Court Opinion

ID: 9628192
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:11:40.845542+00
Date Added: 2024-06-11T18:06:59.504834
License: Public Domain

HALL, Justice
(dissenting):
I respectfully dissent.
In adopting the holdings of certain other jurisdictions, the majority opinion fails to recognize that we have previously given a rather expansive meaning to open-end mortgage provisions for future advances. In Bank of Ephraim v. Davis,1 this Court unanimously held that advances made pursuant to such a provision take priority over all subsequent lien holders. The mortgage is to be interpreted as any other contract and if the future advance provision is sufficiently certain, it will be upheld.2
The language of the clause held to secure future advances in Bank of Ephraim read as follows:
To secure payment of any and all extensions or renewals, and successive extensions or renewals, of the note above described, or of the indebtedness represented by the same, and of any other indebtedness represented by the same, and of any other indebtedness at any time arising from the mortgagor to the mortgagee, whether represented by notes, drafts, open accounts or otherwise,

In the instant case, the clause reads as follows:
. [T]his mortgage shall extend to and be security for . . the payment of any and all claims or demands now due or to become due, now or hereafter contracted or incurred, which the said mortgagee . . . may have or hold against the mortgagors or either of them.
It is my opinion that the latter clause articulates with even greater clarity the meaning of the mortgage; hence it should be enforced according to its own terms. A party’s subjective intent cannot alter the clear terms of a written contract3 and the 1972 loan clearly provides that the mortgage was to be security for future advances.
The majority opinion suggests that the fact that the 1974 loan made no reference to the 1972 loan, in some way weakens the effect of the open-end, future advance clause. The question is not whether the 1974 livestock loan refers to the future advance clause, but rather whether the 1972 mortgage loan refers to the advance made in 1974. The trial court concluded that the future advance clause of the open-end mortgage loan clearly covered the 1974 livestock loan. The court’s decision was based, at least in part, on the fact that the mortgaged property was listed as an asset by the Shiews during the negotiations for the Price loan. The manager of the Price branch of First Security testified as follows:
Q. Now, prior to the making of that loan, did you — well, you obtained from Bill Shiew, it’s been admitted, a statement of his and Linda Shiew’s assets, other'than the cattle, is that right?
A. I did. He declared an $8,000 home in Monticello.
* * * * * *
Q. What is the position of the bank with respect to the loan application that she took at the time?
MR. MORGAN: Objection, that calls for speculation and a legal argument as to what the position of the bank is.
THE COURT: He may answer that.
THE WITNESS: Because of the cattle situation, I had to look for other collateral, and I was aware of the open-end mortgage down in Monticello. And that’s probably why it did not appear on the application, or the security document. It’s very commonly used at First Security *959Bank, and we’ve used it many times. I’m very much familiar with it.
* * * * sjc *
Q. When you negotiated the loan, Mr. Brown, with the Shiews, with respect to the cattle, and you took a financial statement from Mr. Shiew — did you not?
A. Yes, I did.
Q. Was the granting of the loan influenced by the financial statement that you got?
. A. It was.
Q. To what extent?
A. Well, the cattle market, as we’ve stated before, had weakened, and the Shiews had 50 ton of hay that wouldn’t have taken these cattle through the winter, and it was real close. We checked for that as additional collateral, and it stated there that the home was $8,000 worth in Monticello, and we had less than half of that, and that was very much an influence because they wanted to take it through the winter. I wanted to sell it then, but they thought 50 ton of hay, and they wanted to go through the winter hoping that the cattle price would strengthen. The didn’t do that.
The majority also holds that the future advance provision should not apply to unrelated future indebtedness which was not anticipated at the time the mortgage was signed. I believe the court’s reasoning in First National Bank in Dallas v. Rozelle4 was sound wherein it was held that an agreement to secure future advances must necessarily intend to secure sums that are indefinite and uncertain at the time the mortgage was executed. ■ Furthermore, based on the uncontroverted testimony quoted supra, the trial judge specifically found that the two loans were related in the instant case when he ruled as follows:
[T]he mortgaged property in San Juan County was set up by Bill Shiew as an asset when he applied for the livestock loan, and that said asset was relied upon by the plaintiff, and inducement to the plaintiff, in making the livestock loan.

In my opinion, the future advance of 1974 was therefore secured by the 1972 agreement. Furthermore, I believe Utah Farm should be held liable for First Security’s loss, given the actual notice it had of the claim. The fire insurance policy, issued contemporaneously with the 1972 mortgage loan, named Bill Shiew as the insured and First Security as an additional insured, in its capacity as the mortgagee. The policy also contained the following provision:
Loss (if any) under this policy, on buildings only, shall be payable to the mortgagee(s) . . . under any present or future mortgage upon the property described in and covered by this policy, as interest may appear, and in order of precedence of said mortgages.
In the spring of 1976, (following the Shiew divorce) the Monticello house was destroyed by fire. On learning of the loss, Utah Farm issued a check for the face amount of the policy, to the order of Bill “Schew.” Linda Shiew attempted to negotiate the check, but it proved unacceptable without her former husband’s signature. Linda Shiew contacted Utah Farm who then issued a second check payable jointly to Linda Shiew and First Security. First Security contacted Linda Shiew and asked her to endorse the check so it could satisfy the outstanding balance due both on the Monticello ($2,843.80) as well as the Price loan ($4,369.25). Linda Shiew refused to endorse the check, claiming that she had no obligation to satisfy what she referred to as her former husband’s business debts.5 First Security contacted Utah Farm, giving notice of the dispute. Nevertheless, Utah Farm chose to issue two separate checks: one to First Security for $2,843.80 (the balance due on the 1972 Monticello loan) and the other to Linda Shiew for $7,156.20 (the *960face amount of the policy less the amount paid First Security).
Rather than performing its contractual obligation of paying the insurance proceeds to the insured (designated by the policy to be Bill Shiew and First Security), Utah Farm unilaterally decided to adjudicate the rights of the parties and issued two separate checks. Given its knowledge of the conflicting claims it should have been more circumspect. Having wrongfully paid insurance proceeds to Linda Shiew, Utah Farm was found to be jointly liable with the Shiews for the balance of the 1974 loan. Such a decision is legally sound and is supported by the evidence.
I would affirm the trial court’s ruling and judgment.
• CROCKETT, C. J., concurs in the dissent of HALL, J.

. Utah, 559 P.2d 539 (1977).

. Id.

. Ephraim Theatre Company v. Hawk, 7 Utah 2d 163, 321 P.2d 221 (1958).

. 493 F.2d 1196 (10th Cir. 1974). See also Capocasa v. First National Bank of Stevens Point, 36 Wis.2d 714, 154 N.W.2d 271 (1967).

. In reality the obligation was incurred jointly by Linda and Bill Shiew.