*1 FARM UTAH PRODUCTION CREDIT
ASSOCIATION, Plaintiff and
Appellant, WATTS, Watts, Cleown
Milo W. W. Bu Gregory, Gregory, A.
ford L. Elizabeth
Agricultural Stabilization Conser Service, Commodity
vation Credit Cor agency
poration, the United Agriculture, Dept,
States Scott Ste Service, Pump and Burns
venson Farthing Farthing,
Paul dba Paul Contractor,
Grading Defendants
Respondents.
No. 19380.
Supreme Court of Utah.
March *2 Brown, Anderson, R. E.
James Kevin City, Lake for Utah Farm Production Salt Credit Ass’n. Cummings, City Lake for
Robert C. Salt Watts. Johnson,
Christopher Gregory. A. for Jackson, Delta, Farthing. LeRay for G. Jackson, Delta, for R. Stevenson Steven Burns. and
HALL, Chief Justice: Farm Production April In Utah (PCA) sued Milo W. Association Credit (Wattses) and W. Watts Watts Cleown Grego- Gregory Elizabeth A. L. Buford promis- (Gregorys) payment of three ry signed by the Wattses and the sory notes mortgage se- to foreclose a Gregorys and repayment of the notes. The other curing against portion have claims defendants sought also mortgaged property. PCA promissory note an unsecured payment of only by Gregorys and to fore- executed crops alleged security interest close The in turn sued equipment. Gregorys to enforce a uniform real In the trial June estate contract. and the Wattses’ ruled on PCA’s court summary judgment. The cross-motions favor, of the Wattses. We court ruled reverse.
I est. Both Wattses and the Gregorys signed the promissory note for this loan. lending is a institution that finances In March agricultural the Gregorys its owners’ ventures. were in building need of a loan. borrowing The loan began PCA funds. was PCA, made and promissory note in the loans have been secured Wattses’ $20,000 signed amount covering mortgages in of PCA sever- favor Wattses and In June collectively parcels al that now con- land *3 Gregorys again the obtained funds from 1,366-acre ranch stitute the Wattses’ signing PCA after an installment note for (ranch) Kanosh, in last Utah. The recorded $38,890 assigning and their in equity the ranch in mortgage on the favor of PCA 1979, August Grego- farm to PCA. In the August in 1974 and was filed includes rys provide needed additional funds to in- clause. future advances financing terim for the farm living and 1978, August In the Wattses sold Buford expenses. A promissory in note the hay grain Gregory a 481-acre and farm $48,890 signed by amount of the Greg- was (farm) equipment on and related a uniform orys and the Wattses. $369,000. real estate contract for 1980, In the Gregorys abandoned the 1,366 farm is acres the the operated farm. The Wattses the farm in mortgaged provided to The contract PCA. agreement the summer of 1980 under an in part Gregorys that the were to assume 1980, April brought PCA. In with $74,343.65 outstanding loan action on the notes to foreclose balance with PCA. mortgage purported security and inter- sale, time ap- of the At about 1980, August est. In PCA sought summa- $20,000 parently op- loaned the Wattses to ry judgment, which was In July denied. application erate the farm. The loan and agree- PCA entered into a release other evidence indicate that the were funds Gregorys ment with the for satisfaction of Gregorys to to benefit some extent. note, the Gregory Gregory/Watts $20,000, together This with Wattses’ notes, any deficiency and after foreclosure. existing obligation ($74,343.65) and inter- agreement preserved right This also est, into was written due new PCA to either take a in deed lieu fore- January Although in application Gregorys’ closure of in interest Gregorys that indicated both and the proceed- farm continue the foreclosure necessary Wattses Were execute the to ings stipulated judgment promissory note, the signed only note was Gregorys’ foreclosure on the in interest by the Wattses. farm. debt, January the PCA Discovery parties, continued $104,884, now amounted to came due. An- in October PCA filed a second motion application other loan judgment A summary was executed. for partially was applica- granted loan officer recommended on the in entry a minute but was never financing tion that signed by 7,1981, continued. The rec- the court. On December suggested ommendation further that the Wattses filed their motion for summary against Wattses continue to be on judgment liable the loan PCA. PCA filed its their summary continue to used judgment cross-motion on De- January as collateral.1 On May a letter cember 1981. In the Wattses Gregorys advising sought summary sent judgment against also $198,519 approved. loan Gregorys. argument, had been This After additional loan, $82,700 part, in discovery included for the memoranda and were filed with budget, operating prior farm’s 1979 judge the court. The trial denied PCA’s due, obligation that had become and inter- granted summary judgment motion and in being Gregorys 1. Since the farm was sold to the names. contract, legal on a title was in the Wattses’ pri- in Wattses, raised motions strike.3 The PCA and their both
