Kirton McConkie PC v. ASC Utah LLC , 822 Utah Adv. Rep. 12 ( 2016 )

2016 UT App 200THE UTAH COURT OF APPEALS
KIRTON MCCONKIE PC,
Appellant,
v.
ASC UTAH LLC,
Appellee.
Opinion
No. 20140798-CA
Filed September 22, 2016
Third District Court, Salt Lake Department
The Honorable Robin W. Reese
No. 110919255
Christopher S. Hill and Shawn T. Richards,
Attorneys for Appellant
John R. Lund and Julianne P. Blanch, Attorneys
for Appellee
JUDGE STEPHEN L. ROTH authored this Opinion, in which JUDGE J.
FREDERIC VOROS JR. and SENIOR JUDGE RUSSELL W. BENCH
concurred. 1
ROTH, Judge:
¶1 ASC Utah LLC leased property in Summit County from
Wolf Mountain Resorts LC. In a separate case, ASC Utah
obtained a $60 million judgment (the Judgment) against Wolf
Mountain for breach of the lease. Kirton McConkie PC
represented Wolf Mountain in that case. Shortly before trial,
Wolf Mountain assigned its right to receive rents from ASC Utah
1. Senior Judge Russell W. Bench sat by special assignment as
authorized by law. See generally Utah R. Jud. Admin. 11-201(6).
Kirton McConkie v. ASC Utah
to Kirton McConkie to secure payment of Kirton McConkie’s
past due and still-accruing attorney fees. After the trial, the court
determined that ASC Utah had a right to set off its upcoming
rent payment against the Judgment. Kirton McConkie then filed
a separate action to determine whether ASC Utah’s setoff right
had priority over Kirton McConkie’s right to the rents under the
earlier assignment from Wolf Mountain. On summary judgment,
the district court ruled that ASC Utah’s right to a setoff takes
priority. We affirm.
BACKGROUND 2
¶2 In 1997, ASC Utah leased real property in Summit
County, Utah from Wolf Mountain for the operation of a ski
resort (the Ground Lease). The Ground Lease required ASC Utah
to make a substantial annual rental payment each September.
¶3 In a preceding case, ASC Utah sued Wolf Mountain (the
Breach Case) alleging various breaches of the Ground Lease. See
generally ASC Utah, Inc. v. Wolf Mountain Resorts, LC, 2013 UT 24,
¶ 2 n.1, 309 P.3d 201 (providing citations to the litigation
history). Wolf Mountain retained Kirton McConkie to defend it
in the litigation and entered into an engagement agreement for
legal services. Wolf Mountain fell behind in payments to Kirton
McConkie, and in March 2011, with trial in the Breach Case close
at hand, the two amended the engagement agreement. The
amendment required Wolf Mountain to make specified monthly
2. “In reviewing a grant of summary judgment, we recite the
facts and reasonable inferences that may be drawn from them in
the light most favorable to the nonmoving party.” Winegar v.
Springville City, 2014 UT App 9, n.1, 319 P.3d 1 (citing Orvis v.
Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600).
20140798-CA 2 2016 UT App 200Kirton McConkie v. ASC Utah
payments to Kirton McConkie until its legal fees were paid in
full. The amendment 3 also provided,
In order to secure its obligations to [Kirton
McConkie] hereunder, [Wolf Mountain] hereby
grants to [Kirton McConkie] a security interest in,
and hereby assigns to [Kirton McConkie] all of
[Wolf Mountain’s] right, title and interest in and to,
both (a) Rent . . . and (b) Option Payments . . . in
[the] Ground Lease Agreement dated July 3, 1997
. . . , by and between [Wolf Mountain] and ASC
Utah, Inc.
Following the seven-week Breach Case trial, the jury awarded
ASC Utah approximately $54.5 million in damages and the court
entered the Judgment against Wolf Mountain for approximately
$60.6 million, including interest and attorney fees.
