United States v. Parish Chemical Company ( 2019 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT January 3, 2019
_________________________________
Elisabeth A. Shumaker
Clerk of Court
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 17-4192
(D.C. No. 2:09-CV-00804-CW)
PARISH CHEMICAL COMPANY; (D. Utah)
UINTAH PHARMACEUTICAL,
Defendants.
------------------------------
BRET F. RANDALL,
Trustee - Appellee,
and
RW INVESTMENTS,
Objector - Appellant.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before TYMKOVICH, Chief Judge, McKAY and BALDOCK, Circuit Judges.
_________________________________
*
After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
submitted without oral argument. This order and judgment is not binding precedent,
except under the doctrines of law of the case, res judicata, and collateral estoppel. It
may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1
and 10th Cir. R. 32.1.
R.W. Investments (RWI) owns land adjacent to a formerly contaminated property
(Property) that was cleaned up by the U.S. Environmental Protection Agency (EPA)
pursuant to its authority under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601-9675. Under this statute,
the cost of this cleanup constituted a lien in the United States’ favor on the Property. See
id. § 9607(l). EPA recorded notice of the CERCLA lien in the appropriate county office,
and more than two years later RWI purchased and recorded an easement on the Property.
RWI appeals the district court’s order approving the sale of the Property free and clear of
all encumbrances and assigning RWI’s easement interest in the sale proceeds to a
position junior to the CERCLA lien. The Appellees, in turn, move to dismiss the appeal
as moot, based on the sale of the Property after we and the district court denied RWI’s
motions to stay its sale pending appeal. We grant the Appellees’ motion in part and deny
it in part and otherwise affirm the district court’s decision.
BACKGROUND
The Property is an approximately two-acre site in Vineyard, Utah that was
formerly owned and operated by the Parish Chemical Company and an affiliated
company (collectively “Parish”). Parish contaminated the Property with thousands of
gallons of hazardous substances during its operations there, leading EPA to spend
more than $2.5 million in federal funds to clean up the site. EPA began response
activities at the Property in 2008 and completed them in 2016.
2
A. The CERCLA Lien
CERCLA holds owners and operators of contaminated properties liable for the
cost of responding to the release or threatened release of hazardous substances and
authorizes the United States and other persons to bring suit to recover these costs.
See 42 U.S.C. § 9607(a); Colorado v. Idarado Mining Co., 916 F.2d 1486, 1488-89
(10th Cir. 1990). To assist the United States in recovering its costs, CERCLA also
imposes a lien in favor of the United States for all federally funded response costs on
properties owned by liable parties. 42 U.S.C. § 9607(l)(1). A CERCLA lien is
subject to the rights of “any purchaser, holder of a security interest, or judgment lien
creditor whose interest is perfected under applicable State law before notice of the
[CERCLA] lien has been filed in the appropriate office.” Id. § 9607(l)(3) (emphasis
added).
Pursuant to this authority, EPA, acting on behalf of the United States, recorded
a “Notice of Federal Lien” (Notice) on the Property in March 2009 for the response
costs it was incurring there. The Notice described the Property in detail, correctly
identified the Property’s owner, described the nature of the lien, and provided the
date of filing and contact information for the EPA office responsible for the lien.
The Notice also included a certificate of mailing certifying that EPA was
simultaneously sending a copy of the Notice by certified mail to Parish and its
attorney. EPA prominently noted the certified mail article number for this certified
mailing in the letter to Parish and its attorney that accompanied the copy of the
Notice sent to them. On or about the time it recorded the Notice, EPA also made the
3
documents relating to the CERCLA lien and Notice available to the public in a Lien
Filing Record.
B. RWI’s Interest
RWI owns land adjacent to the Property, which it leases to a drywall business.
In 2011, the Utah Department of Transportation (UDOT) condemned a strip of
property that included portions of both the Property and RWI’s land for a
road-widening project. RWI had used part of its condemned land as a parking area.
UDOT compensated RWI $725,000 for its condemned property, including nearly
$289,000 for the lost parking and more than $267,000 in additional compensation for
RWI to raze a building on its remaining property to replace the lost parking. UDOT
also paid RWI $75,000 to enable it to move to another location. But instead of
moving or constructing new parking on its own land using these funds, RWI opted to
address its parking shortage by paying Parish $50,000 for an option to purchase or
acquire a perpetual parking easement on a half-acre of the Property. RWI exercised
the easement option and recorded the option and easement with the appropriate
county office in October 2011, more than two-and-a-half years after the United States
recorded the CERCLA lien on the Property. It is undisputed that the CERCLA lien
appeared in the chain of title for the Property at this time.
