Stearns Lending Inc. v. Pyle

2015 UT App 252THE UTAH COURT OF APPEALS
STEARNS LENDING INC. AND GRA LEGAL TITLE TRUST 2013-1,
Plaintiffs and Appellee,
v.
SHAUNA PYLE, ZOHAR SALMAN, AND JAY R. MOHLMAN,
Defendants and Appellants.
Opinion
No. 20140250-CA
Filed October 8, 2015
Third District Court, Salt Lake Department
The Honorable Keith A. Kelly
No. 100919606
Chris L. Schmutz, Attorney for Appellants
Elizabeth A. Schulte and Alan S. Mouritsen,
Attorneys for Appellee
JUDGE KATE A. TOOMEY authored this Opinion, in which JUDGES
JAMES Z. DAVIS and STEPHEN L. ROTH concurred.
TOOMEY, Judge:
¶1 Zohar Salman and Jay R. Mohlman (collectively,
Appellants) appeal from the trial court’s entry of judgment in
favor of GRA Legal Title Trust 2013-1 (GRA Legal). The trial
court’s order invalidated a trustee’s deed purportedly conveying
to Salman title to a piece of real property. We affirm.
BACKGROUND
¶2 This case has a complicated factual history, and we recite
the facts as necessary to understand the arguments raised on
appeal. Further, when reviewing an appeal from a bench trial,
“we view the evidence in a light most favorable to the trial
court’s findings, and therefore recite the facts consistent with
Stearns Lending v. Pyle
that standard.” ProMax Dev. Corp. v. Mattson, 943 P.2d 247, 250
n.1 (Utah Ct. App. 1997) (citation and internal quotation marks
omitted). “However, we present conflicting evidence to the
extent necessary to clarify the issues raised on appeal.” Id.(citation and internal quotation marks omitted).
¶3 Karen Morgan owns a house and real property in Sandy,
Utah (the Property). In December 2007, Karen obtained a loan
from World Savings Bank, FSB, in the amount of $175,000, which
was secured by a trust deed on the Property (the World Savings
Trust Deed).
¶4 Sometime later, Karen’s husband, Donald Morgan,
approached James Sandmire about an opportunity to make
$15,000 in a thirty-day period. This prompted Sandmire to
encourage his girlfriend, Shauna Pyle, to extend a $75,000 loan to
Donald. After negotiations, the Morgans signed a note in the
principal amount of $90,000 (the Pyle Note), which included
$75,000 cash paid to Donald and $15,000 of “interest” for the
thirty-day loan. To secure this loan, Karen, as the sole owner of
the Property, executed a trust deed on the Property (the Pyle
Trust Deed). The Pyle Trust Deed was recorded in the Salt Lake
County Recorder’s Office on February 2, 2009, as entry number
10612026. Because Sandmire had a copy of the mortgage
statement for the World Savings loan, Pyle and Sandmire
understood that the Pyle Trust Deed stood junior to the World
Savings Trust Deed.
¶5 The Morgans failed to meet the Pyle Note’s deadline for
their $90,000 balloon payment. A month later, Pyle, with
Sandmire acting as her agent, retained Matthew Howell to start
collection efforts against the Morgans. Howell sent the Morgans
a demand letter but did not initiate any legal proceedings. At
this point, Pyle chose not to proceed with foreclosing the Pyle
Trust Deed, recognizing that doing so would mean she would
have to pay off the World Savings Trust Deed to own the
Property.
20140250-CA 2 2015 UT App 252Stearns Lending v. Pyle
¶6 In October 2009, the Morgans began the process of
refinancing the World Savings loan so that they could obtain
cash to pay Pyle. Knowing that the Morgans had no assets
except for the equity in the Property, Pyle was willing to accept a
“fraction of the original note” instead of nothing. In addition, she
understood that the only way she would receive payment under
the Pyle Note would be through the Morgans’ refinancing.
