Fuja v. Adams
| Decision Date | 27 May 2021 |
| Docket Number | No. 20200009-CA,20200009-CA |
| Citation | 492 P.3d 793 |
| Court | Utah Court of Appeals |
| Parties | Tannin FUJA and Megan Fuja, Appellees, v. John ADAMS and Jennifer Adams, Appellants. |
Benson L. Hathaway and Ryan R. Beckstrom, Attorneys for Appellants
Richard H. Reeve, Attorney for Appellees
Opinion
¶1 In this case, we are asked to decide whether a litigant claiming to have sustained damages because of a wrongfully issued injunction must assert a claim to such damages before the injunction is determined to have been improvidently granted. John and Jennifer Adams (the Adamses) claim to have sustained such damages, but they did not assert that claim until after the district court, in a two-day bench trial, determined that a preliminary injunction entered against them had been improvidently granted. The court dismissed the Adamses’ damages claim as untimely, and they now appeal. We reverse.
¶2 The Adamses own a residential lot adjacent to property owned by Tannin and Megan Fuja (the Fujas). Both parcels are located in a subdivision that is subject to a set of recorded covenants, conditions, and restrictions (the CC&Rs). In July 2019, after obtaining a building permit from the relevant municipal authorities, the Adamses began building a house on their lot.
¶3 The Fujas believed that the Adamses’ construction plans were not in compliance with the CC&Rs, and in August 2019 they filed suit to halt construction on the Adamses’ lot. In their complaint, the Fujas asserted that they were entitled to "preliminary and permanent injunction[s] terminating construction of the [Adamses’] new residence and requiring complete compliance with the CC&Rs." The day after filing their complaint, the Fujas filed a motion asking the district court to enter a temporary restraining order (TRO) and a preliminary injunction forbidding further construction.
¶4 A few days later, the court issued a TRO, conditioned on the Fujas posting a $5,000 cash bond, which they did. The TRO required the Adamses to cease further construction for at least a few days until the court could hold a hearing to determine whether to issue a preliminary injunction. The Adamses did not appear at the eventual hearing, and the court heard testimony by proffer from the Fujas. At the conclusion of the hearing, the court entered a preliminary injunction forbidding the Adamses from "performing any work of construction or improvement" on their property until they had "satisfied the requirements" of the CC&Rs. The court did not require the Fujas to post any security in addition to the $5,000 already posted in connection with entry of the TRO.
¶5 Soon thereafter, the Adamses retained counsel and filed a motion asking the court to dissolve the preliminary injunction. In that motion, the Adamses argued that the injunction had been incorrectly issued, but they did not assert any specific claim for damages associated with the injunction, stating only that if the injunction remained in place, construction would be delayed for the winter and that "[t]he winter's delay and exposure [would] ... cause [them] economic hardship." The Adamses also answered the Fujas’ complaint, but did not file a counterclaim.
¶6 Rather than adjudicating the motion to dissolve the injunction, the district court suggested putting the case on a fast track toward a bench trial of the Fujas’ affirmative claims that the Adamses were violating the CC&Rs. The parties agreed, and the court scheduled trial for November 2019. In the weeks leading up to trial, the Adamses submitted initial disclosures in which they requested reasonable attorney fees and costs, but stated that they were "not at this time seek[ing] monetary damages," and that if they later changed their mind on that point they would supplement their disclosures. Later, the Adamses supplemented their disclosures, but that supplement did not include a request for monetary damages.
¶7 The case proceeded to a bench trial. Following the Adamses’ opening argument, the court asked if they were "going to be seeking any damages, monetary damages for the delay" in the construction of their home, to which counsel responded, "They are not." Consistent with this representation, the Adamses did not present any evidence at trial that they had sustained monetary damages as a result of the injunction.
¶8 After hearing evidence for two days, followed by closing arguments, the court announced its decision by telephone conference. As later memorialized in a written ruling, the court ultimately found that the Adamses had violated the CC&Rs in at least one respect, but that the Adamses were "innocent parties" who had proceeded in good faith. Accordingly, the court conducted a "balancing of [the] equities," and concluded that any "injury to the [Fujas could] be compensated in damages," and that an injunction was therefore unwarranted. On that basis, the court determined that the preliminary injunction had been improvidently granted, and that the Adamses had been "wrongfully restrained and enjoined."1 The court vacated the injunction and ordered the Fujas to pay the Adamses’ reasonable attorney fees and costs, concluding that, among other bases, rule 65A(c)(2) of the Utah Rules of Civil Procedure authorized the fee award. At the conclusion of the telephone conference, the court instructed the Adamses to file "an affidavit of fees and costs" within fourteen days.
