Pioneer Builders Company v. KDA Corporation , 437 P.3d 539 ( 2018 )

2018 UT App 206THE UTAH COURT OF APPEALS
PIONEER BUILDERS COMPANY OF NEVADA INC.,
Appellee,
v.
K D A CORPORATION,
Appellant.
Opinion
No. 20170312-CA
Filed November 1, 2018
First District Court, Logan Department
The Honorable Brandon J. Maynard
No. 030100421
N. George Daines and Jonathan E. Jenkins, Attorneys
for Appellant
Gary N. Anderson and R. Christian Hansen,
Attorneys for Appellee
JUDGE KATE A. TOOMEY authored this Opinion, in which
JUDGES DAVID N. MORTENSEN and RYAN M. HARRIS concurred.
TOOMEY, Judge:
¶1 K D A Corporation (K D A) appeals the district court’s
order that denied its Motion to Enforce Redemption Right and
granted Pioneer Builders Company of Nevada Inc.’s (Pioneer)
Motion to Enforce Settlement Agreement. K D A argues the
court erred in ruling K D A waived the statutory right of
redemption 1 under the terms of a settlement agreement (the
1. Redemption is “the regaining of property by satisfaction of an
obligation.” Redemption, Webster’s Third New Int’l Dictionary
1902 (1993). In Utah, “[s]ales of real estate under judgments of
foreclosure of mortgages and liens are subject to redemption,”
(continued…)
Pioneer Builders v. K D A Corporation
Agreement) between K D A and Pioneer. We conclude K D A
did not waive its right of redemption because the Agreement did
not contain a clear and unmistakable waiver of that right. We
therefore reverse and remand this case to the district court for
further proceedings consistent with this opinion.
BACKGROUND
¶2 In October 2000, K D A sold approximately forty acres of
real property (the Property) to a buyer through an installment
contract and secured by trust deed. The buyer financed the
purchase with a loan from Pioneer, and Pioneer’s loan was also
secured by trust deed. When the buyer defaulted, Pioneer
sought to foreclose. The foreclosure resulted in a dispute
concerning the relative priority of the parties’ trust deeds. After
several years of litigation, Pioneer and K D A entered into the
Agreement to “resolv[e] all differences between them, subject to
the terms and conditions of [the] Agreement.”
¶3 The Agreement included multiple provisions that
subordinated K D A’s trust deeds to Pioneer’s trust deeds.
Specifically, K D A agreed that Pioneer’s trust deeds “attached
to, affect, and encumber [the Property] . . . ahead of, superior to,
and not subject to KDA’s [trust deeds].” The parties reiterated
that priority by including a formal subordination agreement,
stating:
(…continued)
Utah Code Ann. § 78B-6-906(1) (LexisNexis 2012), “by a creditor
having a lien on the property junior to that on which the
property was sold,” Utah R. Civ. P. 69C(b). To redeem, the
creditor must, within 180 days of the sale, pay the purchaser of
the property the amount of the purchase at the sale plus six
percent. See id. R. 69C(b), (e).
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[A]s part of a settlement of various claims and
disputes between and among them, KDA and
Pioneer have agreed . . . to the subordination of
KDA’s [trust deeds] and its other claimed estates,
rights, titles, liens, and encumbrances, and other
interests in, on, and/or to the Property . . . to
Pioneer’s [trust deeds].
K D A further agreed “that pursuant to [the subordination
agreement] Pioneer’s [trust deeds] . . . have priority over KDA’s
[trust deeds], and any and all other liens, encumbrances, and
other interests of KDA in, on, and to the Property,” and that the
priority of Pioneer’s trust deeds over K D A’s trust deeds “shall
be respected in the presently pending judicial foreclosure.”
¶4 The Agreement also contained stipulations, releases, and
reservations of claims. In one provision, K D A agreed that
Pioneer is entitled to foreclose upon [the Property],
. . . including, but without limitation, foreclosing
out, terminating, and extinguishing any and all
estates, rights, titles, liens, encumbrances, and
other interests . . . that KDA may have or claim in,
on, or to [the Property], including, without
limitation, KDA’s [trust deeds.]
K D A did not expressly reserve the right of redemption as a
subordinate lienholder on the Property.
¶5 After executing the Agreement, Pioneer continued with
the foreclosure. At a sheriff’s sale, Pioneer was the only bidder
and purchased the Property for $200,000. Less than six months
later, K D A attempted to redeem the Property as a subordinate
lien holder, serving Pioneer with an exercise of redemption and
a cashier’s check for $212,000. Pioneer rejected the redemption
attempt and returned the check, claiming that K D A waived the
right of redemption when it signed the Agreement.
