IN THE UTAH COURT OF APPEALS

‐‐‐‐ ooOoo

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Iota, LLC, a Utah limited liability

company; and California Benefit, Inc., a

California corporation,

Plaintiffs and Appellees,

v.

Davco Management Company, LC, a

Utah limited liability company,

Defendant and Appellant. )

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)

)

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)

)

)

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) OPINION

Case No. 20100855

‐ CA

F I L E D

(August 2, 2012)

2012 UT App 218

‐‐‐‐‐

Fifth District, St. George Department, 080502981

The Honorable James L. Shumate

Attorneys: Darwin C. Fisher, St. George, for Appellant

Paul D. Veasy, David R. Hall, and Alan S. Mouritsen, Salt Lake City, for

Appellees

‐‐‐‐‐

Before Judges McHugh, Voros, and Davis.

DAVIS, Judge:

¶1 Davco Management Company, LC (Davco) appeals several of the trial court’s

rulings in favor of Iota, LLC and California Benefit, Inc. (collectively, Plaintiffs). We

affirm in part, and reverse and remand in part.20100855

‐ CA 2 BACKGROUND

¶2 In 2005, Davco, through its member and manager, David Fisher, entered into a

real estate purchase contract (REPC) with Iota for the purchase of Casa Sonoma and

with California Benefit for the purchase of Casa Grande, both of which are apartment

complexes located in St. George, Utah. That purchase was never finalized because

Davco was unable to obtain financing. However, in 2006, the parties entered into new

REPCs for the purchase of the properties using owner financing. Under the new

REPCs, Davco executed a promissory note for each property (the promissory notes).

The first was executed in favor of Iota in the amount of $1,341,395, with the entire

balance due on or before December 1, 2007. The second was executed in favor of

California Benefit in the amount of $2,411,596, with the entire balance due on or before

December 10, 2007. Davco was to make monthly interest

‐ only payments on the notes

until they became due. To secure payment of the notes, Davco also executed a trust

deed for each property in favor of each property’s seller (the trust deeds), granting a

security interest in the property, rents, and security deposits.

¶3 In connection with the purchase, Davco requested profit and loss statements for

the apartment complexes (the financial information). In advance of closing, Plaintiffs

provided Davco with financial information for January 2005 through May 2006. Davco

contends that this information was inaccurate because the statements contained

information for other properties as well. Davco also alleges that Plaintiffs never

provided financial information for the remainder of 2006, although the trial court found

that Plaintiffs provided that information in February 2007. Davco contends that

Plaintiffs orally agreed to provide the financial information and that this information

was necessary in order for it to obtain financing.

¶4 Although Fisher attempted to obtain lender financing in order to pay the

balances on the promissory notes, his loan application was denied on February 21, 2008,

because (1) he “did not have two years of income stream as the owner,” (2) the

appraised value of Casa Grande was lower than anticipated, and (3) he had credit

problems arising from eleven previous foreclosures. As a result, Davco was unable to

pay the balance of the promissory notes when they matured in December 2007.

However, Davco continued to seek financing after the maturity dates, and Plaintiffs

continued to assist it in that effort.1 Conveying the apartments to Father was apparently part of an effort to obtain

financing in Father’s name.

2 At the time the Ex Parte Order was issued, Fisher was a party to the

proceedings. He was ultimately removed as a party in Plaintiffs’ first amended

complaint.

20100855

‐ CA 3 ¶5 While the apartments were under Davco’s ownership, Davco conveyed Casa

Sonoma to Fisher’s father (Father) without Iota’s knowledge or consent. The

apartments were ultimately conveyed back to Davco. 1 Additionally, Davco recorded a

$500,000 trust deed encumbering Casa Sonoma in favor of Fab 5 Management LLC, also

without the knowledge or consent of Iota.

¶6 On June 3, 2008, approximately six months past the maturity dates on the

promissory notes, Plaintiffs requested that Davco obtain financing by the end of July

2008. When Davco still had not obtained financing by August 25, 2008, Plaintiffs

requested that Davco deliver deeds in lieu of foreclosure. Davco refused the request

and asked Plaintiffs for an extension until October 2. Plaintiffs agreed but requested

that Davco increase its monthly payments by $1,000 per month for Casa Sonoma and

$1,500 per month for Casa Grande as consideration for the extension. Davco rejected

the request and stopped payment on the September interest checks to Plaintiffs, after

which Davco made no additional payments. On September 9, 2008, Davco requested

reimbursement for the cost of improvements made to the apartments while they were

under Davco’s ownership. On September 24, Davco repeated the request and further

alleged that Plaintiffs had previously agreed to a one

‐ year extension on the maturity

dates of the promissory notes. Plaintiffs denied the allegation and ultimately proceeded

with nonjudicial foreclosures of the properties, at which time they discovered the

conveyance to Father and the $500,000 encumbrance.

¶7 Between the time that Davco stopped making monthly payments in September

2008 and the time of the trustee’s sale in February 2009, Davco collected and retained

rents and security deposits from the apartment tenants. On November 5, 2008, the trial

court issued an Ex Parte Order requiring that Davco and Fisher deposit all rents

collected with the court. 2 The Ex Parte Order was sent to Davco and Fisher’s attorney,

who neither filed an objection nor moved to have it set aside at that time. Davco and3 The deficiency judgments were to be reduced by the amounts already deposited

with the court and by any amounts paid under the judgment for violation of the terms

of the trust deeds and the judgments for contempt.

