319 P.3d 747
Utah Ct. App.2014Background
- Gunnison financed a $1.6 million Utah County residence loan secured by a deed of trust; Holladay purchased a 31.25% participation.
- The contract required Gunnison to fund first; Holladay funded after Gunnison’s full commitment.
- Borrower default occurred in 2008; Gunnison foreclosed in 2009, leaving collateral insufficient to cover the loan.
- Dispute centered on how collateral proceeds and principal repayments should be allocated between the banks.
- Key contract provisions discussed: LIFO (paragraph 6), proportional allocation (paragraph 12), and collateral proceeds (paragraph 18C).
- District court held the contract unambiguous and applied LIFO to collateral proceeds; Gunnison appealed seeking ambiguity and extrinsic evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contract language unambiguously fixes collateral proceeds allocation. | Gunnison argues proportional allocation; 12 governs, 6 excludes collateral LIFO. | Holladay argues LIFO applies to all principal repayments, including collateral. | Ambiguity exists; extrinsic evidence may determine intent. |
| What is the effect of paragraph 12’s reference to paragraph 6 on collateral proceeds? | 12, read with 6, supports proportional allocation, not universal LIFO. | 12 subject to 6, so collateral proceeds follow LIFO. | Ambiguity; both readings plausible; 12 may override 6 or be constrained by it. |
| Should extrinsic evidence be considered to resolve the disputed meaning? | Evidence shows intent to share collateral proceeds pro rata. | Extrinsic evidence improper if contract unambiguous. | Extrinsic evidence appropriate due to ambiguity. |
| Should the case be remanded for discovery on intent rather than entry of final judgment? | Court should grant complete extrinsic-evidence discovery. | Rule 56(f) request insufficient as discovery ruled moot. | Remand for consideration of extrinsic evidence. |
Key Cases Cited
- Daines v. Vincent, 2008 UT 51 (Utah 2008) (contract ambiguity; extrinsic evidence permissible to ascertain intent)
- Saleh v. Farmers Ins. Exch., 2006 UT 20 (Utah 2006) (ambiguous contracts; interpret via ordinary meaning and canons)
- Interwest Constr. v. Palmer, 1996 UT (Utah 1996) (threshold question of law for ambiguity; can consider extrinsic evidence)
- Cafe Rio, Inc. v. Larkin-Gifford-Overton, LLC, 2009 UT 27 (Utah 2009) (harmonize contract provisions; no meaningless provisions)
- Central Fla. Invs., Inc. v. Parkwest Assocs., 2002 UT 3 (Utah 2002) (analyze contract language by harmonizing all terms)
- Jones v. ERA Brokers Consol., 2000 UT 61 (Utah 2000) (threshold ambiguity analysis; intent becomes factual question)