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¶6 K D A filed a Motion to Enforce Redemption Right with
the district court. In that motion, K D A denied waiving the right
of redemption and asserted its rights as a “‘creditor having a lien
on the property junior to that on which the property was sold.’”
(Quoting Utah R. Civ. P. 69C(b).) To that end, K D A asked the
court to interpret the Agreement as merely subordinating the
priority of its trust deeds to those of Pioneer.
¶7 Pioneer opposed K D A’s motion and filed its own motion
to enforce the Agreement as a waiver of K D A’s right of
redemption. It argued that the Agreement’s language of the
agreement “clearly demonstrates KDA waived any and all
interest it had in” the Property. Pioneer also noted that, although
the Agreement expressly reserved K D A’s “existing and
ongoing rights,” it did not reserve the right of redemption.
¶8 After considering the arguments, the district court
concluded that K D A “freely and validly waived its right of
redemption and was not entitled to redeem the Property.” The
court stated that the “Agreement clearly provides Pioneer is
entitled to foreclosure upon the Property, thus foreclosing out,
terminating, and extinguishing any and all estates, rights, titles,
liens, encumbrances, and other interests . . . that KDA may have
or claim in . . . [the Property].” (Quotation simplified.) Based on
that language, the court concluded that “when Pioneer
foreclosed upon the Property, any right or title KDA had was
extinguished.” “Therefore, when KDA attempted to redeem the
Property, . . . it was no longer a ‘creditor having a lien on the
property’ or ‘a creditor having a right of redemption.’” (Quoting
Utah R. Civ. P. 69C(b).) After the district court ruled in favor of
Pioneer, K D A stipulated to Pioneer’s award of attorney fees as
the prevailing party, but reserved the right to challenge that
award and seek its own attorney fees if successful on appeal.
¶9 K D A appeals.
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ISSUES AND STANDARDS OF REVIEW
¶10 K D A argues the district court erred in interpreting the
Agreement to waive its statutory right of redemption.
“Settlement agreements are governed by the rules applied to
general contract actions.” Bodell Constr. Co. v. Robbins, 2009 UT
52, ¶ 19, 215 P.3d 933 (quotation simplified). “Questions of
contract interpretation not requiring resort to extrinsic evidence
are matters of law,” which we review for correctness. Zions First
Nat’l Bank, NA v. National Am. Title Ins. Co., 749 P.2d 651, 653
(Utah 1988). “[W]hether the [district] court employed the proper
standard of waiver” is also a matter of law reviewed for
correctness. Pledger v. Gillespie, 1999 UT 54, ¶ 16, 982 P.2d 572.
¶11 K D A also challenges the district court’s award of
attorney fees to Pioneer. We review the district court’s award of
attorney fees for correctness. See Jones v. Riche, 2009 UT App 196,
¶ 1, 216 P.3d 357.
ANALYSIS
I. Waiver
¶12 K D A argues the district court erred in ruling that it
waived the statutory right of redemption when it entered into
the Agreement. We agree. A waiver of any statutorily
guaranteed right must be “explicitly stated,” so that the parties’
intent is “clear and unmistakable.” See Larsen Beverage v. Labor
Comm’n, 2011 UT App 69, ¶ 11, 250 P.3d 82 (quotation
simplified). In our view, this principle applies to potential
waivers of the right of redemption, and the Agreement includes
no such waiver.
¶13 “Settlement agreements are governed by the rules applied
to general contract actions.” Bodell Constr. Co. v. Robbins, 2009 UT
52, ¶ 19, 215 P.3d 933. “The cardinal rule in contract
20170312-CA 5 2018 UT App 206Pioneer Builders v. K D A Corporation
interpretation is to give effect to the intentions of the parties as
they are expressed in the plain language of the [agreement]
itself.” New York Ave. LLC v. Harrison, 2016 UT App 240, ¶ 21, 391
P.3d 268 (quotation simplified). We examine “the entire
[agreement] and all of its parts in relation to each other, giving
an objective and reasonable construction to the [agreement] as a
whole.” G.G.A., Inc. v. Leventis, 773 P.2d 841, 845 (Utah Ct. App.
1989). Our goal is to interpret the agreement “so as to harmonize
all of its terms and provisions, and all of its terms should be
given effect if possible.” Id.¶14 Waiver is “the intentional relinquishment of a known
right.” Souter’s, Inc. v. Deseret Fed. Sav. & Loan Ass’n, 857 P.2d
935, 942 (Utah 1993) (quotation simplified). For waiver to occur,
“there must be an existing right, benefit or advantage, a
knowledge of its existence, and an intention to relinquish it.” Id.(quotation simplified). The waiving party’s conduct “must
evince unequivocally an intent to waive, or must be inconsistent
with any other intent.” Medley v. Medley, 2004 UT App 179, ¶ 7,
93 P.3d 847 (quotation simplified).
¶15 Further, the right of redemption is a statutory right. Pyper
v. Bond, 2011 UT 45, ¶ 14, 258 P.3d 575; see also Utah Code Ann.
