2016 UT App 89



### T HE 

### U TAH 

### C OURT O F 

### A PPEALS

2010

- 1 RADC/CADC V ENTURE , LLC
,

Appell ee ,
v. D OS L AGOS , LLC; M ELLON V ALLEY , LLC; R OLAND N EIL F AMILY L IMITED P ARTNERSHIP ; R OLAND N. W ALKER ; AND S ALLY W ALKER , Appell ants

. Opinion N o. 20140675

- CA Filed April 28, 2016

Second District Court, Farmington Department The Honorable John R. Morris No. 110700200

Clifford V. Dunn, Michael C. Dunn, Evan A. Schmutz, and Jo rdan K. Cameron, Attorney s

for Appellant s Richard C. Terry and Jeremiah R. Taylor
, Attorney s

for Appellee

J UDGE G REGORY K. O RME authored th is Opinion
, in which J UDGE S M ICHELE M. C HRISTIANSEN and K ATE A. T OOMEY concurred

. 1

ORME
, Judge :

¶1 This appeal comes to us from the district court’s grant of summary judgment in favor of 2010

- 1 RADC/CADC Venture,

1

. Judge James Z. Davis heard the arguments in this case but did not have the opportunity to vote on this Opinion prior to his death. See State v. Goins , 2016 UT App 57, n.1. Judge Kate A. Toomey substituted for Judge Davis and, having reviewed the briefs and listened to the oral arguments, participated fully in the court’s resolution of this appeal.2010

- 1 RADC/CADC Venture, LLC v. Dos Lagos, LLC

20140675

- CA 2 2016 UT App 89 LLC (RADC). Appellants challenge the summary judgment on a number of grounds. We affirm.

BACKGROUND

¶2 The pertinent facts of this case are undi sputed. In 2007, Appellants Dos Lagos, LLC, and Mellon Valley, LLC
, ( Borrowers ) received a $2.5 million loan from America West Bank. The loan was personally guaranteed by Appellants Roland N. Walker, Sally Walker, and the Roland Neil Family Limited Partner ship (the Guarantors ) . Later that year, America West entered into a loan participation agreement with Utah First Federal Credit Union, whereby Utah First obtained a fifty

- two percent interest in the loan and America West retained a forty

eight percent inte rest.

¶3 One year later, on December 5, 2008, Borrowers executed a Change in Terms Agreement, which, among other things, extended their promissory note (the Note) with America West. The Note was secured by real property owned by Mellon Valley (the Property)

.
¶4 The FDIC ultimately closed America West and seiz ed America West’s interest in the Note, which it thereafter sold to RADC at auction. Borrowers defaulted on the Note and received multiple letters notifying them of the default and requesting payment. In De cember 2010, RADC purchased the Property

— which was valued at $1,510,000

— at a trustee’s sale for $1,060,000. At the time of the sale, the total amount owing on the Note was $3,426,701.91, leaving a deficiency of $1,916,701.91 between the amount owed and the value of the Property . Utah First , whose interest in the Note had not been affected by America West’s demise and the transfer of its interest
, filed a n action seeking a deficiency judgment the next month.

¶5 In its o riginal Complaint, Utah First was the only named p laintiff and it erroneously indicated that the total amount owed2010

- 1 RADC/CADC Venture, LLC v. Dos Lagos, LLC

20140675

- CA 3 2016 UT App 89 on the Note was just $1,819,774.97. 2 Dos Lagos filed a motion to dismiss, in part because RADC was not included as a party. The parties stipulated to allow ame ndment, and the First Amended Complaint added RADC as a plaintiff. It did not, however, correct the amount owed. Utah First and RADC sought leave to amend again and filed the Second Amended Complaint in September 2012 , alleg ing the amount due as the full $ 3,426,701.91.

¶6 RADC and Utah First filed motions for summary judgment, seeking a deficiency of $1,916,701.91. Borrowers subsequently filed a motion to dismiss and a motion for summary judgment. The district court denied Utah First’s motion for summary judg ment, determining that there were issues of fact surrounding the validity of the loan participation agreement that had been executed by Utah First and America West. But it granted RADC’s motion for summary judgment against Borrowers , awarding RADC a defici ency judgment
, calculated as the difference between the full amount due under the Note and the value of the property at the time of its sale to RADC, see Utah Code Ann. § 57

- 1

- 32 (LexisNexis 2010 ), subject to any subsequently determined interest of Utah Fi rst. The district court denied Borrowers ’ motion to dismiss and motion for summary judgment.

