BMBT, LLC v. Miller

2014 UT App 64
_________________________________________________________
THE UTAH COURT OF APPEALS
BMBT, LLC,
Plaintiff and Appellant,
v.
CHRISTOPHER L. MILLER; GAE O. MILLER; SECURE
MECHANICAL, INC.; AND ALII, LLC,
Defendants and Appellees.
Memorandum Decision
No. 20130272-CA
Filed March 20, 2014
Fourth District Court, Provo Department
The Honorable Darold J. McDade
No. 090403271
Randall T. Todd and Blake S. Atkin, Attorneys
for Appellant
Stanley S. Adams, Attorney for Appellees
Christopher L. Miller and Gae O. Miller
Harold L. Reiser and Victor P. Copeland, Attorneys
for Appellee Secure Mechanical, Inc.
Marc L. Turman, Attorney for Appellee Alii, LLC
JUDGE JAMES Z. DAVIS authored this Memorandum Decision, in
which JUDGE JOHN A. PEARCE concurred. JUDGE J. FREDERIC
VOROS JR. dissented, with opinion.
DAVIS, Judge:
¶1 BMBT, LLC challenges the trial court’s ruling granting
Defendants’ rule 12(b)(6) motion to dismiss for failure to state a
claim. See Utah R. Civ. P. 12(b)(6). We affirm.
¶2 On December 1, 2003, Defendants Christopher L. Miller and
Gae O. Miller executed a promissory note (the Note) in favor of

BMBT, LLC v. Miller
1. Both the Deed and the Note were recorded in Utah County on
November 1, 2006.
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BMBT as consideration for a $60,000 loan. As security for the loan,
the Millers granted BMBT a “security interest” in certain property
located in Lehi, Utah (the Property). On the same day, the Millers
signed a quitclaim deed (the Deed) in favor of BMBT, purporting
to quitclaim their interest to certain property to be described in an
attached document. The first page of the Note was attached to the
Deed and included a description of the Property. BMBT asserts1
that the Millers later sold the Property, first to Secure Mechanical,
Inc. and then to Alii, LLC, companies belonging to the Millers’
business partners.
¶3 On August 31, 2009, BMBT filed a Complaint against the
Millers, Secure Mechanical, and Alii, seeking to quiet title to the
Property. As the case proceeded to trial, Secure Mechanical moved
to bifurcate and conduct a separate trial on the issue of whether the
Deed and the Note conveyed title to BMBT or merely granted
BMBT a mortgage in the Property. At the hearing on the motion,
the trial court expressed its opinion that the Deed and the Note
created a mortgage rather than conveying title and suggested that
a motion to dismiss and a motion to amend the complaint might be
in order. Defendants immediately moved to dismiss, and BMBT
moved for leave to amend.
¶4 The trial court dismissed the quiet title claim with prejudice
and denied BMBT’s motion for leave to amend. BMBT appeals. “A
trial court’s decision granting a rule 12(b)(6) motion to dismiss a
complaint for lack of a remedy is a question of law that we review
for correctness, giving no deference to the trial court’s ruling.”
Oakwood Vill. LLC v. Albertsons, Inc., 2004 UT 101, ¶ 9, 104 P.3d
1226.
¶5 BMBT first argues that the trial court erred in considering
the Deed and the Note without converting Defendants’ rule

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20130272-CA 3 2014 UT App 64
12(b)(6) motion into a motion for summary judgment. “If, on a
motion . . . to dismiss for failure of the pleading to state a claim
upon which relief can be granted, matters outside the pleading are
presented to and not excluded by the court, the motion shall be
treated as one for summary judgment . . . .” Utah R. Civ. P. 12(b).
When a rule 12(b)(6) motion is so converted, the trial court must
give the parties a reasonable opportunity to present evidence in
accordance with rule 56 of the Utah Rules of Civil Procedure in
order to determine whether the motion can be granted as a matter
of law. See id. See generally id. R. 56.
¶6 Generally, it is reversible error for a trial court to consider
and rely on matters outside the pleadings without converting the
rule 12(b)(6) motion to a motion for summary judgment. Oakwood
Vill., 2004 UT 101, ¶ 12. However, our supreme court has held that
it is not error for the trial court to consider documents that are
“referred to in the complaint and [are] central to the plaintiff’s
claim,” regardless of whether such documents were actually
included with the complaint. Id. ¶ 13 (citation and internal
quotation marks omitted). “[I]f the rule were otherwise,” the
supreme court explained, “a plaintiff with a deficient claim could
survive a motion to dismiss simply by not attaching a dispositive
document upon which the plaintiff relied.” Id. (citation and internal
quotation marks omitted). Federal courts applying rule 12(d) of the
Federal Rules of Civil Procedure, which is substantively identical
to the above-quoted provision found in rule 12(b) of the Utah Rules
of Civil Procedure, compare Fed. R. Civ. P. 12(d), with Utah R. Civ.
P. 12(b), have also held that “[t]he district court may take judicial
notice of public records and may thus consider them on a motion
to dismiss.” Stahl v. United States Dep’t of Agric., 327 F.3d 697, 700
(8th Cir. 2003); see also Grant v. Aurora Loan Servs., Inc., 736 F. Supp.
2d 1257, 1263–64 (C.D. Cal. 2010) (collecting federal cases that have
taken judicial notice of trust deeds and other public records in
ruling on motions to dismiss).
¶7 In this case, BMBT sought to quiet title to the disputed
Property but failed to attach the Deed, which formed the basis of

