LeVanger v. HIGHLAND ESTATES PROPERTIES OWNERS ASSOCIATION

• Decision Date: 06 November 2003
• Docket Number: No. 20020090-CA.,20020090-CA.
• Citation: 80 P.3d 569,2003 UT App 377
• Parties: Jean LeVANGER and Rebecca LeVanger, Plaintiffs and Appellees, v. HIGHLAND ESTATES PROPERTIES OWNERS ASSOCIATION, INC.; et al., Defendants and Appellant.
• Court: Utah Court of Appeals

80 P.3d 569

2003 UT App 377

Jean LeVANGER and Rebecca LeVanger, Plaintiffs and Appellees, v. HIGHLAND ESTATES PROPERTIES OWNERS ASSOCIATION, INC.; et al., Defendants and Appellant.

No. 20020090-CA.

Court of Appeals of Utah.

November 6, 2003.

Paul M. Belnap and Andrew D. Wright, Strong & Hanni, Salt Lake City, for Appellant.

E. Jay Sheen, Robinson & Sheen, LLC, South Jordan, for Appellees.

Before Judges JACKSON, BENCH, and DAVIS.

OPINION

DAVIS, Judge:

¶ 1 Highland Estates Properties Owners Association, Inc. (Highland Estates) appeals a trial court order granting Jean and Rebecca LeVanger (the LeVangers) attorney fees and costs. We reverse and remand.

BACKGROUND

¶ 2 The LeVangers are homeowners and members of Highland Estates. On January 21, 1997, the LeVangers filed a derivative action under rule 23.1 of the Utah Rules of Civil Procedure against Highland Estates and members of its Board of Trustees. The LeVangers' verified complaint alleged that the Board of Trustees had breached its fiduciary duty to Highland Estates and the members of Highland Estates by improperly amending Highland Estates's covenants, conditions, and restrictions (CC & Rs). The LeVangers' action sought damages, attorney fees, and rescission of the improper amendments to Highland Estates's CC & Rs.

¶ 3 Prior to the scheduled trial date, Highland Estates filed a motion for summary judgment on several grounds. The trial court held a hearing on this motion and made its ruling from the bench. On May 28, 1998, the trial court entered a written order, memorializing this ruling. The court granted the motion on the issue of the voting and approval process used in amending Highland Estates's CC & Rs, concluding that the actions taken by the Board of Trustees in amending the CC & Rs were "proper" and that the mail-in ballot voting procedure "substantially complied with [Highland Estates's] Bylaws and [CC & Rs] in place." The trial court denied the motion on the other grounds, including the LeVangers' lack of standing under rule 23.1.¹ After making its ruling from the bench at the summary judgment hearing, the trial court and the parties discussed the LeVangers' intention to seek certification of the trial court's decision as final and appealable under rule 54(b) of the Utah Rules of Civil Procedure.²

¶ 4 On March 3, 1999, the trial court entered an order and rule 54(b) certification. Although most of the order focused on a motion to reconsider filed by the LeVangers, it also contained the rule 54(b) certification, which stated that the trial court's May 28, 1998 order was certified as final and appealable under rule 54(b).

¶ 5 Pursuant to the trial court's rule 54(b) certification, the LeVangers filed a notice of appeal. This court considered the LeVangers' appeal and issued a written opinion on April 13, 2000. See Levanger v. Vincent, 2000 UT App 103, 3 P.3d 187 (LeVanger I)

. In LeVanger I, we held that the actions taken by the Board of Trustees in amending Highland Estates's CC & Rs, including the use of mail-in ballots, were improper. See id. at ¶¶ 12-19. Accordingly, we reversed the trial court's grant of Highland Estates's motion for summary judgment on the issue of the voting and approval process used in amending Highland Estates's CC & Rs. See id. at ¶ 23.

¶ 6 Based upon this court's decision in LeVanger I, the LeVangers filed a motion for summary judgment on remand. Among other things, this motion sought an award of attorney fees and costs incurred by the LeVangers in bringing the derivative action. Highland Estates then filed a motion for an evidentiary hearing on several issues, including: (1) whether the LeVangers had standing under rule 23.1; (2) whether the LeVangers' derivative action had conferred a substantial benefit upon Highland Estates; and (3) whether the LeVangers' attorney fees were reasonable.³ The trial court conducted a hearing on both motions on June 26, 2001. After this hearing, a trial was scheduled for September 19, 2001, to address the unresolved issues in the case. At trial, both parties presented evidence to the trial court and, at the conclusion of trial, were instructed by the trial court to submit written closing arguments.

