	The court concluded
that, under the doctrines of apparent authority and equitable
estoppel, Ohio Savings was estopped from arguing that the check
the Nichols sent to FirstPlus did not pay the Bridge Loan Note in
full.
¶17 	The trial court anchored its ruling that Ohio Savings
was equitably estopped from asserting that the Nichols were
obligated to pay it instead of FirstPlus in numerous factual
findings. 	As noted above, the court found that when Metro Title
and the Nichols contacted Ohio Savings to inquire about paying
off the Bridge Loan Note, Ohio Savings directed the Nichols to
FirstPlus. 	The trial court also found that it was reasonable for
the Nichols to rely on these representations and on the written
statements provided at the closing in making the payoff to
FirstPlus. 	The trial court linked its determination that Ohio
Savings ceded apparent authority to FirstPlus to receive the
Nichols’ payoff of the Bridge Loan Note to the communications
among Metro Title, Mrs. Nichol, and Ohio Savings during which
Ohio Savings directed Metro Title and Mrs. Nichol, either
expressly or by implication, to direct the payoff to FirstPlus.

No. 20051092 	6
The trial court also concluded that Ohio Savings was not a holder
in due course based on its finding that Ohio Savings did not pay
FirstPlus for the Bridge Loan Note until after the Nichols
tendered the payoff to FirstPlus. 	Accordingly, the court ordered
Ohio Savings to release the trust deed. 	This appeal followed.
STANDARD OF REVIEW
¶18 	The trial court in this case acted as the fact-finder
in the bench trial and offered a comprehensive array of factual
findings in support of its equitable estoppel and apparent
authority determinations. 	We will not disturb the court’s
findings of fact unless they are clearly erroneous. 	Dep’t of
Human Servs. ex rel. Parker v. Irizarry, 945 P.2d 676, 678 (Utah
1997) (“An appellate court ‘will not reverse the findings of fact
of a trial court sitting without a jury unless they are . . .
clearly erroneous.’” (quoting MacKay v. Hardy, 896 P.2d 626, 629
(Utah 1995))). 	Moreover, in those instances in which the trial
court’s findings include inferences drawn from the evidence, we
will not take issue with those inferences unless the logic upon
which their extrapolation from the evidence is based is so flawed
as to render the inference clearly erroneous. 	State v. Walker,
743 P.2d 191, 193 (Utah 1987) (“‘[An appellate court] must give
great weight to the findings made and the inferences drawn by the
trial judge, but it must reject his findings if it considers them
to be clearly erroneous.’” (quoting 25 Wright & Miller, Federal
Practice and Procedure § 2585 (1971))).
¶19 	Also, the trial court’s application of the equitable
doctrines of estoppel and apparent authority to the facts of this
case is a mixed question of law and fact of an extremely fact-
sensitive nature to which we grant significant deference. 	We
have previously explained that “the doctrine of equitable
estoppel is simply stated, yet it is applicable to a wide variety
of factual and legal situations. 	The variety of fact-intensive
circumstances involved weighs heavily against lightly
substituting our judgment for that of the trial court.”
Irizarry, 945 P.2d at 678 (citing State v. Pena, 869 P.2d 932,
939 (Utah 1994)). 	Similarly, the ruling that FirstPlus acted
with the apparent authority of Ohio Savings deserves significant
deference, as apparent authority, like equitable estoppel, can be
created by a vast array and mix of facts. 	See id.; see also
State v. Levin, 2006 UT 50, ¶ 24, 144 P.3d 1096 (“Discretion is
broadest--and the standard of review is most deferential--when
the application of a legal concept is highly fact dependant and
variable.”). 	We therefore grant broad deference to the trial
court’s decision that the facts adduced at trial satisfy the
requirements of apparent authority and equitable estoppel.

