BV Lending, LLC v. Jordanelle Special Service District

2015 UT App 117THE UTAH COURT OF APPEALS
BV LENDING, LLC, AND BV JORDANELLE, LLC,
Plaintiffs and Appellants,
v.
JORDANELLE SPECIAL SERVICE DISTRICT; JORDANELLE SPECIAL
SERVICE DISTRICT, UTAH SPECIAL IMPROVEMENT DISTRICT
NO. 2005-2; AND W. JEFFERY FILLMORE,
Defendants and Appellees.
Opinion
No. 20140149-CA
Filed May 7, 2015
Fourth District Court, Heber Department
The Honorable Derek P. Pullan
No. 100500444
Michael R. Johnson and Matthew M. Cannon,
Attorneys for Appellants
Mark R. Gaylord, Melanie J. Vartabedian, and Zaven
A. Sargsian, Attorneys for Appellees
JUDGE J. FREDERIC VOROS JR. authored this Opinion, in which
JUDGES MICHELE M. CHRISTIANSEN and JOHN A. PEARCE
concurred.
VOROS, Judge:
¶1 The principal question raised by this appeal is whether a
former property owner can challenge a special service district
assessment after the district has foreclosed on the property for
non-payment of the assessment and the former property owner
thus no longer owes the assessment. The district court concluded
that the challenge was moot. We affirm.
BV Lending v. Jordanelle Special Service District
BACKGROUND
¶2 BV Jordanelle (BVJ) owned approximately 584 acres of
real property near Jordanelle Reservoir in Wasatch County (the
Property). The Property was located within the boundaries of
Utah Special Improvement District No. 2005-2 (the District).
Jordanelle Special Service District (Jordanelle), a special service
district under Utah’s Special Service District Act, created and
oversees the District.
¶3 When Jordanelle created the District, it did so to “finance
the acquisition, construction and installation of costs of certain
water and sewer improvements to benefit certain properties
within [the District].” The resolution that created the District also
provided that “[t]he costs and expenses of the proposed
Improvements shall be paid by a special assessment to be levied
against the properties to be improved or which may be directly
or indirectly benefitted by any of such Improvements.” Then
Jordanelle adopted Ordinance 09-10, levying a special
assessment (the Assessment) against property owners within the
District. Under Utah law, the Assessment “constitute[d] a lien
against the [P]roperty assessed as of the effective date of the
assessment resolution or ordinance.” See Utah Code Ann.
§ 11-42-501(1) (LexisNexis Supp. 2007).
¶4 At the time Jordanelle created the District, BVJ did not
own the Property. See BV Lending, LLC v. Jordanelle Special Serv.
Dist., 2013 UT App 9, ¶ 2, 294 P.3d 656. BV Lending, LLC held a
mortgage on the Property. Id. Approximately four months after
Jordanelle created the District, BV Lending foreclosed on the
Property and bought it at the foreclosure sale. Id. ¶¶ 3–4. The
same day, BVJ filed Articles of Organization, and BV Lending
transferred its ownership interest in the Property to BVJ. Id. ¶ 4.
BVJ recorded its interest in the Property shortly thereafter. Id. As
record owner of the Property, BVJ was responsible for the
Assessment.
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¶5 Believing that the Property derived no benefit from the
improvements, or at least that the benefit derived did not justify
the amount of the Assessment, BVJ did not pay the Assessment.
Consequently, in April 2010, Jordanelle began a non-judicial
foreclosure. The Notice of Default and Election to Sell stated that
“[t]he Assessment amounts were not paid and the total unpaid
balance of the principal of the Assessment owing for the
Property of $10,133,558.56 has been accelerated and declared to
be immediately due.” In July 2010, Jordanelle sent BVJ a Notice
of Trustee’s Sale indicating the Property would “be sold at
public auction to the highest bidder” on September 1, 2010.
¶6 BVJ sued Jordanelle. The complaint alleged that
Jordanelle violated BVJ’s due process rights on the ground that
BVJ did not receive notice of the adoption of the Assessment
(Notice Claims). In addition, BVJ claimed that Jordanelle
unlawfully implemented the Assessment, i.e., the Assessment
required payment for either unconstructed improvements or
deficiently constructed improvements (Implementation Claims).
BVJ also sought a temporary restraining order (TRO) and a
preliminary injunction to enjoin the sale of the Property.
¶7 The district court entered a TRO. Shortly thereafter BVJ
filed for bankruptcy. Because of the automatic stay, the district
court did not rule on BVJ’s request for a preliminary injunction.
Approximately two months later, the bankruptcy court
transferred the matter back to the district court. However, the
bankruptcy court also issued a stay barring Jordanelle from
“exercising [its] state-law rights and/or remedies concerning
[BVJ’s] real property.”