favor objection cross-claim. mary on the made mo- Wattses’ ruled that court tions to was to the affiants’ The trial strike various were dis- makers and alleged personal knowledge con- lack of by PCA’s release of charged cerning re- the sworn matters. We have peatedly opposing that an affidavit held II 56(e) under of Civil Utah Rule Procedure genuine issue point first is that a PCA’s ed.) must be made fact as to whether the of material exists personal knowledge of the affiant and makers” were “accommodation must set forth facts that would be admissi- court erred in therefore the trial and that showing and facts that the ble evidence summary granting the Wattses’ motion the mat- competent testify affiant that its eviden- PCA contends judgment. ters stated therein.4 opposition to the tiary exhibits submitted that such an motion demonstrate Wattses’ *4 reviewing validity of an When the exists. issue of fact corporation affidavit of made on behalf a (plaintiff federally corpora is a chartered brief, as far PCA claims that as it In its tion), a is made those distinction between concerned, just the “never lent” is Wattses agents mere by corporate affidavits made the PCA states credit to their agents by and those are also the mem- made who the Wattses to be that it believed is makers, corporate Where an affidavit bers, the owners of the officers. the and officer, primary by generally borrow- made it is con security and therefore the an corpora us. PCA ar- to in the transaction before sidered the affidavit of the ers be course, must, gues intent is well established “An of that this tion itself.5 officer par- requisite knowledge, possessed the affidavits submitted below. the be of ticular, upon pre relies the affidavits of knowledge such his is but Wood, Nay- employees, However, requisites three former the are sumed.” lor, A the Mills. of affidavits sufficiency review stringent judging more the supports this contention. corpo on behalf of a of affidavits executed corporation agent of who ration an However, correctly the Wattses’ brief example, officer. For corporate is not they to points out that filed a motion agent knowledge of personal such and other affidavits stricken. Inas- these to which he has sworn regarding the facts granted trial the Watts- much as the court presumed, not and there generally will judgment, summary es’ motion for fore, “means and sources” specific if improper the motions must considered his should be shown.7 information judgment not granted, to strike granted motions presumably that he act- Affiant Wood stated Richard to strike.2 during the 1979-80 officer ed as loan examined, time an- during which he period, validity of PCA’s affi- To determine approval of the alyzed, recommended davits, objections examine Wattses’ we Inc., Lab, summary judgment where defendant’s affidavits Bailey Compare v. P.2d Sound (Utah 1984) sufficiency and thus accommodation (post-judgment motion failed for dismissed, issue). upon, longer or but not ruled with- filed status was no pending record not is still where did drawn appellants support the view abandoned that Treloggan, E.g., Treloggan P.2d v. motion), with Nat. Bank Zions First v. C’Est their curiam); City (Utah 1985) Murray (per see (Utah Venture, (Utah 1980) 613 P.2d Bon 1983); Hall, Utah motion, (respondent’s oral had not been 56(e) (Repl.Vol. R.Civ.P. prior judgment, upon implicit- deemed ruled ly judgment give which did not effect denied (1986). 5§ 5. 3 Am.Jur.2d Affidavits motion). omitted). (footnotes 6. Id. Gens, Barrington Great Sav. Bank v. See 942, 942-43, Mass.App.Ct. 397 N.E.2d (court upheld granting Id. at 6.§ trial court’s January 8, Watts/Gregory party, loan. He commodation question of fact is presented that PCA that the went on state believed which is to be determined by the primarily loan to the was made trier of fact.8 because his examination revealed that the respond The Wattses that the intent unknown to Gregorys were PCA. The the creditor or holder is irrelevant sufficiently sets forth Wood affidavit issue of whether an instrument upon and sources of the information means signs party. as an accommodation Under concerning which Wood’s conclusion theory, concerning this PCA’s belief wheth- January 1979 loan based. Wood’s signed er not Wattses the note as concerning summary statement the other irrelevant, is signed two loans for which therefore, since the Wattses claimed below satisfy “means does not and source” they signed parties, that as accommodation requirement noted above. genuine there is no issue of fact Mills, Vaughn president
