Legrand Johnson Constr. Co. v. Celtic Bank Corp. , 420 P.3d 1073 ( 2018 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2018 UT 18
IN THE
SUPREME COURT OF THE STATE OF UTAH
LEGRAND JOHNSON CONSTRUCTION COMPANY,
Appellee,
v.
CELTIC BANK CORPORATION and CELTIC INVESTMENT, INC.,
Appellants.
No. 20160913
Filed May 21, 2018
On Direct Appeal
First District, Logan
The Honorable Brian G. Cannell
No. 090101252
Attorneys:
John A. Snow, James A. Boevers, Salt Lake City, Mark B. Hancey,
Logan, for appellee
Troy L. Booher, Beth E. Kennedy, Leslie K. Rinaldi, Ronald G.
Russell, Jeffery A. Balls, Salt Lake City, for appellants
ASSOCIATE CHIEF JUSTICE LEE authored the opinion of the Court, in
which CHIEF JUSTICE DURRANT, JUSTICE HIMONAS, JUSTICE PEARCE, and
JUDGE POHLMAN joined.
Having recused herself, JUSTICE PETERSEN does not participate herein;
COURT OF APPEALS JUDGE JILL M. POHLMAN sat.
ASSOCIATE CHIEF JUSTICE LEE, opinion of the Court:
¶1 LeGrand Johnson Construction Company (LeGrand)
filed an action seeking to enforce a mechanic’s lien on property
owned by B2AC, LLC, for the unpaid value of construction services
provided by LeGrand. Celtic Bank, B2AC’s lender, sought to
foreclose on the same property after B2AC failed to pay on its loan.
B2AC did not defend against LeGrand’s action to enforce its
mechanic’s lien. The action resulted in a lien for $237,294.21 and an
LEGRAND v. CELTIC BANK
Opinion of the Court
award of $6,395.50 in attorney fees and costs, which were to be
collected from the proceeds of the sale of B2AC’s property.
¶2 LeGrand and Celtic Bank disputed which of their liens
had priority. The district court determined that LeGrand’s lien had
priority. It also awarded LeGrand $132,916.48 in attorney fees and
costs incurred in the lien priority action. And it held that LeGrand
was entitled to recover 18 percent in prejudgment and postjudgment
interest from Celtic Bank based on LeGrand’s contract with B2AC.
The prejudgment interest was awarded not only on the value of the
mechanic’s lien but also on the attorney fees and costs incurred by
LeGrand in seeking to enforce the lien against B2AC and in seeking
to establish priority against Celtic Bank.
¶3 Celtic Bank appeals. It challenges the district court’s
decision awarding prejudgment interest on the value of the
mechanic’s lien and on the amount of LeGrand’s attorney fees. In the
event we reverse the award of prejudgment interest, Celtic Bank also
asks us to vacate the district court’s attorney fee award and to
remand to allow the district court to award attorney fees and costs to
Celtic Bank as the prevailing party on the prejudgment interest
issues. To the extent Celtic Bank remains liable for attorney fees and
costs, Celtic Bank also asks us to reverse the award of postjudgment
interest rate of 18 percent and to limit the postjudgment interest rate
pursuant to Utah Code section 15-1-4.
¶4 We reverse the decision to award prejudgment interest
on the basis of our decision in Jordan Construction, Inc. v. Federal
National Mortgage Ass’n, 2017 UT 28, ¶ 64, 408 P.3d 296. We also
conclude that Celtic Bank is the prevailing party on the prejudgment
interest issues. And we accordingly vacate and remand to the district
court to allow it to award attorney fees in a manner consistent with
this opinion.
I
¶5 Celtic Bank’s first claim of error is vindicated by our
recent decision in Jordan Construction, Inc. v. Federal National Mortgage
Ass’n, 2017 UT 28, 408 P.3d 296. There we explained that “[t]he
extent of overall recovery available on a mechanic’s lien claim, just
like the amount that can be validly listed on the lien itself, can be no
broader than what is provided for by statute.” Id. ¶ 61. And we
noted that the version of the mechanic’s lien statute applicable in
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Opinion of the Court
that case (and here)1 “specifically provided for attorney fees” but
“did not provide that prejudgment interest is recoverable in the
action.” Id. ¶ 62. We thus concluded that “what is left unsaid in the
mechanic’s lien statute is not available for recovery in a mechanic’s
lien action” and held that prejudgment interest is accordingly
“unavailable on a mechanic’s lien claim under the 2008 Utah Code.”
Id. ¶¶ 62, 64.
¶6 This holding applies with equal force here. LeGrand has
identified no plausible basis for distinguishing our holding in Jordan
Construction. Nor has it offered a persuasive ground for overruling it.
