Wittingham v. TNE Limited Partnership , 2020 UT 49 ( 2020 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2020 UT 49
IN THE
SUPREME COURT OF THE STATE OF UTAH
WITTINGHAM, LLC; THE MUIR SECOND FAMILY LIMITED
PARTNERSHIP; and DOROTHY JEANNE MUIR,
Appellees/Cross-appellants,
v.
TNE LIMITED PARTNERSHIP,1
Appellants/Cross-appellees.
No. 20190220
Heard February 12, 2020
Filed July 15, 2020
On Direct Appeal
Second District, Farmington
The Honorable Robert J. Dale
No. 090700547
Attorneys:
James K. Tracy, Stacy J. McNeill, Joshua L. Lee, Salt Lake City,
for appellees/cross-appellants
Jeffrey L. Silvestrini, Bradley M. Strassberg, Salt Lake City,
for appellants/cross-appellees
CHIEF JUSTICE DURRANT authored the opinion of the Court, in
which ASSOCIATE CHIEF JUSTICE LEE, JUSTICE HIMONAS,
JUSTICE PEARCE, and JUSTICE PETERSEN joined.
__________________________________________________________
1 Gavin Dickson; Bruce J. Malcom, individually and as Trustee
of the Bruce J. Malcolm Trust; Maureen H. Malcolm, Trustee of the
Maureen H. Malcolm Trust; Daniel J. Torkelson, trustee; William
Nicholas Muir; Trump Security LLC; Mario Ozuna; Dwight Egan;
Michael Snow; Brett Candiotti; Tod Debie; Ashton Gifford; Juliana
Keller; Mario Naujoks; and Stephen Hawkes.
WITTINGHAM v. TNE LIMITED PARTNERSHIP
Opinion of the Court
CHIEF JUSTICE DURRANT, opinion of the Court:
Introduction
¶1 We are asked to determine whether a contract entered into
by a dissolved partnership is void or merely voidable. This
distinction is important because, among other reasons, “a contract
or a deed that is void cannot be ratified or accepted,” while “a
contract or deed that is voidable may be ratified at the election of
the injured party.”2
¶2 Two years after the Muir Second Family Limited
Partnership (the Muir Partnership or Partnership) was
administratively dissolved, Nicholas Muir—the former general
partner of the Muir Partnership—obtained a loan from the TNE
Limited Partnership (TNE). Mr. Muir obtained the loan, which he
secured through a trust deed, ostensibly to remove an
encumbrance on apartments owned by the dissolved Partnership.
But the encumbrance was, in fact, part of a fraudulent scheme to
obtain title to the apartments.
¶3 Once the scheme was discovered, Wittingham, LLC, a
successor-in-interest to the Muir Partnership, brought suit to
declare the trust deed void and recover damages for the fraudulent
scheme. The district court held that the trust deed was void because
the Muir Partnership had been dissolved prior to the time Mr. Muir
signed the trust deed, and dismissed TNE’s counter-claims against
Wittingham, LLC and cross-claims against Mr. Muir.
¶4 Both TNE and Wittingham, LLC appeal. TNE appeals the
district court’s determination that the TNE trust deed is void and
the court’s dismissal of TNE’s remaining claims. Wittingham, LLC
cross-appeals, arguing that the district court erred in finding that
Mr. Muir was competent and that he intended to bind the dissolved
Partnership when he entered into the TNE transaction. And finally,
Wittingham, LLC claims it was entitled to attorney fees under the
TNE trust deed as the prevailing party.
Background
¶5 The Muir Partnership was organized on December 30,
1993, and continued until it was administratively dissolved on May
3, 2007. Two years after dissolution, Nicholas Muir, the former
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2 Ockey v. Lehmer, 2008 UT 37, ¶ 18, 189 P.3d 51.
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Opinion of the Court
general partner of the defunct Partnership, obtained a loan for
$435,000 from TNE. To secure the loan, Mr. Muir issued a
promissory note to TNE, which was secured by a trust deed on a
pair of apartment buildings owned by the Partnership. Prior to the
execution of the TNE trust deed, Mr. Muir did not disclose to TNE
that the Muir Partnership had been administratively dissolved.
Instead, he created and registered a second entity: “Muir Second
Family Limited Partnership” (second partnership). The only
difference between the names of the two partnerships is that the
name of the second partnership is missing the definite article
“the.”3
¶6 In his negotiations with TNE, Mr. Muir asserted that the
loan was necessary to remove an existing encumbrance on the
apartments. That existing encumbrance was another trust deed,
which secured a promissory note payable to Trump Security LLC.
In fact, the purported purpose of the TNE transaction was a sham.
There was no promissory note payable to Trump Security nor was
there a valid trust deed. And the sole member of Trump Security
was Gavin Dickson, who assisted Mr. Muir in his scheme. Mr. Muir
apparently agreed to the sham encumbrance in order to obtain
funds to repair the apartments.
¶7 After TNE disbursed the funds, the sham encumbrance
was released. Mr. Dickson, acting on behalf of Trump Security,4
then directed that the TNE funds be used for purposes that did not
benefit the Partnership. When Mr. Muir’s family discovered the
sham encumbrance and misappropriation of the TNE funds,
Wittingham, LLC, the Muir Partnership, and Dorothy Jeanne Muir
(collectively, Wittingham) commenced this action, seeking to have
the TNE trust deed declared void.
¶8 Wittingham asserted that the TNE trust deed was void
because (1) the transaction was not for the purpose of winding up
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3 Under the 2009 Utah Revised Uniform Limited Partnership
Act, which applied at the time this suit commenced and has since
been repealed and replaced, “the presence or absence of the word[]
‘the’” is “not distinguishing.” UTAH CODE § 48-2a-102(6)(c) (2009).
4 Wittingham asserted claims against Mr. Dickson and Trump
Security (collectively the Trump defendants). It obtained a default
judgment against the Trump defendants, a judgment which is not
challenged on appeal.
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Opinion of the Court
Partnership affairs and (2) Mr. Muir was incompetent, as the result
of a head injury, when he entered into the TNE transaction.
Wittingham also sought to recover damages from TNE, Trump
Security, and Mr. Dickson for civil conspiracy due to their roles in
the fraudulent scheme. Wittingham obtained a default judgment
against Mr. Muir, who transferred his partnership interest to
plaintiff Jeanne Muir to satisfy the judgment. After the transfer of
Mr. Muir’s partnership interest, the Muir family made a series of
transactions transferring title to the apartment buildings among
successive business entities, the last being Wittingham, LLC.
¶9 In response, TNE filed counter-claims against Wittingham
asserting that the TNE trust deed was valid and that the Muir
Partnership was bound by the agreement.5 It also raised various
cross-claims against Mr. Muir personally, including fraud,
estoppel, and breach of warranty in his individual capacity and as
general partner of the Muir Partnership. It claimed that the transfer
of Mr. Muir’s partnership interest to Jeanne Muir, and the
subsequent transfer of title of the apartments to various entities
owned by Jeanne Muir, was fraudulent and part of a civil
conspiracy to prevent TNE from collecting damages against
Mr. Muir and the Muir Partnership. In the alternative, TNE argued
that the Muir Partnership was unjustly enriched when it retained
the benefit of the $435,000.
¶10 After a bench trial, the district court found that Mr. Muir
was competent when he entered into the TNE transaction. It further
found that Mr. Muir entered into the transaction on behalf of the
Muir Partnership, not the second partnership. But it concluded that
the TNE trust deed was void ab initio, rather than voidable. The
district court reasoned that, because Mr. Muir’s dealings with TNE
were not acts performed for the purpose of winding up Muir
Partnership affairs, the TNE trust deed was an illegal contract and
thus void. Because the court declared the trust deed void, it
dismissed all but one of TNE’s counter-claims—a counter-claim for
unjust enrichment.
¶11 The court determined that Wittingham was unjustly
enriched by a small portion of the funds that were used to pay
various tax and utility liens on the apartments, thereby benefitting
the Partnership. Additionally, on its own initiative, the court
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5 In the alternative, TNE requested that the court reform the
trust deed to “show the Partnership as the Trustor.”
