Capri Sunshine, LLC v. E & C Fox Invs., LLC

• Decision Date: 11 September 2015
• Docket Number: No. 20140523–CA.,20140523–CA.
• Citation: Capri Sunshine, LLC v. E & C Fox Invs., LLC, 366 P.3d 1214 (Utah App. 2015)
• Court: Utah Court of Appeals
• Parties: CAPRI SUNSHINE, LLC, Plaintiff and Appellant, v. E & C FOX INVESTMENTS, LLC, Defendant and Appellee.

366 P.3d 1214

CAPRI SUNSHINE, LLC, Plaintiff and Appellant,

v.E & C FOX INVESTMENTS, LLC, Defendant and Appellee.

No. 20140523–CA.

Court of Appeals of Utah.

Sept. 11, 2015.

Rehearing Denied Nov. 30, 2015.

James K. Tracy, Stacy J. McNeill, and James C. Dunkelberger, Salt Lake City, for Appellant.

R. Willis Orton and Analise Q. Wilson, Salt Lake City, for Appellee.

Judge KATE A. TOOMEY authored this Opinion, in which Judges J. FREDERIC VOROS JR. and MICHELE M. CHRISTIANSEN concurred.

Opinion

TOOMEY, Judge:

¶ 1 Capri Sunshine, LLC (Capri) appeals the district court's decision granting E & C Fox Investments, LLC's (Fox Investments)motion to dismiss Capri's complaint for failure to state a claim upon which relief can be granted.Capri argues that Fox Investments prevented it from paying off a foreclosed debt when Fox Investments purportedly inflated the payoff amount and then bought the property at auction for more than the amount due.We affirm the district court's dismissal.

BACKGROUND

¶ 2"In reviewing the trial court's decision, we accept the factual allegations in the complaint as true and interpret those facts and all inferences drawn from them in light most favorable to the plaintiff as the non-moving party."Oakwood Vill. LLC v. Albertsons, Inc.,2004 UT 101, ¶ 9, 104 P.3d 1226.We therefore recite the facts in accordance with the factual allegations in Capri's complaint.

¶ 3 Between 2007 and 2009, Scott Logan Gollaher and Sharon Western Gollaher took out five large loans to construct The Rail Event Center, a concert venue in Salt Lake City, Utah.Four separate trust deeds secured repayment of the loans.The first, and highest priority, trust deed was for a $975,000 loan from Granite Federal Credit Union (Granite).The second trust deed was for a $500,000 loan, also from Granite.The third trust deed secured two loans from Vernon D. Smith totaling approximately $2,347,000.The final trust deed was for a $1,000,000 loan from Ernest Fox.

¶ 4 In 2010, the Gollahers defaulted on the Granite loans, and Granite recorded a notice of default and intent to sell the property.Fox Investments, an affiliate of Mr. Fox, purchased the two Granite trust deeds, including the promissory obligations secured by those deeds.Fox Investments then filed notice of default and its intent to sell the property at public auction.Although Fox Investments' notice of sale listed the time of sale as 9:00 a.m. on January 10, 2011, the sale was not conducted until 9:45 a.m., without proper postponement.After the January 2011 sale, in which Mr. Fox was the highest bidder, Mr. Fox's trustee conveyed title of the property to Fox Investments and took possession of the property.

¶ 5 Mr. Smith filed a lawsuit asking the court to set aside the sale based on Mr. Fox's trustee's failure to properly postpone the time of the sale.But before the lawsuit was resolved, Mr. Smith's trustee held its own trustee's sale in which Mr. Smith was the highest bidder.On February 15, 2012, a trustee deed was executed purportedly conveying ownership of the property to Mr. Smith.¹

¶ 6 In April 2013, the district court set aside Fox Investments' January 2011 sale, noting that "there were defects in the notice of the foreclosure sale and that such did have a ‘chilling’ effect, at the very least, to Mr. Smith's bid."Mr. Smith then recorded the February 2012 deed and conveyed title of the property via quitclaim deed to Capri.Capri quickly served Fox Investments a fifteen-day notice to vacate the property.But Fox Investments refused, claiming Mr. Smith's foreclosure sale was invalid.

¶ 7 On May 1, 2013, the district court entered its final order setting aside the January 2011 sale.Fox Investments again gave notice of its intent to foreclose on its first trust deed and sell the property at public auction.Capri requested a payoff amount for Fox Investments' first and second trust deeds.In accordance with the requirements enumerated in Utah Code section 57–1–31.5, Fox Investments gave Capri a payoff calculation of approximately $1,500,000 for the first deed and $650,000 for the second.In response, Capri hired a forensic loan auditor to determine the accuracy of the amounts.The auditor's report concluded that Fox Investments' payoff amounts had been overstated and inaccurate after finding that late fees were improperly incorporated into the payoff amounts, that interest on the loans and attorney fees were miscalculated, and that certain benefits were not properly considered.

