Federated Capital Corporation v. Deutsch , 428 P.3d 51 ( 2018 )

2018 UT App 118THE UTAH COURT OF APPEALS
FEDERATED CAPITAL CORPORATION,
Appellant,
v.
NEAL DEUTSCH,
Appellee.
Opinion
No. 20140568-CA
Filed June 21, 2018
Third District Court, Salt Lake Department
The Honorable Keith A. Kelly
No. 139918085
Barnard N. Madsen, Aaron P. Dodd, and Peter
Reichman, Attorneys for Appellant
Lester A. Perry, Attorney for Appellee
JUDGE MICHELE M. CHRISTIANSEN authored this Opinion, in
which JUDGES RYAN M. HARRIS and DIANA HAGEN concurred.
CHRISTIANSEN, Judge:
¶1 This is a case about preservation. Federated Capital
Corporation (Federated), an out-of-state corporation, and Neal
Deutsch, an out-of-state individual, entered into a contract that
specified an out-of-state place of performance but provided that
the contract would be governed by Utah law in Utah courts.
Federated filed suit against Deutsch for breach of contract. The
district court ruled that Utah’s borrowing statute applied
because the other state’s statute of limitations had run, and the
court therefore granted summary judgment for Deutsch.
Federated appeals, arguing that Utah’s borrowing statute is
inapplicable to the suit because the suit arose in Utah. Because
Federated did not raise this issue in the district court, it is
Federated Capital Corporation v. Deutsch
unpreserved. We therefore affirm and remand for the limited
purpose of calculating Deutsch’s attorney fees incurred on
appeal.
BACKGROUND
¶2 Federated, a Michigan corporation, brought suit against
Deutsch, a Florida resident, alleging that he had breached a
credit card contract that required him to make payments in
Pennsylvania. Specifically, Federated alleged that Deutsch had
failed to make credit card payments to Federated’s predecessor-
in-interest totaling $8,881.85 and that he consequently owed
Federated that amount plus five years of interest at 29.99%. A
provision of the contract specified that Utah law applied, that
Utah courts were the proper forum, and that the parties
consented to Utah courts’ jurisdiction (the Controlling Law
& Jurisdiction Clause). Deutsch moved for summary judgment,
arguing that because the place of performance was Pennsylvania
and that state’s four-year statute of limitations had already run,
Utah’s borrowing statute barred the suit. See generally 42 Pa.
Cons. Stat. § 5525(a)(8) (2002); Utah Code Ann. § 78B-2-103
(LexisNexis 2012). 1 The district court agreed and granted
Deutsch’s motion. Federated appeals.
1. Utah’s borrowing statute provides,
A cause of action which arises in another
jurisdiction, and which is not actionable in the
other jurisdiction by reason of the lapse of time,
may not be pursued in this state, unless the cause
of action is held by a citizen of this state who has
held the cause of action from the time it accrued.
Utah Code Ann. § 78B-2-103 (LexisNexis 2012).
20140568-CA 2 2018 UT App 118Federated Capital Corporation v. Deutsch
ISSUE AND STANDARD OF REVIEW
¶3 On appeal, Federated contends that the district court
erred by applying Utah’s borrowing statute so as to import
Pennsylvania’s statute of limitations. In Federated’s view, the
district court should have instead applied Utah’s six-year statute
of limitations for actions founded on contracts. See generally Utah
Code Ann. § 78B-2-309 (LexisNexis 2012). When evaluating a
district court’s decision to grant or deny a motion for summary
judgment, we consider the facts in favor of the nonmoving party,
and review the court’s legal conclusions and ultimate decision
for correctness. Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600.
However, we cannot review a legal conclusion or decision never
actually made by the district court; the preservation doctrine of
appellate review requires that, to reach the merits of an issue on
appeal, the issue must have been brought to the district court’s
attention such that it had the opportunity to rule on it. State v.
Johnson, 2017 UT 76, ¶ 15, 416 P.3d 443. “To provide the court
with this opportunity, the issue must be specifically raised by the
party asserting error, in a timely manner, and must be supported
by evidence and relevant legal authority.” Id. (quotation
simplified).
ANALYSIS
¶4 This case is one of several that follow in the wake of the
Utah Supreme Court’s decision in Federated Capital Corp. v. Libby,
2016 UT 41, 384 P.3d 221. In Libby, our supreme court addressed
a similar case involving Federated based on an identical contract.
The court there held that, because the contract’s forum-selection
provision selected Utah law as applied by Utah courts, the case
was governed by both the substantive and procedural law of
Utah. See id. ¶¶ 13, 17. Consequently, Utah’s borrowing statute
was applicable. Id. ¶ 17.