¶4 ASC Utah filed a motion asserting the right to set off the
annual rental payments due under the Ground Lease against the
Judgment. On September 9, 2011, approximately one week
before ASC Utah’s nearly $3 million annual rent payment came
due to Wolf Mountain, the district court entered a ruling and
order (the Setoff Order) granting ASC Utah’s motion. Wolf
Mountain had opposed the motion on the basis of section 3.02 of
the Ground Lease, which provided that ASC Utah was not
entitled to “any abatement, reduction, set off, counterclaim,
defense or reduction with respect to the payment of any rent.”
But the court determined that, although ASC Utah had
“waive[d] the right [to a] setoff” under section 3.02 of the
Ground Lease, the Judgment for Wolf Mountain’s breach
triggered section 17.02. Section 17.02 provided that “[t]his Lease
3. Because the assignment provision contained in this amendment
is of central focus to the issues now on appeal, for simplicity we
will refer to this amendment as “the assignment.”
20140798-CA 3 2016 UT App 200Kirton McConkie v. ASC Utah
is a valid and binding obligation of Landlord enforceable in
accordance with its terms, subject to equitable principles . . . .”
Interpreting that section, the court stated:
The parties themselves agreed that the Ground
Lease is enforceable against [Wolf Mountain] “in
accordance with its terms subject to equitable
principles.” That phrase reflects that the waiver [in
section 3.02] was not a complete waiver and does
not, to this court, eliminate or negate all the
provisions of the Ground Lease but provides that
where equity is applicable, the lease provisions are
subject to that equitable determination by a court[.]
Ultimately the court concluded that “[b]ased upon principles of
equity and public policy,” ASC Utah “is entitled to post-
judgment setoff . . . on its $60 million judgment against” its
annual rent payment to Wolf Mountain. Accordingly, the court
ordered that “[r]ather than make the annual payment directly”
to Wolf Mountain, ASC Utah “may deduct the amount of the
annual rent payment from the amount of the judgment owed by
[Wolf Mountain] when the annual rent payment is due.” A week
later, ASC Utah set off all of the approximately $3 million annual
rent due against the Judgment.
¶5 In November 2011, Kirton McConkie sued both Wolf
Mountain and ASC Utah alleging various claims for relief,
including breach of contract against Wolf Mountain and unjust
enrichment against ASC Utah. In essence, all of Kirton
McConkie’s claims were aimed at recovering the attorney fees
that Kirton McConkie alleged it was due under the terms of the
assignment. In March 2012, Kirton McConkie moved for
summary judgment “on the issue of rent payments that were
assigned” by Wolf Mountain to Kirton McConkie. Kirton
McConkie argued that the assignment put its claim for attorney
fees ahead of any claim that ASC Utah had as a result of the
Judgment:
20140798-CA 4 2016 UT App 200Kirton McConkie v. ASC Utah
[A]t the time [ASC Utah] recorded its judgment
lien against the Property, the judgment lien, as a
matter of law, did not extend to the Rent, up to the
amount of Kirton & McConkie’s legal fees, because
Wolf Mountain had already conveyed and
assigned the Rent to Kirton & McConkie months
earlier.
¶6 In August 2012, the district court denied Kirton
McConkie’s motion for summary judgment:
The Court concludes as a matter of law that Wolf
Mountain’s purported assignment to [Kirton
McConkie] of an interest under the Ground
Lease—the right to receive rents and other
payments—at best gave [Kirton McConkie], as
purported assignee, the same rights as Wolf
Mountain, the assignor, and nothing more. The
Court also concludes as a matter of law that any
assignment of rents under the Ground Lease that
[Kirton McConkie] may have acquired from Wolf
Mountain would be wholly subject to [ASC Utah’s]
right of setoff or recoupment arising under the
Ground Lease. The Court further concludes as a
matter of law that Wolf Mountain’s right to receive
rent payments from [ASC Utah] under the Ground
Lease was extinguished by [the Setoff Order]
before any such rent monies were due and owing.
The Court adheres to, and the parties are bound
by, [the Setoff Order]. The Court therefore
concludes as a matter of law that because Wolf
Mountain has no right to receive those monies,
neither does [Kirton McConkie] as Wolf
Mountain’s purported assignee.
20140798-CA 5 2016 UT App 200Kirton McConkie v. ASC Utah
Based on this ruling, ASC Utah filed its own motion for
summary judgment, which the court granted. Kirton McConkie
now appeals.