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Opinion of the Court
dismissed the cross-claims that TNE asserted against Mr. Muir
because TNE failed to serve Mr. Muir under Utah Rule of Civil
Procedure 4.
¶12 After trial, Wittingham sought attorney fees under the
Reciprocal Fee Statute. The court denied this request because it
determined that the TNE trust deed did not provide for attorney
fees and held that Wittingham was not a “prevailing party” under
the fee statute. Both Wittingham and TNE appealed.6 We have
jurisdiction pursuant to Utah Code section 78A-3-102(3)(j).
Standards of Review
¶13 TNE challenges the district court’s determination that the
TNE trust deed was void. This is a legal question, “which we
review for correctness, giving no deference to the trial court’s
determination on the matter[].”7 It also challenges the district
court’s determinations that (1) the court lacked personal
jurisdiction over Mr. Muir because TNE failed to properly serve
him under Utah Rule of Civil Procedure 4 and (2) Mr. Muir did not
waive an objection to insufficient service of process by filing a
responsive pleading or making an appearance in the proceedings.
When a “jurisdictional decision has been made on documentary
evidence only, an appeal from that decision presents only legal
questions that are reviewed for correctness.”8 We review for clear
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6 This is the parties’ second appeal in this case. The court of
appeals issued an opinion on the matter in 2016. Wittingham, LLC
v. TNE Ltd. P’ship, 2016 UT App 187, 380 P.3d 397. TNE appealed
the court of appeals decision, in which it affirmed that the TNE
trust deed was void, and we granted certiorari. But we determined
we did not have appellate jurisdiction because the district court
failed to issue a final judgment as to all parties and all claims. As a
result, we vacated the court of appeals decision and dismissed the
appeal. Wittingham, LLC v. TNE Ltd. P’ship, 2018 UT 45, ¶ 23, 428
P.3d 1027. After remand, the district court entered a final judgment
as to all claims and all parties. We then granted TNE’s request that
we retain the direct appeal.
Hi-Country Estates Homeowners Ass’n v. Bagley & Co., 2008 UT
7
App 105, ¶ 8, 182 P.3d 417.
8 Pohl, Inc. of Am. v. Webelhuth, 2008 UT 89, ¶ 8, 201 P.3d 944
(citation omitted) (internal quotation marks omitted).
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error any factual determinations to support a jurisdictional
conclusion.9
¶14 On cross-appeal, Wittingham argues the court erred in
determining that Mr. Muir was competent at the time he entered
into the TNE transaction. We review for clear error the district
court’s “specific findings of fact” underlying its determination that
Mr. Muir was competent.10 A factual finding is clearly erroneous if
it is “against the clear weight of the evidence, or if the appellate
court otherwise reaches a definite and firm conviction that a
mistake has been made.”11 And when the factual findings lead to a
district court’s “ultimate legal conclusion[]” of competency, we
review this conclusion for correctness.12
¶15 Wittingham also challenges the district court’s
determination that Mr. Muir intended to bind the Muir
Partnership, and not the second partnership, when he entered into
the TNE transaction. “Determining whether a contract is
ambiguous presents a threshold question of law, which we review
for correctness.”13 And once a contract is found ambiguous and the
district court considers extrinsic evidence to determine its meaning,
this “generally presents questions of fact” which we review for
clear error.14
¶16 Wittingham also argues that it was entitled to attorney fees
under the Reciprocal Fee Statute, Utah Code section 78B-5-826
because (1) provisions in the TNE trust deed provided for attorney
fees and (2) it was the prevailing party in the matter. Whether a
contract provides for attorney fees is a question of law that we
review for correctness.15 And we review a district court’s
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9 D.A. v. State (State ex rel. W.A.), 2002 UT 127, ¶ 8, 63 P.3d 607.
10 Montes Family v. Carter (In re Estate of Ioupe), 878 P.2d 1168,
1171 (Utah Ct. App. 1994).
11 State v. Walker, 743 P.2d 191, 193 (Utah 1987).
12 In re Estate of Ioupe, 878 P.2d at 1171.
13 Interwest Constr. v. Palmer, 923 P.2d 1350, 1358 (Utah 1996).
14 Id. at 1359.
15 See Brady v. Park, 2019 UT 16, ¶ 29, 445 P.3d 395.
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determination that there was no prevailing party in the matter for
an abuse of discretion.16
Analysis
¶17 The parties raise multiple issues on appeal and
cross-appeal. Although TNE raises eight issues on appeal, we
address only two because our decisions on those issues are
dispositive. First, TNE argues that, under the test we recently
established in Ockey v. Lehmer,17 the district court erred in
determining that the trust deed was void, and not voidable.18 We
agree. Under the rule we established in Ockey, the trust deed is
presumed voidable—a presumption that can be rebutted only
through a showing free from doubt that the contract is against
public policy. Because we hold that the TNE trust deed is voidable,
we reverse and remand to the district court for further proceedings.
¶18 Second, TNE argues the district court erred in declaring,
on its own initiative, that it lacked personal jurisdiction over
Mr. Muir. The court determined that Mr. Muir was not served
under rule 4 of the Utah Rules of Civil Procedure and thus was not
a proper party. And because it concluded he was a necessary and
indispensable party under rule 19 of the Utah Rules of Civil
Procedure, the court dismissed TNE’s claims fraudulent transfer
claims. According to TNE, this was error because Mr. Muir waived
any objection to improper service of process. We agree. Although
TNE failed to properly serve Mr. Muir, he failed to assert the
affirmative defense of improper service of process before or during
trial. And so Mr. Muir waived any objection under rule 4, and the
district court had jurisdiction over him. As a result, we reverse the
court’s decision on this issue and remand for further proceedings.
¶19 On cross-appeal, Wittingham raises three issues. First, it
argues the district court erred in finding that Mr. Muir was
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16 See R.T. Nielson Co. v. Cook, 2002 UT 11, ¶ 25, 40 P.3d 1119.
17 2008 UT 37, 189 P.3d 51.
18 Although the district court did not rule on TNE’s remaining
claims because it determined that the contract and trust deed at
issue was void, TNE nevertheless argues that we can resolve those
remaining claims in TNE’s favor on appeal. We disagree. Instead,
we remand the case so that the parties can litigate any remaining
claims.
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competent at the time he entered into the TNE transaction. We hold
that the district court did not err on this point.
¶20 Second, Wittingham argues the district court erred in
finding that Mr. Muir intended to bind the Muir Partnership, rather
than the second partnership. We hold that the district court did not
err on this point. The court properly considered extrinsic evidence
because the contract was ambiguous as to the identity of the
grantor and did not err in concluding the Muir Partnership was the
intended grantor.
¶21 Finally, Wittingham argues it was entitled to attorney fees
under the Reciprocal Fee Statute as the prevailing party. We decline
to address the merits of this argument because we otherwise
reverse the district court and remand for further proceedings.
I. The District Court Erred in Declaring the TNE Trust Deed Void
¶22 First, we address TNE’s argument that the district court
erred in declaring the trust deed void rather than voidable. “The
distinction between void and voidable” is critical.19 Although a
void contract “cannot be ratified or accepted,” a voidable contract
may either be “ratified” or “set . . . aside” “at the election of the
injured party.”20 TNE argues that under the test we laid out in
Ockey v. Lehmer,21 the TNE trust deed is voidable, not void. We
agree.
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19 Ockey v. Lehmer, 2008 UT 37, ¶ 18, 189 P.3d 51.
20 Id.
21 Id. ¶ 21. In advancing this argument, TNE asks that we clarify
a conflict between our 1919 decision in Houston v. Utah Lake Land,
Water & Power Co., 187 P. 174 (Utah 1919), and our decision in Ockey.
In Houston, we held that a contract was “wholly void” because a
“defunct corporation” no longer had the “power” and “authority”
to transact new business. 187 P. at 177. But in Ockey, we determined
that contracts entered into by trustees of a terminated trust are
presumed voidable—a presumption that can be rebutted by a
“showing free from doubt that the contract is against public
policy.” 2008 UT 37, ¶ 21 (citation omitted). So our decision in
Ockey conflicts with our decision in Houston as to whether a
contract between a third party and an administratively dissolved
limited partnership is void or presumed voidable.
