This opinion is subject to revision before final

publication in the Pacific Reporter

2015 UT 46

IN THE

SUPREME COURT OF THE STATE OF UTAH

VCS, INC., a Utah corporation; and TOM PHELPS,

Appellants,

v.

COUNTRYWIDE HOME LOANS, INC.; AXIOM FINANCIAL, LLC, a Utah 

limited liability company; NATHAN K. SPENCER; NATHAN WILLIAM 

VAN RIJ; SARAH SHIRLEY VAN RIJ; CRAIG BELLISTON; and NATASHA 

BELLISTON,

Appellees.

No. 20111092

Filed April 14, 2015

Third District, Salt Lake

The Honorable Sandra N. Peuler

No. 070917958

Attorneys:

David B. Stevenson, Elizabeth A. Knudson, Ogden, for appellants

Bryce D. Panzer, Bruce M. Franson, Salt Lake City, for appellee 

Countrywide Home Loans, Inc.

Daniel L. Steele, Grant M. Sumsion, Benjamin K. Lusty, 

Salt Lake City, for appellee Axiom Financial, LLC

Larry G. Moore, Salt Lake City, for appellees Nathan K. Spencer, 

Nathan William Van Rij, Sarah Shirley Van Rij, 

Craig Belliston, and Natasha Belliston

CHIEF JUSTICE DURRANT authored the opinion of the Court, in which

ASSOCIATE CHIEF JUSTICE LEE, JUSTICE PARRISH, JUDGE PEARCE,

and JUDGE HANSEN joined.

JUSTICE DURHAM and JUSTICE NEHRING did not participate herein; 

COURT OF APPEALS JUDGE JOHN A. PEARCE and DISTRICT JUDGE ROYAL 

I. HANSEN sat.
VCS v. COUNTRYWIDE

Opinion of the Court

2

JUSTICE DENO G. HIMONAS became a member of the Court on 

February 13, 2015, after oral argument in this matter, and 

accordingly did not participate.

CHIEF JUSTICE DURRANT, opinion of the Court:

Introduction

¶1 Appellant VCS, Inc. provided labor and materials to 

improve real property located in the Acord Meadows planned unit 

development in Salt Lake City. The developer, Acord Meadows, LLC 

(Acord), secured funding for the project from two lenders—America 

West Bank (America West) and Utah Funding Commercial, Inc. 

(Utah Funding). America West and Utah Funding each made several 

loans to Acord and secured those loans with trust deeds to the 

development properties. The lenders also entered into several 

subordination agreements among themselves that altered the 

priority arrangement of their trust deeds.

¶2 VCS was never paid for its work, so it filed a mechanic‘s lien 

covering several lots of the development. Four of those lots were 

later sold through a foreclosure sale after Acord defaulted on its 

loans from Utah Funding. After the sale, VCS claimed that it was

entitled to payment of its mechanic‘s lien, despite the foreclosure, 

because its lien had priority over Utah Funding‘s liens. The district 

court disagreed and ruled that VCS‘s mechanic‘s lien was 

extinguished by the foreclosure of Utah Funding‘s liens.

¶3 VCS‘s appeal presents us with an issue of first impression in 

Utah—namely, where there are three or more creditors who hold an 

interest in the same collateral, what is the effect of a subordination 

agreement between fewer than all of the creditors? Courts have 

taken two approaches to this issue. Under the majority approach, 

called partial subordination, the parties to the subordination 

agreement simply swap places in the priority chain, leaving the 

nonparty creditor unaffected. In contrast, under the minority

approach, called complete subordination, the subordinating creditor 

drops to the bottom of the priority chain and the nonparty creditor 

steps into first priority position.

¶4 We adopt the partial subordination approach because it 

better reflects the intentions of parties to subordination agreements. 

