Court Opinion

ID: 9791976
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:21:27.697723+00
Date Added: 2024-06-11T07:37:39.938911
License: Public Domain

HOWE, Associate Chief Justice
(dissenting):
I dissent. I would affirm the judgment.
As to the fraud issue, I agree with the majority that perhaps, as a general rule, a mortgagor and a senior mortgagee owe no duty to a junior mortgagee to inform him that the senior mortgage has been paid. However, the payment which the jury found was made in the instant case was made during the course of this lawsuit in which one of the principal issues was the priority of the three trust deeds. The majority opinion does not discuss the duty issue in the context of an ongoing lawsuit where quite different rules apply to disclosure. Because of that failure, the majority errs in finding no duty on the part of First Security, Banberry, and Horman to disclose to Kimball the existence of the pertinent settlement agreement between the Horman Family Trust and First Security Bank which the jury found contained provision for payment of two trust deeds which were in competition with Kimball for first priority.
First Security brought this action to foreclose its two trust deeds that allegedly were senior to the purchase money trust deed held by Kimball. Kimball counterclaimed, alleging that his mortgage was senior. In light of Kimball’s assertion of priority, First Security was defended by lawyers engaged by Commonwealth Title Insurance Co., which had insured one of the First Security trust deeds as a first lien on the land. Thus, the issue was clearly framed in the lawsuit: What was the priority of the three trust deeds? With this backdrop, while the lawsuit was pending, First Security and the Horman Family Trust entered into the October 1984 agreement, which ostensibly provides that the Trust purchase the two First Security trust deeds for $1.6 million. However, uncharacteristic of a purchase, First Security made no assignment of the note and trust deed to the purchaser; First Security was to continue pursuit of its foreclosure action. It was agreed that the agreement was to be kept confidential, and the Trust expressly assumed the risk that the agreement would become known to Kimball or Commonwealth. The parties seemed to contemplate that knowledge of the agreement by Kim-ball might bolster his claim that his trust deed was now elevated to first position and that knowledge by Commonwealth might give rise to a claim that it was exonerated from liability as insurer of a first lien.
In my opinion, a duty arose on the part of First Security, Horman, and Banberry to disclose to their adversaries and the trial court the existence of the agreement in the pending foreclosure action since the agreement potentially had an important bearing on the main issue, viz., priority of the three mortgages. Banberry and Horman seek to justify their nondisclosure on the premise that since the parties to the settlement agreement did not intend “payment” of the *1340First Security trust deeds, but only “purchase” of them by the Horman Family Trust, the agreement had no impact on the issues of the foreclosure action and therefore did not need to be disclosed. This argument overlooks the reality that if the agreement provided for payment of the two First Security trust deeds, Kimball was elevated to first position and Commonwealth was exonerated. If it were only a purchase, then perhaps the foreclosure action should be continued by the new purchaser, the Horman Family Trust, as rule 17(a) of the Utah Rules of Civil Procedure requires actions to be prosecuted by the real party in interest. The fact that the jury found that the agreement provided for payment and thus elevated Kimball to first position amply demonstrates that the October 1984 agreement seriously impacted the issues of the pending action. The agreement should have been disclosed to all parties to the lawsuit and the trial court when it was made because it rendered moot a principal issue. We have long passed the era when a lawsuit was a “game of chance” and a party could win by skillfully withholding vital information from the court and adversaries.
I also dissent from the conclusion of the majority that the case must be remanded because of the error in instruction No. 15, wherein the jury was told that it “may” consider the intentions of the parties rather than that it “should” or “must” consider their intentions. While admittedly this is a technical error, in the context of this case I am unable to perceive how it could have been prejudicial to Banberry. The jury was never instructed that it could consider anything else in determining whether the payment of $1.6 million was a purchase or a payment. Instruction No. 15 defined “payment” and “purchase.” It told the jury that the “intention of the parties should be determined from all of the facts surrounding the making of the agreement, and the manner in which the agreement was actually handled by the parties.... ” It further instructed the jury that it may consider the statements of the parties regarding their intent, but that the jury was not bound to determine intent on the basis of what the parties said their intent was. It was told to determine intent from all the evidence having a bearing on intent. Taking the instruction as a whole, as we must, the jury was fully informed that the parties’ intent was the key to its determination of payment versus purchase.
The jury had before it the October 1984 written agreement, and it listened to days of testimony from many witnesses as to what the parties intended by that agreement. It then retired to determine whether the parties had effected a purchase or a payment. In making that determination, I cannot reasonably believe that it could have considered anything other than the intent of the parties as manifested by the written agreement and the testimony it had heard. The majority opinion does not suggest anything else the jury may have considered. No other instruction permitted it to do so. No other evidence was presented relating to the issue. It would be sheer speculation to conclude that because of this technical error in the use of “may,” the jury was set on a course to disregard the evidence, both documentary and testimonial, that it had seen and heard in the courtroom.
It should be noted that even in Ralph A. Badger & Co. v. Fidelity Building & Loan Association, 94 Utah 97, 75 P.2d 669 (1938), which is relied upon by the majority for its position and is quoted in part in the majority opinion, we did not use the mandatory language the majority now insists upon. In Ralph A. Badger and the instant case, the majority relied upon language from 48 C.J. Payment § 1, at 586-87 (1929) (footnotes omitted): “Whether or not a transaction constitutes payment depends largely upon the intention of the par-ties_” (Italics added.) We have, on many occasions in deciding other eases, refused to find prejudicial error in instructions where the error was much more egregious than in the instant case. In those cases, we looked at the instruction as a *1341whole and relied upon Utah Rule of Civil Procedure 61, which forbids us from disturbing a judgment or order “unless refusal to take such action appears to the court inconsistent with substantial justice. The court at every stage of the proceeding must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties.” Our cases place the burden on the appellant to demonstrate that the error was prejudicial to the extent that there is reasonable likelihood that in its absence there would have been a different result. Harris v. Utah Transit Authority, 671 P.2d 217, 222-23 (Utah 1983). No such demonstration has even been attempted in the instant case.
I also dissent from the majority’s conclusion that the wording of the special verdict was prejudicial error. Again, the majority has exalted technical error above substance. While it is true that any payment which was made here with the $1.6 million was made by the Horman Trust, not by Banberry, the legal effect is the same irrespective of who made the payment. In other words, payment by Banberry had the same effect as payment by the Horman Trust as far as Kimball’s rights are concerned. Payment by either elevated Kim-ball’s mortgage into first position. Thus, in my judgment, any error in the verdict form was again harmless.