(Continued)
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¶23 In Ockey, we determined that the conveyance of trust
property was voidable even though the trustees who conveyed the
property lacked authority (because the trust had terminated eight
years before).22 We held that “[i]n determining whether [contracts
are] void or voidable, we start with the presumption that [they] are
voidable unless they clearly violate public policy.”23 This
presumption arises from the principle that parties have “the
freedom to contract.”24 Consistent with this principle, courts must
“employ ‘any reasonable construction’ to declare contracts ‘lawful
and not in contravention of public welfare.’”25 For this reason, it is
only where a party has made “a showing free from doubt that the
contract is against public policy” that courts should hold contracts
to be void.26
¶24 To help courts in determining whether a contract clearly
violates public policy, we identified two factors: (1) whether the
law or legal precedent has declared that the type of contract at issue
is “unlawful” and “absolutely void,”27 and (2) whether “the
contract harmed the public as a whole—not just an individual.”28
In applying these factors in Ockey, we concluded that the
unauthorized conveyance of the trust property was not void but
“merely voidable because the trustee’s actions were not contrary to
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When subsequent case law “directly conflicts with” a prior
holding, we consider such holding “implicitly overruled.” Bear
River Mut. Ins. Co. v. Wall, 1999 UT 33, ¶ 19, 978 P.2d 460. Because
our decision in Ockey directly conflicts with our decision in
Houston, we hold that the rule we established in Ockey implicitly
overruled the rule we established in Houston.
22 2008 UT 37, ¶¶ 4–8, 11.
23 Id. ¶ 21 (emphasis added).
24 Id. ¶ 24.
25 Id. ¶ 24 (citation omitted).
26 Id. ¶ 21 (citation omitted).
27 Id. ¶¶ 23 (quoting Zion’s Serv. Corp. v. Danielson, 366 P.2d 982,
985 (Utah 1961)); see also id. ¶ 24. The law must provide a “clear”
and “well-defined” public policy that the type of contract at issue
is void. Eagle Mountain City v. Parsons Kinghorn & Harris, P.C., 2017
UT 31, ¶¶ 15, 15 n.7, 408 P.3d 322.
28 Ockey, 2008 UT 37, ¶ 23.
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public policy and did not injure anyone other than [the plaintiff]
himself.”29
¶25 So, under our decision in Ockey there is a rebuttable
presumption that defective contracts are voidable rather than void.
This presumption can be rebutted only through a showing, “free
from doubt,” that the contract violates public policy. And, in
considering whether a contract clearly violates public policy, courts
should consider the two Ockey factors. Based on these rules, we
conclude that the TNE transaction is voidable, not void.
A. We conclude that the legislature has not declared the type of contract
at issue in this case to be unlawful and absolutely void
¶26 With the presumption of voidability in mind, we first
consider whether the legislature has declared by statute that the
type of contract at issue is “unlawful” and “absolutely void.”30 In
reviewing a statute to determine whether it provides that a contract
is void, we “apply the traditional rules of statutory construction,”
relying first on the statute’s plain language.31 If the plain language
of the statute is ambiguous, we read the statute “in harmony with
other statutes under the same and related chapters.”32
¶27 Because the Muir Partnership is a “limited partnership”
formed under the General and Limited Liability Partnerships Act
(the Act), we review the Act to determine whether it provides a
well-defined and dominant public policy supporting the
conclusion that the type of contract at issue in this case is void.33
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29 Id. ¶ 20.
30 Id. ¶¶ 23–24 (quoting Zion’s Serv. Corp., 366 P.2d at 985). A
contract or deed can violate clear public policy based on statute or
common-law principles. Id. ¶¶ 22–23. In the case at hand,
Wittingham argues that the legislature has declared a clear public
policy in the 2009 General and Limited Liability Partnerships Act
supporting the conclusion that the TNE trust deed is void.
31Arndt v. First Interstate Bank of Utah, N.A., 1999 UT 91, ¶ 10,
991 P.2d 584.
32 Id. (citation omitted).
33Although the Act has since been repealed and replaced, the
2009 version of the Act was in effect at all relevant times during this
(Continued)
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Under the Act, a limited partnership can act only through its agent,
typically the general partner.34 And the general partner has
authority to bind the partnership by entering into agreements on
the partnership’s behalf.35
¶28 As with any agent, a general partner’s authority to bind
the partnership can be actual (as provided by statute or the
partnership agreement) or apparent (as provided by statute and
common-law agency principles).36 The Act specifically identifies
the scope of a general partner’s actual authority by defining
circumstances under which a general partner’s actions will bind a
partnership. And it grants a general partner “apparent authority”
by incorporating common-law principles of agency—such as the
“apparent authority” principle37 and the principle of “[p]artner by
estoppel”38—which may apply to render a general partner’s acts
enforceable even when those acts fall outside the scope of the
general partner’s actual authority.
¶29 And, importantly for this case, the Act specifically
addresses the nature of a general partner’s authority after a limited
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case. We therefore consider the language of the 2009 version of the
Act.
The Act includes three parts: the General Partnership Act, the
Utah Limited Liability Act, and the Utah Revised Uniform Limited
Partnership Act. All three parts apply to limited partnerships
because a limited partnership is a general partnership that has
followed the specific statutory registration requirements in order to
become a distinct business entity, with many of the attributes of a
corporation. See Arndt, 1999 UT 91, ¶ 13 (applying “corporate
principles concerning derivative actions to limited partnerships”).
34 See UTAH CODE § 48-2a-403 (2009). Limited partners may act
as agents of the limited partnership under certain circumstances,
including when the general partner “wrongfully dissolved” the
limited partnership. Id. § 48-2a-803 (2009).
35Id. § 48-2a-403 (2009); see also Luddington v. Bodenvest Ltd., 855
P.2d 204, 207 (Utah 1993).
36 See Luddington, 855 P.2d at 207–09; Zions Gate R.V. Resort, LLC
v. Oliphant, 2014 UT App 98, ¶ 6, 326 P.3d 118.
37 UTAH CODE § 48-1-11 (2009).
38 Id. § 48-1-13 (2009).
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partnership has been dissolved.39 Under section 48-1-30 of the Act,
when a limited partnership has been dissolved, the general
partner’s authority to act on behalf of the limited partnership is
limited to “wind[ing] up” the partnership’s affairs.40
¶30 Relying on this section, the district court concluded that
the Act provides a clear policy that partners may bind the
partnership only in limited circumstances after dissolution.
According to the court, Mr. Muir did not enter into the TNE
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39 Although dissolution may be triggered by an event specified
in the Act, a limited partnership is “not terminated,” and therefore
continues in a limited capacity, until its affairs have been wound
up. UTAH CODE § 48-1-27 (2009). But under Utah Code
section 48-2a-203.5(7) (2009), when a limited partnership is
involuntarily dissolved because it failed to file an annual report and
did not cure the delinquency within sixty days, it “may not
maintain any action, suit, or proceeding in any court of this state
until it has reinstated its certificate or registration following
dissolution.” In other words, a limited partnership that has been
administratively dissolved is barred from bringing suit until it has
been reinstated. In this case, the parties stipulate that the Muir
Partnership was administratively dissolved because Mr. Muir
failed to file an annual report and did not cure the delinquency. But
whether Jeanne Muir, as limited partner, could properly bring
derivative claims on behalf of the Partnership has not been raised
by the parties, and we do not address the effect it has on the
outcome of this case. See Uintah Basin Med. Ctr. v. Hardy, 2002 UT
92, ¶ 13 n.2, 54 P.3d 1165 (“Since this issue was not raised below,
we decline to address it.”).
40 UTAH CODE § 48-2a-801 (2009) (providing that once a “limited
partnership is dissolved,” “its affairs shall be wound up”).