ISSUE AND STANDARD OF REVIEW
¶7 Although the parties frame the issue slightly differently,
the basic question before us is whether Kirton McConkie’s right
to Ground Lease rents under the assignment is superior to and
takes priority over ASC Utah’s right to set off those rents against
the Judgment. Because this appeal arises from a grant of
summary judgment, “we resolve only legal issues and review
the trial court’s conclusions of law for correctness.” AMS Salt
Indus., Inc. v. Magnesium Corp. of Am., 942 P.2d 315, 319 (Utah
1997).
ANALYSIS
¶8 The basic premise of Kirton McConkie’s argument is
simple: “When Wolf Mountain conveyed its rights in the Rent to
[Kirton McConkie], Wolf Mountain possessed every right to
receive that rent payment in full. And that is exactly what Wolf
Mountain conveyed to Kirton McConkie.” As a result, Kirton
McConkie argues,
Wolf Mountain conveyed all of its interest in the
Rent to [Kirton McConkie] before [ASC Utah]
obtained its judgment lien against Wolf Mountain.
[Kirton McConkie’s] interest in the Rent is not
simply that of a secured creditor . . . . Rather,
[Kirton McConkie] owns—free and clear of all
encumbrances—the right to receive the Rent. That
was the position Wolf Mountain was in when it
conveyed its right to receive the Rent to [Kirton
McConkie]. Because [ASC Utah’s] right to setoff
20140798-CA 6 2016 UT App 200Kirton McConkie v. ASC Utah
and resultant judicial lien came several months
after [Kirton McConkie’s] acquisition, [ASC Utah’s]
execution on the Rent is subject to [Kirton
McConkie’s] rights therein.
ASC Utah counters that the issue must be resolved under the
law of assignments: “[Kirton McConkie’s] right to rent is as an
assignee. It has no greater right to the collateral than the
assignor, [Wolf Mountain].” Thus, ASC Utah argues, because
Wolf Mountain’s interest is subject to ASC Utah’s right to set off,
so is Kirton McConkie’s. We agree with ASC Utah.
¶9 The idea underlying Kirton McConkie’s argument
appears to be that the right to receive future rent payments is
severable from all other rights and responsibilities contained in
the Ground Lease. That is, once Wolf Mountain assigned Kirton
McConkie the right to receive rent, Wolf Mountain no longer
owned any right to ASC Utah’s rent payments—Kirton
McConkie did, at least up to the amount of its unpaid attorney
fees. Therefore, Kirton McConkie argues, ASC Utah could not set
off the September rent payment against the Judgment because
Kirton McConkie “received the assignment of Rent before [ASC
Utah] obtained any setoff rights.” But Kirton McConkie’s
argument misses the mark by ignoring the context in which the
setoff right arose—specifically, the ongoing contractual
relationship between Wolf Mountain and ASC Utah.
¶10 Kirton McConkie asserts that “[b]ecause [Kirton
McConkie] already owned that right [to collect rent] when [ASC
Utah] obtained its judgment, [ASC Utah’s] judicial lien could not
attach to it.” But this assertion fails to take into account the legal
significance of the relationships among the parties. It is true that
“[a]n ‘assignment’ is a transfer of property or some other right
from one person (the ‘assignor’) to another (the ‘assignee’),
which confers a complete and present right in the subject matter
to the assignee.” 6 Am. Jur. 2d Assignments § 1 (2016) (footnotes
omitted). Kirton McConkie asks us to treat the assignment of
20140798-CA 7 2016 UT App 200Kirton McConkie v. ASC Utah
rents as if it were a simple conveyance of property that Wolf
Mountain owned outright, and to treat ASC Utah’s setoff interest
in the rents as if it were simply a subsequent judgment lien
against Wolf Mountain which could not attach to the rents
because Wolf Mountain no longer had an interest in them. But
an assignment of rights in a lease, as occurred here, is not as
simple as a mere conveyance of property. Rather, the property
right assigned—the right to receive rents—is a contractual right
to the performance of the other party to that lease, in this case
lessee ASC Utah. However, ASC Utah has its own rights to the
performance of lessor Wolf Mountain under the Ground Lease.
