Heywood v. Department of Commerce ( 2017 )

2017 UT App 234THE UTAH COURT OF APPEALS
AUSTIN G. HEYWOOD JR.,
Petitioner,
v.
DEPARTMENT OF COMMERCE, DIVISION OF REAL ESTATE,
Respondent.
Opinion
No. 20160289-CA
Filed December 21, 2017
Original Proceeding in this Court
Harold L. Reiser and Adam H. Reiser, Attorneys
for Petitioner
Sean D. Reyes and Brent A. Burnett, Attorneys
for Respondent
JUDGE DIANA HAGEN authored this Opinion, in which JUDGES
MICHELE M. CHRISTIANSEN and JILL M. POHLMAN concurred.
HAGEN, Judge:
¶1 In 2006, a bankruptcy court found that Austin G.
Heywood Jr., a real estate agent, committed fraud by concealing
a bona fide purchase offer from his client so that he could force a
short sale of the property to his own investment group (the 2006
transaction). Several years later, in November 2014, Heywood
submitted an application to the Utah Department of Commerce,
Division of Real Estate (the Division) to renew his license as a
real estate sales agent. In light of the bankruptcy court’s finding,
the Division found that Heywood did not demonstrate the
“honesty, integrity, truthfulness, reputation, and competency”
required for renewal and denied his renewal application. After
exhausting his administrative review options, Heywood now
petitions this court to review the denial of his license. We decline
to disturb the Division’s decision.
Heywood v. Department of Commerce
BACKGROUND
The 2006 Transaction
¶2 In 2006, Heywood acted as a real estate agent for a client
who wanted to sell her home. The client was delinquent on her
mortgage payments and had been unsuccessful in finding a
buyer. Heywood told the client that he knew of a group of short-
sale investors who were interested in purchasing her home.
Heywood did not disclose that he had a personal interest in this
group of investors, which included Heywood and his spouse.
¶3 In March 2006, Heywood listed the client’s property as
under contract, although no offer had been made at that time.
The house was ultimately sold to Heywood’s investment group
for $352,000—a price below its appraised value of $380,000. Prior
to the short sale, Heywood had received an offer from another
buyer to purchase the property for $441,000, but he did not
disclose the offer to the client or her lenders. The same day that
the investment group purchased the property, Heywood resold
it to the other buyer for a substantial profit.
The Bankruptcy Proceedings
¶4 Shortly after the 2006 transaction, the client filed a
petition for relief under chapter 7 of Title 11 of the United States
Code in the United States Bankruptcy Court for the District of
Utah. The bankruptcy trustee eventually brought several causes
of action against Heywood, including a claim for common law
fraud. Heywood was represented by counsel and had the
opportunity to present evidence during a five-day bench trial.
¶5 Following briefing and oral argument, the bankruptcy
court entered a memorandum decision in July 2009 (the 2009
Memorandum Decision), concluding that Heywood was liable to
the bankruptcy estate under common law fraud because his
conduct was “intentionally fraudulent or manifested a knowing
20160289-CA 2 2017 UT App 234Heywood v. Department of Commerce
and reckless indifference toward and disregard of [the client’s]
rights.”
¶6 Heywood did not appeal the bankruptcy court’s findings
of fact and conclusions of law. Instead, he elected to enter into a
settlement agreement with the bankruptcy trustee. Heywood
agreed to pay damages to the trustee in exchange for the trustee
releasing Heywood from “all claims, demands, debts,
obligations, liabilities, costs, expenses, rights of action, causes of
action, or judgments of any kind or character whatsoever”
arising out of the client’s bankruptcy estate. The bankruptcy
court approved the settlement agreement and then dismissed the
case against Heywood. In doing so, the bankruptcy court did not
vacate the 2009 Memorandum Decision.
Licensing and Disciplinary Proceedings before the Division
¶7 In November 2009, the Division received a complaint
about Heywood’s conduct during the 2006 transaction. The
Division notified Heywood that it had initiated an investigation.
¶8 In 2010, Heywood applied for and was issued a renewed
license. In his license renewal application, Heywood disclosed
that the Division was conducting an investigation into the 2006
transaction.
