Court Opinion

ID: 5138662
Source: CourtListenerOpinion
Date Created: 2021-12-21 15:11:45.53146+00
Date Added: 2024-06-11T07:39:22.938757
License: Public Domain

2018 UT App 145

               THE UTAH COURT OF APPEALS

     NATIONAL TITLE AGENCY LLC AND WILLIAM D. ROWLEY,
                        Appellants,
                            v.
                JPMORGAN CHASE BANK NA,
                         Appellee.

                             Opinion
                        No. 20160806-CA
                        Filed July 27, 2018

           Third District Court, Salt Lake Department
             The Honorable Todd M. Shaughnessy
                          No. 160901812

       Sean A. Monson, Ryan M. Merriman, and Jeremy C.
               Reutzel, Attorneys for Appellants
          Gary E. Doctorman and Nicholas U. Frandsen,
                     Attorneys for Appellee

    JUDGE GREGORY K. ORME authored this Opinion, in which
  JUDGES MICHELE M. CHRISTIANSEN and DAVID N. MORTENSEN
                        concurred.

Orme, Judge:

¶1    Appellants National Title Agency LLC and William D.
Rowley (collectively, Plaintiffs) appeal the district court’s order
dismissing their complaint against Appellee JPMorgan Chase
Bank NA (Chase Bank) on the ground that their claims were
barred by the statute of limitations. We affirm.

                        BACKGROUND

¶2    National Title, formed by Rowley in 2006, was a licensed
escrow and title agent that closed real estate transactions in
              National Title Agency v. JPMorgan Chase

Utah. 1 As a licensed escrow agent, National Title held funds in
escrow for its clients in trust accounts at several banks, including
a trust account at Chase Bank (the Trust Account).

¶3     Two unrelated suits were brought against National Title
in 2010, and because it failed to appear in either suit, the district
court entered default judgments against it. Shortly after the
default judgments, the district court issued two writs of
garnishment to Chase Bank, which, National Title alleges,
mindlessly complied with the writs, releasing over $600,000
belonging to National Title’s clients from the Trust Account to
National Title’s judgment creditors. The last such release was in
September 2010.

¶4     National Title periodically received statements from
Chase Bank regarding the Trust Account. Somehow, National
Title did not notice the substantial shortfall in the Trust Account
until October 2013. It then alerted its underwriter, First
American Title Insurance Company (First American), that it
would need assistance in compensating clients for their
escrowed funds that were lost as a result of the Trust Account’s
garnishments. First American promptly sent a written demand
and then filed suit in November 2013 in federal court,
demanding that National Title reimburse First American for any
payments it would have to make to cover the shortfall. First
American then terminated its relationship with National Title,
resulting in National Title’s closure.

¶5    In September 2015, Plaintiffs filed a third-party complaint
against Chase Bank—in the federal case First American brought

1. When reviewing a motion to dismiss, “we accept the factual
allegations in the complaint as true,” and so we recite the facts
“in a light most favorable to the plaintiff as the nonmoving
party.” Russell Packard Dev., Inc. v. Carson, 2005 UT 14, ¶ 3, 108
P.3d 741.

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against Plaintiffs—alleging breach of fiduciary duty, breach of
contract, and negligence per se. But the federal court, citing
principles of federal abstention, dismissed the suit without
prejudice. When Plaintiffs filed those same claims in state district
court, Chase Bank moved to dismiss under rule 12(b)(6) of the
Utah Rules of Civil Procedure on the ground that the suit was
barred by the general four-year statute of limitations. See Utah
Code Ann. § 78B-2-307(3) (LexisNexis Supp. 2017) (specifying
that a four-year statute of limitations applies to claims “for relief
not otherwise provided for by law”). Plaintiffs opposed the
motion to dismiss, arguing that the statute of limitations began
to run in 2013 when First American sued National Title—not in
2010 when the Trust Account was garnished. They also sought to
file an amended complaint.

¶6      Concluding that the statute of limitations began to run in
2010, the district court determined that the breach of contract
claim was subject to a two-year contractual limitation and that
the claims for breach of fiduciary duty and negligence per se
were subject to the general four-year statute of limitations. 2 And
because Plaintiffs sued in 2015, the district court held that the
claims were barred by the applicable statutes of limitations. As a
result, it granted Chase Bank’s motion, dismissed the suit, and
denied Plaintiffs’ motion to amend. This appeal followed.