C. EPA’s Settlement with Parish
In 2009, several months after it recorded the Notice, the United States filed
suit against Parish, as the Property owner and operator, to recover its past and future
costs for cleaning up the Property and for other relief. In late 2012 the United States
4
and a receiver acting on behalf of Parish agreed to settle the United States’ CERCLA
claims against the company through a proposed Consent Decree and Stipulated
Judgment. Among other things, the proposed Consent Decree stipulated to entry of
judgment against Parish for the more than $900,000 in response costs EPA had
incurred at the Property to date.
Because Parish was unable to pay for these and anticipated future response
costs at the site, the Consent Decree provided that Parish would satisfy this
obligation by conveying the Property to a trust that would hold the land for the
benefit of the United States. The Trust Agreement attached to the Consent Decree
provided that the Property could be sold for the United States’ benefit, and
designated Bret F. Randall as trustee [hereinafter “Trustee”] to manage the trust and
any subsequent sale. The Consent Decree and its attachments further identified
RWI’s purported easement interest in the Property as subordinated to the United States’
earlier recorded CERCLA lien and provided for EPA to receive the proceeds of the
Property’s sale, after payment of fees and expenses, until the obligations to it were
satisfied. See Aplt. App. Vol. 1 at 120, 123, 157. Although RWI had been engaged in
the case shortly before this settlement was reached,1 it did not object to the proposed
Consent Decree and attachments when they were made available for public comment or
1
A few months before the proposed settlement documents were lodged with
the court and made available for public comment, RWI moved to intervene in this
case to raise claims related to UDOT’s condemnation of part of the Property. RWI
withdrew its intervention motion in October 2012, before the district court could address
it.
5
otherwise seek to participate in the court’s consideration of the proposed settlement. In
March 2013, following a 30-day public comment period and a hearing, the district
court approved and entered the Consent Decree and Stipulated Judgment.
D. The Property’s Sale
After EPA completed cleanup of the Property late in 2016, the Trustee, acting
under the Consent Decree, moved for an order approving proposed bidding and
auction procedures for sale of the Property free and clear of all liens and
encumbrances, with any such interests transferring to the proceeds of the Property’s
sale (“Sale Motion”). The only interest recorded on the Property besides the United
States’ CERCLA lien was RWI’s easement. At the Trustee’s request, the district
court ordered that the Sale Motion be served on RWI to satisfy due process
requirements.
RWI responded by filing written objections to the Sale Motion in which it
argued that its easement interest was senior to the CERCLA lien and that the district
court lacked authority to approve sale of the Property as proposed. The district court
held a hearing on the Trustee’s motion and RWI’s objections at which RWI, the
United States and the Trustee appeared. After the hearing, at the district court’s
invitation, all three submitted supplemental briefing on, among other things, the
court’s equitable authority to order a sale free and clear of all encumbrances, with
these interests to attach to the sale proceeds in order of priority.
In October 2017, the district court granted the Trustee’s Sale Motion. In its order
(Sale Order), the court found that the United States was the senior interest holder on the
6
Property and that RWI was on at least constructive notice of that interest at the time it
acquired the option and easement.2 The district court further held it had equitable
authority to order the sale free and clear of any encumbrances and to transfer all interests
in the Property to the proceeds of the sale in the order of their priority, that equitable
considerations justified the Property’s sale as proposed by the Trustee, and that RWI had
received sufficient due process with respect to the Property’s sale.
RWI appealed the Sale Order and sought a stay pending appeal in the district
court. It also filed a lis pendens notifying the public of its pending appeal. The
district court denied RWI’s motion and ordered it to release the lis pendens after
receiving written argument and holding a hearing. RWI then filed a motion in this
court to stay the Property’s sale pending appeal, which we denied. The Property, free
of all encumbrances, was sold at auction to an unrelated third-party in January 2018,
and the sale closed in May 2018. The Trustee distributed the sale proceeds shortly
thereafter as required by the Consent Decree and Trust Agreement and authorized by
the district court’s Sale Order. Because the sale proceeds were less than the amount
of the United States’ senior CERCLA lien, RWI did not receive proceeds from the
sale.
