CHAD ESKELSEN AND LORNA ESKELSEN, Appellants, v. THETA INVESTMENT COMPANY, Appellee.
No. 20160955-CA
THE UTAH COURT OF APPEALS
January 4, 2019
2019 UT App 1
Fifth District Court, St. George Department, The Honorable Jeffrey C. Wilcox, No. 120500400
Daniel J. Tobler, Attorney for Appellants
Bryan J. Pattison, Attorney for Appellee
JUDGE MICHELE M. CHRISTIANSEN FORSTER authored this Opinion, in which JUDGES KATE APPLEBY and JILL M. POHLMAN
CHRISTIANSEN FORSTER, Judge:
¶1 Chad Eskelsen and Lorna Eskelsen appeal from the trial court‘s judgment in favor of Theta Investment Company (Theta). We affirm.
BACKGROUND
¶2 In August 2007, JENCO LC and VC Holdings LLC teamed up to purchase real property (the Property) in St. George, Utah. Gilbert Jennings formed, and was the manager of, JENCO. Vaughn Hansen and Carolyn Hansen formed VC Holdings in 2005. VC Holdings was a manager-managed company, and the Hansens were the company‘s only members. Together, the two companies purchased the Property, with JENCO receiving a 68.2% interest in the Property and VC Holdings receiving a 31.8% interest. Shortly after purchasing its interest in the Property, VC Holdings named Mr. Hansen as manager.
¶3 In March 2008, JENCO and VC Holdings formed JVC Leasing LC, and Mr. Jennings was appointed manager of the company. A few months later, JENCO and VC Holdings transferred 100% of their respective interests in the Property to JVC Leasing. In return, JENCO received a 68.2% interest in JVC Leasing, and VC Holdings received a 31.8% interest in JVC.
¶4 In May 2009, the Eskelsens loaned the Hansens $120,000. The Hansens signed a promissory note for the full amount of the loan, and, as security for the loan, they executed a “Limited Liability Company Membership Interest Pledge Agreement,” pledging to the Eskelsens 100% of the total issued and outstanding membership interests in VC Holdings. Importantly, VC Holdings was not a party to the promissory note.
¶5 In June 2010, the Hansens defaulted on the promissory note, and the Eskelsens hired attorney Daniel J. Tobler to help them collect on the promissory note.1 The Eskelsens also filed a UCC-1 financing statement with the Utah Department of Commerce to perfect their security interest in 100% of the membership interests in VC Holdings.2
¶6 In late December 2010, as part of his collection efforts, Mr. Tobler sent a letter (the Foreclosure Letter) to the Hansens, stating that the Eskelsens were “accepting [the Hansens‘] total issued and outstanding membership interests in VC Holdings” “in full satisfaction” of the promissory note. The letter stated that the Eskelsens “were the sole members of VC Holdings” and that they were removing the Hansens as members and managers of the company. Finally, the letter said the Hansens had twenty days to object to the Eskelsens’ proposal.
¶8 In January 2011, Mr. Tobler received a telephone call from another attorney, Mr. Blanchard, who was calling as a favor to the Hansens. Mr. Blanchard stated that his firm officially represented Mr. Jennings. Mr. Blanchard also stated that he did not believe the Eskelsens had properly foreclosed on the Hansens’ membership interests in VC Holdings, but he nevertheless suggested a compromise whereby Mr. Hansen would broker a sale of the Property to Mr. Jennings (through one of Mr. Jennings‘s entities) and place in escrow the proceeds of the sale. The Hansens and the Eskelsens could then determine how the proceeds should be distributed. Mr. Tobler agreed to consult with the Eskelsens and to contact Mr. Blanchard with their answer.
¶9 After his discussion with Mr. Blanchard, Mr. Tobler received a letter from Mr. Jennings in response to Mr. Tobler‘s December 2010 letter. Mr. Jennings asked for “documentary proof of the transition of ownership” of VC Holdings. He also stated that VC Holdings was “indebted to [JVC Leasing] in the amount of $54,270.50” and suggested that the Eskelsens contact him to “work out a repayment plan.” Mr. Tobler never provided Mr. Jennings or Mr. Blanchard with the Foreclosure Letter or the signed agreement between the Eskelsens and the Hansens. He also never provided Mr. Jennings or Mr. Blanchard with the requested “documentary proof” of the transfer of ownership of VC Holdings.
