Kelly v. Timber Lakes Prop. Owners Ass'n

• Decision Date: 17 February 2022
• Docket Number: 20191079-CA
• Citation: 507 P.3d 357
• Parties: Nick KELLY, Appellant and Cross-appellee, v. TIMBER LAKES PROPERTY OWNERS ASSOCIATION, Appellee and Cross-appellant, and Hollyvale Rental Holdings LLC, Appellee.
• Court: Utah Court of Appeals

507 P.3d 357

Nick KELLY, Appellant and Cross-appellee,

v. TIMBER LAKES PROPERTY OWNERS ASSOCIATION, Appellee and Cross-appellant,andHollyvale Rental Holdings LLC, Appellee.

No. 20191079-CA

Court of Appeals of Utah.

Filed February 17, 2022

Russell A. Cline, Salt Lake City, Attorney for Appellant and Cross-appellee

Jeremy C. Reutzel, James C. Dunkelberger, and Ryan M. Merriman, Salt Lake City, Attorneys for Appellee and Cross-appellant Timber Lakes Property Owners Association

Todd W. Prall, Las Vegas, NV, Attorney for Appellee Hollyvale Rental Holdings LLC

Judge Gregory K. Orme authored this Opinion, in which Judges Jill M. Pohlman and Diana Hagen concurred.

Opinion

ORME, Judge:

¶1 To collect on past due assessments, Timber Lakes Property Owners Association (Timber Lakes) conducted a nonjudicial foreclosure on Nick Kelly's property, which Hollyvale Rental Holdings LLC purchased at auction. Following the sale, Kelly sought to set aside the trustee's deed to Hollyvale, arguing, among other things, that Timber Lakes’ failure to wait the statutory three-month period before publishing a notice of trustee's sale was against public policy and thus rendered the foreclosure sale void. He also argued that this failure to wait the full three-month period excused him from paying the past due assessments under the first-to-breach rule.

¶2 The district court concluded that the nonjudicial foreclosure did not violate public policy and granted summary judgment to Timber Lakes and Hollyvale on that claim. Kelly's remaining claims proceeded to a bench trial, at which Kelly presented what the court found to be a forged receipt as evidence that he had paid at least a portion of the assessments that Timber Lakes claimed were past due. Following the trial, the court found in Timber Lakes’ favor and, based on a finding that following summary judgment Kelly pursued his claims in bad faith, awarded Timber Lakes its attorney fees incurred from the point of summary judgment onward. The court, however, denied Timber Lakes’ request for attorney fees incurred prior to summary judgment.

¶3 Kelly appeals the court's grant of summary judgment, post-trial rulings, and the attorney fees award. As part of his challenge to the court's summary judgment order, Kelly raises an argument for the first time on appeal and requests that we review it for plain error. Timber Lakes cross-appeals the court's denial of its request for pre-summary-judgment attorney fees. We affirm the district court in every respect and further hold that, with limited exceptions, plain error review is not available in the civil context. We remand only for calculation of an award of attorney fees in favor of Timber Lakes, for attorney fees it incurred on appeal.

BACKGROUND¹

¶4 Timber Lakes is the homeowners association that governs the Timber Lakes Estates development, located outside Heber City. Timber Lakes derives its authority as a homeowners association from the Declaration of Protective Covenants, Conditions, Restrictions and Management Policies for Timber Lakes Estates (the CC&Rs), which was recorded in Wasatch County in 1989. The CC&Rs have not been amended since their initial recordation.

¶5 Under the CC&Rs, each property owner within Timber Lakes Estates "is deemed to covenant and agree to pay" annual and special assessments to Timber Lakes, both of which "together with interest, costs and reasonable attorney fees shall be a charge on the land and shall be a continuing lien upon the property against which each such assessment is made." The CC&Rs further provide that for assessments that are over 90 days past due, Timber Lakes "may bring an action at law against the Owner personally obligated to pay the [assessments] or foreclose the lien against the property." Timber Lakes’ bylaws, which were adopted in 1979, also provide that it is the duty of Timber Lakes’ board of directors "[t]o foreclose the lien against any property for which assessments are not paid within ninety (90) days after due date or to bring an action at law against the Owner personally obligated to pay the same."

¶6 On November 17, 2011, Kelly purchased property within Timber Lakes Estates (the Property). Prior to closing on the sale, Kelly delivered a $1,000 money order to the seller's agent to cover unpaid assessments on the Property. And at the time of closing, the title company issued a check in the amount of $909.41 to Timber Lakes, $809.41 of which was designated as "delinquent dues" and the remaining $100 as a "transfer fee." Kelly also testified at trial that on November 24, 2011, he went into the Timber Lakes office and paid $1,839 in cash to cover current and future assessments. He provided a copy of a receipt at trial in support of this assertion.

