Knight Adjustment v. Funaro

2021 UT App 65THE UTAH COURT OF APPEALS
KNIGHT ADJUSTMENT BUREAU,
Appellee,
v.
MICHAEL FUNARO,
Appellant.
Opinion
No. 20190779-CA
Filed June 24, 2021
Third District Court, West Jordan Department
The Honorable James D. Gardner
No. 120405055
Ronald Ady, Attorney for Appellant
Jay V. Barney, Attorney for Appellee
JUDGE DIANA HAGEN authored this Opinion, in which
JUDGES DAVID N. MORTENSEN and RYAN M. HARRIS concurred.
HAGEN, Judge:
¶1 Michael Funaro successfully moved to set aside a default
judgment obtained against him by Knight Adjustment Bureau
(Knight) on the grounds that he was never properly served with
the complaint. Knight ultimately chose not to serve Funaro and
voluntarily dismissed the case. Although the judgment was set
aside and the case dismissed, Funaro now appeals, arguing that
the district court should have gone further by dismissing the
case with prejudice and awarding him attorney fees. We
conclude that the court correctly denied Funaro’s request to
dismiss the case with prejudice. However, we conclude that the
court had jurisdiction to entertain Funaro’s motion for attorney
fees, and we remand for the court to determine whether Funaro
is entitled to those fees as the prevailing party.
Knight Adjustment v. Funaro
BACKGROUND
¶2 In 2009, Funaro co-signed an auto loan for his wife’s
friend (the friend). The friend defaulted on the loan, and Knight,
the assignee of the loan financer, filed suit against Funaro and
the friend.
¶3 Knight filed the complaint, summons, and a proof of
service with the district court in mid-April 2012. The process
server affirmed that he had personally served Funaro with a
copy of the complaint and summons on April 4, but he noted the
following “Additional Information Pertaining to this Service”:
4/4/2012 11:45 am Man answered door, was upset, I
asked if he was Michael Funaro, he said he didn’t
need to tell me. I asked for ID, he said I am not a
cop and shut the door. Spoke with the neighbors
who said a man & woman live[] there. I felt it is
[Funaro] & [the friend]. I left serv[ice] at the door.
¶4 Neither Funaro nor the friend filed an answer or
otherwise appeared in the matter. Consequently, the district
court entered default judgments against both of them.
¶5 Funaro first learned of the judgment six years later when
his wages were garnished. Shortly thereafter, Funaro filed a
motion pursuant to rule 60(b)(4) of the Utah Rules of Civil
Procedure, asking the court to set aside the default judgment
against him. In support of the motion, Funaro declared that he
had not lived at the listed address since 2010 and never received
the complaint and summons. Funaro argued that the service of
process was “facially insufficient because it asserts only that the
summons and complaint were served upon an unidentified man
without ever determining whether the address where service
was effected was Mr. Funaro’s residence or usual place of
abode.” Because the purported service was defective, Funaro
argued that the district court never acquired personal
20190779-CA 2 2021 UT App 65Knight Adjustment v. Funaro
jurisdiction over him and was required to set aside the default
judgment as void. In connection with the rule 60(b)(4) motion,
Funaro further argued that the entire case should be dismissed
with prejudice because Knight never properly commenced the
action and because the applicable statute of limitations had since
run. Funaro also requested an award of attorney fees as the
prevailing party.
¶6 The district court scheduled an evidentiary hearing, but
before Funaro called his first witness, Knight conceded that the
evidence would show that Funaro had not been personally
served. Accordingly, the court set aside the default judgment as
void. However, it denied Funaro’s motion to dismiss with
prejudice, explaining that “failure to serve a defendant . . .
doesn’t result in dismissal” but “just means [the court does not]
have jurisdiction over that defendant” until he is properly
served. The court recognized that once service was
accomplished, Funaro could proceed to raise his untimeliness
arguments along with any other defenses. The court also
declined to rule on Funaro’s request for attorney fees on the
ground that the case was still ongoing and Funaro had not yet
prevailed.
¶7 Knight ultimately chose not to serve Funaro. Instead, it
filed a notice of voluntary dismissal without prejudice pursuant
to rule 41(a) of the Utah Rules of Civil Procedure.
¶8 Funaro responded by filing a motion for attorney fees,
arguing that he was the prevailing party because the applicable
statute of limitations had run and Knight would not be able to
refile the lawsuit. Funaro argued that because Knight never
served the summons and complaint on Funaro, it never properly
commenced the action under rule 3(a)(2) of the Utah Rules of
Civil Procedure and could not avail itself of the savings statute,
which allows a plaintiff to commence a new action within one
year when a “timely filed” action fails “otherwise than upon the
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merits.” See Utah Code Ann. § 78B-2-111(1) (LexisNexis 2018).