¶10 According to Mr. Jennings, after he received the Eskelsens’ December 27, 2010 letter, he consulted with Mr. Hansen about the Eskelsens’ claims. Mr. Jennings testified that Mr. Hansen claimed that he (Mr. Hansen) was still the owner of VC Holdings. Mr. Jennings also searched Utah‘s Department of Commerce website and found that Mr. Hansen was still listed as VC Holdings’ manager.
¶11 In January 2011, Mr. Tobler contacted Mr. Blanchard and informed him that the Eskelsens would agree to the proposed escrow agreement. Both attorneys later testified that they understood that the Eskelsens, the Hansens, and Mr. Jennings would agree to sign the escrow agreement. Approximately one month later, Mr. Blanchard contacted Mr. Tobler and informed him that he had not yet had a chance to put together the escrow agreement. Then, on March 22, Mr. Blanchard informed Mr. Tobler that the Hansens wished to work directly with the Eskelsens. Mr. Blanchard stated that he had not prepared an escrow agreement. He also stated that Mr. Tobler should contact him if the Eskelsens did not hear from the Hansens within the next few days. Mr. Blanchard later testified that when he contacted Mr. Tobler on March 22, he was unaware that the Hansens and Mr. Jennings planned to sell VC Holdings’ interest in the Property. Mr. Tobler did not contact Mr. Blanchard within the next few days as requested.
¶12 Ultimately, the Hansens and Mr. Jennings agreed that VC Holdings would sell its ownership interest in JVC Leasing to Theta for $236,337. At that time, Mr. Jennings was the vice president of Theta. Mr. Jennings later testified that he asked Mr. Hansen if he had authority to conduct business on behalf of VC Holdings, and Mr. Hansen confirmed that he did. Mr. Hansen also told Mr. Jennings that the Eskelsens did not have a valid claim to VC Holdings.
¶13 On March 23, 2011, Mr. Engstrom, a partner at Mr. Blanchard‘s firm, ordered closing documents from Southern Utah Title Company for a transfer of 31.8% of the Property interest from JVC Leasing to VC Holdings and then to Theta. Before closing, Southern Utah Title independently verified that Mr. Hansen had the authority to sign the closing documents for VC Holdings. On March 29, Mr. Hansen, acting as manager of VC Holdings, signed an agreement redeeming VC Holdings’ 31.8% membership interest
¶14 In August 2011, the Eskelsens received notice of the Hansens’ chapter 7 bankruptcy filing. That same day, Mr. Tobler searched the relevant recorder‘s office website and discovered the March 29 transfer documents.
¶15 The Eskelsens sued the Hansens, VC Holdings, and Theta. The Eskelsens sought a judgment declaring that VC Holdings, not Theta, owned the 31.8% interest in the Property. The Eskelsens asserted that (1) the transfer to Theta was void as a fraudulent transfer, (2) even if the transfer was not fraudulent, it was void because Mr. Hansen lacked authority to act as VC Holdings’ manager, and (3) even if the transfer was not fraudulent and Mr. Hansen had authority to act as VC Holdings’ manager, the transfer was void because it was “outside of the ordinary course of business” and “Mr. Hansen did not have specific authority to transfer away all of VC Holdings’ assets.”
¶16 After a two-day bench trial, the trial court ruled in Theta‘s favor. In its written findings of fact and conclusions of law, the court concluded (1) that the March 29, 2011 transfer was not a fraudulent transfer, (2) that the Eskelsens failed to properly remove Mr. Hansen as VC Holdings’ manager and Mr. Hansen was therefore VC Holdings’ manager on the date of the transfer, (3) and that Mr. Hansen‘s actions as manager bound VC Holdings.
¶17 After trial, the Eskelsens filed a motion to amend and make additional findings pursuant to
ISSUES AND STANDARDS OF REVIEW
¶18 The Eskelsens first contend that the trial court erred in determining that Mr. Hansen “did not commit a fraudulent transfer under the Utah [Uniform] Fraudulent Transfer Act.” With regard to this claim, we review questions of fact for clear error and questions of law for correctness. Tolle v. Fenley, 2006 UT App 78, ¶ 11, 132 P.3d 63. Although we review questions of law for correctness, “we may still grant a trial court discretion in its application of the law to a given fact situation.” Id. (quotation simplified). “Questions of statutory interpretation are questions of law that are reviewed for correctness and no deference is given to the trial court‘s determination.” Id.
¶19 Second, the Eskelsens contend that the trial court erred in determining the Eskelsens had the burden of disproving Theta‘s defense that it was a good faith transferee.3 “Burden of proof questions typically present issues of law that [we] review[] for correctness.” Martinez v. Media-Paymaster Plus/Church of Jesus Christ of Latter-day Saints, 2007 UT 42, ¶ 41, 164 P.3d 384.
