Franklin Financial v. New Empire Development Co.

Decision Date14 February 1983
Docket NumberNo. 17857,17857
Citation659 P.2d 1040
PartiesFRANKLIN FINANCIAL, A Utah corporation, Plaintiff and Respondent, v. NEW EMPIRE DEVELOPMENT COMPANY, a partnership, Ronald S. Cook, Ray W. Lamoreaux, Wendell P. Hansen, Myron B. Child, Jr., Ponderosa Associates, Thomas E. Sawyer, and Hillgate Park Partnership, et al., Defendants and Appellants.
CourtUtah Supreme Court

Gary A. Atkin, John B. Anderson, R. Dennis Ickes, H. Mifflin Williams, III, John L. McCoy, Salt Lake City, for defendants and appellants.

Ralph J. Marsh, Salt Lake City, for plaintiff and respondent.

STEWART, Justice:

This is a suit by the seller of an apartment house to foreclose a contract of sale and recover the amounts due on the contract and five promissory notes. Plaintiffs moved for and were granted summary judgment, the property was sold, and plaintiff retained all the proceeds of the sale. Three junior lienholders appeal, challenging plaintiff's priority and claiming a share of the sale proceeds. We affirm.

On April 1, 1978 plaintiff, Franklin Financial (Franklin), entered into a Uniform Real Estate Contract to sell an apartment complex to defendant New Empire Development Co. (New Empire), a partnership, and its four individual partners. The contract price of $1.2 million was payable in installments with interest at 9 1/2 percent the first year, increasing to 18 percent thereafter. On the same day, apparently as part of the purchase price, New Empire and its individual partners also executed four promissory notes totalling $400,000 due one year later and a fifth note for $48,000 due two years later. The notes bore interest at 9 1/2 percent until due, increasing to 18 percent thereafter. The contract and the notes were secured by an assignment of the buyers' interest in the apartments.

Subsequently, New Empire obtained additional capital from various other sources and conveyed junior security interests in the apartments. Appellants Ponderosa Associates, Hillgate Park, and Thomas Sawyer are three such junior lienholders who recorded their interests between November 1978 and September 1979.

The buyers made some payments on the contract and notes to Franklin, but soon fell into default. To avoid foreclosure, Franklin and New Empire entered into an Extension and Modification Agreement, the date of which is neither in the record nor in the briefs, but it was apparently subsequent to the recording of the appellants' mortgages. The modification provided for payment in full of the contract and the notes by May 1, 1980, and effective January 1, 1980, increased the interest rate on outstanding balances from 18 percent to 10 percent over the fluctuating prime rate. Despite the modification, the buyers were again in default on May 1, 1980.

After several months of fruitless negotiations to reach an out-of-court settlement, Franklin initiated a foreclosure proceeding on December 10, 1980 against New Empire. Franklin also joined as defendants all junior lienholders of record. The three appellants answered, generally denying Franklin's priority, but alleging no factual basis for the denial. Several depositions were taken by the parties, and on April 27, 1981 Franklin filed a motion for summary judgment. Franklin's motion was accompanied by affidavits setting forth the terms of the contract, notes, and modification agreement with New Empire. In addition, the affidavits established the default balances due and set out the relative priorities of Franklin and each of the junior lienholders. None of the defendants, including appellants, filed any opposing affidavits or memoranda in opposition to the motion for summary judgment.

The motion was to be heard on May 7, but several junior lienholders sought and were granted a continuance for additional discovery. Accordingly, the hearing was postponed until May 18. Following oral argument on the motion, a transcript of which is not in the record, the court granted Franklin summary judgment. In its Judgment of Foreclosure and Order of Sale dated May 28, the court found the debt due Franklin to be $1,379,236 and ruled "that the interests of all of the defendants in the property securing the obligations to plaintiff are all subordinate to the interests of plaintiff in the property ... and that there is no genuine issue as to any material fact and that plaintiff is entitled to judgment as a matter of law."

