Ruth B. Hardy Revocable Trust v. Rindlesbach

2015 UT App 159_________________________________________________________
THE UTAH COURT OF APPEALS
RUTH B. HARDY REVOCABLE TRUST, DELCON CORPORATION PSP
FBO A. WESLEY HARDY, FINESSE PSP, MJS REAL PROPERTIES,
UINTAH INVESTMENTS, DAVID D. SMITH, STEVEN CONDIE,
DAVID L. JOHNSON, BERRETT PSP, VW PROFESSIONAL HOMES PSP,
TY THOMAS, AND D.R.P. MANAGEMENT PSP,
Plaintiffs and Appellees,
v.
MARK L. RINDLESBACH,
Defendant and Appellant.
Memorandum Decision
No. 20140075-CA
Filed June 25, 2015
Third District Court, Salt Lake Department
The Honorable Andrew H. Stone
No. 080913314
James K. Tracy, Stacy J. McNeill, and
James C. Dunkelberger, Attorneys for Appellant
James C. Swindler, Attorney for Appellees
JUDGE STEPHEN L. ROTH authored this Memorandum Decision, in
which JUDGES GREGORY K. ORME and KATE A. TOOMEY concurred.
ROTH, Judge:
¶1 Mark L. Rindlesbach, in his capacity as trustee of the
Rindlesbach Construction Inc. Profit Sharing Plan (the Plan),
appeals the district court’s decision denying the Plan’s objection
Ruth B. Hardy Revocable Trust v. Rindlesbach
to a writ of execution.1 The Plan argues that due to defects in the
writ of execution, the writ failed to comply with applicable rules
in a way that “affected the outcome of the sale” of its property.
Accordingly, the Plan requests that we void the sheriff’s sale of
its property and require the writ to be re-issued in compliance
with the rules of civil procedure before the property is sold. We
reverse the district court’s ruling and remand for further
proceedings.
¶2 In 2007, the appellees in this case—a group of twelve
lenders (the Lenders)—made a $3.3 million loan to a borrower
who was seeking to purchase a large tract of land for
development. The loan was guaranteed by the Plan along with
eight other guarantors. When the borrower failed to pay back the
loan, the Lenders sought recovery from all of the guarantors. By
the time of trial, the Plan was the only guarantor remaining that
had not declared bankruptcy and that had not had its liability
discharged. A verdict was ultimately entered against the Plan,
and the court entered judgment in favor of the Lenders in the
amount of $6,367,203.64.
¶3 Following the entry of judgment, the Lenders applied for
a writ of execution directing the sale of “*a+ny and all claims and
causes of action of Mark Lee Rindlesbach, Trustee of the
Rindlesbach Construction Inc. Profit Sharing Plan.”2 The Plan
objected to the writ, arguing that it failed to give a detailed
description of the property to be sold as required by rule 64 of
the Utah Rules of Civil Procedure. At a hearing on the objection,
the district court determined “that the specificity of the
1. Where appropriate due to context, we refer to Rindlesbach
personally instead.
2. For ease of reference throughout the remainder of this
decision, we refer to both the writ of execution and the
application for the writ of execution as “the writ” because the
application was attached to and incorporated by reference in the
actual writ of execution.
20140075-CA 2 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
description really is a factual matter for each case” and “the
broad language” used in the writ at issue was “appropriate.”
The court also stated,
[T]he time for [the] debtor in this case to show
some prejudice from the broad description used in
the writ in this case was now—was to come
forward and show a potential exemption or to
show a potential reduction in bidders, not in
theory, not based on an inflexible reading of the
rule, but in actuality using facts . . . .
The property was sold at auction in accordance with the writ,
and the Lenders, as the only bidder, acquired the property with
a credit bid of $200,000 against the amount of their judgment.
¶4 On appeal, the Plan argues that the writ “was improperly
issued because the description of the property to be sold does
not describe any item of property with sufficient specificity.”
The Plan points to rules 64 and 64E of the Utah Rules of Civil
Procedure in support of its argument. A party seeking a writ of
execution must file an application stating the “nature, location
and estimated value of the property.” Utah R. Civ. P. 64E(b)(2).