Affiant preclude summary PCA should judgment. through July from late 1976 stated person Whether a is an accommoda $48,890 loan would have been question of intent. In other appearing made without Wattses' words, question it is a intention of he, on the co-makers loan and that in his person claimed to be an accommodation capacity as a member the loan commit- party, person who the accom would be tee, deemed the Wattses co-makers based party, person modated and the who was strength their as co-makers. paper alleged holder when the Naylor, Affiant City Gerald Salt Lake *5 party signed.9 accommodation manager early PCA branch from case, In this PCA was the holder through upon June stated that based the notes when the signed co his participation in PCA’s loan committee makers. In accordance with rule above approved loans, the Watts/Gregory forth, set PCA’s intent is relevant to upon concerning and based discussions signed issue whether the Wattses same, security for the “said loans would Since, parties. accommodation as dis not have been made security without said above, cussed the evidence submitted and as Milo W. Watts and his wife as places issue, the Wattses’ status in distinguished co-makers guarantor from a the trial court erred in granting summary or an party.” accommodation judgment in favor There Wattses. Although may the trial court fore, the case is reversed and remanded. justified striking in portions been other Naylor’s affidavit and necessary Wood’s affi it is When to remand a davit in ignoring Mills’ proceedings, affidavit duty since case further it is the Mills’ statements speak therein do not reviewing of the court to address matters Wattses,' accommodation status of the necessarily which will arise at trial.10 portions Naylor’s and Wood’s parties disagree upon affidavits Since the what is and Therefore, are valid and relevant. is prove trial what not relevant to an accommo considering court erred in not relationship, following these exhib dation we offer the its. considered, When the guidance affidavits are A on issue. maker a note conflict exists as to proclaiming whether the he is an accommodation signed as parties. party accommodation privi When and is therefore entitled to the conflicting evidence is leges as to parties whether a accorded accommodation un person signed paper commercial as an ac- der the has the burden of proving law his Anderson, 8. 6 R. County City, Anderson on the Uniform 10.Salt Lake Salt Lake (Utah 1977) (3d (citing 1984) Commercial Code n. Utah § 3-415:13 R.Civ.P. ed. 9B, ed.) 76(a) (Repl. 1985)); (repealed Vol. [hereinafter cited as ]. Anderson ed., R.App.P. Supp. Utah 1986) (substantially identical to former Utah Anderson, 3-415:16, supra note § 76(a)). R.Civ.P. approach is- “pro- character when it is at note this as the “benefit” or accommodation situations, Although the note itself jurisdictions some ceeds” test.15 some sue.11 signed particular party may reflect that only view the intent of the one party. The fact that accommodation determining as an in factor consider whether a op- signs note as a “maker” as party party is to be afforded the status of an or a an “accommodation maker” posed to party,16 accommodation we believe a more “cosigner” party mean the did not does not accurate of the statement law is that merely means that the sign surety; as a party or whether not an instrument reflected on the alleged may status not be directly indirectly, receives a benefit party one note. The fact that face of the extent, if so is one of to what several or to the left of anoth- signs above another determining factors to in be considered er, some serious indicia that without parties’ intent. Since an accommodation any signif- signature is to have locus of the party can receive a benefit under the code icance, is irrelevant. undermining without his status as a sure- ty,17 may only permis- such evidence raise a alleged accommodation When an party inference that a sible an accom- gleaned party’s cannot be from status party. modation itself, case, only often the note as is the sta other method available to establish Another factor