Selvage v. J.J. Johnson & Associates

• Decision Date: 19 January 1996
• Docket Number: No. 950240-CA,950240-CA
• Citation: 910 P.2d 1252
• Parties: William C. SELVAGE and Wm. C. Selvage, Inc., a Utah corporation, Plaintiffs, Appellants, and Cross-Appellees, v. J.J. JOHNSON & ASSOCIATES, a Utah corporation; Sear-Brown Associates, a New York corporation; and The Sear-Brown Group, Inc., a New York corporation, Defendants, Appellees, and Cross-Appellants.
• Court: Utah Court of Appeals

Page 1252

910 P.2d 1252

William C. SELVAGE and Wm. C. Selvage, Inc., a Utah corporation, Plaintiffs, Appellants, and Cross-Appellees, v. J.J. JOHNSON & ASSOCIATES, a Utah corporation; Sear-Brown Associates, a New York corporation; and The Sear-Brown Group, Inc., a New York corporation, Defendants Appellees, and Cross-Appellants.

No. 950240-CA.

Court of Appeals of Utah.

Jan. 19, 1996.

Anthony L. Rampton and Robert Palmer Rees, Salt Lake City, for Appellants.

James A. Boevers, Salt Lake City, for Appellees.

Before ORME, GREENWOOD and WILKINS, JJ.

OPINION

GREENWOOD, Judge:

William C. Selvage and William C. Selvage, Inc. (collectively "Selvage") appeal the amount of attorney fees awarded by the trial court against Sear-Brown Associates and The Sear-Brown Group, Inc. (collectively "Sear-Brown"). Sear-Brown cross-appeals the trial court's order finding it liable to Selvage under the Utah Uniform Fraudulent Transfer Act and a common law theory of mere instrumentality. We affirm in part and remand in part on the attorney fees issues.

BACKGROUND ¹

In 1986, Selvage entered into an agreement with J.J. Johnson & Associates ("Johnson"), wherein they agreed that Selvage would sell his architectural business to Johnson. The arrangement involved three separate written contracts, each of which provided for attorney fees. On April 7, 1987, Selvage filed an action against Johnson, alleging breach of all three contracts. On September 30, 1988, while the lawsuit was pending, Sear-Brown became Johnson's sole shareholder, and on October 1, 1988, Johnson ceased to do business. Between October 1, 1988 and February 1989, Sear-Brown transferred to itself all of Johnson's assets. On July 6, 1990, Sear-Brown caused Johnson to file a bankruptcy petition.

On January 22, 1991, Selvage filed an Amended Complaint, contending for the first time that Sear-Brown was Johnson's alter ego, or, in the alternative, that "Sear-Brown has assumed the liabilities of J.J. Johnson and Associates or is otherwise responsible in law and fact for the liabilities of J.J. Johnson and Associates." In December 1992, Selvage filed a Second Amended Complaint, adding a mere instrumentality claim and claims under the Uniform Fraudulent Transfer Act (U.F.T.A.). Utah Code Ann. §§ 25-6-1 to-13 (1995). The complaint alleged liability pursuant to the U.F.T.A. under four theories. The first was that the transfers from Johnson were made to an insider, Sear-Brown, in violation of section 25-6-6(2). The three remaining claims were brought under section 25-6-5(1)(a), alleging that the transfers were made with an intent to hinder, delay or defraud a creditor, namely Selvage.

Before trial, Sear-Brown filed a motion for summary judgment contending, among other things, that Selvage's insider transfer claim under the U.F.T.A. was barred by the one-year time limit in Utah Code Annotated section 25-6-10(3) (1995). The motion was denied.

At trial, the attorney who, until that time, had represented both Johnson and Sear-Brown, announced that he was no longer representing Johnson and would represent only Sear-Brown during the trial. At the end of Selvage's case, Sear-Brown moved for a directed verdict, again arguing the U.F.T.A.'s one-year time limit barred the insider transfer claim. The motion was denied. However, the trial court granted Selvage's motion for a directed verdict against Johnson on the grounds that Johnson had failed to appear and mount a defense. Accordingly, the jury returned special interrogatories finding Johnson liable to Selvage in the amount of $109,400.32, plus interest and costs. The jury also found by special interrogatory that Sear-Brown was liable to Selvage for the amounts owed to Selvage by Johnson under all of the U.F.T.A. claims and under the mere instrumentality theory.

After trial, Selvage's attorney filed an affidavit with the court in support of Selvage's application for prejudgment interest and attorney fees. The affidavit attached billing records describing the services rendered, by whom they were rendered, and the billing rates. The affidavit stated that a reasonable attorney fee was $175,000. Sear-Brown did not contest the requested amount of attorney fees, nor the affidavit in support of the application for attorney fees. It did, however, contend that fees were recoverable only for the contract claims, and that because the affidavit did not allocate time among the various causes of action, no fees should be awarded.