Therefore, Funaro argued, Knight’s voluntary dismissal was
“effectively a dismissal with prejudice due to the intervening
statute of limitations.” And because he defeated Knight’s claim,
Funaro asserted that he was the prevailing party and entitled to
attorney fees pursuant to Utah’s reciprocal fee statute. See id.
§ 78B-5-826.
¶9 Knight opposed Funaro’s motion for attorney fees,
arguing that its voluntary dismissal deprived the court of
jurisdiction to take any further action. Knight further argued
that, if Funaro’s arguments were correct, then the court lacked
jurisdiction to consider the motion because Funaro was never
served, and thus the court never obtained personal jurisdiction
over him.
¶10 After full briefing, the district court denied Funaro’s
motion for attorney fees. The court explained that if it assumed,
without deciding, “that Funaro is correct and that neither
[Funaro nor the friend] was served with process and, therefore,
no action was ever commenced, then the Court never acquired
jurisdiction over the instant action.” And if it never acquired
jurisdiction, the court reasoned, it lacked the power to take any
action beyond dismissing the case. The court summarized its
decision by stating, “Whether [Knight] never commenced an
action, whether it was deemed dismissed back in 2012, or
whether it was voluntarily dismissed by [Knight] this year, it is
clear that nothing remains pending before the Court at this
time.”
ISSUES AND STANDARDS OF REVIEW
¶11 Funaro now appeals, challenging the court’s ruling on
multiple grounds. First, he argues that the district court should
have dismissed the case with prejudice for lack of subject matter
jurisdiction because Knight never properly commenced the
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action by serving him with the summons and complaint. Second,
Funaro argues that the district court should have dismissed the
case with prejudice because the statute of limitations had run.
Third, Funaro argues that the district court erred in ruling that it
lacked jurisdiction to entertain his motion for attorney fees.
Although Funaro maintains that the court lacked subject matter
jurisdiction over the action generally, he contends that the court
obtained “separate subject matter jurisdiction” over his motion
for attorney fees pursuant to his rule 60(b) motion.
¶12 The first and third issues involve jurisdictional questions.
“Whether a district court has subject matter jurisdiction over a
proceeding is a matter of law, which we review for correctness.”
In re adoption of B.B., 2017 UT 59, ¶ 16, 417 P.3d 1. As to the
second issue, whether the district court properly declined to rule
on the statute of limitations defense involves interpretation of
the rules of civil procedure and questions of ripeness, both of
which we also review for correctness. See Ghidotti v. Waldron,
2019 UT App 67, ¶ 8, 442 P.3d 1237 (rules of civil procedure);
Heughs Land, LLC v. Holladay City, 2005 UT App 202, ¶ 5, 113
P.3d 1024 (ripeness).
ANALYSIS
I. Subject Matter Jurisdiction
¶13 On appeal, both parties take the position that the district
court never acquired subject matter jurisdiction over this case
because the action was never commenced by service of the
summons and complaint as contemplated by rule 3(a)(2) of the
Utah Rules of Civil Procedure. Funaro maintains that by failing
to properly serve him or the friend, Knight “also failed to invoke
the district court’s subject matter jurisdiction over [its] claims.”
As a result, Funaro contends, Knight could not voluntarily
20190779-CA 5 2021 UT App 65Knight Adjustment v. Funaro
dismiss the case without prejudice. 1 For its part, Knight
maintains that the lack of subject matter jurisdiction means that
the district court did not have authority to entertain Funaro’s
request to dismiss the case with prejudice or to award attorney
fees.
¶14 Rule 3 of the Utah Rules of Civil Procedure governs the
commencement of a civil action. That rule provides, in relevant
part, as follows:
(a) How Commenced. A civil action is commenced
(1) by filing a complaint with the court, or (2) by
service of a summons together with a copy of the
complaint in accordance with Rule 4. If the action
is commenced by the service of a summons and a
copy of the complaint, then the complaint, the
summons and proof of service, must be filed
within ten days of such service. If, in a case
commenced under paragraph (a)(2) of this rule, the
complaint, summons and proof of service are not
filed within ten days of service, the action
commenced shall be deemed dismissed and the
court shall have no further jurisdiction thereof. . . .