¶20 Third, the Eskelsens contend that the trial court erred in determining two particular facts. They assert error in the trial court‘s determination that “Theta . . . did not
¶21 Fourth, the Eskelsens argue that the trial court erred “by not imputing knowledge through the principal-agency relationship between Theta . . . and its attorneys.” “Whether a principal is imputed with its agent‘s knowledge is a legal question” we review for correctness. Lane v. Provo Rehab. & Nursing, 2018 UT App 10, ¶ 23, 414 P.3d 991; see also Insight Assets, Inc. v. Farias, 2013 UT 47, ¶ 13, 321 P.3d 1021 (observing that whether a title company‘s knowledge of a mortgage was imputed to a bank was a question of law). However, whether an agent has knowledge to impute, and what that knowledge is, presents a question of fact, which is we review for clear error. See id. (observing that whether a bank had actual knowledge of a mortgage was a question of fact).
¶22 Fifth, the Eskelsens contend that the trial court erred by denying in part their motion to amend and make additional findings of fact under
ANALYSIS
I. Fraudulent Transfer
¶23 The Eskelsens contend that “[t]he trial court erred in determining [that] the Hansens did not commit a fraudulent transfer.” According to the Eskelsens, “even if [the Hansens] did have some form of authority, the transfer of VC Holdings’ property interest (in JVC Leasing) is voidable as a fraudulent transfer under the Utah [Uniform] Fraudulent Transfer Act.” We are not persuaded.
¶24 Utah‘s Uniform Fraudulent Transfer Act (the Act) “affords remedies for ‘creditors’ against ‘debtors’ who have engaged in fraudulent transfers of property.” See
¶25 Importantly, “[a] fraudulent transfer in Utah first requires a creditor-debtor relationship.” Bradford v. Bradford, 1999 UT App 373, ¶ 14, 993 P.2d 887. A “creditor” is “a person who has a claim,” and a “debtor” is “a person who is liable on a claim.”
¶26 The trial court concluded that the March 29, 2011 transfer between VC Holdings and Theta was not a fraudulent transfer. First, the court determined that “[t]here is no issue that the Hansens are ‘Debtors’ under the Act. The Hansens individually borrowed $120,000 from the Eskelsens. Thus a Debtor/Creditor relationship was established.” And the parties do not dispute this determination on appeal.
¶27 Next, the court observed that VC Holdings was not a party to the loan between the Eskelsens and the Hansens and that VC Holdings did not owe a debt to the Eskelsens. Therefore, the trial court concluded, VC Holdings was not a “debtor” under the Act, and the Eskelsens’ fraudulent transfer claim against VC Holdings necessarily failed. We agree. The record demonstrates that VC Holdings owned the asset at issue—the membership interest in JVC Leasing, which owned the Property—and that VC Holdings transferred its interest in JVC Leasing to Theta. See generally
¶28 Regarding the Eskelsens’ fraudulent transfer claim against the Hansens as individuals, the trial court observed that “JVC Leasing was the owner of the Property, not the Hansens.” The court noted that VC Holdings owned an interest in JVC Leasing, and it was VC Holdings’ interest in JVC Leasing that was transferred to Theta at the March 29, 2011 closing. Because the Hansens, in their individual capacity, did not own an interest in JVC Leasing, the Hansens “could not and did not transfer any interest in JVC Leasing at the March 29, [2011] closing.” The court therefore concluded that the Eskelsens’ fraudulent transfer claim against the Hansens also failed. Again, we agree with the trial court.
¶29 The Act defines a “transfer” as “every mode . . . of disposing of or parting with an asset or an interest in an asset.”
¶30 The record also does not establish, and the Eskelsens do not directly argue, that VC Holdings was Mr. Hansen‘s “alter ego” so that the sale of VC Holdings’ interest in JVC Leasing could nevertheless be considered a transfer of a debtor‘s property. Under the “alter ego” doctrine, a court may disregard a corporate entity and hold an
(1) there must be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, viz., the corporation is, in fact, the alter ego of one or a few individuals; and (2) the observance of the corporate form would sanction a fraud, promote injustice, or an inequitable result would follow.
