CFD Payson, LLC v. Christensen
2015 UT App 251
| Utah Ct. App. | 2015Background
- CFD Payson, LLC owned a one-third membership interest in Pheasant Run at Spanish Fields, LLC, which owned the real property (Pheasant Run land); CFD Payson was wholly owned by Charles Dahl.
- In the Dahls’ 2010 divorce, the court treated Charles Dahl’s interest in the Pheasant Run investment as marital property and ordered liquidation of that interest, awarding one-half of the proceeds to Kim Dahl.
- In March 2012 Kim Dahl recorded a Notice of Lien claiming one-half of proceeds from sale of the Pheasant Run land; the same day her attorneys recorded an attorney lien against any legal or equitable interest held by Kim Dahl for unpaid fees.
- CFD Payson demanded release of the liens; Kim Dahl released hers but the Attorney Defendants did not release theirs, prompting CFD Payson to sue for wrongful lien and slander of title under Utah law.
- The district court granted the Attorney Defendants’ motion to dismiss and Kim Dahl’s motion for summary judgment, concluding the divorce decree vested Kim Dahl with an ownership interest in the property and thus the liens were not wrongful.
- The Utah Court of Appeals reversed, holding the divorce decree awarded Kim Dahl only an interest in proceeds from liquidation of Charles’s membership interest, not ownership of the underlying real property, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the divorce decree gave Kim Dahl an ownership interest in the Pheasant Run land | Decree awarded Kim a vested ownership interest sufficient to support liens on the land or her interest in it | Decree awarded only an interest in proceeds from liquidation; neither spouse had ownership of LLC-owned land | Court: Dahl decree did not award ownership of LLC-owned real property to Kim; only proceeds interest was awarded |
| Whether liens recorded by Kim and her attorneys were wrongful under the Wrongful Lien Act | Liens were wrongful because Kim had no ownership interest in the land and the attorney lien attached to no client-owned property | Liens were valid because Kim had vested ownership rights from the decree or attorney lien was statutorily authorized | Court: Liens wrongful as to the real property; attorney lien could not attach to land because client had no ownership interest in that land |
| Whether CFD Payson stated slander-of-title claim | Title was slandered by false liens recorded against the property or interests purportedly owned by Kim | Liens were true/authorized (not false) because Kim was an owner per divorce decree | Court: Slander claim cannot be dismissed; liens were false as to ownership and thus could support slander claim on remand |
| Whether the corporate form could be disregarded to treat LLC property as owned by Dahl for divorce distribution | CFD Payson argues veil-piercing or equitable disregard is not supported; LLC property is separate | Defendants suggest equitable distribution or veil-piercing could treat land as owned by spouse | Court: No record of veil-piercing; Utah law treats LLC as separate entity; no basis to disregard entity here |
Key Cases Cited
- Jeffs v. Stubbs, 970 P.2d 1234 (Utah 1998) (discusses ownership as a bundle of rights and characterization of lesser interests)
- Bass v. Planned Mgmt. Servs., Inc., 761 P.2d 566 (Utah 1988) (elements of slander of title claim)
- Colman v. Colman, 743 P.2d 782 (Utah Ct. App. 1987) (settings in which a court may disregard corporate form in marital distributions)
- Provo City Corp. v. Knudsen, 558 P.2d 1332 (Utah 1977) (ownership described as a "bundle of sticks" of separate rights)
- In re McCauley, 520 B.R. 874 (Bankr. D. Utah 2014) (membership interest in LLC does not give member interest in LLC real property)