Although the Act does not define what transactions constitute
“winding up” of the partnership’s affairs, we have previously
looked to the Revised Business Corporation Act’s (RBCA)
definition, see Arndt, 1999 UT 91, ¶ 13, which lists the following
activities as winding-up activities: (1) “collecting [] assets;”
(2) “disposing of . . . properties . . . ;” (3) “discharging . . .
liabilities;” (4) “distributing . . . remaining property among . . .
shareholders . . . ;” and (5) “doing every other act necessary to wind
up and liquidate . . . business and affairs.” UTAH CODE
§ 16-10a-1405(1).
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transaction for the purpose of winding up the Partnership, so the
transaction fell outside Mr. Muir’s authority to act as the dissolved
Partnership’s general partner. For that reason it determined that
the trust deed was an illegal contract and was therefore absolutely
void. But unlike the district court, we are not convinced that section
48-1-30 leads to a conclusion “free from doubt that the contract is
against public policy.”41
¶31 Although the district court concluded that there was a
clear public policy against allowing the type of contract at issue in
this case to be formed, there are at least three places in the Act
suggesting the existence of a public policy that is in direct conflict
with the court’s policy finding. First, section 48-1-32(1)(b) suggests
the existence of a general public policy in favor of protecting third
parties who unknowingly enter into contracts with dissolved
partnerships. This section allows a general partner to bind the
dissolved partnership to acts performed outside the course of
winding up the partnership’s business in certain situations where
the other party to the transaction did not have notice of dissolution.
Although the district court determined, for unspecified reasons,
that this provision did not bind the Partnership in this case, the
existence of this provision cuts against, and therefore casts doubt
on, the public policy determination underlying the court’s
conclusion that the TNE transaction was void.
¶32 Second, section 48-1-13 of the Act incorporates the
common-law principle of “[p]artner by estoppel,” a principle that
also aims to protect third parties. Under this principle, a
partnership may be held liable when a person represents himself
or herself as an agent of an “actual or apparent partnership” to a
third party, and the third party extends credit as a result of the
representation.
¶33 And third, section 48-1-11 provides that a partnership may
be bound under the common-law agency principle known as
“apparent authority.”42 That section provides that a “partnership is
bound to make good the loss” when a “partner act[s] within the
scope of his apparent authority [and] receives money or property
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41 Ockey, 2008 UT 37, ¶ 21.
42 UTAH CODE § 48-1-11 (2009).
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of a third person and misapplies it.”43 So, when a general partner’s
transaction is not within the general partner’s actual authority, the
limited partnership may still be bound under the doctrine of
apparent authority.44
¶34 Although the court did not discuss whether the principles
of “partner by estoppel” or “apparent authority” could have
applied in this case, the Act’s incorporation of those principles,
together with the exception the Act creates in section 48-1-32(1)(b),
suggests the existence of a general public policy in favor of
protecting third parties who enter into a transaction with a
dissolved partnership without knowledge of the dissolution.
Because these provisions cut against the public policy identified by
the district court, we conclude that the district court erred in
determining that section 48-1-32 served as a legislative declaration
that the type of contract at issue in this case was “unlawful” and
“absolutely void.” Instead, we conclude that the first Ockey factor
weighs in favor of a finding that the contract at issue is voidable,
rather than void.
B. We conclude that the TNE transaction did not harm the public as a
whole
¶35 We also conclude that the second Ockey factor—whether
the contract harmed the public as a whole—weighs against a
finding that the contract is void. In so doing, we note that the
district court did not consider the second Ockey factor as part of its
analysis. But, on appeal, TNE argues that the type of transaction at
issue in this case does not harm the public as a whole because, as a
typical business transaction, it does not implicate public health,
morality, or welfare. We agree with TNE.
¶36 Although, under the Act, Mr. Muir may not have had
authority to enter into the TNE transaction, it was not the type of
transaction that harms the public as a whole. Typically, contracts
__________________________________________________________
43 Id. Our case law explains that a partner acts within the scope
of his or her apparent authority when the “conduct of the principal
. . . , reasonably interpreted, causes the third person to believe that
the principal consents to have the act done on his behalf by the
person purporting to act for him.” Luddington, 855 P.2d at 209
(quoting RESTATEMENT (SECOND) OF AGENCY § 27 (AM. LAW INST.
1957)).
44 Luddington, 855 P.2d at 208.
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that “harm[] the public as a whole,”45 are those that, by their terms,
harm more than the parties involved in the transaction.46 For
example, we have determined that contracts that “control prices
and limit competition between the bids given” to contractors
“create an unreasonable restraint on trade” and, as a result, harm
“the public as a whole.”47 We have also determined that contracts
for an illegal purpose harm the public as whole. But the TNE
transaction was not a contract for an illegal purpose nor does it
harm parties outside the transaction. Accordingly, we conclude
that the second Ockey factor—whether the contract harms the
public as a whole—does not weigh in favor of a finding that the
TNE transaction is void.
¶37 In sum, the district court erroneously held that the Act sets
forth a well-defined and dominant public policy that renders the
TNE transaction void. Even though Mr. Muir did not enter into the
TNE transaction for the purpose of winding up partnership affairs,
and therefore may have lacked authority to enter into that
transaction, the Act as a whole does not clearly demonstrate that
this type of transaction violates a well-defined and dominant
public policy.48 Additionally, the transaction did not harm the
public as a whole. Accordingly, we conclude that the TNE
transaction is presumptively voidable, not void—a presumption
Wittingham has failed to rebut. For this reason, we reverse the
district court’s decision in this regard and remand for further
proceedings consistent with this opinion.
C. We remand for the district court to make further factual findings in
order to determine whether Wittingham was bound under other
provisions of the statute
¶38 Rather than remand, TNE asks us to rule in its favor on a
number of equitable claims and defenses, including its affirmative
defense of estoppel and its affirmative claims for relief under
promissory estoppel and section 164 of the Second Restatement of
__________________________________________________________
45 Ockey, 2008 UT 37, ¶ 23.
46 See id. ¶ 24.
47 Id. ¶ 23.
48 Id. ¶ 22 (“Although the bank had acted in excess of its
authority [when it issued securities different from those that it was
statutorily authorized to issue], its action did not violate the general
policy of the state so egregiously that the contract was void.”).
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Opinion of the Court
Contracts. But because there are “legal remedies available” under
the statute that may preclude equitable remedies, we remand the
case to allow the district court to enter factual findings on whether
the Muir Partnership was bound even though Mr. Muir did not
intend to wind up partnership affairs.49
¶39 The “right to an equitable remedy is an exceptional one,
and absent statutory mandate, equitable relief should be granted
only when a court determines that damages are inadequate and
that equitable relief will result in more perfect and complete
justice.”50 So equitable relief is “precluded” if TNE has “an
adequate remedy at law and will not suffer substantial irreparable
injury.”51
¶40 TNE may have additional legal remedies available under
the Act. As previously discussed, the statute outlines a general
partner’s actual authority to enter into new transactions
post-dissolution. And there are multiple factual scenarios in which
a partnership could be bound by a general partner’s
post-dissolution actions. The statute mandates that the district
court apply common-law agency principles such as apparent
authority or partner-by-estoppel, both of which would allow the
court to enforce the TNE trust deed against the Muir Partnership or
Mr. Muir in his individual capacity, even if Mr. Muir did not enter
into the transaction for the purpose of winding up Muir
Partnership affairs.52
¶41 Because the TNE transaction is voidable, rather than void,
TNE may have a number of legal remedies available under the
statute. Accordingly, we remand this case for the district court to
determine whether TNE has an available legal remedy. Only after
it has made the appropriate factual findings and subsequent legal
__________________________________________________________
49 VCS, Inc. v. Utah Cmty. Bank, 2012 UT 89, ¶ 41, 293 P.3d 290
(citation omitted).