2 Utah Code section 70A-3-301 (1998) provides:
“Person entitled to enforce” an instrument
means the holder of the instrument, a
nonholder in possession of the instrument who
has the rights of a holder, or a person not
in possession of the instrument who is
entitled to enforce the instrument pursuant
to Section 70A-3-309 or Subsection
70A-3-418(4). 	A person may be a person
entitled to enforce the instrument even
though he is not the owner of the instrument
or is in wrongful possession of the
instrument.
3 Utah Code section 70A-3-602 (1998) provides:
(1) Subject to Subsection (2), an instrument
is paid to the extent payment is made by or
on behalf of a party obliged to pay the
instrument, and to a person entitled to
enforce the instrument. 	To the extent of the
payment, the obligation of the party obliged
to pay the instrument is discharged even
though payment is made with knowledge of a
claim to the instrument under Section
70A-3-306 by another person.
(2) The obligation of a party to pay the
instrument is not discharged under Subsection
(1) if:
(a) a claim to the instrument under
Section 70A-3-306 is enforceable against
the party receiving payment, and:
(i) payment is made with knowledge
by the payor that payment is
prohibited by injunction or similar
process of a court of competent
jurisdiction; or
(ii) in the case of an instrument
other than a cashier’s check,
teller’s check, or certified check,
the party making payment accepted,
(continued...)
7 	No. 20051092
ANALYSIS
¶20 	Ohio Savings opens its brief with an extensive
discussion of the unforgiving nature of the payment rule as
codified in Utah Code sections 70A-3-301 2 and 70A-3-602(1) 3.

3 (...continued)
from the person having a claim to
the instrument, indemnity against
loss resulting from refusal to pay
the person entitled to enforce the
instrument; or
(b) the person making payment knows that
the instrument is a stolen instrument
and pays a person it knows is in
wrongful possession of the instrument.
4 The Nichols ask us to deny Ohio Savings’ request that we
review for sufficiency of the evidence because it failed to
adequately marshal the evidence. 	There is considerable appeal to
this invitation. 	In this instance, however, we decline to affirm
the trial court on those grounds. 	We are content to take up the
merits of the sufficiency claim here because it is so clear that
the great weight of the evidence supports the findings of the
trial court.
No. 20051092 	8
Ohio Savings outlines how the payment rule places the risk of
loss squarely upon a payor in the event that he or she pays
someone other than the holder of a note.
¶21 	Ohio Savings’ arguments based on the unforgiving nature
of the payment rule were made moot, however, by the trial court’s
findings that the equitable doctrines of estoppel and apparent
authority prevent Ohio Savings from foreclosing on the trust deed
securing the Bridge Loan Note. 	Ohio Savings accurately conceded
at oral argument that the payment rule does not trump equitable
doctrines like estoppel and apparent authority. 	Ohio Savings’
case, therefore, rises and falls on the sufficiency of the
evidence supporting the trial court’s application of the
doctrines of equitable estoppel and apparent authority to the
facts of this case. 4
¶22 	We will affirm a trial court’s ruling against a
sufficiency of the evidence challenge unless it is clearly
erroneous. 	Utah R. Civ. P. 52(a); see also S.B.D. v. State
(State ex rel. Z.D.), 2006 UT 54, ¶ 40, 147 P.3d 401 (holding
that for an appellate court to overturn factual findings made by
a trial court, “[t]he result must be against the clear weight of
the evidence or leave the appellate court with a firm and
definite conviction that a mistake has been made”).
¶23 	Ohio Savings contends that some of the trial court’s
subsidiary findings supporting its ultimate findings of equitable
estoppel and apparent authority were clearly erroneous. 	It