Norman v. Murray First Thrift & Loan Co., 596 P.2d 1028, 1030 (Utah 1979). Courts have referred to the first prong as the “formalities requirement.” d‘Elia v. Rice Dev., Inc., 2006 UT App 416, ¶ 30, 147 P.3d 515. A non-exclusive list of factors courts consider in determining whether this prong has been met includes:
(1) undercapitalization of a one-[person] corporation; (2) failure to observe corporate formalities; (3) nonpayment of dividends; (4) siphoning of corporate funds by the dominant stockholder; (5) nonfunctioning of other officers or directors; (6) absence of corporate records; [and] (7) the use of the corporation as a facade for operations of the dominant stockholder or stockholders.6
Colman v. Colman, 743 P.2d 782, 786 (Utah Ct. App. 1987). Courts have referred to the second prong as the “fairness requirement,” and its satisfaction is left “to the conscience of the court.” d‘Elia, 2006 UT App 416, ¶ 30 (quotation simplified). Both prongs of the Norman test must be met in order to make an alter ego claim. See Lodges at Bear Hollow Condo. Homeowners Ass‘n, Inc. v. Bear Hollow Restoration, LLC, 2015 UT App 6, ¶ 12, 344 P.3d 145.
¶31 Nothing in the record establishes that there was no meaningful separation between Mr. Hansen and VC Holdings at the time of the loan, or that Mr. Hansen did not observe proper formalities or keep proper records as an owner, or that funds between VC Holding and Mr. Hansen were being comingled when he was an owner. Additionally, nothing suggests that the loan was for VC Holdings. The trial court did reach an alternative conclusion on the issue of whether the Hansens’ actions could be considered a fraudulent transfer if the Hansens’ and VC Holdings‘s interests could “somehow be melded together so as to become a ‘Debtor.‘”7 But because it is not established, or even argued, that there was a melding together or unity of VC Holdings and Mr. Hansen‘s interests so as to prove that he was the alter ego of VC Holdings, we need not and do not undertake that inquiry.
¶32 Based on the foregoing, we decline to disturb the trial court‘s conclusions.
II. Theta‘s Affirmative Defense
¶33 The Eskelsens next contend that “[t]he trial court erred in determining [that] the Eskelsens had the burden of proving Theta Investment‘s affirmative defense” that Theta was a good faith transferee. More specifically, the Eskelsens assert that Theta had the burden of showing that it “paid valuable consideration and did so without notice” in order to be protected as a good faith transferee, and that the trial court incorrectly shifted that burden to the Eskelsens. Theta, on the other hand, contends that because “[t]he Eskelsens never demonstrated a fraudulent transfer,” “the burden never shifted to Theta on its affirmative defense.” We agree with Theta.
¶34 Section 25-6-5(1) of the Act provides that a fraudulent transfer occurs when a debtor (a) transfers property with actual intent to hinder, delay, or defraud any creditor, or (b) transfers property under certain circumstances without receiving reasonably equivalent value in exchange.
¶35 Here, the trial court did not find that the underlying transaction was voidable as a fraudulent transfer, and thus, the burden never shifted to Theta to prove that it took the Property in good faith and for reasonably equivalent value. Consequently, we conclude that the trial court committed no error on this issue.
III. Theta‘s Knowledge
A. The Eskelsens’ Competing Claim to the Property
¶36 The Eskelsens next contend that the trial court erred in determining certain facts. First, it determined that Theta, via Mr. Jennings, did not have notice of the Eskelsens’ claim to VC Holdings and the Property, and therefore Theta could not have been a good faith transferee. See
¶37 In the context of the good faith transferee defense “[i]t is notice, not knowledge, that the purchaser must have, and it need not be actual notice[—]constructive notice is sufficient to defeat the purchaser‘s claim.” Meyer v. General Am. Corp., 569 P.2d 1094, 1097 (Utah 1977). Constructive notice, such as inquiry notice, “can occur when circumstances arise that should put a reasonable person on guard so as to require further inquiry on his part.” Id.; see also FDIC v. Taylor, 2011 UT App 416, ¶¶ 36–39, 267 P.3d 949 (observing that “Utah courts recognize both actual notice and constructive notice,” and “constructive notice can include . . . inquiry notice which is presumed because of the fact that a person has knowledge of certain facts which should impart to him, or lead him to, knowledge of the ultimate fact” (quotation simplified)). Here, the trial court concluded that Mr. Jennings was made aware of the Eskelsens’ claim when he received the December 2010 letter, and that Mr. Jennings therefore “had a duty to inquire about the Eskelsens’ claims.” The court further concluded that Mr. Jennings had indeed conducted “a reasonable inquiry into the Eskelsens’ claims.”