¶7 Sandmire directed Inwest Title, which was the closing
agent for the refinancing, to ask Howell to provide a payoff
amount for the Pyle Note and the Pyle Trust Deed. In response,
Howell wrote a November letter to Inwest Title stating that
“Pyle will agree to release her trust deed upon payment of
approximately $44,000 (i.e., all proceeds of the refinancing not
required for the payment of the first mortgage and any fees
associated with the refinancing).” This figure was the amount
Donald believed he could obtain from refinancing. The letter had
no expiration date and was never revoked or rescinded.
¶8 Meanwhile, Zohar Salman developed an interest in
purchasing the Pyle Trust Deed. Salman believed that Donald’s
company, Tab’s Trucks, owed him approximately $170,000
related to other business transactions. This alleged unsecured
debt was not supported by documentary proof at trial, and
Salman did not file a lawsuit to recover it. Nevertheless, Salman
believed that if he acquired the Pyle Trust Deed, he could
pressure Donald to pay the unsecured debt by threatening
foreclosure of the Property. Salman negotiated with Sandmire,
who was again acting as Pyle’s agent, for the assignment of the
Pyle Trust Deed. Sandmire apprised Salman of the Morgans’
refinancing efforts and Howell’s letter responding to Inwest
Title’s request for the payoff amount. Salman and Pyle reached
an agreement for the assignment of the Pyle Trust Deed on
February 1, 2010. Salman then retained Jay Mohlman to
represent him and draft documents related to this deal. Both
Salman and Mohlman knew the Pyle Trust Deed was the second
priority lien against the Property. Mohlman also knew or should
20140250-CA 3 2015 UT App 252Stearns Lending v. Pyle
have known that the refinancing was in progress before the
assignment was executed.
¶9 Sandmire continued communicating with Inwest Title
and with Donald about refinancing the World Savings loan, but
did not inform them that Pyle would no longer cooperate in the
refinancing or that she was negotiating to assign the Pyle Trust
Deed to a third party. In response to an inquiry, Howell sent
Inwest Title another letter, stating, “Shauna Pyle will agree to
release her trust deed upon payment of approximately $19,000.”1
¶10 Salman and Pyle executed the assignment of the Pyle
Note and the Pyle Trust Deed on February 6 and recorded it on
February 18. Howell and Sandmire did not tell Inwest Title
about the assignment or indicate that Pyle would no longer
accept the $19,000 payoff as stated in the January letter.
¶11 The Morgans closed their refinancing of the World
Savings loan on February 9. At the closing, the Morgans
executed a note in favor of Stearns Lending Inc. for the principal
amount of $232,702 (the Stearns Note). To secure this note, the
Morgans executed a trust deed on the Property (the Stearns
Trust Deed),2 which was recorded on February 16. The World
Savings loan was paid off with the proceeds of the Stearns loan.
And in accordance with the January letter, Inwest Title tendered
two checks totaling $33,980.48 (the February Checks) to Howell
and specifically stated that they were for the payoff of the Pyle
Trust Deed. Inwest Title also sent Howell a notice of intent to
1. Except for the letter’s January date and the reduction in the
amount of the payoff, this letter was identical to the November
letter.
2. There is no finding by the trial court identifying whether or
when Donald obtained an ownership interest in the Property,
but both Morgans signed the Stearns Trust Deed.
20140250-CA 4 2015 UT App 252Stearns Lending v. Pyle
reconvey the trust deed. Howell forwarded copies of the
February Checks to Mohlman on February 17, and Mohlman
understood they were tendered to Pyle as a payoff of the Pyle
Trust Deed. The February Checks were not cashed.
¶12 On February 22, Mohlman sent the Morgans a letter
notifying them that the Pyle Trust Deed had been assigned to
Salman. The letter demanded that they immediately pay
$270,000 plus attorney fees and costs, and warned that failure to
pay would result in legal action, including foreclosure of the
trust deed on their home.
