Wittingham v. TNE Ltd. P'ship

• Docket Number: 20210677
• Decision Date: 18 July 2024
• Citation: 554 P.3d 924
• Parties: WITTINGHAM, LLC, The Muir Second Family Limited Partnership, and Dorothy Jeanne Muir, Appellees and Cross-appellants, v. TNE LIMITED PARTNERSHIP, Bruce J. Malcolm, and Maureen H. Malcolm, Appellants and Cross-appellees.
• Court: Utah Supreme Court

554 P.3d 924

2024 UT 23

WITTINGHAM, LLC, The Muir Second Family Limited Partnership, and Dorothy Jeanne Muir, Appellees and Cross-appellants,

v.TNE LIMITED PARTNERSHIP, Bruce J. Malcolm, and Maureen H. Malcolm, Appellants and Cross-appellees.

No. 20210677

Supreme Court of Utah.

Heard January 11, 2023

Filed July 18, 2024

Second District, Davis County, The Honorable Michael D. DiReda, The Honorable Robert J. Dale, No. 090700547

James K. Tracy, Joshua L. Lee, Salt Lake City, for appellees and cross-appellants

Trevor J. Lee, Park City, for appellants and cross-appellees

Justice Pohlmanauthored the opinion of the Court, in which Chief Justice Durrant, Associate Chief Justice Pearce, Justice Petersen, and Justice Hagen joined.

Justice Pohlman, opinion of the Court:

INTRODUCTION

¶1 This is the fourth appeal in a case that has endured fifteen years of litigation.At its core, the case is about a 2009 loan transaction between TNE Limited Partnership(TNE) and the Muir Second Family Limited Partnership(the Muir Partnership or the Partnership) at a time when the Partnership was dissolved.The Partnership, along with Dorothy Jeanne Muir and Wittingham, LLC(collectively, plaintiffs), sued TNE and related parties to void the transaction.¹After a seven-day bench trial, the district court granted plaintiffs’ requested relief.As the prevailing parties, plaintiffs requested attorney fees under the reciprocal fees statute, but the court denied the request.

¶2 Both sides appealed.Among other things, TNE contended that the transaction was voidable, not void, and plaintiffs asserted that the district court erred in denying their fees request.After two appeals that failed on jurisdictional defects, we reached the merits of several issues in Wittingham, LLC v. TNE Ltd. Partnership(Wittingham III), where we agreed with TNE that the transaction was merely voidable.2020 UT 49, ¶¶ 80–82, 469 P.3d 1035.We reversed the distinct court’s determination that the transaction was void and remanded the case for further proceedings on whether the transaction bound the dissolved Muir Partnership and whether TNE was entitled to legal or equitable remedies.Id.¶¶ 40 –41.We further instructed the district court to reconsider the attorney fees issue if plaintiffs renewed it on remand.Id.¶ 82.

¶3 Baek in the district court, both parties contended that they were entitled to judgment on the trial record.TNE argued theories of why the transaction must be enforced, which plaintiffs challenged, and plaintiffs renewed their attorney fees request.The court ultimately concluded that plaintiffs could void the transaction, but it again denied their fees request.Before the court’s ruling was final, TNE asked the court to reevaluate its decision in light of new authority, but the court concluded that its decision was correct and entered judgment against TNE.

¶4 Both sides again appeal.TNE primarily challenges the district court’s rejection of its claim that the Muir Partnership is bound by the transaction under a theory of apparent authority.TNE also identifies several reasons why it claims the Partnership should not be allowed to void the transaction.We reject TNE’s claims either because TNE has not shown reversible error or because the issues are unpreserved.We also reject plaintiffs’ renewed challenge to the district court’s denial of their claim for attorney fees because the plain language of the trust deed on which plaintiffs’ claim depends does not allow fees in this case.

BACKGROUND²

[1]¶5 The Muir Partnership was a Utah limited partnership registered in January 1994 and administratively dissolved in May 2007.William Nicholas Muir(Nick) was the general partner, and his sister, Dorothy Jeanne Muir(Jeanne), and other family members were limited partners.³The Partnership owned two apartment buildings in Bountiful, Utah (the apartments).

¶6 In 2009, Nick secured a $450,000 loan to renovate the apartments into rentable condition, pledging the apartments as collateral.Within only a few weeks, Nick sought to refinance the loan and to again pledge the apartments as collateral.TNE learned of the lending opportunity and expressed interest.TNE soon became aware that there was "a partnership involved," that Nick was the general partner, and that Nick’s sister, Jeanne, held an interest.And TNE learned from the apartment manager that Nick had fallen from the roof of the apartments a few years back, had suffered a head injury, and had been in a coma for four months.The manager expressed his view that Nick was "incompetent," and TNE questioned Nick’s "authority to transact business" for the Partnership.

