Wisan v. City of Hildale ( 2014 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2014 UT 20IN THE
S UPREME C OURT OF THE S TATE OF U TAH
BRUCE R. WISAN ,
Plaintiff and Appellee,
v.
CITY OF HILDALE and TWIN CITY WATER AUTHORITY,
Defendants and Appellants.
No. 20100993
Filed June 17, 2014
Fifth District, St. George Dep’t
The Honorable James L. Shumate
No. 070500105
Attorneys:
Jeffrey L. Shields, Zachary T. Shields, Michael C. Walch,
Michael D. Stanger, Nathan R. Denney, Salt Lake City,
for appellee
Peter Stirba, R. Blake Hamilton, Salt Lake City, for appellants
JUSTICE DURHAM authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE NEHRING ,
JUSTICE PARRISH , and JUSTICE LEE joined.
JUSTICE DURHAM , opinion of the Court:
INTRODUCTION
¶1 This case comes to us as another installment in the ongoing
dispute surrounding land owned by the United Effort Plan Trust
(Trust) located in Hildale, Utah. In early 2007, appellee Bruce Wisan,
court-appointed trustee of the Trust, filed a complaint against the
City of Hildale (Hildale) and the Twin City Water Authority
(TCWA) to compel the subdivision of certain parcels of Trust
property located within Hildale’s boundaries. When Hildale and
TCWA failed to appear or answer the complaint, Mr. Wisan moved
for entry of default judgment against both parties, which the district
court granted. Appellants subsequently filed a rule 60(b) motion in
the district court to set aside the default judgment. While that
motion was pending, appellants filed this direct appeal from the
default judgment. The district court ultimately denied appellants’
rule 60(b) motion; appellants never appealed from that denial.
BRUCE R. WISAN v. CITY OF HILDALE
Opinion of the Court
¶2 Litigants may challenge a default judgment either by filing
a rule 60(b) motion with the district court or by appealing the default
judgment directly. The choice of which course to follow will depend
on the reasons alleged for seeking relief from the judgment. The
proper grounds for a direct appeal from a default judgment are
necessarily limited to those that were necessarily decided by the
district court as a prerequisite to entry of default judgment. The
proper grounds for a rule 60(b) motion, in contrast, are limited to
those listed in the rule. Because this direct appeal from the default
judgment relies exclusively on 60(b) arguments, which were made
to the district court in a postjudgment motion and disposed of in an
unappealed order, we dismiss this direct appeal as the incorrect
vehicle for relief and allow the default judgment to stand.
BACKGROUND
¶3 The land in Hildale, Utah, most of which is currently owned
by the United Effort Plan Trust, has been the subject of numerous
disputes for over two decades.1 The Trust was originally created in
1942 by the spiritual leadership of a fundamentalist religious
movement called the “Priesthood Work”—predecessors of the
Fundamentalist Church of Jesus Christ of Latter-day Saints (the
Church or FLDS). The Trust was created as a depository into which
the movement’s adherents could contribute or “consecrate” their
property to be managed centrally by Church leaders acting as
trustees of the Trust. In addition to their role as trustees, FLDS
leadership also exerted substantial influence on the civic affairs of
Hildale.
¶4 Over the ensuing years, the Trust acquired the majority of
the land and improvements in Hildale through contributions from
Church members, but the Church leadership trustees allowed the
contributing residents to continue living on the land. A few decades
after the Trust’s creation, however, several Trust property residents
sued the trustees for breach of fiduciary duty, which set in motion
a protracted chain of litigation involving the nature and
administration of the Trust.
¶5 A primary concern in that litigation was whether the actions
(or inactions) of the Church leadership trustees had harmed the
1
For a more extensive history surrounding the land in Hildale,
Utah, the creation of the Trust, and the subsequent litigation left in
its wake, see Jeffs v. Stubbs 970 P.2d 1234, 1239 (Utah 1998) and
Fundamentalist Church of Jesus Christ of Latter-day Saints v. Lindberg,
2010 UT 51, ¶¶ 2–22, 238 P.3d 1054.
2
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interests of Trust property residents. That concern came to a head
when the Church leadership trustees left the Trust and its
beneficiaries vulnerable to default judgments by failing to retain
counsel to defend the Trust in litigation. In response, and at the
behest of the attorney general of Utah, the district court removed the
Church leadership trustees and appointed a special fiduciary in their
stead. The newly appointed fiduciary was given specific instructions
to administer the Trust according to the Trust beneficiaries’ “just
wants and needs” on a neutral, nonreligious basis. In particular, the
court ordered the trustee to (a) work toward the payment of the
Trust property taxes, (b) request and collect money for the payment
of taxes from persons residing on Trust property, and (c) take action
to remove persons who refuse to pay their fair share of property
taxes from Trust property.
