Isaac McQUEEN, Plaintiff, Appellee, and Cross-appellant, v. JORDAN PINES TOWNHOMES OWNERS ASSOCIATION, INC., Defendant, Appellant, and Cross-appellee.
No. 20110312-CA.
Court of Appeals of Utah.
Feb. 28, 2013.
2013 UT App 53
Bruce A. Maak, Attorney for Appellee and Cross-appellant.
Opinion
CHRISTIANSEN, Judge:
¶ 1 Defendant Jordan Pines Townhomes Owners Association, Inc. appeals the district court‘s grant of partial summary judgment in favor of plaintiff, Isaac McQueen. McQueen cross-appeals the district court‘s denial of his requested attorney fees. We affirm.
BACKGROUND1
¶ 2 Jordan Pines Townhomes Owners Association, Inc. (the Association) is a condo
¶ 3 At some point after he purchased the condominium unit, McQueen came to be in arrears on his assessment fees in the amount of $903.71.2 The Association, acting through its attorney, initiated nonjudicial foreclosure proceedings on March 2, 2007, by recording with the office of the Salt Lake County Recorder a Notice of Lien against McQueen‘s unit. The Association later recorded a Notice of Default, posted a published Notice of Sale by Public Auction, and set the auction for September 11, 2007. Exchange Properties, Inc., a company owned by J. Daniel Fox (collectively, Exchange), was the only bidder at the auction. Exchange purchased McQueen‘s unit for $3,312.76. The purchase amount included the assessment fees arrearage, interest, the cost of selling the unit, and attorney fees incurred in pursuing the foreclosure against McQueen‘s unit. Once the Association delivered the deed to the unit, Exchange evicted McQueen‘s tenants.
¶ 4 On December 31, 2007, McQueen filed suit against Exchange and the Association seeking to quiet title to the unit and to recover damages for slander of title. McQueen thereafter filed a motion for partial summary judgment, arguing as a matter of law that (1) the nonjudicial foreclosure procedure followed by the Association was ineffective and void, (2) McQueen remained the owner of the subject property, and (3) title to the subject property should be quieted in favor of McQueen. On January 4, 2009, the district court granted McQueen‘s partial summary judgment motion and determined that the Association did not appoint a qualified trustee to perform the nonjudicial foreclosure sale as required by section 57-8-20 of the
¶ 5 McQueen next attempted to regain possession of his unit by contacting Exchange and counsel for the Association. When his efforts proved to be unsuccessful, McQueen filed an unlawful detainer action against Exchange and Exchange‘s tenants. The unlawful detainer action was tried before a different district court judge on April 6, 2009. The court took judicial notice of the prior partial summary judgment ruling and determined that McQueen was entitled to exclusive possession of the unit. Exchange did not appeal this ruling. McQueen retook possession of his condominium in April 2009.
¶ 6 On May 26, 2009, McQueen filed a second amended complaint in the quiet title case. In addition to the claims not resolved by the court‘s previous partial summary judgment ruling, the second amended complaint alleged that Exchange had committed waste and that McQueen was entitled to attorney fees. Following a bench trial in March 2010, the court entered final judgment against the Association and issued findings of fact and conclusions of law. Relevant to this appeal, the court ruled that McQueen was not entitled to attorney fees as a matter of law and dismissed that claim with prejudice. The court also confirmed its prior partial summary judgment ruling declaring the fore
ISSUES AND STANDARDS OF REVIEW
¶ 7 On appeal, the Association argues that the district court erred as a matter of law in determining that the nonjudicial foreclosure proceeding conducted by the Association was ineffective and void because the Association failed to appoint a qualified trustee to conduct the nonjudicial foreclosure sale pursuant to the
¶ 8 On cross-appeal, McQueen contends that the district court erred in ruling that the Association is not liable for certain of McQueen‘s attorney fees based upon the condominium declaration and
ANALYSIS
I. The Condominium Ownership Act and the Trust Deed Act Both Require that a Qualified Trustee Be Appointed To Conduct a Nonjudicial Foreclosure or Sale.
A. The Relevant Statutory Law
¶ 9 The question presented by the Association‘s appeal is how much of the
if any unit owner fails or refuses to pay an assessment when due, that amount constitutes a lien on the interest of the owner in the property, and upon the recording of notice of lien by the manager or management committee it is a lien upon the unit owner‘s interest in the property prior to all other liens and encumbrances....
Id.
¶ 10 Based upon McQueen‘s arrearage, there is no dispute the Association had a rightful lien against McQueen‘s condominium unit in this case. Rather, the parties disagree about the procedure undertaken by the Association to foreclose on that lien. The statute also sets forth the procedure for enforcing an assessment lien:
The lien for nonpayment of an assessment may be enforced by sale or foreclosure of the unit owner‘s interest by the manager or management committee. The sale or foreclosure shall be conducted in the same manner as foreclosures in deeds of trust or mortgages or in any other manner prescribed by law.
