Cougar Canyon Loan LLC v. Walker
| Decision Date | 31 December 2020 |
| Docket Number | No. 20190193-CA,20190193-CA |
| Citation | 482 P.3d 227 |
| Parties | COUGAR CANYON LOAN LLC, Appellant, v. Lisa M. WALKER, Zions Bancorporation NA, and Salt Lake County, Appellees. |
| Court | Utah Court of Appeals |
S. Ian Hiatt and Jefferson W. Gross, Salt Lake City, Attorneys for Appellant
Gregory S. Roberts, Michael D. Mayfield, and Carol Ann Funk, Salt Lake City, Attorneys for Appellee Zions Bancorporation, NA
Opinion
¶1 Cougar Canyon Loan LLC (Cougar Canyon) acquired an interest in—but not full ownership of—real property (the Property) that was encumbered by a large lien held by Zions Bancorporation NA (Zions). Cougar Canyon then brought a partition action, naming Zions and all other putative interest holders as defendants, and asking the district court to order the Property sold and distribute the proceeds. In its answer to Cougar Canyon's complaint, however, Zions neglected to include certain information required by Utah's partition statute (the Partition Statute). See Utah Code Ann. § 78B-6-1207 (LexisNexis 2018). After Cougar Canyon filed a motion asking the court to prohibit Zions from introducing evidence of its lien, the court allowed Zions to amend its answer, on the eve of trial, to include the statutorily required information. Cougar Canyon appeals, challenging the court's decision to grant Zions leave to amend its answer. We affirm.
¶2 In the mid-2000s, Lisa M. Walker and her husband Blair Walker owned the Property as joint tenants. In 2007, the Walkers executed and delivered to Zions a Home Equity Line Credit Agreement and Disclosure (Line of Credit), wherein Zions agreed to loan the Walkers up to $960,000. The Line of Credit was secured by a deed of trust (Trust Deed) on the Property. Over the next few years, Zions loaned money to the Walkers pursuant to the Line of Credit, and at some point prior to 2018, the Walkers defaulted on their obligations under the Line of Credit. In July 2018, Zions initiated nonjudicial foreclosure proceedings by recording, through a trustee, a notice of default against the Property, alleging that the Walkers had failed to repay the loan as required, and indicating that Zions had elected to sell the Property. In the notice of default, Zions stated that the outstanding unpaid principal balance on the Line of Credit was $956,385.08. Zions mailed a copy of the notice of default to all persons it believed had an interest in the Property, including Cougar Canyon.
¶3 Cougar Canyon acquired its interest in the Property in 2017, after it prevailed in a securities fraud lawsuit and obtained a $4 million judgment against Blair Walker and others. See Cougar Canyon Loan, LLC v. Cypress Fund, LLC , 2019 UT App 47, ¶ 4, 440 P.3d 884. Based on that judgment, Cougar Canyon executed upon and sold Blair Walker's interest in the Property, and was itself the winning bidder at the ensuing November 2017 sheriff's sale. Thereafter, Cougar Canyon and Lisa Walker owned the Property together, as tenants in common.
¶4 After acquiring its interest in the Property, Cougar Canyon initiated this action in January 2018, seeking partition of the Property by sale and asking for "distribution of the proceeds to the parties in accord with their interests." Cougar Canyon asserted that, as a tenant in common, it was entitled to a one-half interest in the Property, with Lisa Walker entitled to the remaining one-half interest. The complaint named as defendants all persons and entities Cougar Canyon believed might have an interest in the Property, including Zions.1
¶5 In its original answer, filed in March 2018, Zions noted that, in 2007, it had "recorded a revolving credit deed of trust against [the Property] in a first lien position." But in that answer, Zions did not provide any other details about its lien, such as the original amount of the loan or the then-current outstanding balance owed. However, as noted, Zions sent Cougar Canyon a copy of the notice of default some weeks later in connection with its nonjudicial foreclosure efforts; that notice included Zions’ estimate of the then-outstanding principal balance.
¶6 In June 2018, during the early stages of the case, Cougar Canyon made initial disclosures, setting forth the witnesses and documents it planned to use at trial to prove its claims. Some of the other defendants followed suit, but Zions did not serve any initial disclosures, at least not during the early stages of the case.