50 Ockey, 2008 UT 37, ¶ 44 (citation omitted).
51 Id.
52 See UTAH CODE §§ 48-1-11, -13 (2009).
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conclusions should the court consider TNE’s claims for equitable
relief.53
II. The District Court Erred in Holding it Lacked Jurisdiction Over
Mr. Muir
¶42 TNE also argues the district court erred in “rul[ing], sua
sponte, that . . . it lacked jurisdiction” over Mr. Muir based on TNE’s
failure to serve its cross-claims against Mr. Muir pursuant to Utah
Rule of Civil Procedure 4. According to TNE, even though it did
not comply with the requirements of rule 4, the court nevertheless
erred because TNE properly served Mr. Muir under rule 5 by
sending a copy of the Amended Cross-claims to Mr. Muir’s
attorney, who accepted receipt. Alternatively, TNE argues that
even if it was required to serve Mr. Muir under rule 4, the court
erred because Mr. Muir waived an objection to improper service of
process. We agree with TNE’s alternative argument. Because
Mr. Muir failed to object to improper service under rule 4 “before
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53 If the district court determines that TNE does not have a legal
remedy available, it should determine whether TNE’s request for
an equitable remedy is preempted by the Act. Equitable remedies
may be explicitly or implicitly preempted when the legislature
“displaces our residual common-law authority” through
“duly-enacted legislation.” VCS, Inc., 2012 UT 89, ¶ 22. If the Act
“reveals either an express or implicit legislative intent to preempt
common law” remedies, then TNE is not entitled to an equitable
remedy. Graham v. Albertson’s LLC, 2020 UT 15, ¶ 10, 462 P.3d 367.
Express intent is typically provided in an “express exclusive
remedy provision.” Id. ¶ 7. If there is no express intent provided,
courts must consider whether the Act’s “structure and purpose”
provide an implicit intent to preempt a common-law remedy. Id.
¶ 14 (citation omitted) (internal quotation marks omitted). An
implicit intent to preempt a common-law remedy exists if “the
[Act’s] regulatory scheme is so pervasive that the common law
doctrine can no longer function,” or “the [Act] is in irreconcilable
conflict with the common law.” Id. ¶ 14 (citation omitted) (internal
quotation marks omitted). If the court finds that either an explicit
or implicit intent to preempt exists, it must then determine if the
specific equitable remedies requested by TNE “fall[] within the
scope of what the Legislature intended [the Act] to preempt.” Id.
¶ 10. And if the court does so determine, then TNE’s requested
equitable relief is unavailable. Id.
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Opinion of the Court
or during trial,” any objection to the improper service was
waived.54 As a result, the district court had jurisdiction over him.
Accordingly, we reverse the court’s jurisdictional determination.
¶43 Service of process “confers jurisdiction”55 over a defendant
because it “imparts notice that the defendant is being sued and
must appear and defend or suffer a default judgment.”56 When a
party initiates an action, it must serve a defendant under Utah Rule
of Civil Procedure 4. The rule outlines many proper methods of
service, all of which attempt to ensure that the other party has
“adequate notice” of an action and an “opportunity to be heard in
a meaningful manner” throughout the proceedings.57
¶44 When a co-defendant asserts a cross-claim in a “pleading
after the original complaint,” service is governed by Utah Rule of
Civil Procedure 5.58 After an initial complaint is filed and properly
served under rule 4, most subsequent pleadings and motions can
be served under the less stringent requirements of rule 5.59 But if a
party “assert[s] new or additional claims for relief” against a
defaulting party, it must serve those new or additional claims
pursuant to rule 4.60 So when a party has defaulted for any reason,
rule 4 service is required for all new claims against that defaulting
party. Accordingly, TNE’s service of Mr. Muir under the
procedures outlined in rule 5 was insufficient.
¶45 When a party fails to properly serve a defendant, the
defendant can assert the affirmative defense that the court lacks
personal jurisdiction as a result of insufficient service of process.
Our rules of civil procedure require that a defendant raise the
__________________________________________________________
54 UTAH R. CIV. P. 12(h).
55Bel Courtyard Invs., Inc. v. Wolfe, 2013 UT App 217, ¶ 13, 310
P.3d 747 (citation omitted) (internal quotation marks omitted).
56 Meyers v. Interwest Corp., 632 P.2d 879, 880 (Utah 1981).
57 Chen v. Stewart, 2004 UT 82, ¶ 68, 100 P.3d 1177, abrogated on
other grounds by State v. Nielsen, 2014 UT 10, 326 P.3d 645.
58 UTAH R. CIV. P. 5(a)(1)(C).
59For example, most papers can be properly served under rule 5
by “emailing it to . . . the most recent email address” of the party’s
attorney. Id. 5(b)(3)(B).
60 Id. 5(a)(2)(E).
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affirmative defense of insufficient service of process in a motion or
responsive pleading before or during trial.61 To assert this
affirmative defense, the defendant must file a motion to dismiss in
a “responsive pleading” or “by motion.”62 If a defendant fails to do
so, the affirmative defense is waived.63 Additionally, the right to
service of process can be waived either when a defendant expressly
waives it or when a defendant implicitly waives it by participating
in the proceedings without objecting to the court’s jurisdiction.64
These waiver rules are an important aspect of our procedural
system.
¶46 “In our system, the rules provide the source of available
relief. They ‘[are] designed to provide a pattern of regularity of
procedure which the parties and the courts [can] follow and rely
upon.’”65 The waiver rule furthers this pattern of regularity because
it allows the parties to limit their focus (and expenditure of
resources) to only those issues that they deem most important. So
when courts take it upon themselves to address issues not raised
by the parties, the court forces the parties to expend time and
resources addressing an issue that may not be particularly
important to them.66
¶47 For example, a party could intentionally decline to object
to improper service under rule 4 because, having been put on
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61 And rule 60(b) provides a post-judgment remedy for
defendants who did not, as a result of insufficient service of
process, waive the defense before or during trial because they were
unaware of the proceedings against them.
62 Id. 12(b).
63 Id. 12(h).
64 See Bel Courtyard Invs., Inc., 2013 UT App 217, ¶ 13 (“[W]here
a party has not been adequately served with process, a defect in
service can be waived if the party makes a general appearance.”).
65 A.S. v. R.S., 2017 UT 77, ¶ 23, 416 P.3d 465 (alterations in
original) (citation omitted) (internal quotation marks omitted).
66We note that “challenges to subject matter jurisdiction may be
raised at any time and cannot be waived by the parties.” Barnard v.
Wassermann, 855 P.2d 243, 248 (Utah 1993). But we have previously
“conclude[d] that the prohibition against waiver applies only to
subject matter jurisdiction,” not to personal jurisdiction. Id.
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Opinion of the Court
notice in some other way, the party may decide that it is not worth
the time and expense to contest the improper service. In such a case,
the court’s decision to raise the improper service issue would
deprive the improperly served party of control over its preferred
allocation of time and money. For this reason, it is generally the
case that only after a defendant asserts a defense that a court should
consider the merits of the defense. This rule is both fair and
efficient.
¶48 The rule allowing a defendant to implicitly waive the right
to sufficient process through an appearance is fair because by
participating in the proceedings, the party is on notice and so rule
4’s purpose has been fulfilled.67 And the rule is efficient because it
allows the defendant to offer relevant evidence that service was
insufficient—and allows the plaintiff (or cross-claimant) to offer
relevant rebuttal evidence—before the court issues a decision on
the merits of the defense. In this way, our waiver rule provides a
pattern of regularity of procedure that the parties and the courts
can follow and rely on.
¶49 But when a court disregards the waiver rule by raising a
defendant’s affirmative defense on its own initiative, the benefits of
our predictable procedural system are lost. In this case, the district
court ruled that it lacked personal jurisdiction over Mr. Muir based
on insufficient service, even though Mr. Muir did not raise this
defense. In so doing, the court disrupted the “pattern of regularity”
that is the aim of our procedural rules.
¶50 Because Mr. Muir never raised the insufficient service
defense, Mr. Muir and TNE did not have the opportunity to argue
its merits. Instead, TNE was forced to offer new evidence on appeal
to refute the court’s ruling. And, on appeal, TNE argues that service
__________________________________________________________
67 With the exception of the affirmative defense that a court lacks
subject matter jurisdiction, the rules provide that it is a defendant,
not the court or a third-party, who must raise an affirmative
defense. UTAH R. CIV. P. 12(h). If a defendant later learns of an
action against him or her after judgment has been entered, he or
she may seek relief by asserting the affirmative defense in a rule
60(b) motion with the district court. UTAH R. CIV. P. 60(b); see also
State v. All Real Prop., Residence & Appurtenances, 2005 UT 90, ¶ 14,
127 P.3d 693 (requiring parties to “raise an insufficient service
defense” in their “first rule 60(b) motion” to avoid waiving the
defense).
