Town & Country Bank v. Stevens

1. The Honorable Pamela T. Greenwood, Senior Judge, sat by
special assignment as authorized by law. See generally Utah Code
Jud. Admin. R. 11-201(6).
2014 UT App 172
_________________________________________________________
THE UTAH COURT OF APPEALS
TOWN & COUNTRY BANK,
Plaintiff and Appellee,
v.
ROBERT C. STEVENS AND BRETT L. JOHN,
Defendants and Appellants.
Opinion
No. 20130446-CA
Filed July 25, 2014
Fifth District Court, St. George Department
The Honorable James L. Shumate
No. 120500436
Shawn T. Farris, Attorney for Appellants
Barry E. Clarkson and Kimball A. Forbes,
Attorneys for Appellee
SENIOR JUDGE PAMELA T. GREENWOOD authored this Opinion, in
which JUDGES J. FREDERIC VOROS JR. and MICHELE M.
CHRISTIANSEN concurred.1
GREENWOOD, Senior Judge:
¶1 Defendants Robert C. Stevens and Brett L. John (collectively,
Guarantors) appeal the trial court’s grant of partial summary
judgment in favor of Town & Country Bank (the Bank). We affirm.

Town & Country Bank v. Stevens
20130446-CA 2 2014 UT App 172
BACKGROUND
¶2 In December 2008, the Bank loaned Fairground Properties,
Inc. (Borrower) $1,380,000 pursuant to a promissory note. The loan
was secured by a deed of trust (the Fairgrounds Deed of Trust)
encumbering twenty-six parcels of real property located in
Hurricane, Utah. Pursuant to the terms of the promissory note,
Borrower was to make monthly 6.5% interest-only payments to the
Bank beginning in January 2009 and to repay the principal plus any
remaining interest in one lump sum on December 17, 2010.
Guarantors signed personal guarantees (the Guarantees) in which
they “absolutely and unconditionally” guaranteed payment of the
note.
¶3 In early 2009, Stevens sought to move one of his businesses,
Keystone Repair, which was then located in La Verkin, Washington
County, Utah, to two parcels encumbered by the Fairgrounds Deed
of Trust (Lots 46 and 47). To facilitate this project, Borrower
negotiated a Change in Terms Agreement (the CIT Agreement)
with the Bank, in which the Bank agreed that Borrower could
substitute Lots 46 and 47 with other parcels owned by Stevens in
La Verkin (Lot 2 and Lot 5). In anticipation of the move to
Hurricane, Stevens let Keystone Repair’s La Verkin business license
lapse. However, Stevens continued to store a number of vehicles in
Keystone Repair’s storage yard. The City of La Verkin warned
Stevens that it would impose fines if the vehicles were not moved,
but the City of Hurricane would not permit Stevens to move the
vehicles to the new property until he obtained a building permit,
which he could not do until Lots 46 and 47 became unencumbered.
According to Guarantors, the Bank agreed to expedite the
finalization of the CIT Agreement in order to help Stevens avoid
the fines. This alleged agreement to expedite was not reduced to
writing. When Stevens failed to move the vehicles, the City of La
Verkin imposed fines, and on October 29, 2009, the City of La
Verkin obtained a judgment against Stevens (the La Verkin
judgment), which was recorded in Washington County on
November 12, 2009.

