Ruth B. Hardy Revocable Trust v. Rindlesbach

354 P.3d 785

2015 UT App 159

RUTH B. HARDY REVOCABLE TRUST, Delcon Corporation PSP FBO A. Wesley Hardy, Finesse PSP, MJS Real Properties, Uintah Investments, David D. Smith, Steven Condie, David L. Johnson, Berrett PSP, VW Professional Homes PSP, Ty Thomas, and D.R.P. Management PSP, Plaintiffs and Appellees

v.Mark L. RINDLESBACH, Defendant and Appellant.

No. 20140075–CA.

Court of Appeals of Utah.

June 25, 2015.

Rehearing Denied Aug. 18, 2015.

James K. Tracy, Stacy J. McNeill, and James C. Dunkelberger, Salt Lake City, for Appellant.

James C. Swindler, Salt Lake City, for Appellees.

Judge STEPHEN L. ROTH authored this Memorandum Decision, in which Judges GREGORY K. ORME and KATE A. TOOMEY concurred.

Memorandum Decision

ROTH, Judge:

¶ 1 Mark L. Rindlesbach, in his capacity as trustee of the Rindlesbach Construction Inc. Profit Sharing Plan (the Plan), appeals the district court's decision denying the Plan's objection to a writ of execution.¹ The Plan argues that due to defects in the writ of execution, the writ failed to comply with applicable rules in a way that “affected the outcome of the sale” of its property. Accordingly, the Plan requests that we void the sheriff's sale of its property and require the writ to be re-issued in compliance with the rules of civil procedure before the property is sold. We reverse the district court's ruling and remand for further proceedings.

¶ 2 In 2007, the appellees in this case—a group of twelve lenders (the Lenders)—made a $3.3 million loan to a borrower who was seeking to purchase a large tract of land for development. The loan was guaranteed by the Plan along with eight other guarantors. When the borrower failed to pay back the loan, the Lenders sought recovery from all of the guarantors. By the time of trial, the Plan was the only guarantor remaining that had not declared bankruptcy and that had not had its liability discharged. A verdict was ultimately entered against the Plan, and the court entered judgment in favor of the Lenders in the amount of $6,367,203.64.

¶ 3 Following the entry of judgment, the Lenders applied for a writ of execution directing the sale of “[a]ny and all claims and causes of action of Mark Lee Rindlesbach, Trustee of the Rindlesbach Construction Inc. Profit Sharing Plan.”² The Plan objected to the writ, arguing that it failed to give a detailed description of the property to be sold as required by rule 64 of the Utah Rules of Civil Procedure. At a hearing on the objection, the district court determined “that the specificity of the description really is a factual matter for each case” and “the broad language” used in the writ at issue was “appropriate.” The court also stated,

[T]he time for [the] debtor in this case to show some prejudice from the broad description used in the writ in this case was now—was to come forward and show a potential exemption or to show a potential reduction in bidders, not in theory, not based on an inflexible reading of the rule, but in actuality using facts....

The property was sold at auction in accordance with the writ, and the Lenders, as the only bidder, acquired the property with a credit bid of $200,000 against the amount of their judgment.

¶ 4 On appeal, the Plan argues that the writ “was improperly issued because the description of the property to be sold does not describe any item of property with sufficient specificity.” The Plan points to rules 64 and 64E of the Utah Rules of Civil Procedure in support of its argument. A party seeking a writ of execution must file an application stating the “nature, location and estimated value of the property.” Utah R. Civ. P. 64E(b)(2). Once the writ of execution is issued, “the clerk shall attach to the writ plaintiff's application, detailed description of the property, the judgment, notice of exemptions and reply form.”³ Id. R. 64(d)(2)(C). The Plan argues that the writ in this case “did not even come close to providing a detailed description. Rather, the [w]rit provided a bare description of the category of property to be sold.” It argues that the writ's direction to sell “[any] and all claims and causes of action” was only a general description of a category of property and that the writ did not provide potential buyers with enough information for them to be able to discern what exactly was being sold. The Plan argues the need for a more specific description of the claims and causes of action at issue “is self-evident” because such a general description in the context of the sale of any other type of property would never be sufficient. For example, the Plan asserts that a creditor executing on vehicles could not just state “all vehicles owned by the defendant” in the writ but instead would have to provide specific information about the vehicles such as “make, model year, and VIN ... so that both the judgment debtor and potential bidders would know whether there were appropriate exemptions, what property is being sold, and what would be an appropriate bid.”