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Opinion of the Court
was proper under rule 5 because the cross-complaint was served
on Mr. Muir’s attorney, Mr. Canterero. TNE also offers evidence
that Mr. Muir waived the affirmative defense because he appeared
in the proceeding. On the other hand, Wittingham (not Mr. Muir)
attempts to defend the court’s determination with its own
evidence.
¶51 So, as a result of the district court’s decision to sua sponte
decide the service of process issue, the parties have been forced to
raise arguments on appeal that could have, and should have, been
raised before the district court. And Wittingham has been forced to
argue in support of an affirmative defense that belongs to Mr. Muir,
not to Wittingham. This is the kind of situation our waiver rule is
designed to avoid.
¶52 Because the defense of insufficient service may be waived
by the party who allegedly did not receive sufficient service, and
because Mr. Muir did not raise it, he waived the right to proper
service and so was a party to the action. Accordingly, the court
erred in dismissing TNE’s cross-claims against Mr. Muir and
fraudulent transfer claims against both Mr. Muir and
Wittingham.68 As a result, we reverse and remand for the court to
consider these claims on the merits.
III. We Deny the Relief Requested in Wittingham’s Cross-Appeal
¶53 Wittingham raises three issues on cross-appeal. First, it
argues that the district court erred in declaring Mr. Muir competent
to enter into the TNE transaction because the court “failed to give
proper weight to the factual circumstances of the case” and because
TNE’s expert witness used improper circular reasoning. To prevail
on this claim, Wittingham must show that the court’s findings are
“against the clear weight of the evidence.”69 Because the expert
testimony upon which the court relied, and which Wittingham
criticizes on appeal, is not entirely based on the allegedly improper
reasoning, and because the court’s finding is supported by
undisputed lay witness testimony, we hold that the district court
__________________________________________________________
68 In fact, Mr. Muir submitted an affidavit stating he did not
want to assert his right to defend himself against Wittingham’s
claims. He submitted to the court that he “chose not to dispute
[Wittingham’s] allegations” against him because it “was entitled to
default judgment against” him.
69 State v. Walker, 743 P.2d 191, 193 (Utah 1987).
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Opinion of the Court
did not clearly err in finding that Mr. Muir was competent when he
entered into the TNE transaction.
¶54 Second, Wittingham argues the district court erred in
declaring that Mr. Muir entered into the TNE transaction on behalf
of the Muir Partnership, not on behalf of the second partnership he
created with a nearly identical name. Because we agree that the
identity of the borrower is ambiguous in the contract and trust
deed, the district court properly considered extrinsic evidence to
discern the intent of the parties. We hold that the district court did
not clearly err in interpreting this extrinsic evidence to conclude
that Mr. Muir intended to bind the Muir Partnership, not the
second partnership, when he entered into the TNE transaction.
¶55 Finally, Wittingham argues the district court erred in
failing to award attorney fees under the Reciprocal Fee Statute. We
decline to address the merits of this request.
A. The district court did not err in concluding that Wittingham failed to
meet its burden to show, by clear and convincing evidence, that
Mr. Muir was incompetent when he entered into the TNE transaction
on behalf of the Muir Partnership
¶56 First, we consider Wittingham’s challenge to the district
court’s competency determination. In that court, Wittingham
asserted the TNE transaction was void because Mr. Muir was
incompetent as a result of a head injury suffered years before. In
support of this argument, Wittingham offered expert and lay
witness testimony providing evidence of the impact the head injury
continued to have on Mr. Muir. One lay witness testified he “was
not the same person after” the head injury. And others testified that
he has struggled to manage daily tasks since the injury. The court
observed that throughout Mr. Muir’s testimony, he had difficultly
“remembering certain matters” and struggled to “communicate
and manage his daily affairs.” In rebuttal, TNE offered its own
expert witness testimony and lay witnesses, and argued that
despite the injury, Mr. Muir was competent to enter into the
transaction. The district court agreed with TNE.
¶57 On appeal, Wittingham argues the district court erred in
determining that Mr. Muir was competent. Wittingham argues this
in two ways. First, it argues the court’s finding was unsupported
by the record and should be excluded because TNE’s expert, who
testified that Mr. Muir was competent, arrived at his conclusion
through improper circular reasoning. Wittingham further argues
that the court’s determination “failed to give proper weight to the
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factual circumstances in the case.” But Wittingham fails to meet its
burden of persuasion on appeal.
¶58 In addressing the court’s determination, we begin with the
principle that parties are generally presumed to be competent to
enter into a contract.70 This presumption can be rebutted only if the
party asserting incompetence can show, by clear and convincing
evidence, that an individual’s “mental facilities [were] so deficient
or impaired that there was not sufficient power to comprehend the
subject of the contract, its nature and its probable consequences,
and to act with discretion in relation thereto, or with relation to the
ordinary affairs of life.”71 The “capacity” to contract “is measured
at the time of the execution of the contract.” 72 So to prevail on an
incompetency claim, a party typically must submit testimony from
witnesses who observed the individual at or near the time of the
transaction.73
¶59 And because we review the court’s factual findings
regarding Mr. Muir’s competency under a clearly erroneous
standard of review,74 to prevail, Wittingham must show that the
court’s finding that Wittingham failed to rebut the competency
presumption is “against the clear weight of evidence.”75 In
conducting this review, we give “due regard” to the district court’s
“opportunity to judge the credibility of the witnesses.” 76 After
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70 Anderson v. Brinkerhoff, 756 P.2d 95, 99–100 (Utah Ct. App.
1988).
71 Peterson v. Coca-Cola USA, 2002 UT 42, ¶ 17, 48 P.3d 941
(alteration in original) (citation omitted) (internal quotation marks
omitted).
72 Anderson, 756 P.2d at 100.
73Peterson, 2002 UT 42, ¶ 18 (stating that none of the individuals
who were present at the time the allegedly incompetent party
entered into the contract “raised any concerns” about mental
capacity, so no evidence was offered to rebut the presumption of
competency).
74 Montes Family v. Carter (In re Estate of Ioupe), 878 P.2d 1168,
1174 (Utah Ct. App. 1994).
75 Walker, 743 P.2d at 193.
76 UTAH R. CIV. P. 52(a)(4).
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Opinion of the Court
considering all relevant record evidence, we uphold the court’s
competency determination.
¶60 First, Wittingham challenges the testimony of TNE’s
expert witness, Dr. Schenkenberg, to support its assertion that the
district court erred in determining that Wittingham failed to prove
that Mr. Muir was incompetent. Specifically, it argues that
Dr. Schenkenberg used improper circular reasoning—the post hoc
ergo propter hoc fallacy—to conclude Mr. Muir was competent.
According to Wittingham, Dr. Schenkenberg determined that
Mr. Muir was competent because Mr. Muir had never been
declared incompetent. And as a result, Wittingham argues that its
expert witness’s testimony was “essentially” unrebutted.
¶61 We agree, of course, that a conclusion relying
“exclusively” on an improper logical fallacy is insufficient.77 For
example, in USA Power, LLC v. PacifiCorp,78 which is a case
Wittingham cites in support of its argument, we held that a party’s
“[e]vidence that relie[d] exclusively on the post hoc ergo propter hoc
fallacy—‘after this and therefore because of this’” was
insufficient.”79 We explained that we do not “assum[e] a causal
connection between two events merely because one follows the
other,”80 and that a failure to provide evidence to connect such an
inference of causation is “‘wholly speculative,’ and cannot support
a verdict.”81 But our reasoning in USA Power is not enough to lead
to the conclusion that the district court’s “competency” finding in
this case was clearly erroneous, because we are not convinced that
Dr. Schenkenberg relied “exclusively” on circular reasoning.