            ISSUES AND STANDARDS OF REVIEW

¶7    Plaintiffs contend that the district court erred in
dismissing their complaint, on the rationale that all three claims
were time-barred. “When reviewing a rule 12(b)(6) motion to
dismiss, we accept the factual allegations in the complaint as

2. National Title also brought a claim for equitable
indemnification, but the district court concluded that this claim
had not yet accrued. Plaintiffs do not raise this issue on appeal.

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              National Title Agency v. JPMorgan Chase

true and interpret those facts, and all reasonable inferences
drawn therefrom, in a light most favorable to the plaintiff as the
nonmoving party.” Russell Packard Dev., Inc. v. Carson, 2005 UT
14, ¶ 34, 108 P.3d 741. “Because the propriety of a motion to
dismiss is a question of law,” we review the dismissal for
correctness. Id.

¶8      Plaintiffs also contend that the district court erred in
denying their motion to amend. “Typically, the standard of
review of a denial to amend pleadings is abuse of discretion.”
Ottens v. McNeil, 2010 UT App 237, ¶ 20, 239 P.3d 308 (quotation
simplified). But “when the trial court’s denial is based on its
conclusion that the amendment would be futile because the
statute of limitations bars the claim,” we review the application
of the statute of limitations for correctness. Id. “To the extent that
the statute of limitations analysis involves subsidiary factual
determinations, we review those factual determinations using a
clearly erroneous standard.” Id. (quotation simplified).

                            ANALYSIS

                   I. The Statutes of Limitations

¶9     Determining that Plaintiffs’ damages arose upon Chase
Bank’s release of the funds in 2010, the district court concluded
that National Title “was damaged as soon as the garnished
funds left the Trust Account” as “National Title was overdrawn
and would no longer be able to furnish the escrowed funds back
to its customers.” 3 But Plaintiffs, overlooking their ultimate

3. Plaintiffs assert that the district court’s analysis does not apply
to plaintiff Rowley’s claims because he was never considered a
trustee or listed by name on the Trust Account. These facts
surely suggest his individual standing to sue is questionable,
but, in any event, the complaint does not identify any differences
                                                         (continued…)

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              National Title Agency v. JPMorgan Chase

liability as fiduciaries, contend that it was actually their clients
who were harmed upon the release of the escrowed funds and
that the statutes of limitations did not start running on Plaintiffs’
claims until 2013, when First American terminated its
relationship with National Title, filed suit, and forced National
Title out of business.

¶10 Damages are a necessary element in Plaintiffs’ claims for
negligence, breach of contract, and breach of fiduciary duty. See
Hunsaker v. State, 870 P.2d 893, 897 (Utah 1993) (elements
required for a negligence cause of action); Carmichael v.
Higginson, 2017 UT App 139, ¶ 10 n.5, 402 P.3d 146 (elements
required for a breach of contract cause of action); Giles v. Mineral
Res. Int’l, Inc., 2014 UT App 259, ¶ 6, 338 P.3d 825 (elements
required for a breach of fiduciary duty cause of action). Because
a “cause of action accrues when the last event necessary to
complete the legal claim occurs,” damages would indeed have to
arise for there to be a cause of action. Olsen v. Hooley, 865 P.2d
1345, 1347 (Utah 1993). And once a cause of action accrues, the
statute of limitations begins to run. Id.

¶11 Quoting Seale v. Gowans, 923 P.2d 1361 (Utah 1996),
Plaintiffs assert that when Chase Bank garnished the funds, their
damages were “in the form of an enhanced risk of future harm,”
which damages “are not sufficient to start the running of the
statute of limitations.” Id. at 1365 (quotations simplified). But
damages of this character are only relevant in personal injury
cases where, in rare circumstances, a negligent act may occur but
a plaintiff has yet to show symptoms of an injury and is

(…continued)
in the claims asserted by Rowley and National Title. We
therefore conclude that the district court did not err in applying
its analysis to Rowley’s claims as well.

