372 P.3d 683
Utah Ct. App.2016Background
- In 2007 Dos Lagos, LLC and Mellon Valley, LLC (Borrowers) obtained a $2.5M loan from America West Bank, personally guaranteed by Roland N. Walker, Sally Walker, and Roland Neil Family LLP (Guarantors). The loan was secured by Mellon Valley real property.
- America West sold a 52% participation in the loan to Utah First Federal Credit Union (Utah First); America West retained 48%.
- After defaults, the FDIC seized America West’s interest and RADC purchased America West’s interest in the note and later purchased the property at trustee’s sale. Sale price left a deficiency: amount due under the note ($3,426,701.91) minus sale value ($1,510,000) = $1,916,701.91 deficiency.
- Utah First filed a deficiency action within three months of the trustee’s sale but initially misstated the amount owed; RADC was added as a plaintiff by amendment after the three-month period.
- The district court granted summary judgment to RADC for the full deficiency (subject to Utah First’s subsequently determined interest) and later granted summary judgment against the Guarantors. Borrowers and Guarantors appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RADC’s claim was time-barred under Utah Code §57-1-32 and Rule 15(c) | RADC: addition relates back to original timely complaint because same claim/transaction and notice was provided | Appellants: adding a new plaintiff after limitations period is impermissible; Doxey-Layton rule bars relation back for added parties | Court: relation back allowed — original complaint provided sufficient notice and there is identity of interest between Utah First and RADC; claim not time-barred |
| Whether plaintiffs were limited to the amount stated in the original complaint | Plaintiffs: may correct amount via amended complaint; pursue full deficiency shown in record | Appellants: estoppel should bar pursuing a larger amount than in original complaint | Court: no estoppel — borrower had notice and time to respond after Second Amended Complaint; judgment may be for corrected full amount |
| Whether RADC (48% holder) could recover the full deficiency rather than only its pro rata share | RADC: as a holder who pursued collection, may obtain judgment for full debt subject to accounting to co-holder | Appellants: RADC should be limited to its 48% share | Court: awarding full deficiency to RADC (subject to Utah First’s interest) was proper; Borrowers’ obligation is the total debt and RADC must account to Utah First |
| Whether summary judgment against the Guarantors should be vacated if underlying judgment is overturned | Appellants: guarantor judgment depends on reversal of borrower judgment | RADC: guarantor liability follows valid borrower judgment | Court: because judgment against Borrowers affirmed, judgment against Guarantors stands |
Key Cases Cited
- Doxey-Layton Co. v. Clark, 548 P.2d 902 (Utah 1976) (general rule limiting Rule 15(c) relation-back for added parties)
- Sulzen v. Williams, 977 P.2d 497 (Utah Ct. App. 1999) (identity-of-interest exception allowing relation back when no prejudice)
- Weber v. Snyderville West, 800 P.2d 316 (Utah Ct. App. 1990) (appellate affirmation on alternative grounds; courts may affirm on any proper ground)
- Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147 (U.S. 1984) (relation-back rationale: original pleading provides the notice statutes of limitations are meant to secure)
- Penrose v. Ross, 71 P.3d 631 (Utah Ct. App. 2003) (discussion of identity-of-interest requiring parties to have the same interest)
- Irons v. American Nat’l Bank, 172 S.E. 629 (Ga. 1933) (authority recognizing one holder may foreclose and obtain full recovery subject to accounting to co-holders)