Appellants filed notices of appeal, but failed to file a supersedeas bond pursuant to rules 62(d) and 73(d), Utah R.Civ.P., or obtain a stay of execution of the judgment and sheriff's sale under rule 62(a). The apartments were sold as ordered July 7, 1981 for $1,371,267.20, approximately $100,000 less than Franklin's total judgment plus interest, attorney fees, and costs. Franklin subsequently obtained a deficiency judgment.

Appellants argue on appeal that entry of summary judgment was error because (1) Franklin's supporting affidavits are defective; (2) there are genuine issues of material fact, such as whether Franklin had priority; and (3) Franklin's priority extends only to amounts due under the contract and notes prior to their modification and not to the additional interest charged subsequent to the modification. Franklin counters that (1) the appeal should be dismissed as moot because the foreclosure sale has already been carried out and the period for redemption has elapsed; (2) appellants waived their objections to Franklin's affidavits by raising them for the first time on appeal; (3) appellants filed no opposing affidavits or documents to raise a genuine issue of material fact; and (4) the modification did not limit the extent of Franklin's priority, and even if it did, appellants were not prejudiced because the deficiency from the sale approximates the amount by which appellants seek to have the judgment reduced.


We first address Franklin's argument that because the foreclosure sale has already been carried out and the period of redemption has passed, the appeal is moot and should be dismissed. An appeal is moot if during the pendency of the appeal circumstances change so that the controversy is eliminated, thereby rendering the relief requested impossible or of no legal effect. See, e.g., McRae v. Jackson, Utah, 526 P.2d 1190 (1974); Kellch v. Westland Minerals Corp., 26 Utah 2d 42, 484 P.2d 726 (1971); Mikkelsen v. Utah State Tax Commission, 22 Utah 2d 438, 455 P.2d 27 (1969). Thus, if appellants were seeking on this appeal to prevent the foreclosure sale, and because of their failure to obtain a stay of execution, the sale were legally carried out during the pendency of the appeal and the time for redemption had run, the appeal would be moot. See, e.g., Crim v. Sorrow, 243 Ga. 477, 255 S.E.2d 19 (1979); DuBose v. Gastonia Mutual Savings and Loan Association, 55 N.C.App. 574, 286 S.E.2d 617 (1982), appeal denied, 305 N.C. 584, 292 S.E.2d 5 (1982); Lord v. City of Tucson, 10 Ariz.App. 54, 455 P.2d 1004 (1969). However, appellants seek not to prevent the sale, but to establish their right to a share of the sale proceeds. That relief could be granted even though the sale is already completed and the time for redemption has elapsed.

Franklin also contends that the appeal is moot because the sale proceeds were insufficient to cover Franklin's entire primary debt and therefore the proceeds would also be insufficient to pay any of the additional claims of appellants. However, we reject Franklin's contention because if appellants' claims are valid, i.e., that Franklin's priority does not extend to the interest charges based on the amended agreement, then the primary debt would be smaller and the sale proceeds could satisfy the reduced debt and leave a surplus to apply to appellants' debts. See U.C.A., 1953, § 78-37-4. On that theory the entire controversy is not moot since, at least on the allegations presented, a live controversy exists. That brings us to the issue of whether summary judgment was properly entered.


In arguing that summary judgment should not have been granted, appellants assert that Franklin's supporting affidavits were defective because they were not based on personal knowledge, they contained inadmissible conclusions of law, and they referred to documents that were not attached. See Utah R.Civ.P. 56(e). However, it is axiomatic that matters not presented to the trial court may not be raised for the first time on appeal. E.g., Shayne v. Stanley & Sons, Inc., Utah, 605 P.2d 775 (1980); ...

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    ...that the controversy is eliminated, thereby rendering the relief requested impossible or of no legal effect." Franklin Fin. v. New Empire Dev. Co., 659 P.2d 1040, 1043 (Utah 1983); accord Morgan v. Morgan, 854 P.2d 559, 562 (Utah Ct.App.), cert. denied, 860 P.2d 943 The Baums contend that s......
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