¶6 Shortly after the special appointment, Warren Jeffs, then
leader of the FLDS Church, made official pronouncements that
directed his adherents to refuse to cooperate with the Trust or the
court-appointed trustee, specifically declaring that “we must
continue to answer them nothing and not give into [sic] their
proposals.” Mr. Jeffs further stated that it was his intention “not [to]
compromise [with the trustee] in the slightest degree” and “not [to]
work out differences.”
¶7 The court later appointed Mr. Wisan as the successor
trustee. In the exercise of his duties, Mr. Wisan became aware that
multiple housing structures existed on most of the tax parcels
located in Hildale. In many cases, these housing structures belonged
to multiple individuals or families, some members of the dominant
FLDS religion, and some not. Because Washington County, where
Hildale is located, assesses and collects taxes according to the legally
described parcels, the various residents of each tax parcel shared the
property tax obligation. As a result, nonpayment of taxes by any one
resident subjected all of the other residents living on that same tax
parcel to the imposition of penalties, interest, and eventually loss of
the property to a tax sale.2
¶8 In light of this situation, Mr. Wisan determined it would be
prudent to subdivide the Trust property. The conceptualized
subdivisions would divide the existing tax parcels into separate legal
2
In fact, because certain Trust beneficiaries refused to pay
property taxes, the Trust came perilously close to losing the bulk of
its Hildale property. It was spared this result when, only days before
the County’s scheduled property tax sale, several large property tax
payments cured the default.
3
BRUCE R. WISAN v. CITY OF HILDALE
Opinion of the Court
lots. The primary goal of this subdivision plan was to allow the Trust
to distribute separately described pieces of property to Trust
beneficiaries, thus allowing them to remain free from the risk of
losing their property as a result of their neighbors’ tax delinquency.
Moreover, subdivision would facilitate the trustee’s ability to
monitor tax payments connected to each individual housing
structure in accordance with the trustee’s court-ordered duties.
¶9 On numerous occasions, Mr. Wisan consulted with Hildale’s
mayor David Zitting regarding the proposed subdivision, in hopes
of eventually securing the city’s approval. Although Mayor Zitting
stated it was his personal opinion that subdividing the property into
separate legal lots might be good for city management, he stressed
that, for nonspecific reasons, he could not cooperate with Mr. Wisan
as court-appointed trustee. Notwithstanding Mayor Zitting’s lack of
cooperation, Mr. Wisan continued to develop the subdivision plan,
incurring engineering fees in excess of $1 million to prepare the
subdivision plats. Finally, on December 13, 2006, Mr. Wisan
submitted a completed application together with the subdivision
plats to Hildale for approval as required under Utah law. UTAH
CODE §§ 10-9a-603(3), (4)(a). Hildale, however, remained
uncooperative. Hildale’s counsel explained to Mr. Wisan that the
city “ha[d] elected to abstain from taking any action with respect to
the petition to subdivide the property,”3 but “w[ould] not defend or
object to . . . the entry of a court order granting a petition to . . .
subdivide the property.”
¶10 Mr. Wisan accordingly filed a complaint against Hildale on
January 17, 2007, requesting either (a) a writ of mandamus to compel
Hildale to consider the subdivision application, or (b) declaratory
judgment directing the Washington County recorder to record the
proposed subdivision plats without formal city approval. Mr. Wisan
also joined TCWA as a defendant because he believed TCWA was
the culinary water authority for Hildale, whose approval was
necessary under Utah law to validate the subdivision plan.4
3
Mr. Wisan inferred from the statements of Mayor Zitting and
Hildale’s counsel that Hildale’s noncooperation was a product of
Mr. Jeffs’s official pronouncements directing FLDS followers to
“answer [the trustee] nothing” and to refuse to “compromise . . . in
the slightest degree.”
