Court Opinion

ID: 8168426
Source: CourtListenerOpinion
Date Created: 2022-09-09 21:06:05.209491+00
Date Added: 2024-06-11T16:39:42.501301
License: Public Domain

CROCKETT, Chief Justice
(dissenting).
It is true that the senior Peays (herein called the Ellis Peays) had conveyed the property in question to their son, Robert Peay, and his wife by warranty deed on June 29, 1962; and that the latter had similarly conveyed the property to the B & N Corporation on July 10, 1962; and that B & N mortgaged the property to First Security State Bank the next day, July 11, 1962. Under those circumstances there is no question but that the First Security State Bank had a first mortgage which would take preference over any of the parties just mentioned. Conversely, it is true that any purported conveyance after that time by the Ellis Peays could not take priority over, and would have no effect whatsoever upon, the first mortgage lien of said First Security State Bank. This is true of the uniform real estate contract executed the next day by the Ellis Peays as seller and B & N as buyer, by which the latter agreed to pay an obligation on the property to the Ellis Peays.
The fact which impresses me, and causes doubt in my mind about the correctness of the main opinion, is not that the Ellis Peays were parties to and signers of this real estate contract, but the fact that the B & N Corporation, which was then the record titleholder of the property, was a party to and a signer of the said contract, reciting the obligation to pay the Ellis-Peays for the property. This as stated above, had to be subj ect to, and subordinate to, the first mortgage lien of the First Security State Bank. However, subject only to that mortgage, I do not see any reason why the B & N Corporation, as the record legal titleholder, could not have conveyed away, or encumbered, its legal title interest to anyone it desired, and by any means it chose, whether by deed, by a trust-deed arrangement, or a second mortgage; and this includes the use of a real estate contract to acknowledge an obligation to the Ellis Peays, which the parties appear to have done. It is to be conceded that the contract contained no words of grant or mortgage from the owner, B & N Corporation, to the Peays, but it did indicate that said corporation recognized an obligation to the Peays on the property, for which the corporation agreed to pay them. In that connection it is important to note that Mr. C. E. Slavens, who incidentally was not called as a witness, was neither buyer nor seller in said real estate contract; and whether he thought the contract between the B & N Corporation as seller and the Ellis Peays as buyer was executed by them as security for a debt (in effect a mortgage) is immaterial to the *91issue here. But it is of interest to observe that he and his wife did sign as individuals at the end of the contract, and the only explanation of this is that this was done to guarantee performance of the contract.
While it is indeed somewhat irregular that the contract was not recorded until December IS, 1965, three and one-half years after it was executed, it nevertheless gave constructive notice of its existence to anyone desiring to acquire an interest in the property after that date.1 This recording was nearly a year before the transaction with Prudential Federal in October-November, 1966, in which it took a mortgage and advanced the money upon which this controversy centers.
In addition to the constructive notice given by recording as discussed above, there is what impresses me as a far more important proposition to be dealt with, that is, Prudential’s actual notice of the obligation to the Ellis Peays on this property.2 In Prudential’s application for a loan, typed out by its own personnel in its office, it is shown:
PURPOSE OF LOAN
Refinancing Present Mortg.
with: Ellis Peay $ 33,494.09
First Sec. State 66,233.93
And on an attached sheet appears the following:
SCHEDULE OF USE OF FUNDS
To Pay Ellis Peay $ 33,494.00
To Pay First Security State Bank 61,233.00
Pledged Savings 35,000.00
Loan Costs 4,500.00
To Slavens 15,773.00
Total $150,000.00
In regard to this information on the application, Prudential’s loan officer, Mark Radmal, admitted that the document showed the obligation to the Ellis Peays:
*92Q Now, at the time you received that loan application, you were aware of the obligation ozving to Mr. Peay, were you not?
A Yes.
Q And you were aware, as shown on the second page, it was intended that part of the funds be used to satisfy that obligation?
A Yes.
It thus appears to be without question that the Prudential had actual notice that the B & N Corporation, the record titleholder, which was making the application for the loan, had executed the real estate contract showing an obligation to the Ellis Peays; and that one of the plainly stated purposes of the loan was to discharge that debt. The derelictions which seem to be at the root of the difficulty are that the abstracter did not show this duly recorded contract in his report to Prudential; and further, that a title insurance policy was in fact issued to Prudential. What if any liability there may be upon those parties for such conduct is not involved in this lawsuit.
Whatever Prudential’s reasons may have been for not seeing that the debt to the Peays was paid from the proceeds of the loan in accordance with its purpose as stated to them, whether it was because of the abstracter’s failure to show the contract, or because C. E. Slavens told them that the debt to the Peays was being taken care of otherwise, or a combination thereof, I am unable to see how either of those reasons is imputable to or affects the rights of the Ellis Peays.
This final observation: If it should somehow be assumed that Mr. Slavens should be considered as a principal to the-real estate contract, and/or that his opinion as to what the parties thereto intended has any bearing on the issues in this case, it is-pertinent to note that all of the other principals said that the contract was to secure a debt to the Ellis Peays on the property; and further, that it was so referred to in two letters written by Mr. Slavens’ attorneys, Ballif and Ballif, in October, 1967, concerning his financial difficulties; e. g., (Ex. 6), the first letter states: “We are now in the process of contacting all secured creditors, such as Mr. Peay, and obtaining an agreement of forbearance from suit or foreclosure, upon the condition that we' keep all contracts, mortgages or other security rights current during the period of completion and liquidation.”
For the foregoing reasons it is my opinion that the correct procedure would be-to grant the Ellis Peays the relief sought and to leave the Prudential Federal to-whatever remedy it may have against those-at fault in causing the difficulty here in*93volved. I would reverse the judgment.
(All emphasis added).
JEPPSON, District Judge, concurs in the dissenting opinion of CROCKETT, C. J.
ELLETT, J., does not participate herein.

. See Sec. 57-3-2, U.O.A.1953.

. If a party dealing with land has knowledge of facts that would put a reasonable and prudent man upon inquiry he is charged with notice of the facts that reasonable inquiry would reveal. See Toland v. Corey, 6 Utah 392, 24 P. 190, Affd. 154 U.S. 499, 14 S.Ct. 1144, 38 L.Ed. 1062; Mathis v. Madsen, 1 Utah 2d 46, 261 P.2d 952.