¶13 Shortly thereafter, Mohlman executed a substitution of
trustee and recorded a notice of default with intent to sell the
Property. He had a copy of the Stearns Trust Deed at the time
and knew that the World Savings loan had been refinanced, but
did not send a copy of the notice of default or notice of the
pending trustee’s sale to Stearns Lending.
¶14 In April, Inwest Title tendered Howell the $44,000 payoff
amount (the April Checks) set forth in the November letter. The
April Checks specified that they were for the payoff of the Pyle
Trust Deed. Howell did not return the checks or otherwise
indicate that Pyle refused to accept them. Instead, after the
statutory period for objecting to the reconveyance expired,3
Inwest Title recorded a reconveyance of the Pyle Trust Deed on
July 21. The April Checks were not cashed.
¶15 A few days before the scheduled trustee’s sale, the
Morgans’ attorney, Paul Halliday, contacted Mohlman to discuss
the sale and the payoff of the Pyle Trust Deed. Halliday attended
3. The Utah Code provides the procedures for reconveying a
trust deed and provides a sixty-day period between the notice of
intent to reconvey a trust deed and the actual reconveyance of
the trust deed. Utah Code Ann. § 57-1-40 (LexisNexis 2010).
20140250-CA 5 2015 UT App 252Stearns Lending v. Pyle
the trustee’s sale and tendered two checks to Mohlman as trustee
(the July Checks). One check was issued by Inwest Title in the
amount of $33,980.48 (the Inwest Title Check) and the other by
Zions Bank for $10,000; both checks were made payable to
Mohlman as trustee. The Inwest Title Check specifically stated
that it was the payoff of the Pyle Trust Deed, which was
identified by its entry number: “P/O & Recon SL Co
E#10612026.” The amount of the Inwest Title Check matched the
total of the February Checks.
¶16 Mohlman accepted the July Checks. He endorsed and
deposited them around July 29. At the time, Mohlman knew that
Inwest Title believed it had an agreement with Pyle regarding
the payoff of the Pyle Trust Deed and that Inwest Title had
previously tendered $33,980.48 to Howell as a payoff. Mohlman
never told Halliday that the July Checks would instead be
applied to Donald’s alleged unsecured business debt, nor did
Mohlman and Halliday make such an agreement. Furthermore,
Halliday did not have authorization from Karen, Inwest Title, or
Stearns Lending to tender the July Checks for any purpose other
than to satisfy the Pyle Trust Deed.
¶17 Despite Inwest Title’s reconveyance of the Pyle Trust
Deed and his acceptance of the July Checks, Mohlman
rescheduled the trustee’s sale for September 8. When Halliday
inquired about the trustee’s sale, Mohlman responded that he
would not cancel it unless Donald paid Salman “substantially
more” than the amount due and owing under the Pyle Trust
Deed. Halliday then demanded the return of the July Checks,
but Mohlman refused.
¶18 Mohlman held the trustee’s sale of the Property as
planned. Salman purported to “credit bid” $100,000 at the
trustee’s sale, and on September 14, Mohlman recorded a
trustee’s deed that purported to convey the Property to Salman.
In October, Salman began eviction proceedings against the
Morgans. Since then, Salman has had possession of the Property
20140250-CA 6 2015 UT App 252Stearns Lending v. Pyle
and has received all of its rental income since November 2010,
but has not paid for insurance or property taxes. Instead, Stearns
Lending and its successor have paid those expenses.
¶19 Stearns Lending filed this action against Pyle, Salman,
Mohlman, and Donald and Karen Morgan. It raised a breach-of-
contract claim against Pyle and Salman, and generally sought to
invalidate the trustee’s sale and to ensure the Stearns Trust
Deed’s senior lien position against the Property. Sometime later,
Stearns Lending assigned its interest in the Stearns Trust Deed to
GRA Legal.
