Holt v. Katsanevas, 920225-CA

• Decision Date: 19 May 1993
• Docket Number: No. 920225-CA,920225-CA
• Citation: 854 P.2d 575
• Parties: Keith C. HOLT and Joyce S. Holt, Plaintiffs and Appellants, v. Manuel KATSANEVAS, Defendant and Appellee.
• Court: Utah Court of Appeals

Page 575

854 P.2d 575

Keith C. HOLT and Joyce S. Holt, Plaintiffs and Appellants, v. Manuel KATSANEVAS, Defendant and Appellee.

No. 920225-CA.

Court of Appeals of Utah.

May 19, 1993.

Earl D. Tanner, Jr., Salt Lake City, for plaintiffs and appellants.

Nick J. Colessides, Salt Lake City, for defendant and appellee.

Before GARFF, GREENWOOD and ORME, JJ.

OPINION

GREENWOOD, Judge:

Plaintiffs, Keith C. and Joyce S. Holt, appeal from an order of summary judgment entered in favor of defendant, Manuel Katsanevas. We reverse the summary judgment because plaintiffs demonstrated the existence of a material factual issue in this case, and remand.

BACKGROUND

In 1979, plaintiffs, defendant, and defendant's brother, Steven Katsanevas, entered into a uniform real estate contract (the "Contract"), in which plaintiffs agreed to sell and the Katsanevas brothers agreed to buy real property located at 280 West South Temple in Salt Lake City (the "South Temple property") for $275,000. The Contract included a prohibition against prepayments for the first 120 months and further provided that the Katsanevases would not receive title to the property until the purchase price was paid in full. As the first payment was due October 1, 1979, prepayments were prohibited until October 1, 1989.

In late 1982, defendant was approached by Triad Corporation concerning its possible purchase of the South Temple property for approximately $3,000,000. As part of the proposed transaction, Triad would require defendant to convey fee title by warranty deed to the South Temple property. Defendant, therefore, approached plaintiffs about replacing the South Temple property as collateral for the Contract with other property owned by defendant which was located at 118 North 300 West in Salt Lake City (the "North Temple property"). Plaintiffs gave tentative permission for the exchange of collateral.

Because the South Temple property was encumbered by an earlier loan to plaintiffs from Continental Bank and Trust, the Triad purchase also required payoff of that loan in order to clear title. The balance on the Continental Bank loan was approximately $46,000 at that time. After several meetings, the parties orally agreed that defendant could pay off the Continental loan, notwithstanding the Contract's prepayment prohibition, plaintiffs would convey title to the South Temple property to defendant so that defendant could then sell the property to Triad, and defendant would provide substitute collateral for the Contract in the form of an assignment of contract for the North Temple property. According to plaintiffs, it was also agreed that the $46,000 payment to Continental Bank would be applied to the end of the Contract's original term rather than at the time of actual payment to Continental. Defendant, however, asserts that the parties agreed that the $46,000 was to be applied to the Contract at the time of payment.

Defendant paid the balance of the loan due to Continental Bank, title was cleared, and defendant sold the South Temple property to Triad Corporation. The Contract was then secured by the North Temple property via a February 13, 1984 document titled "Assignment of Contract (for Security)" and a Trust Deed bearing the same date. The Assignment of Contract recites that the assignment is given to secure an indebtedness of approximately $172,000. The Trust Deed indicates that it secures a contract "in the principal sum of" $250,000. Both of these documents were prepared by counsel for defendant and were signed by defendant and his brother but not by plaintiffs.

Also in 1984, a Release was executed by plaintiffs releasing defendant's brother from his obligations under the Contract. The Release states in the recitals that the obligation due the plaintiffs by the defendant is "in the sum of $172,000 (as more particularly described in the Trust Deed and Assignment of Contract)."

Monthly payments, as required by the Contract, continued. Statements reflecting defendant's payments and a principal balance consistent with application of the $46,000 payment at the end of the Contract's original payment term were sent to defendant by the escrow agent. Defendant used the escrow agent's statements for tax purposes.

In late 1989, defendant objected to the escrow agent's statements, claiming that the $46,000 payment should have been applied to the loan balance at the time it was paid to Continental Bank. Plaintiffs filed an action for declaratory relief against defendant, seeking an order determining that the parties agreed to apply the payment at the end of the Contract, and that the Contract's prepayment prohibition remained in effect.