And in applying that approach to this case, we conclude that VCS‘s 

mechanic‘s lien remained junior to one of Utah Funding‘s liens, so 

the mechanic‘s lien was extinguished once Utah Funding‘s lien was 

foreclosed upon. On this basis we affirm the district court‘s ruling.
Cite as: 2015 UT 46

Opinion of the Court

3

Background

I. Events Leading Up to the Present Dispute

¶5 The facts of this case center on fourteen parcels of real 

property located in Salt Lake City in the Acord Meadows planned 

unit development (Acord Meadows PUD). In May 2005, several 

buyers obtained title to lots one through fourteen of the Acord 

Meadows PUD.1 Near the end of 2005, the buyers conveyed the 

properties to Acord Meadows, LLC (Acord). To fund the purchase, 

Acord granted America West a $540,000 trust deed (America West 

Trust Deed 1) and granted Utah Funding a $152,000 trust deed (Utah 

Funding Trust Deed 1).2 Both trust deeds were entered into on 

December 28, 2005, and recorded on December 30, 2005.

¶6 Shortly after America West and Utah Funding recorded 

their trust deeds, VCS, Inc. (VCS) performed work on lots one 

through six and lot fourteen.3 It did so under a previously negotiated 

contract between it, Acord, Lind Enterprises, Inc., and L. Kyle Lind. 

VCS was never paid for its work.

¶7 In May 2006, Acord granted America West another trust 

deed, this time for $425,000 (America West Trust Deed 2). America 

West recorded the deed on May 25, 2006. In connection with the new 

trust deed, America West required that Utah Funding agree to 

subordinate Utah Funding Trust Deed 1 to America West Trust Deed 

2. The parties executed a subordination agreement, which was 

recorded on July 12, 2006 (Subordination Agreement 1). 

¶8 Acord sought further funding from America West in 

October 2006. To secure an additional $751,233, Acord and America 

West agreed to modify the amount of America West Trust Deed 1 

from $540,000 to $1,291,233 (Modified America Trust Deed 1). On the 

same day the parties modified the deed, America West executed a 

subordination agreement that made America West Trust Deed 2 

1 The May 2005 buyers were Robert Mills, Rick Newton, Bart 

Roser, Victoria Serre, and Lind Enterprises, Inc. 

2 Utah Funding assigned its interest in Utah Funding Trust Deed 

1 to Lind Enterprises, Inc., Ms. Serre, and Huish Group on January 3, 

2006. And soon after that, on January 17, 2006, Huish Group 

assigned its interest to North Star Funding Group, Inc. 

3 The parties agree, only for purposes of this appeal, that VCS 

began performing work on January 6, 2006. 
VCS v. COUNTRYWIDE

Opinion of the Court

4

subordinate to Modified America West Trust Deed 1 (Subordination 

Agreement 2). 

¶9 Soon after receiving funds from America West, Acord 

sought further funding from Utah Funding. Acord granted Utah 

Funding a $100,000 trust deed (Utah Funding Trust Deed 2).4 Utah 

Funding recorded the deed on November 13, 2006. 

¶10 As a final source of funding, Acord granted America West 

another trust deed, this time for $200,000, on August 7, 2007 

(America West Trust Deed 3).5 This deed differed from the others in 

that it covered only lots one and two. America West required Utah 

Funding to subordinate both Utah Funding Trust Deed 1 and Utah 

Funding Trust Deed 2 to America West Trust Deed 3 (Subordination 

Agreements 3 and 4). 

¶11 In September 2007, VCS filed notice of a mechanic‘s lien for 

work it performed on lots three through six for $127,335.91. And two 

months later, in November 2007, it filed notice of a mechanic‘s lien 

for work it performed on lots one and two for $98,000. VCS later 

amended each of those notices, in January 2008, by changing the date 

of the first labor and material to January 6, 2006.6 It also amended the 

4 Utah Funding assigned its interest in Utah Funding Trust 

Deed 2 to Lind Enterprises, Inc., Huish Group, Keith and Verla 

Hamp, and American Pension Services, Inc. admin. for Vicki Serre 

IRA #5957 on November 3, 2006. Later, on June 27, 2007, Huish 

Group assigned part of its interest (including only lots one through 

six) to CCT Investments. 