20100855

‐ CA 4 Fisher did not deposit any of the rent or security deposits with the trial court until

August 7, 2009, at which point they deposited $33,805.33.

¶8 A trustee’s sale was conducted on February 20, 2009. Iota purchased Casa

Sonoma with a credit bid of $934,000, and California Benefit purchased Casa Grande

with a credit bid of $1,800,000. Following the trustee’s sale, Plaintiffs brought suit to

obtain deficiency judgments against Davco and to recover the rents and security

deposits collected by Davco between September 1, 2008, and February 20, 2009. Davco

disputed the claims, arguing breach of contract, breach of the implied covenant of good

faith and fair dealing, equitable estoppel, and waiver. Davco also claimed that it was

entitled to recover against Plaintiffs for the cost of improvements made to the

apartments. Although no contempt allegation was raised in their complaint, Plaintiffs

raised in the pretrial order and argued in their trial brief that both Davco and Fisher

should be held in contempt for failing to comply with the Ex Parte Order. Davco

challenged the trial court’s jurisdiction to conduct the contempt proceeding in

conjunction with the trial due to the lack of an affidavit of the facts constituting

contempt. At trial, Davco also moved to have the Ex Parte Order stricken, asserting that

the trial court failed to comply with rule 67 of the Utah Rules of Civil Procedure in

issuing the order. The trial court denied the motion.

¶9 Following a three

‐ day trial, the trial court rejected all of Davco’s defenses and

ruled that Plaintiffs were entitled to deficiency judgments against Davco. Davco was

ordered to pay $389,438.30 to Iota and $272,266.20 to California Benefit, as well as

Plaintiffs’ attorney fees. Furthermore, the trial court concluded that Davco’s failure to

remit the rent and security deposits to Plaintiffs was a violation of the terms of the trust

deeds and awarded Plaintiffs $132,844.96 for that violation. The trial court also ruled

that Davco had violated the terms of the Iota trust deed by conveying Casa Sonoma to

Father and by encumbering the property. The trial court dismissed Davco’s claim that

it was entitled to a set

‐ off for improvements made to the property. The trial court also

held Davco and Fisher in contempt for their failure to comply with the Ex Parte Order

and awarded Plaintiffs $71,119.17, representing rent and security deposits, together

with their attorney fees in connection with the contempt. 3 Davco now appeals.20100855

‐ CA 5 ISSUES AND STANDARDS OF REVIEW

¶10 On appeal, Davco argues that the trial court made a number of errors. First,

Davco challenges several of the trial court’s factual findings, claiming that the findings

were unsupported by the evidence. We review a trial court’s findings of fact for clear

error. See Houskeeper v. State

, 2008 UT 78, ¶ 18, 197 P.3d 636.

¶11 Second, Davco argues that the court incorrectly applied the statute of frauds and

its part performance exception. This is a mixed question of law and fact. See Spears v.

Warr

, 2002 UT 24, ¶ 23, 44 P.3d 742, overruled on other grounds by Tangren Family Trust ex

rel. Tangren v. Tangren

, 2008 UT 20, ¶ 16 & n.20, 182 P.3d 326. Thus, we review the trial

court’s determinations regarding the applicability of the statute of frauds for correctness

and its underlying factual determinations for clear error. See id.

¶12 Third, Davco argues that the trial court should have ruled that Plaintiffs’ claims

were barred by equitable estoppel. “The issue of whether equitable estoppel has been

proven is a classic mixed question of fact and law.” Department of Human Servs. ex rel.

Parker v. Irizarry

, 945 P.2d 676, 678 (Utah 1997). Because the equitable estoppel inquiry

is highly fact

‐ sensitive, “we properly grant the trial court’s decision a fair degree of

deference when we review the mixed question of whether the requirements of the law

of estoppel have been satisfied in any given factual situation.” Id.

¶13 Fourth, Davco contests the trial court’s conclusion that Plaintiffs did not waive

their right to enforce the terms of the promissory notes. “[W]e

. . . grant very broad

discretion to the trial court’s application of legal propositions to the facts in waiver

cases.” Living Scriptures, Inc. v. Kudlik

, 890 P.2d 7, 10 (Utah Ct. App. 1995).

¶14 Fifth, Davco contests the trial court’s finding that Plaintiffs did not breach the

implied covenant of good faith and fair dealing. “[W]hether there has been a breach of

good faith and fair dealing is a factual issue,” Cook v. Zions First Nat’l Bank

, 919 P.2d 56,

61 (Utah Ct. App. 1996), and “[w]e review questions of fact under the clearly erroneous

standard,” Tangren Family Trust ex rel. Tangren v. Tangren

, 2006 UT App 515, ¶ 6, 154

P.3d 180, aff’d

, 2008 UT 20, 182 P.3d 326.

¶15 Sixth, Davco contends that the trial court lacked jurisdiction to hold Davco and

Fisher in contempt. “We review legal conclusions concerning the existence of20100855

‐ CA 6 jurisdiction for correctness and afford no deference to the district court.” State v.