Once the writ of execution is issued, “the clerk shall attach to the
writ plaintiff’s application, detailed description of the property,
the judgment, notice of exemptions and reply form.”3 Id. R.
3. The Lenders argue that the Plan’s “improper issuance
argument hangs on a phrase found in . . . Rule 64, which imposes
certain ministerial duties on the clerk after issuing a writ of
execution.” While they argue that the description was
sufficiently specific, the Lenders assert if any error occurred, it
was the clerk’s error, because the rule requires the clerk to attach
the detailed description of the property. We reject this reading of
the rule. “We read the plain language of the statute as a whole*+
and interpret its provisions in harmony with other statutes in the
same chapter and related chapters.” Pearson v. South Jordan City,
(continued...)
20140075-CA 3 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
64(d)(2)(C). The Plan argues that the writ in this case “did not
even come close to providing a detailed description. Rather, the
[w]rit provided a bare description of the category of property to
be sold.” It argues that the writ’s direction to sell “*a+ny and all
claims and causes of action” was only a general description of a
(2012 UT App 88, ¶ 18, 275 P.3d 1035 (alteration in original)
(citation and internal quotation marks omitted). When read
separately, these two requirements—the requirement in rule
64E(b) that the judgment holder describe the “nature, location
and estimated value” of the property to be sold in the writ
application and the requirement in rule 64(d)(2) that the clerk
attach a specific description of the property to the writ itself—
might be seen as allocating distinct information-gathering roles
to the two. But such a reading cannot survive the broader
context. The rules dealing with the collection of judgments
provide a judgment creditor with a number of tools for
gathering information about the debtor’s property. For example,
under rule 64(c)(2), judgment creditors, at the court’s discretion,
may conduct discovery, subpoena witnesses, and request
hearings “as necessary to identify property and to apply the
property toward the satisfaction of the judgment or order.” Utah
R. Civ. P. 65(c)(2). In fact, the identification of a debtor’s
property may well have started in discovery, even before
judgment is rendered. Thus, the judgment creditor has a wide
array of tools for collecting information about debtor property
subject to execution. The rules give the clerk, on the other hand,
no such ability, much less the resources to conduct such an
inquiry, with regard to every application for writ of execution
that is presented. As a consequence, there is no merit to the
proposition that the wording of the rule is meant to shift the
burden to identify specific debtor property subject to sale from
the judgment creditor to the court clerk once the application is
submitted. Rather, the responsibility to identify specific property
for sale remains with the judgment creditor, whom the rules
abundantly equip to discover such information.
20140075-CA 4 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
category of property and that the writ did not provide potential
buyers with enough information for them to be able to discern
what exactly was being sold. The Plan argues the need for a
more specific description of the claims and causes of action at
issue “is self-evident” because such a general description in the
context of the sale of any other type of property would never be
sufficient. For example, the Plan asserts that a creditor executing
on vehicles could not just state “all vehicles owned by the
defendant” in the writ but instead would have to provide
specific information about the vehicles such as “make, model
year, and VIN . . . so that both the judgment debtor and potential
bidders would know whether there were appropriate
exemptions, what property is being sold, and what would be an
appropriate bid.”
¶5 The Plan argues that the writ’s failure to provide more
specific information about the claims and causes of action being
sold introduced “an unacceptable level of vagueness and
uncertainty in the sales process” and likely impacted the number
and value of bids received at auction. It contends that “*w+ithout
more information, it would be impossible for a bidder to
determine whether the nature and value of the property
warrants any bid whatsoever.” The Plan argues that the writ for
the claims and causes of action at issue here should have
included “the name of the case, the case number, and the Court
in which the case is pending.” The Plan points to the fact that the
Lenders were aware of a pending lawsuit between the Plan and
the City of Saratoga Springs. The Plan contends that “*c+learly,
the City of Saratoga Springs . . . would have been an interested
party at a sale in which a claim the City was defending was
being sold.” However, the Plan argues, the writ’s failure to
identify the claim beyond the more general description of “[a]ny
and all claims and causes of action” prevented “the City [or] any
other bidder” from “hav*ing+ enough certainty about what they
were bidding on to feel comfortable making a bid at the
execution sale.” The Plan accordingly argues that the sale was
affected by the writ’s defects and that the district court’s refusal
20140075-CA 5 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
to sustain the Plan’s objection to the writ “was not harmless
error.”