5 We note that the parties failed to include Utah Funding Trust 

Deed 3 in the record. But its existence was undisputed below and the 

parties agree on its material terms. Moreover, the deed is referenced 

in one of the subordination agreements that is in the record. 

Accordingly, for purposes of this opinion, we assume that the deed 

exists and that its terms are as the parties have represented.

6 At the time VCS filed its notice of a mechanic‘s lien, and at the 

time this lawsuit commenced, Utah law provided that a construction 

service lien related back to ―the time of the commencement of 

construction service on the ground for the improvement.‖ UTAH 

CODE § 38-1-5(1) (Supp. 2011). Because this was the law in place at 

the time of all relevant events in this case, we assume its application 

in this appeal. See Gressman v. State, 2013 UT 63, ¶ 13, 323 P.3d 998 

(―Under our case law, the parties‘ substantive rights and liabilities 

are determined by the law in place at the time when a cause of action 
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Opinion of the Court

5

amount owed on lots one and two to $29,876.98 and the amount 

owed on lots three through six to $175,907.20.

¶12 At some point during these events, America West‘s trust 

deeds were reconveyed and released. The parties have provided few 

specifics regarding when the deeds were released.7 But regardless, 

VCS has never challenged the assertion that America West‘s trust 

deeds were reconveyed and released, and even conceded the point 

below. So for purposes of this appeal, we acknowledge the parties‘ 

stipulation and assume that all of America West‘s trust deeds were 

reconveyed and released.

¶13 Acord later defaulted on both Utah Funding trust deeds. 

The trustee of each of the trust deeds issued a notice of default and 

election to sell for each. Only lots one through four were listed on the 

notices. The trustee held a sale under Utah Funding Trust Deed 2 on 

March 4, 2008. Huish Group, Keith Hamp, and Verla Hamp 

purchased that interest. VCS alleges that co-appellant Tom Phelps 

and several others made a bid for the property, but that the trustee 

refused to accept their bid. 

¶14 In August 2008, about five months after the sale under Utah 

Funding Trust Deed 2, the trustee held a sale under Utah Funding 

Trust Deed 1. North Star Funding Group, Lind Enterprises, Inc., and 

Ms. Serre purchased that interest. They later conveyed the interest to 

L. Kyle Lind. Mr. Lind then conveyed lots one, three, and four to 

separate buyers. He conveyed lot one to Nathan Spencer. In 

connection with that conveyance, Mr. Spencer executed a trust deed 

in favor of Axiom Financial, LLC. Mr. Lind conveyed lot three to 

Nathan Van Rij and Sarah Van Rij. The Van Rijs executed a note in 

favor of Countrywide Home Loans, Inc. to pay for lot three. And 

finally, Mr. Lind conveyed lot four to Craig Belliston and Natasha 

 

arises . . . .‖ (internal quotation marks omitted)). Moreover, neither 

party has contested its application.

7 One of the third-party defendants, Axiom Financial, LLC, 

asserts that America West Trust Deed 2 was released on May 22, 

2007, approximately two months before America West loaned Acord 

funds under America West Trust Deed 3. But other than that 

assertion, there is no further evidence regarding the reconveyances 

of America West‘s trust deeds.
VCS v. COUNTRYWIDE

Opinion of the Court

6

Belliston. Each person who purchased from Mr. Lind was named as 

a third-party defendant by VCS and is an appellee in this appeal.8

II. Procedural History

¶15 Near the end of 2007, Acord commenced suit against VCS, 

alleging breach of contract, negligent misrepresentation, fraud, and 

estoppel. VCS answered the complaint and also made claims against 

third-party defendants Lind Enterprises, L. Kyle Lind, and 

Countrywide. VCS later amended its complaint to add Axiom 

Financial, LLC, Nathan Spencer, the Van Rijs, and the Bellistons as 

third-party defendants. VCS claimed, among other things, that its 

mechanic‘s lien had priority over the third-party defendants‘ 

interests in the Acord Meadows PUD.

