Bank of Ephraim v. Davis

• Decision Date: 06 January 1977
• Docket Number: No. 14514,14514
• Citation: 559 P.2d 538
• Parties: BANK OF EPHRAIM, a corporation, Plaintiff and Appellant, v. Halbert DAVIS et al., Defendants, Respondents and Cross-Appellants.
• Court: Utah Supreme Court

Page 538

559 P.2d 538

BANK OF EPHRAIM, a corporation, Plaintiff and Appellant, v. Halbert DAVIS et al., Defendants, Respondents and Cross-Appellants.

No. 14514.

Supreme Court of Utah.

Jan. 6, 1977.

Louis G. Trevort, Manti, for plaintiff and appellant.

S. Rex Lewis, Provo, for Steinmann.

Wayne G. Petty of Moyle & Draper, Salt Lake City, for Prudential.

Vernon B. Romney, Atty. Gen., Salt Lake City, for State Tax Commission.

MAUGHAN, Justice:

We consider an appeal and a cross-appeal. Each claims error in the assignment of priorities to the mortgage liens of the two appellants. Also at issue is the award of attorney's fees to cross-appellant Prudential Federal Savings and Loan Association, hereafter Prudential.

We discover no error in the assignment of priorities, nor in the award of attorney's fees; and therefore, affirm. No costs awarded.

The Bank of Ephraim, which was first in time to record its mortgage, contends a dragnet clause in its mortgage is sufficient to give it priority, for all sums owed by its debtor-mortgagor, over all subsequent lien holders. The Bank holds two mortgages on two separate parcels, but the principle involved applies to both. The parcels will be identified as the cafe property and trailer court property.

The mortgage covering the cafe property shows a face amount of $2,400.

On the back of the mortgage, the following typewritten provision has been added:

This mortgage covers all additional advances on this loan, the total principal amount not to exceed $3,000.

The standard dragnet clause of the mortgage is part of the original printed form, and states:

To secure payment of any and all extensions or renewals, and successive extensions or renewals, of the note above described, or of the indebtedness represented by the same, and of any other indebtedness represented by the same, and of any other indebtedness at any time arising from the mortgagor to the mortgagee, whether represented by notes, drafts, open accounts or otherwise, . . .. (Emphasis supplied.)

The mortgage provisions covering the trailer court property are the same, except the face amount is $4,000; and the added typewritten provision prescribes additional advances in excess of $6,000.

The mortgage covering the cafe property was executed August 7, 1970. On the same day, the mortgagor executed a second mortgage to Babylon Corporation, to secure an indebtedness of $14,500. On June 6, 1972, the mortgagor borrowed $10,228.80 from Prudential, giving Prudential a mortgage covering the cafe and trailer court parcels.

Subsequently, the mortgagor executed three additional notes to Bank of Ephraim. At the time of trial, Bank of Ephraim was awarded judgment for $43,037, principal; $6,536.75, interest; $3,000, attorney's fees; and a decree of foreclosure on the cafe property. Babylon Corporation was awarded a total judgment of $16,435.52. Prudential Federal Savings was awarded a total judgment of $6,750.33.

In assigning priorities, on the foreclosure of the cafe property, Bank of Ephraim's first position was limited to $3,000. Babylon Corporation was assigned second priority, Prudential was given third priority, and the balance of the judgment of the Bank of Ephraim was assigned fourth priority.

On March 15, 1971, the mortgagor executed a promissory note to Bank of Ephraim, secured by a mortgage on the trailer court property. On October 16, 1972, the mortgagor gave a mortgage to Prudential as previously stated. On July 31, 1974, the mortgagor borrowed an additional $1,508.41, from Bank of Ephraim, on the trailer court parcel. The trial court assigned the following priorities: first, Bank of Ephraim in the principal sum of $5,508.41; second, to Prudential Federal Savings; third, Bank of Ephraim for balance of indebtedness owed on all obligations.

On appeal, Bank of Ephraim contends that all of the advances it made, by reason of the dragnet clause, should have priority over the intervening liens.

There are two separate legal issues involved. The first requires an interpretation of the mortgage drafted by Bank of Ephraim. Recordation of the bank's mortgages gave notice to subsequent mortgagees. ¹ Bank of Ephraim claims the dragnet provision inparted notice the mortgage secured advancements, or indebtedness, in any amount. The trial court limited the first priority of Bank of Ephraim to the express limitations of amount set forth in the mortgages, by the typewritten additions.

A mortgage is governed by the same rules of interpretation that apply to written instruments generally. ² In the event of uncertainty, as to the meaning of a contract, it is construed most strictly against its framer. One will not be permitted to so fashion a contract as to mislead another, by setting forth clearly an apparent representation, induce a contrary limitation or expansion elsewhere in the instrument. ³ Furthermore, this court has held where there is a printed form of contract, and other words are inserted, in writing or otherwise, it is to be assumed the latter take precedence over the printed matter. ⁴ Under the facts here, Bank of Ephraim is precluded...