Timothy v. Pia Anderson Dorius Reynard Moss , 2019 UT 70 ( 2019 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2019 UT 70
IN THE
SUPREME COURT OF THE STATE OF UTAH
PAUL TIMOTHY and JANICE TIMOTHY,
Petitioners,
v.
PIA, ANDERSON, DORIUS, REYNARD & MOSS, LLC,
and BRENNAN MOSS,
Respondents.
No. 20180228
Heard December 12, 2018
Filed December 16, 2019
On Certiorari to the Utah Court of Appeals
Third District, Salt Lake
The Honorable Todd M. Shaughnessy
No. 120905780
Attorneys:
Nelson Abbott, Provo, for petitioners
J. Ryan Mitchell, John P. Mertens, William O. Kimball,
Salt Lake City, for respondents
JUSTICE PETERSEN authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
JUSTICE HIMONAS, and JUSTICE PEARCE joined.
JUSTICE PETERSEN, opinion of the Court:
INTRODUCTION
¶1 We granted certiorari in this case to address whether a
law firm that deposited funds from a client into its trust account is
a “transferee” under the former Uniform Fraudulent Transfer Act
TIMOTHY v. PIA ANDERSON DORIUS REYNARD & MOSS
Opinion of the Court
(UFTA). 1 However, while this case was before the court of
appeals, Petitioners allowed the judgment that formed the basis of
their fraudulent-transfer claim to expire. Respondents filed a
suggestion of mootness with this court. They argue that
Petitioners have no remedy under the UFTA because they are no
longer creditors, so even if Petitioners were to prevail on the
transferee issue, it would not affect their rights.
¶2 We agree and dismiss the petition as moot. We further
vacate the judgment of the court of appeals because Petitioners’
fraudulent-transfer claim became moot before that court’s opinion
was issued. The judgment of the district court stands.
BACKGROUND 2
¶3 Paul and Janice Timothy prevailed in a lawsuit against
Thomas and Teri Keetch for, among other things, fraud and
breach of contract. The Timothys obtained a judgment against the
Keetches on May 6, 2009. 3 But they were never able to collect it.
¶4 The record indicates that the Keetches took measures to
avoid paying this debt, including depositing their money into an
1 The UFTA was set out in Utah Code sections 25-6-1 to -14. It
was subsequently amended, renumbered, and renamed as the
Uniform Voidable Transactions Act. This amendment was not
effective until after the facts in this case took place. Accordingly,
we cite to and apply the 2013 version of the UFTA unless
otherwise noted. Additionally, we refer to such claims as
fraudulent-transfer claims rather than voidable-transaction
claims.
2 When reviewing a district court’s grant of summary
judgment, we view “the facts and all reasonable inferences drawn
therefrom in the light most favorable to the nonmoving party.”
Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (citation omitted).
Summary judgment is proper “if the moving party shows that
there is no genuine dispute as to any material fact and the moving
party is entitled to judgment as a matter of law.” UTAH R. CIV. P.
56(a).
3 Although the district court ruled in the Timothys’ favor on
January 13, 2009, the final judgment of $76,451.17 plus attorney
fees was not signed and filed until May 6, 2009. The latter date is
when the statute of limitations on the judgment began to run.
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Opinion of the Court
account held in a minor son’s name. 4 Despite this, the Keetches
testified at a supplemental hearing in March 2011 that they had no
assets. And Brennan Moss, an attorney with the law firm of Pia,
Anderson, Dorius, Reynard & Moss (PADRM), wrote letters
stating that the Keetches did not have significant assets.
¶5 Although the Keetches claimed to have no assets, less
than a week after the supplemental hearing, PADRM deposited
into its trust account (IOLTA) 5 a check for $50,000 drawn from the
minor’s bank account. The check had been written over a month
earlier, and its memo line read: “Terry Keetch.” With
representation from Moss, the Keetches later used $20,000 from
those funds to make a down payment on a house.
¶6 The Timothys tried to access the proceeds in the IOLTA
by obtaining a writ of garnishment against PADRM that required
the firm to hold all funds owned by the Keetches. 6 But PADRM
twice refused to accept service of the writ. And by the time it did
accept service, the Keetches had moved all of their money out of
the IOLTA.
¶7 Finally, in August 2012, the Timothys sued both Moss
and PADRM, alleging various theories of fraudulent transfer
under the UFTA, civil conspiracy, and wrongful conduct.