¶ 7 In a written ruling dated November 27, 2001, and an order entered on December 10, 2001, the trial court ruled on the unresolved issues in the case. The trial court determined that the LeVangers had standing as derivative plaintiffs under rule 23.1 because: (1) the issue of the LeVangers' standing "was effectively, if not expressly, decided by" an earlier trial court order which denied Highland Estates's motion for summary judgment on that issue; (2) Highland Estates did not raise and the LeVanger I court did not address the issue in LeVanger I, and when the LeVanger I court reached the merits of the appeal, its "acceptance of [the LeVangers'] standing to bring the action [was] implicit in" its decision; and (3) Highland Estates did not "raise the issue at the Court of Appeals, or ... file an appropriate motion on remand, both [of which] support a conclusion that [Highland Estates] did, in fact, waive the standing issue." The trial court also determined that the LeVangers' derivative action conferred a substantial benefit upon Highland Estates and, therefore, that the LeVangers were entitled to $41,327.15 in attorney fees and costs to be paid by Highland Estates. Highland Estates appeals.

ISSUES AND STANDARDS OF REVIEW

¶ 8 First, Highland Estates argues that the trial court erred in concluding that the LeVangers had standing as derivative plaintiffs under rule 23.1 of the Utah Rules of Civil Procedure.

[T]he question of whether a given individual or association has standing to request a particular relief is primarily a question of law, although there may be factual findings that bear on the issue. We will review such factual determinations made by a trial court with deference. State v. Pena, 869 P.2d 932, 935-36 (Utah 1994). Because of the important policy considerations involved in granting or denying standing, we will closely review trial court determinations of whether a given set of facts fits the legal requirements for standing, granting minimal discretion to the trial court. Id. at 938, 939.

Kearns-Tribune Corp. v. Wilkinson, 946 P.2d 372, 373-74 (Utah 1997).

¶ 9 Second, Highland Estates argues that the trial court erred in concluding that the LeVangers' derivative action conferred a substantial benefit on similarly situated members of Highland Estates. The trial court's conclusion on this issue was the basis for its award of attorney fees and costs to the LeVangers. The determination of whether a substantial benefit is conferred in the context of a derivative action is a mixed question of law and fact, which requires a trial court to determine "whether a given set of facts comes within the reach of a given rule of law." State v. Pena, 869 P.2d 932, 936 (Utah 1994). "Although we review legal questions for correctness, we may still grant a trial court discretion in its application of the law to a given fact situation." Jeffs v. Stubbs, 970 P.2d 1234, 1244 (Utah 1998).

ANALYSIS

I. Standing

¶ 10 Highland Estates argues that the trial court erred in concluding that the LeVangers had standing as derivative plaintiffs under rule 23.1 of the Utah Rules of Civil Procedure. Rule 23.1 provides, in relevant part, that a "derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association." Utah R. Civ. P. 23.1. The trial court made several rulings in support of its determination that the LeVangers had standing under rule 23.1.

¶ 11 First, the trial court determined that the issue of the LeVangers' standing under rule 23.1 "was effectively, if not expressly, decided by" an earlier trial court order which denied Highland Estates's motion for summary judgment on this issue. In that order, the trial court ruled that "[b]ased upon the record before the [c]ourt, there are insufficient facts and insufficient grounds to, as a matter of law, determine that plaintiffs are inappropriate parties to bring this action."

¶ 12 Summary judgment is appropriate only when "there is no genuine issue as to any material fact and [when] the moving party is entitled to judgment as a matter of law." Utah R. Civ. P. 56(c). This standard is set out, in identical form, in rule 56(c) of both the Utah Rules of Civil Procedure and Federal Rules of Civil Procedure. See Fed. R.Civ.P. 56(c); Utah R. Civ. P. 56(c). Accordingly, "we freely refer to authorities which have interpreted the federal rule." Gold Standard, Inc. v. American Barrick Res. Corp., 805 P.2d 164, 168 (Utah 1990); see Tucker v. State Farm Mut. Auto. Ins. Co., 2002 UT 54, ¶ 7 n. 2, 53 P.3d 947

("Interpretations of the Federal Rules of Civil Procedure are persuasive where the Utah Rules of Civil Procedure are `substantially similar' to the federal rules." (citations omitted)).

¶ 13 The denial of a motion for summary judgment on an issue is not a final decision on the merits of that issue. See Switzerland Cheese Ass'n v. E. Horne's Mkt., Inc., 385 U.S. 23, 25, 87 S.Ct. 193, 195, 17 L.Ed.2d 23 (1966)

("[T]he denial of a motion for a summary judgment because of unresolved issues of fact does not settle or even tentatively decide anything about the merits of the claim. It is strictly a pretrial order that decides only one thing—that the case should go to trial."); 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2712 (3d ed. 1998 & Supp.2003) ("[A] denial of summary judgment is not a decision on the merits; it simply is a decision that there is a material factual issue to be tried."). Therefore, we conclude that the trial court erred in determining that the order denying Highland Estates's motion for summary judgment was a decision on...