427 P.3d 511
Utah Ct. App.2018Background
- Bay Harbor Farm, LLC (Bay Harbor) is an LLC formed in 1994; Proctor and Weed each had 45% interests and were listed as managers; no written operating agreement existed.
- Bay Harbor largely ceased farm operations after 2001; Proctor leased and operated the property and a worker was injured in 2002, leading to workers’ compensation litigation naming both Bay Harbor and Proctor.
- Proctor retained attorney Steven Sumsion to defend him; Sumsion believed Proctor had authority to retain him for Bay Harbor and filed an appearance and billed work on Bay Harbor’s behalf beginning in 2005.
- In December 2005 Proctor (and his wife Anna) signed an engagement letter and promissory note that referenced Bay Harbor; Proctor later died in 2008 and Anna signed a second promissory note in 2009.
- Sumsion recorded an attorney’s lien against Bay Harbor property in 2006. Bay Harbor challenged the lien; in a prior appeal the court held the lien was not a “wrongful lien” but left open whether Bay Harbor was Sumsion’s client.
- In 2014 Sumsion sued to foreclose his lien and for breach of contract and unjust enrichment; the district court granted Bay Harbor summary judgment, concluding Proctor lacked authority to bind Bay Harbor and Sumsion’s unjust-enrichment claim was time-barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Bay Harbor was Sumsion’s client (authority to bind LLC) | Proctor (as manager/participant) had apparent/actual authority and Weed acquiesced/ratified retention | Utah statute required assent of two-thirds of profit interests for acts outside ordinary course; no written operating agreement waived that rule and Weed did not assent | Bay Harbor was not Sumsion’s client; Proctor lacked authority alone and Weed did not assent; summary judgment affirmed |
| Whether hiring Sumsion was within ordinary course of business | (Sumsion) could be within ordinary course; factual dispute exists | (Bay Harbor) defensive litigation after farm ceased was outside ordinary course and triggered 2/3 approval requirement | Court accepted district court’s finding that retention was outside ordinary course; inadequately briefed contrary argument by Sumsion |
| Whether unwritten waiver/operating agreement existed to vary statutory 2/3 rule | Sumsion: course of dealing between Proctor and Weed effectively waived the statutory default | Bay Harbor: statutory definition required a written operating agreement in effect at the time; none existed | No waiver; 2005 statute required written operating agreement to vary default rule, so 2/3 rule applied |
| Timeliness of unjust-enrichment claim | Tolling via promissory note or tolling by prior litigation; laches | Claim accrued by Aug 2006; four-year statute expired in 2010; no effective tolling shown | Claim time-barred under four-year statute; tolling arguments rejected; laches argument unpreserved |
| Validity/enforceability of attorney’s lien | Lien arises by statute for compensation due | No compensation due because Bay Harbor was not a client and unjust-enrichment claim is time-barred | Lien has no basis here and foreclosure claim fails |
| Entitlement to appellate attorney fees | — | Bay Harbor sought fees under promissory-note statute after prevailing below | Because Bay Harbor prevailed on appeal, remand to quantify reasonable appellate fees |
Key Cases Cited
- Bay Harbor Farm, LC v. Sumsion, 329 P.3d 46 (Utah Ct. App. 2014) (prior appeal holding attorney’s lien was not a wrongful lien)
- Rehn v. Christensen, 392 P.3d 872 (Utah Ct. App. 2017) (attorney’s lien arises by operation of law for compensation due)
- Emergency Physicians Integrated Care v. Salt Lake County, 167 P.3d 1080 (Utah 2007) (unjust enrichment as remedy to recover reasonable value of services)
- Bullock v. Department of Transportation, 966 P.2d 1215 (Utah Ct. App. 1998) (ratification requires knowledge of all material facts and intent to ratify)
- Zions Gate R.V. Resort, LLC v. Oliphant, 326 P.3d 118 (Utah Ct. App. 2014) (ratification premised on full knowledge and express or implied intention to ratify)