¶8 Respondents filed a motion for partial summary
judgment in the district court, arguing that they were not
“transferees” under the UFTA and were thus immune from
liability on the fraudulent-transfer claims. The district court
agreed and granted Respondents’ motion, holding:
4The district court found that the Keetches had access to the
minor’s account and that much of the money deposited into that
account was theirs.
5 In Utah, all lawyers or law firms must maintain an “Interest
on Lawyers’ Trust Account” or “IOLTA,” which is “an interest or
dividend-bearing trust account for client funds.” UTAH CODE JUD.
ADMIN. R. 14-1001(a).
6 After interest, and minus the $2,682.47 the Keetches had paid
toward the judgment, the amount due under the judgment was
$170,786.44 in July 2011, when the Timothys served PADRM with
the writ of garnishment.
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TIMOTHY v. PIA ANDERSON DORIUS REYNARD & MOSS
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Because the relevant provisions of the Utah Uniform
Fraudulent Transfer Act were modeled on federal
Bankruptcy law, the court is persuaded that
“transferee” as used in the Act is most logically
defined in the manner it has been defined in the
Bankruptcy context. That is, a “transferee” must
exercise dominion or control over the transferred
asset. Here, [defendants] did not—and could not—
exercise dominion and control over funds held in
the firm’s trust account. . . . Accordingly,
[defendants were] not “transferee[s]” within the
meaning of the Act and the [Timothys’] fraudulent
conveyance claims fail as a matter of law. Those
claims are hereby dismissed with prejudice.
The Timothys timely appealed that ruling.
¶9 On August 24, 2017, while the case was pending before
the court of appeals, the Timothys filed in the district court an
application to renew their judgment against the Keetches. In its
ruling, the district court noted that judgments are valid for a
period of eight years pursuant to Utah Code section 78B-5-202(1),
and that “[a] judgment creditor may renew a judgment by filing a
motion under Rule 7 [of the Utah Rules of Civil Procedure] in the
original action before the statute of limitations on the original
judgment expires.” 7 The district court concluded that because
more than eight years had passed since the original judgment was
entered on May 6, 2009, the statute of limitations barred the
Timothys from renewing their judgment. Accordingly, the district
court denied the Timothys’ renewal request.
7 To clarify, there are two different eight-year periods at play
in relation to a judgment. First, section 78B-5-202(1) defines the
duration of the judgment itself. Creditors can renew their
judgments by filing a motion to renew before the original
judgment expires. See UTAH CODE § 78B-6-1802; UTAH R. CIV. P.
58C. Second, section 78B-2-311 establishes the statute of
limitations to commence a separate action on a judgment. At issue
here is the expiration of the judgment itself under section
78B-5-202(1) and the Timothys’ failure to renew their judgment
under section 78B-6-1802. We are not presented with an argument
about the statute of limitations to commence an action on the
judgment under section 78B-2-311.
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¶10 However, neither party informed the court of appeals
that the judgment had expired. And the court of appeals issued its
ruling on February 23, 2018, affirming the district court’s grant of
summary judgment on the basis that PADRM “had no legal right
to put the funds to its own use” and therefore “lacked the
requisite dominion” to be considered a transferee under the
UFTA. See Timothy v. Pia, Anderson, Dorius, Reynard & Moss LLC,
2018 UT App 31, ¶ 27, 424 P.3d 937 (citation omitted).
¶11 The Timothys then petitioned for certiorari. We granted
the petition on the issue of whether the court of appeals erred
when it used the dominion-and-control test to determine whether
PADRM was a “transferee” under the UFTA. Respondents then
filed a suggestion of mootness, arguing that we should not reach
the merits of the petition because the Timothys’
fraudulent-transfer claims became moot when their judgment
expired. We exercise jurisdiction under Utah Code section
78A-3-102(5).
STANDARD OF REVIEW
¶12 “On certiorari, we review the decision of the court of
appeals, not the trial court.” Fla. Asset Fin. Corp. v. Utah Labor
Comm’n, 2006 UT 58, ¶ 8, 147 P.3d 1189 (citation omitted). And
where “the decision of the court of appeals rests on questions of
statutory interpretation, we review it for correctness, affording no
deference to the court of appeals’ legal conclusions.” Id.
ANALYSIS
¶13 The merits of this case call for us to review the court of
appeals’ interpretation of the UFTA sections 25-6-5(1)(a)–(b) and
25-6-6(1). However, we must first address the mootness argument
raised by Respondents. The question we face is whether a
fraudulent-transfer claim based on a judgment becomes moot
when the underlying judgment expires. We conclude that the
Timothys’ fraudulent-transfer claim is moot and do not reach the
merits of the issue presented. Further, because their claim became
moot before judgment was entered in the court of appeals, we
vacate that ruling.