20140568-CA 3 2018 UT App 118Federated Capital Corporation v. Deutsch
¶5 The supreme court then considered the application of
Utah’s borrowing statute to the facts of the case. The court
explained that the borrowing statute creates a two-part test; first,
the statute asks whether the cause of action arose in another
jurisdiction and, second, it asks whether the cause of action is
not actionable in the other jurisdiction due to the lapse of time.
Id. ¶ 18. “If both of these elements are satisfied, a Utah court will
adopt that foreign jurisdiction’s time limitations[.]” 2 Id. The
supreme court noted in Libby that Federated had not challenged
the district court’s determination that the cause of action arose in
Pennsylvania and therefore proceeded to the second part of the
test. Id. ¶ 19. The supreme court concluded that the second part
of the test was satisfied because Pennsylvania’s four-year statute
of limitations had expired by the time Federated filed suit in
Utah. Id. ¶ 27. Because both elements set forth by the borrowing
statute were satisfied, the supreme court concluded that
Federated’s suit against Libby was time-barred. Id. ¶ 29.
¶6 In a concurring opinion, two members of the court
emphasized that Federated’s concession—that the cause of
action had arisen in Pennsylvania—meant that the court was
unable to address the meaning of the term “arises in” found in
the borrowing statute. See id. ¶ 36 (Lee, J., concurring) (“When
the argument is squarely raised, our courts should decide
whether the borrowing statute’s ‘arises in’ formulation is a
2. The supreme court noted that the borrowing statute contains
an exception: the statute does not operate when the cause of
action is held by a citizen of Utah who has held it since it
accrued. Federated Capital Corp. v. Libby, 2016 UT 41, ¶ 18, 384
P.3d 221. Because Federated is not a citizen of Utah and because
Federated did not hold the causes of action at the time they
accrued, the exception did not apply in Libby and does not apply
here.
20140568-CA 4 2018 UT App 118Federated Capital Corporation v. Deutsch
reference to applicable choice-of-law rules or is dictated simply
by the longstanding ‘place of performance’ test.”).
¶7 Federated distinguishes the present case from Libby on a
single ground. In contrast to its position in Libby, Federated does
not concede that its causes of action flowing from this contract
arose in Pennsylvania. 3 Instead, Federated contends that, based
on the language of the contract, the causes of action pleaded in
the complaint arose in Utah. Federated relies on the Controlling
Law & Jurisdiction Clause in the contract, which contained
choice-of-law, forum-selection, and personal-jurisdiction
provisions:
CONTROLLING LAW AND JURISDICTION. This
Agreement shall be governed solely by and
interpreted entirely in accordance with the laws of
the State of Utah, . . . regardless of where you
reside . . . . YOU CONSENT TO PERSONAL
JURISDICTION IN THE STATE AND FEDERAL
COURTS IN UTAH AND AGREE THAT ANY
LAWSUIT PERTAINING TO THE ACCOUNT
MUST BE BROUGHT ONLY IN SUCH COURTS
IN UTAH, REGARDLESS OF WHO FILES THE
SUIT, AND MAY BE MAINTAINED ONLY IN
THOSE COURTS UNLESS AND UNTIL ANY
PARTY ELECTS ARBITRATION PURSUANT TO
THE ARBITRATION PROVISION IN THIS
AGREEMENT.
(Capitalization in original.) Federated reasons that, because the
contract specified that it would be governed by Utah law, any
3. We note that this case, and the related cases we also decide
today, had already been dismissed by the time the supreme
court issued its decision in Libby.
20140568-CA 5 2018 UT App 118Federated Capital Corporation v. Deutsch
breach of the contract should be deemed to have occurred in
Utah. On this basis, Federated contends on appeal that its causes
of action arose in Utah and that the district court was wrong to
grant summary judgment in favor of Deutsch.
I. Preservation
¶8 We will generally only address issues on appeal that have
been properly preserved. See 438 Main St. v. Easy Heat, Inc., 2004
UT 72, ¶ 51, 99 P.3d 801 (“Issues that are not raised at trial are
usually deemed waived.”); see also Wohnoutka v. Kelley, 2014 UT
App 154, ¶¶ 3–4, 330 P.3d 762. Here, Federated’s specific legal
theory was not preserved for appeal, because Federated never
presented this theory or the underlying line of reasoning to the
district court. See Prime Ins. Co. v. Graves, 2016 UT App 23, ¶ 9,
367 P.3d 1029 (explaining that “the appellant must present the
legal basis for a claim, not merely the underlying facts or a
tangentially related claim,” to preserve it for appeal (quotation
simplified)); see also State v. Johnson, 2017 UT 76, ¶ 14 n.2, 416
P.3d 443 (noting that when an appellant raises an “entirely
distinct legal theory” on appeal, the appellant has raised a “new
claim or issue” rather than merely an argument in support of an
existing issue). To reach this conclusion, we first examine the
filings and arguments made by the parties below. We then
consider whether the policies underlying the preservation rule
are implicated.
