Trapnell & Assocs., LLC v. Legacy Resorts, LLC

• Decision Date: 06 July 2020
• Docket Number: No. 20190048,20190048
• Court: Utah Supreme Court
• Parties: TRAPNELL & ASSOCIATES, LLC, Petitioner, v. LEGACY RESORTS, LLC and America First Federal Credit Union, Respondents.

469 P.3d 989

TRAPNELL & ASSOCIATES, LLC, Petitioner,

v.LEGACY RESORTS, LLC and America First Federal Credit Union, Respondents.

No. 20190048

Supreme Court of Utah.

Heard January 13, 2020

Supplemental Briefing Received March 6, 2020

Filed July 6, 2020

Matthew G. Grimmer, Jacob R. Davis, Lehi, for appellant

Peter C. Schofield, Rod N. Andreason, Justin W. Starr, Lehi, for appellee Legacy Resorts

Mark R. Gaylord, Nathan R. Marigoni, Salt Lake City, for appellee America First Federal Credit Union

Justice Pearce authored the opinion of the Court, in which Chief Justice Durrant, Associate Chief Justice Lee, Justice Himonas, and Justice Petersen joined.

On Certiorari to the Utah Court of Appeals

Justice Pearce, opinion of the Court:

INTRODUCTION

¶1 Trapnell & Associates, LLC (Trapnell) asks us to review the court of appeals’ application of the partial subordination doctrine to a set of liens with circular priority. We love a lien subordination dispute as much as the next court, but we are prevented from sinking our teeth into the meat of that question because we lack jurisdiction.

¶2 After the district court entered its final judgment in this matter, but before the time to appeal expired, Trapnell apparently purchased the plaintiff's—Praia, LLC (Praia)—interest in this litigation. Trapnell announced its arrival to the scene by filing a notice under Utah Rule of Civil Procedure 17 that it was now the real party in interest. That same day, Trapnell lodged a notice of appeal.

¶3 Legacy Resorts, LLC (Legacy) and America First Federal Credit Union (AFCU) asked the court of appeals to summarily dismiss Trapnell's appeal. Legacy and AFCU argued that Trapnell needed to file a motion to substitute pursuant to Utah Rule of Civil Procedure 25 if it wanted to take the litigation over from Praia. They further argued that because Trapnell had improperly inserted itself into the dispute, the notice of appeal it had filed was ineffective. The court of appeals recognized the potential problem and remanded to the district court in apparent hopes that the district court could address the issue. The district court did not see the problem with Trapnell's approach and affirmed that, in its view, Trapnell had properly become a party to the action.

¶4 Legacy and AFCU appealed that decision. The court of appeals addressed Trapnell's attempted entry in the same opinion in which it ruled on the merits of Trapnell's arguments. See Trapnell & Assocs. LLC v. Legacy Resorts LLC , 2018 UT App 231, 438 P.3d 44. The court of appeals noted the procedural oddities of trying to substitute into the action through a rule 17 notice but came to the very pragmatic conclusion that because Trapnell intended to become a party and the district court had treated Trapnell as a party, Trapnell had become a party. See id. ¶¶ 16–23.

¶5 We cannot follow the court of appeals down that path. Our rules of civil procedure do not permit Trapnell to make itself a party to an ongoing action simply by declaring it so. The consequence of failing to follow the rules is that the notice of appeal Trapnell filed is invalid. And without a valid notice of appeal, the court of appeals lacked jurisdiction to render its decision.

¶6 When Legacy and AFCU began to squawk about Trapnell's procedural misadventure, Praia attempted to fix Trapnell's error by filing a motion to extend the time to file its own notice of appeal. The district court twice denied that motion, and Praia lodged a "conditional cross-appeal" to challenge that decision. We vacate the court of appeals’ decision and remand to that court so that it can sort out what to do with Praia's conditional cross-appeal.

BACKGROUND

¶7 This case involves various loans secured by Zermatt Resort in Midway, Utah. The court of appeals did a yeoman's job of reciting the facts underlying the dispute, and we refer those interested in the details to read that opinion. See generally Trapnell & Assocs. LLC v. Legacy Resorts LLC , 2018 UT App 231, 438 P.3d 44. For the purpose of our discussion, it suffices to say that a dispute arose between lienholders regarding the distribution of the fourteen million dollars a foreclosure sale of Zermatt (Foreclosure Sale) had generated. See id. ¶¶ 1–13.

¶8 A suit was initiated. Praia moved for summary judgment, arguing that the district court should award it the lion's share of the Foreclosure Sale's proceeds. Id. ¶ 9. Legacy and AFCU cross-moved for summary judgment, contending that Praia should, in the words of a judge not involved in this dispute, get nothing and like it. Id. Since Legacy, AFCU, and Praia all held liens on the property, resolution of those motions hinged on whose lien was subordinate to whose and for how much.