Town & Country Bank v. Stevens
20130446-CA 3 2014 UT App 172
¶4 The CIT Agreement was finally signed in July 2010.
Pursuant to the CIT Agreement, Stevens signed a deed of trust (the
Indian Knolls Deed of Trust) in favor of the Bank, encumbering Lot
2 and Lot 5 as substitute collateral for the note. Stevens represented
that he held “good and marketable title of record to [Lot 2 and Lot
5] in fee simple, free and clear of all liens and encumbrances.”
¶5 Eventually, Stevens sold Lot 2 for $88,000. Pursuant to the
terms of the Indian Knolls Deed of Trust, the Bank was the
beneficiary of the proceeds from the sale of Lot 2. However,
because the La Verkin judgment was recorded before the Indian
Knolls Deed of Trust, the title company would not insure the title
until the La Verkin judgment was satisfied. In order to clear the
title, the Bank paid the City of La Verkin $40,000 of the Lot 2 sale
proceeds to satisfy the La Verkin judgment.
¶6 The principal of the loan became due on December 17, 2010,
but Borrower did not pay it. Guarantors assert that Borrower and
the Bank reached an agreement to renew the promissory note for
an additional two years but that the Bank “reneged” on the
agreement. This alleged agreement was also not reduced to
writing. When Borrower failed to pay the loan principal in
accordance with the promissory note, the Bank instituted
nonjudicial foreclosure proceedings. In response, on May 10, 2011,
Borrower filed Chapter 11 bankruptcy.
¶7 On April 5, 2012, the bankruptcy court confirmed
Borrower’s Reorganization Plan, which provided that the Bank
would retain its status as a secured creditor; that Borrower would
sell the individual parcels that had been encumbered by the
Fairgrounds Deed of Trust and use 80% of the proceeds to pay off
the promissory note; that the deadline for paying off the note
would be May 2017 rather than the December 2010 deadline
indicated in the promissory note; and that the interest rate going
forward would be 4% rather than the 6.5% stated in the note.

Town & Country Bank v. Stevens
20130446-CA 4 2014 UT App 172
¶8 Relying on the Guarantees, the Bank sued Guarantors for
breach of contract, breach of the covenant of good faith and fair
dealing, and unjust enrichment. Relying on the Indian Knolls Deed
of Trust, the Bank also sued Stevens for breach of contract, breach
of the covenant of good faith and fair dealing, unjust enrichment,
fraudulent misrepresentation, fraudulent concealment, and
negligent misrepresentation. The Bank sought summary judgment
on its breach of contract claims. Guarantors opposed summary
judgment, asserting that there were disputed issues of fact
regarding whether the Bank had breached the implied covenant of
good faith and fair dealing and whether the La Verkin judgment
lien was enforceable. They also asserted that the Bank could not
recover from them because the Bank’s loan to Borrower “continues
to be over-collateralized and secured” and because the Bank would
“realize its payments through the Plan of Reorganization.”
¶9 The trial court determined that there were “no disputed
issues of material fact” and that the Bank was “entitled to judgment
as a matter of law” on its breach of contract claims against
Guarantors for breach of the Guarantees and on its breach of
contract claim against Stevens for breach of the Indian Knolls Deed
of Trust. Accordingly, the trial court entered judgment against
Guarantors in the amount of $1,352,011.18 and against Stevens in
the amount of $40,000. The trial court also awarded the Bank its
attorney fees and costs. Guarantors now appeal.
ISSUES AND STANDARD OF REVIEW
¶10 Guarantors first assert that summary judgment was
precluded by disputed issues of fact regarding whether the Bank
breached the implied covenant of good faith and fair dealing,
whether the La Verkin judgment lien was enforceable, and whether
the Reorganization Plan altered the terms of the Guarantees.
Guarantors also assert that the trial court could not enter judgment
against them for breach of the Guarantees so long as Borrower
continued to make payments pursuant to the Reorganization Plan

Town & Country Bank v. Stevens
20130446-CA 5 2014 UT App 172
and that the one-action rule should be extended to preclude such
judgments. Finally, Guarantors argue that the La Verkin judgment
lien was not enforceable against Lot 2 and that the trial court
therefore erred in concluding that Stevens breached the Indian
Knolls Deed of Trust.
¶11 Summary judgment is appropriate when “there is no
genuine issue as to any material fact and . . . the moving party is
entitled to a judgment as a matter of law.” Utah R. Civ. P. 56(c).
“Accordingly, in reviewing a trial court’s grant of summary
judgment, we consider only whether [it] correctly applied the law
and correctly concluded that no disputed issues of material fact
existed.” Pigs Gun Club, Inc. v. Sanpete Cnty., 2002 UT 17, ¶ 7, 42
P.3d 379 (alteration in original) (citation and internal quotation
marks omitted).
ANALYSIS
I. Disputed Issues of Fact
¶12 Guarantors first assert that the trial court erred in granting
summary judgment to the Bank on its claims for breach of the
Guarantees because there were disputed issues of fact regarding
Guarantors’ defense that the Bank breached the implied covenant
of good faith and fair dealing. “The obligation of good faith
requires each party to refrain from actions that will intentionally
destroy or injure the other party’s right to receive the fruits of the
contract.” Oakwood Vill. LLC v. Albertsons, Inc., 2004 UT 101, ¶ 43,
104 P.3d 1226 (citation and internal quotation marks omitted).
Guarantors assert that the Bank breached the covenant by reneging
on oral promises to expedite the land swap and to extend the term
of the note. But Guarantors are not parties to these alleged
agreements, and they fail to explain or analyze how the Bank’s
failure to follow through with agreements between the Bank and
Borrower impaired Guarantors’ rights under the Guarantees or
negated Stevens’s breach of the warranty of clear title in Lot 2.