¶9 Federated sued Deutsch in November 2013, alleging that
he had breached the credit card contract in March 2008. The
complaint’s statement of jurisdiction alleged that jurisdiction
flowed from the contract’s Controlling Law & Jurisdiction
Clause:
2. Pursuant to the terms and conditions of the
[contract], [Deutsch] consented to personal
jurisdiction in the State of Utah and the [contract] is
20140568-CA 6 2018 UT App 118Federated Capital Corporation v. Deutsch
governed solely by and interpreted entirely in
accordance with the laws of the State of Utah.
3. Accordingly, jurisdiction is obtained and venue
is properly set in the Third Judicial District, Salt
Lake County in the State of Utah.
We note that Federated’s complaint did not allege that the Utah
district court had jurisdiction because the causes of action arose
in Utah as a result of the parties’ consent to Utah courts’
jurisdiction.
¶10 We next consider whether Federated presented such a
legal theory to the district court during the summary judgment
proceedings. Deutsch moved for summary judgment, conceding
the applicability of the Controlling Law & Jurisdiction Clause
but arguing that the proper application of Utah’s borrowing
statute mandated dismissal because the causes of action were
time-barred in Pennsylvania. In its memorandum in opposition
to summary judgment, Federated did not explicitly assert that
the borrowing statute was inapplicable because the causes of
action actually arose in Utah. Instead, Federated argued that
“Utah’s borrowing statute should not be construed to rewrite the
forum-selection clause of the agreement.” In Federated’s view,
because Deutsch “ha[d] not challenged the enforceability of the
forum-selection clause[, t]here is no question that Utah’s
procedural rules govern Federated Capital’s claim.” In other
words, Federated argued that the forum-selection provision of
the Controlling Law & Jurisdiction Clause meant that Utah’s
procedural rules, including Utah’s statutes of limitations,
governed any lawsuit arising from the contract. But this
argument did not set forth a theory that the Controlling Law
& Jurisdiction Clause actually changed the place of breach, i.e.,
where the causes of action arose. The memorandum in opposition
thus did not “specifically raise[]” this issue, let alone provide
20140568-CA 7 2018 UT App 118Federated Capital Corporation v. Deutsch
“support[] by evidence and relevant legal authority.” 4 See
Johnson, 2017 UT 76, ¶ 15 (quotation simplified). Consequently,
the memorandum did not preserve the issue for appeal.
¶11 Federated also claims that Deutsch’s reply to the
memorandum in opposition “acknowledged Federated raised
the same issue it is arguing on appeal,” i.e., whether the cause of
action arose in Utah as a result of the Controlling Law
& Jurisdiction Clause. Specifically, Federated highlights the
sentence, “Federated then claims that the account agreement
‘states otherwise’ implying that since the agreement contains a
forum selection clause for Utah, the cause of action for non-
payment must have arose in Utah.” It is true that this sentence
appears to concern the issue presented on appeal. But we do not
believe that a brief mention in the defendant’s reply
memorandum can satisfy the plaintiff’s preservation-burden of
arguing the issue and providing supporting legal authority. See
Johnson, 2017 UT 76, ¶ 15 (“To provide the court with this
opportunity, the issue must be specifically raised by the party
asserting error, in a timely manner and must be supported by
evidence and relevant legal authority.” (emphases added)
(quotation simplified)).
¶12 We next consider whether Federated raised the legal
theory at the summary judgment hearing. The hearing
addressed the motions for summary judgment in this case and
two others, all of which had nearly identical filings. The
4. On appeal, Federated identifies three cases that, in its view,
support the proposition that a cause of action “arises” in the
jurisdiction whose law applies to the case. Federated’s
memorandum in opposition to summary judgment did not
present this proposition or cite any of the three cases. The
omission strongly suggests that Federated did not present this
argument to the district court.
20140568-CA 8 2018 UT App 118Federated Capital Corporation v. Deutsch
defendants had made payments electronically and those
payments had been routed through Utah. Federated argued that
the routing of the payments had changed the place of
performance to Utah and thus that the causes of action in those
cases had arisen in Utah:
I don’t believe [the] cause of action arose in another
jurisdiction for the two cases where electronic
payments were made to Utah. And even if they
were, I believe all of them, all these three cases[,]
the borrowing statute shouldn’t apply based on
that second prong where a cause of action was not
brought in Pennsylvania because of lapse of time.