¶9 In 2012, Heywood again applied for and was issued a
renewed license. In completing his online application, Heywood
did not disclose that the Division’s investigation was still
ongoing.
¶10 On the same day Heywood renewed his license online,
the Division filed a notice of agency action and petition,
initiating a disciplinary proceeding against Heywood to revoke
his license. A year later, the parties stipulated to the dismissal of
the disciplinary action to allow for further review and
investigation.
20160289-CA 3 2017 UT App 234Heywood v. Department of Commerce
¶11 In 2014, Heywood submitted another license renewal
application. This time, the Division denied his application.
Heywood subsequently filed a request for agency review.
Review by the Utah Real Estate Commission
¶12 On review, Heywood moved for summary disposition,
arguing that the doctrine of laches applied because the Division
unreasonably delayed taking action against him. The Presiding
Officer of the Utah Real Estate Commission found that the
doctrine of laches was inapplicable in an administrative context
and, in any event, the passage of time in this case could not “be
considered unreasonable or prejudicial, particularly where
[Heywood] was at all times on notice of the investigation and
was allowed to work on an unrestricted license.”
¶13 The Presiding Officer then granted the Division’s motion
in limine to give preclusive effect to the 2009 Memorandum
Decision. Heywood argued that the doctrine of issue preclusion
did not apply because the 2009 Memorandum Decision, which
left open the calculation of punitive damages, expressly stated
that it was not a final judgment. Nevertheless, the Presiding
Officer ruled that the 2009 Memorandum Decision became final
as soon as “the 30-day deadline by which the trustee was
required to request further hearing [on punitive damages]
passed.” As the Presiding Officer noted, Heywood elected to
settle the amount of damages owed to the estate rather than
preserve his right to appeal. The Presiding Officer concluded
that the parties did not stipulate to vacatur of the 2009
Memorandum Decision as part of the settlement, nor did the
bankruptcy court vacate its prior decision when it dismissed the
case.
¶14 Following a hearing, the Presiding Officer entered a
written order affirming the Division’s decision to deny
Heywood’s 2014 license renewal application. The Presiding
Officer based the decision not only on the 2006 transaction but
20160289-CA 4 2017 UT App 234Heywood v. Department of Commerce
also on Heywood’s lack of remorse and refusal to take
responsibility for his conduct. Heywood “repeatedly attempted
to defend the deal in its entirety” and “claimed he made full and
appropriate disclosures.” He refused to acknowledge any
wrongdoing and instead criticized the Division for not pursuing
its concerns earlier. The Presiding Officer found that Heywood
“does not appear to realize just how egregious his conduct was,
despite having years to reflect upon it,” and that under those
circumstances he “cannot be trusted to act in the public interest
under a real estate license.” In addition to denying Heywood’s
license renewal, the Presiding Officer ruled that he “may not
reapply for a license with the Division for at least three years
from the date of this order.” Following this decision, Heywood
filed a request for further administrative review.
Review by the Department of Commerce
¶15 On review to the Department of Commerce, Heywood
raised, among other things, the same three issues presented on
judicial review: (1) whether the doctrine of laches barred the
Division’s denial of his license, (2) whether the Presiding Officer
properly considered the 2009 Memorandum Decision, and
(3) whether the three-year ban on applying for license renewal
was unconstitutionally excessive. As to the third issue, which
was not supported by “any legal authority or analysis,” the
Executive Director of the Department of Commerce ruled that
Heywood had failed to “meet the briefing requirements” and
declined to consider that challenge.
¶16 The Executive Director rejected Heywood’s arguments
regarding laches and the preclusive effect of the 2009
Memorandum Decision. First, the Executive Director agreed
that, even if the doctrine of laches could apply to a disciplinary
proceeding where the agency is acting to protect public welfare,
the renewal was not a disciplinary proceeding but a request for
agency action initiated by Heywood. The Executive Director also
20160289-CA 5 2017 UT App 234Heywood v. Department of Commerce
concluded that Heywood had not suffered any prejudice as a
result of the Division’s failure to pursue the disciplinary action.