¶8 The state court litigation proceeded, largely on the Notice
Claims. In August 2011, the district court issued an order (the
2011 Order) dismissing the Notice Claims for lack of standing.
The district court reasoned that BVJ lacked standing to assert the
Notice Claims because it did not own the Property, or even exist
as a legal entity, at the time Jordanelle gave notice of the
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Assessment. However, the 2011 Order also stated, “As the
[current] owner of the [P]roperty and as the party obligated to
pay the [A]ssessment, BVJ has standing to raise constitutional
and all other claims arising out of implementation of the
assessment ordinance . . . .” In other words, the district court
determined that BVJ had standing to pursue the Implementation
Claims, but not the Notice Claims. BVJ appealed the dismissal of
the Notice Claims. This court affirmed the 2011 Order “with
respect to the Notice Claims.” BV Lending, LLC, 2013 UT App 9,
¶¶ 9, 17.
¶9 In November 2011, about one year after the bankruptcy
court transferred the case back to state court—and during the
pendency of BVJ’s appeal of the 2011 Order—the parties
stipulated to a dismissal of the bankruptcy petition. The parties
also stipulated, “Upon entry of the . . . dismissal [o]rder,
[Jordanelle] shall be entitled to exercise its state-law rights and
remedies with respect to [the Property]. In so doing, [Jordanelle]
shall begin the foreclosure process anew . . . .”
¶10 True to its word, in December 2011, Jordanelle sent BVJ
the second Notice of Default and Election to Sell. Jordanelle sent
BVJ the second Notice of Trustee’s Sale stating that the Property
would “be sold at public auction to the highest bidder.” BVJ
again moved for a TRO and preliminary injunction. The district
court issued a second TRO restraining Jordanelle from selling
the Property. At the ensuing hearing, the district court orally
granted BVJ’s motion for preliminary injunction. The district
court granted the preliminary injunction in part because
Jordanelle had failed to comply with the Assessment’s required
notice provisions before foreclosing.
¶11 Shortly after the district court granted the preliminary
injunction, Jordanelle cured the notice defects of its earlier
attempted sale and sent BVJ a third Notice of Default and
Election to Sell. BVJ did not seek a third TRO. Jordanelle
proceeded with the foreclosure and purchased the Property by
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credit bid at the foreclosure sale (Foreclosure Sale). Days later,
BVJ filed a lis pendens on the Property. Approximately two
weeks after that, Jordanelle received a deed to the Property.
¶12 Meanwhile, BVJ’s Implementation Claims remained
pending before the district court. Shortly before the Foreclosure
Sale, Jordanelle moved for summary judgment on the merits of
BVJ’s “remaining claims”—that is, those claims that remained
after the 2011 Order and related appeal. Jordanelle believed that
only BVJ’s fifth and sixth claims for relief remained after the
2011 Order. BVJ, on the other hand, believed that its first, third,
fifth, and sixth claims for relief remained after the 2011 Order.1
Shortly after the Foreclosure Sale—but before the district court
ruled on Jordanelle’s first motion—Jordanelle again moved for
summary judgment, this time on the ground that the Foreclosure
Sale mooted BVJ’s remaining claims.
¶13 In March 2013, the district court ruled on Jordanelle’s
motions. The district court granted Jordanelle’s motion for
summary judgment on the merits of BVJ’s fifth and sixth claims
for relief. Because BVJ argued that more than its fifth and sixth
claims for relief remained, the district court also concluded that
BVJ’s first and third claims for relief “were strictly [N]otice
[C]laims” and accordingly the 2011 Order “dismissed [those
claims] in their entirety.” Accordingly, the district court
dismissed all of BVJ’s remaining claims for relief. In the
alternative, the district court concluded “even if BVJ’s first, third,
fifth or sixth claim for relief included an implementation
component—meaning that the improvements are at this time
non-operational and do not benefit BVJ’s property—[those]
claim[s] [are] moot.” BVJ appeals.
1. BVJ does not argue that its second or fourth claims for relief
survived the 2011 Order.
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ISSUES
¶14 BVJ raises three issues on appeal. First, BVJ contends that
the district court erred by dismissing BVJ’s Implementation
Claims as moot. Second, BVJ contends the district court erred in
determining that BVJ’s first and third causes of action
constituted Notice Claims that did not survive the 2011 Order
and related appeal. Finally, BVJ contends that the district court
erred by granting summary judgment in favor of Jordanelle on
all its remaining claims because “there was absolutely no
evidentiary basis to do so.”
ANALYSIS
¶15 We begin with the question of mootness. Our resolution
of that question disposes of BVJ’s entire appeal. We review for
correctness the district court’s order that the Foreclosure Sale
mooted BVJ’s Implementation Claims. See Spain v. Stewart, 639
P.2d 166, 168 (Utah 1981).
¶16 “If the requested judicial relief cannot affect the rights of
the litigants, the case is moot . . . .” Duran v. Morris, 635 P.2d 43,
45 (Utah 1981); see also In re C.D., 2010 UT 66, ¶ 11, 245 P.3d 724(“A case is deemed moot when the requested judicial relief
cannot affect the rights of the litigants.” (citation and internal
quotation marks omitted)). In this case, BVJ argues “that either
[it] did not owe the [A]ssessment or, at a minimum, that [it] did
not owe as much as [Jordanelle] claimed.” However, Jordanelle’s
purchase of the Property eliminated BVJ’s obligation to pay the
Assessment. Because BVJ no longer owes any part of the
Assessment, the district court could not grant BVJ’s requested
relief and correctly ruled BVJ’s Implementation Claims moot.