¶38 Specifically, the court found that upon receipt of the December 2010 letter, Mr. Jennings immediately responded with his own letter asking for “documentary proof of the transition of ownership,” but that the Eskelsens never responded to that request. Mr. Jennings also asked Mr. Hansen about the Eskelsens’ claim, and Mr. Hansen told Mr. Jennings that their claim was not valid and that he (Mr. Hansen) had authority to sign for VC Holdings. Mr. Jennings then searched the Utah Department of Commerce‘s website and saw that Mr. Hansen was listed as the manager for VC Holdings. Theta conducted the closing through Southern Utah Title Company, which had performed its own search of the Department of Commerce‘s website and found that Mr. Hansen was listed as manager of VC Holdings. Theta also received a title commitment that did not show any encumbrances to JVC Leasing‘s interest in the Property.
¶39 The court further found that (1) Mr. Jennings relied on Mr. Hansen‘s representations
¶40 “[T]o successfully challenge a trial court‘s factual findings on appeal, the appellant must overcome the healthy dose of deference owed to factual findings by identifying and dealing with the supportive evidence and demonstrating the legal problem in that evidence, generally through marshaling the evidence.” Taft v. Taft, 2016 UT App 135, ¶ 19, 379 P.3d 890 (quotation simplified). “[A] party who fails to identify and deal with supportive evidence will never persuade an appellate court to reverse under the deferential standard of review that applies to factual findings.” Id. (quotation simplified).
¶41 Theta is correct that, on appeal, the Eskelsens do not marshal the supportive evidence or challenge “the trial court‘s extensive findings that the inquiry was exhaustive and turned up nothing.” Rather, they make claims about what Mr. Jennings and Theta should have known or might have learned had they investigated further. For example, the Eskelsens assert that “[h]ad [Mr. Jennings] investigated further or possibly inquired of his own attorneys he would have learned the Eskelsens’ claim was legitimate.” They also assert that “relying on the Utah Department of Commerce‘s website . . . was inadequate” because “Mr. Jennings himself had not update[d] the Department‘s website when he moved from vice-president to president of Theta . . . for at least three to four years, indicating he should know it is not a reliable source for definitive information.”
¶42 The Eskelsens’ self-serving statements do not discharge their burden of demonstrating that the trial court‘s findings are not adequately supported by the record. See Taft, 2016 UT App 135, ¶ 19. Because the Eskelsens have “not adequately marshaled the evidence” and have “otherwise failed” to demonstrate clear error, “we presume that the evidence supports the trial court‘s finding” that Theta, via Mr. Jennings, conducted a reasonable inquiry into the Eskelsens’ claim. See Grimm v. DxNA LLC, 2018 UT App 115, ¶ 17, 427 P.3d 571.
B. Mr. Hansen as Manager of VC Holdings
¶43 The Eskelsens also contend that “[t]he trial court erred in determining [that] the Hansens had authority to act for VC Holdings on March 29, 2011.” VC Holdings was established as a manager-managed company. At the time the transfer took place, manager-managed companies were governed under the Utah Revised Limited Liability Company Act.8 This act required initial managers to be “designated in the articles of organization“; and afterwards “managers shall be those persons identified in documents filed with the division.”
¶44 The Eskelsens assert that Mr. Hansen lacked the authority to act on behalf of VC Holdings. As part of this argument they assert that “[a]s they became the sole members of VC Holdings, [they] removed the Hansens
¶45 At trial, the Eskelsens asserted that they properly foreclosed on the Hansens’ membership interests in VC Holdings pursuant to
Because the Eskelsens, as new members of VC Holdings, did not properly remove Mr. Hansen as the manager of VC Holdings; did not file a certificate of amendment pursuant to paragraph 8.1(a) of the Operating Agreement; and, did not dispute the Division‘s website prior to the March 29, 2011 closing, . . . Mr. Hansen, not the Eskelsens, was the Manager of VC Holdings on March 29, 2011.