¶20 After a bench trial, the court awarded judgment to GRA
Legal. It determined that Stearns Lending was a good-faith
purchaser for value without notice of the assignment of the Pyle
Trust Deed. It determined that Salman, in contrast, was not a
good-faith purchaser for value. As to the breach-of-contract
claim, the trial court determined that the January letter was a
valid offer accepted by Stearns Lending when Inwest Title
tendered the February Checks to Howell. The trial court then
ruled that Pyle breached the agreement with Stearns Lending
when she assigned the Pyle Trust Deed to Salman and refused to
authorize the release of the Pyle Trust Deed after receipt of the
February Checks. Because Salman was Pyle’s assignee, the court
concluded that Salman was bound by Pyle’s agreement with
Stearns Lending and was also liable for the breach of that
agreement. The court further concluded that Pyle and Salman
were estopped from challenging the priority of the Stearns Trust
Deed.
¶21 Next, the trial court ruled that the September trustee’s
sale was void ab initio for several reasons. One stated reason was
that the Pyle Trust Deed had been properly reconveyed on July
21. Another was that Mohlman, on behalf of Salman, accepted
the July Checks in full satisfaction of the Pyle Trust Deed. Yet
another was that Mohlman failed to restart the foreclosure
process after he accepted the July Checks.
20140250-CA 7 2015 UT App 252Stearns Lending v. Pyle
¶22 Alternatively, the trial court determined that pursuant to
the doctrine of equitable subrogation, the Stearns Trust Deed
held the senior lien position on the Property because it had
assumed the position of the World Savings Trust Deed.
¶23 In accordance with its rulings, the trial court ordered that
the trustee’s deed purporting to convey the Property to Salman
was void. This appeal ensued.
ISSUE ON APPEAL
¶24 Appellants Salman and Mohlman contend that the trial
court erred by invalidating the trustee’s sale and the trustee’s
deed that purportedly conveyed the Property to Salman.
ANALYSIS
¶25 Although Appellants raise a number of arguments in
support of their appeal, we address only one, which is
dispositive. Appellants argue “there was no evidence that
[Mohlman] agreed to discount the payoff on the Note and accept
the July Checks in full satisfaction of the Note.” We understand
this argument to be that Mohlman’s acceptance of the July
Checks did not constitute an accord and satisfaction of the Pyle
Trust Deed. We conclude they have not demonstrated error in
the trial court’s determination that an accord and satisfaction
had occurred before the trustee’s sale and that the trustee’s sale
was void ab initio.4
4. Appellants raise additional arguments on appeal. In
particular, Appellants challenge the trial court’s several
rationales for ruling that the Pyle Trust Deed did not hold the
senior lien position on the Property. The position of the Pyle
Trust Deed matters only if the Morgans were still obligated
(continued…)
20140250-CA 8 2015 UT App 252Stearns Lending v. Pyle
¶26 Appellants essentially contend that the trial court erred in
concluding that an accord and satisfaction had occurred.
Although we generally review for correctness the trial court’s
decision that the facts established an accord and satisfaction,
ProMax Dev. Corp. v. Raile, 2000 UT 4, ¶ 17, 998 P.2d 254,
Appellants present their challenge to the trial court’s decision as
a challenge to the sufficiency of the evidence supporting the
factual findings in support of accord and satisfaction. “[A]
finding of fact is clearly erroneous if it is without adequate
evidentiary support or if it is induced by an erroneous view of
the law.” Cove View Excavating & Constr. Co. v. Flynn, 758 P.2d
474, 477 (Utah Ct. App. 1988). “We will not set aside the trial
court’s findings unless they are against the clear weight of the
(…continued)
under the deed as of September 2010. Because we conclude that
the Morgans’ obligation under the Pyle Trust Deed was
discharged by that time and that Appellants thus were not
entitled to foreclose, see infra ¶ 34, we need not consider these
arguments. Further, Appellants attack the trial court’s rulings
concerning the validity of the July reconveyance and the
foreclosure process leading up to the September trustee’s sale.