¶16 Countrywide filed for summary judgment, which the 

district court granted. In its order the court explained,

[T]he Court finds that the subordination agreements, 

which were contracts between the lenders identified 

therein and not intended to benefit any other party 

(such as VCS or the other Third-Party Plaintiffs), 

became null and void due to the payment of the 

indebtedness of the lender given priority therein and 

the release and reconveyances of the instruments 

granted priority thereby, and did not affect the priority 

of [Utah Funding Trust Deed 1,] pursuant to which 

Countrywide and its borrowers claim title. 

The court later granted summary judgment in favor of the other 

third-party defendants on the same basis. VCS appealed the district 

court‘s rulings in favor of the third-party defendants. We have 

jurisdiction under Utah Code section 78A-3-102(j).

Standard of Review

¶17 In reviewing a district court‘s grant of summary judgment, 

―we view the facts and all reasonable inferences drawn therefrom in 

the light most favorable to the nonmoving party.‖9 But we review a 

―district court‘s legal conclusions and ultimate grant or denial of 

summary judgment‖ for correctness.10

8 VCS‘s claims against Countrywide have been settled. 

Accordingly, Countrywide is no longer a party to this appeal.

9 Fericks v. Lucy Ann Soffe Trust, 2004 UT 85, ¶ 2, 100 P.3d 1200 

(internal quotation marks omitted).

10 Massey v. Griffiths, 2007 UT 10, ¶ 8, 152 P.3d 312.
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Opinion of the Court

7

Analysis

¶18 VCS asks us to reverse the district court‘s ruling for two 

reasons. First, it argues that the court erred as a matter of contract 

law by concluding that the subordination agreements were ―null and 

void‖ once America West‘s liens were reconveyed and released. And 

second, it argues that, assuming that the subordination agreements 

were not ―null and void,‖ its mechanic‘s lien had priority over Utah 

Funding Trust Deed 1 because that deed lost its original priority 

position as a result of being subject to several subordination 

agreements. The district court did not reach VCS‘s second argument 

because it determined that there was no need to do so once it ruled 

against VCS on the first issue.

¶19 We affirm the district court‘s ruling, but do so on an 

alternative basis. Even were we to agree with VCS on the first issue 

(and so disagree with the district court), we would nonetheless 

affirm the district court‘s ruling because VCS‘s mechanic‘s lien was 

junior to Utah Funding Trust Deed 1, and so was extinguished when 

Utah Funding Trust Deed 1 was foreclosed upon.

¶20 In reaching that conclusion, we adopt the majority 

approach—termed ―partial subordination‖—to the issue of circular 

lien priorities, which arises where there are at least three creditors 

who hold an interest in the same property and fewer than all of those 

creditors enter into a subordination agreement. We do so because the 

partial subordination approach most accurately reflects the 

intentions of parties who enter into subordination agreements and it 

also prevents nonparty creditors, such as VCS, from obtaining a 

windfall. Applying that approach to this case, we conclude that Utah 

Funding Trust Deed 1 had priority over VCS‘s mechanic‘s lien. 

Because we resolve the case in this manner, we have no need to 

decide whether the district court correctly decided that the 

subordination agreements were ―null and void‖ once America 

West‘s liens were reconveyed and released.

¶21 VCS‘s final argument is that Utah Funding (and its 

assignees) received more money from the foreclosure sale than they 

were entitled to. We decline to address the merits of this argument, 

however, because it is unpreserved.