Mullins

, 2005 UT 43, ¶ 6, 116 P.3d 374.

¶16 Seventh, Davco argues that the Ex Parte Order was invalid because the trial court

did not comply with rule 67 of the Utah Rules of Civil Procedure. “We review the

interpretation and application of a rule of procedure for correctness.” Edwards v. Powder

Mountain Water & Sewer

, 2009 UT App 185, ¶ 14, 214 P.3d 120. Nevertheless, where the

outcome of the proceedings is not affected by an alleged error, it will be considered

harmless. See Covey v. Covey

, 2003 UT App 380, ¶ 21, 80 P.3d 553.

¶17 Finally, Davco argues that the trial court erred in concluding that it had breached

the terms of the Iota trust deed by conveying Casa Sonoma to Father and by recording

the $500,000 encumbrance. Because this argument was not preserved for appeal, Davco

argues plain error. In order to demonstrate plain error, Davco must establish “that

there was error below, that the error should have been obvious to the district court, and

that the error was prejudicial.” State v. Diaz

‐ Arevalo

, 2008 UT App 219, ¶ 13, 189 P.3d

85.

ANALYSIS

I. Factual Findings

¶18 Davco challenges three of the trial court’s factual findings: (1) that there was no

oral contract to extend the maturity dates of the promissory notes, (2) that Plaintiffs

provided the financial information to Davco, and (3) that the financial information was

not necessary in order for Davco to refinance. We conclude that all of these findings are

either supported or constitute harmless error.

¶19 Although both parties present arguments regarding the sufficiency of the

evidence to support the trial court’s finding that no oral contract existed, it does not

appear to us that the trial court ever made such a finding. The findings merely state

that Fisher alleged that Plaintiffs had agreed to a one

‐ year extension and that Richard T.

Murset, managing member of both Iota and California Benefit, denied that such an

agreement existed. Because any such oral agreement would be unenforceable under the

statute of frauds, and because we ultimately conclude that the part performance20100855

‐ CA 7 exception to the statute of frauds does not apply in this case for reasons independent of

the oral contract’s existence, see infra ¶¶ 24

‐ 25, we conclude that the trial court’s failure

to make a specific finding as to the existence of the oral contract was harmless.

¶20 Davco next alleges that the trial court’s finding that Plaintiffs provided Davco

with the financial information was clearly erroneous because the evidence was

insufficient to demonstrate that the financial information for June through December of

2006 was ever provided. Murset’s testimony that he provided the remainder of the 2006

information in February 2007 was sufficient to support the trial court’s finding to that

effect. Davco makes a number of arguments concerning the lack of documentation and

inconsistencies between Murset’s deposition and his testimony at trial. However, the

trial court was free to accept Murset’s testimony even in the absence of supporting

documentation and in the face of alleged inconsistencies, see Henshaw v. Henshaw

, 2012

UT App 56, ¶¶ 11

‐ 12, 271 P.3d 837 (explaining that “[i]t is within the province of the

trial court, as the finder of fact, to resolve issues of credibility” and that a lack of

documentary evidence supporting a witness’s testimony or contradictory testimony

from other witnesses does not preclude the trial court from accepting the witness’s

testimony as true), especially given that those inconsistencies appear to be attributable

mainly to confusion about what was being asked.

¶21 Davco also alleges that it could not use the information provided to obtain

refinancing because it included information regarding other rentals managed by

Plaintiffs and the manner in which the numbers were presented made it impossible to

determine what portion of the numbers actually reflected the profits and losses of Casa

Grande and Casa Sonoma. However, even if we were to accept Davco’s assertion that

the financial information was detrimentally over

‐ inclusive and that this fact rendered

the trial court’s finding erroneous, any error in the finding was harmless in light of the

trial court’s additional finding that the financial information was not needed to obtain

refinancing.

¶22 The trial court’s finding that the financial information was unnecessary was

supported by the evidence and therefore not clearly erroneous. Davco asserts that the

evidence on which the trial court relied—the testimony of the mortgage broker that

Davco needed two years of financial information under its ownership and that the 2005

and 2006 financial information could not assist the refinance—was stricken by the trial

court on hearsay grounds. However, the trial court struck only the mortgage broker’s20100855

‐ CA 8 testimony regarding statements made to him by a commercial lender. The mortgage

broker’s testimony regarding the reasons the loan application was denied was not

hearsay. The mortgage broker testified that one of the reasons for the denial was

Fisher’s failure to meet seasoning requirements, which he explained required a two

‐

year financial history from the current owner of the property. The mortgage broker also

testified that in processing Davco’s application, he never requested that Fisher provide

him with the financial information for 2005 and 2006. This non

‐ hearsay evidence was

sufficient to support the trial court’s finding that the financial information was not

necessary to obtain financing.

II. Statute of Frauds

¶23 The trial court ruled that Davco’s defense that it had orally agreed with Plaintiffs

to a one

‐ year extension on the maturity dates of the promissory notes was barred by the

statute of frauds. Davco does not dispute that the alleged modification is subject to the

statute of frauds. See generally Fisher v. Fisher

, 907 P.2d 1172, 1176 (Utah Ct. App. 1995)

(“[W]hen a contract is required to be in writing, the same requirement applies with

equal force to any alteration or modification thereof.” (alteration in original) (internal

quotation marks omitted)). Rather, Davco asserts that the modification is subject to the

part performance exception to the statute of frauds. “[W]here there is evidence of part

performance under the modified agreement, and where it would be inequitable to

permit a party to repudiate the oral modification and seek enforcement of the written

contract, the oral agreement may be removed from the statute of frauds and enforced.”