¶7 Shortly thereafter, RADC moved for summary judgment against the Guarantors on the ground that judgment had been awarded against Borrowers on the obligation guaranteed by the Guarantors . The district court granted the motion , and

2

. RADC suggests that this amount represented Utah First’s fifty

- two percent interest in the total amount owed on the Note. But by our math, fifty

- two percent of $3,426,701.91 is $1,781,884.99.2010

- 1 RADC/CADC Venture, LLC v. Dos Lagos, LLC

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- CA 4 2016 UT App 89 Borrowers and the Guarantors (collectively, Appellants) now appeal

. 3

ISSUES AND STANDARD OF REVIEW

¶8 Appellants first argue that RADC’s cl aim did not relate back to the o riginal C ompl aint and was therefore barred by the statute of limitations. They next contend that the district court erred by awarding RADC the full amount due under the Note rather than just its pro rata share . Finally, Appellants claim that it was error for the distri ct court to gran t summary judgment against the Guarantors

. All of the issues raised involve the district court’s interpretation and application of the law in granting summary judgment. ‚* W ] e review the *district+ court’ s legal conclusions for correctness, affording those legal conclusions no deference. ‛ Ault v. Holden , 20 02 UT 33, ¶ 15, 44 P.3d 781.

ANALYSIS

I. RADC’s Claim Was Not Time

- Barred

.
¶9 T he resolution of Appellant’s primary argument on appeal depend s on the operation of the applicable statute of limitations. S ection 57

- 1

- 32 of the Utah Code requires that ‚an action . . . to recover the balance due upon [an] obligation for which *a+ trust deed was given as security‛ must be commenced ‚within three months after any sale of property under a trust deed

. ‛ See Utah Code Ann. § 57

- 1

- 32 (LexisNexis 201 0 ). Appellants argue that because RADC did not commence an action against Borrowers within three months of the trustee’s

3

. Utah First moved to voluntarily dismiss its claims without prejudice, which the district court allowed over B orrowers’ objection. Utah First is therefore not a party to this appeal.2010

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- CA 5 2016 UT App 89 sale, its claim was barred before it joined the action via the First Amended Complaint. 4

¶10 There is no d ispute that RADC was not identified as a plaintiff i n any complaint filed against Borrowers within three months of the trustee’s sale. There is als o no dispute that Utah First’s o riginal Complaint was filed within that three

- mont h window. What we must d etermine, then, is whether the o riginal Complaint operates to satisfy the three

- month requirement for RADC as well as for Utah First

.
¶11 Appellants contend that the First Amended C omplaint impermissibly added a party to the proceeding in violation of the applicable statute of limitations. Rule 15(c) of the Utah Rules of Civil Procedure allows an amended complaint to ‚relate*+ back to the date of the original pleading‛ if ‚the claim

. . . asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading .‛ Utah R. Civ. P. 15 (c). Relying on the Utah Supreme Court’s opinion in Doxey

- Layton Co. v. Clark , 548 P.2d 902 (Utah 1976), Appellants argue that this rul e generally does

‚ not apply to an amendment which substitute s or add s new parties

. . . whether plaintiff or defendant

. ‛ See i d. at 906.

4

. Appellants also take issue with the district court’s alternate conclusion that ‚even if the claims of RADC do not relate back to the original filing of the complaint, because the purposes of Utah Code Ann. § 57

- 1

- 32 have been satisfied, RADC’s failure to comply with the statute did not constitute an absolute bar to the suit.‛ Because we conclude that RADC’s claim does relate back to the filing of the original Complaint, we need not consider the propriety of this alternate ruling. See generally Weber v. Snyderville West , 800 P.2d 316, 320 (Utah Ct. App. 1990) (‚We may affirm the trial court on any proper ground.‛).2010

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- CA 6 2016 UT App 89 ¶12 Of course, there are exceptions to this general rule. The principal exception is articulated in Sulzen v. Williams , 199 9 UT App 76, 977 P.2d 497 , where this court state d :

[W] hile generally Rule 15(c) . . . will not apply to an amendment which substitutes or adds new parties for those brought before the court by the original pleadings, [the Utah Supreme Court has] made an exception to the general rule. The exception operates where there is a relation back, as to both plaintiff and defendant, when new and old parties have an identity of interest; so it can be assumed or proved the rel ation back is not prejudicial.

Id. ¶ 14 (alterations and omission in original) ( citation and internal quotation marks omitted). ‚ The rationale of Rule 15(c) is that a party who has been notified of litigation concerning a particular occurrence has been given all the notice that statutes of limit ations were intended to provide. ‛ Baldwin C ounty Welcome Ctr. v. Brown , 466 U. S. 147, 150 n.3 (1984) (considering the comparable federal rule) . ‚ The same general standard of notice applies regardless of whether a litigant seeks to add defendants, plaintiffs, or claims. ‛ McClelland v. Deluxe Fin. Servs., Inc. , 431 F. App ’ x 718, 723

– 24 (10th Cir. 2011) (considering the comparable federal rule)

. Here, the First Amended Complaint did nothing more than add RADC , a successor coholder of the very note Uta h First had sued up on, as a plaintiff. It did not assert new claims. It therefore follows that when Utah First filed the o riginal Complaint, seeking the deficiency between the amount owed on the N ote and the value of the P roperty purchased by RADC at the t rustee’s sale, Borrowers received sufficient notice to satisfy the rationale of rule 15(c).