Second, the Executive Director agreed that the 2009
Memorandum Decision was final and that the Presiding Officer
properly considered the bankruptcy court’s findings of fraud in
denying Heywood’s 2014 license renewal application. Heywood
filed a request for judicial review.
ISSUES AND STANDARDS OF REVIEW
¶17 Heywood asks this court to review three issues, two of
which we address on the merits. First, Heywood claims that the
denial of his license was untimely and should be barred by the
doctrine of laches. Second, he argues that he should not have
been precluded from challenging the findings made in the 2009
Memorandum Decision because it was not a final order. Both of
these legal issues were raised below and addressed in the
Executive Director’s order. We review an administrative
agency’s legal decisions for correctness, giving no deference to
the agency. Hughes Gen. Contractors, Inc. v. Utah Labor Comm'n,
2014 UT 3, ¶ 25, 322 P.3d 712.
¶18 Heywood’s third issue is whether the Division “abused its
discretion by imposing an unreasonably harsh penalty upon
[him] in barring him from reapplication until 2018.” While
Heywood attempted to raise this issue below, the Executive
Director declined to consider it due to Heywood’s inadequate
briefing. To obtain judicial review, petitioners must
“appropriately address their opening brief and arguments to the
Executive Director’s final order.” Utah Physicians for a Healthy
Env't v. Executive Dir. of the Utah Dep't of Envtl. Quality, 2016 UT
49, ¶ 16, 391 P.3d 148. Here, Heywood does not challenge the
Executive Director’s refusal to reach the merits but instead takes
issue with the Presiding Officer’s initial decision to impose the
three-year ban. Because Heywood does not attack the basis for
20160289-CA 6 2017 UT App 234Heywood v. Department of Commerce
the Executive Director’s order, we do not reach the merits of this
issue.
ANALYSIS
I. Timeliness
¶19 Heywood argues that the Division’s denial of his license
is an “untimely licensing action” and should be barred by the
doctrine of laches. 1 In making this argument, Heywood draws
no distinction between the dismissed disciplinary action
initiated by the Division and the 2014 licensing renewal
application initiated by Heywood. He argues that characterizing
the disciplinary proceeding and the license renewal as separate
actions is “strictly semantics,” because the denial of his license
renewal ultimately produced the same sanction that would have
resulted from the dismissed disciplinary action—revocation of
his real estate license. But disciplinary proceedings and denial of
a renewal application are distinct agency actions.
¶20 Disciplinary proceedings are governed by sections 61-2f-
401 to -410 of the Utah Code. While a disciplinary proceeding
may result in the revocation of a license, other civil penalties can
be assessed as well, including a fine of up to $5,000 per violation
or the amount of any gain or economic benefit derived from each
violation. See Utah Code Ann. § 61-2f-407 (LexisNexis 2011).
1. In his opening brief, Heywood makes an alternative argument
that “the Division’s denial of Heywood’s license fails its own
standards for timeliness pursuant to Utah Administrative Code
Rule 151-4-108.” Because this argument was not raised in the
administrative proceedings, we do not separately address it
except to note that it rests on the same mistaken assumption that
the disciplinary action that was later dismissed and the 2014
licensing renewal application were the same “agency action.”
20160289-CA 7 2017 UT App 234Heywood v. Department of Commerce
¶21 On the other hand, license renewal is governed by
sections 61-2f-201 to -208 of the Utah Code. Unlike a disciplinary
action initiated by the Division, a renewal request is triggered by
the licensee’s application. An applicant is not automatically
entitled to renewal and the Division must consider the honesty,
integrity, truthfulness, reputation, and competency of the
applicant before granting the renewal. See Utah Code Ann. § 61-
2f-203(1)(c) (LexisNexis Supp. 2017).
¶22 The distinction between an agency-initiated disciplinary
action and a request for agency action by a licensee is fatal to
Heywood’s laches argument. Heywood attempts to invoke
laches to require the Division to renew his license because the
Division did not act to revoke his license sooner. Laches is an
“equitable doctrine by which a court denies relief to a claimant
who has unreasonably delayed in asserting the claim, when the
delay has prejudiced the party against whom relief is sought.”