4
Mr. Wisan also joined Russell Shirts, the Washington County
recorder, as a defendant in this case. Mr. Shirts filed a timely answer.
But after the public works director for Washington County reviewed
(continued...)
4
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See UTAH CODE § 10-9a-603(2)(a). Two copies of the summons and
complaint were properly served on Mayor Zitting, one in his
capacity as registered agent of Hildale, and the other in his capacity
as registered agent of TCWA. But, consistent with the
communications from Mayor Zitting and Hildale’s counsel, neither
Hildale nor TCWA opposed the complaint by filing a timely
response. As a result, on February 27, 2007, the court entered default
against both Hildale and TCWA under rule 55(a) of the Utah Rules
of Civil Procedure.
¶11 Nevertheless, in an effort to maintain a working relationship
with the city, Mr. Wisan refrained from immediately petitioning the
court for default judgment. Instead, he continued to work with the
county’s engineers and surveyors to prepare acceptable subdivision
plats.5 Mr. Wisan also sent a letter to Mayor Zitting proposing a five-
month timetable to negotiate with the city and come to a voluntary
agreement regarding subdivision. In light of the city’s prior lack of
cooperation, Mr. Wisan also noted that if no voluntary agreement
could be reached, he would simply petition the court for entry of
default judgment. Mr. Wisan finished his letter by requesting a
timely response to the proposed five-month timetable and asked the
city to propose any other viable alternatives it deemed preferable.
Mayor Zitting never responded.
¶12 Around this same time, and in an abrupt change of course,
Mr. Jeffs sent a letter to his followers instructing them to cease
passively ignoring the appointed fiduciary and to instead retain
legal counsel and demand “protection of their rights.” Such action,
he said, would appear to be the work of individuals rather than the
authorities of the Church, creating the impression that “the
Priesthood is answering them nothing, but at the same time
individuals are demanding their rights of protection.” In the
following weeks, Mr. Wisan perceived what he described as more
ardent opposition from city leaders regarding the subdivision plan.
Unable to obtain the city’s cooperation, Mr. Wisan instead secured
Washington County’s stipulation to entry of default judgment and
moved the district court for entry of default judgment against
Hildale and TCWA.
4
(...continued)
and approved the subdivision plat, Mr. Shirts stipulated to entry of
a judgment ordering him to record the subdivision plat.
5
Washington County ultimately certified all of the plats for
technical correctness and approved them for recording in “as is”
condition.
5
BRUCE R. WISAN v. CITY OF HILDALE
Opinion of the Court
¶13 In response, Hildale and TCWA jointly filed a preemptory
opposition to default judgment in which both parties acknowledged
their “decision not to file a formal answer to the complaint” but
alleged that default judgment was still improper because the
Mr. Wisan had failed to comply with state and local law regarding
the subdivision process. A few days later, TCWA retained separate
counsel6 and independently made a second motion, this time
petitioning the court to vacate its rule 55(a) entry of default.7
Apparently unaware of TCWA’s objections, however, Judge Ludlow
ordered default judgment against both Hildale and TCWA. Judge
Ludlow later recused himself, and the case was reassigned to Judge
Shumate, who vacated the default judgment8 but preserved and took
under advisement the question of entry of default in hopes that
doing so would “bring everybody to the table” and “push [the
parties] towards . . . [voluntary] resolution” of the subdivision
dispute.9 Judge Shumate cautioned, however, that if he continued to
see “obstreperous behavior” from TCWA, he “could still make a
ruling on [the entry of default],” which would essentially foreclose
negotiations and compel TCWA to comply with a resulting default
judgment.
6
Hildale ultimately hired the same counsel as TCWA but did so
much later, in August 2010. Until that time, Hildale did not attempt
to set aside the entry of default (under rule 55(c)) or the subsequent
entry of default judgment (under rule 60(b)).
7
In doing so, TCWA incorrectly relied on rule 60(b)’s standards
for relief rather than rule 55(c)’s standard of “good cause shown.”
rule 60(b)’s standards govern relief only from default judgment
under rule 55(b), while rule 55(c)’s “good cause” standard governs
relief from an entry of default under rule 55(a). This distinction is
made clear in rule 55(c) which declares that “[f]or good cause shown
the court may set aside an entry of default and, if a judgment by
default has been entered, may likewise set it aside in accordance
with [r]ule 60(b).”