Indeed, the rights and obligations of the parties under the
Ground Lease are inextricably intertwined; Wolf Mountain
cannot by assignment simply sever the benefit of receiving rents
from ASC Utah from Wolf Mountain’s own obligations as lessor.
Cf. Clark v. Shelton, 584 P.2d 875, 877 (Utah 1978) (“Generally, the
law favors the assignability of contractual rights, unless the
assignment would add to or materially alter the obligator’s duty
or risk.”). Rather, the assignee of a contractual right, such as the
right to receive rent under a lease, receives the assigned benefit
subject to the assignor’s corresponding obligations to the other
party to the lease.
¶11 Thus, an assignee is often described as standing “in the
shoes of the assignor.” Sunridge Dev. Corp. v. RB & G Eng’g, Inc.,
2010 UT 6, ¶ 13, 230 P.3d 1000 (citation and internal quotation
marks omitted). And a corollary of this principle is that
[t]he assignee is subject to any defenses that would
have been good against the [assignor]; the assignee
cannot recover more than the assignor could
recover; and the assignee never stands in a better
position than the assignor. [A]n assignee gains
nothing more, and acquires no greater interest than
had his assignor. In other words, the common law
20140798-CA 8 2016 UT App 200Kirton McConkie v. ASC Utah
puts the assignee in the assignor’s shoes, whatever
the shoe size.
Id. (alterations in original) (citations and internal quotation
marks omitted); see also SME Indus., Inc. v. Thompson, Ventulett,
Stainback & Assocs., Inc., 2001 UT 54, ¶ 16, 28 P.3d 669 (“[T]he
assignee never stands in a better position than the assignor.”
(emphasis, citation, and internal quotation marks omitted)); Jack
B. Parson Cos. v. Nield, 751 P.2d 1131, 1133 (Utah 1988) (“An
assignment of an interest in a contract gives the assignee the
same rights as the assignor and nothing more.”).
¶12 In its Setoff Order, the district court reasoned that section
3.02 of the Ground Lease effectively prevented ASC Utah from
withholding rent as a self-help remedy for any breach by Wolf
Mountain during the ordinary course of the lease. But once the
Judgment was entered, that limitation became “subject to
equitable principles” under section 17.02. The court also found
that requiring ASC Utah to continue paying millions of dollars
in rent in the face of the landlord’s enormous judgment
obligation for substantial breaches of the lease would be
inequitable and against public policy. The court then concluded
that, once section 17.02 was triggered by the Judgment, ASC
Utah could set off rent as it became due. That is, absent the
Judgment section 3.02 of the Ground Lease would have
controlled and prohibited a setoff—just as Wolf Mountain would
have been entitled to the rent, so too would Kirton McConkie.
But the Judgment intervened before the September rent came
due and ASC Utah’s equitable right to a setoff under the Ground
Lease matured.
¶13 Kirton McConkie’s argument that Wolf Mountain no
longer had any interest in the rents after the assignment is in
effect an argument that the assignment would have allowed
Wolf Mountain to elevate its obligation to pay Kirton McConkie
over its responsibilities to compensate ASC Utah for serious
breaches of the Ground Lease. This would essentially require
20140798-CA 9 2016 UT App 200Kirton McConkie v. ASC Utah
ASC Utah to pay Wolf Mountain’s attorney fees with rent money
it would not have owed to Wolf Mountain directly.
¶14 But such an approach is contrary to the fundamental
principle that “the assignee never stands in a better position than
the assignor.” SME Indus., 2001 UT 54, ¶ 16 (emphasis, citation,
and internal quotation marks omitted). As the Utah Supreme
Court explained, the “essential purpose” behind the principle
is to protect the obligor, the party who must
perform the correlative duty of the assigned right,
so that the risk to the obligor is not materially
enlarged over the risk created by its agreement
with the assignor. In other words, the purpose
behind the rule is that an assignee has rights and
liabilities identical to those of its assignor. We
believe that the relationship between the assignee
and obligor is not best characterized as a form of
privity, but rather as a continuation of the rights
and liabilities of the assignor as evidenced by the
assigned agreements and any further limitations
stated in the assignment itself.
