Trust v. River Crossings Llc.

238 P.3d 1035

ARBOGAST FAMILY TRUST, Plaintiff and Respondent, v. RIVER CROSSINGS, LLC, Defendant and Petitioner.

No. 20080699.

Supreme Court of Utah.

May 14, 2010.

Scott M. Lilja, Nicole M. Deforge, Salt Lake City, for plaintiff.

Tyler T. Todd, Chad J. Utley, Shawn T. Farris, St. George, for defendant.

On Certiorari to the Utah Court of Appeals

NEHRING, Justice:

INTRODUCTION

¶ 1 This case presents us with the question of what a party must do to “appear” under rule 5(a)(2)(B) of the Utah Rules of Civil Procedure. We hold that the court of appeals correctly determined that a rule 5(a)(2)(B) appearance requires a party to make a formal presentation or submission to the trial court. Because River Crossings failed to make an appearance as required by this rule, we affirm.

BACKGROUND

¶ 2 In this opinion, we include only those facts we deem relevant to the specific question presented to us. A more detailed recitation of the facts and proceedings can be found at Arbogast Family Trust v. River Crossings, LLC, 2008 UT App 277, ¶¶ 2-9, 191 P.3d 39.

¶ 3 In September 2004, Arbogast Family Trust loaned River Crossings, LLC, $2,450,000. The loan repayment was due approximately one year later, on September 16, 2005. The loan agreement included a penalty provision imposing a six percent late fee if payment was more than five days overdue.

¶ 4 River Crossings repaid the loan in full on October 7, 2005, approximately twenty-one days after the due date. Because the loan was more than five days overdue, Arbogast claimed it was entitled to collect a late fee of over $148,000 plus interest. River Crossings claimed it owed no additional fees because Arbogast granted it an extension of time to repay the loan. Because of the dispute, River Crossings authorized Southern Utah Title Company to hold $178,000 in escrow until the matter was resolved. These funds were eventually deposited with the district court.

¶ 5 On January 10, 2006, Arbogast filed a Complaint for Declaratory Judgment to obtain the funds held in escrow. Arbogast granted River Crossings an extension of time to answer the complaint or to communicate a settlement offer. On June 28, 2006, River Crossings made a settlement offer to Arbogast. The next day Arbogast sent a letter rejecting the offer and stating:

My client has previously granted your client an extension of time within which to answer the complaint. However, given the present state of the case, I am, on behalf of my client, hereby requesting that your client file an Answer to the complaint within twenty (20) days of the date of this letter.

Id. ¶ 4.

¶ 6 Approximately one month later, River Crossings sent an email to Arbogast's principal proposing the parties “discuss the direction of [the] lawsuit.” Id. ¶ 5. No further communication occurred. On July 31, more than thirty days after the June 29 letter, Arbogast obtained a certificate of default from the court clerk. Arbogast did not alert River Crossings or provide it with a copy of its request for default judgment. On August 10, default judgment was entered against River Crossings. Notice of default was sent to River Crossings on August 15. Id.

¶ 7 On September 26, 2006, River Crossings filed a rule 60 motion to set aside the default judgment. The trial court denied the motion, and River Crossings appealed. River Crossings argued to the court of appeals that the district court abused its discretion when it refused to set aside the default judgment because Arbogast failed to provide notice of default to River Crossings as required by rule 5 of the Utah Rules of Civil Procedure. River Crossings further argued that the district court's refusal to set aside the default judgment was based on faulty findings of fact.

¶ 8 The court of appeals affirmed the district court's refusal to set aside the default judgment. Id. ¶ 35. Citing our decisions in Central Bank & Trust Co. v. Jensen, 656 P.2d 1009 (Utah 1982) and Lund v. Brown, 2000 UT 75, 11 P.3d 277, the court of appeals reasoned that Arbogast was not required to give notice to River Crossings before seeking default judgment because River Crossings failed to make a formal appearance through a pleading in the action as required by Utah Rule of Civil Procedure 5(a)(2)(B).

Arbogast, 2008 UT App 277, ¶ 16, 191 P.3d 39. The court of appeals further found that the district court's refusal to set aside the default judgment was not based on faulty findings of fact and that River Crossings did not show any reasonable justification or excuse for its failure to answer Arbogast's complaint. Id. ¶¶ 29-31.

¶ 9 River Crossings petitioned for certiorari. We granted the petition to decide whether the court of appeals erred in its determination that River Crossings did not “appear” under Utah Rule of Civil Procedure 5(a)(2)(B) such that Arbogast was required to give River Crossings notice before default judgment was entered. We have jurisdiction in this case pursuant to Utah Code section 78A-3-102(3)(a) (2008).