Town & Country Bank v. Stevens
2. Because we conclude that Guarantors have failed to establish the
existence of a material factual dispute regarding the implied
covenant of good faith and fair dealing, we need not discuss
whether the statute of frauds, the parol evidence rule, or any other
factors precluded the trial court from considering the alleged oral
modifications, as the Bank asserts.
20130446-CA 6 2014 UT App 172
Because Guarantors have failed to adequately explain how the
alleged factual disputes are material, they have failed to carry their
burden of persuasion on appeal. See Waddoups v. Amalgamated2
Sugar Co., 2002 UT 69, ¶ 31, 54 P.3d 1054 (“[O]nce the moving party
challenges an element of the nonmoving party’s case on the basis
that no genuine issue of material fact exists, the burden then shifts
to the nonmoving party to present evidence that is sufficient to
establish a genuine issue of material fact.”); Smith v. Smith, 1999 UT
App 370, ¶ 9, 995 P.2d 14 (“Appellant bears the burden of
demonstrating the validity of her points on appeal.”).
¶13 Guarantors also assert that there are disputed issues of fact
relating to whether the La Verkin judgment lien was enforceable.
Namely, they assert that the lien “was not specifically recorded
against Lot 2” and that the La Verkin judgment “did not comply
with statutes concerning judgments recorded in Registry of
Judgments.” However, the Bank does not dispute that the lien was
not specifically recorded against Lot 2 and disagrees with
Guarantors only as to the legal effect of the recording. And
whether the La Verkin judgment lien complied with statute is a
legal question, not a factual one. Thus, we reject Guarantors’
contention that there is any dispute of fact relating to this issue and
consider only the legal question of whether the lien, as recorded,
was enforceable against Lot 2 or constituted an encumbrance on the
property in contravention of Stevens’s representations. See infra
¶¶ 22–24.
¶14 Finally, Guarantors suggest that there are material facts in
dispute regarding whether the Guarantees were “altered when the

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20130446-CA 7 2014 UT App 172
Borrower created and commenced performance under the
Reorganization Plan.” Although Guarantors allude to this
argument in their opening brief, they do not develop it until their
reply brief, and even there, Guarantors have failed to cite relevant
legal authority supporting their position. At oral argument, counsel
for the Guarantors conceded that he was unaware of any legal
authority supporting his position but asserted that there was no
authority supporting the Bank’s position either.
¶15 We agree with the Bank that NCNB Texas National Bank v.
Johnson, 11 F.3d 1260 (5th Cir. 1994), provides persuasive, on-point
authority. The defendant guarantor in Johnson advanced essentially
the same argument made by Guarantors in this case: that a
“confirmed plan of reorganization” barred suit against him and
that “there is no deficiency on the notes since the reorganization
plan expressly provides that the . . . loans will be fully repaid.” Id.
at 1266. The United States Court of Appeals for the Fifth Circuit
determined that the guarantor’s argument “lack[ed] merit” and
held, “The discharge of a debtor in reorganization proceedings
does not affect a guarantor’s liability.” Id. The court explained that
the reorganization plan did not constitute an “accord and
satisfaction . . . because there [had] been no accord. Reorganization
proceedings are judicial, not contractual, even where a secured
creditor voluntarily participates.” Id. We find the Fifth Circuit’s
reasoning persuasive, particularly in light of the fact that
Guarantors have provided us with no contrary authority.
Accordingly, we reject Guarantors’ argument that there was an
existing material issue of fact regarding whether the
Reorganization Plan altered Guarantors’ obligations under the
Guarantees because the issue is resolved as a matter of law.
II. Breach of the Guarantees
¶16 Guarantors next assert that the trial court erred in granting
summary judgment against them when Borrower was still making
payments on the loan pursuant to the terms of the Reorganization
Plan. In particular, they assert that Utah’s one-action rule should be