Id. at 1177. In order for an oral contract to come under the part performance exception

to the statute of frauds, the following conditions must exist:

First, the oral contract and its terms must be clear and

definite; second, the acts done in performance of the contract

must be equally clear and definite; and third, the acts must

be in reliance on the contract. Such acts in reliance must be

such that a) they would not have been performed had the

contract not existed, and b) the failure to perform on the part

of the promisor would result in fraud on the performer who

relied, since damages would be inadequate.

Martin v. Scholl

, 678 P.2d 274, 275 (Utah 1983) (internal quotation marks omitted).4 While it does not appear that the trial court ever made a specific finding as to

whether an oral agreement was made, see supra ¶ 19, the trial court’s failure to make a

finding on this issue was harmless because any part performance on the part of Davco

was not exclusively referable to the alleged oral contract, see infra ¶ 25.

20100855

‐ CA 9 ¶24 Because we conclude that the reliance prong of the test is not satisfied here, we

agree with the trial court that Davco’s breach of contract defense is barred by the statute

of frauds. The requirements of this prong are most stringent where the existence of the

oral contract is uncertain, that is, where neither independent acts nor an admission of

the contract affirmatively demonstrate that an oral contract existed. See id. at 277

‐ 78.

Such is the case here. Plaintiffs vigorously deny the existence of an oral contract to

extend the maturity dates, and the only evidence of the contract presented by Davco is

Fisher’s assertion and the testimony of the real estate agent that he “vaguely”

remembered Murset telling him that Plaintiffs had given Davco “another year” to

refinance. The disputed evidence in this case required the trial court to make a

credibility judgment on the question of whether an oral contract existed, and thus, the

acts in reliance must have been “exclusively referable to the contract,” 4 see id. at 277

(internal quotation marks omitted), in order for the oral contract to be enforceable on

grounds of part performance. See id. at 274, 280 (holding that a ranch foreman’s actions

of working long hours, declining more lucrative employment, and performing personal

services for the employer were not exclusively referable to an alleged promise by the

employer to convey 120 acres of land to the foreman in return for his continued

employment, particularly given that the existence of the oral contract was vigorously

disputed). In other words, Davco’s performance in reliance on the alleged oral contract

“must be reasonably explicable only on the postulate that a contract exists.” See id. at

277 (internal quotation marks omitted).

¶25 Davco’s actions here are not such that they can only be explained by an

agreement with Plaintiffs to extend the maturity dates by a year. Its actions can just as

easily be explained by Plaintiffs’ leniency in enforcing the maturity dates and

cooperation with Davco’s continued efforts to obtain financing after the maturity dates

had passed. If Davco hoped to ultimately obtain refinancing and Plaintiffs had

indicated a willingness to cooperate with the financing after the maturity dates, it is to

be expected that Davco would continue to manage the apartments and make payments

on the promissory notes until it could pay the balance due to Plaintiffs; Davco could not

have expected Plaintiffs to continue to indulge Davco’s delay in paying the balance if5 Davco also asserts that it spent approximately $128,376 on remodeling costs in

reliance on the agreement to extend the maturity dates. However, Fisher testified at

trial that the improvements were made during 2006 and 2007. Since the oral agreement

is not alleged to have been entered into until at least December 2007, when the maturity

dates were reached, the fact that Davco undertook the improvements does not indicate

any reliance on an oral agreement to delay the maturity dates. And even if some

improvements continued after the maturity dates, we cannot say that such

improvements would be exclusively referable to an oral agreement.

6 Although the parties also argue the applicability of the statute of frauds to

Plaintiffs’ alleged agreement to provide the financial information, the trial court did not

explicitly rule on that question. Rather, the trial court implicitly rejected it by finding

that the financial information was not needed for the refinance—in other words, any

breach of an alleged promise to provide the financial information would be immaterial

because the financial information could not have helped Davco obtain refinancing.

Because the financial information was not needed for the refinance, Davco cannot

demonstrate that its acts were in any way reliant on the alleged promise to provide the

financial information.

20100855

‐ CA 10 Davco was not at least making the agreed

‐ upon monthly payments. 5 Thus, Davco’s

actions indicate merely an ongoing cooperation between the parties and are not

exclusively referable to the alleged oral contract to extend the maturity dates for a

particular period of time. 6

III. Equitable Estoppel

¶26 Davco next contends that the trial court should have concluded that Plaintiffs’

claims were barred by equitable estoppel. This claim is based on Davco’s assertion that

Plaintiffs failed to fulfill their promises to provide Davco with accurate financial

information and to extend the maturity dates on the promissory notes by one year.

¶27 In order to establish equitable estoppel, a party must prove

(1) a statement, admission, act, or failure to act by one party

inconsistent with a claim later asserted; (2) reasonable action

or inaction by the other party taken on the basis of the first20100855

‐ CA 11 party’s statement, admission, act, or failure to act; and (3)

injury to the second party that would result from allowing

the first party to contradict or repudiate such statement,

admission, act, or failure to act.