I. MOOTNESS
¶14 The Timothys’ judgment against the Keetches was
entered on May 6, 2009, and it expired as a matter of law eight
years later on May 7, 2017. See UTAH CODE § 78B-5-202(1). When
they attempted to renew the judgment on August 24, 2017, the
district court denied their renewal motion as untimely. The
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Opinion of the Court
Timothys concede this voided their judgment, and they do not
raise any argument that the underlying debt is somehow still
collectible. Respondents argue this renders the Timothys’
fraudulent-transfer claim against them moot because the
Timothys are no longer creditors with a claim and therefore have
no remedy under the UFTA. We agree with Respondents. 8
¶15 “Mootness . . . presents one of the several bases that may
prevent a court from reaching the merits of a case.” State v. Legg,
2018 UT 12, ¶ 13, 417 P.3d 592. “An issue on appeal is considered
moot when ‘the requested judicial relief cannot affect the rights of
the litigants.’” State v. Sims, 881 P.2d 840, 841 (Utah 1994) (citation
omitted). Unlike standing, which must be determined by the facts
that existed at the time the suit was filed, “[a]n appeal is moot if
during the pendency of the appeal circumstances change so that
the controversy is eliminated.” Salt Lake Cty. v. Holliday Water Co.,
2010 UT 45, ¶ 15, 234 P.3d 1105. And we typically will not decide
an issue that becomes moot while on appeal. State v. Black, 2015
UT 54, ¶ 10, 355 P.3d 981.
¶16 Although the Timothys concede that their judgment
against the Keetches is void, they argue that their fraudulent-
8 Other courts that have addressed this issue have reached a
similar conclusion. See, e.g., RRR, Inc. v. Toggas, 98 F. Supp. 3d 12,
22 (D.D.C. 2015) (“[O]nce a judgment has been extinguished as a
matter of law, any fraudulent transfer action based upon that
judgment is also extinguished.”); cf. Or. Recovery, LLC v. Lake
Forest Equities, Inc., 211 P.3d 937, 942 (Or. Ct. App. 2009) (“[W]hen
the judgments on which the UFTA claim is based expired,
plaintiffs were no longer creditors of defendants and their
[fraudulent-transfer] claims became moot.”); Carr v. Guerard, 616
S.E.2d 429, 429–31 (S.C. 2005) (concluding that once plaintiff lost
his status as a judgment creditor, he lost standing to bring his
fraudulent-transfer action). But the Mississippi Supreme Court
has made the important distinction that the expiration of the
judgment, by itself, is not enough to invalidate a UFTA claim if
the underlying debt is somehow still viable. See Parker v.
Livingston, 817 So. 2d 554, 562 (Miss. 2002) (“Assuming arguendo
that the Florida judgments had expired, the underlying debt
remained. Therefore it was still within the chancellor’s power to
entertain the fraudulent conveyance action, as all of the elements
. . . are present.”).
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transfer claim against Respondents is not moot for a number of
reasons. First, they assert that under Porenta v. Porenta, the UFTA
requires a debtor-creditor relationship only at the time the action
is filed—not throughout the entirety of the case—as evidenced by
“the fact that the act uses present tense when defining the term
‘claim.’” (Citing 2017 UT 78, ¶ 12, 416 P.3d 487.) But the Timothys
misread the holding of Porenta.
¶17 In Porenta, after a married couple filed for divorce, the
husband transferred his interest in the couple’s marital home to
his mother to prevent that property from being distributed as part
of the marital estate. Id. ¶¶ 1–3. While the divorce case was
pending, the husband died, causing the divorce court to dismiss
the case for lack of jurisdiction. Id. ¶ 5. Soon after, however, the
wife sued the husband’s mother under the UFTA. Id. ¶ 6.
Following trial, the district court ruled that the husband’s transfer
of the marital home to his mother was fraudulent under the
UFTA. Id. ¶ 8.
¶18 On appeal, the mother argued that a debtor-creditor
relationship must exist at the time a UFTA claim is filed, and that
any such relationship had been extinguished in that case because
the husband died before the wife had filed her claim. Id. ¶¶ 1, 9.
Relying on the use of present-tense language in the statute, see id.
