Opinion
No. 14125.
February 4, 1976.
Appeal from the Third District Court, Salt Lake County, Ernest F. Baldwin, Jr., J.
Walter P. Faber, Jr., and David Lloyd, of Watkins Faber, Salt Lake City, for Utah Title and First Security St. Bank.
Ronald C. Barker, Salt Lake City, for Timothys.
Gordon L. Roberts, Roy B. Moore and F. Alan Fletcher, of Parsons, Behle Latimer, Salt Lake City, for plaintiff and respondent.
On December 13, 1972, defendants Seiger made and delivered to Tracy Collins Bank Trust Company a note in the sum of $55,974.70 which was given for full value received. The note was not paid on February 12, 1973, its due date, and after some negotiations between the parties, a new note was given to Tracy Collins in the sum of $50,000 under date of March 14, 1973. As security for payment of the latter note, the Seigers contemporaneously executed and delivered a trust deed covering the property involved in this lawsuit. The trust deed was duly recorded on March 16, 1973. The consideration for the new note was a forbearance to sue, together with a promise to place the proceeds of the loan in an "undisbursed bank control" account without interest until June 1, 1973, together with giving Seiger a release of 25 bicycles held as security for the first note and a promise to release others in the future. Tracy further agreed to a reduction in the interest rate from 12 per cent down to 9 per cent per annum.
Several extensions of time to pay the first debt were given. Finally on May 10, 1974, funds were disbursed on the note dated March 14, 1973, and used to pay and cancel the note dated December 13, 1972. In the meantime, the defendants Timothy had acquired the Seigers' interest in the property. On August 24, 1973, Mr. and Mrs. Timothy executed a note in the amount of $40,000 to First Security State Bank and, as security therefor, executed a trust deed on the same property covered by the trust deed to Tracy Collins Trust Company. This latter trust deed was placed on record August 28, 1973.
The record does not show when First Security actually disbursed any funds in connection with the note it received from Mr. and Mrs. Timothy.
In the present case, Tracy Collins foreclosed its trust deed as a mortgage and First Security foreclosed the trust deed given to it by Mr. and Mrs. Timothy as a part of the same lawsuit.
The trial court ruled that the trust deed of Tracy Collins had first priority and both First Security and defendants Timothy appealed. The trial court also ruled that the interest of Ann W. Timothy in the trust deed property was subordinate to the interest of judgment creditors who only had a judgment against her husband. She has appealed from that part of the judgment.
She defaulted, but the record fails to show that the judgments were against her.
70A-3-408, U.C.A. 1953, as amended, Replacement Vol. 7B.
Want or failure of consideration is a defense . . . except that no consideration is necessary for an instrument or obligation thereon given in payment of or as security for an antecedent obligation of any kind.
It is obvious that the Seigers were not obligated to pay both notes. The trial court found that the second note and trust deed were given to secure the first note and the evidence amply supports that finding. It also found that there was consideration for the second note, although under the statute referred to above, consideration is not required where the security (trust deed) is given to secure a prior debt.
It is of no concern to the defendants how Tracy Collins handles its bookkeeping matters. The fact that it kept both notes on its books for some time does not change the fact that it at all times had a large debt owing to it by the Seigers and that the debt was secured by a trust deed.
That deed was of record before Mr. and Mrs. Timothy obtained any interest in the property and before First Security State Bank obtained a note and trust deed from them. The trust deed of Tracy Collins was of record at the time the defendants Timothy and First Security State Bank obtained their deeds. Therefore they took their deeds with constructive notice of the first trust deed and their interests are subordinate to that of respondent.
The trial court was in error in giving the judgment creditors priority over the interest of Ann W. Timothy and to that extent it is reversed. In all other particulars it is affirmed. Costs are awarded to the respondent against the appellants and to Mrs. Timothy against the defendants Transportation Safety Systems, Inc. and Pacific States Cast Iron Pipe Company, Inc.
HENRIOD, C.J., and CROCKETT, TUCKETT and MAUGHAN, JJ., concur.