Whitaker v. Utah State Ret. Bd.

, 2008 UT App 282, ¶ 22, 191 P.3d 814 (internal quotation

marks omitted). Davco cannot establish the third prong of the test—that it was injured

by Plaintiffs’ alleged failure to provide accurate financial information and to extend the

maturity dates.

¶28 First, the trial court’s finding that the financial information was not needed to

obtain financing forecloses the possibility that the failure to provide the information

injured Davco. But even if we were to agree with Davco that the evidence was

insufficient to support this finding, Davco has pointed us to no evidence that would

support the opposite conclusion, i.e., that the financial information was necessary to

obtain refinancing and that Plaintiffs’ failure to provide it caused Davco’s failure to

refinance. At best, Davco’s arguments might demonstrate that the effect of not

providing the financial information to the mortgage broker was unknown.

¶29 Similarly, Davco failed to establish that it would have been able to refinance if

the maturity dates had been extended to December 2008 in accordance with Plaintiffs’

other alleged promise, given that its original application was rejected not only for

Davco’s failure to meet seasoning requirements but also due to the low appraisal and

Fisher’s bad credit. The most Davco can show is that the mortgage broker stated in his

deposition that he did not know whether the loan would have been approved if the

seasoning requirement had been met, a statement the broker repudiated at trial. In fact,

despite the fact that the trustee’s sale did not occur until February 2009, two months

past the time Davco claims it should have been permitted to refinance, Davco never did

manage to obtain refinancing. See generally Utah Code Ann. § 57

‐ 1

‐ 31 (2010) (outlining

the procedure for curing a default under a trust deed).

¶30 While the trial court did not make any explicit conclusions regarding equitable

estoppel, its ruling in favor of Plaintiffs implicitly and justifiably rejects this defense.

Because we conclude that Davco failed to meet its burden in establishing its equitable

estoppel claim, see generally State v. Hamilton

, 2003 UT 22, ¶ 35, 70 P.3d 111 (explaining20100855

‐ CA 12 that “estoppel is an affirmative defense” and its proponent has “the burden of proving

reliance”), we affirm the trial court’s implicit ruling.

IV. Waiver

¶31 Next, Davco asserts that Plaintiffs waived their right to declare a default when

the maturity dates passed without payment because they agreed to a one

‐ year extension

on the maturity dates of the promissory notes. Because we have determined that any

such agreement was unenforceable due to its failure to comply with the statute of

frauds, Davco’s waiver argument fails.

V. Covenant of Good Faith and Fair Dealing

¶32 Davco asserts that Plaintiffs breached the implied covenant of good faith and fair

dealing because their failure to either provide the financial information or delay the

maturity dates long enough for Davco to establish a two

‐ year history of ownership

prevented Davco from refinancing. “Under the covenant of good faith and fair dealing,

each party impliedly promises that he will not intentionally or purposely do anything

which will destroy or injure the other party’s right to receive the fruits of the contract.”

Brown v. Moore

, 973 P.2d 950, 954 (Utah 1998) (internal quotation marks omitted).

“[O]ne party may not render it difficult or impossible for the other to continue

performance and then take advantage of the non

‐ performance he has caused.” Zion’s

Props., Inc. v. Holt

, 538 P.2d 1319, 1321 (Utah 1975). That is not what occurred here.

¶33 As to Plaintiffs’ alleged failure to provide the financial information, the trial court

determined that the information was not needed for refinancing, so the failure to

provide it could not have been a breach of the covenant of good faith and fair dealing.

Moreover, Plaintiffs’ refusal to give Davco an additional year to refinance so it could

establish two years of ownership could not have been a breach of good faith and fair

dealing because Plaintiffs were not required to surrender their rights under the

promissory notes in order to assist Davco in refinancing. Declining to give up rights

granted by a contract does not constitute a breach of the covenant of good faith and fair

dealing, cf. Cook Assocs., Inc. v. Utah Sch. & Institutional Trust Lands Admin.

, 2010 UT App

284, ¶ 16, 243 P.3d 888, and the alleged promise to do so in this case is unenforceable

under the statute of frauds. Furthermore, it does not appear that Davco would have

ultimately benefitted from an extension because the trial court found that there were7 Davco also contends that the notice it received did not comply with due process

requirements, but because we reverse the contempt order on jurisdictional grounds, we

need not reach this question.

8 Plaintiffs assert that deposition testimony by Fisher, which was quoted in their

trial brief, was the equivalent of an affidavit. While it is possible that a sworn

admission by the alleged contemnor could meet the statute’s affidavit requirement, cf.

Crank v. Utah Judicial Council

, 2001 UT 8, ¶ 28 n.11, 20 P.3d 307 (noting the possibility

that a verified pleading might be considered equivalent to an affidavit in the context of

a contempt proceeding), we do not think the requirement was met under the

circumstances of this case, where the Plaintiffs merely quoted a few lines of Fisher’s

(continued...)

20100855

‐ CA 13 factors apart from the seasoning issue that prevented Davco from refinancing and

because Davco never did refinance, despite accruing two years of ownership prior to

the trustee’s sale. Thus, Plaintiffs’ actions were unlikely to have injured Davco’s ability

to receive the fruits of its contract.

