FRANKLIN CREDIT MANAGEMENT CORP. v. Hanney
262 P.3d 406
Utah Ct. App.2011Background
- Shirley Hanney forged Blaine Hanney's signature on a special power of attorney to obtain a loan on the Property.
- Shirley, as trustee, executed a Warranty Deed conveying the Property out of the Hanney Family Trust and as joint tenants to Blaine and Shirley.
- Shirley then executed a Trust Deed on the Property using the forged special power of attorney, with loan proceeds used to pay Hanney & Hanney Construction debts.
- Blaine learned of Shirley's actions in 2003; Franklin Credit (assignee of Bank One) filed foreclosure suit seeking a judgment on the Trust Deed.
- Trial court held the Trust Deed void; on appeal, the Utah Court of Appeals affirmed in part and reversed in part, holding the Trust Deed valid as to Shirley's interest but not Blaine's, and protected Bank One under the Uniform Trustee Powers Act.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Bank One could rely on the Warranty Deed to convey out of the Trust | Franklin Credit argues Shirley validly conveyed via the Trust, thus creating a lien. | Blaine contends Shirley lacked authority to convey out of the Trust without joint action. | Bank One protected; Warranty Deed effective for third-party dealing with trustee. |
| Whether the Trust Deed encumbers Blaine's interest in the Property | Shirley had authority to encumber Blaine's interest via the general power of attorney or implied/apparent authority or ratification. | Blaine argues Shirley lacked authority to encumber his interest; no ratification occurred. | Trust Deed valid on Shirley's interest but not on Blaine's; no ratification; no apparent/imagined authority to bind Blaine. |
| Whether the court properly exercised discretion in reopening the evidentiary record | Reopening was appropriate to address amount due if needed and did not prejudice Blaine. | Reopening was improper if it permitted later proof of amounts due that were not timely presented. | Trial court did not abuse discretion in reopening; remanded for consistent proceedings. |
Key Cases Cited
- Belnap v. Walker Bank & Trust Co., 627 P.2d 47 (Utah 1981) (a partial owner may encumber her share)
- Tracy-Collins Trust Co. v. Goeltz, 301 P.2d 1086 (Utah 1956) (joint tenancy severed by mortgage of one tenant's interest)
- Huntsman v. Huntsman, 192 P.2d 368 (Utah 1920) (power of attorney construed to major business only for principal's benefit)
- Eagar v. Burrows, 2008 UT 42 (Utah) (fiduciary duties of agents; authority limits)
- Zions First Nat'l Bank v. Clark Clinic Corp., 762 P.2d 1090 (Utah 1988) (ratification requires knowledge and intent)
- Bradshaw v. McBride, 649 P.2d 74 (Utah 1982) (statute of frauds and writing requirement for agency to convey land)
- Moses v. Archie McFarland & Son, 230 P.2d 571 (Utah 1951) (ratification requires assent with knowledge of facts)