¶ 8 On May 15, 2013, Capri moved the court to issue a temporary restraining order and preliminary injunction to stop Fox Investments from proceeding with its trustee's sale, which the district court denied the same day.Fox Investments held a trustee's sale on May 17, 2013.Capri bid $1,000,000, but Fox Investments countered with a $1,600,000 credit bid and won.

¶ 9 Capri filed another lawsuit asserting claims for declaratory judgment, injunctive relief, accounting, waste, and unlawful detainer.²In response, Fox Investments filed a counterclaim for quiet title to the property and moved to dismiss Capri's complaint, claiming that Capri lacked standing to assert its claims and otherwise failed to state claims upon which relief could be granted.The district court granted Fox Investments' motion and dismissed Capri's claims with prejudice.³Capri appeals.

ISSUES AND STANDARDS OF REVIEW

¶ 10 On appeal, Capri raises several issues challenging the district court's order granting Fox Investments' rule 12(b)(6) motion.First, Capri challenges the court's dismissal of its declaratory judgment claims, which asked the district court to determine that Fox Investments' payoff statement and bid violated Utah law.Second, it argues the court erred in dismissing its claims for accounting, waste, and unlawful detainer.Finally, Capri argues the court erred when it dismissed Capri's complaint with prejudice.

¶ 11"A trial court's decision granting a rule 12(b)(6)motion to dismiss a complaint for lack of a remedy is a question of law that we review for correctness, giving no deference to the trial court's ruling."Oakwood Vill. LLC v. Albertsons, Inc.,2004 UT 101, ¶ 9, 104 P.3d 1226."In reviewing the dismissal, we must keep in mind that the purpose of a rule 12(b)(6) motion is to challenge the formal sufficiency of the claim for relief, not to establish the facts or resolve the merits of a case."Whipple v. American Fork Irrigation Co.,910 P.2d 1218, 1220(Utah1996).Thus, we note that "dismissal is justified only when the allegations of the complaint clearly demonstrate that the plaintiff does not have a claim."Id.

ANALYSIS

¶ 12 Capri first challenges the district court's decision to dismiss its declaratory judgment claims seeking to set aside Fox Investments' trustee's sale as a matter of law for failure to comply with Utah Code sections 57–1–28, –31, and –31.5.Capri contends that Fox Investments' inaccurate payoff amount deprived it of the opportunity to cure the default under section 57–1–31.And, although it concedes that Fox Investments' payoff statement did not technically violate section 57–1–31.5, Capri argues the statement was nevertheless "substantively and fundamentally flawed because it grossly overstate[d] the amount actually due."We disagree.

¶ 13 To determine the sufficiency of Capri's complaint, we must first examine the applicable law.Section 57–1–31 allows any person with a subordinate lien on the trust property to cure an existing default in the performance of any obligation secured by the trust deed.In particular, it allows the subordinate lienholder to "pay to the beneficiary ... the entire amount then due under the terms of the trust deed (including costs and expenses actually incurred in enforcing the terms of the obligation, or trust deed, and the trustee's and attorney's fees actually incurred)""at any time within three months of the filing for record of notice of default under the trust deed."Utah Code Ann. § 57–1–31(1)(LexisNexis 2010).Upon request, the trustee must provide a detailed listing of the costs and fees required to pay off the defaulted loan.Seeid.§ 57–1–31.5(2)(a)–(b), (3).If the default is not cured, the trustee can sell the property at public auction to the highest bidder.Seeid.§§ 57–1–27, –28.

¶ 14 Although it has provided ample authority supporting its right to redeem the property, Capri has not provided any legal authority or reasoned analysis supporting the proposition that Fox Investments' inflated payoff amount violates the duties prescribed under either statute.SeeState v. Thomas,961 P.2d 299, 304–05(Utah1998)(explaining that the Utah Rules of Appellate Procedure require "development of [legal] authority and reasoned analysis based on that authority");see alsoUtah R.App. P. 24(a)(9).Moreover, Capri does not point to any allegations in its complaint that suggest Fox Investments actually refused payment or otherwise denied Capri the opportunity to cure the default.Instead, Capri suggests Fox Investments' purportedly inflated payoff amount prevented it from curing the default.Without reasoned analysis or supportive legal authority, this argument fails to demonstrate how the facts alleged in Capri's complaint, if proven, support a claim that entitles it to relief.SeeThomas,961 P.2d at 305(explaining that this court will not take on the burden of argument or research if the appellant fails to develop applicable authority);see alsoWhipple,910 P.2d at 1221–22(providing that a rule 12(b)(6) dismissal is appropriate where "it is clear that plaintiff is not entitled to relief under any facts that could be proved"(citation and internal quotation marks omitted)).

¶ 15 Furthermore, Capri fails to demonstrate that the facts as alleged show it performed the obligations necessary to redeem the property.Under Utah law, to exercise the right to cure a default, Capri needed to "pay to the beneficiary ... the entire amount then due under the terms of the...