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In re Excess Proceeds from Foreclosure

In re Excess Proceeds from Foreclosure, 2020 UT App 54 (Harris, J.)

Contract

A property owner borrowed money from Instant Mortgage Lending Inc. (IML) and that loan was memorialized in a promissory note. The loan was secured by a trust deed that listed Instant Funding—not IML—as the beneficiary but also defined “beneficiary” as the holder of the promissory note. The note was amended seven times, and never again did the drafters list IML as the holder. A later document corrected the beneficiary to IML, but it was never signed by Instant Funding. IML later assigned its interest to Ocean 18. The owner’s property was later sold at a foreclosure sale, and Ocean 18 sought to obtain the excess proceeds from the sale over two other claimants. The district court awarded the excess to the two other claimants because it concluded that IML was not a beneficiary of the trust deed. The Court of Appeals reversed, holding:

  • Both sides espouse interpretations of the trust deed that are plausible and reasonably supported by its language, so the trust deed is facially ambiguous as to the identity of the beneficiary. 
  • The district court erred in concluding that Instant Funding was the beneficiary of the trust deed. As with any contract, if a trust deed is facially ambiguous, courts look to the parties’ intentions to resolve ambiguity. Parol evidence may be admitted to determine intent. Examining the parol evidence in this case—including the course of dealing between the parties and IML’s executive’s declaration that the listing of Instant Funding as a beneficiary on the trust deed was a mistake—Instant Funding was never intended to be the beneficiary of the trust deed; at the time the deed was created, the parties intended IML to be the beneficiary. 
  • The parol evidence is not sufficient for the Court to conclude whether IMC remained the holder of the Note and the beneficiary of the trust deed and whether IMC properly transferred its interests to Ocean 18. The case is remanded for further proceedings, which may include discovery. 

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