8
Judge Shumate apparently based his decision to vacate solely on
the technical ground that the default judgment failed to include a
copy of the subdivision plat it had ordered Washington County to
record and was therefore “basically . . . meaningless.” The record
reflects that the court’s decision did not have anything to do with the
merits of TCWA’s arguments.
9
The court was clear that “the resolution we all seek is that
[TCWA] ha[s] a chance to have input, [so it] can then feel satisfied
that [it has] done [its] responsibility under the law and can sign off
on the plat.”
6
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¶14 The parties thereafter met multiple times to discuss the
subdivision issue, but after months of unsuccessful negotiations,
Mr. Wisan requested that the court render a final decision on his
original default judgment petition. On October 12, 2010, the court
held a hearing on Mr. Wisan’s default judgment petition and
TCWA’s prior motion to set aside the rule 55(a) entry of default. At
the hearing, Judge Shumate noted that his “original intention in
taking the matter under submission for over two years” was to
encourage “the parties [to] reach[] a settlement,” but, given that it
was “well-established that this matter is in default,” the court orally
declared that “the motion to set aside the [entry of default] . . . is . . .
denied and a default judgment may enter.”
¶15 Following the court’s oral announcement, Hildale and
TCWA immediately filed a preemptory rule 60(b) motion for relief
from the impending judgment. The district court did not rule on this
motion before entering default judgment against Hildale and TCWA
on November 3, 2010.10 Both Hildale and TCWA filed a notice of
direct appeal from the default judgment on November 29, 2010.
While this appeal was pending, and nearly three years after default
judgment was entered, the district court finally denied Hildale and
TCWA’s rule 60(b) motion on July 3, 2013.11 Neither party filed an
appeal from that denial.
¶16 On appeal, Hildale and TCWA allege that the district court
erred by entering default judgment against them. Hildale and
TCWA attempt to rely on rule 60(b) as the vehicle for relief, arguing
that the default judgment should be set aside because the fiduciary
did not act in good faith in pursuing default judgment and because
Mayor Zitting, though registered agent for both parties, did not
know he needed to give both parties notice of the complaint against
them. Alternatively, Hildale and TCWA argue that the default
judgment should be vacated because recording the plats would be
contrary to public policy. Because we dismiss this appeal on
procedural grounds, we do not reach the merits of these arguments.
10
Default judgment was also entered by stipulation against the
Washington County recorder, who was ordered to immediately
record the subdivision plat attached to the default judgment.
11
The delay was largely due to an order filed by the federal
district court staying any further proceedings in this case pending
resolution of the FLDS Church’s motion to intervene in a federal case
on free exercise grounds.
7
BRUCE R. WISAN v. CITY OF HILDALE
Opinion of the Court
ANALYSIS
¶17 Rule 55 of the Utah Rules of Civil Procedure governs the
process for obtaining a default judgment against a party that fails to
appear or answer a complaint. “When a party against whom a
judgment . . . is sought has failed to plead or otherwise defend . . .
the clerk shall enter the default of that party.” UTAH R. CIV . P. 55(a).
Although “a defendant’s failure to appear warrants an entry of
default,” it “does not automatically entitle a plaintiff to a default
judgment.” Pennington v. Allstate Ins. Co., 973 P.2d 932, 940 (Utah
1998) (emphasis in original). After the clerk enters default, the
nondefaulting party must then petition either the clerk or the
court—depending on the circumstances—to enter judgment against
the defaulting party.12 UTAH R. CIV . P. 55(b). The clerk or the court
may then enter default judgment, but “only if the well-pled facts
show that the plaintiff is entitled to judgment as a matter of law.”
Pennington, 973 P.2d at 940 (internal quotation marks omitted).
¶18 If the aggrieved party challenges the entry of default before
the judgment is entered, the court may set aside the entry of default
“[f]or good cause shown.” UTAH R. CIV . P. 55(c). However, if a
default judgment has already been entered, the defaulting party has
two options for seeking relief from the judgment: it may (1) directly
appeal the default judgment and/or (2) file a rule 60(b) motion with
the district court.