Sunridge Dev. Corp., 2010 UT 6, ¶ 15 (citation and internal
quotation marks omitted). Kirton McConkie’s argument that the
assignment effectively insulated it from ASC Utah’s right to set
off the annual rent against the subsequent Judgment payment
defeats the “essential purpose” of protecting ASC Utah—“the
party who must perform the correlative duty of the assigned
right”—because such a result would “materially enlarge[]” “the
risk to the obligor[, ASC Utah] . . . over the risk created by its
agreement with the assignor[, Wolf Mountain].” Id. (citation and
internal quotation marks omitted). Rather, Kirton McConkie’s
relationship with ASC Utah under the assignment is simply “a
continuation of the rights and liabilities of” Wolf Mountain
under the Ground Lease. And, as the Setoff Order provides, ASC
Utah has a right under the terms of the Ground Lease to set off
20140798-CA 10 2016 UT App 200Kirton McConkie v. ASC Utah
the annual rent payment against Wolf Mountain’s liability under
the Judgment. By separating Wolf Mountain’s duties as landlord
from ASC Utah’s obligation to pay rent, Kirton McConkie’s
approach would deny ASC Utah a remedy that the Setoff Order
determined was available to it under the Ground Lease. 4 Kirton
McConkie’s approach also vitiates the principle that the assignee
stands in the shoes of the assignor because the assignment
would change the relative “rights and liabilities” of the parties
and, as a result, “materially enlarge[] . . . the risk” to ASC Utah
as lessee under the Ground Lease. See id.
4. Kirton McConkie also challenges whether the Setoff Order
could “extinguish[] [its] right to receive a portion of the Rent”
because it did not meet the legal requirements for a valid setoff.
The right to a setoff of one obligation against another requires
“mutuality of obligation.” Mark VII Fin. Consultants Corp. v.
Smedley, 792 P.2d 130, 133 (Utah Ct. App. 1990) (“As a general
rule, in order to warrant a set-off the demands must be mutual
and subsiding between the same parties[.]” (citation and internal
quotation marks omitted)). In the Setoff Order, the district court
recognized that “[t]he parties agree that pursuant to the terms of
the Ground Lease that [ASC Utah] owes annual rent payments
to [Wolf Mountain] on September 15.” The court then stated,
The debt owed by [ASC Utah] to [Wolf Mountain],
namely the Ground Lease rent payment, and [ASC
Utah’s] claim against [Wolf Mountain], namely the
judgment, are mutual and valid obligations
because they are both based upon the same
Ground Lease. Each side, both [ASC Utah] and
[Wolf Mountain], owe something to each other and
both are based upon the Ground Lease . . . .
Therefore, they are mutual debts for purposes of
. . . setoff.”
We agree with the district court that this meets the requirements
for a valid setoff.
20140798-CA 11 2016 UT App 200Kirton McConkie v. ASC Utah
¶15 Accordingly, we conclude that Kirton McConkie, as
assignee, stood in the shoes of its assignor Wolf Mountain with
respect to ASC Utah’s annual rent obligation and that, as the
district court ruled, “because Wolf Mountain has no right to
receive those monies, neither does [Kirton McConkie] as Wolf
Mountain’s purported assignee.” Therefore, even if the
assignment occurred before the Judgment, the timing did not
create the kind of priority interest that Kirton McConkie asserts
here.
¶16 Kirton McConkie attempts to avoid this result by casting
ASC Utah as a judgment creditor with a lien in competition with
Kirton McConkie’s superseding prior interest as a creditor in the
rent. In this regard, Kirton McConkie refers to ASC Utah’s right
to a setoff and resultant judicial lien and argues that, because
Kirton McConkie “already owned that right [to collect rent]
when [ASC Utah] obtained its judgment, [ASC Utah’s] judicial
lien could not attach to it.” But this approach undersells ASC
Utah’s rights under the Setoff Order. Although ASC Utah’s right
to a setoff was triggered by the Judgment, that right is not
dependent on or derivative from a judgment lien. Rather, ASC
Utah’s setoff right arose out of the Ground Lease itself. In the
Setoff Order, the district court recognized that
[t]he debt owed by [ASC Utah] to [Wolf Mountain],
namely the Ground Lease rent payment, and [ASC
Utah’s] claim against [Wolf Mountain], namely the
judgment, are mutual and valid obligations
because they are both based upon the same
Ground Lease. Each side, both [ASC Utah] and
[Wolf Mountain], owe something to each other and
both are based upon the Ground Lease . . . .