Laches, Black’s Law Dictionary (10th ed. 2014). “To successfully
assert a laches defense, a defendant must establish both that the
plaintiff unreasonably delayed in bringing an action and that the
defendant was prejudiced by that delay.” Veysey v. Nelson, 2017
UT App 77, ¶ 8, 397 P.3d 846 (citation and internal quotation
marks omitted). In other words, laches is a defense to an action
brought by a dilatory party, not a basis for affirmative relief.
¶23 Here, the denial of Heywood’s license renewal was not
the result of an action brought by the Division against Heywood.
Instead, Heywood requested agency action when he submitted
his license renewal application in 2014. Even assuming that the
doctrine of laches could bar an administrative agency from
initiating—or reviving—a disciplinary action where there was
inexcusable delay and demonstrated prejudice, 2 it would not
2. This court has previously recognized “the institutional
reluctance of Utah courts to apply equitable doctrines against
(continued…)
20160289-CA 8 2017 UT App 234Heywood v. Department of Commerce
apply in the context of a request for agency action. Regardless of
the Division’s decision not to pursue disciplinary proceedings, it
still had an obligation under the statute to consider Heywood’s
honesty, integrity, truthfulness, reputation, and competency
before granting his 2014 request for license renewal.
¶24 While framed as a timeliness argument, the crux of
Heywood’s grievance is that it was unfair for the Division to
base its decision on misconduct that occurred eight years earlier.
To the extent Heywood is challenging the staleness of the
evidence, Utah Code section 61-2f-203 places no time limitation
on the evidence that the Division can consider in assessing the
“honesty, integrity, truthfulness, reputation, and competency of
the applicant.” See Utah Code Ann. § 61-2f-203(1)(c). Although
staleness might decrease the probative value of such evidence,
the bankruptcy court’s findings of misconduct were not viewed
in isolation but in light of Heywood’s attitude and behavior at
the time of the Division hearing. As the Presiding Officer noted,
Heywood did not accept responsibility or recognize the
seriousness of his misconduct. This bears heavily on whether he
is currently fit for licensure. Thus, the Division properly
considered this evidence in reaching its decision.
(…continued)
municipal bodies and governmental subdivisions.” Tooele Assocs.
Ltd. P’ship v. Tooele City, 2011 UT App 36, ¶ 3, 251 P.3d 835. Even
if this were a review from a disciplinary action initiated by the
Division, it is doubtful that we would apply laches to prevent an
agency from taking action to protect public welfare. “As a
general rule, laches or neglect of duty on the part of officers of
the government is no defense to a suit by it to enforce a public
right or protect a public interest.” Utah Power & Light Co. v.
United States, 243 U.S. 389, 409 (1917).
20160289-CA 9 2017 UT App 234Heywood v. Department of Commerce
II. Issue Preclusion
¶25 Heywood claims that the Division erred as a matter of
law in giving preclusive effect to the bankruptcy court’s 2009
Memorandum Decision, which found he had committed fraud in
connection with the 2006 transaction. “Issue preclusion, often
referred to as collateral estoppel, prevents relitigation of issues
already determined in a previous action.” Collins v. Sandy City
Board of Adjustment, 2000 UT App 371, ¶ 8, 16 P.3d 1251. “In
effect, once a party has had his or her day in court and lost, he or
she does not get a second chance to prevail on the same issues.”
Buckner v. Kennard, 2004 UT 78, ¶ 12, 99 P.3d 842. A party may be
precluded from relitigating an issue if four criteria are met:
(i) the party against whom issue preclusion is
asserted was a party to or in privity with a party to
the prior adjudication; (ii) the issue decided in the
prior adjudication was identical to the one
presented in the instant action; (iii) the issue in the
first action was completely, fully, and fairly
litigated; and (iv) the first suit resulted in a final
judgment on the merits.
Gressman v. State, 2013 UT 63, ¶ 37, 323 P.3d 998 (citation and
internal quotation marks omitted).
