District, San Juan The Honorable Lyle R. Anderson No.
Richard E. Mrazik, Adam E. Weinacker, Salt Lake City, for
appellee 2DP Blanding, LLC
C. Halls, Blanding, for appellants
G. Russell, Royce B. Covington, Jeffery A. Balls, Salt Lake
City, for appellee Black Oil Company
Associate Chief Justice Lee authored the opinion of the
Court, in which Chief Justice Durrant, Justice Himonas,
Justice Pearce, and Judge Holmberg joined.
recused herself, Justice Durham does not participate herein;
District Judge Kent R. Holmberg sat.
Associate Chief Justice.
1 The district court proceedings in a prior case resulted in
the entry of a court order authorizing a foreclosure sale of
parcels of real property. That order was not stayed pending
appeal. And the sale was executed while the appeal went
forward. The property was eventually purchased by an entity
that was not a party to the litigation. We are asked whether
the third-party purchaser took the property subject to the
resolution of the case on appeal. We answer this question in
the negative. We conclude that an appellant who takes no
action to preserve his interests in property at issue on
appeal has no recourse against a lawful third-party
2 This case is an offshoot of a lien dispute between Ray
Palmer and First National Bank. In July 2003, Palmer agreed
to sell two parcels of commercial real estate to JDJ
Holdings, Inc. JDJ obtained two loans to finance the
purchase-one from First National and one from Palmer. Both
loans were secured by trust deeds. First National recorded
its deed on December 5, 2003, and had first position. Palmer
recorded his deed on December 12, 2003, and had second
3 Due to a flaw in the initial loan approval, First National
was required to record a new deed after Palmer recorded his
deed. Before recording the new deed, First National got an
erroneous title report that failed to show the Palmer deed.
And despite having knowledge of Palmer's loan at its
inception, First National relied on the erroneous title
report and simply revoked its original deed and recorded the
new deed on March 8, 2004. The bank did not obtain a
subordination agreement from Palmer. The new deed accordingly
appeared to elevate Palmer's deed to first position. But
no one discovered this repositioning at the time.
4 Five years later JDJ defaulted on both loans. Palmer and
First National both claimed that their deed was entitled to
senior position. The deed holders initiated legal proceedings
to settle the dispute, and the district court granted summary
judgment to First National. The court held that the bank was
entitled to equitable reinstatement of its original deed. It
also authorized First National to "exercise all rights
and remedies provided by its Trust Deed with respect to the
Property, " including proceeding with a foreclosure
5 Palmer appealed the court's decision on April 8, 2011.
He challenged the lien priority established by the district
court's order. But he did not formally seek or obtain a
stay of the order. And he did not file a lis pendens
on the property at any point during the litigation.
6 On June 29, 2011, First National issued a Notice of
Trustee's Sale under its reinstated trust deed. First
National then purchased the parcel at issue in this case,
Parcel 2, at the trustee's sale on August 8, 2011. It
subsequently conveyed the parcel to Black Oil Company.
7 In February 2013, the Utah Court of Appeals overturned the
district court's order. The court concluded that the
district court erred in reinstating First National's
first deed. And it remanded for further proceedings in light
of Palmer's senior deed.
8 2DP Blanding, LLC entered the scene shortly thereafter. It
purchased Parcel 2 from Black Oil on July 7, 2013. The
following day, Palmer recorded a Notice of Default and
Election to Sell under his original trust deed. And the day
after that, 2DP recorded its warranty deed for the
9 Three months later 2DP filed suit, seeking to quiet title
to Parcel 2 and to enjoin Palmer's foreclosure sale. The
parties filed competing motions for partial summary judgment.
2DP argued that it owned the parcel free and clear of
Palmer's trust deed because Palmer failed to obtain a
stay of the court's order authorizing the original
foreclosure sale and the parcel was properly sold pursuant to
that order. Palmer countered that because First National
bought the parcel at the foreclosure sale, all subsequent
purchasers of the parcel took subject to First National's
knowledge of Palmer's appeal of the court order.
10 The district court granted summary judgment in 2DP's
favor. It concluded that Black Oil and 2DP were both bona
fide purchasers and neither had actual knowledge of
Palmer's appeal. It also emphasized that the foreclosure