BMBT, LLC v. Miller
2. Although the first page of the Note was attached to the Deed to
provide the description of the Property referenced in the Note, the
Note in its entirety was not incorporated by reference as part of the
Deed. Though it was a contemporaneous document, it remained
separate from the Deed and, standing alone, was not central to
BMBT’s claim of title.
3. The trial court’s consideration of the Deed could also be justified
by this exception.
20130272-CA 4 2014 UT App 64
its quiet title claim. Despite BMBT’s failure to explicitly reference
the Deed in its complaint, we agree with Defendants that the Deed
was fairly considered in conjunction with the rule 12(b)(6) motion
because reference to the Deed was implicit in BMBT’s claim of title
and the Deed was central to that claim. Furthermore, even
assuming that the Note could not fairly be treated as having been
referenced by the complaint and being central to BMBT’s claim, we2
agree with Defendants that the trial court could take judicial notice
of the Note as a public record and properly consider it in ruling on
the motion to dismiss. Accordingly, we conclude that the trial3
court did not err in declining to convert Defendants’ motion to
dismiss to a motion for summary judgment.
¶8 BMBT next asserts that the trial court erred in granting
Defendants’ motion to dismiss. The Utah Quiet Title Act precludes
the holder of a mortgage from maintaining a quiet title action on
the basis of the mortgage: “A mortgage of real property may not be
considered a conveyance which would enable the owner of the
mortgage to recover possession of the real property without a
foreclosure and sale.” Utah Code Ann. § 78B-6-1310 (LexisNexis
2012). However, BMBT maintains that the Deed and the Note are
ambiguous as to whether the parties intended to grant BMBT a
present possessory interest in the Property or only a mortgage.
¶9 Utah subscribes to the lien theory of mortgages, which holds
“that a mortgage . . . does not vest title in the mortgagee, but

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merely creates a lien in his favor.” Bybee v. Stuart, 189 P.2d 118,
122–23 (Utah 1948). Thus, “[i]t is possible for a party to transfer a
. . . deed without intending to convey the property.” Winegar v.
Froerer Corp., 813 P.2d 104, 110 (Utah 1991). Accordingly, “parol
evidence is admissible in equity to show that a deed, although
absolute on its face, was intended as a mortgage.” Id. Generally,
this is an issue for the fact-finder, who should examine a number
of factors in determining the parties’ intent. Hansen v. Kohler, 550
P.2d 186, 189 (Utah 1976).
¶10 However, “where . . . there is a written agreement between
the parties, contemporaneous with the deed, which shows the deed
to have been given for security purposes, the court will look to the
real transaction, and treat it as a mortgage.” Bybee, 189 P.2d at 122.
Where the deed, read in conjunction with the contemporaneous
document is unambiguous, resort to parol evidence is unnecessary.
See Glauser Storage, LLC v. Smedley, 2001 UT App 141, ¶¶ 21–23, 27
P.3d 565 (excluding parol evidence tending to indicate that a
transaction was intended as a mortgage where a contemporaneous
agreement unambiguously indicated that the parties intended to
convey a present possessory interest rather than a mortgage). The
Note was signed on the same day as the Deed, and the first page of
the Note was attached to the Deed to provide the description of the
Property. The Note unambiguously identified the Property as
security for the loan from BMBT to the Millers and even indicated
the parties’ intent for the Millers “to actively engage in selling the
[P]roperty during the time of [the] contract” to satisfy the Note. Cf.
Bybee, 189 P.2d at 122 (holding that the terms of a contemporaneous
contract giving the grantor the right to sell the land unambiguously
indicated the parties’ intent for ownership to remain with the
grantor). We agree with the trial court that, read together, the Deed
and the Note unambiguously give BMBT a mortgage in the
Property. Because a quiet title claim cannot be based on a
mortgage, Utah Code Ann. § 78B-6-1310, the trial court correctly
dismissed BMBT’s quiet title claim.