2
The district court also noted that the record “strongly suggest[ed]” that RWI
had actual notice of the CERCLA lien as well. Aplt. App. Vol. 2 at 542 n.4.
7
DISCUSSION
A. Motion to Dismiss Appeal as Moot
The Trustee, joined by the United States, moves to dismiss this appeal as
constitutionally moot or, in the alternative, under the equitable mootness doctrine.
Constitutional mootness is a threshold question we must address “because the
existence of a live case or controversy is a constitutional prerequisite to federal court
jurisdiction.” Rio Grande Silvery Minnow v. BLM, 601 F.3d 1096, 1109 (10th Cir.
2010) (internal quotation marks omitted). “An appeal is constitutionally moot if the
court can fashion no meaningful relief. At the same time, if a court can fashion some
form of meaningful relief, even if it only partially redresses the grievances of the
prevailing party, the appeal is not moot.” Search Mkt. Direct, Inc. v. Jubber (In re
Paige), 584 F.3d 1327, 1336 (10th Cir. 2009) (internal quotation marks, brackets and
ellipses omitted). The equitable mootness doctrine, in turn, is not jurisdictional but
we have held that it “allows a court to decline to hear a bankruptcy appeal, even
when relief could be granted, if implementing the relief would be inequitable.”
C.O.P. Coal Dev. Co. v. C.W. Mining Co. (In re C.W. Mining Co.), 641 F.3d 1235,
1239-40 (10th Cir. 2011). In either case, the party asserting mootness bears the
burden of showing that dismissal is warranted. See Paige, 584 F.3d at 1336,
1339-40.
Consistent with these principles, we consider whether this appeal is
constitutionally moot by looking to whether meaningful relief is available if RWI
prevails on either or both of the two issues it raises on appeal. Those issues are:
8
(1) whether the district court exceeded its authority in ordering the sale of the
Property free and clear of RWI’s easement and any other encumbrances while
remitting these interests to the proceeds of the sale in order of their priority;3 and
(2) whether the district court erred in finding that RWI’s easement interest in the
Property was junior in priority to the CERCLA lien. We conclude that the first of
these issues is constitutionally moot, but the second is not.
RWI’s contention that the district court erred in extinguishing its easement on
the Property and transferring that interest to the sale proceeds is constitutionally moot
because it challenges the sale of the Property under the terms ordered by the district
court. It is well-established that courts lack the power to undo a court-approved sale
of a property to a good-faith purchaser. See, e.g., Tompkins v. Frey (In re Bel Air
Assocs., Ltd.), 706 F.2d 301, 304-05 & n.10 (10th Cir. 1983) (stating a property’s sale to
a good faith purchaser “remov[es] the property from the jurisdiction of the courts and
render[s] moot the appeal from the order authorizing the sale”); C.W. Mining Co.,
641 F.3d at 1239 (same). As the Supreme Court stated long ago, “[s]trong as a
plaintiff’s equity may be, it can in no case be stronger than that of a purchaser, who has
put himself in peril by purchasing a title, and paying a valuable consideration, without
3
As part of this argument, RWI contends the district court violated its due
process rights because its interest in the Property could only be extinguished through
judicial foreclosure. It also complains that its due process rights were violated
because it “was not allowed to participate in” the determination of EPA’s response
costs in the Consent Decree, Aplt. Opening Br. at 29, even though it had an
opportunity to participate in the public comment period on the proposed Consent
Decree but did not do so.
9
notice of any defect in it.” Boone v. Chiles, 35 U.S. 177, 210 (1836). Thus, “[w]here
there is no stay [of the property’s sale pending appeal], an appellant loses all actionable
rights to the property that has been lawfully conveyed to a third party. And any cloud his
prior rights created on the property’s title is thereby extinguished.” 4 2DP Blanding, LLC
v. Palmer, 423 P.3d 1247, 1252 (Utah 2017); see also United States v. Fitzgerald,
109 F.3d 1339, 1342 (8th Cir. 1997) (holding appellant’s argument that property should
have been sold subject to his senior interest was moot because “the property is now in the
hands of good faith purchasers who relied upon the sale, and we cannot undo that
purchase”).5
4
An appellant’s request for a stay of the property’s sale pending appeal does
not prevent its claims from becoming moot if the request is denied. See In re Nat’l
Mass Media Telecomm. Sys., Inc., 152 F.3d 1178, 1180-81 (9th Cir. 1998) (“Because
constitutional mootness focuses only on the inability of the court to grant effective
relief, the conduct of the parties is irrelevant in determining whether a claim is
moot.”). But RWI does not lose out on appellate review entirely. This court
considered the merits of the claim when RWI filed an emergency motion for a stay
pending appeal. In this motion RWI clearly demonstrated irreparable harm,
explaining that this court would lose jurisdiction to review the merits when the
property sold. Notwithstanding the strength of RWI’s irreparable-harm argument, the
court denied the motion because RWI simply could not show a likelihood of success
on the merits.