Town & Country Bank v. Stevens
3. There are a number of bases on which we might reject this
argument. First, as the Bank has pointed out, Guarantors do not
appear to have preserved their one-action rule argument, and in
fact, their brief fails to comply with the requirement that the
appellant provide “citation to the record showing that the issue
was preserved in the trial court” or “a statement of grounds for
seeking review of an issue not preserved in the trial court.” See
Utah R. App. P. 24(a)(5)(A)–(B); State v. King, 2006 UT 3, ¶ 13, 131
P.3d 202 (“We have consistently held that a defendant who fails to
preserve an objection at trial will not be able to raise that objection
on appeal unless he is able to demonstrate either plain error or
exceptional circumstances.”). Furthermore, in the Guarantees
themselves, Guarantors explicitly waived “any right (including the
right, if any, under Utah’s one-action rule . . . ) to require [the Bank] to
proceed against or exhaust any security held by [the Bank] at any
time or to pursue any other remedy in [the Bank’s] power before
proceeding against Guarantor.” (Emphasis added.) Nevertheless,
because we are convinced that Guarantors’ argument is clearly
precluded by the supreme court’s holding in Machock v. Fink, 2006
UT 30, 137 P.3d 779, we exercise our discretion to consider the
issue. See generally Patterson v. Patterson, 2011 UT 68, ¶ 13, 266 P.3d
828 (“Our preservation requirement is self-imposed and is
therefore one of prudence rather than jurisdiction. Consequently,
(continued...)
20130446-CA 8 2014 UT App 172
extended to protect guarantors in situations such as theirs. See
generally Utah Code Ann. § 78B-6-901 (LexisNexis 2012). While
acknowledging that our supreme court has held that “[t]he one-
action rule does not apply to suits against guarantors,” Machock v.
Fink, 2006 UT 30, ¶ 14, 137 P.3d 779, Guarantors argue that the
holding should apply only to circumstances where a creditor seeks
payment from a guarantor after a foreclosure sale, in which case
recovery would be limited by Utah Code section 57-1-32, see id.
¶ 17; see also Utah Code Ann. § 57-1-32 (LexisNexis 2010). Where
foreclosure has not yet been initiated, they argue, creditors should
be precluded from obtaining a judgment against guarantors.3

Town & Country Bank v. Stevens
3. (...continued)
we exercise wide discretion when deciding whether to entertain or
reject matters that are first raised on appeal.”).
4. The Machock court acknowledged that a creditor could obtain a
more limited guarantee of collection, rather than payment, “where
recovery is conditioned on the creditor’s exhaustion of remedies
against the debtor,” essentially allowing invocation of the one-
action rule. Machock, 2006 UT 30, ¶¶ 18–19. However, parties may
“allocate risk as they see fit” and agree to guarantee payment,
precluding application of the one-action rule. Id. ¶ 20.
20130446-CA 9 2014 UT App 172
¶17 The statutory one-action rule provides, “There is only one
action for the recovery of any debt, or the enforcement of any right,
secured solely by mortgage upon real estate . . . .” Utah Code Ann.
§ 78B-6-901(1). But in Machock, the Utah Supreme Court held that
“[t]he one-action rule does not apply to suits against guarantors”
and that a creditor therefore need not foreclose against a debtor
prior to pursuing an action against a guarantor. Machock, 2006 UT
30, ¶¶ 14, 20. The Machock court explained that the purpose of a
guarantee of payment is to shift “much of the risk of delay or loss
from the creditor to the guarantor” by permitting the creditor to
recover from the guarantor rather than the debtor. Id. ¶ 19. When
the creditor elects to do so, the guarantor then “step[s] into the
position of the creditor” and may “foreclose the trust deed” and
“seek a deficiency from the debtor,” assuming all the burdens,
risks, and delays that entails. Id. Thus, the Machock court reasoned,
“application of the one-action rule would undermine the risk- and
burden-shifting purpose of [guarantees] of payment.” Id.4
¶18 One of the other reasons the Machock court gave for its
ruling that the one-action rule does not apply to actions against
guarantors was the fact that the rule’s “purpose of preventing
double recovery” is “served by section 57-1-32” of the Utah Code.
Id. ¶ 17. When a creditor forecloses property pursuant to a trust
deed but is unable to recover the full balance secured by the