In concluding that ASC Utah “has the right to exercise its right of
setoff . . . for its rent payments owed to [Wolf Mountain] against
the judgment owed to [ASC Utah] by [Wolf Mountain],” the
Setoff Order addressed both sections 3.02 and 17.02 of the
20140798-CA 12 2016 UT App 200Kirton McConkie v. ASC Utah
Ground Lease. With respect to section 3.02, the court found that
it waived the right to a setoff and that, except for this anti-setoff
provision, ASC Utah would be “entitled to do as it now seeks to
do, that is, set off . . . the rent payments against the judgment.”
With respect to section 17.02, the court stated that it “simply
require[s] [Wolf Mountain] to abide by the terms of the Ground
Lease but subject to principles of equity and bankruptcy law and
other creditors’ rights law[s].” Recognizing that section 17.02
“was put in [the Ground Lease] by the same authors of Section
3.02,” the court found that the Ground Lease “provides that
where equity is applicable, the lease provisions are subject to
[an] equitable determination by a court.” Accordingly, the Setoff
Order concluded:
Based upon principles of equity and public policy,
. . . [ASC Utah] is entitled to post-judgment
setoff or recoupment on its $60 million judgment
against [Wolf Mountain] for the rent payment
[ASC Utah] owes [Wolf Mountain] on September
15 each year. Rather than make the annual
payment directly to [Wolf Mountain], [ASC Utah]
may deduct the amount of the annual rent
payment from the amount of the judgment owed
by [Wolf Mountain] when the annual rent payment
is due and submit documents reflecting such set off
or recoupment.
And here, in granting summary judgment to ASC Utah, the
district court echoed the reasoning of the Setoff Order,
concluding that “any assignment of rents under the Ground
Lease that [Kirton McConkie] may have acquired from Wolf
Mountain would be wholly subject to [ASC Utah’s] right of
setoff or recoupment arising under the Ground Lease.”
¶17 Thus, ASC Utah’s right to set off its rent obligation
against the Judgment for Wolf Mountain’s breach derives from
the mutual obligations and rights of ASC Utah and Wolf
20140798-CA 13 2016 UT App 200Kirton McConkie v. ASC Utah
Mountain under the Ground Lease itself, not from the legal
status of the Judgment as a lien on Wolf Mountain’s interests.
Kirton McConkie’s assignment, while perhaps superior to the
lien of a random third-party with a judgment against Wolf
Mountain, does not take priority over ASC Utah’s right, as lessee
under the Ground Lease, to set off rents against Wolf Mountain,
the lessor. To the contrary, as assignee of Wolf Mountain’s right
to the rents, Kirton McConkie stands in the lessor’s shoes and
therefore has the same rights as Wolf Mountain and “nothing
more.” Sunridge Dev. Corp., 2010 UT 6, ¶ 13 (citation and internal
quotation marks omitted).
¶18 The cases Kirton McConkie relies on to support its
argument are inapposite because they do not involve
assignments. Instead, they deal with the relative rights of parties
with interests in property that predate a creditor’s judgment lien.
For example, Kirton McConkie relies heavily on Kartchner v. State
Tax Commission, 294 P.2d 790 (Utah 1956), in which the Utah
Supreme Court held that “the judgment lien [of a third-party
judgment creditor] was subordinate and inferior to a deed which
predated it, whether [the deed was] recorded after such
judgment or whether [the deed was] not recorded at all,” id. at
791. According to Kirton McConkie, Kartchner stands for the
proposition that “a judgment creditor cannot take from the
judgment debtor something that it does not own.” But as we
have discussed above, ASC Utah’s setoff right arises from the
relationship of lessor and lessee under the Ground Lease, not
from an unrelated judgment lien, and Kirton McConkie’s
implicit characterization of ASC Utah as merely a subsequent
judgment creditor does not fit the circumstances. The other cases
that Kirton McConkie cites are similarly inapposite. See Garland
v. Fleischmann, 831 P.2d 107, 112 (Utah 1992) (concluding, in the
context of a quiet title action, that the lien of a third party’s
judgment against a grantor who had conveyed the subject
property away before entry of the judgment could not affect the
grantee’s interest because the judgment lien could attach only
20140798-CA 14 2016 UT App 200Kirton McConkie v. ASC Utah
“to the actual interest owned” by the grantor “when the
judgment was docketed”); Butler v. Wilkinson, 740 P.2d 1244,
1257 (Utah 1987) (noting “[a]s a foundational matter” that “a
judgment lien has no greater dignity in property law than the
nature of the property to which it attaches”); Capital Assets Fin.