(b) Time of Jurisdiction. The court shall have
jurisdiction from the time of filing of the complaint
1. Although it is not spelled out in Funaro’s opening brief, we
understand that Funaro seeks a ruling on this issue to prevent
Knight from refiling this case by relying on Utah’s savings
statute. See supra ¶ 8. In his reply brief, Funaro contends that
failure to serve the summons and complaint means that Knight
“never timely filed a Rule 3(a)(2) action and never timely
commenced an action as is required by [the savings statute].”
20190779-CA 6 2021 UT App 65Knight Adjustment v. Funaro
or service of the summons and a copy of the
complaint.
¶15 Funaro argues that because he was never properly served,
the action was never “commenced” under rule 3(a)(2) and
therefore the district court never obtained jurisdiction under rule
3(b). Alternatively, he argues that because the proof of service
was insufficient on its face, the action was “deemed dismissed
on April 14, 2012, ten days after the date of the alleged service,”
and according to the rule, the district court had “no further
jurisdiction” at that point.
¶16 Funaro confuses the concepts of subject matter
jurisdiction and personal jurisdiction. “Subject matter
jurisdiction concerns a court’s power to hear a case.” Iota LLC v.
Davco Mgmt. Co., 2016 UT App 231, ¶ 44, 391 P.3d 239 (cleaned
up). Subject matter jurisdiction is a narrow concept that is
limited to “(a) statutory limits on the authority of the court to
adjudicate a class of cases, and (b) timing and other limits on the
justiciability of the proceeding before the court (such as
standing, ripeness, and mootness).” In re Adoption of B.B., 2017
UT 59, ¶ 121, 417 P.3d 1 (Lee, A.C.J., opinion of the Court on this
issue) (cleaned up). On the other hand, “personal jurisdiction is
the court’s ability to exercise its power over a person for the
purposes of adjudicating his or her rights and liabilities.” Jackson
Constr. Co. v. Marrs, 2004 UT 89, ¶ 8, 100 P.3d 1211 (cleaned up).
¶17 There is no question that the district court has subject
matter jurisdiction to adjudicate debt collection cases, the class of
cases to which this case belongs. See In re adoption of B.B., 2017
UT 59, ¶ 143 (observing that Utah “district courts are courts of
general jurisdiction” with “general power to hear ‘all matters
civil and criminal’ so long as they are ‘not excepted in the Utah
Constitution and not prohibited by law’” (quoting Utah Code
Ann. § 78A-5-102(1))). But Funaro nevertheless contends that the
district court’s jurisdiction over the subject matter of this
20190779-CA 7 2021 UT App 65Knight Adjustment v. Funaro
particular case was never invoked. Specifically, quoting Upper
Blue Bench Irrigation Dist. v. Continental Nat. Bank & Trust Co., 72
P.2d 1048, 1053 (Utah 1937)), he argues that “in the action below
there was an ‘entire failure to invoke the court’s jurisdiction over
the subject matter’” because Knight “attempted service of
process ‘in a manner wholly inadequate to bring the court’s
powers into activity.’” We disagree.
¶18 Under rule 3(b), subject matter jurisdiction vests with the
district court when the complaint is filed or when the summons
and a copy of the complaint are served. Utah R. Civ. P. 3(b); cf.
State v. Smith, 2014 UT 33, ¶ 24, 344 P.3d 573 (citing 5(a) of the
Utah Rules of Criminal Procedure for the proposition that
“subject matter jurisdiction vests with the district court upon the
filing of an information”). If the plaintiff elects to commence a
case under rule (3)(a)(2), the plaintiff is required to file the
“complaint, the summons and proof of service . . . within ten
days of such service.” Utah R. Civ. P. 3(a)(2). But nothing in the
rule requires that the proof of service be effective—or even
sufficient on its face—before the court can exercise subject matter
jurisdiction over the action.
¶19 Instead, whether a defendant has been properly served
affects only personal jurisdiction. If a defendant has not been
properly served, “such as by personal service, service by mail, or
service by publication,” the “court lacks personal jurisdiction”
over that defendant. Cooper v. Dressel, 2016 UT App 246, ¶ 3, 391
P.3d 338; see also Wittingham, LLC v. TNE Ltd. P'ship, 2020 UT 49,
¶ 45, 469 P.3d 1035 (stating that if a “party fails to properly serve
a defendant, the defendant can assert the affirmative defense
that the court lacks personal jurisdiction as a result of
insufficient service of process”). “And judgments entered by a
district court lacking personal jurisdiction over the defendant are
void.” Cooper, 2016 UT App 246, ¶ 3. Therefore, whether the
defendant has been properly served impacts whether the court
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has personal jurisdiction over the defendant, not whether the
court has subject matter jurisdiction over the case.