I. Under the Partial Subordination Approach, Utah Funding Trust 

Deed 1 had Priority Over VCS‘s Mechanic‘s Lien

¶22 VCS argues that the subordination agreements entered into 

by Utah Funding rearranged the priority chain and resulted in VCS‘s 

mechanic‘s lien having priority over Utah Funding Trust Deed 1. In 
VCS v. COUNTRYWIDE

Opinion of the Court

8

making this argument, VCS asks us to adopt a minority approach to 

the issue of circular lien priorities called ―complete subordination.‖ 

But we decline to do so and instead adopt the majority approach, 

which is called ―partial subordination.‖ Under that approach, Utah 

Funding Trust Deed 1 retained priority over VCS‘s mechanic‘s lien 

even though it was subject to several subordination agreements.

¶23 The issue of circular lien priorities is an issue of first 

impression in Utah. Described simply, this issue arises where three 

or more creditors hold an interest in the same collateral and fewer 

than all of the creditors enter into a subordination agreement. The 

resulting question is what effect the subordination agreement has on 

the nonparty creditors.11

¶24 Here, the issue arises because America West, Utah Funding, 

and VCS each held an interest in the Acord Meadows PUD. America 

West and Utah Funding entered into four different subordination 

agreements that purported to alter the priority among their 

respective interests. VCS is not a party to any of these agreements. 

The following chart describes the effect of each subordination 

agreement:

11 We note that this issue appears to arise most often in cases 

involving personal property, not real property. See, e.g., Caterpillar 

Fin. Servs. Corp. v. Peoples Nat’l Bank, N.A., 710 F.3d 691, 693–94 (7th 

Cir. 2013). But neither party has argued that this distinction matters 

in this case. Moreover, at least one court has concluded that, as to 

this issue, there is no distinction ―to draw between real property and 

personalty.‖ Duraflex Sales & Serv. Corp. v. W.H.E. Mech. Contractors, 

110 F.3d 927, 936 (2d Cir. 1997). We, too, see no reason why the 

analysis should differ depending on whether real property or 

personal property is at issue.
Cite as: 2015 UT 46

Opinion of the Court

9

Agreement Effect

Subordination 

Agreement 1

Subordinated Utah Funding Trust Deed 1 

to America West Trust Deed 2

Subordination 

Agreement 2

Subordinated America West Trust Deed 2 

to Modified America West Trust Deed 1

Subordination 

Agreement 3

Subordinated Utah Funding Trust Deed 1 

to America West Trust Deed 3

Subordination 

Agreement 4

Subordinated Utah Funding Trust Deed 2 

to America West Trust Deed 3

We are primarily concerned with whether Utah Funding Trust Deed 

1 had priority over VCS‘s mechanic‘s lien because each of the thirdparty defendants obtained title through the foreclosure on Utah 

Funding Trust Deed 1. VCS argues that although its mechanic‘s lien 

was originally junior to Utah Funding Trust Deed 1 because it was 

recorded later, it gained priority over Utah Funding Trust Deed 1 as 

a result of the various subordination agreements outlined above.

¶25 The partial subordination approach for addressing circular 

lien priorities holds that the nonparty creditor is unaffected by the 

subordination agreement and ―simply swaps the priorities of the 

parties to the subordination agreement.‖12 The following 

hypothetical illustrates how this approach operates:

[T]he third lienholder should be able to succeed to that 

part of the interest that was subordinated by the first 

lienholder, so long as the second lienholder is neither 

burdened nor benefitted by the subordination 

agreement. For example, A, B and C have claims 

against the debtor which are entitled to priority in 

alphabetical order. ―A‖ subordinates his claim to ―C.‖ 

After foreclosure of the secured interest, the resulting 

fund is insufficient to satisfy all three claims. The 

proper distribution of the fund is as follows.

1. Set aside from the fund the amount of ―A‖  ̳s 

claim.

2. Out of the money set aside, pay ―C‖ the 

amount of its claim, pay ―A‖ to the extent of 

any balance remaining after ―C‖  ̳s claim is 

satisfied.

