Opinion ID: 2631886
Heading Depth: 2
Heading Rank: 3

Heading: Priority in the Proceeds

Text: ¶ 25 We next turn to the question of whether, despite our conclusion that Deere had a security interest only in the home, Deere could nonetheless claim priority over Schriever in the excess proceeds of the entire trust property. In concluding that Deere had priority over Schriever in the proceeds, the district court relied on section 70A-9-306. However, this section does not apply to a disposition (e.g., sale) of the Tremonton property and affixed manufactured home due to their status as real property. See Utah Code Ann. § 70A-9-104(j) (1997) (repealed 2001) (excluding real estate transactions from Chapter 9, except as provided for fixtures in section 70A-9-313). In contrast to the approach of the district court, other courts have focused on section 70A-9-313 when considering whether an interest in a fixture continues in the proceeds. See, e.g., Maplewood Bank v. Sears, 265 N.J.Super. 25, 625 A.2d 537, 539-40 (App.Div.1993) (relying on section 70A-9-313, not section 70A-9-306, in determining whether fixture financer could claim priority interest in proceeds of sale of real estate that included fixtures). ¶ 26 Section 70A-9-313 provides one express remedy for cases where a fixture financer has priority over all real estate interests in the fixture: removal of the fixture. See Utah Code Ann. § 70A-9-313(8) (1997) (repealed 2001). The U.C.C. does not address whether [a] secured party may do something else in lieu of removal, such as . . . make a claim against the proceeds of a real estate foreclosure sale. William D. Hawkland et al., Uniform Commercial Code Series § 9-313:7 (2000). ¶ 27 Courts appear unanimous in interpreting this omission as preventing a fixture financer from sharing in the proceeds of a sale of real estate. See Maplewood, 625 A.2d at 539-40 (holding that under U.C.C. section 9-313, a fixture financer with priority interest in kitchen fixtures, having foregone right of removal, could not claim priority over mortgage lender in proceeds of sale of real estate); Hoger, 880 P.2d at 288-89; see also FGB Realty Advisors, 672 A.2d at 548 (noting that, upon default, removal provides the only remedy to fixture financer despite impracticality of removing in-ground swimming pool (dicta)); cf. Hawkland § 9-313:7 (arguing that, given difficulties in estimating fixture's contribution to real estate sale proceeds, fixture financer with right to remove fixture should not have right to await foreclosure sale and claim proceeds, unless removal would breach peace). ¶ 28 Unlike the situation in cases like Maplewood, Deere may not have had the option of removing the home before the trustee's sale. Specifically, Deere's failure to comply with section 70A-9-313's fixture filing requirements likely rendered its interest in the home subordinate to that of the Sodberry trust beneficiary. See Utah Code Ann. § 70A-9-313(4), (5) (1997) (repealed 2001) (requiring fixture filing to retain priority against most types of real estate interests, unless certain conditions are met (e.g., holder of real estate interest disclaims interest in fixtures)); cf. 35 Am.Jur.2d Fixtures § 51 (1967) (noting that mortgage covers subsequently-annexed fixtures even though the mortgage instrument did not refer to fixtures (citing cases)). If Deere's interest was inferior to that of the trust beneficiary, Deere could not have claimed a statutory right to remove the home. See Utah Code Ann. § 70A-9-313(8) (1997) (repealed 2001) (conditioning right of removal on fixture financer having interest superior to all other real estate interests). But we need not decide whether the existence of the trust precluded removal, for Deere's right to claim an interest in the proceeds does not turn on whether Deere could remove the home, as discussed below. ¶ 29 Construing section 70A-9-313, we see no evidence that the legislature intended that, when removal is unavailable, a fixture financer have an interest in the proceeds of the sale of the real estate. First, section 70A-9-313 makes no mention of any remedy other than removal. Moreover, the drafters of section 9-313 intended to provide only a limited set of exceptions to the general rule that, in a priority dispute, real estate interests trump interests in chattel that have become fixtures. See U.C.C. § 9-313 cmt. 1 (stating that chattel interests [are] subordinate to real estate interests except as protected by the priorities in section 9-313). The absence of express authorization, together with the default rule favoring real estate interests, makes it unlikely the legislature intended to grant a fixture financer a priority interest in proceeds of a sale of real estate. Cf. Olson v. Salt Lake City Sch. Dist., 724 P.2d 960, 966 (Utah 1986) (relying on canon of construction under which the enumeration of specific items in a statute indicates the legislature's intent to exclude other items (citing 2A Sutherland's Statutory Construction § 47.23 (4th ed. 1984))). Second, when the legislature intended to grant an interest in proceeds in other contexts, it did so expressly. See Utah Code Ann. § 70A-9-306 (1997) (repealed 2001) (permitting security interest to continue in proceeds); cf. Maplewood Bank, 625 A.2d at 540 (declining to construe U.C.C. section 9-313 as permitting fixture financer's interest to continue in proceeds because this would be legislating and noting that, in the one state (Louisiana) that allows this remedy, the legislature expressly authorized it by adding nonuniform language to U.C.C. § 9-313(8)). ¶ 30 Accordingly, we conclude the district court erred in granting Deere a priority interest in the proceeds of the trust sale. [3] We reverse the district court's grant of summary judgment in favor of Deere. On remand, the district court should exclude Deere from those eligible to claim an interest in the proceeds. We offer no opinion as to whether Deere's security interest in the home remained effective after the trustee's sale, as this issue is not before the court.