9 	No. 20051092
argues that it was error to make Ohio Savings suffer the loss in
this case when its communications created, at most, an
“unintentional inference” that the Nichols should pay off the
Bridge Loan Note to FirstPlus instead of Ohio Savings. 	Intent is
certainly relevant to equity. 	See Parduhn v. Bennett, 2005 UT
22, ¶ 41, 112 P.3d 495 (finding that the district court
appropriately focused on the intent of the business partners in
an equitable distribution case). 	But absence of intent will not
immunize a party from a determination that its conduct was
inequitable. 	What matters is the reasonableness of the reliance
placed on the conduct of the party against which estoppel is
sought, not the mental state of the offending party. 	See IHC
Health Servs. v. D&K Mgmt., Inc., 2003 UT 5, ¶ 10, 73 P.3d 320
(“In order to prevail on a claim for equitable estoppel a party
must show that the party to be estopped acted in such a way as to
induce reasonable reliance by the other party and that allowing
the first party to act contrary to its earlier actions would work
to the detriment of the relying party.”).
¶24 	As our summary of the trial court’s factual findings
makes apparent, there is a constellation of communications which
could, in many configurations, equitably estop Ohio Savings from
looking to the Nichols for payment. 	We have little regard for
the claimed misinterpretations and misapplications of these
communications by the trial court. 	In the area of equitable
estoppel and apparent authority, it matters little whether Ohio
Savings expressly instructed the Nichols to pay FirstPlus or
whether it merely insisted on multiple occasions that payment not
be directed to it and that the Nichols should contact the
originating lender for more information. 	In the context of the
totality of the communications from Ohio Savings to the Nichols
on the subject of payment, the trial court was on solid factual
footing when it concluded that the Nichols reasonably relied on
the Ohio Savings communications. 	Similarly, the trial court had
support for its conclusion that it was unreasonable to expect the
Nichols to obtain a payoff figure from FirstPlus only to pay Ohio
Savings.
¶25 	Our views on this point would not be altered even were
we to find persuasive several of Ohio Savings’ perceived flaws in
the trial court’s findings. 	Contrary to the trial court’s
finding, Ohio Savings may not have had a corporate practice to
permit correspondent lenders like FirstPlus to collect payments
from lenders on its behalf. 	The presence or absence of such a
practice was, as Ohio Savings reminds us, not something that
would have been known to the Nichols before they paid FirstPlus.
Because the Nichols were not aware of Ohio Savings’ corporate
practice regarding allowing payments to be made to correspondent

No. 20051092 	10
lenders, an erroneous finding about the actual practice would not
affect the reasonableness of the Nichols’ reliance on the
communications they received from Ohio Savings. 	The Nichols did
what Ohio Savings told them to do, either through its express
instructions or unambiguous inferences. 	Whether these
instructions had also been consistent with Ohio Savings’ business
practices would have added little.
¶26 	Similarly, the Real Estate Settlement Procedures Act,
12 U.S.C. §§ 2601 through 2617 (RESPA), may not have applied to
the Bridge Loan Note, and consequently, Ohio Savings may not have
been required by law to treat as timely any payments made to the
original servicer within sixty days of the effective date of the
transfer of the loan. 	Ohio Savings nevertheless caused RESPA
rights to be communicated to the Nichols for both the Thirty-Year
Note and the Bridge Loan Note. 	It was not clearly erroneous for
the trial court to find that it was the fact of the communication
that mattered, not whether Ohio Savings had a legal obligation to
make the communications. 	Further, Ohio Savings’ argument that
the Nichols should have known that the RESPA payment provisions
applied only to monthly payments and not to the payoff of the
outstanding balance of the note leaves us unmoved. 	There is
nothing in the substance of the notice that would suggest that
the payments made under its provisions had any dollar limit. 	It
is only with the expenditure of considerable effort that we are
able to pry from the text of the notice the inference that there
may be some limit on the amount that the Nichols would be
permitted to pay to FirstPlus within the first sixty days of the
loan.
¶27 	Nor are we troubled by the trial court’s determination
that it was not unreasonable to treat as one piece the
communications from Ohio Savings relating to the Thirty-Year Note
and the Bridge Loan Note. 	That Ohio Savings’ identical messages
concerning each loan may have had a mutually reinforcing effect
on the degree of confidence the Nichols developed in the
correctness of their decision to pay FirstPlus does not work to
erode the reasonableness of their reliance on Ohio Savings’
instructions directed solely to the Bridge Loan Note.
¶28 	Based on our review of the record, we are convinced
that the trial court’s ruling was in line with the clear weight
of the evidence. 	See Z.D., 2006 UT 54, ¶ 40. 	We therefore
affirm the trial court’s judgment in this matter.
---

11 	No. 20051092
¶29 	Chief Justice Durham, Associate Chief Justice Wilkins,
Justice Durrant, and Justice Parrish concur in Justice Nehring’s
opinion.