Reinbold v. Utah Fun Shares

• Decision Date: 31 March 1993
• Docket Number: No. 920037-CA,920037-CA
• Citation: Reinbold v. Utah Fun Shares, 850 P.2d 487 (Utah App. 1993)
• Parties: Carolyn REINBOLD, Plaintiff and Appellant, v. UTAH FUN SHARES, a Nevada limited partnership, et al., Defendants and Appellees.
• Court: Utah Court of Appeals

Page 487

850 P.2d 487

Carolyn REINBOLD, Plaintiff and Appellant, v. UTAH FUN SHARES, a Nevada limited partnership, et al Defendants and Appellees.

No. 920037-CA.

Court of Appeals of Utah.

March 31, 1993.

Floyd W. Holm (argued), Chamberlain & Higbee, Cedar City, for plaintiff and appellant.

Michael W. Park (argued), The Park Firm, St. George, for defendants and appellees.

Before BILLINGS, GARFF and GREENWOOD, JJ.

OPINION

GREENWOOD, Judge:

Plaintiff, Carolyn Reinbold (Reinbold) appeals from a judgment holding that her trust deed interest in certain real property was junior to that of defendant, Brian Head Equities (BHE). We affirm the trial court's determination.

BACKGROUND

On February 7, 1983, Utah Fun Shares (UFS), a Nevada limited partnership, purchased Unit 5A of the Southview Lodge condominiums at Brian Head, Utah, from Southview Lodge Partnership (Southview). UFS executed a note in favor of Southview for $65,000, and the note was secured by a trust deed (initial trust deed) on Unit 5A naming Southview as beneficiary. The initial trust deed was recorded on February 7, 1983. Southview later assigned the initial trust deed and note to one of its partners Richard L. Smith and his wife, Loretta E. Smith. This assignment was recorded on July 15, 1983.

On June 19, 1983, UFS executed twenty-three time share trust deeds on Unit 5A as security for notes with a total principal sum of $122,100, payable to All American Realty, Inc. (All American). The time share trust deeds were recorded on July 15, 1983. All American, a Nevada real estate company, was the general partner of UFS. Charles Van Pelt (Van Pelt) was president and broker-owner of All American. All American immediately assigned its interest in the time share trust deeds to All American Mortgage Company Investment Trust II (Trust II), a real estate investment entity created by Van Pelt. These assignments were recorded on July 15, 1983.

Shortly before the time share trust deeds were recorded, the Smiths made a demand for payment from UFS on the initial trust deed and note. The note required two equal payments of $32,500, and the due date for the first payment had passed. Van Pelt told the Smiths that UFS was unable to make the payments, but he offered to "roll" the initial trust deed note into Trust II where it would earn approximately 16% to 18% interest for the Smiths. A document entitled "Demand for Payment" indicated that the Smiths would provide the original initial trust deed documents and a request for reconveyance "upon receipt of payment in full." This document also included the Smiths' agreement to the transfer of payoff funds into Trust II. Van Pelt provided two receipts for the Smiths dated July 19 and 20, 1983, respectively, which indicated that checks in an amount sufficient to satisfy the $65,000 note had been deposited into Trust II. Although the original cancelled checks were never produced, an account ledger and bank statement were introduced at trial to substantiate the deposit of the Smiths' funds. Richard Smith maintained, however, that Van Pelt merely moved the funds around in different accounts, and never actually paid the principal and interest due on the initial trust deed note.

The initial trust deed was never reconveyed, nor was there an action to compel such reconveyance. The Smiths subsequently assigned their interest in the initial trust deed and note to BHE, a Nevada corporation of which Richard Smith is president. This assignment was recorded on January 8, 1985. BHE initiated nonjudicial foreclosure proceedings pursuant to the initial trust deed, and a trustee's sale was scheduled in May of 1985.

Because of the foreclosure proceedings, Mark Alden, trustee of Trust II, filed suit against UFS, Southview, the Smiths, BHE, and Southern Utah Title Company, seeking to enjoin the foreclosure sale, claiming UFS had defaulted on the time share trust deed obligations and asking for a determination of the lienholders' relative priorities. On May 17, 1985, a hearing was held on Trust II's motion for a preliminary injunction. At that hearing, Van Pelt, on behalf of UFS, confessed judgments in favor of Trust II in the amount of $162,405.46 and BHE in the amount of $86,097.58. In addition, the court ordered that any foreclosure proceeding against the condominium would be postponed until the court determined the relative priorities of the parties. Counsel for Trust II drafted the judgment and order that was signed and entered on July 16, 1985.

