Cougar Canyon Loan, LLC v. Cypress Fund, LLC

• Decision Date: 18 May 2020
• Docket Number: No. 20180502,20180502
• Citation: 466 P.3d 171
• Court: Utah Supreme Court
• Parties: COUGAR CANYON LOAN, LLC, Appellee, v. The CYPRESS FUND, LLC; Cypress Management, LLC; Olympus Capital Alliance, LLC; Cypress Capital III, LLC; Robert N. Baxter; and BLAIR M. WALKER, Appellants.

466 P.3d 171

COUGAR CANYON LOAN, LLC, Appellee,

v.The CYPRESS FUND, LLC; Cypress Management, LLC; Olympus Capital Alliance, LLC; Cypress Capital III, LLC; Robert N. Baxter; and BLAIR M. WALKER, Appellants.

No. 20180502

Supreme Court of Utah.

Heard March 9, 2020

Filed May 18, 2020

Jefferson W. Gross, S. Ian Hiatt, Salt Lake City, for appellee

Troy L. Booher, Dick J. Baldwin, Salt Lake City, for appellants

Chief Justice Durrant authored the opinion of the Court, in which Associate Chief Justice Lee, Justice Petersen, Judge Christiansen Forster, and Judge Hagen joined.

Having recused themselves, Justices Himonas and Pearce do not participate herein; Court of Appeals Judges Michele M. Christiansen Forster and Diana Hagen sat.

On Direct Appeal

Chief Justice Durrant, opinion of the Court:

Introduction

¶1 Cypress Fund, LLC asks us to declare, as a matter of public policy, that Cougar Canyon Loan, LLC cannot foreclose on Cypress's cause of action for legal malpractice. In a separate case, Cougar Canyon obtained a $4 million judgment against Cypress. Believing this judgment resulted from its former legal counsel's malpractice, Cypress filed a malpractice suit against that counsel. But Cougar Canyon—in its effort to collect on its $4 million judgment against Cypress—foreclosed on Cypress's right to bring the malpractice claim. On appeal, Cypress argues that public policy requires us to undo this foreclosure. Because the policy concerns raised by Cypress are insufficient to override the plain language of rules 64 and 64E of the Utah Rules of Civil Procedure (the rules governing the foreclosure of legal claims through a writ of execution), we decline to do so.¹

Background

¶2 In an underlying lawsuit, Cougar Canyon obtained a $4 million judgment against Cypress. After losing its appeal, Cypress (and other related parties)² sued Jones, Waldo, Holbrook & McDonough, P.C., the law firm that represented it in the underlying lawsuit, for malpractice. At some point after filing this lawsuit, each Cypress party assigned a 99 percent interest in its malpractice claims to JWHM Claims, an entity of which each Cypress party is a member.

¶3 While Cypress appealed the judgment in the underlying suit and initiated its malpractice claim against Jones Waldo, Cougar Canyon attempted to collect on its $4 million judgment against Cypress. As part of its collection efforts, Cypress has foreclosed on homes and asserted alter ego claims in a separate proceeding. Cougar Canyon alleges it has managed to collect "only a fraction of its judgment" through these collection efforts. After attempting to collect from Cypress's assets for more than a year, Cougar Canyon applied for writs of execution on Cypress's legal malpractice action against Jones Waldo.

¶4 Cypress opposed Cougar Canyon's writs of execution by filing a motion to quash. In its motion, Cypress argued that the writs of execution should be cancelled because the malpractice claims had been assigned to another party and because public policy dictated that the claims be exempt from involuntary execution.

¶5 After holding a hearing on the writs of execution, the district court determined that our decision in Snow, Nuffer, Engstrom & Drake v. Tanasse³ subjected legal malpractice causes of action to execution. Accordingly, the district court held that Cougar Canyon was not prohibited from executing on and purchasing Cypress's legal malpractice claim against Jones Waldo. Because each Cypress party had transferred a 99 percent interest in their malpractice claim to JWHM Claims, Cougar Canyon was able to execute only on each party's remaining 1 percent interest.

¶6 Following the district court's order denying Cypress's motion to quash the writs of execution, Cypress filed a notice of appeal. Shortly thereafter, and fearing that the denial of its motion to quash did not constitute a final appealable order, Cypress petitioned for interlocutory appeal. We consolidated both appeals into this case. We have jurisdiction pursuant to Utah Code section 78A-3-102(3).