¶ 12, we agreed with the mother that the UFTA does indeed
“require[] an ongoing debtor-creditor relationship when a claim
under the [UFTA] is filed.” Id. ¶ 1. But we ultimately determined
that the wife’s claim survived the husband’s death because she
had maintained a debtor-creditor relationship with his estate at
the time of filing. Id. ¶¶ 36, 55. Specifically, the wife’s claim for the
entire marital estate, “including the right to preserve the joint
tenancy,” extended to the husband’s estate upon his death. Id.
¶ 36. So while Porenta does state that a debtor-creditor
relationship must exist at the time of filing a UFTA claim, it does
not follow that it is immaterial whether the debt is invalidated or
satisfied during the pendency of the case.
¶19 Second, the Timothys point out that mootness is not
concerned with whether all elements of a claim persist throughout
the litigation, but instead, whether a court’s decision can affect the
rights of the parties. As the Timothys ask for money damages
against Respondents, they argue that granting this remedy will
certainly affect their rights.
¶20 The Timothys are generally correct that a claim does not
become moot merely because the facts that satisfy the elements of
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TIMOTHY v. PIA ANDERSON DORIUS REYNARD & MOSS
Opinion of the Court
the claim change during the litigation. 9 So long as the requested
judicial relief can affect the rights of the litigants, a change in the
facts supporting each element of the claim does not necessarily
equate to mootness. See Sims, 881 P.2d at 841; see also Holliday
Water Co., 2010 UT 45, ¶ 15.
¶21 The Timothys give the example of a statutory rape
prosecution, which does not become moot if the victim turns
eighteen while the case is pending. And while that is certainly
true, it is not analogous to the situation presented.
¶22 Here, we must interpret the requirements of the UFTA
and the remedies the statute provides to determine whether the
Timothys’ claim is moot. When interpreting a statute, our primary
objective is “to ascertain the intent of the legislature.” Bagley v.
Bagley, 2016 UT 48, ¶ 10, 387 P.3d 1000 (citation omitted). “[T]he
best evidence of the legislature’s intent is the plain language of the
statute itself.” Id. (citation omitted). Thus, “we look first to the
plain language of the statute,” id. (citation omitted), while reading
“the statute as a whole,” State v. Jeffries, 2009 UT 57, ¶ 11, 217 P.3d
265.
¶23 A plaintiff in a UFTA action seeks to collect a debt from
a transferee rather than the original debtor. Accordingly, under
the plain language of the statute, a plaintiff must be a creditor
with a claim against the debtor to obtain any remedy against the
transferee. See UTAH CODE § 25-6-5, -6, -8. The UFTA broadly
defines “[c]reditor” as “a person who has a claim,” id. § 25-6-2(4),
with “[c]laim” meaning “a right to payment,” id. § 25-6-2(3).
¶24 In defining what constitutes a fraudulent transfer, the
UFTA makes clear that a transfer by an insolvent debtor is
fraudulent only as to a creditor of that debtor. See id. § 25-6-5, -6
(enumerating when “[a] transfer made or obligation incurred by a
debtor is fraudulent as to a creditor” (emphasis added)).
9 See, e.g., State v. Laycock, 2009 UT 53, ¶¶ 12–18, 214 P.3d 104
(holding that despite a change in circumstances, the case was not
moot because a legal controversy still existed between the parties);
State ex rel. Bluestone Coal Corp. v. Mazzone, 697 S.E.2d 740, 748
(W. Va. 2010) (holding that “a case may survive mootness upon a
change of circumstances,” so long as parties have a cognizable
legal interest in the outcome of the litigation).
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¶25 Further, section 25-6-8, which establishes the remedies
available under the UFTA, speaks of remedies available only to
creditors. Section 25-6-8(1) states: “In an action for relief against a
transfer or obligation under this chapter, a creditor . . . may obtain”
various remedies. (Emphasis added.) Similarly, section 25-6-8(2)
states: “If a creditor has obtained a judgment on a claim against the
debtor, the creditor . . . may levy execution on the asset transferred
or its proceeds.” (Emphases added.)
¶26 Once the district court denied the Timothys’ motion to
renew judgment, the Timothys concede they no longer had a
viable judgment or a right to payment from the Keetches.10
Because they are not creditors with a claim, the Timothys can no
longer obtain a remedy under the UFTA. Their
fraudulent-transfer claim against Respondents is therefore moot. 11
¶27 The premise of the Timothys’ argument to the contrary
is that after an alleged fraudulent transfer, the transferee assumes
independent liability for damages to the plaintiff even if the
judgment expires. For this, the Timothys point to subsection
25-6-9(2), which states that a “creditor may recover judgment for
the value of the asset transferred . . . against any subsequent
transferee.”