5
Although many of the cases stating this rule are grounded in former Bankruptcy
Rule 805 or section 363(m) of the Bankruptcy Code, 11 U.S.C. § 363(m), see e.g., Bel
Air, 706 F.2d at 304-05 & n.10; C.W. Mining Co., 641 F.3d at 1239, the rule has also
been recognized and applied outside of the bankruptcy context, see Fitzgerald, 109 F.3d
at 1342 (finding appeal of foreclosure sale was moot because property had been sold to a
good faith purchaser); see also Restatement (First) of Restitution § 74 cmt. i (Am. Law
Inst. 1937) (“A person, other than the judgment creditor or his attorney, who purchases at
a valid execution sale upon a judgment which is not void but which is subsequently
reversed is entitled to retain the subject matter if, before reversal, he has obtained the
legal title and has paid value therefor.”). The general application of this rule is also
10
RWI does not dispute that the Property was sold to a good-faith purchaser or that
the sale cannot be undone. Instead it argues that this appeal is not moot because the
district court can grant it relief from the “improper distribution” of the sale proceeds “to
an inferior interest holder” by “order[ing] the U.S. to return the proceeds it improperly
received.” RWI’s Resp. to Trustee’s Mot. to Dismiss at 6, 8, 21. But this is not a
challenge to the district court’s determination that it had authority to extinguish all
encumbrances on the Property and transfer them to the sale proceeds, but rather a
challenge to the district court’s separate determination of the relative priorities of RWI’s
and the United States’ interests in the Property and, upon its sale, to the sale proceeds.
Because we cannot undo the sale of the Property without encumbrances as authorized by
the district court, RWI’s appeal of this aspect of the Sale Order is constitutionally moot.
We therefore lack jurisdiction to consider this issue and dismiss it from this appeal.6
consistent with our recognition that we “may lack jurisdiction over an appeal where the
impact of reversal would fall most heavily on parties not before the court.” Paige,
584 F.3d at 1343; see Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc.,
841 F.2d 92, 96 (10th Cir. 1988) (“We are without jurisdiction to impose substantial
adverse consequences upon” persons absent from the proceedings).
6
RWI apparently seeks to avoid this result by characterizing the relief it seeks
on this issue as “revers[al of] the district court’s finding that it had equitable
authority to adjudicate the priority of RWI’s interest in this case.” Aplt. Opening Br.
at 37. But RWI’s argument on this issue belies this characterization, as it asserts
throughout that “the district court erred in extinguishing RWI’s [easement] interest”
in the Property when it approved the sale of the Property without encumbrances,
Aplt’s Reply Br. at 16; see id. at 16-23; Aplt’s Opening Br. at 11-12, 28-37, and
seeks to have this decision reversed, Aplt’s Opening Br. at 37 (concluding district
court’s order “to extinguish RWI’s easement and option interests and to transfer
those interests to the [sale] proceeds . . . was in error . . . and should be reversed”).
