Sunrise Oaks Capital Fund, LLC v. Maughan Family Partnership ( 2012 )

IN THE UTAH COURT OF APPEALS
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Sunrise Oaks Capital Fund, LLC, ) MEMORANDUM DECISION
)
Plaintiff and Appellee, ) Case No. 20110044‐CA
)
v. )
) FILED
The Maughan Family Partnership; ) (September 27, 2012)
Richard Maughan; Margaret Maughan; )
Russell Maughan; Frank Maughan, Jr.; ) 2012 UT App 271Douglas Maughan; Russell C. Maughan; )
Gina Maughan; and Franklin D. )
Maughan, )
)
Defendants and Appellants. )
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Second District, Farmington Department, 090700077
The Honorable John R. Morris
Attorneys: Timothy W. Blackburn and Richard H. Reeve, Ogden, for Appellants
Robert W. Hughes, Salt Lake City, for Appellee
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Before Judges Orme, McHugh, and Roth.
ORME, Judge:
¶1 Appellants (the Maughans) appeal from the denial of their requested relief from
the sheriff’s sale of their property. Appellee (Sunrise) argues for affirmance and
requests an award of its attorney fees and costs incurred on appeal. We affirm and
remand to the district court to determine the amount of Sunrise’s fees and costs
reasonably incurred on appeal.
¶2 The Maughans executed a note and trust deed in favor of Sunrise in March 2008.
The trust deed secured the Maughans’ repayment obligation with a sixty‐acre parcel of
land in Weber County. The Maughans supplied the property description and tax
identification number incorporated in the trust deed. The Maughans also owned an
adjacent sixty‐acre property that was included in the same tax parcel, with the same tax
identification number. The adjacent parcel was not intended to be pledged as security
and was not described in the trust deed.
¶3 The Maughans defaulted, and Sunrise commenced this action to judicially
foreclose its trust deed. Sunrise obtained summary judgment in its favor. In October
2009, the district court issued a writ of execution directing the Weber County Sheriff to
sell the property described in the trust deed. The property described in the writ
contained the tax identification number and the correct metes and bounds description
from the trust deed. In November 2009, however, the sheriff published a notice of sale
containing the metes and bounds description for the larger tax parcel corresponding to
the tax identification number, including the adjacent property not secured by the trust
deed.1 At the ensuing sale, the property was sold to Sunrise for $135,000. The
certificate of sale prepared and recorded by the sheriff also described the property using
the description of the larger tax parcel, erroneously including the adjacent sixty‐acre
parcel. When Sunrise was made aware of the incongruence between the property
description in the certificate of sale and the description in the trust deed, Sunrise
contacted the sheriff to correct the certificate. The sheriff immediately complied with
the request and revised the certificate to describe the property sold using the property
description from the trust deed.
¶4 The Maughans filed an objection to the sheriff’s sale in January 2010, claiming
that the price paid by Sunrise was “substantially inadequate.” In February 2010, the
district court found the Maughans’ objection to be “without merit.” In May 2010, the
Maughans filed a motion to set aside the sheriff’s sale and order of summary judgment,
ostensibly pursuant to rule 60(b) of the Utah Rules of Civil Procedure. For the first
1
The error was the sheriff’s. It was suggested at oral argument that, in an ironic
effort to preclude mistakes, someone in the sheriff’s office must have used the “copy
and paste” feature of a word processing program to lift the exact description from the
county’s tax records for inclusion in the notice of sale, without realizing that the tax
parcel was twice as large as the parcel authorized to be sold.
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time, the Maughans alleged that there was a mistake in the property description used in
the certificate of sale prepared by the sheriff. In early September—approximately nine
months after the sale and three months after filing their motion to set aside—the
Maughans asserted in their supplemental briefing on the motion that the notice of sale
was flawed and rendered the sheriff’s sale invalid. The district court again ruled
against the Maughans.
¶5 On appeal, the Maughans contend that the secured property was not sold for
adequate value at the sheriff’s sale. The Maughans also argue that the court committed
error in determining that the sheriff’s sale was valid and enforceable.2
¶6 “There is a general policy to sustain a sheriff’s sale. The policy of the courts is to
uphold judicial sales except when they are manifestly unfair . . . . [E]specially this is
true in a state such as Utah which has a substantial period of redemption.” Beesley v.
Hatch, 863 P.2d 1319, 1322 (Utah 1993) (citation and internal quotation marks omitted).
District courts are afforded a “high degree of discretion” in determining whether to set
aside a sheriff’s sale. Pyper v. Bond (Pyper II), 2011 UT 45, ¶ 24, 258 P.3d 575, aff’g 2009
UT App 331, 224 P.3d 713. This discretion, however, is not limitless. On the contrary,
our jurisprudence has developed a rather specific and systematic methodology for
considering challenges to sheriff’s sales like the instant one.