That simply wasn’t the case. . . . A cause of action
or a case could not have been brought in
Pennsylvania. It had to be brought in Utah based
on the agreement of the parties. And based on that
we think [Utah’s] six-year statute should apply,
your Honor.
On appeal, Federated characterizes this as an argument “that the
borrowing statute did not apply because, by contract, the case
arose in Utah.”
¶13 We do not agree. We read this portion of the transcript to
make two arguments based on the premise that the causes of
action arose where the contract was to be performed, i.e., in
Pennsylvania. Neither argument presented to the district court
the legal theory now before us: whether the Controlling Law
& Jurisdiction Clause changed the legal place of breach such that
the causes of action arose in Utah.
¶14 First, Federated argued that the place of performance
changed to Utah as a result of electronic payments being routed
through Utah; thus, the causes of action arose in Utah because
Utah was the place of performance in those cases. This position
20140568-CA 9 2018 UT App 118Federated Capital Corporation v. Deutsch
accepted the premise that the place of performance determined
where the causes of action arose. In contrast, Federated now
contends that the place of performance was irrelevant to
determining where the causes of action arose. The argument that
routing payments through Utah changed the place of
performance to Utah did not preserve a claim that the
Controlling Law & Jurisdiction Clause meant that any breach-of-
contract cause of action arose in Utah, because it did not bring
the latter legal theory to the district court’s attention such that
the court had the opportunity to rule on it. See Johnson, 2017 UT
76, ¶ 15.
¶15 Second, Federated made essentially the same argument to
the district court as it presented in Federated Capital Corp. v. Libby.
Specifically, Federated asserted “that the borrowing statute
applies only where a cause of action that arises in another
jurisdiction is ‘not actionable by reason of the lapse of time,’ and
is thus inapplicable here since it was the forum selection clause
that rendered Federated’s claims not actionable in
Pennsylvania.” See Federated Capital Corp. v. Libby, 2016 UT 41,
¶ 8, 384 P.3d 221. In other words, Federated claimed that,
because it could file suit only in Utah, the claims were not barred
by any Pennsylvania statute of limitations. 5 This second
argument does not specifically suggest that the causes of action
arose in Utah by operation of the choice-of-law provision; rather,
it posited only that the causes of action were actionable solely in
Utah by operation of the forum-selection clause.
5. The supreme court rejected this argument, holding that the
borrowing statute “unambiguously applies whenever a cause of
action is ‘not actionable by reason of the lapse of time,’
regardless of whether some independent reason also renders a
cause of action ‘not actionable.’” Federated Capital Corp. v. Libby,
2016 UT 41, ¶ 24, 384 P.3d 221 (quotation simplified).
20140568-CA 10 2018 UT App 118Federated Capital Corporation v. Deutsch
¶16 We have examined the transcript carefully but do not see
where Federated “specifically raised” a claim that the causes of
action legally arose in Utah because the parties selected Utah law
as controlling the place of breach. See Johnson, 2017 UT 76, ¶ 15;
see also Thomas v. Mattena, 2017 UT App 81, ¶ 8, 397 P.3d 856(explaining that preservation requires that the legal basis of a
claim be presented to the district court and not merely the
underlying facts or a tangentially related claim); cf. Wohnoutka v.
Kelley, 2014 UT App 154, ¶ 6, 330 P.3d 762 (noting that it is not
the duty of the appellate court to “scour the record to save an
appeal”). Nor do we see where Federated supported such an
argument below with “relevant legal authority.” See Johnson,
2017 UT 76, ¶ 15. Indeed, Federated’s arguments below mirrored
those made in Libby 6 and largely rested on the position that,
regardless of where the causes of action arose, the claims were
actionable only in Utah due to the forum-selection clause.
¶17 We recognize that “issues must be preserved, not
arguments for or against a particular ruling on an issue raised
below.” See Gressman v. State, 2013 UT 63, ¶ 45, 323 P.3d 998(quotation simplified). The words “issue” and “argument,”
however, are not dispositive; in addressing preservation, “Utah
courts have conflated the words issue, claim, argument, and
matter.” Patterson v. Patterson, 2011 UT 68, ¶ 15, 266 P.3d 828(quotation simplified); see also id. ¶ 17 (“This court and the Utah
Court of Appeals have on countless occasions exercised our
discretion to refuse to consider new issues, arguments, claims, or
matters on appeal.”). As a result, “semantics alone cannot be our
guide in applying our preservation rule.” Id. ¶ 15. Instead, to
properly apply the preservation rule, we must consider the role
6. The notice of appeal in the current case was filed two years
before the Utah Supreme Court issued Libby.