These rulings all served as alternative bases for the court’s order
invalidating the trustee’s sale. Appellants also contend that
“there was no contract” to release the Pyle Trust Deed upon
payment of $19,000, due to the lack of an offer, acceptance, and a
meeting of the minds. The trial court’s ruling with respect to the
contract claim provided a separate basis for entering judgment
in favor of GRA Legal. Accordingly, because we affirm the trial
court’s order on the independent ground of accord and
satisfaction, we need not address Appellants’ remaining
arguments. See, e.g., Beehive Brick Co. v. Robinson Brick Co., 780
P.2d 827, 833 (Utah Ct. App. 1989) (explaining that “this court
need not analyze and address in writing each and every
argument, issue, or claim raised” (citation and internal quotation
marks omitted)).
20140250-CA 9 2015 UT App 252Stearns Lending v. Pyle
evidence or we otherwise reach a definite and firm conviction
that a mistake has been made.” Id.
¶27 “An accord and satisfaction arises when the parties to a
contract agree that a different performance, to be made in
substitution of the performance originally agreed upon, will
discharge the obligation created under the original agreement.”
Golden Key Realty, Inc. v. Mantas, 699 P.2d 730, 732 (Utah 1985).
The result is that “*t+he substituted agreement calling for the
different performance discharges the obligation created under
the original agreement.” Id. “The obligation discharged may
arise out of contract, quasi-contract, tort or some other theory of
recovery.” Bennion v. LeGrand Johnson Constr. Co., 701 P.2d 1078,
1082 (Utah 1985).
¶28 An accord and satisfaction has three elements. ProMax,
2000 UT 4, ¶ 20. The first is the existence of “an unliquidated
claim or a bona fide dispute over the amount due,” id., or, if the
amount due is undisputed, the debtor’s incurrence “of a legal
detriment in order to confer a benefit” on the creditor,
Sugarhouse Fin. Co. v. Anderson, 610 P.2d 1369, 1372 (Utah 1980).
The second is the debtor’s offer of payment “as full settlement of
the entire dispute.” ProMax, 2000 UT 4, ¶ 20. The third is a
creditor’s “acceptance of the payment as full settlement of the
dispute.” Id. This last element “may be satisfied by *either a+
subjective intent to discharge an obligation by assenting to the
accord, or conduct which gives rise to a reasonable inference that
acceptance of payment discharged the obligation.” Dishinger v.
Potter, 2001 UT App 209, ¶ 22, 47 P.3d 76 (emphasis omitted).
¶29 Appellants vaguely challenge the trial court’s findings
with respect to the first element by asserting that the amount
due on the Pyle Note was “over $100,000.” Even so, the trial
court’s unchallenged findings are sufficient to support a
conclusion that the Morgans had incurred a legal detriment to
confer a benefit on Salman. See Sugarhouse, 610 P.2d at 1372. In
particular, the court found that the Morgans refinanced the
20140250-CA 10 2015 UT App 252Stearns Lending v. Pyle
World Savings loan and executed the Stearns Note for the
primary purpose of obtaining funds to pay the debt on the Pyle
Note. See id. at 1372–73 (holding that the defendant’s negotiation
of a loan with a third party that enabled him to pay off the
substitute obligation immediately was sufficient consideration to
support an accord). Appellants have not demonstrated that these
findings are unsupported by the evidence.
¶30 As to the second element, Appellants argue that “*t+he
clear weight of the evidence showed that the July Checks did not
result in payment in full of the *Pyle+ Note.” They seem to argue
that because the amount due on the Pyle Note was over $100,000
and the July Checks fell short of that amount, the Morgans did
not offer payment as a full settlement of the entire obligation
under the Pyle Note.
¶31 This argument fails for two reasons. First, the trial court
found that the Morgans presented the July Checks for the payoff
of the Pyle Trust Deed. The court further found that on the
memo portion of the Inwest Title Check, which was attached
when Mohlman received it, the notation indicated it was for the
payoff and reconveyance of the Pyle Trust Deed as identified by
its entry number in the Salt Lake County Recorder’s Office: “P/O
& Recon SL Co E#10612026.” Appellants have not shown that
these findings are without adequate evidentiary support. And
second, an accord and satisfaction by its nature calls for a
substituted performance. See Golden Key Realty, 699 P.2d at 732.