§ 78B-6-906 (LexisNexis 2012); Utah R. Civ. P. 69C. To waive a
statutory right, the waiver must be “clear and unmistakable.”
Medley, 2004 UT App 179, ¶ 10 (quotation simplified). This court
“will not infer from a general contractual provision that the
parties intended to waive a statutorily protected right unless the
undertaking is explicitly stated.” Larsen Beverage, 2011 UT App
69, ¶ 11 (quotation simplified). 2
2. We note that close scrutiny on behalf of the district court is
particularly appropriate in cases dealing with an alleged waiver
of the right of redemption. As this court has noted, the right of
(continued…)
20170312-CA 6 2018 UT App 206Pioneer Builders v. K D A Corporation
¶16 Here, the Agreement does not establish a “clear and
unmistakable” waiver of the right of redemption. See Medley,
2004 UT App 179, ¶ 10 (quotation simplified). Under the relevant
provision, K D A agreed that “Pioneer is entitled to foreclose
upon” the Property, including “foreclosing out, terminating, and
extinguishing” all of K D A’s rights and interests, including
K D A’s trust deeds. Although this provision is very broad, it
does not mention redemption, nor refer to the statutory
provisions that provide the right to redeem. See Utah Code Ann.
§ 78B-6-906(1) (LexisNexis 2012) (“Sales of real estate under
judgments of foreclosure of mortgages and liens are subject to
redemption . . . .”); Utah R. Civ. P. 69C(b) (“Real property subject
to redemption may be redeemed . . . by a creditor having a lien
on the property junior to that on which the property was sold
. . . .”).
¶17 Pioneer argues that “the all-encompassing language in
[that provision] leaves no doubt that K D A’s right of
redemption was terminated.” But “such a restrictive reading of
[that provision] is not supported by [this court’s] prior
decisions.” Larsen Beverage, 2011 UT App 69, ¶ 10; see also id.
¶¶ 4, 11–12 (determining that an employer’s stipulation to pay
“all medical expenses” resulting from an employee’s work-place
(…continued)
redemption is designed to “provide a check on bids that are well
below market value.” Brockbank v. Brockbank, 2001 UT App 251,
¶ 12, 32 P.3d 990. Allowing a debtor or a subordinate lien holder
to contractually waive the right of redemption without
expressing clear and unmistakable intent is inconsistent with
that purpose. See id. To that end, K D A asks us to determine that
waivers of the statutory right of redemption will never be
enforced. But because we conclude the Agreement did not
establish a “clear and unmistakable” waiver, we need not
address that argument further.
20170312-CA 7 2018 UT App 206Pioneer Builders v. K D A Corporation
accident did not waive the employer’s statutory right to seek
reimbursement because the stipulation in the contract provision
“made no reference to the statutory right” (quotation
simplified)); Medley, 2004 UT App 179, ¶¶ 4, 10 (determining
that an agreement for payments “[in] lieu of and as satisfaction
of any claim either party ha[d] to alimony” did not waive the
statutory right to future alimony (quotation simplified)). Parties
wishing to waive the right of redemption must make that waiver
“clear and unmistakable” by explicitly stating their intention. See
Medley, 2004 UT App 179, ¶ 10 (quotation simplified).
¶18 Here, the Agreement “contains neither a mention of the
statute at issue nor even a reference to the general concept of
[redemption].” Larsen Beverage, 2011 UT App 69, ¶ 11. Granted,
K D A did not expressly reserve the right of redemption in the
Agreement. But failure to reserve a statutorily protected right is
not the equivalent of a waiver of that right. See id. (determining
there was no waiver when the agreement was “entirely silent
concerning” the statutory right at issue). We will not infer from
the Agreement’s general provisions that the parties intended to
waive the right of redemption. See id.¶19 Indeed, the broad language cited by the district court does
not expressly waive any of K D A’s rights. It acknowledges
Pioneer’s right to foreclose on the Property, and it recognizes
that K D A’s rights and interests will be “foreclosed out,”
“terminated,” and “extinguished” upon that foreclosure. In
Utah, the foreclosure process includes not only the sale of the
relevant property but also the statutory time for redemption. See
Utah R. Civ. P. 69C(d), (h) (establishing that “[t]he property may
be redeemed within 180 days after the sale” and “[t]he purchaser
or last redemptioner is entitled to conveyance upon the
expiration of the time permitted for redemption”). And during
the time for redemption, “a creditor having a lien on the
property junior to that on which the property was sold” may
20170312-CA 8 2018 UT App 206Pioneer Builders v. K D A Corporation
redeem the property by paying to the purchaser “the sale price
plus six percent.” Id. R. 69C(b), (e).
