Mastro

I.

OVERVIEW

Michael and Joan Kelly 1 Mastro (Mastro) appeal the district court’s finding that Samuel 2 and Winifred Witt (Witt) had a first priority security interest in certain collateral. As a result of this priority, the district court held that Mastro must apply the receivables from the collateral, which he purchased at a foreclosure sale, toward a debt owed by Witt to Mastro. Mastro had secured this debt by obtaining Witt’s security interest in the collateral. Witt cross-appeals the district court’s denial of attorneys’ fees and partial denial of costs. We reverse and remand.

II.

FACTS AND PROCEDURAL HISTORY

The relevant facts of this case are undisputed. Lew S. McGinnis (McGinnis) was entitled to the receipts from a land sale contract on the Sherwood Gardens Apartments. This land sale contract was a wraparound contract; the property was already subject to a first mortgage and a portion of the payments under the land sale contract had to be remitted to the mortgagee. Thus, the receipts of the land sale contract to which McGinnis was rightfully entitled, hereafter referred to as the Sherwood Receivables, included only that portion of the land sale contract payments…