¶46 On appeal, the Eskelsens do not engage with the reasoning behind the trial court‘s conclusion that Mr. Hansen was the manager of VC Holdings on March 29, 2011. See Hi-Country Estates Homeowners Ass‘n v. Jesse Rodney Dansie Living Trust, 2015 UT App 218, ¶ 5, 359 P.3d 655 (“[A]n appellant must address the basis for the district court‘s ruling.“); Golden Meadows Props., LC v. Strand, 2010 UT App 257, ¶ 17, 241 P.3d 375 (explaining that an appellant cannot demonstrate that a district court erred if it “fails to attack the district court‘s reasons” for its decision). Instead, as Theta correctly observes, “[t]he Eskelsens proceed as though it was established that they removed [Mr.] Hansen as manager of VC Holdings and installed themselves to that position.” The Eskelsens have failed to provide any meaningful authority or reasoned analysis challenging the trial court‘s finding that the Eskelsens did not remove Mr. Hansen as manager of VC Holdings. See
C. Mr. Hansen‘s Authority as Manager
¶47 The Eskelsens next assert that “the Hansens’ actions on March 29, 2011, exchanging VC Holdings’ interest in JVC Leasing for an interest in [the Property] and then transferring that real property interest to Theta Investment was done without authority because the Hansens . . . did not have the Eskelsens’ approval.”
¶48
an act of a manager, including the signing of a document in the company name, for apparently carrying on in the ordinary course of the company business, or business of the kind carried on by the company, binds the company unless the manager had no authority to act for the company in the particular matter and the lack of authority was expressly described in the articles of organization or the person with whom the manager was dealing knew or otherwise had notice that the manager lacked authority.
¶49 Here, the trial court observed that VC Holdings’ Articles of Organization contain “no express language limiting Mr. Hansen‘s authority, as Manager, to transfer VC Holdings[‘s] assets.” However, VC Holdings‘s Operating Agreement contains a prohibition on managers’ actions. Specifically, article 5.4 of the Operating Agreement provides:
Notwithstanding any other provision of this Agreement, without the approval of Members whose aggregate Membership Interest is at least 51 percent, the Managers may take no action with respect to: the sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the Company‘s assets . . . .
¶50 Theta correctly observes that the Eskelsens do not challenge the trial court‘s finding that Mr. Jennings did not have notice of any restriction on Mr. Hansen‘s authority to act pursuant to section 5.4 of VC Holdings’ Operating Agreement. Rather, the Eskelsens acknowledge the trial court‘s finding and continue to assert that Mr. Jennings “had significant and continual notice of the Eskelsens’ claim,” which “must amount to knowledge that the Hansens lacked authority” to act on behalf of VC Holdings.
¶51 As previously discussed, however, the court found that Mr. Jennings conducted a reasonable inquiry into the Eskelsens’ claim. Mr. Jennings asked for “documentary proof” of their claim but never received it. Mr. Jennings spoke with Mr. Hansen about his authority to act on VC Holdings’ behalf. He also searched the Department of Commerce‘s website and discovered that Mr. Hansen was listed as VC Holdings’ manager. As the trial court observed, the “simple act” of updating the Department of Commerce‘s website, as required by section 8.1(a) of VC Holdings’ Operating Agreement, would have “provided part of the additional proof that Mr. Jennings requested” from the Eskelsens. That update also would have put Southern Utah Title, which conducted its own search of the Department of Commerce‘s website, on notice that the Eskelsens’ did not intend to retain Mr. Hansen as the manager of VC Holdings.
¶52 In addition, pursuant to
¶53 Here, the trial court correctly recognized that, although section 5.4 of VC Holdings’ Operating Agreement contained a restriction on Mr. Hansen‘s authority to act, the company‘s articles of organization, which are a matter of public record, did not contain a similar restriction on authority. Thus, the trial court appropriately considered whether Mr. Jennings knew of section 5.4‘s requirement “that Mr. Hansen had to have VC Holding[s‘s] members[‘] approval before participating in the March 29, 2011 closing,” and the court concluded that Mr. Jennings had no notice or knowledge of section 5.4‘s restriction on Mr. Hansen‘s authority.
¶54 The trial court found additional support for its conclusion that Mr. Jennings had no knowledge of any restrictions on Mr. Hansen‘s authority under article 5.5 of the Operating Agreement, titled “Agency Power and Authority,” which provides:
A Manager apparently acting for the Company in the usual course of business has the power to bind the Company and no person has an obligation to inquire into the Manager‘s actual authority to act on the company‘s behalf. However, if a Manager acts outside the scope of the Manager‘s actual authority, the Manager will indemnify the Company for and costs of damages it incurs as a result of the unauthorized act.