¶13 The sufficiency of the notice to Borrowers is further demonstrated by the identity of interest between Utah First and RADC. The cases cited by Appellants in relatio n to this point are unhelpful, as they address a framework that is inapplicable to2010

- 1 RADC/CADC Venture, LLC v. Dos Lagos, LLC

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- CA 7 2016 UT App 89 the facts of this case. For instance, Appellants suggest that because ‚RADC and Utah First are two separate and distinct entities,‛ there can be no relation back. We acknowl edge that it is often necessary to look at the connection between the business operations of the original and added parties, see Russell v. Standard Corp. , 898 P.2d 263, 265 (Utah 1995), but that factor alone is insufficient to resolve an identity

- of

- inter est question

. We cannot ignore the fact that although there is no direct business or ongoing contractual relationship between Utah First and RADC, this case centers around one debt, one promissory note, and one trustee’s sale. In very simple terms, there i s but one ‚conduct, transaction, or occurrence‛ on which all claims are based. See Utah R. Civ. P. 15(c). There is perhaps no closer identity of intere st than that shared by two parties who are joint holders of the same note. See generally Penrose v. Ross , 2003 UT App 157, ¶ 16, 71 P.3d 631 ( ‚ [A] n identity of interest requires parties to have the ‘same’ interest.‛ ).

¶14 We also point out that as a policy matter, cases such as this one should be decided in a single action. Cf. Utah Code Ann. § 78B

- 6

- 901 (1) ( LexisNexis 201 2 ) (‚ There is only one action for the recovery of any debt, or the enforcement of any right, secured solely by mortgage upon real estate and that action shall be in accordance with the provisions of this chapter. ‛)

. So long as the rights of t he parties are protected and the rules of law are followed

— which they were here by the notice given to Borrowers via the initial Complaint and by the identity of interest between RADC and Utah First

— our judicial system values judicial economy. See O kelberr y v. West Daniels Land Ass’n
, 2005 UT App 327, ¶ 11, 120 P.3d 34

. By allowing the amendments to the o riginal Complaint, the district court furthered this objective

.

II. It Was Not Error for the District Court to Award RADC the

Full Deficiency Amount

.
¶15 Appellan ts next challenge two aspects of the district court’s order concerning the amount of the judgment. First, they2010

- 1 RADC/CADC Venture, LLC v. Dos Lagos, LLC

20140675

- CA 8 2016 UT App 89 argue that the district court should not have awarded judgment in the amount sought by the Second Amended Complaint

— the full deficiency amount

— bu t should instead have limited any judgment to a sum calculated with reference to the amount claimed to be due in the original Complaint

. S econd, Appellants argue that it was error to award the entire deficiency judgment amount to RADC
, even though the district court expressly made that judgment subject to any later

- determined interest of Utah First. We conclude that the district court did not err in either regard.

Plaintiffs Were Entitled to Recover the Full Deficiency A. Amount

.
¶16 The o riginal Complaint c laimed that the total amount still due on the Note was $1,819,774.97. The First Amended Complaint, which added RADC as a plaintiff, left that amount unchanged. Finally, in the Second Amended Complaint, the
amount due on the Note was updated to correct the full amount actually due on the Note and to state the amount still due following the sale of the land securing the Note

— $1,916,701.91. When Plaintiffs moved for summary judgment, they sought a deficiency judgment in this amount.

¶17 Appellants point to the la nguage of section 57

- 1

- 32 to argue that Plaintiffs were limited to pursui ng the amount indicated in the o riginal Complaint. Specifically, the statute mandates that ‚the complaint shall set forth the entire amount of the indebtedness.‛ Utah Code Ann. § 57

- 1

- 32 (LexisNexis 2010)

. The question before us , as Appellants state it, is whether, based on that language, RADC ‚should have been estopped from arguing that the amount owing was more than what was originally ple ad [ e d+.‛

¶18 A successful claim of estoppel woul d require, among other things, a showing that Appellants took reasonable action

— or reasonably refrained from action

— based on the misstatement of the amount of indebtedness included in the original2010

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- CA 9 2016 UT App 89 Complaint. See Salt Lake City Corp. v. Big Ditch Irrigation Co. , 2011 UT 33, ¶ 41, 258 P.3d 539. According to Appellants, without citation to any portion of the record, ‚ [Borrowers] did not engage in a trial and negotiation strategy that they would or could have employed had the total amount due under the note bee n originally asserted as the same amount as ultimately claimed.‛ This is not the sort of inaction that is co ntemplated by the doctrine of estoppel.