These arguments therefore challenge the district court’s authority to approve the
11
RWI’s challenge to the district court’s decision on the priority of its interest is
subject to a different analysis. With respect to this claim, the United States argues that no
relief is available, so that this issue is also constitutionally moot, because all of the
proceeds from the Property’s sale have been distributed by the Trustee. But the proceeds
available after payment of fees and expenses were disbursed to a single entity, the United
States, which is a party to this action. As a result, the party receiving the available sale
proceeds is within the district court’s jurisdiction and had notice of RWI’s claim that its
easement interest had priority over the United States’ interest in these proceeds. These
circumstances distinguish this case from those relied upon by the United States, which
concerned circumstances in which sale proceeds had been disbursed to innocent
third-parties who had no reason to doubt the finality of the transaction. See, e.g., Whatley
Ranch Joint Venture, Ltd. v. Whatley (In re Whatley), 169 B.R. 698, 699, 700-01
(D. Colo. 1994) (holding challenge to property sale was moot because the property had
been sold to a good faith purchaser and the sale proceeds distributed to the debtor’s
bankruptcy creditors and “it is speculative at best that [the] estate creditors could be
effectively or equitably ordered to disgorge funds distributed to them a year ago”),
aff’d, 54 F.3d 788 (10th Cir. 1995) (unpublished); see also In re Simon Transp. Servs.,
Inc., 138 F. App’x 52, 56 (10th Cir. 2005) (holding appeal of asset sale in Chapter 11
bankruptcy was moot in part because “[a]llowing the proceeds of a sale to pass to a third
party absent a stay or segregation of funds fails to place parties on notice, thereby
Property’s sale without RWI’s easement attached, not its authority to determine the
priority of the interests that were transferred from the Property to the sale proceeds.
12
reintroducing uncertainty” to the transaction), rejected on other grounds in In re C.W.
Mining Co., 740 F.3d 548, 560 (10th Cir. 2014).
Neither the United States nor the Trustee has explained why we or the district
court could not order the United States to disgorge the proceeds it received from the
Property’s sale if RWI were to prevail on its priority claim on appeal. Accordingly, they
have not demonstrated that there is no relief the court could order should RWI prevail on
this issue, with the result that RWI’s challenge to the district court’s priority
determination is not constitutionally moot. Cf. Jackson v. Denver Producing & Ref. Co.,
96 F.2d 457, 461 (10th Cir. 1938) (refusing to dismiss appeal for constitutional mootness
“where only a part of the controversy has become moot and other questions remain for
decision”).
The Trustee and United States further contend that even if RWI’s appeal is not
constitutionally moot in its entirety, we should nonetheless dismiss it under the
equitable mootness doctrine because granting RWI relief under the circumstances of
this case would be inequitable. RWI responds that the doctrine is not available
outside of the bankruptcy context and does not warrant reversal in this case in any
event. But we choose not to decide these questions, because we can readily resolve
on the merits the priority-of-interest issue over which we have jurisdiction. See C.W.
Mining Co., 641 F.3d at 1240 (proceeding to the merits after exercising discretion not
to decide whether equitable mootness doctrine applied).
13
B. Priority of the United States’ and RWI’s Interests in the Property
RWI contends the United States’ CERCLA lien does not have priority over its
easement interest in the Property because the earlier-recorded lien Notice did not
include all of the information required by Utah’s lien notice statute and therefore was
invalid and of no effect in establishing the lien’s priority. The United States argues
in response that CERCLA’s lien provision, 42 U.S.C. § 9607(l), does not require
compliance with state lien notice requirements and that even if it did, the Notice
recorded by EPA sufficiently complied with the Utah statute. Reviewing these
questions de novo, O’Toole v. Northrop Grumman Corp., 499 F.3d 1218, 1221
(10th Cir. 2007) (review of legal questions is de novo), we agree with the district
court that the Notice sufficiently complied with Utah’s lien notice requirements and
that it is therefore unnecessary to decide whether such compliance was required
under CERCLA.
The Utah statute governing notice requirements for lien filings at the time EPA
recorded the CERCLA lien provided in relevant part:
(1) A lien claimant or the lien claimant’s agent shall send by certified
mail a written copy of the notice of lien to the last-known address of the
person against whom the notice of lien is filed no later than 30 days after
the day on which a lien claimant or the lien claimant’s authorized agent
files a notice of lien meeting the requirements of Subsection (2):
(a) for recordation with:
(i) a county recorder;
(ii) a county clerk; or
(iii) a clerk of the court.
...
14
(2) The notice of lien described in Subsection (1) shall contain the
following information:
(a) the name and address of the person against whom the lien is filed;
(b)(i) a statement that certain property owned by the person against whom
the lien is filed is subject to a lien;
(ii) the amount of the judgment, settlement, or compromise if the lien is
based on a charge against or interest in a judgment, settlement, or
compromise; or
(iii) the amount of state taxes owed;
(c) the article number contained on the certified mail receipt;
(d) the date the notice of lien was filed; and
(e) the name and address of the lien claimant.
Utah Code Ann. § 38-12-102(1) & (2) (2005) (emphasis added).