12 Caterpillar Fin. Servs. Corp., 710 F.3d at 693–94.
VCS v. COUNTRYWIDE

Opinion of the Court

10

3. Pay ―B‖ the amount of the fund remaining 

after ―A‖  ̳s claim has been set aside.

4. If any balance remains in the fund after ―A‖ 

 ̳s claim has been set aside and ―B‖  ̳s claim 

has been satisfied, distribute the balance to 

―C‖ and ―A‖.

Thus, ―C‖, by virtue of the subordination agreement, is 

paid first, but only to the amount of ―A‖  ̳s claim, to 

which ―B‖ was in any event junior. ―B‖ receives what it 

had expected to receive, the fund less ―A‖  ̳s prior 

claim. If ―A‖  ̳s claim is smaller than ―C‖  ̳s, ―C‖ will 

collect the balance of its claim, in its own right, only 

after ―B‖ has been paid in full. ―A‖, the subordinator, 

receives nothing until ―B‖ and ―C‖ have been paid 

except to the extent that its claim, entitled to first 

priority, exceeds the amount of ―C‖  ̳s claim, which, 

under its agreement, is to be first paid.13

Partial subordination is the approach subscribed to by a majority of 

jurisdictions.14

¶26 The complete subordination approach reaches a different 

result under the same hypothetical. Under that approach, C remains 

junior to B even though A agrees to subordinate its interest to C‘s. So 

under the complete subordination approach, B moves into first 

13 ITT Diversified Credit Corp. v. First City Capital Corp., 737 S.W.2d 

803, 804 (Tex. 1987) (citing GRANT GILMORE, SECURITY INTERESTS IN 

PERSONAL PROPERTY § 39.1 at 1021 (1965)).

14 See Caterpillar Fin. Servs. Corp., 710 F.3d at 693–94; Duraflex Sales 

& Serv. Corp., 110 F.3d at 936; Mid-Ohio Chem. Co. v. Petry, 140 F. 

Supp. 2d 828, 830–31 (S.D. Ohio 2000); In re Cliff’s Ridge Skiing Corp., 

123 B.R. 753, 766–67 (Bankr. W.D. Mich. 1991); In re Price Waterhouse 

Ltd., 46 P.3d 408, 410–11 (Ariz. 2002); Bratcher v. Buckner, 109 Cal. 

Rptr. 2d 534, 542 (Ct. App. 2001); Co-Alliance, LLP v. Monticello Farm 

Serv., Inc., 7 N.E.3d 355, 359–60 (Ind. Ct. App. 2014); Grise v. White, 

247 N.E.2d 385, 389–91 (Mass. 1969); ITT Diversified Credit Corp., 737 

S.W.2d at 804. We also note that one of the principal architects of the 

Uniform Commercial Code also advanced the partial subordination 

approach. See GRANT GILMORE, SECURITY INTERESTS IN PERSONAL 

PROPERTY § 39.1 at 1021 (1965).
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Opinion of the Court