Town & Country Bank v. Stevens
20130446-CA 10 2014 UT App 172
property, section 57-1-32 permits the creditor to seek a judgment
for the remaining balance. See Utah Code Ann. § 57-1-32. However,
section 57-1-32 provides, “The court may not render judgment for
more than the amount by which the amount of the indebtedness
with interest, costs, and expenses of sale, including trustee’s and
attorney’s fees, exceeds the fair market value of the property as of
the date of the sale.” Id. In Surety Life Insurance Co. v. Smith, 892
P.2d 1 (Utah 1995), the Utah Supreme Court held that a guarantor
against whom a creditor seeks a deficiency judgment is entitled to
the “fair market value credit” outlined by the statute. Id. at 2–3.
¶19 Relying on the Machock court’s statement that section 57-1-32
is sufficient to protect guarantors even if the one-action rule is not
applicable, Guarantors assert that the one-action rule should be
applied to guarantors in their situation because the lack of a
foreclosure precludes them from benefitting from the provisions of
section 57-1-32. If they are not protected by section 57-1-32, they
assert, the Bank “should have been estopped from maintaining a
separate civil action against” them. However, the Machock court
made clear that its decision was not limited to circumstances where
foreclosure has been initiated and explicitly held that “the one-
action rule does not prevent creditors from bringing suit against a
guarantor of payment prior to foreclosure.” Machock, 2006 UT 30,
¶ 20 (emphasis added); see also Strevell–Paterson Co. v. Francis, 646
P.2d 741, 743 (Utah 1982) (“[A] guarantee of payment is absolute,
and the guaranteed party need not fix its losses by pursuing its
remedies against the debtor or the security before proceeding
directly against the guarantor.” (emphasis omitted)). In fact,
Machock anticipated creditors recovering from guarantors prior to
foreclosure, outlining two permissible options for creditors to
pursue: the creditor may either seek recovery from the guarantor,
requiring the guarantor to then seek recovery from the debtor
pursuant to “the equitable doctrine of subrogation,” or the creditor
may foreclose against the debtor and seek a deficiency judgment
from the guarantor, in which case it must comply with the terms of
section 57-1-32. Machock, 2006 UT 30, ¶¶ 19, 22.

Town & Country Bank v. Stevens
20130446-CA 11 2014 UT App 172
¶20 Furthermore, as the Bank points out, its suit against
Guarantors will not result in double recovery because it still cannot
collect more than the amount it is owed under the promissory note.
See Western Steel Co. v. Travel Batcher Corp., 663 P.2d 82, 83–84 (Utah
1983) (“The law is well settled that an obligee is entitled to be paid
in full but cannot exact double recovery.”). The judgment merely
makes it easier for the Bank to obtain what it is owed and shifts the
burden of recovering the debt to Guarantors, just as the Guarantees
intended. Accordingly, we determine that the trial court correctly
granted judgment against Guarantors pursuant to the Guarantees.
III. Breach of the Indian Knolls Deed of Trust
¶21 Finally, Stevens argues that he did not breach the Indian
Knolls Deed of Trust because his representation that Lot 2 was not
encumbered by the La Verkin judgment lien was legally correct.
Accordingly, he argues that the Bank was not required to pay off
the La Verkin judgment in order to gain clear title to Lot 2 and that
the $40,000 judgment for breach of the Indian Knolls Deed of Trust
should not have been entered against him.
¶22 First, Stevens asserts that the La Verkin judgment did not
encumber Lot 2 because it was not specifically recorded against Lot
2. However, a judgment need not be recorded against a specific
parcel of property to be enforceable against that property. All that
is required is that a “judgment or an abstract of judgment” be
“recorded in the office of the county recorder in which the real
property of the judgment debtor is located.” Utah Code Ann.
§ 78B-5-201(3)(a) (LexisNexis 2012). Thus, because the La Verkin
judgment was recorded in Washington County and Lot 2 was
located in Washington County, the recording of the La Verkin
judgment was effective to create a lien against Lot 2, so long as the
recording complied with the other requirements of section 78B-5-
201.
¶23 Stevens also asserts that the La Verkin judgment lien was
unenforceable because it did not comply with section 78B-5-201(4),

