Iota LLC v. Davco Mgmt. Co. LC

• Decision Date: 25 November 2016
• Docket Number: No. 20130552-CA,20130552-CA
• Parties: IOTA LLC and California Benefit Inc., Appellees, v. DAVCO MANAGEMENT COMPANY LC and David Fisher, Appellants.
• Court: Utah Court of Appeals

391 P.3d 239

IOTA LLC and California Benefit Inc., Appellees,

v.DAVCO MANAGEMENT COMPANY LC and David Fisher, Appellants.

No. 20130552-CA

Court of Appeals of Utah.

Filed November 25, 2016

Darwin C. Fisher, Attorney for Appellants

Paul D. Veasy, Alan S. Mouritsen, and Douglas C. Naftz, Salt Lake City, Attorneys for Appellees

Judge Stephen L. Roth authored this Opinion, in which Judges J. Frederic Voros Jr. and Kate A. Toomey concurred.¹

Opinion

ROTH, Judge:

¶1 This case returns to us after we vacated a contempt judgment and remanded to the district court in Iota, LLC v. Davco Mgmt. Co. (Iota I ), 2012 UT App 218, 284 P.3d 681. That decision was based on a procedural defect, and on remand Iota LLC and California Benefit Inc. (collectively, Iota) cured the defect. The district court entered a new contempt judgment, from which Davco Management Company LC and David Fisher² (collectively, Davco) now appeal. We affirm.

BACKGROUND

¶2 A full account of the background in this case is available in Iota I , 2012 UT App 218, ¶¶ 2–9, 284 P.3d 681. In summary, Davco contracted with Iota for the purchase of two apartment complexes in St. George, Utah. The sale was owner-financed and Davco executed a promissory note to Iota for each property, both with maturity dates in December 2007. Payment of the notes was secured by trust deeds for each property. Among other things, the trust deeds granted Iota a security interest in the form of an assignment of the rents and other sources of revenue associated with the apartments on the two properties in the event of a default.

¶3 By September of 2008, the promissory notes were long past due and negotiations to resolve the defaults had proved unsuccessful. Davco stopped making payments on the notes, which triggered foreclosure on the properties and this lawsuit. During the initial stage of this suit, Iota moved ex parte for an order requiring Davco to deposit all apartment rents into court. The motion was based on Utah Rule of Civil Procedure 67, which provides that a court may order a party to deposit with the clerk of court "any money or other thing" that is shown by admissions in the pleadings or "upon the examination of a party," to belong to or be "due to another party."

¶4 The district court issued an order on November 5, 2008 (the Ex Parte Order) requiring Davco Management and Fisher to deposit with the court all rents collected. Davco was properly served and neither filed an objection nor moved to have it set aside. Davco Management, through Fisher, collected and retained apartment rental payments and other revenue from September 2008 until the foreclosure sale was completed in February 2009. However, Davco deposited money with the court only once, in August 2009, when it remitted $33,805.33. The single deposit was considerably less than the amount Davco had collected after the Ex Parte Order was entered, and Davco made the deposit only after "the Court made clear [in a hearing attended by Fisher] its displeasure with Davco's and David Fisher's failure to pay collected rents ... into the Court."

¶5 Following the foreclosure sale of the properties, Iota sought deficiency judgments against Davco and to recover the rents and other revenue that Davco collected between September 1, 2008, and February 20, 2009. In addition, Iota argued in its trial brief that both Davco Management and Fisher should be held in contempt for failing to comply with the Ex Parte Order. Davco responded to the contempt argument by challenging the court's contempt jurisdiction on the basis that Iota had failed to file an affidavit of the facts constituting contempt as required by Utah Code subsection 78B–6–302(2). Davco also moved to have the Ex Parte Order struck, asserting that the trial court failed to comply with Utah Rule of Civil Procedure 67 in issuing it. The court denied both motions.

¶6 Iota prevailed at trial on its breach of contract and deficiency claims and successfully urged the court to hold Davco Management and Fisher in contempt for failing to comply with the Ex Parte Order. The court entered deficiency judgments against Davco (calculated as the difference between the proceeds of the trustee's sale and the unpaid balance of the promissory notes) and awarded Iota its attorney fees. The district court made two other rulings relevant to the current appeal. First, it concluded that Davco's failure to remit rents and other revenues to Iota after it defaulted on the promissory notes was a violation of the trust deeds' requirement to do so. Second, it held both Davco Management and Fisher in contempt for their failure to comply with the Ex Parte Order. The court entered a separate contempt judgment in the amount of $71,119.17 for revenues withheld, plus attorney fees.