VI. Contempt

¶34 Davco next challenges the trial court’s finding of contempt against Davco and

Fisher, asserting that Davco and Fisher were not provided with proper notice of the

contempt allegation and that the trial court therefore lacked jurisdiction to hold either of

them in contempt. 7 Utah Code section 78B

‐ 6

‐ 302(2) provides, “When [a] contempt is

not committed in the immediate view and presence of the court or judge, an affidavit or

statement of the facts by a judicial officer shall be presented to the court or judge of the

facts constituting the contempt.” Utah Code Ann. § 78B

‐ 6

‐ 302(2) (2008). In this case, no

affidavit was ever filed. The contempt issue makes its first appearance in the December

18, 2009 pretrial order, which states that Plaintiffs were “seek[ing] judgment against

David Fisher individually, specifically requesting that he be held in contempt of court

for his willful violation of the Order and that judgment be entered against him for the

rents and security deposits taken by him.” The pretrial order says nothing regarding a

contempt allegation against Davco. Plaintiffs’ trial brief then proceeds to present facts

and argument in support of Plaintiffs’ contempt allegations against both Davco and

Fisher. However, neither the pretrial order nor the trial brief contains an appropriate

affidavit. 88 (...continued)

deposition in their trial brief. Plaintiffs further asserted at oral argument that “the

attorneys’ making the motions before the court” regarding contempt was the equivalent

of “a statement of facts by a judicial officer.” The term “judicial officer” is not explicitly

defined for purposes of section 78B

‐ 6

‐ 302. However, as that term is used in other

provisions of the Utah Code relating to contempt, it is apparent that it refers to judges

and not attorneys. See Utah Code Ann. § 78B

‐ 6

‐ 301(12) (2008) (listing “[d]isobedience of

the lawful orders or process of a judicial officer” as an action constituting contempt); id.

§ 78A

‐ 2

‐ 218 (providing that “[e]very judicial officer has power” to enforce order in

court proceedings, compel obedience to court orders, compel attendance of individuals

in court, administer oaths in court proceedings, and punish for contempt). We therefore

determine that the appropriate definition of a judicial officer in the context of section

78B

‐ 6

‐ 302 is “any justice or judge of a court of record or any county court judge,” see

Utah Code Ann. § 20A

‐ 1

‐ 102(36) (Supp. 2011) (defining “judicial officer” for purposes of

the election code). Thus, a written pleading submitted by an attorney does not

constitute “a statement of the facts by a judicial officer.”

9 Davco also appears to contend that the trial court did not have personal

jurisdiction over Fisher to hold him in contempt. As a matter of clarification, we

reiterate that

a trial court has the power to hold non

‐ parties in contempt if

(continued...)

20100855

‐ CA 14 ¶35 Plaintiffs assert that the arguments in their pleadings satisfied due process

because they provided “adequate and timely notice of the charges made against the

alleged contemnor” by “set[ting] forth the acts done or omitted that form the factual

basis for the contempt charge,” see Khan v. Khan

, 921 P.2d 466, 468

‐ 69 (Utah Ct. App.

1996) (internal quotation marks omitted), just as an affidavit would have done. But the

statutory affidavit requirement is not concerned only with due process; it is

jurisdictional. See Robinson v. City Court ex rel. City of Ogden

, 112 Utah 36, 185 P.2d 256,

258 (1947). Thus, even assuming that the discussion in the pretrial order and the trial

brief complies with due process, it is not sufficient under the statute to confer

jurisdiction on the trial court in the absence of an affidavit. Cf. Jones v. Cox

, 84 Utah 568,

37 P.2d 777, 778 (1934) (reversing a trial court’s contempt ruling on jurisdictional

grounds where the trial court had issued an order to show cause but no initiating

affidavit was ever filed). Thus, the trial court’s contempt ruling cannot stand. 99 (...continued)

those parties conspire to frustrate a lawful order of the court.

Specifically, a person may be held in contempt for

“[d]isobedience of any lawful judgment, order or process of

the court,” or “[a]ny other unlawful interference with the

process or proceedings of a court.”

Crank

, 2001 UT 8, ¶ 25 (alterations in original) (citations omitted) (quoting Utah Code

Ann. § 78

‐ 32

‐ 1(5), (9) (1996) (current version at Utah Code Ann. § 78B

‐ 6

‐ 301(5), (9)

(2008))). Furthermore, we note that at the time Fisher was initially subjected to the Ex

Parte Order, he was a party to the proceedings. See infra note 12.

20100855

‐ CA 15 VII. Rule 67

A. Harmless Error

¶36 Davco also argues that the trial court erred in issuing the Ex Parte Order without

complying with the terms of rule 67 of the Utah Rules of Civil Procedure, which permits

such an order only “[w]hen it is admitted by the pleadings, or shown upon the

examination of a party, that he has in his possession or under his control any money

. . . which belongs or is due to another party.” Utah R. Civ. P. 67. Davco asserts that if the

trial court did indeed fail to comply with rule 67 in issuing the Ex Parte Order, then

Davco and Fisher cannot be found in contempt for violating it. Because we determine

that the trial court never acquired jurisdiction over the contempt issue, we have relieved

Davco and Fisher of the only harm they claim as a result of the issuance of the allegedly

unlawful Ex Parte Order and any error in issuing that order was harmless.