Thus, the fact that the July Checks were written for an amount
less than the $100,000 allegedly due on the Pyle Note does not
defeat a finding that the Morgans presented the July Checks as a
full settlement of the entire obligation under the Pyle Note,
especially in light of evidence that the Morgans and Pyle had
been negotiating for months for a payoff very close to the
amount tendered.
¶32 As to the third element, Appellants claim there was no
evidence that Mohlman “agreed to discount the payoff on the
20140250-CA 11 2015 UT App 252Stearns Lending v. Pyle
[Pyle] Note and accept the July Checks in full satisfaction of the
Note.” The trial court found that Mohlman accepted, endorsed,
and deposited the July Checks, which included the notation
regarding the payoff of the Pyle Trust Deed. Restrictive wording
accompanying a tender of full payment is “one evidentiary fact
to be considered with other evidence, if any, in making the
factual determination of whether the creditor knew or should
have known that the payment was tendered as full satisfaction
of an identified obligation of the debtor.” Cove View Excavating
& Constr. Co. v. Flynn, 758 P.2d 474, 477–78 (Utah Ct. App. 1988).
¶33 Here, the trial court’s finding that Mohlman accepted the
July Checks in full satisfaction of the Pyle Note and the Pyle
Trust Deed was supported by several subsidiary findings in
addition to the notation on the Inwest Title Check. Specifically,
the court found that at the time Mohlman deposited the July
Checks, he knew Inwest Title believed it had an agreement with
Pyle regarding the payoff of the Pyle Trust Deed. Moreover, the
court found that Mohlman knew Inwest Title had previously
tendered a check for the same amount as the Inwest Title Check
to Howell as payoff of the Pyle Trust Deed. Appellants have not
shown that these findings are against the clear weight of the
evidence. Consequently, they have not shown clear error in the
trial court’s finding that Mohlman accepted the July Checks in
full satisfaction of the Morgans’ obligation under the Pyle Note
and Pyle Trust Deed.5
5. Appellants also argue that the Morgans’ behavior after
Mohlman deposited the July Checks supports their view that an
accord and satisfaction did not occur. Specifically, Appellants
assert that if there had been an accord and satisfaction, the
Morgans would not have continued negotiating with Mohlman
and Salman and would have objected to the trustee’s sale on the
basis of accord and satisfaction. “The existence of conflicting
evidence does not give rise to clear error as long as evidence
(continued…)
20140250-CA 12 2015 UT App 252Stearns Lending v. Pyle
¶34 In summary, Appellants have not shown that the trial
court’s finding that an accord and satisfaction took place is
without adequate evidentiary support or against the clear
weight of the evidence. See id. Because Appellants accepted the
Morgans’ substitute performance when they deposited the July
Checks, the Morgans’ obligation under the Pyle Note and the
Pyle Trust Deed was discharged through an accord and
satisfaction. See ProMax Dev. Corp. v. Raile, 2000 UT 4, ¶ 20, 998
P.2d 254. As a consequence, Appellants were not entitled to
foreclose on the Pyle Trust Deed, and the trustee’s sale of the
Property was therefore invalid.
CONCLUSION
¶35 Appellants have not demonstrated error in the trial
court’s determination that an accord and satisfaction had
occurred before the trustee’s sale of the Property and that the
trustee’s sale was void ab initio. Accordingly, we affirm the trial
court’s order invalidating the trustee’s deed purportedly
conveying the Property to Salman.
(…continued)
supports the trial court’s decision.” Hale v. Big H Constr., Inc.,
2012 UT App 283, ¶ 60, 288 P.3d 1046 (citation and internal
quotation marks omitted). At most, Appellants have identified
conflicting evidence, but they have not established that the trial
court’s decision is unsupported.
20140250-CA 13 2015 UT App 252