¶7 On February 24, 2016, Timber Lakes, through counsel, sent Kelly a letter informing him that it intended to conduct a nonjudicial foreclosure on the Property to collect past due assessments and that Kelly could "prevent a foreclosure action" by contacting Timber Lakes and making payment arrangements. The letter also informed Kelly of his right to instead demand a judicial foreclosure. On May 2, 2016, Timber Lakes recorded a notice of default and election to sell against the Property (the Notice of Default). The Notice of Default indicated that Kelly had been informed of his right to request a judicial foreclosure at least 30 days prior and that he "did not request a judicial foreclosure." By July 2016, Timber Lakes’ records indicated that Kelly owed over five thousand dollars in unpaid assessments, late fees, and interest. Its records did not reflect the $1,839 cash payment Kelly claimed to have made on November 24, 2011. And in early July 2016, Timber Lakes, again through counsel, recorded and published a Notice of Trustee's Sale that set August 1, 2016, as the public auction date.

¶8 On July 18, 2016, Kelly, who at the time was in Puerto Rico on business and had been away for "many months," was informed for the first time either by his daughter or by an employee that the Notice of Trustee's Sale had been posted on the Property. Kelly immediately called Timber Lakes’ property management company, which conversation he recorded. Kelly told an agent of the property management company that although he "may owe something," it was not the amount that was alleged and that he was in Puerto Rico and needed time to retrieve supporting documentation. The agent informed Kelly that the Timber Lakes board of directors would be holding a meeting on August 17 and that she would request that Timber Lakes’ counsel postpone the August 1 sale date until August 18 so that the board could consider further postponement of the sale at that meeting.

¶9 That same day, Kelly also spoke with a paralegal at the law firm that represented Timber Lakes, which conversation he also recorded. During that conversation, Kelly acknowledged, "I believe that we actually do owe for some HOA. But make no mistake, it might have been for partial of this year, and it might have been for a little bit of last year. But that's it." He also confirmed that he had documentation of prior payments but explained that they were not readily accessible because he was in Puerto Rico and was not due back for another three weeks.² He also stated that "if I need to call somebody, if I need to get my attorney on it to get something stopped before I get up there, I have no problem doing that."

¶10 Following the call, and at Kelly's request, the paralegal emailed Kelly "copies of statements, notices and return mail sent to the addresses" the law firm had on file for Kelly. The paralegal also informed Kelly,

[W]e are not postponing the foreclosure sale date beyond August 18, 2016. You need to pay off the account in our office ... or provide copies of your bank statements showing payments to Timber Lakes ... [that] cleared your account along with copies of the front and back sides of all checks clearly showing they were cashed by Timber Lakes ... or its agents.

¶11 The district court later found that "[a]side from making contact with Timber Lakes and its legal counsel and asking them to postpone the sale, [Kelly] took no affirmative action to enjoin the trustee's sale." The court further noted that "Kelly testified at the trial that he had family and friends who were available to him to either help him provide evidence of his claimed payments or to present payment to Timber Lakes. He chose not to have them do so." And despite having claimed he had an attorney, Kelly did not engage counsel to enjoin the trustee's sale.

¶12 The Timber Lakes board of directors held its scheduled meeting on August 17, 2016. The board discussed the pending trustee's sale of the Property but decided against postponing the sale any further. The trustee's sale of the Property took place the next day, on August 18, 2016. Hollyvale, the highest bidder, purchased the Property at auction.

¶13 In September 2016, Kelly filed suit against Timber Lakes and Hollyvale seeking to set aside the trustee's deed to Hollyvale as void and to quiet title in the Property. Kelly also asserted, among other things, claims for breach of contract and breach of the implied covenant of good faith and fair dealing against Timber Lakes. He later amended his complaint to add a claim for mistake against both defendants and a request for an accounting against Timber Lakes. Timber Lakes counterclaimed for declaratory judgment on the validity of the sale and for an award of attorney fees.

¶14 In early 2017, all three parties filed motions for partial summary judgment, seeking "a determination by the Court regarding the validity of Timber Lakes’ trustee's sale" of the Property. Kelly argued that the sale was "void because the trustee did not wait the statutorily required time before giving ‘notice of sale.’ " Specifically, Kelly argued that the trustee was statutorily required to wait at least three months after recording the Notice of Default before giving the Notice of Trustee's...