B. Collateral Bar Doctrine

¶37 Judge Voros’s concurring opinion, in which Judge McHugh joins, electing not to

address the merits of Davco’s rule 67 argument in light of our determination that any

error on the part of the trial court in failing to comply with rule 67 was harmless,

constitutes the majority opinion on this matter. Nevertheless, because I anticipate that

the contempt issue may again arise on remand in the event Plaintiffs elect to pursue the

contempt matter, I would have us address the merits of the rule 67 argument as

guidance for the trial court. See generally State v. Low

, 2008 UT 58, ¶ 61, 192 P.3d 86710 A third exception, excusing noncompliance with an order later found invalid

where complying with the challenged order “could cause irreparable injury” such that

“[s]ubsequent appellate vindication does not necessarily have its ordinary consequence

of totally repairing the error,” Maness v. Meyers

, 419 U.S. 449, 460 (1975), is inapplicable

under the facts of this case because Fisher and Davco would have suffered no

“irreparable injury” by complying with the Ex Parte Order and depositing the funds

with the court.

20100855

‐ CA 16 (explaining that appellate courts have discretion to address issues that are likely to arise

on remand in order to provide guidance to the trial court).

¶38 As far as I can tell from the record and the briefs, Davco did not raise its

challenge to the validity of the Ex Parte Order until the time of trial, almost eighteen

months after the Ex Parte Order was issued and after the order had already been

violated. Rather than challenge the order, Davco and Fisher simply elected to ignore it.

“The orderly and expeditious administration of justice by the courts requires that an

order issued by a court with jurisdiction over the subject matter and person must be

obeyed by the parties until it is reversed by orderly and proper proceedings.” Maness v.

Meyers

, 419 U.S. 449, 459 (1975) (internal quotation marks omitted).

Under the collateral bar doctrine, a party may not challenge

a district court’s order by violating it. Instead, he must move

to vacate or modify the order, or seek relief in [the appellate

courts]. If he fails to do either, ignores the order, and is held

in contempt, he may not challenge the order unless it was

transparently invalid or exceeded the district court’s

jurisdiction.[ 10 ]

United States v. Cutler

, 58 F.3d 825, 832 (2d Cir. 1995); see also Maness

, 419 U.S. at 458

(“Persons who make private determinations of the law and refuse to obey an order

generally risk criminal contempt even if the order is ultimately ruled incorrect.”); United

States v. United Mine Workers of Am.

, 330 U.S. 258, 294 (1947) (“Violations of an order are

punishable as criminal contempt even though the order is set aside on appeal

. . . .”); 17

C.J.S. Contempt § 24 (2011) (outlining the collateral bar doctrine) cf. State v. Clark

, 2005

UT 75, ¶¶ 35

‐ 36, 124 P.3d 235 (stating that “[t]he proper method for contesting an

adverse ruling is to appeal it, not to violate it” and that “an attorney who violates court

orders and breaks ethical rules

. . . cannot claim immunity from contempt proceedings”11 In fact, even when responding to Plaintiffs’ contempt allegation in its trial brief,

Davco did not raise the issue of the Ex Parte Order’s validity. That argument appears to

have been raised for the first time during trial.

12 To the extent that Davco’s argument may be construed as asserting that the trial

court lacked personal jurisdiction over Fisher, that argument is based solely on Davco’s

contention that Fisher was not a party to the action. However, Fisher was a party at the

time the Ex Parte Order was issued on November 4, 2008, and was not removed as a

party until Plaintiffs filed their first amended complaint on November 14, 2008.

20100855

‐ CA 17 and “may not protest adverse rulings by violating them in the name of zealous

advocacy”). “Even to invoke the ‘transparently invalid’ ‘exception,’ however, a

defendant must make some good faith effort to seek emergency relief from the appellate

court.” Cutler

, 58 F.3d at 832 (additional internal quotation marks omitted). Davco

made no such effort. 11 Cf. id. at 832

‐ 33 (rejecting a defendant’s argument that an order

was transparently invalid where the defendant “made no effort whatever to vacate or

modify the order, or seek relief in [the appellate court]”). And Davco has not alleged

that the trial court lacked jurisdiction to issue the Ex Parte Order, only that it was not

supported by the appropriate admissions by Davco and Fisher. 12 See generally Utah R.

Civ. P. 67. Thus, I would hold that Davco and Fisher cannot avoid a contempt charge

on the basis that the Ex Parte Order they violated was invalid when they made no good

faith effort to object to the order prior to violating it.

VIII. Davco’s Breaches

¶39 Finally, Davco argues that the trial court plainly erred in concluding that Davco

had breached the Iota trust deed by recording deeds to Father and by encumbering the

property. Davco asserts that these conclusions are relevant to Plaintiffs’ affirmative

defense that any breach resulting from the failure to provide the financial information

was excused by Davco’s previous breaches. However, because we have concluded that

Plaintiffs were not obligated to provide the financial information, any error in the trial

court’s conclusions regarding Davco’s breaches could not have been prejudicial. See

generally State v. Diaz

‐ Arevalo

, 2008 UT App 219, ¶ 13, 189 P.3d 85 (explaining that a

party challenging a ruling on grounds of plain error must establish “that there was error

below, that the error should have been obvious to the district court, and that the error was

prejudicial ” (emphasis added)).13 Because Plaintiffs were awarded fees in the trial court in connection with their

non

‐ contempt claims and have prevailed on those claims on appeal, they are entitled to

an award of their attorney fees and costs on appeal with respect to those claims, to be

assessed by the trial court on remand. See Meadowbrook, LLC v. Flower

, 959 P.2d 115, 120

(Utah 1998).

