507 P.3d 357
Utah Ct. App.2022Background
- Timber Lakes HOA initiated a nonjudicial foreclosure to collect unpaid assessments on property purchased by Kelly; Notice of Default recorded May 2, 2016 and Notice of Trustee’s Sale recorded/published in early July 2016 (about one month short of the statutory three‑month cure period); trustee sale occurred August 18, 2016 and Hollyvale bought the Property.
- Kelly sued to set aside the trustee’s deed and quiet title, and alleged breach of contract and breach of the implied covenant of good faith and fair dealing; Timber Lakes counterclaimed for declaratory relief and fees.
- District court granted summary judgment that the trustee’s sale was not void or voidable (Timber Lakes substantially complied; Kelly had actual notice and did not enjoin the sale) and dismissed claims against Hollyvale; remaining contract and covenant claims proceeded to bench trial.
- At trial Kelly relied on a November 24, 2011 receipt purporting to show payment of assessments; Timber Lakes produced bank records showing no deposit, a handwriting expert who opined the receipt was forged, and evidence the office was closed that day.
- The trial court found Kelly had not paid the dues, may have submitted a forged receipt, rejected his first‑to‑breach argument, and awarded Timber Lakes attorney fees under the bad‑faith statute for fees incurred after the summary judgment ruling; denied contractual fee recovery for pre‑summary‑judgment fees under the CC&Rs/bylaws.
- On appeal the court affirmed in all respects, held that (absent a rule) plain‑error review generally is not available in ordinary civil cases, and remanded only to calculate Timber Lakes’ reasonable appellate fees limited to defending the first‑to‑breach and implied‑covenant rulings.
Issues
| Issue | Plaintiff's Argument (Kelly) | Defendant's Argument (Timber Lakes) | Held |
|---|---|---|---|
| 1. Availability of plain‑error review for unpreserved civil challenge to Timber Lakes’ authority to foreclose | Plain‑error should apply; Timber Lakes lacked statutory/contractual authority for nonjudicial foreclosure (UCAA not adopted into CC&Rs) | Plain‑error review is a criminal‑origin doctrine not generally available in ordinary civil appeals absent rule authorization | Court held plain‑error review is not generally available in ordinary civil cases absent express rule authorization, so it declined to reach Kelly’s unpreserved authority argument |
| 2. Validity of trustee’s sale (premature notice; three‑month waiting period) | Early notice (one month short) violated statute and public policy, rendering the deed void | Substantial compliance and actual notice to Kelly; at most a voidable defect needing prejudice and timely challenge; bona fide purchaser protection (Hollyvale) | Sale not void as against public policy; at most voidable, and district court’s alternative holdings (no timely injunction, bona fide purchaser) stand; affirmed |
| 3. First‑to‑breach and implied covenant claim (does Timber Lakes’ premature notice excuse Kelly’s nonpayment) | Timber Lakes breached first by not providing full three‑month cure, excusing Kelly’s payments | Kelly’s nonpayment was the initial, material breach that triggered foreclosure; defects in the remedy do not constitute the first breach | Court affirmed that Kelly was the first breaching party (he failed to pay); Timber Lakes’ conduct in pursuing foreclosure did not constitute the initial breach; implied‑covenant claim failed |
| 4. Attorney fees (bad‑faith award, contractual fees under CC&Rs/bylaws, appellate fees) | Bad‑faith award improper or excessive; CC&Rs/bylaws should cover all litigation fees including pre‑summary judgment fees | Fees are proper under bad‑faith statute for post‑summary‑judgment conduct because Kelly proceeded in bad faith (forged receipt); CC&Rs/bylaws do not extend to post‑foreclosure litigation fees; request for appellate fees warranted | Court affirmed bad‑faith fee award for fees incurred after summary judgment (finding of bad faith supported by forged receipt); denied contractual recovery for pre‑summary‑judgment fees because CC&Rs/bylaws apply to collection/foreclosure actions and do not cover later litigation; awarded Timber Lakes reasonable appellate fees limited to defending the first‑to‑breach and implied‑covenant rulings |
Key Cases Cited
- Bank of Am. v. Adamson, 391 P.3d 196 (Utah 2017) (discusses void vs. voidable trustee’s deeds and the need for finality in real‑property title)
- Ockey v. Lehmer, 189 P.3d 51 (Utah 2008) (void‑as‑against‑public‑policy standard for setting aside deeds)
- Occidental/Nebraska Fed. Sav. Bank v. Mehr, 791 P.2d 217 (Utah Ct. App. 1990) (procedural notice defects intended to protect trustor; premature notice does not require setting aside sale absent prejudice)
- In re Discipline of Sonnenreich, 86 P.3d 712 (Utah 2004) (bad‑faith statute requires action or defense both without merit and not brought in good faith)
- Wardley Better Homes & Gardens v. Cannon, 61 P.3d 1009 (Utah 2002) (definition of “without merit” for fee‑shifting bad‑faith analysis)
- Timm v. Dewsnup, 86 P.3d 699 (Utah 2003) (irregularities in foreclosure procedure immaterial absent prejudice or chilling of bidding)