Id.
¶ 11 Relevant to our analysis is section 57-1-19(3), which defines a trust deed as a device that “convey[s] real property to a trustee in trust to secure the performance of an obligation of the trustor or other person named in the deed to a beneficiary.” Id.
[a] trust deed with an unqualified trustee or without a trustee shall be effective to create a lien on the trust property, but the power of sale and other trustee powers under the trust deed may be exercised only if the beneficiary has appointed a qualified successor trustee under Section 57-1-22.
Id.
B. Plain Language Interpretation of the Condominium Ownership Act and the Trust Deed Act
¶ 12 Following its grant of partial summary judgment at oral argument, the district court ruled that the Association had failed to comply with the statutory requirements for a nonjudicial foreclosure of an assessment lien. Under the district court‘s interpretation of the
¶ 13 The Association argues on appeal that the district court incorrectly interpreted subsections 57-8-20(a) and (b) and ignored the superiority of the
¶ 14 In support of its position, the Association relies on the language in section 57-8-20(4)(b), which states that a foreclosure upon or a sale of a condominium unit need only be enforced by the “manager or management committee.”
¶ 15 Interpreting the interplay between the
¶ 16 Subsection 57-8-20(4)(b) of the
¶ 17 Our analysis of the plain language of the
¶ 18 The Association argues that appointment of a trustee under the
C. The Absence of a Trustee in the Present Case
¶ 19 Next, the Association argues that its attorney was legally authorized to act on its behalf and conduct the foreclosure sale of
¶ 20 The Association‘s argument again ignores the plain language of subsection 57-8-20(4)(b) of the
¶ 21 The purpose of requiring the appointment of a qualified trustee is to provide an independent third party who can objectively execute a foreclosure or sale in the absence of judicial oversight. See generally Russell v. Lundberg, 2005 UT App 315, ¶ 22, 120 P.3d 541 (“[A] trustee has a duty to act with reasonable diligence and good faith on [the trustor‘s] behalf consistent with [the trustee‘s] primary obligation to assure payment of the secured debt.” (alterations in original) (citation and internal quotation marks omitted)). Indeed, while a trustee‘s obligations in a trust deed relationship do not normally rise to the level of fiduciary duty, a trustee is not without any duty whatsoever. See id. (“While a trustee‘s primary duty and obligation is to the beneficiary of the trust, the trustee‘s duty to the beneficiary does not imply that the trustee may ignore the trustor‘s rights and interests.” (citations and internal quotation marks omitted)); Blodgett v. Martsch, 590 P.2d 298, 302 (Utah 1978) (“The duty of the trustee under a trust deed is greater than the mere obligation to sell the pledged property in accordance with the default provision of the trust deed instrument, it is a duty to treat the trustor fairly and in accordance with a high punctilio of honor.“). This underlying rationale behind the trustee requirement thus strengthens our conclusion that a party must appoint a qualified trustee in order to enforce an assessment lien without judicial intervention. Because the Association failed to properly appoint a qualified trustee, we affirm the district court‘s determination that the sale of McQueen‘s condominium unit to Exchange was invalid.
II. McQueen Is Not Entitled to Attorney Fees Because His Claim Did Not Arise Under the Condominium Declaration, Under an Applicable Statute, or as Consequential Damages.
¶ 22 After the bench trial in March 2010, the district court issued a memorandum decision, ruling that McQueen was entitled to “reasonable attorney fees for efforts to recover title and possession of the property.” The Association then submitted a motion to amend or modify that decision, which the court granted. The district court issued its final ruling on the matter on March 17, 2011, stating, “As a matter of law, McQueen is not entitled to recover his attorney[] fees from
A. The Condominium Declaration and Utah Code Section 78B-5-826
¶ 23 McQueen first argues that the court should have awarded his attorney fees based upon an application of Utah‘s Reciprocal Fee Statute to the condominium declaration at issue in this case. See
A court may award costs and attorney fees to either party that prevails in a civil action based upon any promissory note, written contract, or other writing executed after April 28, 1986, when the provisions of the promissory note, written contract, or other writing allow at least one party to recover attorney fees.