¶26 Heywood does not contest the first three criteria of issue
preclusion. He challenges only the fourth criterion, claiming that
the 2009 Memorandum Decision is not a final judgment on the
merits. Heywood argues that the “2009 Memorandum Decision
was never final, but was rather interlocutory in nature and
remained subject to appeal.” He also contends that the
bankruptcy court’s approval of the parties’ settlement agreement
was “a de facto vacatur” of its 2009 Memorandum Decision, given
that the language of the settlement released him from “all claims,
demands, debts, obligations, liabilities, costs, expenses, rights of
20160289-CA 10 2017 UT App 234Heywood v. Department of Commerce
action, causes of action, or judgments of any kind or character
whatsoever.”
¶27 The fact that Heywood ultimately elected to settle with
the bankruptcy trustee does not affect the finality of the 2009
Memorandum Decision. In accordance with persuasive authority
from other jurisdictions, we hold that a decision that fully
resolves an issue on the merits, after giving the parties an
opportunity to be heard, is final for purposes of issue preclusion
even if the parties agree to a settlement that results in dismissal
before the entry of final judgment. Even assuming that a prior
decision vacated as part of a settlement would lose its preclusive
effect, we conclude that no such vacatur occurred here. As a
result, the 2009 Memorandum Decision was properly accorded
preclusive effect on the issue of whether Heywood committed
fraud.
A. A Sufficiently Firm Decision May Have Preclusive Effect
Even Where the Parties Settled Prior to Entry of Final
Judgment.
¶28 A “final judgment” for purposes of issue preclusion
“includes any prior adjudication of an issue in another action
that is determined to be sufficiently firm to be accorded
conclusive effect.” Restatement (Second) of Judgments § 13
(1982) (Am. Law Inst. 1982). The prior adjudication of the issue is
considered sufficiently firm if “[(1)] it was not tentative, [(2)] the
parties had an opportunity to be heard, and [(3)] there was an
opportunity for review.” Carpenter v. Young, 773 P.2d 561, 568
(Colo. 1989). Here, each of these factors supports the conclusion
that the 2009 Memorandum Decision was final for purposes of
precluding relitigation of whether Heywood committed fraud in
connection with the 2006 transaction.
¶29 First, the 2009 Memorandum Decision was not “avowedly
tentative,” at least not with respect to the issue of Heywood’s
liability. See id. at 566. “A judgment is upon the merits when it
20160289-CA 11 2017 UT App 234Heywood v. Department of Commerce
amounts to a declaration of the law as to the respective rights
and duties of the parties based on . . . facts and evidence upon
which the rights of recovery depend, irrespective of formal,
technical, or dilatory objections or contentions.” State v.
Sommerville, 2013 UT App 40, ¶ 32, 297 P.3d 665 (omission in
original) (citation and internal quotation marks omitted). The
2009 Memorandum Decision is a reasoned opinion setting forth
detailed findings of fact and conclusions of law that support the
bankruptcy court’s determination that Heywood committed
fraud. The bankruptcy court concluded that Heywood’s conduct
was “intentionally fraudulent or manifested a knowing and
reckless indifference toward and disregard of [his client’s]
rights” and that Heywood was jointly and severally liable for the
full amount of the client’s damages.
¶30 The only issue that remained unresolved was a possible
award of punitive damages. Specifically, the bankruptcy court
found that “punitive damages may be awarded” and allowed
the trustee thirty days to request a hearing to determine the
appropriate amount, noting that “[f]ailure to timely request and
set the hearing shall be a bar to any award of punitive damages.”
Given that punitive damages had not yet been determined, the
bankruptcy court stated:
This ruling is specifically intended to be
interlocutory and no judgment will be entered at
this time. Final judgment will be entered following
the above-described process and possible hearing
on punitive damages.
¶31 Leaving open the issue of damages did not render the
bankruptcy court’s decision on liability tentative. See Zdanok v.
Glidden Co., 327 F.2d 944, 955 (2d Cir. 1964) (holding that the
mere fact that the damages had not yet been assessed should not
deprive a ruling on liability of preclusive effect); Aetna Cas. &
Surety Co. v. Jeppesen & Co., 440 F. Supp. 394, 399–405 (D. Nev.