¶9 Fourteen days later, the Adamses filed not only an affidavit of fees and costs, but also a declaration, accompanied by numerous exhibits, setting forth over $45,000 in damages they claimed to have sustained as a result of the injunction. The Fujas opposed this request on timeliness grounds, pointing out that the Adamses "did not seek damages in their responsive pleading, did not assert a counter-claim for monetary damages, and did not present evidence at the hearing for any of the damages claimed." The court quantified the Adamses’ reasonable attorney fees as $72,427.50 and costs as $4,644.93, and entered judgment against the Fujas in those amounts. But it refused to award the Adamses any monetary damages associated with the wrongful injunction, concluding that the Adamses’ "claim for damages arising from their being wrongfully enjoined [was] untimely."
¶10 The Adamses appeal,2 asserting that the district court erred by denying their claim for wrongful injunction damages, rooted in rule 65A(c), as untimely. "The interpretation of a rule of procedure is a question of law that we review for correctness." Arbogast Family Trust v. River Crossings, LLC , 2010 UT 40, ¶ 10, 238 P.3d 1035 (quotation simplified); accord Total Restoration Inc. v. Merritt , 2017 UT App 162, ¶ 6, 405 P.3d 778.
¶11 The sole issue presented for our review—whether the Adamses’ claim for wrongful injunction damages was timely presented—is governed by rule 65A(c) of the Utah Rules of Civil Procedure. That rule requires district courts to "condition issuance" of TROs and preliminary injunctions "on the giving of security by the applicant, in such sum and form as the court deems proper, unless it appears that none of the parties will incur or suffer costs, attorney fees or damage as the result of any wrongful order or injunction, or unless there exists some other substantial reason for dispensing with the requirement of security." Utah R. Civ. P. 65A(c)(1). In this case, the district court required the Fujas to post a $5,000 cash bond prior to entry of the TRO, but it did not require additional security prior to entry of the preliminary injunction. Rule 65A(c) provides, however, that "[t]he amount of security shall not establish or limit the amount of costs, ... reasonable attorney fees ..., or damages that may be awarded to a party who is found to have been wrongfully restrained or enjoined." Id. R. 65A(c)(2).3 Indeed, we have previously stated that, "if it is found that the injunction was wrongfully issued, the enjoined party has an action for costs and damages incurred as a result of the wrongfully issued injunction." See Utah Telecomm. Open Infrastructure Agency v. Hogan , 2013 UT App 8, ¶ 21, 294 P.3d 645 (quotation simplified).
¶12 Although rule 65A(c) clearly envisions that a party injured by a wrongful injunction will be able to claim attorney fees and damages, the rule has relatively little to say about how—and when—such a claim is to be pursued. What limited guidance the rule offers is given in the context of discussing the liability of a surety who has provided a bond,4 and in that context the rule provides that "[t]he surety's liability may be enforced on motion without the necessity of an independent action." Utah R. Civ. P. 65A(c)(3). Our supreme court has stated that "[t]his language does not preclude a separate action on an injunction bond," and also "allows an action on the bond to be enforced in the action in which it is filed at the option of the enjoined party." See Mountain States Tel. & Tel. Co. v. Atkin, Wright, & Miles, Chartered , 681 P.2d 1258, 1264 (Utah 1984). In other words, at least in cases involving a third-party surety, rule 65A(c) by its terms gives a party aggrieved by a wrongful injunction a choice: it may file a separate lawsuit for damages, or it may seek recourse by motion in the same case in which the injunction was imposed. See id.
¶13 But this case does not involve a third-party surety. Therefore, the first question we must address is whether the procedure applicable in cases where a wrongfully enjoined party is seeking to recover damages from a surety—where the aggrieved party has the option of filing a separate lawsuit or addressing the matter by motion—is also applicable in cases where damages are sought directly from the litigant who obtained the wrongful injunction. We are unaware of any Utah case law addressing this question. But the analogous federal rule of civil...
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..."fees incurred in this appeal," when the appellate court had reversed summary judgment); cf. Fuja v. Adams , 2021 UT App 55, ¶ 22 n.9, 492 P.3d 793 (allowing, under the facts of that case, for the possibility that if the appellants prevail on an attorney fees request on remand, they might "......