Brigham Young University v. Tremco Consultants, Inc.

• Decision Date: 01 February 2005
• Docket Number: No. 20020687., No. 20020540
• Citation: 110 P.3d 678,2005 UT 19
• Parties: BRIGHAM YOUNG UNIVERSITY, Plaintiff and Appellee, v. TREMCO CONSULTANTS, INC., aka Tremco Legal Solutions, Inc., a Utah corporation, and John Does 1-10, Defendants and Appellant, and SoftSolutions, Inc., a non-incorporated association, Appellant. Lee A. Duncan, Kenneth W. Duncan, Alvin S. Tedjamulia, Julee Associates, L.C., AST Associates, L.C., and KWD Associates, L.C., Movants to Intervene and Appellants.
• Court: Utah Supreme Court

110 P.3d 678

2005 UT 19

BRIGHAM YOUNG UNIVERSITY, Plaintiff and Appellee, v. TREMCO CONSULTANTS, INC., aka Tremco Legal Solutions, Inc., a Utah corporation, and John Does 1-10, Defendants and Appellant, and SoftSolutions, Inc., a non-incorporated association, Appellant.

Lee A. Duncan, Kenneth W. Duncan, Alvin S. Tedjamulia, Julee Associates, L.C., AST Associates, L.C., and KWD Associates, L.C., Movants to Intervene and Appellants.

Nos. 20020540, 20020687.

Supreme Court of Utah.

February 1, 2005.

As Amended March 29, 2005.

Rehearing Denied March 20, 2005.

Herschel J. Saperstein, Steven W. Call, Michael D. Mayfield, Benjamin J. Kotter, Salt Lake City, for Brigham Young University.

Eric K. Schnibbe, Chris R. Hogle, Salt Lake City, for Tremco Consultants.

Earl Jay Peck, Salt Lake City, for SoftSolutions.

Clark R. Nielsen, Salt Lake City, for movants to intervene.

PARRISH, Justice:

¶ 1 Tremco Legal Solutions, Inc. ("Tremco") appeals from a summary judgment rendering it liable for an earlier judgment obtained by Brigham Young University ("BYU") against SoftSolutions, Inc. ("SoftSolutions"). We hold that the district court erred in summarily extending liability for BYU's earlier judgment to Tremco. SoftSolutions and individual appellants Kenneth W. Duncan; Alvin S. Tedjamulia; Lee A. Duncan; KWD Associates, L.C.; AST Associates, L.C.; and Julee Associates, L.C. (collectively, the "Duncan individuals and entities") appeal from a separate order of the district court that similarly rendered them liable for BYU's earlier judgment against SoftSolutions. We hold that we lack jurisdiction over the appeals of SoftSolutions and the Duncan individuals and entities and accordingly decline to address those appeals on the merits.

BACKGROUND

¶ 2 This case arrives with an extensive history of prior proceedings. Between 1987 and 1990, BYU entered into a series of software licensing agreements with SoftSolutions, the last of which allowed SoftSolutions to use BYU's DSearch software technology in exchange for royalty payments. A major dispute arose between BYU and SoftSolutions concerning use of the technology and payment of royalties. Negotiations failed, and the parties submitted the dispute to mediation. Mediation also failed, and BYU and SoftSolutions initiated arbitration proceedings pursuant to the terms of the license agreement.

¶ 3 In 1992, prior to the initiation of arbitration proceedings, SoftSolutions was administratively dissolved by the state of Utah for failing to file an annual report.¹ Before its dissolution, however, SoftSolutions assigned its technology licenses to an affiliated company, SoftSolutions Technology Corporation ("STC"), which had been formed a number of years earlier to develop and market software using the technology licenses held by SoftSolutions. SoftSolutions received no value for the assignment of its licenses to STC.

¶ 4 In 1994, WordPerfect, a company later acquired by Novell, purchased STC's stock. As stockholders of STC, three limited liability companies—KWD Associates, AST Associates, and Julee Associates—collectively received approximately $13.5 million from WordPerfect. In conjunction with the sale of STC's stock to WordPerfect, STC entered into an indemnification agreement with Tremco Consultants, Inc., a company that developed, marketed, and sold software pertaining to the management of law practices.² For a period in the late 1980s, Tremco did business as "SoftSolutions Legal Solutions" but eventually relinquished that name to the company that was to become SoftSolutions, the party to this case.

¶ 5 The indemnification agreement addressed the pending royalty dispute with BYU. In it, Tremco agreed to be responsible for any claims made against STC. The agreement was signed by an officer of STC and an officer of Tremco and recited, in relevant part, as follows:

A. Prior to the date hereof, certain disputes have arisen with respect to claims by [BYU] as to royalties claimed owing under license arrangements regarding the DSearch algorhythm [sic].

B. Tremco has been involved in defending that action and has, itself, asserted various claims against BYU as offsets or absolute defenses.

C. The parties hereto desire to clarify the respective responsibilities of the companies with respect to the BYU claims.

NOW THEREFORE, ...