¶20 Considering the foreclosure process, it is fair to interpret
the Agreement’s broad language to express that K D A’s rights
in the Property would not “terminate” until expiration of the
time for redemption. Thus, not only does the Agreement fail to
explicitly state the parties’ intent to waive the right of
redemption, but its language is consistent with a contrary
interpretation. For waiver to occur, “the party’s actions or
conduct must evince unequivocally an intent to waive, or must
be inconsistent with any other intent.” Mont Trucking, Inc. v.
Entrada Indus., Inc., 802 P.2d 779, 781 (Utah Ct. App. 1990)
(quotation simplified). The Agreement does not meet that
standard.
¶21 K D A asserts that the Agreement merely was intended to
subordinate K D A’s trust deeds, giving Pioneer’s trust deeds
first priority in the pending foreclosure. This interpretation is
reasonable because it “harmoniz[es] all of [the Agreement’s]
terms and provisions” and gives “an objective and reasonable
construction to the [Agreement] as a whole.” See G.G.A., Inc. v.
Leventis, 773 P.2d 841, 845 (Utah Ct. App. 1989). Interpreting the
Agreement to subordinate K D A’s interests in the Property
gives effect to provisions that would be superfluous if the parties
intended to waive the right of redemption. For example, the
Agreement expressly recognizes the continued validity of
K D A’s trust deeds, specifying that Pioneer’s trust deeds are
“ahead of, superior to, and not subject to” K D A’s trust deeds.
And, “as part of [the Agreement],” the parties entered into a
separate subordination agreement to reiterate Pioneer’s priority
over K D A in the “pending judicial foreclosure.” If K D A
intended to waive the right of redemption, it is difficult to
understand why the parties also executed a subsequent formal
subordination agreement. Instead, the Agreement suggests that
K D A intended to maintain its rights as a subordinate lien
20170312-CA 9 2018 UT App 206Pioneer Builders v. K D A Corporation
holder, including the right of redemption. See Utah R. Civ. P.
69C(b).
¶22 Further, the broad language of the Agreement that
Pioneer claims “leaves no doubt that KDA’s right of redemption
was terminated” is consistent with the mere subordination of
K D A’s interests in the Property. As K D A notes in its brief, that
language simply describes what happens to a subordinated lien
holder upon foreclosure. That is, the first priority lien holder is
entitled to “foreclose out” and “terminate” the second priority
lien holder’s rights in the relevant property. But those rights are
not terminated until the foreclosure process is complete—that is,
when the redemption period expires. See Utah Code Ann. § 78B-
6-906(1) (LexisNexis 2012); Utah R. Civ. P. 69C(b), (d). Thus, an
examination of the Agreement “as a whole,” see G.G.A., Inc., 773
P.2d at 845, supports our conclusion that K D A did not make a
“clear and unmistakable” waiver of the right of redemption, see
Medley, 2004 UT App 179, ¶ 10 (quotation simplified).
¶23 In sum, the Agreement does not show K D A’s clear and
unmistakable intent to waive its statutory right of redemption.
See id. We therefore conclude the district court erred in ruling
that K D A waived the right of redemption.
II. Attorney Fees
¶24 K D A asks us to vacate the district court’s award of
attorney fees to Pioneer. “In Utah, attorney fees are awardable
only if authorized by statute or by contract.” Jones v. Riche, 2009
UT App 196, ¶ 1, 216 P.3d 357 (quotation simplified). “If the
legal right to attorney fees is established by contract, Utah law
clearly requires the court to apply the contractual attorney fee
provision and to do so strictly in accordance with the contract’s
terms.” Id. ¶ 2.
¶25 Here, the Agreement provides for an award of costs and
reasonable attorney fees to the prevailing party in litigation
20170312-CA 10 2018 UT App 206Pioneer Builders v. K D A Corporation
regarding enforcement of any of the Agreement’s terms. After
the district court ruling in favor of Pioneer, K D A stipulated to
Pioneer’s award of attorney fees as the prevailing party but
reserved the right to challenge that award and seek its own
attorney fees if successful on appeal. Because we reverse the
district court’s ruling and remand for further proceedings, we
vacate the award of attorney fees to Pioneer as the prevailing
party and instruct the district court on remand to determine
whether K D A should be awarded attorney fees as the
prevailing party.
CONCLUSION
¶26 The district court erred in ruling that K D A waived its
statutory right of redemption under the terms of the Agreement.
We therefore reverse and remand this case for further
proceedings consistent with this opinion.
20170312-CA 11 2018 UT App 206