11

priority position, then C, then A. A minority of jurisdictions have 

adopted this approach.15

¶27 But the cases applying the complete subordination approach 

offer little justification for doing so. One rationale is that the 

complete subordination approach more closely adheres to the 

dictionary definition of ―subordination.‖ As the Alabama Supreme 

Court explained, ―[b]y definition,  ̳subordination‘ contemplates a 

reduction in priority. Nothing in the definition contemplates raising a 

lower priority lienholder up to the position of the subordinating 

party.‖16 But this rationale is unpersuasive because the central 

question in cases of circular lien priorities is what the parties 

intended, not what the dictionary definition of ―subordination‖ is in 

a vacuum.17

¶28 Another rationale for the complete subordination approach 

is that it prevents the nonparty creditor from being harmed. But this 

rationale is equally unpersuasive because it fails to recognize that the 

partial subordination approach offers nonparty creditors the same 

protection. As the hypothetical above illustrates, under partial 

subordination, C (the creditor gaining priority) only gains priority to 

the extent that A (the creditor who originally had priority) would 

have had priority.18 Explained differently, ―[t]he  ̳partial‘ in  ̳partial 

15 See, e.g., AmSouth Bank, N.A. v. J & D Fin. Corp., 679 So. 2d 695, 

698 (Ala. 1996) (per curiam); Old Stone Mortg. & Realty Trust v. New 

Ga. Plumbing, Inc., 236 S.E.2d 592, 593 (Ga. 1977); Blickenstaff v. Clegg, 

97 P.3d 439, 447–48 (Idaho 2004); Ladner v. Hogue Lumber & Supply 

Co., 91 So. 2d 545, 547 (Miss. 1956).

16 AmSouth Bank, N.A., 679 So. 2d at 698; see also BLACK‘S LAW 

DICTIONARY 1563 (9th ed. 2009) (defining ―subordination‖ as ―[t]he 

act or an instance of moving something (such as a right or claim) to a 

lower rank, class, or position‖).

17 See, e.g., Strohm v. ClearOne Commc’ns, Inc., 2013 UT 21, ¶ 34, 308 

P.3d 424 (―When interpreting a contract, a court first looks to the 

contract‘s four corners to determine the parties‘ intentions, which are 

controlling.‖ (internal quotation marks omitted)).

18 ITT Diversified Credit Corp., 737 S.W.2d at 804 (explaining that 

the proper distribution of funds is: ―1. Set aside from the fund the 

amount of ―A‖  ̳s claim. 2. Out of the money set aside, pay ―C‖ the 

amount of its claim, pay ―A‖ to the extent of any balance remaining 

after ―C‖  ̳s claim is satisfied.‖ (citing GRANT GILMORE, SECURITY 

INTERESTS IN PERSONAL PROPERTY § 39.1 at 1021 (1965))).
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Opinion of the Court

12

subordination‘ denotes the fact that the parties to a subordination 

agreement swap places in the priority ladder only to the extent of the 

smaller of the swapping parties‘ loans.‖19

¶29 We decline to adopt the complete subordination approach 

because it conflicts with the well-established rule that the parties‘ 

intentions control a contract. As the Seventh Circuit explained, 

complete subordination ―would benefit a nonparty to the 

subordination agreement . . . and why would the parties to the 

subordination agreement, who did not include [the nonparty], want 

to do that?‖20 We have made this same point in several contract-law 

cases involving third-party beneficiaries by observing that the 

―benefits conferred by contracts are presumed to flow exclusively to 

the parties who sign the contracts. A third party may claim a 

contract benefit only if the parties to the contract clearly express an 

intention to confer a separate and distinct benefit on the third 

party.‖21

¶30 The subordination agreements that affected Utah Funding‘s 

trust deeds evidence the intent to alter the priority arrangement of 

interests held by Utah Funding and America West, not VCS. Each of 

the agreements provides as follows: ―[The applicable Utah Funding 

lien] is hereby made second and subordinate to the [applicable 

America West lien].‖ Nothing in that language suggests that the 

parties intended to benefit VCS. Applying complete subordination 

would ―allow an intervening lienholder to obtain a windfall by 

becoming a senior lienholder through no action of [its] own.‖22

¶31 In this case, Utah Funding recorded Utah Funding Trust 

Deed 1 before the date VCS began performing work on the Acord 

Meadows PUD, which gave Utah Funding Trust Deed 1 priority.23

Under the partial subordination approach, that priority arrangement 

was unaffected by the subordination agreements between Utah 

19 Caterpillar Fin. Servs. Corp., 710 F.3d at 694.

20 Id. at 693.

21 Bybee v. Abdulla, 2008 UT 35, ¶ 36, 189 P.3d 40 (internal 

quotation marks omitted).