¶19 The circumstances warranting a direct appeal from a
default judgment are very limited. A party challenging a default
judgment on direct appeal may raise only grounds that were
necessarily decided by the district court in the entry of default
judgment. Those grounds are (1) whether default was properly
entered against a party under rule 55(a),13 (2) whether the
12
The nondefaulting party may petition the clerk, rather than the
court, for entry of judgment only if: (1) the defendant’s default is for
failure to appear, (2) the defendant is not an infant or incompetent
person, (3) the defendant has been personally served pursuant to
rule 4(d)(1), and (4) the claim against the defendant is for a sum
certain or for a sum that can be made certain by computation. UTAH
R. CIV . P. 55(b)(1). Under all other circumstances, the nondefaulting
party may petition the court to enter default judgment.
13
P&B Land, Inc. v. Klungervik, 751 P.2d 274, 276–77 (Utah Ct. App.
1988) (“No default judgment may be entered . . . unless default has
previously been entered. . . . [T]he entry of default is an essential
predicate to any default judgment.” (footnote, citation, and internal
(continued...)
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complaint’s well-pled facts demonstrate that the plaintiff is entitled
to judgment as a matter of law,14 and (3) whether the relief granted
is consistent in kind and amount with the complaint’s prayer for
relief and is within the district court’s authority to grant.15
¶20 In contrast, the grounds under which a 60(b) challenge may
be brought are both inclusive of the above grounds and also more
expansive. If the defaulting party moves the district court to set
aside the default judgment under rule 60(b), the court “may in the
furtherance of justice relieve a party or his legal representative from
[that] judgment” for reasons including “mistake, inadvertence,
surprise, or excusable neglect,” “newly discovered evidence,” and
fraud by an adverse party, among others. UTAH R. CIV . P. 60(b). The
district court’s ruling on that motion is a final appealable order,
which an appellate court can then review for error. Amica Mut. Ins.
13
(...continued)
quotation marks omitted)).
14
Pennington, 973 P.2d at 940; See also Skanchy v. Calcados Ortope
SA, 952 P.2d 1071, 1076 (Utah 1998) (“On appeal from a default
judgment, a defendant may contest the sufficiency of the complaint
and its allegations to support the judgment.” (internal quotation
marks omitted)); Yuanzong Fu v. Rhodes, 2013 UT App 120, ¶ 27, 304
P.3d 80 (McHugh, J., concurring in part and dissenting in part) (“[A]
party appealing from a default judgment entered as a result of the
failure to appear can challenge the sufficiency of the complaint to
support the judgment for the first time on appeal.”).
15
U TAH R. CIV . P. 54(c)(2) (“A judgment by default shall not be
different in kind from, or exceed in amount, that specifically prayed
for in the demand for judgment.”). See also Yuanzong Fu, 2013 UT
App 120, ¶ 24 (McHugh, J., concurring in part and dissenting in
part) (“[W]ith respect to a default entered for failure to appear, a
party may challenge the amount of damages for the first time on
appeal of the default judgment itself.”); Katz v. Pierce, 732 P.2d 92, 95
(Utah 1986) (holding that the court would not consider—on appeal
from the district court’s denial of appeallants’ rule 60(b) motion—a
new challenge to the district court’s award of damages in excess of
the amount prayed for because appellants did not raise the issue in
their rule 60(b) motion below or on direct appeal from the judgment,
though appellants “might have done so”).
9
BRUCE R. WISAN v. CITY OF HILDALE
Opinion of the Court
Co. v. Schettler, 768 P.2d 950, 970 (Utah Ct. App. 1989) (“[A]n order
denying relief under rule 60(b) is a final appealable order.”).16
¶21 In this case, Hildale and TCWA availed themselves of both
a direct appeal and a rule 60(b) motion. Hildale and TCWA first filed
a rule 60(b) motion with the district court, seeking to vacate the
impending default judgment they expected in light of Judge
Shumate’s announcement at the October 12 hearing that “default
judgment may enter.” When default judgment did enter on
November 3, 2010, Hildale and TCWA next filed a notice of appeal
from the “Final Judgment and Order . . . entered on November 2,
2010.”17 This is the direct appeal before us now. Notwithstanding the
filing of a notice of appeal, the district court still had jurisdiction to
rule on the 60(b) motion pending before it. See Baker v. W. Sur. Co.,
757 P.2d 878, 880 (Utah Ct. App. 1988) (“[T]he trial court has
jurisdiction to consider a 60(b) motion while an appeal is
pending. . . . [I]f the district court finds the motion to be without
merit, it may enter an order denying the motion, and the parties may
appeal from that order.”). The district court ultimately did rule on
16
We recognize that the court of appeals has established a bright
line rule disallowing direct appeals from a default judgment entered
for failure to appear. See State v. Sixteen Thousand Dollars U.S.