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therefore unable to produce evidence of actual or future harm.4
See id. at 1365‒66; Lee v. Williams, 2018 UT App 54, ¶ 36, 420 P.3d
88; Riggs v. Asbestos Corp., 2013 UT App 86, ¶¶ 14‒15, 304 P.3d
61. Thus, damages for an enhanced risk of future injury are
intended to reduce the number of speculative claims among
plaintiffs facing uncertainty as to whether an injury will arise.
Seale, 923 P.2d at 1365. The same cannot be said, however, for
cases where a plaintiff seeks damages for a financial loss,
because there is no occasion for speculation as to whether the
plaintiff has suffered an injury.

¶12 Generally, “damages serve the important purpose of
compensating an injured party for actual injury sustained, so
that she may be restored, as nearly as possible, to the position
she was in prior to the injury.” Mahmood v. Ross, 1999 UT 104,
¶ 19, 990 P.2d 933 (quotation simplified). General damages are
those that flow naturally and are a necessary result of a breach or
injury. Id.; Cohn v. J.C. Penney Co., 537 P.2d 306, 307 (Utah 1975).
And a plaintiff who has sustained a financial loss has standing to
immediately bring an action to recover its damages once that
loss has occurred. Although Plaintiffs assert that Chase Bank’s
improper release of funds from the Trust Account did not
initially harm them, the garnishing of escrowed funds from the
Trust Account to satisfy a judgment against National Title is the
breach and the proximate cause of the alleged injuries
underlying Plaintiffs’ claims. Had Chase Bank not released the
funds, or had it immediately restored them upon National Title’s
timely demand, the Trust Account would not have experienced a
shortfall and the events of 2013 would not have unfolded. As
soon as the improper garnishment occurred, National Title

4. Moreover, damages for enhanced risk of future injury are
available only when “a plaintiff seeks to recover damages for a
possible future injury without having suffered any presently
cognizable injury.” Medved v. Glenn, 2005 UT 77, ¶ 14, 125 P.3d
913.

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remained on the hook for those amounts, vis-a-vis its clients to
whom the funds belonged, and it immediately had standing, as
trustee of the account, to demand restoration of the amounts
misappropriated by Chase Bank. Like the district court, we
conclude that damages accrued and the statutes of limitations
began running on Plaintiffs’ claims in 2010 when Chase Bank
garnished funds in the Trust Account to satisfy unrelated
judgments against National Title.

¶13 Plaintiffs insist that what they seek in this action is not
recovery of the garnished funds but rather special or
consequential damages for harms that the loss of those funds
eventually caused. Special damages and consequential damages,
as opposed to general damages, are just “two ways of naming
the damages that occur as a natural consequence of the harm,”
USA Power, LLC v. PacifiCorp, 2016 UT 20, ¶ 93 n.128, 372 P.3d
629 (quotation simplified), above and beyond general damages.
These terms are “essentially synonymous,” with special
damages being the term traditionally used in tort law and
consequential damages being the term used in contract law. Id.
Unlike general damages, special or consequential damages
“‘include items of loss that are more or less peculiar to the
particular plaintiff and would not be expected to occur regularly
to other plaintiffs in similar circumstances.’” State v. Corbitt, 2003
UT App 417, ¶ 20, 82 P.3d 211 (Orme, J., concurring) (quoting
Dan B. Dobbs, Handbook on the Law of Remedies § 3.2, at 138 (West
1973)).

¶14 Here, First American’s lawsuit and termination of its
relationship with National Title was perhaps a natural
consequence of the loss of $600,000 from the Trust Account, but
this is not a loss that would be routinely expected in every case
like this one. Quite extraordinarily, in our judgment, the
substantial shortfall in the Trust Account went unnoticed by
Plaintiffs for almost three years, and upon learning that it would
have to reimburse the garnished funds, First American
demanded that National Title transfer all escrowed funds in

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              National Title Agency v. JPMorgan Chase

National Title’s possession. It also subsequently terminated its
relationship with National Title and brought suit. The unnoticed
loss of a significant amount of money, the failure to monitor and
diligently superintend those funds, National Title’s inability to
reimburse First American, and First American filing suit and
terminating its relationship with National Title all did eventually
happen in this case. But these were not typical results of an
improper garnishment, and it is unlikely that these same events
would occur in every circumstance where a bank improperly
garnishes a trust account. Rather, while being a natural
consequence of the events as they unfolded, these events were
unique to National Title’s situation.

