Insight Assets, Inc. v. Farias
2013 UT 47
Utah2013Background
- In 2004 Sellers (Phalens) sold Ogden property to Buyers (Boecks) financed partly by a bank loan ($70,300) and partly by seller financing ($17,600) evidenced by a Sellers Trust Deed; documents were recorded in order: warranty deed, bank trust deed, sellers trust deed.
- Buyers defaulted; Wells Fargo (assignee of bank trust deed) foreclosed in 2005, recorded its foreclosure deed, and sold the property through subsequent conveyances to Homero Farias.
- Sellers never attempted foreclosure or otherwise enforced their vendor trust deed; in 2009 Sellers assigned their interest to Insight Assets, which recorded a notice of default and sought to assert the vendor purchase‑money mortgage.
- The district court granted summary judgment for Farias, finding him a bona fide purchaser; Insight Assets appealed, and Farias cross‑appealed denial of attorney fees.
- The Utah Supreme Court held that although seller financing ordinarily has priority as a vendor purchase‑money mortgage, Insight Assets’ claim is barred by laches due to prolonged inaction; the Court reversed the denial of attorney fees and remanded to determine fees owed to Farias.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether vendor purchase‑money mortgage has priority over earlier bank mortgage | Insight: vendor PMM takes priority over third‑party PMM under Purchase Money Rule | Farias: Bank lacked notice so Purchase Money Rule does not apply; alternatively Farias is a bona fide purchaser | Court: Did not decide notice issue because laches bars Insight’s claim; recognized vendor PMM can have priority but defeated by equity |
| Whether Recording Act protects Farias as a bona fide purchaser | Insight: N/A (relies on PMR priority) | Farias: Recording Act makes him a good‑faith purchaser free of unrecorded interests | Court: Recording Act inapplicable because Sellers Trust Deed had been recorded prior to Farias’ purchase; bona fide purchaser defense not available on that basis |
| Whether laches bars Insight’s claim despite statute of limitations | Insight: Action timely within six‑year statute; laches inapplicable | Farias: Long inaction and prejudice justify laches | Held: Laches applies — Sellers/assignor slept on rights and Farias prejudiced (evidence lost, reasonable belief of extinguishment) |
| Whether prevailing party (Farias) is entitled to attorney fees under Utah Code §78B‑5‑826 | Insight: Sought fees below and on appeal (contract permits beneficiary fees) | Farias: Entitled to reciprocal fee award if contract would have allowed fees to at least one party | Held: Fee‑shifting statute applies; remanded to compute reasonable fees owed to Farias |
Key Cases Cited
- Kemp v. Zions First Nat’l Bank, 470 P.2d 390 (Utah 1970) (examines equities and recording/notice issues when vendor and third‑party purchase‑money mortgages conflict)
- ALH Holding Co. v. Bank of Telluride, 18 P.3d 742 (Colo. 2000) (bank could not claim recording statute protection where it had notice of seller’s unrecorded instrument)
- F.M.A. Fin. Corp. v. Build Inc., 404 P.2d 670 (Utah 1965) (discusses laches in the context of actions to enforce obligations secured by real property)
- Hooban v. Unicity Int’l, Inc., 285 P.3d 766 (Utah 2012) (interprets statutory reciprocal fee‑shifting where a contract would allow at least one party to recover attorney fees)
- Sunridge Dev. Corp. v. RB & G Eng’g, Inc., 230 P.3d 1000 (Utah 2010) (assignor/assignee principles; assignee takes subject to defenses against assignor)