¶20 Here, even if Knight did not properly serve Funaro on
April 4, Knight properly invoked the district court’s subject
matter jurisdiction when it filed the complaint with the court.
After Funaro moved to set aside the judgment, Knight conceded
that the attempted service did not comply with the personal
service requirements of rule 4(d)(1). 2 Because the service was
deficient, the district court lacked personal jurisdiction over
Funaro, rendering the default judgment void. See id.Accordingly, the court properly set aside the judgment as void
pursuant to rule 60(b)(4).
¶21 But the deficient service did not affect the court’s subject
matter jurisdiction over the action. As the court recognized, the
failure to serve a defendant “just means [the court doesn’t] have
[personal] jurisdiction over that defendant” until he is properly
served. The court’s subject matter jurisdiction over the action
was properly invoked when the complaint was filed, and that
subject matter jurisdiction remained invoked until Knight filed
its notice of voluntary dismissal, which had the effect of
dismissing the case without prejudice. See Utah R. Civ. P.
41(a)(1)(B) (providing that, “[u]nless the notice . . . states
otherwise, the dismissal is without prejudice”). Because the
defect in service did not deprive the district court of subject
matter jurisdiction, the court correctly rejected Funaro’s
invitation to dismiss the case with prejudice on that basis.
2. In relevant part, the rule provides that personal service may be
accomplished “by delivering a copy of the summons and
complaint to the individual personally, or by leaving them at the
individual’s dwelling house or usual place of abode with a
person of suitable age and discretion who resides there.” Utah R.
Civ. P. 4(d)(1)(A).
20190779-CA 9 2021 UT App 65Knight Adjustment v. Funaro
II. Statute of Limitations
¶22 The court also correctly rejected Funaro’s invitation to
dismiss the case “with prejudice due to the intervening statute of
limitations.” Funaro contends that he was entitled to a dismissal
with prejudice because the applicable statute of limitations has
since expired, thereby extinguishing Knight’s right to refile the
action.
¶23 The district court correctly declined to address, within the
context of a rule 60(b) motion, Funaro’s request to dismiss the
underlying case. Under rule 60(b), a “court may relieve a party
or its legal representative from a judgment” for multiple reasons,
including if “the judgment is void.” Utah R. Civ. P. 60(b)(4). The
rule is limited to granting relief from a judgment and provides
no other remedies. See id. R. 60(b). A motion to set aside a
judgment, even if granted, does not result in the dismissal of the
underlying case, with or without prejudice. See id. The only
action the district court could take in response to Funaro’s
motion was to set aside the default judgment, which it did.
¶24 Funaro’s request to dismiss the case based on the statute
of limitations was not only beyond the scope of a rule 60(b)
motion but was also premature. An issue is ripe for adjudication
“only when it has sharpened into an actual or imminent clash of
legal rights.” Pett v. Autoliv ASP, Inc., 2005 UT 2, ¶ 4, 106 P.3d
705 (cleaned up). “Where there exists no more than a difference
of opinion regarding the hypothetical application of [the] law to
a situation in which the parties might, at some future time, find
themselves, the question is unripe for adjudication.” Id. (cleaned
up). As the district court explained below, if Knight had chosen
to pursue the action by properly serving Funaro, Funaro could
have then raised any defenses, including the statute of
limitations. But those defenses cannot be raised in the context of
a rule 60(b) motion, which by definition seeks only relief from
the judgment and not dismissal of the underlying case.
20190779-CA 10 2021 UT App 65Knight Adjustment v. Funaro
III. Attorney Fees
¶25 Lastly, Funaro argues that the district court should have
awarded him reasonable attorney fees as the prevailing party.
The loan contract at issue provided that, if the debtor defaulted,
the debtor would pay the lender’s “costs for collecting amounts
owing,” including attorney fees. Funaro argues that this
provision entitles him to an award of attorney fees pursuant to
Utah’s reciprocal attorney fee statute, which allows a court to
“award costs and attorney fees to either party that prevails in a
civil action based upon any . . . written contract,” when that
contract “allow[s] at least one party to recover attorney fees.”
Utah Code Ann. § 78B-5-826 (LexisNexis 2018).
¶26 The district court did not reach the question of whether
Funaro was the prevailing party in this action within the
meaning of the reciprocal attorney fee statute. Instead, the court
ruled that it lacked jurisdiction to consider the fee request. The
court explained that “[a]ssuming that Funaro is correct and that
neither [Funaro nor the friend] was served with process and,
therefore, no action was ever commenced, then the court never
had jurisdiction over the instant action.” In other words, the
court reasoned that “under Funaro’s theory of the case, the very
thing that makes him a prevailing party also results in a lack of
jurisdiction to consider the fee request.”