which be indica through parol evidence. Because tus is of an tive accommodation status is whether upon PCA’s intent and dispute this turns signature person claiming to be alleged ac of the Wattses’ thus notice necessary an accommodation status, parol is ad commodation evidence party to the other receive the consideration pursuant to subsection missible in this case given exchange for the note.18 3-415(3).12 parol The relevant evidence establishing the this case is that evidence Finally, correctly points out at the time the facts and circumstances that a cannot be signed.13 notes were given maker on a note for his or her own Janu debt.19 The issue then is whether the 3-415(1) focuses Subsection Watts/Gregory represented ary 1979 loan alleged purpose for which an accommo a new delivered satisfaction party signed. Application of the dation *6 previous following The debt. “purpose determine whether or not test” to helpful: authority may be party, party signed as an accommodation a generally It is held that mere exe- above,14 turns the intent as indicated note evidences the cution of a renewal brief, parties. of the In its PCA contends by promise and does same debt a new secondary test to determine that there is a payment discharge or of not constitute a party signs not a as an accom whether or original operates only as an note but party: “Whoever received modation is true payment. of It extension time proceeds ‘principal of the loan is the obli- ” accepted pay- that one note and commentators de- gor.’ Other courts Davis, Bank, S.W.2d 144 11. E.g., merce Union Bank v. 581 Lyons v. Commercial 443 Citizens (Tenn.Ct.App.1978). (Fla.Dist.Ct.App.1983). So.2d indicated, E.g., Lyons, at 231. 16. 443 So.2d all references are 12. Unless otherwise Code con- Utah Uniform Commercial to the supported is com- 70A Such a construction tained in title 17. of the official Uniform ment 2 to section 3-415 Code; Marquette Leroy v. Berger, see also Lasky P.2d 1159-60 Commercial See v. (Minn.1979). Bank, (not pub- 277 N.W.2d (Colo.Ct.App.1975) for official Nat. selected (certiorari lication) by the Colorado Su- denied Bank, 14, 1975). July E.g., 227 Kan. at preme Farmers State Court on 934; Annot., (1979 A.L.R.3d 342 1986). Supp. accompanying supra text. & 14. See note 9 and Miller, See, Eg., Kopff S.W.2d e.g., Cooper, Bank v. Farmers State (Mo.Ct. 1973). (1980); App. P.2d Com- Kan. another, (c)all given ment of rights but new note of party such to recourse against any without new to consideration others. person same for the same sum the old as authority A division of concerning exists one generally is not deemed a satisfac- scope “any party” of the reference to thereof,
tion so unless received and ac- 3-606(1).21 in subsection We believe that cepted.20 discharge pro the defense of found that properly
vision is characterized as a “sure- Thus, tyship appear defense.”22 it would Ill 3-606(1), including that subsection while they Wattses contend that parties accommodation and other to were released 3-606 PCA section when sureties, an position instrument in the of discharged Gregorys. Section 3-606 apply binding does makers them provides, pertinent part: code only principals.23 selves discharges any party The holder The crux of the Wattses’ case is the instrument to the extent that without they that were released because failed party’s such consent holder rights to reserve against (a) express without reservation when PCA released A mak rights or agrees any releases not to sue claiming er party to be against person the party whom has to and thus entitled defenses subsec knowledge right of the holder a 3-606(1) tion has the of proving burden agrees or suspend right recourse discharge under that subsection.24 against person to enforce the in- such or strument collateral or dis- otherwise Section 3-606 does not its terms ...; charges person such or any requirements create formal for a reser (b) unjustifiably impairs any collateral rights except vation to be effective that given by for the instrument or on behalf “express.” express An reservation is party any against of the or person whom clear, definite, explicit, one is plain, right he has of recourse. direct, unmistakable, opposed to a (2) By express rights reservation of implied.25 reservation that inferred against right party with of recourse reading asserts careful of the preserves the holder agreement settlement between itself and (a) against rights all his such express discloses an reserva as of the time when instrument was rights the Wattses since due; originally agreement refers to PCA’s foreclosure (b) right pay part, action.26 relevant PCA/Grego time; instrument as agreement of that release ry provides: Fladeland, (Rev. *7 20. Dictionary Farmers Union Oil Co. v. 287 See 25. Black's Law 5th ed. 315, 319, 254, (1970) 1979). Minn. 178 N.W.2d omitted); Bank (citations Peoples Nat. See also 559, Boyer, (Minn.Ct.App. v. 354 N.W.2d transcript hearing The par- 26. from the on the 1984). summary judgment ties’ motion for includes the following excerpt: 231, Compare Lyons, at 443 So.2d with South Schirow, Reporter, put west THE Florida Production Credit Ass 'n v. COURT: Mr. that on the 338, (Fla.Dist.Ct.App.1980). 