20140568-CA 11 2018 UT App 118Federated Capital Corporation v. Deutsch
of the policies of judicial economy and fairness underlying the
rule. Id.¶18 The policy of judicial economy seeks to avoid
“unnecessary appeals and retrials” by giving “the trial court an
opportunity to address the claimed error, and if appropriate,
correct it.” Id. (quotation simplified). And the policy “requires
that a party must present his entire case and his theory of
recovery to the trial court.” Id. (quotation simplified). As
explained above, Federated did not assert to the district court the
legal theory now before us—that a choice-of-law provision in a
contract sets the place of breach such that the case actually arose
in Utah. Instead, Federated argued to the district court that the
second element of the borrowing statute was unsatisfied because
the suit was rendered non-actionable in Pennsylvania by reason
of the forum-selection provision rather than by the lapse of time.
See supra ¶ 5 (describing the borrowing statute’s elements);
¶¶ 12, 15 (examining Federated’s argument below). Federated’s
failure to raise the “place of breach” legal theory below thereby
frustrated the policy of judicial economy.
¶19 The policy of fairness is also implicated. “It generally
would be unfair to reverse a district court for a reason presented
first on appeal.” Patterson, 2011 UT 68, ¶ 16. This is because, had
the contention now before us been raised below, Deutsch “might
have countered the argument, potentially avoiding the time and
expense of appeal.” See id. But because Federated only argued to
the district court that Utah law applied and did not make a claim
that the suit arose in Utah pursuant to the Controlling Law
& Jurisdiction Clause, Deutsch had no opportunity to counter
such a claim and thereby avoid the costs of an additional three
years of appellate litigation.
¶20 We conclude that allowing Federated to contend on
appeal that a choice-of-law provision also sets the place of any
20140568-CA 12 2018 UT App 118Federated Capital Corporation v. Deutsch
breach would violate both of the policies on which the
preservation rule rests. Consequently, regardless of whether it is
properly characterized as an issue or an argument, we deem the
contention unpreserved.
¶21 “When an issue has not been preserved in the trial court,
but the parties argue that issue on appeal, the parties must argue
an exception to preservation for the issue to be reached on its
merits.” Johnson, 2017 UT 76, ¶ 47. Federated does not assert that
an exception to the preservation rule applies here. We therefore
decline to reach the merits on this issue.
II. Attorney Fees Incurred on Appeal
¶22 Deutsch contends that he should be awarded his
reasonable attorney fees and costs incurred on appeal. “Under
Utah’s reciprocal attorney fee statute, courts may award attorney
fees to the prevailing party of a contract dispute so long as the
contract provided for the award of attorney fees to at least one of
the parties[.]” 7 Federated Capital Corp. v. Haner, 2015 UT App 132,
¶ 11, 351 P.3d 816; see also Utah Code Ann. § 78B-5-826
(LexisNexis 2012). Here, the contract provided for an award of
attorney fees to Federated, and the district court awarded
attorney fees to Deutsch based on the reciprocal attorney fee
statute. “A party entitled by contract or statute to attorney fees
7. Utah’s reciprocal attorney fee statute provides,
A court may award costs and attorney fees to
either party that prevails in a civil action based
upon any promissory note, written contract, or
other writing executed after April 28, 1986, when
the provisions of the promissory note, written
contract, or other writing allow at least one party to
recover attorney fees.
Utah Code Ann. § 78B-5-826 (LexisNexis 2012).
20140568-CA 13 2018 UT App 118Federated Capital Corporation v. Deutsch
below and that prevails on appeal is entitled to fees reasonably
incurred on appeal.” Haner, 2015 UT App 132, ¶ 19 (quotation
simplified). Deutsch has prevailed on appeal, and we therefore
award Deutsch his reasonable attorney fees incurred in
connection with this appeal in an amount to be determined by
the district court on remand.
CONCLUSION
¶23 We conclude that Federated did not preserve the issue it
presents on appeal—namely, that Utah’s borrowing statute was
inapplicable because the causes of action actually arose in Utah
pursuant to the Controlling Law & Jurisdiction Clause—because
Federated did not squarely raise this legal theory in the district
court proceedings such that the court had an opportunity to rule
on it.
¶24 Affirmed.
20140568-CA 14 2018 UT App 118