Washington Nat. Ins. Co. v. Sherwood Associates

• Decision Date: 19 June 1990
• Docket Number: No. 890502-CA,890502-CA
• Citation: 795 P.2d 665
• Parties: WASHINGTON NATIONAL INSURANCE COMPANY, an Illinois corporation, Plaintiff and Appellee, v. SHERWOOD ASSOCIATES, a Utah limited partnership; The Ridge Athletic Club, Inc., a Utah corporation; Darrell D. Tanner, individually, and as Trustee of the Tanner Family Trust; Jason Tanner, an individual; Tracy A. Tanner McDonald, an individual; Linley A. Tanner, an individual; Bradley H. Tanner, an individual, et al., Defendants and Appellants.
• Court: Utah Court of Appeals

Page 665

795 P.2d 665

WASHINGTON NATIONAL INSURANCE COMPANY, an Illinois corporation, Plaintiff and Appellee, v. SHERWOOD ASSOCIATES, a Utah limited partnership; The Ridge Athletic Club, Inc., a Utah corporation; Darrell D. Tanner individually, and as Trustee of the Tanner Family Trust Jason Tanner, an individual; Tracy A. Tanner McDonald, an individual; Linley A. Tanner, an individual; Bradley H Tanner, an individual, et al., Defendants and Appellants.

No. 890502-CA.

Court of Appeals of Utah.

June 19, 1990.

Jackson Howard and Leslie Slaugh, Provo, for defendants and appellants.

Clark W. Sessions and Cynthia K. Cassell, Salt Lake City, for plaintiff and appellee.

Before BILLINGS, GARFF and GREENWOOD, JJ.

OPINION

BILLINGS, Judge:

Darrell Tanner and The Ridge Athletic Club ¹ (hereinafter collectively referred to as "Tanner") appeal from a partial summary judgment and decree of foreclosure entered in favor of Washington National Insurance Company ("Washington"). We reverse and remand.

In December of 1979, Sherwood Associates ("Sherwood") executed a $1.2 million note in favor of Bettilyon Mortgage Loan Company ("Bettilyon"). This note was secured by a deed of trust on real property commonly known as The Ridge Athletic Club. Subsequently, Bettilyon assigned its interest in the note to Washington. Darrell Tanner purchased The Ridge Athletic Club in December of 1982, and assumed the obligations under the note and trust deed in January of 1983.

Tanner ceased making payments under the note in May 1987. On November 30, 1987, Washington accelerated the note pursuant to its contractual rights. Washington demanded that Tanner pay the note in full by December 7, 1987, to cure the default. Tanner responded by tendering only the amount that was delinquent under the note. Washington rejected the tender.

Ultimately, Washington filed this action and subsequently filed a motion for partial summary judgment to foreclose on the property. The district court held that Tanner was required to pay the entire amount due under the note in order to cure his default and that he had failed to do so and thus granted Washington's motion. Tanner appeals from the district court's entry of this foreclosure judgment.

Summary judgment should be granted under Utah Rule of Civil Procedure 56(c) "only when it is clear from the undisputed facts that the opposing party cannot prevail." Lach v. Deseret Bank, 746 P.2d 802, 804 (Utah Ct.App.1987). "When reviewing an appeal from summary judgment, we construe the facts and view the evidence in the light most favorable to the losing party." Parents Against Drunk Drivers v. Graystone Pines Homeowners' Assoc., 789 P.2d 52, 54 (Utah Ct.App.1990). See also Geneva Pipe Co. v. S & H Ins. Co., 714 P.2d 648, 649 (Utah 1986); Lucky Seven Rodeo Corp. v. Clark, 755 P.2d 750, 752 (Utah Ct.App.1988). "If ... we conclude that there is a dispute as to a genuine issue of material fact, we must reverse the grant of summary judgment and remand for trial on that issue." Atlas Corp. v. Clovis Nat'l Bank, 737 P.2d 225, 229 (Utah 1987).

RETROACTIVE APPLICATION OF SECTION 57-1-31

In judicial foreclosures prior to 1985, a debtor in default could pay the amount in default under the note at any time prior to foreclosure and thereby cure the default and avoid foreclosure. Utah Code Ann. § 57-1-31 (1981). In 1985, section 57-1-31 was amended, deleting the phrase which had allowed a debtor in a judicial foreclosure proceeding to cure the default by simply paying the amount in default. ² Thus, following this amendment, no statutory rights to cure remained under section 57-1-31 if the beneficiary chose to enforce his or her rights by judicial foreclosure.

Tanner bought the property and assumed the subject loan three years prior to the 1985 amendment of section 57-1-31. However, the judicial foreclosure action was brought in 1987, after the amendment. Tanner assumed that the pre-amendment version of the statute applied and thus tendered to Washington the amount in default. ³ Washington rejected the tender, arguing that the current version of section 57-1-31 applied, and thus, that Tanner had to pay the entire amount of the debt in order to cure. The district court agreed with Washington's position.