388 So.2d plain- record to the effect that for counsel interpretation tiff believes of the re- Egbert, 22. See First Nat. Bank v. 663 P.2d legal lease lends instrument itself to a inter- (Utah 1983); 86-87 Wohlhuter v. St. Charles pretation by Court as to the extent of the Co., Lumber Fuel& 62 Ill.2d 338 N.E.2d subject release and is not to a factual determi- (1975). taking nation evidence as what was Unum, E.g., Inc., by provisions agreement United States meant F.2d (5th Cir.1981); Egbert, vague, see Court would find somewhat 86-87; Wohlhuter, subject legal Ill.2d 338 N.E.2d at interpreta- other hand to a right. tion. All Anderson, supra § note 3-606:12 at 568-69. (B) repayment Greg- To secure Wattses on their on the note as Notes, ory/Watts previously Watts have makers. PCA also relies on language its given mortgage.... PCA certain Said Gregorys that the agreed and PCA to “con- ” mortgage eighty- covers a four hundred litigation clude as between them and (481) (the piece one acre the Wattses. PCA would have us imply Farm”) “Gregory properties and other this express was an reservation of (col- by including his home owned Watts rights regard with to PCA’s claims on the Farm”).... lectively the “Home notes. Inasmuch obviously as PCA intend- pursue
ed to its foreclosure action and the Gregorys (E) were not released Gregorys and PCA desire to settle from the Wattses’ among cross-claim because of the differences them and to re- the release agreement, language this support solve the Lawsuit insofar as it affects does not PCA’s interrelationships their and to to- claim. work gether litigation to conclude between The to this action have extensive them and the Watts. ly briefed the issues of whether the ex press reservation writing must be in From and Release U.C.A., 1953, the applicability of 15-4-1 §§ after the execution hereof and the execu 2A, to -7 We need delivery tion and of the documents and not reach these issues. paragraphs through cash described Although it is generally accepted hereby PCA will and does release and (accommodation surety that a party) need discharge Gregorys and each of them given not be notice of the reservation of any liability they may from and all rights,28 primary obligor case, in such a Gregory/Watts to PCA under seems, given must be such information Notes, Note, Gregory under the under part agreement. Moreover, of a release Mortgage, any security agree under rights implicitly reservation of deals with ments, Assignment under the Equity subject release, matter of a and such any and under other documents of securi prior reservation must made to or con
ty given by Gregorys.... to PCA From temporaneously point with the in time hereof, and after execution PCA’s sole agreement when a release takes effect. remedy recovery of the sums due it Gregorys Greg under from PCA/Gregory agree release ory/Watts through Notes shall be fore integration among ment contains an clause Gregory closure sale of Farm Since, noted, provisions. just its a reser and/or the Home Farm.... rights vation of subject mat added.) (Emphasis correctly points release, ter of a and because such reserva agreement out that under this its sole rem- subsequent not made such edy recovery of the sums due it from release, parol evidence is inadmissible Watts/Gregory under the this case to establish a reservation of notes shall be foreclosure sale rights. Because the release does not However, merely farm and ranch. reserv- preserve rights terms PCA’s on the notes ing right against property of foreclosure Wattses, we hold that no express owned the Wattses is not an rights reservation of was made this case. rights against reservation of instrument, required by on the as is section *8 IV paper 3-606. The law of commercial estab- that, assuming obligation PCA contends the Watts- independent lishes an of the un- derlying reserving rights parties, es are accommodation By debt.27 its upon property, any cannot released from oth- foreclosure rights against any deficiency. upon PCA did not its the er reserve than PCA relies See, U.C.A., 392, 394, 1953, 70A-3-413(1) Turner, e.g., E.g., 28. Hallowell v. Idaho § 95 1313, (1973). 