First of Denver Mortg. Investors v. C. N. Zundel and Associates
| Decision Date | 24 August 1979 |
| Docket Number | Nos. 15696,16051,s. 15696 |
| Citation | 600 P.2d 521 |
| Parties | UTAH 79-18 FIRST OF DENVER MORTGAGE INVESTORS and Citibank, N.A., Plaintiffs and Appellants, v. C. N. ZUNDEL AND ASSOCIATES, a limited partnership, et al., Defendants and Respondents. FIRST OF DENVER MORTGAGE INVESTORS, et al., Plaintiffs and Respondents, v. C. N. ZUNDEL AND ASSOCIATES, a limited partnership, Bland Brothers, Inc., et al., Defendants and Appellant. |
| Court | Utah Supreme Court |
Richard H. Nebeker, Salt Lake City, for plaintiffs and appellants in 15696 and for plaintiffs and respondents in 16051.
J. Anthony Eyre, George H. Speciale, Milo S. Marsden, Jr., Albert J. Colton, Robert S. Howell, David H. Schowbe, Richard C. Davidson, Carvel R. Shaffer, Salt Lake City, George K. Fadel, Albert E. Mann, Bountiful, John H. Kelly, pro se., LeRoy S. Axland, Randy S. Ludlow, Salt Lake City, for defendants and respondents in 15696.
Robert C. Cummings, Salt Lake City, for defendants and appellant in 16051 and for defendants and respondents in 15696.
Gordon A. Madsen, Robert F. Orton, Salt Lake City, for defendants and appellants in 16051.
This appeal from the district court consolidates two separate but related proceedings. These proceedings involve the allocation of priorities between mortgagees foreclosing against real property in Davis County, Utah, and competing lien claimants who provided services and materials for improvements to the property.
Plaintiffs, First of Denver Mortgage Investors ("FDMI") and Citibank, N.A., were granted a judgment against defendant Mountain Springs by the trial court on December 20, 1977, in the amount of $2,358,396.08. The amount represented $1,558,005.51 in outstanding principal and $800,390.57 in interest. The judgment was secured by a lien on the Lakeview Terrace subdivision. The court's conclusions of law include the following:
4. Plaintiffs have stipulated in open court that they shall bid only the sum of one million nine hundred thousand for said property (at the sheriff's sale) and take no deficiency judgment against the defendant, Mountain Springs Construction Company, nor against any of the individual guarantors.
The Judgment and Decree of Foreclosure states:
The priority of the mechanic's and materialmen's liens is reserved for future determination and shall be set forth in a supplemental Judgment and Decree of Foreclosure to be entered prior to Sheriff's Sale.
The Decree further provides:
. . . that the proceeds of sale be applied in payment of the Sheriff's cost of sale and thereafter to the parties in accordance with the priority to be determined by the court . . . .
The court subsequently entered its order awarding priority to mechanics' liens claimed by eight defendants. The appeal from that order by plaintiffs is Case No. 15696 in this Court.
In a consolidated case, No. 16051, defendant Bland Brothers, Inc. ("Bland Bros.") appeals from the lower court's denial of its motion to set aside the sheriff's sale held pursuant to the foreclosure action and raises procedural issues in connection therewith. We shall examine first the common facts underlying these cases and then deal separately with the issues raised on appeal.
This litigation concerns a subdivision which originally comprised 44 acres in Bountiful, Utah, known as Lakeview Terrace subdivision. A trust deed was recorded as to this property on August 1, 1973, when plaintiff FDMI made a loan of $450,000 to C.N. Zundel and Associates, a limited partnership. In November 1973 defendant Child Brothers, Inc. ("Child Bros.") commenced the first work on the property for C.N. Zundel. The work consisted of locating existing lines and putting in pipeline, water and sewer systems, and storm drains. Subsequently, the original FDMI loan was refinanced, and the 1973 trust deed released, with FDMI advancing $1,500,000 to Zundel and several limited partners. This amount was secured by a new trust deed recorded on February 19, 1974. The construction loan was for the financing of improvements on the 44-acre property, which was to comprise 54 single-family building sites and 69 condominium units. The loan was due and payable on January 15, 1976.
On August 8, 1975, Zundel conveyed the property to Mountain Springs Construction Company, whose stockholders were the same individuals who had been Zundel's limited partners. Because Zundel had become delinquent on the FDMI loan, FDMI on September 8, 1975, filed its first complaint for foreclosure. In November FDMI concluded a supplemental loan agreement with Mountain Springs, the successor to C.N. Zundel and Associates, which modified the construction loan so as to require repayment in installments in July 1976, October 1976, July 1977, and December 1977.