RWI does not dispute that the Notice of the CERCLA lien EPA recorded in
2009 substantially complied with these requirements. In fact, RWI points to only
two alleged deficiencies in the Notice: that it does not include an address for
the “United States,” as the lien claimant, see id. § 38-12-102(2)(e), or the article
number from the certified mailing of the recorded Notice to the Property owner,
see id. § 38-12-102(2)(c).
The district court properly rejected the first claimed deficiency out-of-hand, as
the Notice clearly states that the United States is acting with respect to the CERCLA
lien through EPA and provides the name and address of the EPA office tasked with
this responsibility. See Aplt. App. Vol. 1 at 177-78. But it is true that the Notice as
recorded does not include the article number for the certified mailing by which EPA
sent the Notice to Parish, but instead includes a certificate of mailing that serves the
15
same purpose. Thus, the question is what, if any, effect the omission of the certified
mailing article number on the recorded Notice has on its validity.7
RWI argues that this omission invalidates the Notice in its entirety, and thus
deprives the United States of its priority position, because Utah’s lien notice statute
requires strict rather than substantial compliance with its terms. RWI bases this
argument solely on the statute’s use of the word “shall” in describing the required
contents of a lien notice. Utah Code Ann. § 38-12-102(2). RWI’s argument is
meritless.
Under Utah law, “there is no universal rule of statutory construction to
distinguish between statutes requiring strict or substantial compliance.” Aaron & Morey
Bonds & Bail v. Third Dist. Court, 156 P.3d 801, 803 (Utah 2007). To make this
determination, the Utah courts look to whether the provision in question is mandatory or
directory. See id.; Kennecott Copper Corp. v. Salt Lake Cty., 575 P.2d 705, 706 (Utah
1978). A statutory provision is mandatory and generally requires strict compliance if it is
“of the essence of the thing to be done,” and a failure to strictly adhere to it would
possibly prejudice “those whose rights are protected by the statute.” Kennecott, 575 P.2d
at 706; see Aaron & Morey, 156 P.3d at 803. A statutory provision is directory and
requires only substantial compliance if it goes “merely to the proper, orderly and prompt
conduct of the business” and if substantial compliance with its terms will effectuate the
7
The validity of the CERCLA lien itself is not at issue, because Utah law
expressly provides that a failure to meet the lien notice requirements does not
invalidate the lien. See Utah Code Ann. § 38-12-103(3).
16
policy behind the statute and will not prejudice those whom the statute is intended to
protect. Kennecott, 575 P.2d at 706; see Aaron & Morey, 156 P.3d at 803.
While the legislature’s use of the term “shall” implies that a statutory provision is
mandatory, see Aaron & Morey, 156 P.3d at 804-05 & n.2, the Utah Supreme Court has
expressly held that this usage is not determinative, see Kennecott, 575 P.2d at 706
(holding that use of “shall” and “must” do not render a statute mandatory because “[t]he
intention of the legislature . . . should be controlling and no formalistic rule of grammar
or word form should stand in the way of carrying out the legislative intent”). In fact, the
Utah courts have held on a number of occasions that statutes stating that something
“shall” be done are directory rather than mandatory and thus are satisfied by substantial
compliance. See, e.g., Aaron & Morey, 156 P.3d at 804-05 (holding strict compliance
with statutory requirement that prosecutor’s fax number “shall” be included in a bail
bond forfeiture notice was not required because the requirement was directory rather than
mandatory); Southwick v. Southwick, 259 P.3d 1071, 1074-75 (Utah Ct. App. 2011)
(holding strict compliance with statute providing that a disclaimer notice “shall” include a
certain recitation was not required for the notice to be legally effective because the
provision was directory rather than mandatory); see also Cache Cty. v. Prop. Tax Div.,
922 P.2d 758, 764 (Utah 1996) (holding statute stating that tax commission “shall” act by
a certain date was directory rather than mandatory); Kennecott, 575 P.2d at 707 (holding
statute stating board of county commissioners “must” and “shall” levy a tax by certain
dates was directory).
17
Considering Utah’s statutory requirements for lien notices under these
standards, we conclude that the certified mailing article number requirement in
Utah’s lien notice statute is directory rather than mandatory, and that the statute was
therefore satisfied by EPA’s undisputed substantial compliance with it. First, the text
of Utah’s lien notice statute indicates that its primary purpose is to ensure that the
person against whom the notice of lien was filed has notice that the lien was
recorded. See Utah Code Ann. § 38-12-102(1). The purpose of Utah’s recording
statutes, meanwhile, is “to protect the purchaser’s interest against the asserted interest of
any third parties, and to inform third parties of the existence of pre-existing
encumbrances on the property.” FDIC v. Taylor, 267 P.3d 949, 960 (Utah Ct. App.