¶6 The Lenders point us to Bangerter v. Petty, 2010 UT App
49, 228 P.3d 1250. In Bangerter, we declared, “There is a general
policy to sustain a sheriff’s sale unless [it is] manifestly unfair
. . . .” Id. ¶ 15 (alteration in original) (citation and internal
quotation marks omitted). Examples of manifest unfairness
include “gross irregularities, mistake, fraud, or collusion.” Id.(citation and internal quotation marks omitted). The Lenders
contend that the Plan has failed to meet its burden of
demonstrating manifest unfairness. They argue that the Plan has
failed to show the sale would have resulted in a better price even
with a more specific description and that the irregularities were
substantial rather than merely technical. Moreover, they contend
that where the Plan was “evasive in *its+ testimony” and
“conceal[ed] the existence of potential claims, [it] should not be
heard to complain that [its] claims were not better identified and
more thoroughly described.”
¶7 It is important to note, however, that the Plan is not
appealing the district court’s denial of a motion filed after the
execution sale to set the sale aside. Instead, the Plan is arguing
that the district court’s decision to allow the sale to go forward
over the Plan’s pre-sale objection was error. All of the cases that
the Lenders have pointed us to have dealt with objections that
were made to irregularity in execution or trustee sales after the
sale took place, not before. See, e.g., Timm v. Dewsnup, 2003 UT 47,
¶ 34, 86 P.3d 699; Commercial Bank of Utah v. Madsen, 236 P.2d
343, 344 (Utah 1951); Bangerter, 2010 UT App 49, ¶ 7. We have
not located any cases that have addressed an appeal from a
district court’s decision to allow an execution sale to proceed
over a party’s objection of irregularity brought before the sale
rather than after. Accordingly, the appropriate standard and
analysis we are to apply in such a case is essentially a matter of
first impression and is not governed by the cases to which the
Lenders have pointed. However, we conclude that the facts of
this case allow us to come to a resolution without having to
20140075-CA 6 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
decide more generally the issues that arise from this case’s
unique procedural posture.
¶8 First, we note that “[t]he public auction procedure
provides a key safeguard for a judgment debtor because the
public nature of the sale provides an opportunity for the open
market to determine the value of the judgment debtor’s
property.” Kristopher Wood, Comment, Short Circuiting the
Justice System: How Defendants Are Misusing Writs of Execution, 39
Pepp. L. Rev. 747, 754 (2012) (alteration in original) (citation and
internal quotation marks omitted); cf. Snow, Nuffer, Engstrom, &
Drake v. Tanasse, 1999 UT 49, ¶¶ 12–14, 980 P.2d 208(determining that permitting a law firm to purchase a legal
malpractice claim against itself violates public policy in part
because then “the appropriate value of the legal malpractice
claim will never be fairly determined”); Brigham Truck
& Implement Co. v. Fridal, 746 P.2d 1171, 1173 (Utah 1987) (per
curiam) (noting that a sale was commercially reasonable because
“*t+he public, upon proper notice, was invited to participate and
given an opportunity to bid upon a competitive basis”). Public
sales are “made at auction to the highest bidder” and allow “all
persons . . . the right to come in and bid.” Johnson Cotton Co. v.
Cannon, 129 S.E.2d 750, 755 (S.C. 1963). These sales provide “a
competitive environment with more than one bidder.”
Manufacturers Hanover Trust Co. v. Koubek, 396 S.E.2d 669, 672
(Va. 1990).
¶9 We therefore recognize the Plan’s concern that these
purposes might have been frustrated by the lack of specificity in
the writ, which resulted in a notice of sale containing the
disputed language: “*a+ny and all claims and causes of action.”