¶62 At trial, Dr. Schenkenberg was asked to opine on whether
Mr. Muir was competent when he entered into the TNE
transaction. He described the evidence he obtained in order to
reach his conclusion: first, he examined Mr. Muir and administered
multiple tests, including tests that measured executive functioning
skills and verbal comprehension; second, he reviewed documents
that included Mr. Muir’s medical records and observations of his
__________________________________________________________
77 USA Power, LLC v. PacifiCorp., 2016 UT 20, ¶ 136, 372 P.3d 629.
78 Id.
79 Id.
80 Id. (alteration in original) (citation omitted).
81 Id. ¶ 137 (citation omitted).
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behavior following the head injury; third, he reviewed medical
literature; and fourth, he noted that there had never been a formal
determination that Mr. Muir was incompetent. When asked for his
ultimate conclusion after reviewing all the evidence,
Dr. Schenkenberg stated that he began with the assumption that
Mr. Muir was competent because at the time Mr. Muir entered into
the transaction, “there had been no . . . demonstration that there
was not competence, so no formal adjudication of that had been
done.”
¶63 Wittingham argues this testimony is insufficient because it
relies “exclusively” on an improper logical fallacy:
Dr. Schenkenberg “concluded that Mr. Muir was competent”
because Mr. Muir “had not yet been adjudicated incompetent.” But
in his testimony Dr. Schenkenberg relied on other evidence to
support his ultimate conclusion. He reviewed Mr. Muir’s medical
records, examined Mr. Muir and administered various tests,
reviewed deposition testimony, and reviewed scientific literature.
In his testimony at trial, he noted that Mr. Muir performed
“average” to “very well” on the tests he administered during the
physical examination. He also noted the record he reviewed
indicated that Mr. Muir signed “a wide range of documents” after
his initial injury but before the TNE transaction, including
informed consent forms for follow-up treatment and contracts for
“selling a house” and “getting a divorce.” Dr. Schenkenberg
opined that the absence of any third party’s concern or a formal
declaration that Mr. Muir was incompetent for these other
transactions was important evidence suggesting that Mr. Muir was
competent to enter into the TNE transaction. So while
Dr. Schenkenberg articulated the legal presumption that Mr. Muir
was competent, he relied on other evidence to support that
conclusion. He did not rely exclusively on the absence of any
formal adjudication that Mr. Muir was incompetent. So we do not
agree that Dr. Schenkenberg’s testimony is insufficient to support
the district court’s competency determination.
¶64 But, even were we to exclude Dr. Schenkenberg’s
testimony, we would nevertheless uphold the district court’s
competency determination. Wittingham argues that, once TNE’s
expert testimony is excluded, the evidence of its own expert is
“essentially unrebutted.” And according to Wittingham, this
unrebutted expert testimony, coupled with the factual
circumstances of the case, clearly weighs against the district court’s
determination. We disagree.
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Opinion of the Court
¶65 In making its argument on appeal, Wittingham fails to
address the other evidence the district court relied on. Expert
testimony is not required in a competency proceeding. In fact, lay
witness testimony may be more beneficial because it is more likely
to provide direct evidence of an individual’s mental state during
the relevant time period—when the individual entered into the
contract. In other words, a district court can rely solely on lay
witness testimony when determining competency. And in this case,
the district court heard lay witness testimony from four individuals
who testified that Mr. Muir “understood the proposed
transaction.” Wittingham makes no attempt to challenge, or
address, that testimony on appeal.
¶66 Instead, Wittingham argues the district court failed to
properly consider the factual circumstances of the case when it
determined that Wittingham failed to prove, by clear and
convincing evidence, that Mr. Muir was incompetent when he
entered into the TNE transaction. In support of this argument,
Wittingham points to Mr. Muir’s head injury, which occurred years
before the TNE transaction. And it argues that the expert and lay
witness testimony showed that the head injury significantly
impacted Mr. Muir’s daily affairs. Wittingham also asserts, based
in part on the fact that the court had already determined the Trump
defendants engaged in a fraudulent scheme, that Mr. Muir was
coerced into the transaction.
¶67 But we are not persuaded that the district court failed to
properly consider these “factual circumstances.” Although the
district court did not rule in Wittingham’s favor on this issue,
Wittingham presents no evidence (other than the district court’s
adverse ruling) to suggest that the court failed to consider the
evidence Wittingham points to on appeal. And, as we discussed,
the record contains testimony from lay witnesses that Mr. Muir
understood the TNE transaction.
¶68 It is true that this lay witness testimony conflicts with the
witness testimony presented by Wittingham. But the district court
is in “the best position to assess the credibility of the witnesses and
to gain a sense of the proceeding as a whole.”82 And in arriving at
__________________________________________________________
82 Valcarce v. Fitzgerald, 961 P.2d 305, 314 (Utah 1998); see also
Wasatch County v. Okelberry, 2008 UT 10, ¶ 8, 179 P.3d 768
(explaining that we give great deference to the district court’s
(Continued)
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its decision, we assume the court weighed the conflicting testimony
presented by both parties.83 So Wittingham’s argument that the
court did not consider the factual circumstances of the case fails.
¶69 In sum, Wittingham fails to show that the district court
could not rely on TNE’s expert witness testimony. And, even if
TNE’s expert witness testimony should have been excluded,
Wittingham does not show that the record evidence as a whole
clearly weighs against the court’s determination. This is because
the record contains testimony of four lay witnesses who testified
that Mr. Muir was competent at the time he entered into the
transaction. Accordingly, we affirm the district court’s competency
determination.
B. The district court did not err in determining Mr. Muir executed the
TNE trust deed on behalf of the Muir Partnership
¶70 Wittingham also argues the district court erred in
determining that the TNE trust deed was executed on behalf of the
Muir Partnership and not the second partnership. According to
Wittingham, the district court erred in relying on the concept of
“misnomer,” instead of the concept of “misidentification,” in
interpreting the language of the TNE trust deed. We disagree.
¶71 When interpreting a contract or deed, a court attempts “to
give effect to the intent of the parties” by first looking to the “plain
language” within the “four corners of the deed” or contract. 84 And
we interpret a contract or deed “in light of the reasonable
expectations of the parties, looking to the agreement as a whole and
to the circumstances, nature, and purpose of the contract.”85 When
a term is ambiguous—“capable of more than one reasonable
__________________________________________________________
factual findings, particularly those that “involve[] various and
complex facts . . . and credibility determinations”).
83 “Where contradictory testimony is offered by two witnesses,
‘[t]he fact finder is free to weigh the conflicting evidence presented
and to draw its own conclusions.’” Valcarce, 961 P.2d at 314
(alteration in original) (citation omitted).
84Ault v. Holden, 2002 UT 33, ¶ 38, 44 P.3d 781 (citation omitted);
Brady v. Park, 2019 UT 16, ¶ 53, 445 P.3d 395.
85 Peirce v. Peirce, 2000 UT 7, ¶ 19, 994 P.2d 193.
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Opinion of the Court
interpretation”86—we may consider “extrinsic evidence of the
parties’ intent.”87
¶72 The interpretive issue at the heart of this case stems from
the name listed as the grantor in the TNE trust deed. In order to
create a proper conveyance of land, a deed must identify “the
grantor, the grantee, and . . . a description of the boundaries in a
manner sufficient to construe the instrument as a conveyance of an
interest in land.”88 When the name of a grantee or grantor is
missing or incapable of identification, a court may invalidate a
deed. But when the deed merely contains a misnomer because it
adds or omits “minimal” or “legally insignificant” words to the
name of the entity listed as a party, a court need not invalidate a
deed so long as the grantee or grantor “can be ascertained by
sufficient evidence.”89 In other words, a court will not invalidate a
deed for a technical error in a name when the party to the
transaction is clear.
¶73 In this case, the trust deed listed “Muir Second Family
Limited Partnership” as the grantor (and owner of apartment
buildings serving as security for the loan). This is problematic
because Mr. Muir managed two partnerships with nearly identical
names. He managed the dissolved Muir Partnership, which is
named “The Muir Second Family Limited Partnership” and the
second partnership, which is named “Muir Second Family Limited
Partnership.” So the only difference between the names of the two
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86 Brady, 2019 UT 16, ¶ 54 (emphasis omitted).