Servs. v. Lindsay, 956 P.2d 1090, 1095 (Utah Ct. App. 1998)
(stating that “a judgment lien cannot attach to a debtor’s real
property if the property has already been sold, conveyed, or
quitclaimed—even if the judgment lien is recorded first—
because there is no ‘interest’ to which the lien can attach.”); Lach
v. Deseret Bank, 746 P.2d 802, 804 (Utah Ct. App. 1987) (relying
on the judgment lien statute and Kartchner to conclude that
“Utah law is clear. A judgment creditor cannot place a lien
against the property of a judgment debtor’s grantee.”).
¶19 Kirton McConkie also relies on cases which hold that a
prior assignment takes priority over a right to a setoff arising
from litigation. See, e.g., Carson v. Chevron Chem. Co., 635 P.2d
1248, 1259–61 (Kan. Ct. App. 1981) (concluding that a third-party
assignee’s prior assignment of rights to a money judgment took
priority over a right of setoff that arose from counterclaims
between the assignor and the defendant). But these cases are
different because the right to a setoff arose solely as the result of
the counterclaims in the litigation, whereas here the right to a
setoff arose from the rights and obligations contained within the
Ground Lease, not from the litigation itself. 5
5. To the extent Kirton McConkie’s contention that “[t]his appeal
is all about timing and priority” amounts to an argument that its
right to the September rent payment is a security interest with
priority over ASC Utah’s subsequent judgment lien, that
argument is unavailing because, among other things, even
though the assignment preceded the Judgment, ASC Utah
perfected its judgment lien before Kirton McConkie perfected
the assignment. Cf. J.R. Simplot Co. v. Sales King Int’l, Inc., 2000
(continued…)
20140798-CA 15 2016 UT App 200Kirton McConkie v. ASC Utah
CONCLUSION
¶20 We conclude that Kirton McConkie, as the assignee of
Wolf Mountain’s right to the annual rent payment under the
Ground Lease, stands in Wolf Mountain’s shoes. The Setoff
Order gave ASC Utah the right to set off its annual rent payment
against the Judgment, and under the assignment, Kirton
McConkie “gains nothing more, and acquires no greater interest
than had [its] assignor,” Wolf Mountain. Sunridge Dev. Corp.,
2010 UT 6, ¶ 13 (citation and internal quotation marks omitted).
Thus, the district court did not err in concluding that because
Kirton McConkie had no greater right than Wolf Mountain to
receive the September 2011 rent payment, the assignment did
not prevent ASC Utah from setting off the rent payment against
the Judgment. Accordingly, we affirm.
(…continued)
UT 92, ¶ 24, 17 P.3d 1100 (“A perfected security interest usually
takes priority over an unperfected security interest.”). Though
Kirton McConkie “fil[ed] a UCC-1 financing statement . . . with
the Utah Division of Corporations” before the Judgment, the
parties do not dispute that the assignment could not have been
perfected through a UCC filing; rather, perfection of the
assignment required an appropriate recording in the real
property records of the county recorder where the property
subject to the Ground Lease was located. ASC Utah recorded the
Judgment in November 2011, but Kirton McConkie did not
record a notice of the assignment until February 2012. See In re
C.W. Mining Co., 530 B.R. 878, 887 (Bankr. D. Utah 2015) (“[A]
judicial lien creditor has priority over an unperfected security
interest . . . .”).
20140798-CA 16 2016 UT App 200