20160289-CA 12 2017 UT App 234Heywood v. Department of Commerce
1977) (applying collateral estoppel on the fully litigated issue of
liability even though the prior case settled on the issue of
damages before entry of final judgment), vacated and remanded on
other grounds, 642 F.2d 339 (9th Cir. 1981). The ruling was a firm
declaration of law as to Heywood’s liability for common law
fraud.
¶32 Second, Heywood had an opportunity to be fully heard
on this issue. During the bankruptcy proceeding, Heywood, who
was represented by counsel, had the opportunity to present
testimony and exhibits over the course of a five-day bench trial,
to fully brief the issues, and to be heard at oral argument prior to
issuance of the 2009 Memorandum Decision.
¶33 Third, the finding of fraud would have been subject to
appeal upon entry of final judgment, but Heywood chose to
forego any appeal in favor of settlement. Heywood
acknowledges that the 2009 Memorandum Decision “remained
subject to appeal prior to dismissal” of the action and that, “if the
parties had not settled and instead had proceeded to judgment,
those judgments likely could have been appealed.” A party’s
“tactical decision to settle the case rather than seeking the entry
of judgment and an appeal does not warrant the preclusion of
collateral estoppel.” Ossman v. Diana Corp., 825 F. Supp. 870, 876
(D. Minn. 1993).
¶34 While Utah courts have not considered this issue, the
weight of authority from other jurisdictions supports our
conclusion that
[i]f a court reaches a decision on the merits that is
supported by a reasoned opinion, and the parties
are fully heard and the issues fully litigated, the
decision is final for collateral estoppel even if the
parties enter into a settlement and stipulate to
dismissal with prejudice prior to the entry of a final
judgment.
20160289-CA 13 2017 UT App 234Heywood v. Department of Commerce
American Family Mut. Ins. Co. v. Clancy, No. CV-09-01077-PHX-
ROS, 2011 WL 13077359, at *3 (D. Ariz. Mar. 9, 2011); see also
Ossman, 825 F. Supp. at 878 n.21 (collecting cases). 3 In the present
case, the 2009 Memorandum Decision would have been subject
to review had the parties not settled prior to the entry of final
judgment. We conclude that the fact that Heywood chose to
waive his right to review by entering into a settlement
3. See also Bates v. Union Oil Co., 944 F.2d 647, 651 (9th Cir. 1991)
(applying collateral estoppel where party assumed the risk that
the judgment would have preclusive effect by settling and not
pursuing appeal); Chemetron Corp. v. Business Funds, Inc., 682
F.2d 1149, 1191–92 (5th Cir. 1982) (applying collateral estoppel
even though prior case had been settled and dismissed with
prejudice before the entry of final judgment); Siemens Med. Sys.,
Inc. v. Nuclear Cardiology Sys., Inc., 945 F. Supp. 1421, 1436
(D. Colo. 1996) (applying issue preclusion to partial summary
judgment where issue was fully litigated but defendant chose to
forego appeal by settling before final judgment was entered);
Abbott Labs. v. Thermo Chem, Inc., 790 F. Supp. 135, 139–40 (W.D.
Mich. 1991) (applying collateral estoppel even though the parties
in the prior action reached a settlement agreement); Donovan v.
United States Postal Service, 530 F. Supp. 894, 899 (D.D.C. 1981)
(applying collateral estoppel to rulings that would have been
subject to appeal had the defendant not settled and stipulated to
dismissal); Carpenter v. Young, 773 P.2d 561, 568 (Colo. 1989)
(applying collateral estoppel to issues decided on summary
judgment even though the parties ultimately entered into a
settlement agreement). But see Glidden Co. v. Lumbermens Mutual
Cas. Co., 861 N.E.2d 109, 118 (Ohio 2006) (holding that
interlocutory order could not be given preclusive effect because
case was ultimately settled and dismissed, given that, under
Ohio law, “all prior interlocutory orders are dissolved after a
dismissal”).
20160289-CA 14 2017 UT App 234Heywood v. Department of Commerce
agreement does not affect the finality of the decision for
purposes of issue preclusion. See Carpenter, 773 P.2d at 568.
