DePatco, Inc. v. Teton View Golf Estates, LLC
2014 UT App 266
Utah Ct. App.2014Background
- Teton View Golf Estates, a Utah LLC formed by Idaho Development, borrowed from Idaho Development; Idaho Development took a promissory note secured by a deed of trust on development land.
- DePatco supplied materials and recorded a materialman’s lien against the land; a foreclosure action was later filed in Idaho by Idaho Development.
- The Idaho trial court granted summary judgment to DePatco on the theory the loan was a member capital contribution; the Idaho Supreme Court reversed and remanded, finding factual issues.
- On remand the Idaho court determined Utah law governs priority and stayed the Idaho action while DePatco sued in Utah for a declaratory judgment that non-member creditors must be paid before member-creditors during winding up.
- The Utah trial court granted summary judgment to DePatco, holding Utah Code § 48-2c-1308(1) requires payment to non-member creditors before member-creditors; Idaho Development and Teton View appealed.
Issues
| Issue | Plaintiff's Argument (DePatco) | Defendant's Argument (Idaho Dev./Teton View) | Held |
|---|---|---|---|
| Priority during winding up: whether non-member creditors are paid before member-creditors | § 48-2c-1308 requires payment to non-member creditors first | Section 48-2c-1304’s "priority under law" triggers lien/superior-title analysis that could let member-creditor (secured) prevail | Affirmed: § 48-2c-1308(1) controls; non-member creditors paid before member-creditors |
| Whether the LLC operating agreement can alter statutory distribution priority | Statute controls; non-member rights cannot be contracted away without their consent | Operating agreement adopted older law and altered priority in favor of member-creditor | Rejected: operating agreement cannot impair non-member creditors’ statutory rights absent their consent; chapter provisions control |
| Whether factual disputes precluded summary judgment | Statutory rule is dispositive; the asserted facts don’t change statutory priority | Various factual assertions (promises of priority, timing of foreclosure, deed position) create material issues | Rejected: facts immaterial to statutory interpretation; summary judgment appropriate |
| Which statute governs when statutes appear to overlap (1304 vs 1308) | Rely on the more specific statute (1308) for distribution order | Prefer broader “priority under law” from 1304 to incorporate lien priority across members/non-members | Court: specific provision (§ 48-2c-1308(1)) controls the sequence; 1304 is general and not dispositive here |
Key Cases Cited
- Orvis v. Johnson, 177 P.3d 600 (recognition of summary-judgment review standard)
- Gutierrez v. Medley, 972 P.2d 913 (statutory interpretation is a question of law reviewed de novo)
- Idaho Dev., LLC v. Teton View Golf Estates, LLC, 272 P.3d 373 (Idaho Supreme Court decision vacating summary judgment and remanding)
- Lyon v. Burton, 5 P.3d 616 (specific statutory provisions control over general ones)
- In re Adoption of Baby E.Z., 266 P.3d 702 (start with plain meaning when interpreting statutes)