One of the main justifications for setting aside a sheriff’s sale
or extending the redemption period involves the interplay of
two factors: (1) gross inadequacy of the purchase price and
(2) irregularity in the sale so as to indicate at least slight
circumstances of unfairness. “These factors operate on a
sliding scale. Thus, the greater the disproportionality in
price, the less unfairness or fewer irregularities a party must
demonstrate before a court may justifiably extend a
redemption period or set aside a sheriff’s sale.”
2
Because we uphold the district court’s disposition on the merits, in the process
of which we resolve the Maughans’ substantive arguments, we need not consider their
argument that the district court erred in ruling that their rule 60(b) motion was
untimely and otherwise improper.
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Meguerditchian v. Smith, 2012 UT App 176, ¶ 10 (emphasis added) (internal citations,
additional internal quotation marks, and footnote omitted) (quoting Pyper II, 2011 UT
45, ¶ 15) . In short, a party must demonstrate both a grossly inadequate price and
irregularity in the conduct of the sale before this “sliding scale” even comes into play.
That is, recognition of the sliding scale should not obscure the debtor’s fundamental
obligation to establish both an inadequate price and irregularity in the sale. See Pyper II,
2011 UT 45, ¶ 16. See also Mark Mfg. Co. v. Joseph Nelson Supply Co., 237 P. 223, 227 (Utah
1925) (noting “that where inadequacy of price is shown[,] the courts will be quick to
seize upon other irregularities in the conduct of the sale, and such irregularities, coupled
with inadequacy of price, may be sufficient grounds for avoiding the sale”) (emphasis
added) (citation and internal quotation marks omitted).
¶7 The Maughans argue that the $135,000 sale price bid at the December 2009
sheriff’s sale was “substantially inadequate and created an inequitable situation of
unfair dealing.” They first objected to the sale price in early 2010 when they filed a
motion challenging the sheriff’s sale and requesting that the district court quash the
writ of execution. In denying that motion, the court focused on the inadequacy of the
evidence presented by the Maughans with regard to the price obtained at the sheriff’s
sale:
Notably, [the Maughans] have not submitted an appraisal
for the subject property and acknowledge that the property’s
current value is unknown. The Maughans base their
argument that the sales price from the property’s sheriff’s
sale was substantially inadequate [as compared to] the sales
prices of neighboring properties from nearly three and a half
(3 ½) years ago, a time at which [the Maughans]
acknowledge that the market and property values were
significantly greater than current values. Additionally, [the
Maughans’] assertion that these neighboring properties are
comparable to the subject property is founded upon the
opinion of Russell Maughan, a defendant in this litigation
whose credentials for appraising and comparing real
property have not been established. Moreover, [the
Maughans] have not submitted any evidence that a ready
market for the subject property exists. Accordingly, the
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Court finds that [the Maughans’] outdated, self‐serving, and
insufficient evidence carries little weight with regard to
establishing a current value for the subject property.
The Maughans again contended that the sale price was grossly inadequate when they
later filed their rule 60(b) motion, the denial of which led to this appeal. In ruling on
that motion, the district court was once again unimpressed with the Maughans’
evidence, explaining, with our emphasis, as follows:
[D]espite being fully aware of the rationale for the Court’s
denial of [the Maughans’] prior objection to the December 4,
2009 sheriff’s sale, [the Maughans] have again failed to present
any competent evidence regarding the value of the trust deed
property for the Court to make a determination that a fair
price could not be realized from the sheriff’s sale.
Elsewhere, the district court observed “that while the notice for the December 4, 2009
sheriff’s sale was inaccurate, [the Maughans] have failed to demonstrate how this
inaccuracy prevented the realization of a fair price . . . in justification of a departure
from Utah’s general policy to uphold sheriff’s sales.” See Beesley v. Hatch, 863 P.2d 1319,
1322 (Utah 1993).
¶8 In light of the insufficient evidence presented by the Maughans to the district
court, we conclude that the court did not abuse its discretion in concluding that the
Maughans failed to show that the price obtained at the sheriff’s sale was grossly
inadequate. Therefore, they have failed to satisfy one of the two requirements
necessary to trigger judicial invalidation of a flawed sheriff’s sale. Because the
Maughans failed to demonstrate that the price was grossly inadequate, we have no
occasion to consider their arguments about the irregularities of the sale. It follows that
the district court did not err in refusing to set aside the sheriff’s sale in this case.
¶9 Sunrise is entitled to an award of its attorney fees and costs reasonably incurred
on appeal; we remand for determination of that amount. See Management Servs. Corp. v.
Development Assocs., 617 P.2d 406, 409 (Utah 1980) (“[A] provision for payment of
attorney’s fees in a contract includes attorney’s fees incurred by the prevailing party on
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appeal as well as at trial, if the action is brought to enforce the contract.”) Otherwise,
we affirm.
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Gregory K. Orme, Judge
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¶10 WE CONCUR:
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Carolyn B. McHugh, Judge
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Stephen L. Roth, Judge
20110044‐CA 6