The trial court adopted the jury's findings and awarded Selvage judgment against Johnson for $191,644.60 in principal, costs and interest, and $42,500 in attorney fees. The trial court's award of attorney fees was founded upon the attorney fee provision in the three contracts between Selvage and Johnson. The trial court's findings of fact state the amount of the attorney fees award is based on "the amount in dispute, the complexity of the issues presented, the hourly rates charged by the plaintiffs' attorneys and the total evidence presented at trial."

The trial court entered judgment for Selvage against Sear-Brown in the same amounts as it awarded against Johnson. The trial court also concluded that Selvage's insider transfer claim was not time-barred by section 25-6-10(3) of the U.F.T.A. because of the discovery and relation back rules.

Both parties appeal. Sear-Brown contends that the insider transfer claim was barred by the U.F.T.A.'s one-year time limit, and that this limit is a statute of repose and not a statute of limitation. It further argues that the evidence did not support the jury verdict under the intent to hinder, delay or defraud, and that it was error to conclude that Johnson was the mere instrumentality of Sear-Brown. ² Selvage challenges the trial court's award of attorney fees, contending that: the award of $42,500 in attorney fees is inadequate; the trial court failed to enter sufficient findings of fact and conclusions of law; and the trial court abused its discretion by failing to grant an evidentiary hearing on the question of attorney fees.

STANDARDS OF REVIEW

Whether the time limit for the insider transfer claim is a statute of repose or a statute of limitation is an issue of statutory interpretation, which we review for correctness as a question of law. State v. Larsen, 865 P.2d 1355, 1357 (Utah 1993). The application of the time limit is also a question of law, reviewed for correctness. Gramlich v. Munsey, 838 P.2d 1131, 1132 (Utah 1992); McKean v. McBride, 884 P.2d 1314, 1316-17 (Utah App.1994), cert. denied, 899 P.2d 1231 (Utah 1995).

Review of the jury's verdict, however, places a difficult burden on the challenging party. "To support a claim that the jury verdict is against the clear weight of the evidence, an appellant must marshal all of the evidence that supports the findings and demonstrate that when viewed in the light most favorable to the verdict, there is insufficient evidence to support it." Steenblik v. Lichfield, 906 P.2d 872, 875 (Utah 1995). Furthermore, all reasonable inferences are drawn in favor of the verdict, and if the evidence supports the verdict, we will affirm. Id.

Whether attorney fees are recoverable in an action is a question of law, which is reviewed for correctness. See Robertson v. Gem Ins. Co., 828 P.2d 496, 499 (Utah App.1992). Similarly, whether the trial court's findings of fact in support of an award of attorney fees are sufficient is also a question of law, reviewed for correctness. See State v. Pharris, 846 P.2d 454, 459 (Utah App.), cert. denied, 857 P.2d 948 (Utah 1993) (citing State v. Ramirez, 817 P.2d 774, 782 (Utah 1991)). However, "the trial court has broad discretion in determining what constitutes a reasonable fee, and we will consider that determination against an abuse-of-discretion standard." Dixie State Bank v. Bracken, 764 P.2d 985, 991 (Utah 1988); Regional Sales Agency v. Reichert, 784 P.2d 1210, 1215 (Utah App.1989), vacated on other grounds, 830 P.2d 252 (Utah 1992).

ANALYSIS

I. Timeliness of the Insider Transfer Claim

Sear-Brown appeals the trial court's ruling that Selvage's insider transfer claim was not time-barred. At trial, the jury found Sear-Brown liable, in part, on the grounds that the transfer of Johnson's assets to Sear-Brown was an insider transfer. The insider transfer claim was based upon section 25-6-6(2) of the U.F.T.A., which provides A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at the time, and the insider had reasonable cause to believe that the debtor was insolvent.

Utah Code Ann. § 25-6-6(2) (1995). The jury found, by special interrogatory, that Selvage had proved all of these elements at trial. However, this section is governed by the time limits section of the U.F.T.A., section 25-6-10, which provides:

A claim for relief or cause of action regarding a fraudulent transfer or obligation under this chapter is extinguished unless action is brought:

. . . . .

(3) under Subsection 25-6-6(2), within one year after the transfer was made or the obligation was incurred.

Utah Code Ann. § 25-6-10 (1995). Sear-Brown argues that Selvage's insider transfer claim is time-barred by the one-year time limit in section 25-6-10(3) because it was not asserted until the Second Amended Complaint, filed in December 1992, whereas the insider transfer was completed in February 1989.

The trial court ruled that, pursuant to the discovery and relation back doctrines, Selvage's insider transfer claim was not barred by the one-year statute of limitation. On appeal, Sear-Brown argues that the time limit in section 25-6-10(3) is a statute of repose, and that the discovery and relation back doctrines are not applicable to a statute of repose. We disagree with the contention that section 25-6-10(3) is a statute of repose.

In Utah, the determination of "[w]hether a statute that bars or...