STANDARD OF REVIEW

¶ 10 On certiorari, “we review the decision of the court of appeals, not the decision of the district court.” Nolan v. Hoopiiaina, 2006 UT 53, ¶ 19, 144 P.3d 1129. “The interpretation of a rule of procedure is a question of law that we review for correctness.” State v. Rodrigues, 2009 UT 62, ¶ 11, 218 P.3d 610 (internal quotation marks and alteration omitted).

ANALYSIS

¶ 11 According to Utah Rule of Civil Procedure 5(a)(1) “every judgment, every order ... every pleading ... every paper ..., every written motion ..., and every written notice, appearance, demand, offer of judgment, and similar paper shall be served upon each of the parties.” Although this rule expresses a general policy that parties should have notice of any activity in the case, rule 5 goes on to denote a limit to this policy. Under rule 5(a)(2)(B) “[n]o service need be made on parties in default ... for failure to appear.” Utah R. Civ. P. 5(a)(2) (emphasis added).

¶ 12 Although rule 5 clearly articulates that notice, including notice of default, need not be given to parties who fail to appear in a proceeding, the rule does not answer the question presented here: What does it mean to “appear”?

¶ 13 River Crossings contends that the court of appeals erred when it concluded that only a “formal appearance” before a court, such as filing an answer, could constitute an appearance under rule 5(a). Directing our attention to federal circuit court interpretations of the federal equivalent of rule 5, River Crossings promotes a more expansive definition of appearance, one that would include some level of informal contacts or negotiations between the parties. According to River Crossings, this more generous definition is most consistent with the policy of hearing cases on the merits and is more in accord with our case law and the Utah Standards of Professionalism and Civility.

¶ 14 In contrast, Arbogast asks us to affirm the court of appeals' decision that only a formal appearance will suffice to trigger notice requirements under rule 5. Arbogast contends that this view is most consistent with our decisions in Central Bank & Trust Co. v. Jensen, 656 P.2d 1009 (Utah 1982) and Lund v. Brown, 2000 UT 75, 11 P.3d 277, and that this approach will most effectively foster a just, expedient, and predictable process.

¶ 15 We hold that the court of appeals correctly determined that (1) a party must make a formal filing or submission to the district court in order to make an appearance under rule 5(a) and (2) although not required by rule 5, the Utah Standards of Professionalism and Civility encourage attorneys to attempt to provide a final notification to the opposing party before entering default judgment.

I. THE COURT OF APPEALS CORRECTLY DETERMINED THAT RULE 5 REQUIRES PARTIES TO FORMALLY APPEAR BY A FILING OR SUBMISSION TO THE DISTRICT COURT

¶ 16 This case presents us with the task of interpreting a single word within one of our procedural rules. When interpreting a rule of civil procedure, “we look to the express language of that procedural rule and to the cases interpreting it.” First Equity Fed., Inc. v. Phillips Dev., LC, 2002 UT 56, ¶ 11, 52 P.3d 1137. “[T]o the extent thatthey are similarly worded,” we can also turn to the federal rules of civil procedure and cases interpreting them for further guidance. Bichler v. DEI Sys., Inc., 2009 UT 63, ¶ 24 n. 2, 220 P.3d 1203; First Sec. Bank v. Conlin, 817 P.2d 298, 299 (Utah 1991). In conducting this analysis, it is “most important ... that the rules be understood, and applied, with clarity and consistency,” and that “the defendant, the court, the state, and others be able to determine [the meaning of the rule].” State v. Todd, 2006 UT 7, ¶ 8, 128 P.3d 1199.

¶ 17 Rule 5 expressly provides that all pleadings, papers, and any other information related to the lawsuit must be served on each of the parties except that “[n]o service need be made on parties in default ... for failure to appear.” Utah R. Civ. P. 5(a) (emphasis added). The parties do not dispute that failing to make an appearance in a lawsuit may relieve the opposing party from having to give notice and serve pleadings. Rather, the only dispute is what a party must do to “appear” under the rule to trigger the right to receive notice of all filings and proceedings from opposing counsel.

¶ 18 When we interpret a procedural rule, we do so according to our general rules of statutory construction. See Burns v. Boyden, 2006 UT 14, ¶ 19, 133 P.3d 370 (“We interpret court rules, like statutes and administrative rules, according to their plain language.”). Thus, in our quest to define the word “appear,” we start by examining the ordinary meaning or usually accepted interpretation. See State v. Rothlisberger, 2006 UT 49, ¶ 15, 147 P.3d 1176; Keene v. Bonser, 2005 UT App 37, ¶ 10, 107 P.3d 693 (“In construing the plain language of a [rule], words which are used in common, daily, nontechnical speech, should, in the absence of evidence of...