¶ 24 We determine that McQueen does not satisfy the first condition of the statute. McQueen argues that he sought to enforce the terms of the condominium declaration by suing the Association for breach of its provisions. See Hooban v. Unicity Int‘l, Inc., 2012 UT 40, ¶ 22, 285 P.3d 766 (“[A]n action is ‘based upon’ a contract under the statute if a ‘party to the litigation assert[s] the writing‘s enforceability as basis for recovery.‘” (second alteration in original) (quoting Bilanzich, 2007 UT 26, ¶ 15, 160 P.3d 1041)). McQueen points to his second amended complaint as support for his claim that the Association breached the condominium declaration.11 However, none of the five counts listed in McQueen‘s second amended complaint expressly or substantively alleged a breach of the condominium declaration. To the contrary, McQueen sued the Association on just two grounds—seeking to quiet title to the property and alleging slander of title. He prevailed only on the quiet title action. The remaining counts—slander of title (again), unjust enrichment, waste, and trespass—were levied against Exchange.
¶ 25 McQueen‘s quiet title action is distinct from a suit based upon breach of the condominium declaration, even though the two may be related. The principal purpose behind the quiet title action was to establish rightful ownership of the condominium unit, not to enforce the condominium declaration. See Andrus v. Bagley, 775 P.2d 934, 935 (Utah 1989) (“The purpose of a quiet title action is to perfect an interest in property that exists at the time suit is filed.“). Though it is true that a part of the quiet title litigation below involved analysis of the condominium declaration, resolution of the case ultimately turned upon the district court‘s interpretation of the
B. Attorney Fees as Consequential Damages
¶ 26 McQueen also claims he is entitled to his attorney fees as a result of the consequential damages he incurred. Recovery of attorney fees as consequential damages is a narrow exception to the normal rule requiring statutory or contractual authorization of an attorney fee award. See Collier v. Heinz, 827 P.2d 982, 983 (Utah Ct. App. 1992). Recovery of attorney fees as consequential damages generally applies in just two situations. The first is when the litigation is based on an insurance contract. See Pugh v. North Am. Warranty Servs., Inc., 2000 UT App 121, ¶ 14, 1 P.3d 570 (“Our courts have carved out a narrow exception to [the] rule [requiring statutory or contractual authorization for attorney fees] in the insurance context.“). This case is clearly not based on an insurance contract. Second, “[a] well-established exception to this general rule allows recovery of attorney fees as consequential damages, but only in the limited situation where the defendant‘s breach of contract foreseeably caused the plaintiff to incur attorney fees through litigation with a third party.” Collier, 827 P.2d at 984; see also Lewiston State Bank v. Greenline Equip., LLC, 2006 UT App 446, ¶ 22, 147 P.3d 951. This exception refers to the third-party tort rule and does not apply in this case. McQueen would have had to assert and establish that the Association breached the condominium declaration and that the breach foreseeably caused him to incur attorney fees in litigation with a third party. Those facts do not exist here. Rather, the dispute is solely between the Association and McQueen and “under the third-party exception, attorney fees incurred in litigation between the contracting parties are not recoverable by the non-breaching party as damages.” Collier, 827 P.2d at 984.
¶ 27 Moreover, this exception requires that damages result from a breach of a contract. See id. McQueen sued the Association seeking to quiet title to the property and alleging slander of title, not for breach of the condominium declaration. McQueen‘s request for attorney fees is understandable after he was forced to bring suit against the Association to quiet title to his condominium. However, “attorney fees are recoverable under this exception only if they are caused by and are a foreseeable result of the original breach of contract, not a subsequent wrongful act.” Gardiner v. York, 2006 UT App 496, ¶ 9, 153 P.3d 791. The Association‘s ineffective foreclosure was not a breach of the declaration, even though it may have been a procedurally wrongful act. Therefore, because this exception requires the award of damages arising from a breach of contract, it is inapplicable to this case. Accordingly, we conclude that McQueen is not entitled to attorney fees as a result of consequential damages.
CONCLUSION
¶ 28 The district court correctly construed the
Judge MICHELE M. CHRISTIANSEN authored this Opinion, in which Judge JAMES Z. DAVIS concurred. Judge J. FREDERIC VOROS JR. concurred with opinion.
¶ 29 I concur in the result reached by the majority opinion, and agree with its analysis except as to one point. The fatal flaw in the Association‘s nonjudicial foreclosure was not the absence of a trustee, but the absence of a trust deed. I do not agree that under the controlling version of the statute the manager or management committee of a condominium homeowners association may, when no conveyance in trust has occurred, appoint a qualified trustee. Nor do I agree that such a “trustee” may, upon a unit owner‘s non-payment of assessments, notice and conduct a public sale and, presumably, convey to the highest bidder fee simple title to the condominium.
¶ 30 In this context, a trustee is “a person to whom title to real property is conveyed by trust deed, or his successor in interest.”
¶ 31 The
¶ 32 As noted in the majority opinion, the Legislature has since amended the