2011) (internal quotation marks omitted). The statutory requirement that the recorded
lien notice include the article number for the certified mailing of the notice to the person
against whom the notice is filed does not go to the essence of either of these statutory
purposes, but rather goes “to the proper, orderly and prompt conduct of the business” at
hand. Kennecott, 575 P.2d at 706. In addition, to the extent that recorded proof of
mailing could be considered essential to these statutory purposes, EPA’s recording of a
certificate of mailing as part of the Notice satisfied these purposes. These considerations
support the conclusion that the article number requirement is directory, not mandatory,
and is therefore satisfied by substantial compliance.8
8
RWI argues that strict compliance is nonetheless required because inclusion of
the certified mailing number on the recorded lien notice allows interested third-parties to
independently determine, by checking the number against postal records, whether the lien
18
We also agree with the district court that RWI suffered no prejudice as a result of
EPA’s substantial compliance with the lien notice statute. In considering this issue,
“[t]he question . . . is not whether prejudice could hypothetically occur, but whether
it actually did occur in this case.” Aaron & Morey, 156 P.3d at 805. The district
court found that RWI had constructive notice of the CERCLA lien before it acquired the
easement, and likely actual notice as well. RWI does not dispute these findings. In light
of this notice, if RWI had had any questions about the CERCLA lien notice or the lien
itself, including questions about whether the lien notice had been sent to Parish by
certified mail as required, it could have put these questions to Parish in the course of its
easement negotiations with the company, contacted EPA, and/or consulted EPA’s
publicly available Lien Filing Record. Further, we note that RWI had options other than
acquisition of an easement on the Property available to it to remedy its parking shortage,
especially given the substantial payments UDOT had made to it to replace this parking or
relocate. For its own reasons, RWI opted instead to secure an easement on the
notice was sent by certified mail to the property owner as required. But RWI does not
point to anything in the lien notice statute or elsewhere that suggests the legislature
intended that a recorded lien notice would benefit third-parties in this way. In fact, to the
contrary, the Utah legislature recently reordered the lien notice statute to clarify that the
article number on the certified mail receipt is not a required component of the lien notice
as recorded but rather is a component of the separate notice of lien filing sent to the
person against whom the notice is filed. See 2014 Utah Laws Ch. 129 (revising Utah
Code § 38-12-102 to distinguish between the contents of the recorded lien notice and the
contents of the notice mailed to the party against whom the lien notice is filed, codified at
Utah Code Ann. § 38-12-102(2)(a) (describing required contents of notice of lien for
recording) and id. § 38-12-102(2)(b) (adding requirement that lien notice provided to
affected party include article number from the certified mail receipt)).
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already-encumbered Property, thereby assuming the risk that its interest would be junior
to the previously recorded CERCLA lien. Whatever prejudice RWI suffered as a result
of this decision was of its own making.
In sum, we can discern no reason under Utah’s lien notice statute why the
otherwise validly recorded CERCLA lien notice should lack legal effect merely because
it does not include the article number for the separate certified mailing EPA made to
Parish pursuant to the statute.9 The requirement that the recorded CERCLA lien notice
include the article number, as it existed at the time EPA recorded the Notice, was
directory, not mandatory. As a result, EPA’s substantial compliance with the lien notice
requirements rendered its CERCLA lien notice legally effective and gave it priority over
RWI’s later recorded easement.
CONCLUSION
For the reasons stated above, we dismiss RWI’s challenge to the sale of the
Property free and clear of its easement for lack of jurisdiction and affirm the district
9
We are also not persuaded that Utah Code Ann. § 38-12-103(2) requires a
different result. This statute merely allows the person against whom a lien notice is filed
to assert that that the lien notice does not comply with the statute’s notice requirements
and recover damages if the lien claimant does not correct a non-compliant notice. It
therefore begs the question of what constitutes compliance with the statutory lien notice
requirements.
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court’s determination that RWI’s interest in the Property and the proceeds from its
sale was junior to the United States’ CERCLA lien.
Entered for the Court
Monroe G. McKay
Circuit Judge
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