¶27 As explained in Part I, Funaro’s theory of the case is
incorrect. The district court lacked personal jurisdiction over
Funaro because he was never served. But the court obtained
subject matter jurisdiction over the case at the time the complaint
was filed with the court. The fact that the court never obtained
personal jurisdiction over Funaro did not deprive it of
jurisdiction to award attorney fees against Knight.
¶28 “Simply because a court concludes that it lacks personal
jurisdiction over a defendant does not necessarily mean that it
lacks authority to rule on a collateral matter as it relates to a
20190779-CA 11 2021 UT App 65Knight Adjustment v. Funaro
plaintiff.” Bautista v. Gallery, 2009 WL 10672521, Nos. CV 08-
3717(RZx), CV 08-6262(RZx), at *2 (C.D. Cal. Apr. 23, 2009)
(emphasis in original). The court is not required to “have
personal jurisdiction over each party to a lawsuit in order to
enforce a judgment against one party to that lawsuit,” so long as
the court has “personal jurisdiction over the person against
whom the judgment is being enforced.” Id. at *3. And, by filing
the action, “the plaintiff consents to the personal jurisdiction of
the court whose jurisdiction the plaintiff invoked.” Scott
Dodson, Plaintiff Personal Jurisdiction and Venue Transfer, 117
Mich. L. Rev. 1463, 1466 (2019); see also Adam v. Saenger, 303 U.S.
59, 67 (1938) (stating that the plaintiff “by his voluntary act in
demanding justice from the defendant[] submitted himself to the
jurisdiction of the court”); Viron Int’l Corp. v. David Boland, Inc.,
237 F. Supp. 2d 812, 818 (W.D. Mich. 2002) (“A court may lack
personal jurisdiction over a defendant, but never over a plaintiff,
who consents to such jurisdiction by filing suit.”).
¶29 An order awarding attorney fees to Funaro would not
“compel any act or impose any liability upon [him],” and
therefore “does not purport to exercise jurisdiction over [his]
person.” See Shisler v. Sanfer Sports Cars, Inc., 83 Cal. Rptr. 3d 771,
777 (Cal. Ct. App. 2008). Rather, such an order would impose
liability upon Knight, over whom the district court
unquestionably had personal jurisdiction. See id. “Since the trial
court had jurisdiction of the subject matter and jurisdiction over
[Knight], there was no jurisdictional impediment to [Funaro]
specially appearing to call upon the trial court to enforce [his]
statutory right to fees.” See id.
¶30 Although we conclude that the district court had
jurisdiction to entertain Funaro’s motion for attorney fees, we
express no opinion on whether Funaro is entitled to fees as the
prevailing party under the reciprocal fee statute. Because the
question of which party is the prevailing party depends “on the
context of each case, . . . it is appropriate to leave this
20190779-CA 12 2021 UT App 65Knight Adjustment v. Funaro
determination to the sound discretion of the trial court.” See R.T.
Nielson Co. v. Cook, 2002 UT 11, ¶ 25, 40 P.3d 1119. Given that the
district court did not reach this issue, we remand to the district
court for it to undertake a prevailing party analysis in the first
instance. 3
CONCLUSION
¶31 We conclude that Knight properly invoked the district
court’s subject matter jurisdiction when it filed the complaint
with the court, and any inadequacy in service of process went
only to the district court’s ability to exercise personal jurisdiction
over Funaro. Additionally, the court did not err in refusing, in
the context of a rule 60(b) motion, to dismiss the entire
underlying case on statute of limitations grounds. However,
because the court had jurisdiction to consider Funaro’s motion
for attorney fees, we remand to the district court to determine
whether Funaro is entitled to fees as the prevailing party under
the reciprocal fee statute.
3. Funaro also requests his attorney fees on appeal. Specifically,
he contends that “if this Court reverses the district court and
rules that Defendant Funaro was the prevailing party, thus
entitling him to attorney fees at the trial level, then he is also
entitled to attorney fees in this appeal, and to have the case
remanded to the district [court] to determine the amount of the
Defendant Funaro’s attorney fees at the trial level and on
appeal.” We have not ruled that Funaro was the prevailing
party, only that the district court has jurisdiction to decide that
question. And given that Knight prevailed on the other two
issues that Funaro raised, we decline to award Funaro attorney
fees on appeal. See Eberhard v. Eberhard, 2019 UT App 114, ¶ 58,
449 P.3d 202 (declining to award attorney fees in an appeal with
mixed results).
20190779-CA 13 2021 UT App 65