Attorneys for St. George resident Peni Cox contend U.S. District Judge Clark Waddoups was wrong to lift a state judge’s order stopping ReconTrust’s foreclosures. ReconTrust argued to the appellate judges that Waddoups properly lifted state District Judge James Shumate’s injunction a few weeks after it was issued in May in St. George.
ReconTrust has been foreclosing on about 4,000 Utah homes yearly. Cox argued in a state court lawsuit filed last year that ReconTrust is not registered to do business in Utah and cannot legally foreclose on her home.
When the case was moved by ReconTrust to federal court, Waddoups overturned Shumate’s decision and Cox appealed.
The State of Utah intervened in the appeal and argued Waddoups was wrong to decide that the National Bank Act pre-empts state laws that otherwise would restrict ReconTrust from foreclosing. “The state’s interest is preserving the integrity of state law,” Assistant Attorney General Jerrold Jensen told the three judges considering the appeal. State of Utah Amicus Brief
State laws require trustees who sell foreclosed property to be either title insurance companies or attorneys who are members of the Utah State Bar. Jensen said last month that ReconTrust does not fit either requirement.
None of those arguments may matter, however, because the appellate judges indicated the only issue before them may be whether Waddoups erred by keeping the dispute in federal court, rather than remanding it back to state court.
“What’s wrong with the federal court having kept jurisdiction?,” Circuit Judge Harris Hartz, of Albuquerque, asked Salt Lake City attorney Craig Smay, who argued on behalf of Cox.
Smay responded that Waddoups should have sent the case back to state court because he erred in concluding that the federal law pre-empts the state laws. “This court ought to rule on that,” Smay said.
The presiding circuit judge, Michael Murphy of Salt Lake City, also challenged Smay’s position. Murphy said Waddoups plainly had jurisdiction when ReconTrust moved Cox’s lawsuit from state court to federal court.
A decision overturning Waddoups’ ruling could reinstate the injunction. A ruling affirming his decision merely allows the case to continue in federal court in Utah.