(Emphasis added.) The court observed that each of the Hansens signed a “Resolution of Members” authorizing the sale of VC Holdings’ ownership interest in JVC Leasing. And although neither of the Hansens were actually members of VC Holdings on March 29, 2011,9 “no evidence was produced at trial that
¶55 On appeal, the Eskelsens fail to acknowledge the trial court‘s findings regarding section 5.5 of the Operating Agreement. See Golden Meadows Props., LC v. Strand, 2010 UT App 257, ¶ 17, 241 P.3d 375 (explaining that an appellant cannot demonstrate that a district court erred if it “fails to attack the district court‘s reasons” for its decision). Consequently, they have not carried their burden of demonstrating that the trial court‘s findings regarding section 5.5 were not adequately supported by the record. See Taft v. Taft, 2016 UT App 135, ¶ 19, 379 P.3d 890.
¶56 In sum, the Eskelsens have not demonstrated clear error in the trial court‘s findings relating to Mr. Hansen‘s authority to act, and its findings that Theta and Mr. Jennings had no notice or knowledge of the restrictions in section 5.4 of VC Holdings‘s Operating Agreement are adequately supported by the evidence. Consequently, we are not persuaded the trial court erred in determining that Mr. Hansen had the authority to act on VC Holdings‘s behalf on March 29, 2011, the date the Property was transferred.
IV. The Principal-Agency Relationship
¶57 The Eskelsens next contend that “[t]he trial court erred by not imputing knowledge through the principal-agency relationship between Theta Investment and its attorneys.” According to the Eskelsens, “[t]hrough his attorneys“—Mr. Blanchard and Mr. Engstrom—“Mr. Jennings had full knowledge of the loan between the Eskelsens and the Hansens because Mr. Blanchard had actually drafted those agreements.” “Further,” the Eskelsens assert, “Mr. Jennings knew the only reason the Eskelsens were not taking further steps to exclude the Hansens after accepting their membership interest in VC Holdings is because of a tentative agreement to allow the Hansens to broker a sale,” i.e., the escrow agreement. We are not persuaded.
¶58 To begin, Mr. Blanchard prepared the loan agreement for the Hansens, not Mr. Jennings. Pursuant to the Restatement (Third) of the Law Governing Lawyers, “[u]nder traditional agency principles, a lawyer‘s knowledge relating to the representation is attributed to the lawyer‘s client.” Restatement (Third) of the Law Governing Lawyers § 28 cmt. B (Am. Law Inst. 2000). Id. § 28 cmt. b. But “[a] client is not charged with a lawyer‘s knowledge concerning a transaction in which the lawyer does not represent the client.” Id. See generally
¶59 Moreover, at trial, Mr. Blanchard struggled to remember the loan agreement he prepared for the Hansens. He was unsure whether he wrote it or whether a paralegal wrote it under his direction. Mr. Blanchard could tell from the agreement that he sent it to the Hansens with blanks for them to fill in. He could not recall if he was present when the agreement was signed, and he did not “remember ever having a signed copy.” When asked if he recalled preparing the loan agreement at the time he spoke with Mr. Tobler, Mr. Blanchard stated, “It‘s possible I had forgotten. I think I remembered, but maybe I—maybe I didn‘t. Again, I didn‘t pull it up. I didn‘t look at it. I didn‘t see it. Frankly, I didn‘t spend a lot of time on it.” Mr. Engstrom was not called to testify at trial.
¶60 The trial court listened to the testimony of Mr. Jennings and Mr. Blanchard and declined to find that Mr. Blanchard knew what the Eskelsens claim he should have known and that any of Mr. Blanchard‘s knowledge should be imputed to Mr. Jennings. See American Fork City v. Thayne, 2012 UT App 130, ¶ 4, 279 P.3d 840 (per curiam) (“We defer to the trial court‘s ability and opportunity to evaluate credibility and demeanor.” (quotation simplified)). Indeed,
¶61 Based upon the trial court‘s advantaged position in judging credibility and resolving conflicts in the evidence, and the deference we thus owe it, we conclude that the court did not err in declining to impute unproven “knowledge” to Mr. Jennings or Theta.
V. The Eskelsens’ Motion to Amend
¶62 Finally, the Eskelsens assert that “[t]he trial court erred in denying in part [their] motion to amend its findings.” According to the Eskelsens, “the Trial Court made a few incorrect Findings of Fact” that ”potentially had a significant impact on the Court‘s conclusions.” (Emphasis added.)
¶63 First, the Eskelsens challenge paragraph 31 of the trial court‘s findings of fact, which states, “Mr. Tobler never gave Mr. Blanchard the Foreclosure Letter or the signed Agreements.” The Eskelsens assert that the court should also have found that “Mr. Blanchard actually drafted those exact agreements and remembered that fact at the time he was discussing these matters with Mr. Tobler.” Thus, according to the Eskelsens, “it is really of no significance that Mr. Tobler did not provide [Mr. Blanchard] with signed agreements because [Mr. Blanchard] already knew exactly what was in them.”