We accordingly reinforce that decision here and reverse the district
court’s award of prejudgment interest on the basis of Jordan
Construction.
II
¶7 That conclusion also sustains Celtic Bank’s second claim
of error. Our decision that LeGrand is not entitled to prejudgment
interest also requires us to vacate the district court’s attorney fee
award.
¶8 The district court determined that LeGrand “qualified as
the ‘successful party’ pursuant to Utah Code Ann. § 38-1-18” and
thus awarded LeGrand its attorney fees. But that determination was
made at a time when LeGrand had prevailed on all issues before the
court—both in establishing its lien priority and in establishing its
right to prejudgment interest. That no longer holds, as we have now
concluded that LeGrand was not entitled to prejudgment interest.
¶9 We accordingly vacate the fee award and remand for
further proceedings that accord with this opinion. On remand the
district court should decide whether and to what extent LeGrand (or
Celtic Bank) may be entitled to an attorney fee award under Utah
Code section 38-1-18. That will require the court to identify the
“successful party” in this “action brought to enforce” a mechanic’s
lien. UTAH CODE § 38-1-18 (2008).
_____________________________________________________________
1 See UTAH CODE § 38-1-18(1) (2008). In Jordan Construction, Inc. v.
Federal National Mortgage Ass’n we also noted that the legislature has
subsequently amended the statute to now provide for prejudgment
interest. 2017 UT 28, ¶ 57 n.40 (citing UTAH CODE § 38-1a-309 (2012)).
But we also concluded, as we reinforce here, that the amended
provision has no effect on its predecessor, and does not apply
retroactively. See id.
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LEGRAND v. CELTIC BANK
Opinion of the Court
¶10 In remanding we highlight an issue that has not been
briefed to us and that we are therefore not deciding. The issue is
whether the “successful party” analysis under section 38-1-18 is to be
decided (a) on a claim-by-claim basis, under which LeGrand may be
entitled to its fees as the successful party on the priority claim, but
Celtic Bank may be entitled to fees as the successful party on the
prejudgment interest claim; or (b) on an overarching basis that
examines the “action” as a whole, under which the district court
would determine which party was overall more “successful,” and
award fees only to that party. This question is for the district court
on remand. It is not presented to us and we do not decide it.
¶11 We do decide one final issue that was presented to us,
however, and which may become an issue on remand. We hold that
if LeGrand is awarded attorney fees on remand, it is not entitled to
prejudgment interest on any fee award and is entitled only to the
postjudgment interest rate of 2.65 percent. See UTAH CODE § 15-1-4
(2014); UTAH COURTS, Post Judgment Interest Rates,
http://www.utcourts.gov/resources/intrates/interestrates.htm (last
visited May 14, 2018) (listing the post judgment interest rate for each
calendar year). Prejudgment interest is not available under the
mechanic’s lien statute for reasons set forth above. And we also hold
that LeGrand is not entitled to the 18 percent interest rate under the
operative contract between LeGrand and B2AC.
¶12 The district court found “that the collection of interest at
the contractual rate against an entity that was not a party to the
contract is provided for implicitly in the mechanic’s lien statute.” But
our cases hold that “[t]he extent of overall recovery available” is
limited to costs specifically provided for by statute. Jordan Constr., Inc.
v. Fed. Nat’l Mortg. Ass’n, 2017 UT 28, ¶¶ 61–62, 408 P.3d 296. And
the mechanic’s lien statute does not specifically provide for the
collection of interest at a contractual rate against an entity that is not
a party to the contract. For that reason LeGrand is not entitled to the
contractual interest rate under the mechanic’s lien statute.
¶13 In so concluding we reject LeGrand’s attempt to establish
a right to interest under the terms of the contract between LeGrand
and B2AC. The contract provides for an 18 percent interest rate on
“past due balances.” But Celtic Bank was not a party to the contract.
And it lacks privity with B2AC. For that reason Celtic Bank cannot
contractually be obligated to pay an interest rate on any attorney fees
that may be awarded on remand. And Celtic Bank has only a
statutory obligation to pay postjudgment interest.
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Opinion of the Court
III
¶14 We reinforce our holding in Jordan Construction, Inc. v.
Federal National Mortgage Ass’n, 2017 UT 28, ¶ 64, 408 P.3d 296, that
prejudgment interest is not available under the 2008 version of the
Utah Mechanic’s Lien Act. We also vacate the attorney fee award
because it was premised, at least in part, on the notion that LeGrand
had succeeded in establishing its right to prejudgment interest. And
we remand to allow the district court to enter a new fee award, with
the clarification that LeGrand has no right to prejudgment interest
on any fees it may be awarded (either under the statute or the
contract between LeGrand and B2AC).
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