The inability of a potential purchaser to identify from the notice
of sale what he or she is buying might well hamper the ability of
the open market to determine the value of the property being
sold. This is because such a sale may not attract potential bidders
interested in the specific property being sold, undermining the
competitiveness of the sale. However, for the reasons explained
below, and under the specific circumstances of this case, we
conclude that the Plan has largely failed to show that such harm
20140075-CA 7 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
was threatened or occurred due to the highly speculative nature
of the majority of the claims it brought to the district court’s
attention. But we ultimately agree with the Plan that the claim it
asserted involving the City of Saratoga Springs was not
described in sufficient detail to accomplish the salutary purposes
of execution sales.
¶10 In support of its argument that the description attached to
the writ of execution was too general to properly identify the
property being sold, the Plan identifies five individuals or
entities against which the Plan had claims that the Lenders were
aware of: (1) John Jacob, (2) Heritage West Credit Union, (3) SL6,
(4) Stone River Falls, and (5) the City of Saratoga Springs. At the
hearing before the district court on the Plan’s objection to the
writ, the Lenders argued that the Plan should not be able to
argue that it would suffer harm from the general description
when it had either refused to provide the Lenders with more
details about these claims or so denigrated their value as to make
separate identification pointless. The district court judge
appeared to agree, stating,
Well, it seems to me that the specificity of the
description really is a factual matter for each case,
and the time for [the] debtor in this case to show
some prejudice from the broad description used in
the writ in this case was now—was to come
forward and show a potential exemption or to
show a potential reduction in bidders, not in
theory, not based on an inflexible reading of the
rule, but in actuality using facts . . . .
We agree with the district court that the analysis required here is
fact intensive. Accordingly, we turn to the evidence before us to
determine whether the district court abused its discretion in
determining that the Plan would suffer no harm by allowing the
sale to proceed under the general description provided by the
Lenders.
¶11 The Lenders acknowledged a potential claim against
Jacob in their response to the Plan’s objection. They noted that
20140075-CA 8 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
Rindlesbach had listed a claim of $890,000 against Jacob on his
financial statements in 2008. However, they argued that the Plan
had conceded this debt was uncollectable and of no value. When
asked specifically about the Jacob claim under oath at a
supplemental proceeding, Rindlesbach responded that he
“didn’t have a strong note,” and when asked if he thought the
debt was collectable, he responded, “No.” The Plan made no
effort to contest the Lenders’ characterization of this claim at the
hearing. We are not persuaded that the district court abused its
discretion in determining that the writ of execution’s failure to
specifically identify the Plan’s claim against Jacob was unlikely
to prejudice the outcome of the sale when the Plan itself appears
to have conceded that the claim was essentially worthless.
¶12 The Heritage West and SL6 claims stand on even weaker
ground. During the same supplemental proceeding, counsel for
the Plan stated that the Plan “[p]otentially” had a claim against
“Heritage West, but we haven’t brought a claim,” and
Rindlesbach stated no more than that “I would like to get my
money back from SL6.” The Plan provided no further
information about these claims at the proceeding. And the Plan
failed to even raise these claims to the court’s attention at the
objection hearing. Cf. Hill v. Estate of Allred, 2009 UT 28, ¶ 64, 216
P.3d 929 (“As a general rule, claims not raised before the trial
court may not be raised on appeal.” (citation and internal
quotation marks omitted)). Given that the Plan had provided the
Lenders with no information about the nature of these claims
and failed to even discuss them at the objection hearing, it is
difficult to understand how the district court’s failure to require
the writ’s property description to include any specific reference
to these claims can be judged an abuse of discretion.
¶13 Similarly, the Plan has failed to convince us that the
Lenders or the district court had sufficient information about
any claims involving Stone River Falls to identify them more
specifically. The Plan points us to statements in the record where
the Lenders acknowledge that they “discovered transactions that
may give rise to claims of *the Plan+” against this party.
However, the statements the Plan points us to do not persuade
as that the Lenders had any real knowledge of either the true
20140075-CA 9 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
nature or value of these potential claims. The statements are
merely a list of everything the Lenders had been able to discover
about Stone River Falls but are inconclusive as to whether the
Lenders had actually been able to discern the specific parties,
property, and value of the claims involved. Further, the
statements include an allegation by the Lenders that Rindlesbach
was sympathetic to one of the parties involved with Stone River
Falls and had “no interest” in bringing suit anyway. Given that
no additional information was provided by the Plan about these
claims at the objection hearing, we are unconvinced that the
district court abused its discretion in failing to require a more
specific description.