22 Co-Alliance, LLP, 7 N.E.3d at 359.

23 See Ault v. Holden, 2002 UT 33, ¶ 31, 44 P.3d 781 (―In Utah, 

between two purchasers of real property, the first to validly record a 

conveyance and take the property without notice of a prior interest 

in the property takes the property over a purchaser who 

subsequently records a deed.‖).
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Opinion of the Court

13

Funding and America West. The subordination agreements affected 

the priority arrangement between America West and Utah Funding 

vis-à-vis each other. Neither party intended to allow VCS‘s 

mechanic‘s lien to jump ahead in the priority chain. For these 

reasons, we conclude that Utah Funding Trust Deed 1 had priority 

over VCS‘s mechanic‘s lien, and foreclosure on that trust deed 

extinguished VCS‘s mechanic‘s lien. On this basis we affirm the 

district court‘s ruling.

II. VCS Did Not Preserve Its Argument That Utah Funding 

Received More Money From the Foreclosure Sale Than 

It Was Entitled To

¶32 VCS next argues that Utah Funding Trust Deed 1‘s priority 

is limited to the original amount of its lien—$152,000. But we decline 

to address the merits of this argument because VCS failed to 

preserve it.24

¶33 As a general rule, we ―will not consider an issue unless it 

has been preserved in the court below.‖25 And the question of 

whether a party has preserved an issue below ―turns on whether the 

district court ha[d] an opportunity to rule on [the] issue.‖26

¶34 VCS did not argue below that Utah Funding Trust Deed 1‘s 

priority was limited to $152,000.27 Moreover, VCS has not established 

24 Within its argument that Utah Funding (and its assignees) 

received more money than they were entitled to from the foreclosure 

sale, VCS appears to also argue that the modification of America 

West Trust Deed 1 prejudiced VCS‘s rights under its mechanic‘s lien. 

But VCS did not make this argument below and so it, too, is 

unpreserved. Moreover, given the fact that VCS has conceded that 

America West‘s liens were reconveyed and released, it is unclear 

why those liens would even be relevant for purposes of the 

foreclosure sale.

25 Baird v. Baird, 2014 UT 8, ¶ 20, 322 P.3d 728 (internal quotation 

marks omitted).

26 Id. (internal quotation marks omitted).

27 At oral argument, counsel for VCS was pressed for record 

citations that would establish VCS preserved this argument below. 

Counsel cited several pages in the transcript of the hearing held on 

Countrywide‘s motion for summary judgment. But those pages do 

not support VCS‘s position. In that portion of the hearing, counsel 

for VCS referred to several Utah Court of Appeals cases for the 

proposition that Utah courts had expressed ―sympathy‖ for the 
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Opinion of the Court

14

as a factual matter that the foreclosure sale on Utah Funding Trust 

Deed 1 netted proceeds in excess of $152,000, and, in fact, at oral 

argument counsel for VCS stated that the foreclosure sale did not 

―generate enough to satisfy the $152,000 trust deed.‖ So, on the one 

hand, VCS argues that Utah Funding (and its assignees) received too 

much, but, on the other hand, it acknowledges that the foreclosure 

sale did not generate enough proceeds to satisfy Utah Funding Trust 

Deed 1. VCS‘s inconsistent argument is likely a product of the fact 

that there was no record developed below on the issue.

¶35 In short, because VCS never gave the district court an 

opportunity to rule on the issue of whether Utah Funding (and its 

assignees) received more than the value of Utah Funding Trust Deed 

1 ($152,000), the argument is unpreserved.

Conclusion

¶36 We adopt the partial subordination approach to the issue of 

circular lien priorities. Under that approach, Utah Funding Trust 

Deed 1 retained priority over VCS‘s mechanic‘s lien. On that basis, 

we affirm the district court‘s ruling that foreclosure on Utah Funding 

Trust Deed 1 extinguished VCS‘s mechanic‘s lien.

 

complete subordination approach. Counsel did not use those cases in 

support of the argument now made on appeal—that Utah Funding 

(and its assignees) received more than they were entitled to from the 

foreclosure sale.