20100855

‐ CA 18 CONCLUSION

¶40 Because we conclude that the trial court correctly rejected Davco’s part

performance, equitable estoppel, waiver, and good faith and fair dealing claims, we

affirm the trial court’s deficiency judgment in favor of Plaintiffs. We also reject Davco’s

plain error challenge to the trial court’s findings that Davco breached the Iota trust deed

because Davco has failed to demonstrate prejudice. 13 Nevertheless, we reverse the trial

court’s contempt rulings against Davco and Fisher for lack of jurisdiction and remand

to the trial court for additional proceedings, on the contempt matter only, consistent

with this opinion. And because we reverse the contempt rulings on jurisdictional

grounds, we determine that any error relating to the trial court’s Ex Parte Order was

harmless.

¶41 Affirmed in part, and reversed and remanded in part.

____________________________________ James Z. Davis, Judge

‐‐‐‐‐

VOROS, Associate Presiding Judge (concurring in part and writing for the majority in

part):

¶42 I fully concur in Judge Davis’s opinion, except as to Part VII.B. That section of

the opinion offers guidance on an issue that Judge Davis anticipates may arise on

remand. I would decline to give such guidance in this case for reasons stated below.20100855

‐ CA 19 And because Judge McHugh concurs with my opinion on this issue, the following

opinion represents the judgment of the court on this one limited point.

¶43 This court unanimously rejects Davco’s challenge to the trial court’s denial of its

motion to set aside the Ex Parte Order on the ground that any possible error was

harmless. This holding disposes of the claim of error on appeal. However, Judge Davis

would in addition hold that Davco and Fisher forfeited their right to challenge the

contempt citation on the ground that the Ex Parte Order was not a lawful order of the

court. While we recognize that we have discretion to address issues fully briefed on

appeal that will likely arise on remand, see State v. Low, 2008 UT 58, ¶ 61, 192 P.3d 867

(citing State v. James

, 819 P.2d 781, 795 (Utah 1991)), we decline to do so here for several

reasons.

¶44 First, we are not persuaded that the question is likely to arise on remand. Judge

Davis anticipates “that the contempt issue may again arise on remand in the event

Plaintiffs elect to pursue the contempt matter.” Of course, none of us can foretell the

future. But the fact that an issue might arise on remand if Plaintiffs elect to pursue the

matter falls short of the “likely to arise” standard.

¶45 Second, the question treated in Part VII.B was not briefed by the parties on

appeal. Judge Davis cites State v. Low

, which in turn cites State v. James

, and James limits

the principle of giving guidance on remand to issues “fully briefed” on appeal:

[T]here are other issues presented on appeal that will likely

arise during retrial. We therefore exercise our discretion to

address those issues for purposes of providing guidance on

remand. See State v. James

, 819 P.2d 781, 795 (Utah 1991)

(“Issues that are fully briefed on appeal and are likely to be

presented on remand should be addressed by this court.”).

Low

, 2008 UT 58, ¶ 61; see also Utah R. App. P. 30(a) (“If a new trial is granted, the court

may pass upon and determine all questions of law involved in the case presented upon

the appeal and necessary to the final determination of the case.” (emphasis added)).

Neither party here briefed the question of whether one who disobeys a court order

forfeits the right to challenge its lawfulness in a later contempt hearing. We are thus

disinclined to resolve the issue “without the engaged participation of the parties whose20100855

‐ CA 20 affairs will be directly affected” by that resolution. See State v. Robison

, 2006 UT 65, ¶ 16,

147 P.3d 448 (referring to reversing on an unbriefed issue).

¶46 Finally, the question treated in Part VII.B is one of first impression in Utah.

Davco contends that it disobeyed an unlawful order of the court. Our contempt statute

defines contempt of court to include “disobedience of any lawful

. . . order

. . . of the

court.” Utah Code Ann. § 78B

‐ 6

‐ 301 (2008) (emphasis added). We are aware of no Utah

decision addressing what lawful means as used in this statute. The Utah case cited by

our colleague holds that a lawyer’s ethical duty of zealous advocacy does not insulate

his actions from contempt proceedings. See State v. Clark

, 2005 UT 75, ¶¶ 33–36, 124

P.3d 235. But in that case, the lawyer “knowingly violated a lawful court order.” Id.

¶ 39 (emphasis added). The lawfulness of the Ex Parte Order here has not been

resolved.

¶47 In sum, the question of law Judge Davis treats in Part VII.B is not necessary to

the resolution of this appeal, was not briefed by the parties, involves a novel question of

statutory interpretation, and may well not arise on remand. Consequently, we express

no opinion on it.

____________________________________ J. Frederic Voros Jr.,

Associate Presiding Judge

‐‐‐‐‐

¶48 I CONCUR:

____________________________________ Carolyn B. McHugh,

Presiding Judge