¶9 The district court concluded that Praia was not entitled to any proceeds and granted Legacy's motion for summary judgment. Id. ¶ 10. The district court dismissed Praia's remaining claims and entered a final judgment on August 10, 2016. Id.

¶10 According to a document Trapnell filed in the court of appeals, on August 18, 2016, Praia assigned its interest in the case to Trapnell. Id. ¶ 11. On August 22, 2016, Trapnell attempted to enter the litigation by filing a rule 17 "Notice of Substitution of Real Party in Interest." Id. The entirety of that pleading stated

Plaintiff Trapnell & Associates, LLC ("Trapnell"), pursuant to Rule 17 of the Utah Rules of Civil Procedure, provides notice that Trapnell, as assignee of the claims brought by Praia, LLC (the former Plaintiff in this matter) against Defendant Legacy Resorts, LLC, including the claim for declaratory judgment, is the real party in interest who shall prosecute this action.

Trapnell filed a Notice of Appeal on the same day. Id. ¶¶ 3, 11.

¶11 Legacy and AFCU quickly moved the court of appeals to summarily dispose of Trapnell's appeal. Legacy and AFCU argued that the court of appeals lacked jurisdiction to hear the case. They reasoned that if Trapnell wanted to substitute into the action for Praia, it needed to file a motion pursuant to Utah Rule of Civil Procedure 25. They further argued that the rule 17 notice Trapnell filed was an ineffective mechanism to grant Trapnell party status. Because no "party" had filed a notice of appeal within the required thirty-day window, the court of appeals lacked jurisdiction. Or so went the argument Legacy and AFCU advanced to the court of appeals.¹ Id. ¶ 12.

¶12 Praia reemerged to file a motion under Utah Rule of Appellate Procedure 4(e) for an extension of time to file an appeal in the district court. It filed this motion on September 26, 2016—after the original thirty days to file the notice of appeal had expired but within the window rule 4(e) allows a party to seek additional time to appeal.² Id. ; see also UTAH R. APP. P . 4(e) (permitting a trial court to extend the time for filing a notice of appeal if the motion is filed no more than thirty days after the original deadline). Legacy opposed Praia's motion primarily claiming that the district court lost jurisdiction over the case when Trapnell filed its notice of appeal.

¶13 On the same day that Praia filed its rule 4(e) motion for additional time, Trapnell filed, in the court of appeals, a motion to substitute into the appeal pursuant to Utah Rule of Appellate Procedure 38. Trapnell included, as an exhibit to a declaration from Trapnell's attorney, a copy of the document memorializing Praia's assignment of its interest in this litigation to Trapnell. This appears to be Trapnell's first attempt in either the district court or the court of appeals to validate its assertion that Praia had assigned claims to it. Legacy opposed that motion arguing, among other things, that because Trapnell had filed the notice of appeal, it was attempting to substitute itself for itself. Legacy also claimed that it would be prejudiced by Trapnell's substitution into the case. AFCU joined in Legacy's opposition to Trapnell's motion.

¶14 On September 29, 2016, the district court denied Praia's rule 4(e) motion for an extension of time. The district court gave little reasoning but stated that after reviewing the motion and opposition, "the Court notes the final order in this [case] has already been appealed and is before the Court of Appeals." Praia appealed the district court's denial of its motion for an extension of time to file an appeal.

¶15 On October 21, 2016, Praia joined Trapnell's rule 38 motion for substitution before the court of appeals. Legacy opposed the substance of Praia's motion. Legacy again argued that Trapnell was trying to substitute itself for itself, that it was attempting to substitute into an appeal over which the court of appeals had no jurisdiction, and that the document Trapnell was using to demonstrate that it was the owner of Praia's interest in the litigation failed "to show that Trapnell assumed Praia's obligations in this case." In a reply supporting its joinder in Trapnell's motion, Praia argued that Trapnell should be named a party because it is the real party in interest and substitution would not prejudice Legacy.

¶16 On November 2, 2016, the court of appeals deferred ruling on Legacy's and AFCU's motion for summary disposition for lack of jurisdiction. It also deferred ruling on Trapnell's rule 38 substitution motion until it could resolve Praia's appeal of the denial of its motion for additional time to file its appeal.

¶17 On December 21, 2016, the court of appeals reversed the district court's order denying Praia's motion for an extension of time to file an appeal. By way of reminder, the district court had denied that motion noting that it was unnecessary to give Praia additional time because Trapnell had already lodged an appeal of the final order in the case. The court of appeals appears to have read that order to say that the district court believed that it had lost jurisdiction to grant Praia's motion when Trapnell filed its notice of appeal. The appeals court explained that the district court had jurisdiction to consider the...