¶17 BVJ maintains that by dismissing its Implementation
Claims, the district court essentially “ruled that once a
foreclosure sale occurs the owner of the property has no legal
recourse whatsoever, regardless of whether the foreclosure sale
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was lawful or not” and regardless of the pendency of “litigation
that questions the very authority of the foreclosing party to
pursue its alleged rights.”
¶18 This argument implies that BVJ has sought legal recourse
for an unlawful foreclosure sale. But BVJ acknowledges in its
opening brief that “the claims at issue in this case are about
whether the assessment ordinance was lawfully implemented,
not whether [the] Foreclosure Sale was lawful or proper.” This
statement is accurate. BVJ filed its amended complaint years
before the Foreclosure Sale occurred and did not amend it
thereafter to allege that the foreclosure was unlawful.
Accordingly, no pleading before the court sought relief for injury
suffered as a result of the Foreclosure Sale. Moreover, as noted
above, although BVJ had sought to restrain or enjoin Jordanelle’s
first two foreclosure sales, it sought no such relief with respect to
the third. In sum, BVJ did not ask the district court to prevent the
Foreclosure Sale before the fact or plead for relief for wrongful
foreclosure after the fact. Consequently, we agree that the
lawfulness of the Foreclosure Sale is not before us. This
controversy concerns only the lawfulness of the Assessment—
the Assessment that BVJ did not pay and no longer owes.2
¶19 BVJ also argues that because the district court can still
award it effective relief, the Foreclosure Sale did not moot its
claims. First, BVJ claims that the district court could order the
return of the Property if the court finds the Assessment
wrongfully required BVJ to pay for non-existent, or deficient,
improvements. Second, BVJ claims that the district court could
award money damages as an alternative to ordering the return
of the Property. Finally, BVJ claims that the district court could
award nominal damages because “[a] plaintiff who proves a
2. We express no opinion on the legality of the Foreclosure Sale
or on whether BVJ had grounds to obtain any form of
preliminary relief.
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constitutional violation is always entitled to recover nominal
damages, even if actual damages do not exist, and even if other
forms of relief might be foreclosed.”
¶20 But BVJ identifies remedies for an injury not alleged in its
operative complaint. The relief BVJ now claims the district court
could award arises from the Foreclosure Sale, the lawfulness of
which was not argued before the district court or placed before
this court on appeal. BVJ admits that “[t]he Complaint does not
contain a specific demand for money damages stemming from
the [F]oreclosure [S]ale for the simple reason that the
[F]oreclosure [S]ale occurred long after the Amended Complaint
was filed.” A court can only grant relief for those issues properly
before it. Because BVJ did not plead a claim for wrongful
foreclosure, the district court cannot award relief for wrongful
foreclosure. Nor does the hypothetical existence of an unasserted
claim save the amended complaint from dismissal on mootness
grounds.
¶21 Finally, we do not agree that the district court’s dismissal
of BVJ’s Implementation Claims stands for the proposition that
the owner of foreclosed property has no legal recourse. Rather, it
stands for the proposition that the district court may only
adjudicate claims properly before it. As explained, BVJ’s
complaint before the district court did not contemplate the
Foreclosure Sale. Accordingly, the district court’s ruling does not
address any claim for relief based on wrongful foreclosure.3
3. The record indicates that BVJ filed a complaint with the
district court on December 7, 2012, alleging, among other things,
wrongful foreclosure. The district court dismissed the complaint
without prejudice under rule 4(b) of the Utah Rules of Civil
Procedure. BV Jordanelle v. Jordanelle Special Servs. Dist., Case No.
120500139, order of dismissal (Apr. 24, 2013). That matter is not
before us on appeal.
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¶22 Accordingly, the district court correctly determined that
the Foreclosure Sale mooted BVJ’s Implementation Claims.
¶23 Because we dispose of this appeal on mootness grounds,
we do not reach BVJ’s remaining claims. BVJ contends that the
district court mislabeled Implementation Claims as Notice
Claims. From the beginning, all of BVJ’s claims were either
Notice Claims or Implementation Claims. In the 2013 appeal, we
determined that BVJ lacked standing to prosecute its Notice
Claims. BV Lending, LLC v. Jordanelle Special Serv. Dist., 2013 UT
App 9, ¶¶ 9, 17, 294 P.3d 656. We now determine that BVJ’s
remaining claims—its Implementation Claims—are moot. In
sum, all of BVJ’s claims are non-justiciable for one reason or the
other; consequently, any error in ruling a claim non-justiciable
for one reason when it was in fact non-justiciable for the other is
necessarily harmless. Cf. Carlton v. Brown, 2014 UT 6, ¶ 30, 323
P.3d 571. BVJ also contends that the district court rejected on
summary judgment potentially meritorious Implementation
Claims. Because we affirm the district court’s ruling that these
claims are moot, we do not examine their merit.
CONCLUSION
¶24 The district court correctly concluded that the Foreclosure
Sale mooted BVJ’s Implementation Claims. On this basis, we
affirm.
20140149-CA 9 2015 UT App 117