RICK L. KNUTH is the keeper of the Banking and Finance Law Spotlight Site.

Rick's practice focuses on assisting institutional and private lenders and borrowers in asset-based loan transactions, real estate financing, accounts receivable and inventory-based financing. He has over 30 years experience in loan documentation, mortgage and trust deed foreclosures, loan participations, credit opinion letters, workouts, and insolvency proceedings of all kinds. He counsels banks large and small in all aspects of their commercial credit relationships.

Look for postings by the other attorneys in our Commercial Lending and Banking Practice Group.

Keven M. Rowe (Group Leader)
Tom Berggren
Rick L. Knuth
Kyle V. Leishman
James W. Peters
Susan B. Peterson
Jacob Redd
George R. Sutton
Glen D. Watkins
Randon W. Wilson

Published Articles

"Fraudulent Checks- the 'Same Wrongdoer' Defense"
by Rick L. Knuth

Originally Published in Utah Banker Magazine Fall 2013.

Important Resources
Trustee Sales
Posted on Mar. 27, 2017

In a case decided January 14, 2016, the Utah Supreme Court ruled that a trustee's sale conducted by an unqualified trustee, was neither void nor voidable.

Samuel Adamson refinanced his home in 2007. Thereafter, the loan became owned by Bank of America, which appointed ReconTrust as successor trustee. Contrary to Utah Code Ann. Section 57-1-21, ReconTrust did not maintain a physical office within the state, but nonetheless recorded a Notice of Default and Election to Sell.

Adamson never called ReconTrust at the telephone number provided in the recorded notice, did not seek to enjoin the sale, and neither did he attend the sale.

The property was sold the trustee sale to BAC Home Loan, which later sold it to Distressed Assets. The new owner filed an unlawful detainer action in 2014, seeking to evict Adamson, who had been living in the home since January, 2010 without paying rent or property taxes. 

The District Court found that ReconTrust was unqualified to be a trustee, lacked authority to conduct the sale and the trustee's deed was void ab initio.

The Utah Supreme Court reversed. First, noting the Trust Deed Act's policy of promoting the validity of trustee's deeds, the Supreme Court said "the time when a trustor needs to contact a trustee . . . is beforethe foreclosure sale, not after." (Italics in original). The Court went on to discuss the distinction between deeds that are void from inception, and those that are merely voidable.

A deed is void ab initio only if it violates some public policy, and a deed issued by a trustee lacking authority does not harm the public. As a result, the District Court erred in finding the trustee's deed was void from inception.

As to whether the trustee's deed was voidable, the Supreme Court observed that voidability requires a showing of fraud or some unfair dealing by the trustee, as well as a showing of prejudice and a causal connection between the defect in the deed and the prejudice to the trustor. In Adamson's case, the Supreme Court found no indication that ReconTrust had engaged in any fraud or unfair dealing. Since Adamson had never attempted to contact ReconTrust, he suffered no prejudice as a result of the inability to visit a brick-and-mortar office in Utah and there was no evidence that had Adamson been able to visit a physical office in Utah that it would have somehow enabled him to cure the default. Accordingly, the trustee sale was neither void, voidable, nor could Adamson recover damages as a result of the trustee's lack of statutory authority.

Note, however, in 2011, too late to be of use in the Adamson case, the Utah Legislature enacted Utah Code Ann. Section 57-1-23.5, providing that a person who conducts a trustee sale without the requisite statutory qualification is liable to the trustor for "actual damages suffered by the trustor as a result of the unauthorized sale or $2000, whichever is greater."



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Rick Knuth is a member of the American College of Mortgage Attorneys.

George Sutton was recognized in 2012 as Utah Attorney of the Year in Financial Services Regulation Law by Best Lawyers in America.

Rick Knuth was recognized in 2012 as Utah Attorney of the Year in Banking and FinanceLaw by Best Lawyers in America.

All eligible attorneys in this group are ranked AV Preeminent by Martindale-Hubbell.

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