¶14 Finally, the Plan asserted at the objection hearing that it
had a claim against the City of Saratoga Springs that ought to
have been separately identified. This claim was a counterclaim in
a suit by Saratoga Springs against the Plan. At the hearing, the
Plan described the claim as one “for reimbursement of money
spent on building a collector road.” The Lenders seemed to
acknowledge the legitimacy of this claim, asserting that the
Plan’s claims had “no value to *the Plan+ except maybe the
counterclaim against Saratoga Springs which we don’t mind
leaving out of the sale and let[ting the Plan] litigate with the city
over that one because it’s an offset type of claim. As to all of the
others, [the Plan does not] care.” And in their briefing, the
Lenders have identified the court case in which the Plan’s
counterclaim was pending by case name, court, and case
number—descriptive information that would have been readily
available at the time the writ was issued. Thus, this claim was
susceptible of specific identification in a writ of execution, giving
any interested member of the public enough information to
consider its potential; and, as the Plan contends, certainly the
City of Saratoga Springs itself was a potential bidder at an
execution sale of a counterclaim against it. Thus, with respect to
this claim, the parties were well aware of detailed information
beyond the “*a+ny and all claims” description in the writ that
could have more accurately informed the public about the claim
being sold and aided any potential buyers in evaluating its
worth, thereby better fulfilling the purpose of the public sale
process. Given this, as well as the Lenders’ own offer to allow
20140075-CA 10 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
the claim to be separated from the others for purposes of the
execution sale, the district court seems to have exceeded its
discretion in not taking up the Lenders’ offer to sell this claim
separately.
¶15 Accordingly, we reverse the district court’s decision to
allow the writ to go forward with the description of “*a+ny and
all claims.” We therefore vacate the execution sale and remand
to the district court for further proceedings. The issue of whether
the claims could be sold as a group or are required to be sold
separately is not before us. Accordingly, on remand the district
court may exercise its discretion either to separate the claim
involving the City of Saratoga Springs from the others or to sell
it along with the rest of the claims, provided it is adequately
described, and otherwise keeping in mind the purposes of a
public execution sale.4
¶16 The Plan requests attorney fees incurred on appeal. The
Plan points to a clause in the loan guarantee underlying this
action that provides Lenders with attorney fees incurred in
collection efforts. The Plan therefore argues that if it prevails on
appeal then it should be awarded attorney fees under the
“reciprocal right to recover attorney fees provision of Utah Code
[section] 78B-5-826.” While we have determined that the Plan
was correct in its assertion that the claim involving the City of
Saratoga Springs should have been described in more detail, this
does not mean that the Plan has “prevailed” on appeal in the
usual sense. See Valcarce v. Fitzgerald, 961 P.2d 305, 319 (Utah
1998) (“*W+hen a party who received attorney fees below
prevails on appeal, the party is also entitled to fees reasonably
incurred on appeal.” (citation and internal quotation marks
omitted)). The Plan was not awarded attorney fees below. On
4. We note that while we found no abuse of discretion in its
decisions as to the other claims at issue, because the sale process
will have to be repeated, our remand should not be interpreted
as restricting the district court from reconsidering more broadly
how the execution sale (or sales) ought to proceed.
20140075-CA 11 2015 UT App 159Ruth B. Hardy Revocable Trust v. Rindlesbach
appeal, the substantial judgment entered in favor of the Lenders
and against the Plan has not been reversed, and indeed, remains
almost wholly unaffected. While the matter will be remanded so
that the property disposed of in the writ can be sold again with a
more detailed description, the fact remains that the property will
still be sold. Accordingly, we decline to award the attorney fees
incurred by the Plan on appeal.
¶17 We reverse and remand to the district court for further
proceedings consistent with this opinion.
20140075-CA 12 2015 UT App 159