¶64 At trial, however, Mr. Blanchard had no clear recollection on the matter:
Q. At the time you‘re talking to [Mr.] Tobler, did you recall that you had done the promissory note and pledge agreement that . . . formed the basis of the debt between the Eskelsens and the Hansens, or had you maybe forgotten that?
A. It‘s possible I had forgotten. I think I remembered, but maybe I—maybe I didn‘t. Again, I didn‘t pull it up. I didn‘t look at it. I didn‘t see it. Frankly, I didn‘t spend a lot of time on it . . ..
In addition, he was unsure whether he wrote the loan agreement or whether a paralegal wrote it under his direction. Mr. Blanchard could not recall whether he was present when the agreement was signed, and he did not “remember ever having a signed copy.”
¶65 “We defer to the trial court‘s ability and opportunity to evaluate credibility and demeanor.” American Fork City v. Thayne, 2012 UT App 130, ¶ 4, 279 P.3d 840 (per curiam) (quotation simplified). Here, the trial court listened to Mr. Blanchard‘s testimony and had the opportunity to evaluate his credibility and demeanor. Based on that testimony, the trial court reasonably could have determined that Mr. Blanchard did not have any specific memory of the loan agreement he prepared for the Hansens and the Eskelsens. Consequently, we cannot conclude that the court exceeded its discretion in declining to make the Eskelsens’ requested finding.
¶66 Second, the Eskelsens challenge paragraph 32 of the trial court‘s findings of fact, which states, “Mr. Tobler never discussed [Mr. Jennings‘s] request for documents with Mr. Blanchard.” According to the Eskelsens, Mr. Blanchard testified that “he did not remember it being discussed, not that it was never discussed.” At trial, the following exchange with Mr. Blanchard took place:
Q. Did Mr. Tobler ever tell you about a document request from [Mr.] Jennings?
A. No, I don‘t remember that.
Q. Did Mr. Tobler[,] during these conversations in January, February, and March of 2011, did Mr. Tobler provide you with any documentary proof that . . . the Hansens’ interests were validly foreclosed on?
A. No. Again, we did not—that was not a heavy item of discussion.
The trial court heard Mr. Blanchard‘s testimony and observed his demeanor at trial. Based on Mr. Blanchard‘s testimony, the court reasonably could infer that Mr. Blanchard did not remember Mr. Tobler telling him about a document request from Mr. Jennings because that conversation never occurred.
¶68 But the email Mr. Blanchard sent to Mr. Tobler on March 22, 2011, also stated, “If your clients don‘t hear from [Mr. Hansen] in the next day or so please let me know.” Thus, Mr. Blanchard‘s email indicated he was waiting to hear from Mr. Tobler, and Mr. Blanchard testified at trial that he did not receive a response from Mr. Tobler or the Eskelsens “in the next day or so” and “at that point [he] thought it was done and resolved.” Mr. Tobler confirmed at trial that he did not contact Mr. Blanchard in the next couple of days to let him know whether Mr. Hansen had spoken with the Eskelsens. Based on the foregoing, we agree with Theta that “the trial court could reasonably infer and therefore find, as it did, that as of March 22, the Eskelsens were to work directly with the Hansens and that [Mr.] Blanchard would not be preparing any agreement unless he heard otherwise from [Mr.] Tobler.”
¶69 Lastly, we note that the Eskelsens have failed to explain, in the context of the trial court‘s unchallenged findings, what impact these allegedly incorrect findings had on the trial court‘s ultimate conclusions. Rather, the Eskelsens merely assert that “[t]hese incorrect findings potentially had a significant impact on the Court‘s conclusions.” (Emphasis added.) That is not sufficient to demonstrate that the trial court exceeded its discretion in declining to amend its findings. See
CONCLUSION
¶70 We conclude that Utah‘s Uniform Fraudulent Transfer Act does not afford the Eskelsens a remedy against Theta, VC Holdings, or the Hansens. In addition, the trial court did not err in determining that Mr. Jennings conducted a reasonable inquiry into the Eskelsens’ claim, that Theta and Mr. Jennings had no notice or knowledge of any restrictions on Mr. Hansen‘s authority to act, and that Mr. Hansen had the authority to act on behalf of VC Holdings on March 29, 2011. Lastly, we conclude that the trial court did not exceed its discretion when it denied the Eskelsens’ motion to amend and make additional findings of fact. The judgment of the trial court is affirmed.