AmericanWest Bank v. Kellin
2015 UT App 300
| Utah Ct. App. | 2015Background
- In 2007 Sandy Kellin borrowed to buy two fractionalizable condominium units (Unit 302 and Unit 402); both loans later defaulted and AmWest Bank foreclosed.
- Trustee sales occurred: AmWest purchased Unit 402 by credit bid of $625,000 (amount owing then $1,044,453) and purchased the remaining seven-eighths of Unit 302 for $455,000 (amount owing then $995,777).
- AmWest sued for deficiency judgments; Bryson (co-borrower on Unit 402) settled and AmWest obtained summary judgment on indebtedness; trial was limited to fair-market-value at time of sale for each foreclosed interest.
- Each party presented appraisal expert testimony: AmWest’s expert (Weed) appraised whole-unit values and testified there was no market for one-eighth shares; Kellin’s expert (Hunt) appraised one-eighth shares and proposed multiplying those values to aggregate whole- or multi-eighth values.
- The district court rejected the simple aggregation of fractional-share values as inconsistent with USPAP Standards and credited Weed’s whole-unit valuations for Unit 402 and, for Unit 302, used the whole-unit fee-simple value as the only admissible offset because AmWest failed to present admissible evidence of the seven-eighths value.
- District court entered combined deficiency judgment against Kellin; Kellin appealed. The Court of Appeals affirmed and remanded for calculation of AmWest’s appellate attorney fees.
Issues
| Issue | Plaintiff's Argument (Kellin) | Defendant's Argument (AmWest) | Held |
|---|---|---|---|
| Whether creditor must prove fair market value of foreclosed property | AmWest must prove fair market value as part of its burden; absent credible evidence of value, creditor cannot obtain deficiency | AmWest says it pleaded value and court determines fair market value from evidence | Court assumed district court’s allocation (creditor had burden) but found no reversible error in application and did not resolve the general burden question |
| Proper "highest and best use" valuation: whole unit vs. fractional one-eighth interests | Kellin: highest and best use was fractionalized one-eighth shares; values should be aggregated from one-eighth appraisals | AmWest: no market for one-eighth shares; highest and best use is as whole condominium units | Court affirmed district court: rejected simple multiplication of fractional values under USPAP rule 1-4(e); whole-unit valuation was appropriate given record and lack of market for one-eighth shares |
| Credibility and use of expert testimony (Weed and Hunt) | Kellin: district court found Weed partly non-credible and should not have relied on his valuations | AmWest: Weed’s whole-unit appraisals were the most reliable evidence | Court: appellate court will not second-guess credibility where record supports findings; district court reasonably credited parts of Weed’s testimony and rejected improper portions |
| Use of AmWest’s credit bid at trustee’s sale as evidence of fair market value | Kellin: credit bid demonstrates fair market value and court erred in treating it otherwise | AmWest: credit bid is relevant for calculating deficiency but fair market value must be separately determined | Court: district court did not use credit bid as value; it used Weed’s appraisal for FMV and used credit bid only to compute the deficiency amount when larger than appraised FMV |
Key Cases Cited
- Machock v. Fink, 137 P.3d 779 (Utah 2006) (statutory procedure limits creditor to deficiency equal to indebtedness less FMV after trustee's sale)
- City Consumer Servs., Inc. v. Peters, 815 P.2d 234 (Utah 1991) (deficiency-judgment statutory cap prevents creditor windfalls after undervalued trustee sales)
- Ross v. Epic Eng'g, PC, 307 P.3d 576 (Utah Ct. App. 2013) (harmless-error principle and disregard of non-prejudicial errors)
- Valcarce v. Fitzgerald, 961 P.2d 305 (Utah 1998) (prevailing-party entitlement to recovery of attorney fees under applicable rules)
- Giles v. Mineral Res. Int'l, Inc., 338 P.3d 825 (Utah Ct. App. 2014) (party awarded fees below who prevails on appeal generally entitled to appellate fees)