¶7 In Iota I , this court affirmed the deficiency judgments. However, we vacated the contempt judgment against Davco Management and Fisher. Our decision turned on the requirement that, "[w]hen the contempt is not committed in the immediate view and presence of the court or judge, an affidavit ... shall be presented ... of the facts constituting the contempt." Utah Code Ann. § 78B–6–302(2) (LexisNexis 2012). We determined that Iota never filed an affidavit, and as a consequence, "we reverse[d] the trial court's contempt rulings against Davco and Fisher for lack of jurisdiction and remand[ed] to the trial court for additional proceedings, on the contempt matter only...." Iota I , 2012 UT App 218, ¶ 40, 284 P.3d 681. Further, "because we reverse[d] the contempt rulings on jurisdictional grounds, we determine[d] that any error relating to the trial court's Ex Parte Order was harmless" and therefore did not address Davco's challenges to the order on the merits. Id.

¶8 On remand, Iota filed an affidavit in support of its allegations of contempt against Davco, and the district court scheduled an evidentiary hearing to address the matter. At the hearing, the court took notice of the evidence, facts, and orders of the court from the prior contempt proceedings, "except for those portions reversed by [this court in Iota I ]." In addition, Fisher testified for Davco Management as its managing member and on his own behalf, and Iota presented the testimony of its officer, Richard T. Murset.³ At the conclusion of the hearing, the district court again held both Davco Management and Fisher in contempt based on a review of Iota I , briefing and testimony from the postappeal hearing, and evidence from the prior proceedings.

¶9 In its second contempt order, the district court concluded that the affidavit filed by Iota satisfied the statute's requirement and that the jurisdictional issue identified in Iota I had thus been satisfied. The court also concluded that the collateral bar doctrine precluded Davco from arguing that the Ex Parte Order was improperly issued:

Davco and David Fisher violated Utah Code Annotated § 78B–6–301 by knowingly disobeying this Court's Ex Parte Order in failing to turn over the rents to the court clerk for further disposition by Order of this Court. David Fisher, on behalf of himself and his company, Davco, has knowingly and wrongfully retained the security deposits and has failed to deliver those amounts to Iota ... to apply towards Plaintiffs' debt obligations.

The district court found Davco Management and Fisher in contempt and entered judgment against both in the sum of $116,025.02, which included the amount of the withheld rents and other revenues as well as Iota's attorney fees incurred in the contempt proceedings both before and after Iota I . Davco appeals.

ANALYSIS

¶10 Davco raises multiple challenges to the district court's decision finding Davco Management and Fisher in contempt for failure to comply with the Ex Parte Order. Specifically, Davco contends that the district court either erred or abused its discretion by: (1) holding Davco in contempt based on an unclear and ambiguous Ex Parte Order; (2) awarding Iota damages; (3) finding Davco in contempt of court; (4) affirming its prior judgment for contempt; (5) awarding Iota its attorney fees and costs incurred in the preremand proceedings; (6) finding that the Order was valid and lawful; (7) denying Davco's motion to strike the Order; (8) taking judicial notice of all the facts, orders, and documents from the principal case; and (9) denying Davco the opportunity to present evidence showing that Iota's calculation of the withheld rents was wrong.

¶11 The issues fall into three categories: those challenging the validity of the Ex Parte Order, those challenging the district court's finding that Davco was in contempt for violating the Ex Parte Order, and those challenging the district court's award of attorney fees to Iota. We address them in that order.

I. The Validity of the Ex Parte Order

¶12 Davco asserts that the Ex Parte Order was invalid and unenforceable because it failed to comply with rule 67 of the Utah Rules of Civil Procedure and, as a consequence, the district court should have struck it.⁴ We first consider whether the district court properly concluded that the collateral bar doctrine blocked Davco's motion to strike the Ex Parte Order; only if that decision was incorrect need we consider the merits of Davco's argument that the order was invalid. The applicability of the collateral bar doctrine presents a question of law that we review for correctness. Cf. PC Riverview LLC v. Cao , 2016 UT App 178, ¶ 5 n.3, 381 P.3d 1185. We agree with the district court that the collateral bar doctrine precludes Davco from waiting until after it violated the Ex Parte Order to challenge its validity.

A. The Collateral Bar Doctrine

¶13 "Under the collateral bar doctrine, a party may not challenge a district court's order by violating it. Instead, he must move to vacate or modify the order, or seek relief in [an appellate court]." United States v. Cutler , 58 F.3d 825, 832 (2d Cir. 1995). "If he fails to do either, ignores the order, and is held in contempt, he may not challenge the order...