¶15 Of course, in contract actions special or consequential
damages are an adjunct to general damages. Cohn, 537 P.2d at
308. Special or consequential damages must be pleaded in the
same suit as the action claiming general damages. 5 Seale, 923
P.2d at 1364 (providing that “once some injury becomes
actionable, a plaintiff must plead all damages” in one suit)
(emphasis in original). And because “a cause of action accrues
upon the happening of the last event necessary to complete the
cause of action,” Myers v. McDonald, 635 P.2d 84, 86 (Utah 1981),

5. Unlike general damages, which “may be recovered under a
general allegation of damage,” special or consequential damages
must be pleaded with particularity. Cohn v. J.C. Penney Co., 537
P.2d 306, 308 (Utah 1975). See Utah R. Civ. P. 9(h). For special
damages, a plaintiff “must plead each type of damage
specifically so that the opposing party has an adequate
opportunity to defend against the plaintiff’s claims.” Hodges v.
Gibson Products Co., 811 P.2d 151, 162 (Utah 1991). And to
recover consequential damages, a plaintiff must not only prove
that damages were caused by the contract breach but that “they
were foreseeable at the time the parties contracted” and that the
amount can be proven with reasonable certainty. Mahmood v.
Ross, 1999 UT 104, ¶ 20, 990 P.2d 933.

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general damages are the only damages necessary to complete a
cause of action and start the running of the statute of limitations.
Moreover, “mere ignorance of the existence of a cause of action”
will not toll the statute of limitations. Id.

¶16 In sum, the statutes of limitations started to run in 2010
when Plaintiffs sustained the loss of the escrowed funds for
which they were responsible—not in 2013 when aspects of their
claimed special or consequential damages at last came to
fruition. Plaintiffs brought this suit on March 15, 2016, almost six
years after the escrowed funds entrusted to them were
improperly released from the Trust Account. Because their
breach of contract claim is subject to a two-year contractual
limitations provision and their breach of fiduciary duty and
negligence claims are subject to the general four-year statute of
limitations, Plaintiffs’ claims are time-barred. See Utah Code
Ann. § 78B-2-307(3) (LexisNexis Supp. 2017) (providing that
“[a]n action may be brought within four years” when “not
otherwise provided for by law”); Lilley v. JP Morgan Chase, 2013
UT App 285, ¶ 11, 317 P.3d 470 (providing that a negligence
claim is subject to the general four-year statute of limitations);
Russell/Packard Dev., Inc. v. Carson, 2003 UT App 316, ¶ 11, 78
P.3d 616 (providing that a breach of fiduciary duty claim is
subject to the general four-year statute of limitations), aff’d on
other grounds, 2005 UT 14, 108 P.3d 741. For these reasons, the
district court properly dismissed Plaintiffs’ complaint.

                       II. Motion to Amend

¶17 Plaintiffs argue that, because their claims are all timely,
the district court erred in denying their motion to amend their
complaint. Permission for a party to amend its complaint should
be freely given when justice requires. Utah R. Civ. P. 15(a)(2).
But “justice does not require that leave be given if doing so
would be futile.” Jensen v. IHC Hospitals, Inc., 2003 UT 51, ¶ 139,
82 P.3d 1076 (quotation simplified). And “it is well settled that a
court may deny a motion to amend as futile if the proposed

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amendment would not withstand a motion to dismiss.” Id.
(quotation simplified). Because Plaintiffs’ claims are barred by
the statute of limitations, a restatement of their claims would not
have helped them, and the district court did not err in denying
their motion to amend.

                          CONCLUSION

¶18 We conclude that Plaintiffs’ claims for breach of contract,
breach of fiduciary duty, and negligence per se are barred by the
statutes of limitations. And because these claims are time-barred,
the district court did not err in its denial of Plaintiffs’ motion to
amend. Accordingly, we affirm.

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