¶ 5 The Plan argues that the writ's failure to provide more specific information about the claims and causes of action being sold introduced “an unacceptable level of vagueness and uncertainty in the sales process” and likely impacted the number and value of bids received at auction. It contends that “[w]ithout more information, it would be impossible for a bidder to determine whether the nature and value of the property warrants any bid whatsoever.” The Plan argues that the writ for the claims and causes of action at issue here should have included “the name of the case, the case number, and the Court in which the case is pending.” The Plan points to the fact that the Lenders were aware of a pending lawsuit between the Plan and the City of Saratoga Springs. The Plan contends that “[c]learly, the City of Saratoga Springs ... would have been an interested party at a sale in which a claim the City was defending was being sold.” However, the Plan argues, the writ's failure to identify the claim beyond the more general description of “[a]ny and all claims and causes of action” prevented “the City [or] any other bidder” from “hav[ing] enough certainty about what they were bidding on to feel comfortable making a bid at the execution sale.” The Plan accordingly argues that the sale was affected by the writ's defects and that the district court's refusal to sustain the Plan's objection to the writ “was not harmless error.”

¶ 6 The Lenders point us to Bangerter v. Petty, 2010 UT App 49, 228 P.3d 1250. In Bangerter, we declared, “There is a general policy to sustain a sheriff's sale unless [it is] manifestly unfair....” Id. ¶ 15 (alteration in original) (citation and internal quotation marks omitted). Examples of manifest unfairness include “gross irregularities, mistake, fraud, or collusion.” Id. (citation and internal quotation marks omitted). The Lenders contend that the Plan has failed to meet its burden of demonstrating manifest unfairness. They argue that the Plan has failed to show the sale would have resulted in a better price even with a more specific description and that the irregularities were substantial rather than merely technical. Moreover, they contend that where the Plan was “evasive in [its] testimony” and “conceal[ed] the existence of potential claims, [it] should not be heard to complain that [its] claims were not better identified and more thoroughly described.”

¶ 7 It is important to note, however, that the Plan is not appealing the district court's denial of a motion filed after the execution sale to set the sale aside. Instead, the Plan is arguing that the district court's decision to allow the sale to go forward over the Plan's pre-sale objection was error. All of the cases that the Lenders have pointed us to have dealt with objections that were made to irregularity in execution or trustee sales after the sale took place, not before. See, e.g., Timm v. Dewsnup, 2003 UT 47, ¶ 34, 86 P.3d 699 ; Commercial Bank of Utah v. Madsen, 120 Utah 519, 236 P.2d 343, 344 (1951) ; Bangerter, 2010 UT App 49, ¶ 7, 228 P.3d 1250. We have not located any cases that have addressed an appeal from a district court's decision to allow an execution sale to proceed over a party's objection of irregularity brought before the sale rather than after. Accordingly, the appropriate standard and analysis we are to apply in such a case is essentially a matter of first impression and is not governed by the cases to which the Lenders have pointed. However, we conclude that the facts of this case allow us to come to a resolution without having to decide more generally the issues that arise from this case's unique procedural posture.

¶ 8 First, we note that “[t]he public auction procedure provides a key safeguard for a judgment debtor because the public nature of the sale provides an opportunity for the open market to determine the value of the judgment debtor's property.” Kristopher Wood, Comment, Short Circuiting the Justice System: How Defendants Are Misusing Writs of Execution, 39 Pepp. L.Rev. 747, 754 (2012) (alteration in original) (citation and internal quotation marks omitted); cf. Snow, Nuffer, Engstrom, & Drake v. Tanasse, 1999 UT 49, ¶¶ 12–14, 980 P.2d 208 (determining that permitting a law firm to purchase a legal malpractice claim against itself violates public policy in part because then “the appropriate value of the legal malpractice claim will never be fairly determined”); Brigham Truck & Implement Co. v. Fridal, 746 P.2d 1171, 1173 (Utah 1987) (per curiam) (noting that a sale was commercially reasonable because “[t]he public, upon proper notice, was invited to participate and given an opportunity to bid upon a competitive basis”). Public sales are “made at auction to the highest bidder” and allow “all persons ... the right to come in and bid.” Johnson Cotton Co. v. Cannon, 242 S.C. 42, 129 S.E.2d 750, 755 (1963). These sales provide “a competitive environment with more than one bidder.” Manufacturers Hanover Trust Co. v. Koubek, ...