362 P.3d 904
Utah Ct. App.2013Background
- In July 2003, Palmer sold commercial property to JDJ Holdings for $1,950,000 and JDJ obtained two loans to finance the purchase.
- First National Bank ofLayton funded $1,025,000 and recorded its deed in December 2003; its loan was USDA-guaranteed and to be first priority.
- Palmer provided a $780,000 seller-financed loan secured by a second trust deed recorded after First National’s, making Palmer’s lien second in priority.
- USDA later informed First National that only $975,000 of its loan was guaranteed and the $1,025,000 deed needed to be split into two deeds ($975,000 and $50,000).
- A title report prepared for reconveyance erroneously showed only First National’s lien; First National reconveyed and recorded a new deed for $975,000 in March 2004, unaware of Palmer’s lien.
- By May 2009, Palmer discovered the change in priority and notified First National, leading to litigation over equitable reinstatement/subrogation and foreclosure actions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether equitable subrogation applies to reorder priority. | First National argues subrogation permits restoring first priority. | Palmer contends subrogation is inapplicable in these facts. | Equitable subrogation does not apply. |
| Whether equitable reinstatement is warranted given negligence and inquiry notice. | First National seeks reinstatement to first priority due to mistake and equities. | Palmer argues negligence and lack of inquiry exclude reinstatement. | Equitable reinstatement denied due to First National’s negligence and inquiry notice. |
Key Cases Cited
- Martin v. Hickenlooper, 59 P.2d 1139 (Utah 1936) (recognizes forms of equitable subrogation)
- Bingham v. Walker Bros., Bankers, 283 P.1055 (Utah 1929) (definition of conventional subrogation)
- State Farm Mut. Auto. Ins. Co. v. Northwestern Nat’l Ins. Co., 912 P.2d 983 (Utah 1996) (insurer subrogation rights)
- Pioneer Builders Co. v. KDA Corp., 2012 UT 74 (Utah) (test for inquiry notice in real estate)
- Badger Coal & Lumber Co. v. Olsen, 167 P.681 (Utah 1917) (equitable reinstatement principles in mistake cases)
- Dairyland Ins. v. State Farm Mut. Auto. Ins. Co., 882 P.2d 1143 (Utah 1994) (summary judgment standard and negligence considerations)
- Emergency Physicians Integrated Care v. Salt Lake Cnty., 2007 UT 72 (Utah) (summary judgment and standard of review)