The district court reached the correct conclusion only if the 1985 amendment to section 57-1-31 applies to this contractual transaction. In Utah, a statute generally cannot be given retroactive effect unless the legislature expressly declares such an intent in the statute. Utah Code Ann. § 68-3-3 (1986) provides that "[n]o part of these revised statutes is retroactive, unless expressly so declared." See also Madsen v. Borthick, 769 P.2d 245, 253 (Utah 1988); Stephens v. Henderson, 741 P.2d 952, 953 (Utah 1987); In re J.P., 648 P.2d 1364, 1369 & n. 4 (Utah 1982).

The legislature did not state that section 57-1-31, as amended in 1985, should be applied retroactively. Thus, under the general rule, the 1985 amendment to section 57-1-31 should not be applied to this contractual transaction entered into before the amendment's adoption.

Washington relies on an exception to the general rule, claiming that even without express legislative intent a statute may be applied retroactively if it affects only procedural and not substantive rights. Pilcher v. State, 663 P.2d 450, 455 (Utah 1983); In re J.P., 648 P.2d at 1369 n. 4; Foil v. Ballinger, 601 P.2d 144, 151 (Utah 1979). In Pilcher, the Utah Supreme Court explained this exception:

A contrary rule applies, however, where a statute changes only procedural law by providing a different mode or form of procedure for enforcing substantive rights. Such remedial statutes are generally applied retrospectively to accrued or pending actions to further the Legislature's remedial purpose.... "[P]rocedural statutes enacted subsequent to the initiation of a suit which do not enlarge, eliminate, or destroy vested or contractual rights apply not only to future actions, but also to accrued and pending actions as well."

Pilcher, 663 P.2d at 455 (emphasis added) (quoting State v. Higgs, 656 P.2d 998, 1000 (Utah 1982)); see also Carlucci v. Utah State Indus. Comm'n, 725 P.2d 1335, 1337 (Utah 1986).

Thus, we must determine whether the 1985 amendment of section 57-1-31 affects a substantive right or merely a procedural one ⁴ in order to resolve whether the amended statute applies to this foreclosure action. The Utah Supreme Court focused on the "definitional" distinction between a substantive and procedural change to a statute in an early case, Petty v. Clark, 113 Utah 205, 192 P.2d 589 (1948). In Petty, the court was asked to assess whether an amendment to a statute which made a jury advisory in trials based on equitable contract claims was substantive or procedural. The court found the amendment was procedural, ⁵ stating:

The parties, in making their contract, did not rely on the provisions of the statute before it was amended, the amendment does not change the meaning of the contract at all, nor does the amendment deprive either party of any right which he would have had if the amendment had been enacted before the contract was made.

Id., 192 P.2d at 593. The Petty court went on to define a substantive change ⁶ in the law. Substantive law is defined as the positive law which creates, defines and regulates the rights and duties of the parties and which may give rise to a cause for action, as distinguished from adjective law which pertains to and prescribes the practice and procedure or the legal machinery by which the substantive law is determined or made effective.

Id. at 593-94.

In this contractual dispute, we begin our analysis of whether the change to section 57-1-31 is substantive or merely procedural with the premise that a contract implicitly contains the laws existing at the time it was entered. ⁷ Beehive Med. Elecs., Inc. v. Indus. Comm'n, 583 P.2d 53, 60 (Utah 1978) (citing Edwards v. Kearzey, 96 U.S. 595, 601, 24 L.Ed. 793 (1878) (holding that contracts embrace laws which affect their validity, construction, discharge, and enforcement)); Quagliana v. Exquisite Home Builders, Inc., 538 P.2d 301, 308 (Utah 1975); Portland Sav. Bank v. Landry, 372 A.2d 573, 575-76 (Me.1977).

If a statutory amendment changes the contractual rights and obligations of the parties, it is substantive. Petty, 192 P.2d at 593. However, if the amendment merely affects the legal machinery by which parties enforce their rights under the contract, Pilcher, 663 P.2d at 455, or simply clarifies the legislature's previous intentions, Foil, 601 P.2d at 151, it is procedural. ⁸

Washington claims that because the statutory amendment affects only Tanner's rights to cure his contractual default, it involves a remedy, is thus "remedial," and can be applied retroactively. ⁹ We disagree. A change in a statutory remedy or defense is a substantive change if it affects the rights and duties of the parties. Several Utah cases illuminate this point.

In Brunyer v. Salt Lake County, 551 P.2d 521 (Utah 1976), the Utah Supreme Court examined the issue of whether a statute creating the right to contribution among joint tortfeasors applied retroactively. Whether this statute created a new remedy or a new cause of action available to joint tortfeasors is debatable. What is important is that the statute created a new substantive right. Thus, the court found the statutory modification could not be applied retroactively because "[t]he contribution statute established a primary right and duty which was not in existence at the time the injuries in this case arose." Id. at 522.

Likewise, in Stephens v. Henderson, 741 P.2d 952, 953-54 (Utah 1987), the Utah Supreme Court examined the application of the Liability Reform Act which limited a defendant's joint liability in tort actions. The court determined that the act could not be applied retroactively because it was substantive and affected "the relationship between the parties at the...