440 P.3d 906
Utah Ct. App.2019Background
- Veracity Networks (tenant) filed an interpleader after competing demands for rent: MCG (landlord), Banner Bank (assignee of rents), and an attorney who claimed a lien. Veracity deposited rents with the court and sought to be discharged from liability.
- The underlying landlord-tenant action (unlawful detainer) had been decided for MCG in district court and was on appeal; Veracity continued to assert the Lease might be invalid and reserved rights regarding overpayments.
- District court dismissed the interpleader, finding Banner Bank’s assignment of rents uncontested, and later awarded attorney fees to MCG based on two Lease provisions: an attorney-fees clause (Paragraph 22.13) and an indemnification clause (Paragraph 11.1).
- Veracity appealed the fee award, arguing (1) the interpleader was not an action to interpret the Lease and therefore not covered by the attorney-fees clause, and (2) the indemnification clause did not authorize fees in this intra-party action or was barred because MCG acted with willful misconduct/gross negligence.
- The Court of Appeals held that the interpleader was not an action to interpret the Lease, so fees under Paragraph 22.13 were improper; but because the district court gave no factual findings or reasoning as to Paragraph 11.1 (willful misconduct/gross negligence and applicability), the appellate court remanded for further proceedings and vacated the fee award.
Issues
| Issue | Plaintiff's Argument (Veracity) | Defendant's Argument (MCG) | Held |
|---|---|---|---|
| Whether the interpleader was an action "to enforce or interpret" the Lease (attorney-fees clause) | Interpleader sought only to resolve competing payees and reserve rights; it was not brought to interpret or relitigate Lease terms | Veracity put Lease terms at issue by disputing rent amount and claiming interest in rents, so attorney-fees clause applies | Court: Interpleader was not an action to interpret the Lease; fee award under Paragraph 22.13 was erroneous |
| Whether indemnification clause (Paragraph 11.1) authorizes fees in this intra-party interpleader | Clause applies only to third-party actions; alternatively, MCG acted with willful misconduct/gross negligence so indemnification is barred | Clause’s plain language covers "any litigation…to which Landlord is made a party" and thus can apply; there was no willful misconduct | Court: Could not resolve on appeal—issue not preserved as third-party-only argument, and district court made no findings on willful misconduct/gross negligence; remand required for reasoned findings |
| Whether district court plainly erred in applying American Rural Cellular to deny indemnification in intra-party dispute | N/A (Veracity invoked American Rural Cellular to show settled law) | N/A | Court: American Rural Cellular persuasive but not so clearly controlling that district court plainly erred; review limited by plain-error standard |
| Whether MCG is entitled to appellate attorney fees | MCG prevailed below and seeks fees on appeal | Veracity opposes | Court: Because fee award below vacated and MCG did not prevail on appeal, MCG is not entitled to appellate fees |
Key Cases Cited
- R.T. Nielson Co. v. Cook, 40 P.3d 1119 (Utah 2002) (contractual attorney-fee awards are enforced only according to contract terms)
- American Rural Cellular, Inc. v. Systems Communication Corp., 939 P.2d 185 (Utah Ct. App. 1997) (interpreting an indemnity clause to apply to third-party claims rather than intra-party disputes given contract context)
- Blaisdell v. Dentrix Dental Sys., Inc., 284 P.3d 616 (Utah 2012) (reciting and applying American Rural Cellular)
- Capson v. Brisbois, 592 P.2d 583 (Utah 1979) (interpleading stakeholder may recover fees in some circumstances)