¶35 Significantly, no issues remained pending at the time the
bankruptcy action was dismissed. Heywood cites to cases where
courts refused to apply collateral estoppel because the
interlocutory ruling was not necessarily subject to appeal at the
time of settlement. See, e.g., Continental Airlines, Inc. v. American
Airlines, Inc., 824 F. Supp. 689, 706–09 (S.D. Tex. 1993) (refusing
to apply collateral estoppel where the additional issues
remained pending at the time of settlement, making it unclear
whether the interlocutory order would have ultimately been
essential to any final judgment); Garcia v. General Motors Corp.,
990 P.2d 1069, 1072–75 (Ariz. Ct. App. 1999) (refusing to apply
collateral estoppel to a motion in limine that was not
independently appealable). Here, by the terms of the 2009
Memorandum Decision, once the thirty-day period for seeking a
further hearing had passed, punitive damages were barred. At
that point, there were no remaining issues and all that was left
for the bankruptcy court was the ministerial act of entering the
final judgment. There is no dispute that the bankruptcy court’s
finding of fraud would have been reviewable had Heywood not
chosen to forego appeal in favor of settlement.
¶36 With respect to the issue of fraud, the 2009 Memorandum
Decision was not tentative, the parties were fully heard, and
there was an opportunity for appellate review, which Heywood
waived by settling prior to the entry of final judgment. As a
result, Heywood was properly precluded from relitigating the
issue of fraud.
B. The 2009 Memorandum Decision Was Not Vacated.
¶37 Heywood argues the 2009 Memorandum Decision can
have no preclusive effect because it was vacated, but the record
does not support this contention. Heywood fails to identify any
20160289-CA 15 2017 UT App 234Heywood v. Department of Commerce
order, docket entry, or other record showing that the bankruptcy
court vacated its decision.
¶38 Heywood suggests that we should view the approval of
the settlement and subsequent dismissal by the court as “a de
facto vacatur,” but he provides no authority for that proposition.
While he argues that “parties are entitled to stipulate to the
vacatur of a judgment in order to effectuate settlement,” he cites
no language in the settlement agreement where the parties
conditioned the settlement on vacatur. More importantly, the
parties never moved the bankruptcy court to set aside the 2009
Memorandum Decision, and the court never did so. 4
¶39 Nonetheless, Heywood claims that the settlement
agreement “clearly contemplated vacatur of the 2009
Memorandum Decision” because it released Heywood from “all
claims, demands, debts, obligations, liabilities, costs, expenses,
rights of action, causes of action, or judgments of any kind or
character whatsoever.” This provision does not condition the
settlement on vacatur of the 2009 Memorandum Decision nor
does it purport to limit the preclusive effect of the bankruptcy
court’s decision.
4. Some courts have held that issue preclusion may apply even
where the prior decision was set aside as part of the settlement.
See, e.g., Bates, 944 F.2d at 650 (holding that a judgment vacated
as a condition of settlement can still have preclusive effect);
Chemetron Corp., 682 F.2d at 1191–92 (reasoning that a party who
makes a tactical decision to risk an adverse decision by fully
litigating an issue should not be able to avoid offensive collateral
estoppel by later settling the case). We need not decide whether,
and under what circumstances, a settlement conditioned on
vacatur will preclude collateral estoppel because Heywood’s
settlement was not conditioned on vacatur and the 2009
Memorandum Decision was never set aside.
20160289-CA 16 2017 UT App 234Heywood v. Department of Commerce
¶40 Because the 2009 Memorandum Decision was never
vacated, the bankruptcy court’s findings that Heywood engaged
in fraud were entitled to preclusive effect.
CONCLUSION
¶41 On the issues presented for review, we hold that the
Division’s denial of Heywood’s license renewal was not
untimely or barred by the doctrine of laches and that the
bankruptcy court’s finding that Heywood committed fraud
during the 2006 transaction was entitled to preclusive effect. We
decline to review the issue of whether the Presiding Officer
imposed an unreasonably harsh penalty because Heywood has
failed to challenge the Executive Director’s ruling that the issue
was inadequately briefed. Accordingly, we decline to disturb the
Executive Director’s decision.
20160289-CA 17 2017 UT App 234