Standard of Review

¶7 We must decide whether, under Utah law, a party who obtained a judgment allegedly because of opposing counsel's malpractice should be permitted to foreclose on the opposing party's resulting legal malpractice claim. This is a question of law, which we review for correctness.⁴

Analysis

¶8 Cypress argues that, as a matter of public policy, we should prohibit a "party who benefits from opposing counsel's malpractice" from executing "on the resulting legal malpractice action." Because none of the policy concerns raised by Cypress justifies a departure from the plain language of rules 64 and 64E of the Utah Rules of Civil Procedure —the procedural rules governing writs of execution—we decline to do so.

¶9 Cypress also asks us to determine whether a denial of a motion to quash is a final, appealable order. Because it is unnecessary to answer this question to resolve the merits of this case, and because it would be unwise to do so without the benefit of adversarial briefing, we decline to do so.

I. The Malpractice Claim is Subject to Execution in This Case

¶10 According to Cypress, we should prohibit, as a matter of public policy, a "party who benefits from opposing counsel's malpractice" from "foreclos[ing] on the resulting legal malpractice action." In Cypress's view, three public policies support this categorical prohibition: (1) a policy against allowing "a double windfall recovery," (2) a policy in favor of ascertaining an appropriate value of clients’ malpractice claims against their former lawyers, and (3) a policy in favor of providing clients a fair trial on the merits of their malpractice claims. We reject Cypress's argument in this case because, under rules 64 and 64E of the Utah Rules of Civil Procedure, legal malpractice claims may be "acquired by a creditor through attachment and execution,"⁵ and none of the policies identified by Cypress justifies a departure from these rules in this case.

¶11 Rule 64E of the Utah Rules of Civil Procedure governs writs of execution. Under that rule, a party may use a writ of execution "to seize property in the possession or under the control of the defendant following entry of a final judgment ... requiring ... the payment of money." And rule 64 defines the property subject to execution to include "real and personal property, tangible and intangible property, the right to property whether due or to become due, and an obligation of a third person to perform for the defendant."⁶ We have interpreted this language to include legal malpractice claims.⁷

¶12 Because the property subject to execution under our rules of procedure includes all causes of action, the legal malpractice claim in this case is subject to execution. And the policy concerns identified by Cypress provide insufficient justification to ignore or amend those rules in this case.

¶13 Although Utah's constitution confers on this court primary authority over the adoption of "rules of procedure and evidence" (subject to amendment by the legislature only "upon a vote of two-thirds of all members of both houses"),⁸ we have explained that "an appeal to this court is not the appropriate means to amend a court rule."⁹ Rather, when interpreting a rule of procedure on appeal, "it is [our] duty and practice ... to adhere to the plain language of a rule."¹⁰ In other words, "[w]hen interpreting procedural rules, we use our general rules of statutory construction."¹¹

¶14 And under our general rules of statutory construction, public policy considerations are rarely¹² sufficient to override the plain language of the governing text.¹³ Instead, a court should consider public policy only where it is clarifying the meaning of an ambiguous statute or rule or where it is shaping "a subject lodged firmly within the court's sphere, like the common law."¹⁴

¶15 So even where an appellant presents compelling reasons "for a policy shift" that is not currently supported by the plain language of our rules of procedure, we do not "rewrite the rule on the fly."¹⁵ Rather, we refer the issue to the appropriate rules committee for additional study, and, if appropriate, we amend the language of the relevant rule through our normal rule-making process.¹⁶ Accordingly, we conclude that Cypress's policy arguments do not warrant setting aside Cougar Canyon's execution of Cypress's malpractice claim.

¶16 Although Cypress raises three policy concerns that may warrant further consideration by our rules committee, Cypress makes no attempt to argue that its position is supported by the language of our rules of civil procedure. Instead, Cypress cites our opinion in Tanasse to argue that we should enact a new exception to the general rule that "a legal malpractice claim, like any other chose in action, may ordinarily be acquired by a creditor through attachment and execution."¹⁷ But our decision in Tanasse does not justify a departure from the plain language of rules 64 and 64E.

¶17 In Tanasse , we prohibited lawyers from purchasing legal malpractice claims against themselves.¹⁸ Our authority to create such a prohibition stemmed from our "plenary authority to govern the practice of law."¹⁹ "This authority includes the power to determine what constitutes the practice of law and to promulgate rules to control and regulate that practice."²⁰ In contrast to our general rule-making authority, which is partly shared with the legislature, our authority to govern the practice of law by those who are licensed in Utah is exclusive²¹ and absolute.²²

¶18 It was under the aegis of this exclusive and absolute authority to regulate a lawyer's practice of law that we considered the policy concerns presented in Tanasse .²³ As part of that decision, we explained that a lawyer's "actions—in forcing an execution sale of [a former client]’s assets to satisfy a default judgment, purchasing [the former client]’s pending legal malpractice claim against [the lawyer], and extinguishing that claim through a ...