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¶11 We conclude that the trial court was not required to convert
Defendants’ motion to dismiss to a motion for summary judgment
and that the trial court correctly granted Defendants’ motion to
dismiss. Accordingly, we affirm.
VOROS, Judge (dissenting):
¶12 I respectfully dissent. On November 2, 2012, counsel for
BMBT walked into a hearing on Defendants’ motion to bifurcate
and walked out having had their complaint dismissed with
prejudice. Defendants’ oral motion to dismiss was granted, and
BMBT’s oral motion to amend was denied. The ruling was based
on the trial court’s conclusion that the underlying documents
created a security interest in the Property. The trial court acted
decisively and perhaps—ultimately—correctly. But in my
judgment the dismissal was premature because without resort to
extrinsic evidence the documents are ambiguous.
¶13 Neither document before the court was in the form of a
mortgage or trust deed. Each was produced from a printed form
that the parties adapted, with strikeouts and insertions, to a use
other than its intended use. The resulting documents are imprecise
and confusing. One document is titled “Quitclaim Deed (Two
Individuals to Husband and Wife).” It states:
[The Millers] do hereby remise, release, quitclaim,
grant and convey unto BMBT, LLC, and a Limited
Liability Company, Husband and Wife, as sole joint
tenants with rights of survivorship, hereinafter
“Grantees,” the following lands . . . .
The other document is titled “Promissory Note And Security
Agreement.” Its boilerplate language contemplates a transaction
involving personal property. It states, for example:

BMBT, LLC v. Miller
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As (Collateral”) [sic] Maker here by [sic] authorizes
Holder to file a UCC financing Statement in the
appropriate state or states to protect this security
interest. Holder has a right to foreclose and take
immediate possession of part or all of the Collateral
immediately upon any default of this note and have
all other rights provided for pursuant to section nine
of the Utah Uniform Commercial Code.
¶14 BMBT seeks the opportunity to present extrinsic evidence of
the parties’ intent. “Before the [trial] court may consider extrinsic
evidence of the parties’ intent . . . , it must first conclude that the
contract is facially ambiguous.” Wilson v. Johnson, 2010 UT App 137,
¶ 8, 234 P.3d 1156 (citing Daines v. Vincent, 2008 UT 51, ¶ 25, 190
P.3d 1269). A contract provision is ambiguous “if it is capable of
more than one reasonable interpretation because of uncertain
meanings of terms, missing terms, or other facial deficiencies.”
Daines, 2008 UT 51, ¶ 25 (citations and internal quotation marks
omitted). To determine if a contract is facially ambiguous, “a
judge [must] first review relevant and credible extrinsic evidence
offered to demonstrate that there is in fact an ambiguity.” Id. ¶ 31.
Further, when two agreements are “executed ‘substantially
contemporaneously’ and are clearly interrelated,” they must be
construed as a whole and harmonized if possible. Winegar v. Froerer
Corp., 813 P.2d 104, 109 (Utah 1991) (quoting Atlas Corp. v. Clovis
Nat'l Bank, 737 P.2d 225, 229 (Utah 1987))
¶15 These two documents are on their faces inconsistent, and
neither purports to be a mortgage or trust deed. The Quitclaim
Deed describes an absolute conveyance; the Promissory Note And
Security Agreement describes a security agreement governed by
the Uniform Commercial Code. I therefore cannot agree that they
are unambiguous.
¶16 I do agree that Defendants’ interpretation of these docu-
ments is “arguably more reasonable” than BMBT’s. See Holladay
Bank & Trust v. Gunnison Valley Bank, 2014 UT App 17, ¶ 18. But

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that does not mean that, read together, the documents are unam-
biguous. “So long as competing interpretations are reasonably
based on the natural and ordinary meaning of the terms of the
contract and generally consistent with interpretive canons, both fall
within the permissible spectrum of reasonability that courts use to
determine ambiguity.” Id. True, “equitable mortgages are generally
found when what appears to be an absolute conveyance on its face
was actually intended as a mortgage.” Burkhardt v. Bailey, 680
N.W.2d 453, 465 (Mich. Ct. App. 2004). But here the documents are
not so clear that extrinsic evidence need not even be considered in
determining what “was actually intended.” See id.
¶17 Moreover, BMBT makes another, and subtler, argument. It
observes that the Promissory Note And Security Agreement
provides that the entire principal was due “in a single lump sum on
or before March 1st 2004.” The Note further provides that upon
default, BMBT “has a right to foreclose and take immediate
possession” of the Property. Although the documents are both
dated December 1, 2003, they were not recorded until November
1, 2006—after the Note’s due date. BMBT thus argues that the
“intent of the parties could be found to be” that BMBT “was
entitled to title and possession of the property” upon the Millers’
default, that the Millers did default, and that BMBT then recorded
the Deed as authorized by the Promissory Note And Security
Agreement. I cannot see how this theoretical possibility may be
excluded without resort to extrinsic evidence. No court has
considered whether this explanation enjoys factual support or, if it
does, whether BMBT acted within its rights.
¶18 In sum, I agree with BMBT that the trial court erred in
granting Defendants’ oral motion to dismiss. I would reverse the
judgment of dismissal and let the matter proceed at least to the
summary judgment stage.