Pima County v. INA/Oldfather 4.7 Acres Trust No. 2292, 2

• Decision Date: 20 December 1984
• Docket Number: No. 2,CA-CIV,2
• Citation: 700 P.2d 877,145 Ariz. 179
• Parties: PIMA COUNTY, a body politic and corporate, Plaintiff/Appellee, and John J. Arena and Isobel L. Arena, husband and wife, Defendants/Cross-Claimants/Appellees, v. INA/OLDFATHER 4.7 ACRES TRUST # 2292, an Arizona partnership; Ina/Oldfather Associates, an Arizona partnership; Corbec Investments Corporation, Defendants/Cross-Claimants/Appellants. 5134.
• Court: Arizona Court of Appeals

Page 877

700 P.2d 877

145 Ariz. 179

PIMA COUNTY, a body politic and corporate, Plaintiff/Appellee, andJohn J. Arena and Isobel L. Arena, husband and wife, Defendants/Cross-Claimants/Appellees, v.INA/OLDFATHER 4.7 ACRES TRUST # 2292, an Arizona partnership; Ina/Oldfather Associates, an Arizona partnership; Corbec Investments Corporation, Defendants/Cross-Claimants/Appellants.

No. 2 CA-CIV 5134.

Court of Appeals of Arizona Division 2.

Dec. 20, 1984.

Review Denied March 5, 1984.

Lawrence E. Condit, Tucson, for plaintiff/appellee and defendants/cross-claimants/appellees.

Robert C. Stubbs & Associates, P.C. by G. Lawrence Schubart, Tucson, for defendants/cross-claimants/appellants.

OPINION

HOWARD, Judge.

This appeal concerns a dispute between a vendor and an assignee of the purchaser over the proceeds of a settlement in a condemnation action.¹

The appellees, the Arenas, entered into a contract to sell five acres of unimproved land to Evelyn Hanson or her nominees for the sum of $275,000.The agreement provided for an earnest money deposit of $2,500.The sum of $77,250 was to be paid at closing and the balance of $195,250 was to be paid in semi-annual installment payments.Prior to the date set for closing, Hanson assigned her interest to Disney Investment Fund which in turn assigned the purchase to defendants and appellantIna/Oldfather Associates which closed on the purchase.It executed a deed of trust with the Arenas as the beneficiaries and Ina/Oldfather Associates as the trustor.Subsequently, Ina/Oldfather Associates assigned its rights to Corbec Investment Corporation which took the title under the partnership called Ina/Oldfather 4.7 Acres Trust # 2292.

Paragraph 6 of the deed of trust reads as follows:

"That any award of damages in connection with any condemnation ... is assigned and shall be paid to [the] Beneficiary as further security for all obligations secured hereby ... and upon receipt of such moneys [the] Beneficiary may hold the same as such further security, or apply or release the same in the same manner and with the same effect as above provided for disposition of proceeds of fire or other insurance."

The paragraph in the deed of trust which provides for the disposition of proceeds of fire or other insurance is paragraph 2.It provides:

"To provide, maintain, and deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary.The amount collected under any fire or other insurance policy may be applied by Beneficiary upon any indebtedness secured hereby and in such order as Beneficiary may determine, or at option of Beneficiary the entire amount so collected or any part thereof may be released to Trustor.Such application or release shall not cure or waive any default or notice of Trustee's sale hereunder or invalidate any act done pursuant to such notice."

The Arenas moved for summary judgment which the trial court granted based on paragraph 6 of the deed of trust, holding that it was enforceable against appellants and ordering that the entire sum of $37,224 be paid to the Arenas.The trial court refused to grant appellees' request for attorney's fees.

Appellants contend that the trial court erred in awarding the entire amount of the condemnation award to appellees and that the court further erred in failing to order either that the total condemnation award be applied to reduce the principal balance or that the total award be held as security.

When only part of the mortgaged land is taken, in the absence of any agreement in the mortgage or deed of trust, there is a split of authority as to whether or not the proceeds of the condemnation award have to be apportioned between the mortgagee and mortgagor.In a number of jurisdictions the lien holder is held entitled to all of the condemnation award up to the amount of the secured indebtedness.City of Chicago v. Salinger, 384 Ill. 515, 52 N.E.2d 184, 154 A.L.R. 1104(1943);seeBuell Realty Note Collection Trust v. Central Oak Investment Co., 483 S.W.2d 24(Tex.Civ.App.1972);H. Teague, Condemnation of Mortgaged Property, 44 Tex.L.Rev. 1535(1966);D. Leipziger, The Mortgagee's Remedies for Waste, 64 Cal.L.Rev. 1086(1976); 4 J. Sackman and R. Van Brunt, Nichols' The Law of Eminent Domain§ 12.43(rev. 3rd ed. 1981).In other jurisdictions a trust deed holder or mortgagee is entitled to share in an award resulting from condemnation of part of the property constituting the security only to the extent the security has been impaired by the taking.People ex rel. Department of Transportation v. Redwood Baseline, Ltd., 84 Cal.App.3d 662, 149 Cal.Rptr. 11(1978).However, when the deed of trust or mortgage has a provision determining the disposition of such proceeds, it governs.People ex rel. Department of Transportation v. Redwood, supra.The deed of trust here clearly gives the beneficiaries of the trust the right to the proceeds and the option as to its application.Appellants argue that A.R.S. § 33-702(B) prohibits the provision for the condemnation award which is contained in the Arena deed of trust.We do not agree.The statute provides:

"A mortgage or trust deed may provide for an assignment to the mortgagee or beneficiary of the interest of the mortgagor or trustor in leases, rents, issues, profits or income from the property covered thereby, whether effective before, upon or after a default under such mortgage or trust deed or any contract secured thereby, and such assignment may be enforced without regard to the adequacy of the security or the solvency of the mortgagor or trustor by any one or more of the following methods:

1.The...