¶28 But this language does not make a transferee liable for
money damages even where an underlying debt has become void.
The same section clarifies that “to the extent a transfer is voidable
10 We note that the UFTA does not require that a claim be
reduced to a judgment. A “[c]laim” is “a right to payment,
whether or not the right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured.” UTAH CODE
§ 25-6-2(3). So theoretically, if a plaintiff could somehow show
that even though the judgment had expired, the plaintiff still had
a viable right to payment, the UFTA action would not be moot.
11 It is important to clarify, however, that the expiration of a
judgment does not automatically lead to the dismissal of a related
fraudulent-conveyance claim. Like a statute of limitations, the
expiration of the judgment is an affirmative defense that can be
waived. This could create a complex issue in a UFTA case.
However, because the Timothys have not raised this issue here,
we do not address it.
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in an action by a creditor under Subsection 25-6-8(1)(a), the creditor
may recover judgment for the value of the asset transferred . . . or
the amount necessary to satisfy the creditor’s claim, whichever is
less.” Id. § 25-6-9(2) (emphases added). So a plaintiff under the
UFTA must be a creditor, and recovery is generally capped at the
amount of the plaintiff’s underlying claim. If a plaintiff has no
underlying right to repayment from the debtor, the plaintiff has
no cause of action against an alleged transferee of the insolvent
debtor’s assets.
¶29 We also note that the Timothys’ UFTA claim became
moot before the court of appeals issued its opinion on February
23, 2018. The Timothys concede their judgment became invalid
when it expired. By operation of Utah Code section 78B-5-202, the
Timothys’ judgment expired on May 7, 2017—eight years after the
date of the judgment’s entry. And they failed to timely renew it.
We agree with the district court’s determination that it “was
deprived of jurisdiction to renew the Judgment due to the passage
of time and the expiration of the Statute of Limitations.”
¶30 However, Respondents, who prevailed in the court of
appeals, ask us to dismiss the petition but not vacate the court of
appeals’ opinion. But when a case becomes moot before final
adjudication, the proper result is vacatur and dismissal of the
judgment. See Teamsters Local 222 v. Utah Transit Auth., 2018 UT
33, ¶ 22, 424 P.3d 892.
¶31 To be clear, this was not the court of appeals’ error, but a
failure of Respondents to file a suggestion of mootness with the
court of appeals after the judgment had expired. However, the
result is the same: we must vacate the court of appeals’ opinion
because the case became moot before the opinion issued.
II. THE MOOTNESS EXCEPTION
¶32 Finally, the Timothys argue that even if their case is
moot, we should reach the merits of the petition because an
exception to mootness applies here. We have recognized an
exception to the mootness doctrine when the case: (1) “affect[s]
the public interest,” (2) “[is] likely to recur,” and (3) “because of
the brief time that any one litigant is affected, [is] likely to evade
review.” State v. Steed, 2015 UT 76, ¶ 7, 357 P.3d 547. These
elements form a conjunctive test, so one arguing for this exception
to the mootness doctrine must establish the existence of each
element.
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¶33 The Timothys argue that the transferee issue affects the
public interest and that it may recur. Assuming this is correct,
however, the Timothys have not shown that the transferee issue is
one of inherently short duration that is likely to evade review.
“The types of issues likely to evade review are those that are
inherently short in duration so that by the time the issue is
appealed, a court is no longer in a position to provide a remedy.”
Guardian ad Litem v. State ex rel. C.D., 2010 UT 66, ¶ 14, 245 P.3d
724; see also Ellis v. Swensen, 2000 UT 101, ¶ 27, 16 P.3d 1233
(holding that violation of the election code is likely to evade
review because the election would always be over before the
violation could be litigated).
¶34 But the issue of how “transferee” should be defined
under the UFTA is not one of inherently short duration. There
was ample time for the district court to rule on this issue. And if
the Timothys had timely renewed their judgment against the
Keetches, we could have reached the merits of this question and
the court of appeals’ opinion would not need to be vacated.
¶35 Accordingly, we conclude that the exception to the
mootness doctrine does not apply in this case.
CONCLUSION
¶36 The Timothys’ UFTA claim against Respondents is moot.
Because the court of appeals issued its decision after the claim
became moot, we must vacate that opinion. The judgment of the
district court remains in place.
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