Currency, 914 P.2d 1176 (Utah Ct. App. 1996). The proper and
exclusive course, according to the court of appeals, is for litigants to
first file a 60(b) motion in the district court, followed only then by an
appeal from the district court’s denial of that motion. Id. at 1178. The
court of appeals has subsequently reaffirmed this holding from
Sixteen Thousand Dollars in recent years. See, e.g., Salazar v. Chavez,
2012 UT App 177, ¶ 3 n.2, 282 P.3d 1033 (“[A] defaulting party is not
entitled to appeal from the default judgment directly but must first
seek redress through a rule 60(b) motion and appeal from the denial
of that motion.” (internal quotation marks omitted)); Yuanzong Fu,
2013 UT App 120, ¶ 15 (quoting Sixteen Thousand Dollars for the
proposition that “[i]n order to preserve a challenge to a default
judgment entered for failure to appear, the defendant must first seek
relief in the trial court” followed only then by an appeal from the
trial court’s denial of a postjudgment motion). Because we hold that
there are certain circumstances—though narrow— under which a
direct appeal can be brought from a default judgment without first
petitioning the district court for rule 60(b) relief, we overrule Sixteen
Thousand Dollars and its progeny on this point.
17
The notice of appeal incorrectly identifies the date of the order
as November 2, 2010. The order was actually entered on November
3, 2010.
10
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that motion, denying it on July 3, 2013. However, Hildale and
TCWA never filed an appeal from that ruling.
¶22 We are thus left to decide only this direct appeal. As stated
above, we will entertain a direct appeal from a default judgment (for
failure to appear) only when the defaulting party alleges grounds
that were necessarily decided by the district court in entering default
judgment. Hildale and TCWA have failed, however, to raise any
such grounds in this appeal. Instead they simply present anew the
same arguments they made in their 60(b) motion before the district
court. Specifically, Hildale and TCWA argue that the district court
should have set aside the default judgment because (1) Mr. Wisan
allegedly did not act in good faith in pursuing default judgment;
(2) Mayor Zitting, though the registered agent for both parties, did
not know he needed to give both parties notice of the complaint
against them; and (3) recording the plats would be contrary to public
policy. None of these issues were necessary to the district court’s
entry of default judgment. Rather, they assert possible reasons—
exclusive to rule 60(b)—for which a court may grant a party relief
from a judgment properly entered as a matter of law. The district
court rejected these arguments and denied the 60(b) motion. Hildale
and TCWA could have appealed from that ruling, but failed to do
so. But these grounds are not reviewable on direct appeal.18 Appeal
on these grounds must be taken from the district court’s denial of
the defaulting party’s rule 60(b) motion. Because Hildale and TCWA
failed to appeal that denial, and because these particular rule 60(b)
arguments are not reviewable on direct appeal, we dismiss this
appeal without reaching the merits of these arguments.
____________
18
Alhough Hildale and TCWA also made these 60(b) arguments
to the district court prior to entry of the default judgment, this timing
does not make the arguments part of our review of the default
judgment itself. See Jensen v. Intermountain Power Agency, 1999 UT 10,
¶ 7, 977 P.2d 474 (noting that appellate courts have jurisdiction only
over judgments or orders designated in the notice of appeal because
“the object of a notice of appeal is to advise the opposite party that
an appeal has been taken from a specific judgment in a particular
case” (internal quotation marks omitted)); see also Jensen v. Jensen,
2013 UT App 143, ¶ 3, 304 P.3d 878 (holding that a district court’s
order submitted “after the entry of the final appealable order, and
. . . not identified as an order on appeal in the notice of appeal” was
“not within the scope of . . . appeal”). Our review is limited to the
propriety of the judgment, circumscribed by those issues necessarily
decided by the court in entering the judgment.
11