Town & Country Bank v. Stevens
20130446-CA 12 2014 UT App 172
which requires that “information identifying the judgment debtor”
either appear “on the judgment or abstract of judgment” or be
contained in a “separate information statement” filed with the
county. Id. § 78B-5-201(4). Stevens asserts that the La Verkin
judgment “itself did not include any debtor identifying information
as required by statute, nor did the creditor file a judgment
information statement to supplement the judgment with the
information required.” This assertion is inaccurate because the La
Verkin judgment identified Robert C. Stevens by name as the
judgment debtor. We recently held in Irving Place Associates v. 628
Park Ave., LLC, 2013 UT App 204, 309 P.3d 260, cert. granted, 320
P.3d 676 (Utah 2014), that a recorded judgment that identified the
judgment debtor by name complied with the identification
requirements of section 78B-5-201(4) and was sufficient to create a
lien on real property. Id. ¶¶ 16–17. Stevens has given us no reason
to depart from this precedent. Accordingly, we determine that the
La Verkin judgment lien was enforceable against Lot 2.
¶24 However, even if we were to determine that a defect in the
recording of the lien made it ultimately unenforceable against Lot
2, the judgment would still constitute an encumbrance on the
property that made Stevens’s representation that he had “good and
marketable title of record to [Lot 2] in fee simple, free and clear of
all liens and encumbrances,” a false representation. “[T]he term
‘encumbrance’ is more comprehensive than ‘lien.’” Brewer v.
Peatross, 595 P.2d 866, 868 (Utah 1979). “An encumbrance may be
said to be any right that a third person holds in land which
constitutes a burden or limitation upon the rights of the fee title
holder.” Id. Compare Black’s Law Dictionary 1006 (9th ed. 2009)
(defining “lien” as “[a] legal right or interest that a creditor has in
another’s property”), with id. at 607 (defining “encumbrance” as
“[a] claim or liability that is attached to property or some other
right and that may lessen its value, such as a lien”). As the Bank
points out, even if a separate information statement were required
to make the lien enforceable against Lot 2, there was nothing to
prevent La Verkin City from filing such a statement at any time.
The very existence of the recorded La Verkin judgment created the

Town & Country Bank v. Stevens
5. The title company clearly contemplated the possibility of
litigation, as it declined to issue title insurance on Lot 2 until the La
Verkin judgment was satisfied.
20130446-CA 13 2014 UT App 172
potential for litigation and belied Stevens’s representation that he
had “good and marketable title” to Lot 2. Thus, regardless of5
whether the recorded La Verkin judgment created an enforceable
lien against Lot 2, it encumbered Lot 2 because it compromised the
value of Stevens’s title. See Howe v. Professional Manivest, Inc., 829
P.2d 160, 163 (Utah Ct. App. 1992). For this reason, the trial court
did not err in determining that Stevens had breached the Indian
Knolls Deed of Trust by falsely representing that he had good and
marketable title to Lot 2.
IV. Attorney Fees
¶25 The Bank was awarded its attorney fees below and has
requested an award of fees on appeal based on provisions in the
Guarantees and the Indian Knolls Deed of Trust, each of which
permit the Bank to recover attorney fees and costs incurred to
enforce the terms of those contracts. See generally Utah R. App. P.
24(a)(9) (requiring that a party seeking fees on appeal “state the
request explicitly and set forth the legal basis for such an award”).
We determine that the Bank is entitled to an award of attorney fees
reasonably incurred on appeal and remand for the trial court to
calculate such an award. See Valcarce v. Fitzgerald, 961 P.2d 305, 319
(Utah 1998) (“[W]hen a party who received attorney fees below
prevails on appeal, the party is also entitled to fees reasonably
incurred on appeal.” (citation and internal quotation marks
omitted)).
CONCLUSION
¶26 We determine that there are no genuine issues of disputed
material fact that would preclude summary judgment. We also

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20130446-CA 14 2014 UT App 172
conclude that the trial court correctly determined that Guarantors
breached the Guarantees and that Stevens breached the Indian
Knolls Deed of Trust. Finally, we conclude that the Bank is entitled
to an award of attorney fees on appeal. We therefore affirm and
remand for the trial court to calculate the Bank’s attorney fees on
appeal.