Trust II filed a motion for summary judgment on June 27, 1985, claiming that there was no genuine issue of material fact regarding the priority of interests in the condominium. The motion was denied. In June of 1988, Reinbold succeeded to Trust II's interest as beneficiary of twenty-two of the twenty-three time share trust deeds, by executing on a judgment lien she had obtained against Trust II. Finally, BHE filed for Chapter 11 bankruptcy relief in March of 1989.

Reinbold successfully sought relief from the bankruptcy's automatic stay, and the parties proceeded to trial to determine their relative priorities in Unit 5A. After the trial was completed, the trial court found that BHE, as the beneficiary under the initial trust deed which was recorded first, held the senior lien position as to Unit 5A. The court found that Reinbold acquired Trust II's interest in the time share trust deeds which were recorded after the initial trust deed, placing her in a junior lien position. The court also found that no reconveyance of the initial trust deed was ever recorded or even properly requested, and no notice of any claim of extinguishment of the debt owed on the initial trust deed had ever been filed. In addition, the court found that Southview and the Smiths had no interest in Unit 5A, because they had assigned their rights to others.

Pursuant to these findings, the court held that UFS remained indebted to BHE for the amount previously confessed and reduced to judgment in July of 1985. The court concluded that this prior judgment was binding as the law of the case. The court also found that Reinbold had failed to prove by a preponderance of the evidence that the initial trust deed note had been extinguished. Finally, the court ruled that BHE as the senior lien holder, could commence foreclosure proceedings against Unit 5A, and Reinbold would retain the junior judgment for $162,405.46 that was confessed by UFS in July of 1985.

Reinbold appeals, claiming the trial court erred (1) by finding that the debt secured by the initial trust deed had not been extinguished, and (2) by holding that the initial trust deed was a valid lien with priority over Reinbold's lien. ¹

STANDARD OF REVIEW

When an appellant is essentially challenging the legal sufficiency of the evidence, a clearly erroneous standard of appellate review applies. Utah Rule of Civil Procedure 52(a) provides: "Findings of fact, whether oral or documentary shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses." "A finding attacked as lacking adequate evidentiary support is deemed 'clearly erroneous' only if we conclude that the finding is against the clear weight of the evidence." Reid v. Mutual of Omaha Ins. Co., 776 P.2d 896, 899-901 (Utah 1989) (citations omitted). See Grayson Roper Ltd. v. Finlinson, 782 P.2d 467, 470 (Utah 1989). We review the evidence in a light most favorable to the trial court's findings and affirm if there is a reasonable basis for doing so. Gillmor v. Gillmor, 745 P.2d 461, 462 (Utah App.1987), cert. denied, 765 P.2d 1278 (Utah 1988). A prerequisite to an appellant's attack on findings of fact is the requirement that appellant marshall all the evidence in support of the findings in order to demonstrate "that the evidence, including all reasonable inferences drawn therefrom, is insufficient to support the findings." Grayson, 782 P.2d at 470. See Reid, 776 P.2d at 899. An appellant's challenges to the trial court's legal conclusions, "on the other hand, are reviewed for correctness and are not given special deference." Bountiful v. Riley, 784 P.2d 1174, 1175 (Utah 1989). See Grayson, 782 P.2d at 470.

ANALYSIS

Debt Extinguishment

Reinbold argues that the findings regarding the validity of the initial trust deed were clearly erroneous. Specifically, Reinbold challenges the court's finding that the debt owed on the initial trust deed was never extinguished, thereby leaving BHE in a first lien position as to Unit 5A. Reinbold claims there is insufficient evidence to support this finding.

As a precursor to her argument, Reinbold marshalled the following evidence as supportive of the trial court's findings:

1. The public record establishes that the initial trust deed was recorded prior to the time share trust deeds;

2. UFS confessed judgment in favor of BHE in July of 1985 pursuant to the note secured by the initial trust deed; and

3. Neither a deed of reconveyance nor an action to compel reconveyance was ever instituted by Reinbold's predecessors.

Despite these facts, Reinbold claims the initial trust deed was extinguished by operation of law upon payment of the promissory note. She argues that because payment extinguished the debt owed on the trust deed, the public record is immaterial and should be disregarded by the trial court. Lastly, she claims the July 1985 judgment was intended to be provisional in nature and, therefore, could not operate as the law of the case at the later trial.

Reinbold's marshalling of the evidence, however, is incomplete. It fails to include the relevant testimony of Richard Smith, presented at trial through reading portions of his deposition. In his...