1. Tremco consents and acknowledges that Tremco is the responsible party with respect to the BYU claims and is solely responsible for the defense and pursuit of claims with respect to that matter. In connection therewith, Tremco shall assume all costs and expenses of every nature, including legal costs and expenses with respect to the current disputes with BYU and shall indemnify and hold [STC] harmless from any and all claims, damages or liabilities of any nature, including but not limited to costs and attorneys' fees, stemming from or in connection with, BYU claims with respect to the DSearch algorhythm [sic].

¶ 6 BYU eventually prevailed against SoftSolutions in the arbitration proceeding, obtaining an award in 1996 in the amount of $1,672,467, plus attorney fees (the "SoftSolutions judgment" or the "award"). The award was reviewed and confirmed by the district court in 1998 after SoftSolutions filed an action for declaratory judgment, seeking to have the award vacated or modified. After the district court confirmed the arbitration award, SoftSolutions appealed to this court. We affirmed the district court's confirmation of the award but remanded for a recalculation of attorney fees. Softsolutions, Inc. v. Brigham Young Univ., 2000 UT 46, ¶ 57, 1 P.3d 1095.

¶ 7 Because SoftSolutions possessed few, if any, assets upon its dissolution, BYU experienced difficulty collecting its judgment. In January 2000, BYU initiated an action against Tremco in an attempt to establish Tremco's liability for BYU's judgment against SoftSolutions. The district court consolidated BYU's action against Tremco with the earlier action filed by SoftSolutions. Tremco answered and counterclaimed. BYU then moved to dismiss Tremco's counterclaim. Tremco opposed BYU's motion to dismiss and also moved for summary judgment on BYU's original claim. In connection with its opposition to BYU's motion to dismiss and its own motion for summary judgment, Tremco filed and relied on the affidavit of Kenneth W. Duncan ("Duncan affidavit"), an officer of Tremco, SoftSolutions, and STC. BYU responded to Tremco's motion for summary judgment with a motion for declaratory relief and a cross-motion for partial summary judgment on its claim against Tremco.

¶ 8 On May 14, 2002, the district court granted BYU's motion for partial summary judgment and denied Tremco's motion for summary judgment, holding Tremco liable for the judgment BYU had obtained years earlier against SoftSolutions. The court grounded its ruling on four theories: (1) Tremco was bound to the judgment against SoftSolutions under Utah Rule of Civil Procedure 17(d) because Tremco, STC, and SoftSolutions were part of an association of entities carrying on a common business; (2) Tremco was liable to BYU for the judgment against SoftSolutions by virtue of Tremco's indemnity agreement with STC, of which BYU was a third-party beneficiary; (3) Tremco was liable for the judgment against SoftSolutions because Tremco aided a fraudulent transfer of SoftSolutions' assets to STC; and (4) Tremco, as a privy of SoftSolutions, was liable for BYU's judgment against SoftSolutions pursuant to the doctrines of res judicata and collateral estoppel. Also as part of its May 14, 2002 ruling, the district court granted BYU's motion to dismiss Tremco's counterclaim and its motion to strike the Duncan affidavit. The district court entered judgment on the ruling on June 13, 2002, awarding BYU judgment against Tremco in the amount of the SoftSolutions judgment, plus interest and attorney fees.

¶ 9 Tremco appeals from the district court's ruling of May 14, 2002, and its judgment of June 13, 2002. Tremco asserts that the district court's imposition of liability upon it for BYU's judgment against SoftSolutions is fatally flawed and violative of Tremco's constitutional right to due process of law. Tremco additionally asserts that the district court erred in striking the Duncan affidavit.

¶ 10 On July 10, 2002, after the district court had issued its ruling and judgment against Tremco, it issued a supplemental order, on BYU's motion, extending liability for the SoftSolutions judgment to the Duncan individuals and entities. The district court based the supplemental order on Utah Rules of Civil Procedure 17(d) and 69(s), section 16-10a-1408 of the Utah Code, and two cases: Murphy v. Crosland, 915 P.2d 491 (Utah 1996), and Steenblik v. Lichfield, 906 P.2d 872 (Utah 1995). It also relied on additional exhibits BYU had filed with the court. Those exhibits consisted of records from the Utah Department of Commerce documenting the formation of KWD Associates, AST Associates, and Julee Associates before the sale of STC's stock to WordPerfect, as well as photocopies of checks made by WordPerfect to the three companies for the purchase of STC's stock.

¶ 11 SoftSolutions and the Duncan individuals and entities contest the district court's extension of liability to them in its July 10, 2002 supplemental order. They argue that they cannot be held liable for the SoftSolutions judgment because they were never made parties to the action below and because the district court improperly disregarded the legal separation between corporate entities.

ANALYSIS

¶ 12 We begin by addressing Tremco's appeal from the district court's ruling, issued May 14, 2002, and judgment, issued June 13, 2002, which rendered Tremco liable for BYU's judgment against SoftSolutions. We then address the appeal filed by SoftSolutions and the Duncan individuals and entities with respect to the validity of the supplemental order.

I. TREMCO'S APPEAL

¶ 13 Summary judgment is appropriate when there are no genuine...