¶7 Around this same time, Nick discovered that the Partnership was administratively dissolved because its renewal paperwork had not been submitted.Nick was told that he"would have to re-file the company" under a "new name."He then registered a new entity, "Muir Second Family Limited Partnership," differing in name by omitting the word "The."

¶8 Several title insurance companies considered insuring the transaction for TNE, but some expressed concern about the status of the Partnership and Nick’s authority to close the transaction.Eventually, TNE secured insurance and closed the deal.In connection with the closing, the parties signed a trust deed and promissory note (together, the TNE transaction), in which Nick pledged the apartments as collateral for a $435,000 loan.Nick signed the TNE trust deed and promissory note on behalf of the Partnership.

The Litigation

¶9 Jeanne first learned about the TNE transaction after it was complete.When she discovered the TNE trust deed, she filed suit, both individually and on behalf of the Muir Partnership.Shortly thereafter, Nick transferred his interest in the Partnership to Jeanne, and, through a series of transactions, title to the apartments was eventually transferred to Wittingham, LLC, a company Jeanne managed.Wittingham then joined Jeanne and the Muir Partnership as a plaintiff in the litigation.

¶10 In the complaint, the Muir Partnership and Wittingham sought a judicial declaration that all actions taken by the Partnership after its administrative dissolution, including the TNE transaction, "were not for the purposed) of winding up the Partnership" and were "void ab initio."Alternatively, they sought a declaration that the TNE transaction "is voidable and should be set aside" because Nick lacked the mental capacity to transact with TNE.Jeanne asserted claims of her own and claims with the Partnership, but she was not a party to these declaratory judgment claims.

¶11 TNE counterclaimed, seeking a declaration that the TNE trust deed "is valid and enforceable."Later, in its trial briefing, TNE asserted in the alternative that the TNE trust deed was merely voidable, not void.TNE also responded to plaintiffs’ argument regarding Nick’s competency, contending that Nick was competent when he executed the TNE transaction.But TNE argued that if the court disagreed about Nick’s competency, it should conclude either that (1) the Muir Partnership must still pay restitution for the benefit it received, or (2) the Partnership ratified the TNE transaction by retaining the benefit.

¶12 After a seven-day bench trial, the district court rejected plaintiffs’ argument that Nick was incompetent but concluded that the TNE transaction was an unenforceable transaction that could not bind the Muir Partnership.Specifically, the court determined that the Partnership had been dissolved before the transaction occurred and that the transaction was not a "winding up" activity under the General and Limited Liability Partnerships Act (the Partnerships Act), Utah Code sections 48-1-.5 to -48 (2009).⁴SeeUtah Code § 48-1-32(1)(a)(2009)(providing that, with certain exceptions, "a partner can bind the partnership" after dissolution "[b]y any act appropriate for winding up partnership affairs").And although there is a presumption under the law that the defective transaction was voidable (rather than void), seeWittingham III,2020 UT 49, ¶ 25, 469 P.3d 1035, the district court concluded that the presumption had been rebutted and that the TNE transaction was "void … and not merely voidable."

¶13 Although plaintiffs prevailed at trial, the district court denied their request for attorney fees based on paragraph 4 of the trust deed.Paragraph 4 provides that, to protect the security of the trust deed, the Muir Partnership agrees

[t]o appear in and defend any action or proceeding purporting to affect the [apartments], the title to said [apartments], or the rights or powers of [TNE ⁵]; and should [TNE] elect to also appear in or defend any such action or proceeding, to pay all costs and expenses, including … attorney’s fees in a reasonable sum incurred by [TNE].

¶14 Invoking Utah’s reciprocal fees statute, seeUtah Code § 78B-5-826, plaintiffs argued that because TNE would have been able to recover fees under paragraph 4 had it prevailed in the litigation, plaintiffs(as the prevailing parties) were entitled to recover their fees from TNE.The district court disagreed.It concluded that, based on the plain language, paragraph 4"[did] not apply to plaintiffs’ declaratory judgment action to invalidate the trust deed."

The Appeal (Wittingham III)

¶15 On appeal, TNE asked us to review "whether a contract entered into by a dissolved partnership is void or merely voidable."Wittingham III,2020 UT 49, ¶ 1, 469 P.3d 1035.We agreed with TNE that the TNE transaction was voidable, not void, and that the district court erred in ruling otherwise.Id.¶ 22.

¶16 First, we noted the "rebuttable presumption that defective contracts are voidable rather than void,"id.¶ 25(citingOckey v. Lehmer,2008 UT 37, 189 P.3d 51), and that this presumption can be rebutted "only where a party has made ‘a showing free from doubt that the contract is against public policy,’ "id.¶ 23(quotingOckey,2008 UT 37, ¶ 21, 189 P.3d 51).Then, we applied Ock...