Both plaintiffs and defendant then filed motions for summary judgment. Plaintiffs asserted an agreement to apply the payment at the end of the original contract's payment period, which they supported with the escrow agent's statements reflecting principal and interest balances consistent with application of the payment at the end of the original contract's payment period. Additionally, plaintiffs asserted that in 1986 they had sent defendant a letter reflecting this agreement to apply the $46,000 payment at the end of the original contract term, and defendant had not replied with any objection.

Plaintiffs also relied on an admission in defendant's deposition that he had used the escrow agent statements to prepare tax returns for a number of years. In his deposition, defendant admitted awareness of discussions about different possibilities as to how the payment was to be applied. Plaintiffs contended that the affidavits, depositions, escrow statements, and other documents supported their position that defendant agreed to apply the payment at the end of the original contract's payment period.

Defendant asserted, on the other hand, that two other documents supported his position that the payment should have been applied to the Contract's principal balance at the time it was made. These documents were the assignment of contract for the North Temple property and the document releasing defendant's brother from obligation under the Contract. Because both these documents indicate that the principal balance was approximately $172,000, defendant contends that they establish that the payment was applied to the principal of the loan at the time it was paid. Defendant also relied on two letters--an unsigned letter from plaintiffs to defendant, and a correspondence from defendant's counsel to plaintiffs. Plaintiffs, however, denied ever seeing or sending the first letter, and denied receiving the second.

The trial court granted defendant's motion for summary judgment, concluding that the payment should have been applied to the Contract balance when paid. Plaintiffs then filed a motion for reconsideration, supported by an affidavit by Robert Bailey, a Continental Bank officer, and a second affidavit of plaintiff Keith Holt. According to the two affidavits, Bailey had been working with Keith Holt to obtain an SBA loan for him. The affidavits describe an informal meeting attended by Keith Holt, defendant, defendant's legal counsel and Robert Bailey, in which the proposed Triad transaction was discussed. Keith Holt's affidavit states that during this meeting he and the Katsanevas brothers reached an oral agreement to apply the Continental Bank payment at the end of the original contract's payment period. Robert Bailey's affidavit also acknowledges a discussion regarding paying off the Continental Bank loan in order to allow the Katsanevases to sell their property to Triad. Bailey's affidavit further states:

Keith [Holt] made three proposals; First, he offered to make the substitution if they would pay his increased income taxes for the year. They declined this plan. Second, he offered to substitute collateral if they would raise the interest rate on the contract. They declined the second offer.

Keith's third plan was to apply the payment to Continental Bank to the end of the contract. They would continue making their regular monthly payments until the principal balance was reduced to the amount of their payment to Continental Bank. At that time, their payment would be credited to the contract which would then be paid in full.

Keith and the Katsanevas brothers agreed to the third plan. I remember them standing and shaking hands on the deal.

Outside the Crown Burger after the meeting, I told Keith that he had come out "smelling like a rose" and that this arrangement would work fine for this SBA loan. We picked up [ ] the commercial officer at Continental Banking working with Keith, and had lunch at Diamond Lil's.

The trial court granted the motion for reconsideration and did not grant defendant's motion to strike these supplemental affidavits. We assume, therefore, that the trial court allowed and considered them. The trial court then affirmed summary judgment in favor of defendant, finding that no agreement existed which would require that the payment be applied at the end of the original Contract's payment period.

In its Memorandum Decision granting summary judgment to defendant, the trial court made findings of fact, including the following:

8. Plaintiffs agreed to reduce the principal sum due under the contract by the sum of $46,386.51.

9. The plaintiffs and defendants executed and delivered to each other various documents including a Release, an Assignment of Contract, and a short form Trust Deed, wherein they recited that the then existing indebtedness was the sum of approximately $172,000.00, which balance assumes that the payment of $46,386.51 was applied to the then balance of the contract, at the time that it was made.

10. It was necessary for defendant Manuel Katsanevas to borrow the $46,386.51 in order to pay off the plaintiffs' loan [from Continental Bank.]

11. The payment of plaintiffs' loan [ ] was not a gift, nor was it intended to plaintiff [sic] to bestow any other financial benefit upon plaintiffs; the payment...