¶19 But even if Appellants might have acted differently in the months following the filing of the original Comp laint had it included the amount actually due, t he Second Amended Complaint was filed in September 2012. The district court did
not grant RADC’s motion for summary judgment until April 2013

. Thus, e ven ignoring the fact that Borrowers likely always knew

— an d surely should have known

— the full amount owed under the Note, they had seven months between the filing of the Second Amended Complaint and the district court’s order during which they could have ‚engage*d+ in a *different+ trial and negotiation strategy ‛ when confronted with the increased amount, if so inclined. Because t hey did not do so then, there is no reason to assume they would have done so earlier

. It was therefore not error for the district court to enter judgment based on the amount alleged in th e Second Amended Complaint once that amount was proven

.

I t Was Not Error for RADC to Receive Judgment Based on B. the Full Amount Due on the Note

.
¶20 RADC had only a forty

- eight percent interest in the N ote, but the district court awarded the entire deficiency amount to RADC, albeit subject to any subsequently determined interest of Utah First. We acknowledge that, at first glance, it might appear that Appellants make a compelling argument. After all, i t seems somewhat intuitive that as a forty

- eight percent owner of the Note, RADC should have received judgment for only forty

- eight percent of the amount still owing on the Note

.2010

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- CA 10 2016 UT App 89 ¶21 Appellants complain that the district court’s order, making the judgment subject to any subseq uently determined interest of Utah First, ‚cited no law.‛ But after registering this complaint, Appellants direct this court to no statute, case, or other authority that supports their contention that the district court got this wrong . Appellants’ failure to carry their burden of persuasion on appeal is a sufficient ground for us to reject this argument. See Hi

- Country Estates Homeowners Ass’ n v. Jesse Rodney Dansie Living Trust , 2015 UT App 218, ¶ 8, 359 P.3d 655.

¶22 We do briefly note, however, that it would be unjust to allow debtors to avoid responsibility for a substantial portion of their obligations simply because one of two creditors on a single debt takes the laboring oar in collecting the debt

. 5 See, e.g.
, Irons v. American Nat ’l Bank

, 172 S.E. 629, 6 41 ( Ga. 1933) (‚ Any one of the holders may foreclose, giving the notice required by law to all holders concerned. ‛); Zalesk v. Wolanski , 281 Ill. App. 54, 55 (1935) (determining that ‚ the plaintiff, as one of the note holders, under the terms of the trust deed, had the right to declare the whole amount of the indebtedness due and unpaid ‛)

. The district court determin ed that Borrowers owed $1,916,701.91 under the Note. How that amount is divided between RADC and Utah First is no business of Borrowers , provid ed that they

are the only two holders of the N ote and the judgment represents the total amount properly due under the N ote

. There is no dispute that the amount awarded by summary judgment is the total amount owed , and the qualifying language of the judgmen t recogniz es the possible interest of Utah First and

5 . Of course, the creditor who obtains a judgment would then have to account to the other creditor for its interest in the note or other instrument. Cf. Joseph Nelson Supply Co. v. Leary , 164 P. 1047, 1049 ( Utah 1917) (‚*A+ person who claims the contract price, in whole or in part, which is due to the contractor

. . . , takes the assignment subject to the claims for labor performed and material furnished to the contractor, which was by him used in the performance of his contract*.+‛).2010

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- CA 11 2016 UT App 89 protects Appellants from having to pay the debt twice

— once to RADC and once to Utah First

.

III. Summary Judgment Against the Guarantors Will Not Be Disturbed

.
¶23 Finally, Appellants contend that the district co urt erred by granting summary judgment against the Guarantors

. Appellants’ straightforward argument is that judgment was improperly granted against Borrowers on the underlying obligation and so the judgment against the Guarantors is likewise invalid

. Appel lants recognize that their arguments on behalf of the Guarantors rise or fall with their arguments on behalf of Borrowers , argu ing that ‚if the judgment that forms the basis of the judgment against the guarantors is overturned, then the judgment against guarantors must also be overturned.‛ Because we have declined to disturb the judgment against Borrowers , we have no occasion to dist urb the judgment against the Guarantors

.

CONCLUSION

¶24 We reject Appellants’ arguments on appeal. RADC was properly added as a plaintiff to the case in the First Amended Complaint because that amendment relates back to the o riginal Complaint. The district c ourt did not err by awarding judgment for the entire deficiency amount or by awarding that full amount to RADC , subject , of course, to its obligation to account to Utah First for its share of any proceeds recovered . Finally, Appellants have not demonstrate d any reason why the judgment against the Guarantors should be disturbed.

¶25 Affirmed.