The following lien claimants first performed work on the Lakeview property for Mountain Springs on the dates indicated: Child Bros., November 15, 1973; Duncan Electric, January 22, 1975; Robert J. Wardrop, December 1, 1975; Countertop Shop, Inc., March 9, 1976; Max D. Scheel, April 19, 1976; Ronald Graham Tile Co., March 23, 1976; and Bland Bros., March 8, 1976. Additionally, Holt-Witmer provided wallpaper and linoleum under contract with Zundel commencing January 1, 1975. Except for Child Bros., the lien claimants all performed labor or furnished materials on various condominium units situated on the property. 1
In June 1976 Child Bros., as credit in the approximate amount of $22,000 toward the sum owed by Zundel and Mountain Springs, accepted a check for $13,210 and a warranty deed to two lots in the subdivision. FDMI's trust deed provided that the title to the property deeded to Child Bros. would revert to FDMI if the required payment was not made by July 1, 1976. In exchange for the payment in cash and property, Child Bros. executed a release of all liens and claims. The release was recorded on June 22, 1976.
Mountain Springs failed to pay the July 1976 installment on its note to FDMI. A partial assignment of the promissory note and trust deed from FDMI to Citibank, N.A., was recorded on July 30, 1976, and FDMI and Citibank on August 2, 1976, filed an amended complaint seeking foreclosure of the property. Mountain Springs answered, counter-claimed for damages, and filed a lis pendens against the property. One year later Child Bros. cross-claimed for money due and failure of warranty on the lots conveyed to it. Subsequently, the plaintiffs and the lien claimant defendants moved for summary judgment.
Following the December 20, 1977, hearing, plaintiffs were awarded a judgment against Mountain Springs; the question of lien priority was reserved for later determination. The sheriff's sale took place on January 19, 1978. Plaintiff FDMI bid $1,900,000 for the property; no higher bids were received. On January 24, the court entered a Memorandum Decision awarding the lien claimants first priority over the plaintiffs. That ruling involved total liens in the undisputed amount of $37,397.42. In making its ruling, the court in effect rejected a stipulation signed by attorneys for Child Bros. and FDMI on January 11, 1978, that Child Bros.' lien was junior to the trust deed. The provisions of the Memorandum Decision were embodied in the court's Order Granting Summary Judgment and Order Amending Certificate of Sale on February 1, 1978. Pursuant to this order, the sheriff's certificate of sale was amended to change plaintiff's bid to $1,937,397.42. On February 16, 1978, following the entry of a summary judgment in favor of lien claimant Holt-Witmer, the court entered another order requiring "that the sheriff's certificate of sale shall be amended to show that plaintiff's bid for the property is the sum of $1,944,732.86."
Child Bros.' cross-claim and counterclaims against Zundel, Mountain Springs, and plaintiffs were dismissed following a trial on February 1, 1978. Child Bros.' counsel was not present at the trial for reasons set out in an affidavit filed with Child Bros.' appellate brief.
On these facts, the plaintiffs FDMI and Citibank in Case No. 15696 seek reversal of the summary judgment dated February 1, 1978, awarding the named lien claimants priority over plaintiffs' trust deed.
Plaintiffs contend that liens for materials furnished for construction in Lakeview Terrace could not relate back to the date of the first work commenced on November 15, 1973, by Child Bros. for two basic reasons. First, plaintiffs characterize Child Bros.' work as "off-site improvements" and argue that liens arising subsequent to such improvements and after the recording of plaintiffs' trust deed which relate to specific structures cannot relate back to the date of the commencement of Child Bros.' work. Second, plaintiffs rely on Child Bros.' release of its claims to a lien for work performed prior to June 17, 1976. Plaintiffs further argue that the work done in October 1976 by Child Bros. was not under the same contract as work done previously by Child Bros. on Lakeview Terrace and was therefore, as stipulated by Child Bros., junior and subordinate to plaintiffs' trust deed.
Whether the lower court decided the question of lien priority properly depends on a consideration of several propositions of law underlying plaintiffs' contentions.
The first issue is whether the improvements by Child Bros. met the general statutory requirements under Utah law for the attachment of mechanics' liens. The Utah lien statute, § 38-1-3, 2 lists the following persons among those entitled to a mechanics' lien: "Contractors, subcontractors and all persons performing any services or furnishing any materials used in the construction, alteration, or improvement of any building or structure or improvement to any premises in any manner . . . ."
"The purpose of the lien statutes is to protect those who have added directly to the value of property by performing labor or furnishing materials upon it," Stanton Transportation Co. v. Davis, 9 Utah 2d 184, 187, 341 P.2d 207, 209 (1959). The broad...
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