87 Id. ¶ 53.
88Rocky Mountain Energy v. Utah State Tax Comm’n, 852 P.2d 284,
286 (Utah 1993).
89 Kelly v. Hard Money Funding, Inc., 2004 UT App 44, ¶ 22–23, 87
P.3d 734 (citation omitted). In Kelly, the plaintiff asked the court to
invalidate a deed that transferred interest in land from a limited
liability company to a lender. Id. ¶¶ 2, 21. The plaintiff argued that
because the listed borrower was “PCO Holdings, Inc.,” which is not
a legal entity, instead of “PCO Holding Company, Inc.,” the deed
was invalid due to the insufficient description of the borrower. Id.
¶¶ 21–22. The court of appeals determined that this was a
misnomer because the “descriptive difference between” the named
grantee “and the actual corporate identity of the intended grantee”
was “minimal” and “legally insignificant.” Id. ¶ 23.
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Opinion of the Court
partnerships is that the name of the second partnership is missing
the definite article “the.” And, importantly, under the Utah Revised
Uniform Limited Partnership Act, “the presence or absence of the
word[] . . . ‘the’” is “not distinguishing.”90 So by listing “Muir
Second Family Limited Partnership” as the grantor, the trust deed
could be referring to the dissolved Muir Partnership, which was the
owner of the apartments being encumbered by the trust deed, or it
could be referring to the second partnership, which had no legal
interest in the apartments.
¶74 In light of the existence of two entities with legally
indistinguishable names, the district court determined that the
trust deed was capable of more than one reasonable interpretation
regarding the identity of the grantor and was therefore ambiguous.
And, because the identity of the grantor was ambiguous, the court
considered extrinsic evidence to determine, based on the intent of
the parties, which entity was the grantor in the TNE transaction.91
¶75 After considering extrinsic evidence, the district court
concluded that the omission of the “the” from the trust deed was
merely a misnomer. A misnomer occurs when the right party is
involved but is misnamed, allowing a court to overlook the error in
the absence of prejudice.92 And the court concluded that the parties
intended to identify the dissolved Muir Partnership, the entity with
a legal right in the apartments, but inadvertently failed to include
the “the” in the deed.
¶76 In contrast, Wittingham argues that the court should have
relied on the concept of “misidentification,” which occurs when a
party mistakenly sues the wrong entity because the mistaken entity
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90 UTAH CODE § 48-2a-102(6)(c) (2009).
91 We also note that extrinsic evidence is permissible, even if a
contract is unambiguous, if a party can show that the contract was
the result of a mutual mistake or fraud. See Jensen v. Manila Corp. of
the Church of Jesus Christ of Latter-day Saints, 565 P.2d 63, 64–65 (Utah
1977). While TNE requested relief under both principles, the court
resolved the issue on ambiguity.
92 See Reddyship P’ship/5900 N. Freeway LP v. Harris Cty. Appraisal
Dist., 370 S.W.3d 373, 376 (Tex. 2012); see also Misnomer, MERRIAM–
WEBSTER.COM DICTIONARY, https://www.merriam-
webster.com/dictionary (last visited July 8, 2020) (“[T]he
misnaming of a person in a legal instrument.”).
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Opinion of the Court
has a similar name to the correct entity. According to Wittingham,
the omission of “the” in this case is more properly characterized as
a “misidentification,” not a misnomer, because, unlike in other
“misnomer” cases, an entity with the exact name listed in the trust
deed—the second partnership—exists. And because the trust deed
lists an entity that has no legal interest in the subject matter of the
transaction—the apartments—Wittingham argues that the trust
deed is void.93 In other words, Wittingham suggests that the deed
unambiguously identifies a grantor but that the deed is
nevertheless void because the identified grantor has no property
interest in the property secured by the deed. We disagree.
¶77 We reject Wittingham’s argument and conclude that the
omission of the word “the” from the trust deed does not clearly,
and incorrectly, identify another entity as the intended grantor.
This is because the inclusion of the word “the” does not create a
legally significant distinction between entities. 94 So even though
the trust deed did not include the word “the,” it could have
referred, as a matter of law, to either the dissolved Muir
Partnership or the second partnership.
¶78 Accordingly, we find no error in the court’s ruling.
Because the word “the” does not create a legally recognizable
distinction between the dissolved Muir Partnership and the second
partnership, the trust deed was ambiguous and the court did not
err in considering extrinsic evidence in reaching its conclusion that
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93 Wittingham cites case law from other jurisdictions to argue
that the proper remedy in “misidentification” cases is to void the
transaction. For example, in Clinton v. Avello, the plaintiff named
Bernard V. Avello as a defendant instead of Bernard J. Avello. 434
N.E.2d 355, 356–57 (Ill. Ct. App. 1982). Because both persons
existed, the court affirmed summary judgment against the plaintiff
because of the misidentification. Id. Because we conclude that the
concept of “misidentification” does not apply in this case, we do
not decide what the proper remedy would be in a
“misidentification” case.
94See UTAH CODE § 48-2a-102(6)(c) (2009) (providing that when
establishing an entity name with the division, the addition or
omission of the word “the” is not distinguishing).
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Opinion of the Court
the parties intended to list the Muir Partnership, as the legal owner
of the apartments, on the trust deed.95
C. We vacate the district court’s decision to not award attorney fees and
remand for a new determination following final judgment upon remand
¶79 Wittingham argues that the district court erred in
declining to award it attorney fees. But, because “our rulings on the
other issues in this case may have upended the basis for the court’s
attorney fees decision, we decline to address” Wittingham’s
arguments.96 “Instead, we vacate the district court’s previous
decision and remand for a new . . . determination” if the parties’
seek attorney fees following the district court’s final judgment
upon remand.97
Conclusion
¶80 After employing the analysis required under Ockey v.
Lehmer,98 we reverse the district court’s determination that the TNE
trust deed was void. We do so because the statutes at issue in this
case fail to provide a clear and well-defined public policy indicating
that the type of transaction at issue here should be void and because
the TNE transaction deed did not harm the public as a whole. As a
result, the TNE trust deed is voidable. And we remand for further
proceedings consistent with this opinion.
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95 We note that the type of ambiguity at issue in this case is
described as a “latent” ambiguity. A latent ambiguity “arises from
a collateral matter when the document’s terms are applied or
executed,” Watkins v. Ford, 2013 UT 31, ¶ 28, 304 P.3d 841 (citation
omitted), and include matters such as “trade usage, the mislabeling
of a person or thing, or linguistic context.” Mind & Motion Utah Invs.,
LLC v. Celtic Bank Corp., 2016 UT 6, ¶ 42, 367 P.3d 994 (emphasis
added). In this case, the district court relied on extrinsic evidence—
that Mr. Muir managed two partnership with nearly identical
names—when it determined a latent ambiguity existed as to the
identity of the grantor. And based on this objective extrinsic
evidence, the district court correctly determined that the trust deed
was ambiguous as to the identity of the grantor.
96 Brady, 2019 UT 16, ¶ 112.
97 Id.
98 2008 UT 37, 189 P.3d 51.
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¶81 We also reverse the district court’s determination that it
lacked jurisdiction over Mr. Muir. Because Mr. Muir waived any
objection to insufficient service, he was a proper party to the action
over whom the court had jurisdiction. Accordingly, we remand for
further proceedings on TNE’s cross-claims and fraudulent transfer
claims.
¶82 We also decline to grant any of the claims Wittingham
raises on cross-appeal. First, we hold that the district court did not
clearly err when it found that Mr. Muir was competent at the time
he entered into the TNE transaction because that determination
was supported by sufficient evidence. Second, we hold that the
court did not clearly err in determining that the parties to the TNE
transaction intended to bind the Muir Partnership, not the second
partnership. And finally, we decline to address the merits of
Wittingham’s request for attorney fees under the Reciprocal Fee
Statute. Instead, we vacate the court’s judgment so that the district
court can make a new attorney fee determination, upon the party’s
request, on remand.
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