1980 P.2d 509 1315 Second, following authority support prop- its the are the far as Wattses concerned, osition: Gregorys merely the were not discharge Any any deficiency under subsection of released could from which only is available “to the Section 3-606 have arisen foreclosure. PCA’s re the affects ac- extent” that conduct the of Gregorys lease the in effect makes the obligation. party’s This commodation Wattses and the Wattses’ liable fairly readily where can be determined for the entire debt. The release states ques- affects the conduct collateral. The Gregorys the were from liabil released “all is, was the collat- what value ity they which to PCA under the have eral of which the accommodation Gregory/Watts pro notes.” Section 3-606 rights deprived or as to which his was vides relevant that the holder dis diminished?29 were otherwise charges any party to the instrument PCA claims that “extent” to which the agrees extent that the holder releases or mortgage released on the any party against not to sue whom the only any deficiency notes was claim. right According has recourse. First, authority is not to PCA’s directed person ly, right when the whom case, situation in this but to the situa partially discharged, of recourse exists is impairs unjustifiably tion when the holder others who are also sureties are also dis 3~606(1)(b).30 collateral under subsection charged, only but to the extent that only case we have found cites which rights impaired.35 have been Since PCA above-quoted authority is Beneficial rights against failed to reserve its case, In that Finance Co. v. Lawrence.31 Wattses, discharge if complete was defendant accommodation maker was parties. Wattses are accommodation discharge claiming under 3-606 due perfect security holder’s failure to its inter allegedly in impairment
est
resulted
V
pledged by
principal
to collateral
obli-
point
only
PCA’s final
is that the
gors.32 The court there held
no
re
remaining
issue
the amount due under
since
perfect
lease occurred
had the holder
notes. PCA
relies on
trial court’s
collateral,
security
ed
interest in
having previously granted
partial
PCA’s
priority
would
subordinate to
se
other
summary judgment.
prepared
Since the
parties.33 Indeed,
cured
all of
cases
signed by
order was never
the court and
in support
quoted proposition
cited
ruling only appears
unsigned
as an
involve releases
collateral
the holder
entry,
jurisdiction
minute
we
no
pledged by
primary obligor
rule
this issue.36
or a comaker.34 The
case
bar does not
The case is reversed and
pledged by
involve
release
collateral
remanded. No
principal obligors.
costs awarded.
Willer,
rev'd,
45,
App.Div.1975),
Paper
29. 2A F. Hart & W.
Commercial
74 N.J.
DURHAM
concur.
HOWE, Justice, concurring: reversing summary judg-
I concur in opinion no on other mat- express
ment but opinion. in the
ters treated Court’s the Decision of the
In the Matter of Deamer, OF City, BOUNDARY COMMISSION Michael L. Salt Lake Utah, COUNTY, appellant. Relative to the DAVIS City Policy Bountiful Annexation
West Fadel, George Bountiful, respon- K. Declaration and the Protest of Woods dent. City 2-83. Thereto — Case No. Cross ZIMMERMAN, Justice: CITY, Appellant, WEST BOUNTIFUL dispute This case arises out of a between City City West Bountiful and Woods Cross city sought over a tract of land each CITY, Respondent. WOODS CROSS attempted annex. West Bountiful to annex No. 19466. land in 1983. Woods Cross filed protest County Boundary with the Davis Supreme Court of Utah. Commission, but the Commission ruled in March favor of West Bountiful’s annexation. appealed
Woods Cross the decision to the court, contending district that certain of requirements statutory for annexation and that the West Boun- followed therefore void. The tiful annexation was Commission, district court reversed appealed to this Court. We West Bountiful procedural affirm the district court grounds. filed a April
On West Bountiful policy setting out its master declaration particular to annex a tract of land intent County. Later Woods Cross Davis policy declaration to also filed a master County. A land in Davis annex certain designated by Woods portion of the land declaration also was covered Cross’s In late Bountiful’s declaration. West designated area in the owners Bountiful petition with the West filed a City expressing their desire to be Council