¶7 As the case proceeded, and before any meaningful discovery had been conducted, the parties came before the district court in early August 2018 for a hearing and, while discussing scheduling matters, Cougar Canyon noted that Zions had initiated nonjudicial foreclosure proceedings. In light of the pendency of those proceedings, the parties agreed that an effort should be made to expedite trial on Cougar Canyon's partition action, so that the partition trial could be completed before any sale of the Property occurred in connection with Zions’ nonjudicial foreclosure efforts. The court then scheduled a trial to occur on September 25, 2018, less than two months hence, and set other expedited deadlines, including an August 31 deadline for amending pleadings.
¶8 Zions did not seek leave to amend its answer by the August 31 deadline. Fifteen days later, however, on September 14, it did seek such leave; its request was spurred by Cougar Canyon's motion in limine,2 filed on September 12, that sought an order precluding Zions from introducing any evidence of its interest in the Property, on the basis that Zions had failed to comply with the Partition Statute's requirement that certain information about its interest be included in its answer, see Utah Code Ann. § 78B-6-1207 (LexisNexis 2018), and had failed to serve initial disclosures. Zions responded to Cougar Canyon's motion in limine by, among other things, belatedly filing its initial disclosures and by filing a motion seeking leave to amend its answer to include the statutorily required information. Attached to Zions’ various mid-September filings were copies of the Line of Credit, Trust Deed, and associated documents, as well as its statement that the outstanding amount then owed on the Line of Credit was $1,003,949.53.
¶9 After full briefing, the two motions—Cougar Canyon's motion in limine and Zions’ motion to amend—came before the district court for oral argument on September 24, the day before the trial was to be held. At the hearing, Cougar Canyon acknowledged that, before filing its complaint in January, it ran a title search and learned of the existence and date of Zions’ lien as well as "what the original principal amount was." Cougar Canyon also did not "dispute receiving the notice of default" in July 2018, but it nevertheless asserted that Zions had waived any right to assert its lien when it failed to include in its answer the information required by the Partition Statute. For its part, Zions asserted, among other things, that Cougar Canyon would not be prejudiced by any amendment, because it was fully aware from other sources, including the nonjudicial foreclosure proceedings, of all the information that the statute required.
¶10 At the conclusion of the hearing, the court denied Cougar Canyon's motion in limine and granted Zions’ motion for leave to amend, allowing Zions to file an amended answer containing the statutorily required information. The court also postponed the trial, and allowed Zions to serve belated initial disclosures. However, the court ordered Zions to pay reasonable attorney fees and costs incurred by Cougar Canyon, "which [Cougar Canyon] would not have incurred had Zions ... filed its original answer" in compliance with the Partition Statute. The court later quantified that fee award, ordering Zions to pay Cougar Canyon $20,208.75 in attorney fees and costs.
¶11 Following the court's ruling on the two motions, the parties eventually stipulated to most of the relevant facts,3 including the fact that the "payoff estimate amount" on the Line of Credit was $1,035,895.93, and based on those stipulated facts, the court ordered the Property to be sold. At the sale, Zions purchased the Property with a credit bid of $930,526.00, and the trustee conveyed the Property to Zions by trustee's deed. There were no excess proceeds.
¶12 Cougar Canyon now appeals, challenging the district court's order granting Zions’ motion to amend. In so doing, it asks us to consider three issues. First, it asserts that the district court misinterpreted and misapplied the Partition Statute, a law Cougar Canyon construes as mandating waiver of any claims related to any liens not particularly described in a litigant's original answer. "We review questions of statutory interpretation for correctness, affording no deference to the district court's legal conclusions." State v. Outzen , 2017 UT 30, ¶ 5, 408 P.3d 334 (quotation simplified).
¶13 Second, and in the alternative, Cougar Canyon asserts that the district court inappropriately granted Zions’ motion to amend its answer. District courts have "substantial discretion" in considering motions to amend, and "[o]ur review under this discretionary standard is deferential." See Stichting Mayflower Mountain Fonds v. United Park City Mines Co. , 2017 UT 42, ¶¶ 48–49, 424 P.3d 72. Id. ¶ 49.
¶14 Third, and also in the alternative, Cougar Canyon challenges the district court's decision to allow Zions to serve belated initial disclosures, instead of prohibiting Zions from introducing any evidence about its lien as a sanction for its failure to serve timely disclosures. We review a district court's ruling on sanctions under rule 26 of the Utah Rules of Civil Procedure using an abuse of discretion standard. See...
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