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LLC v. Dos Lagos, LLC

Supreme Court of Utah

June 2, 2017

2010-1 RADC/CADC Venture, LLC, Respondent,
v.
Dos Lagos, LLC; Mellon Valley, LLC; Roland Neil Family Limited Partnership; Roland N. Walker; and Sally Walker, Petitioners.

         On Certiorari to the Utah Court of Appeals

         Second District, Farmington The Honorable John R. Morris No. 110700200

          Richard C. Terry, Jeremiah R. Taylor, Douglas A. Oviatt, Salt Lake City, for respondent

          Douglas B. Thayer, Andy V. Wright, Lehi, for petitioners

          Justice Pearce authored the opinion of the Court, in which Chief Justice Durrant, Associate Chief Justice Lee, Justice Durham, and Justice Himonas joined.

          Pearce Justice

         INTRODUCTION

         ¶1 Petitioners Dos Lagos, LLC and Mellon Valley, LLC defaulted on a loan in which Utah First Federal Credit Union (Utah First) owned a 52 percent interest and 2010-1 RADC/CADC Venture, LLC (RADC) owned a 48 percent interest. Utah First filed a deficiency action against Petitioners Dos Lagos, LLC; Mellon Valley, LLC; and guarantors, the Roland Neil Family Limited Partnership, Roland N. Walker, and Sally Walker (collectively, Dos Lagos). Utah First filed an amended complaint adding RADC as a party plaintiff, but not before the statute of limitations had expired. The district court held that the amended complaint related back to the date of the original complaint under Utah Rule of Civil Procedure 15(c) and awarded RADC the full amount of the loan. The court of appeals affirmed, and we granted Dos Lagos's petition for a writ of certiorari. Dos Lagos first argues that RADC's claims do not relate back to the filing of Utah First's original complaint under rule 15(c). Second, Dos Lagos argues that the court of appeals erred in awarding 100 percent of the amount due on the note to RADC.

         ¶2 We conclude that the amended complaint relates back to the date of the original complaint and that the court of appeals properly upheld the district court's decision to allow RADC to collect the full amount due on the note.

         BACKGROUND

         ¶3 In March 2007, America West Bank (America West) loaned Dos Lagos, LLC and Mellon Valley, LLC $2.5 million under a Loan Agreement. The Roland Neil Family Limited Partnership, Roland Walker, and Sally Walker each personally guaranteed the loan.

         ¶4 The Loan Agreement states that the Lender may "sell, transfer, assign or grant participations in all or any part of the Loan." The Loan Agreement also provides that the "Borrower . . . unconditionally agrees that either Lendor or such purchaser may enforce Borrower's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan."

         ¶5 In December 2007, America West entered into a Loan Participation Agreement (Participation Agreement) with Utah First Federal Credit Union. Under the Participation Agreement, Utah First obtained an undivided 52 percent interest in the Loan, and America West retained an undivided 48 percent interest.

         ¶6 The following December, Dos Lagos, LLC and Mellon Valley, LLC executed a Change in Terms Agreement, which modified and extended their promissory note (Note) with America West. The Note was secured by real property that Mellon Valley, LLC owned (Property). The Revolving Credit Deed of Trust on the Property named America West as both beneficiary and trustee.

         ¶7 Then in May 2009, the Federal Deposit Insurance Corporation (FDIC) closed America West and seized its assets, including America West's interest in the Note. Between May and December 2009, the FDIC sent Dos Lagos multiple letters, notifying it that its loan with America West was in default and demanding payment. In 2010, the FDIC auctioned and sold America West's 48 percent interest in the Note to 2010-1 RADC/CADC Venture, LLC (RADC). The FDIC subsequently assigned and transferred the Revolving Credit Deed of Trust to RADC and recorded the assignment at the Washington County Recorder's Office. In September 2010, Dos Lagos, LLC and Mellon Valley, LLC received notice from the FDIC that their loan had been transferred from America West to RADC.

         ¶8 In December 2010, RADC purchased the Property securing the Note at a trustee's sale for $1, 060, 000.00. The value of the Property securing the Note was $1, 510, 000.00. At the time of the sale, the outstanding payoff balance on the Revolving Credit Deed of Trust was $3, 426, 701.91, leaving a deficiency of $1, 916, 701.91 between the amount owed and the value of the Property.

         ¶9 In January 2011, Utah First filed a deficiency action (Original Complaint) intending to recover the difference between the entire debt under the Note and the value of the Property. Utah First was the Original Complaint's sole plaintiff. And although the Original Complaint made reference to "the entire amount of indebtedness" and demanded "all sums due and owing pursuant to" the Note's terms, Utah First erroneously alleged that the total amount owed on the Note was just $1, 819, 774.97. Dos Lagos moved to dismiss, alleging that Utah First was not the real party in interest under Utah Rule of Civil Procedure 17(a). Dos Lagos also claimed that Utah First had no cause of action because America West transferred its interests in the Trust Deed and Note to RADC, not Utah First.

         ¶10 In August 2011, more than eight months after the trustee's sale, Utah First filed a motion for leave to amend the complaint with a proposed amended complaint (First Amended Complaint). The First Amended Complaint added RADC as a party plaintiff. It also clarified that under the Participation Agreement, Utah First received an undivided 52 percent interest in the loan and America West received an undivided 48 percent interest, which the FDIC later sold to RADC. Dos Lagos stipulated to the filing of the First Amended Complaint.

         ¶11 In June 2012, Utah First and RADC proposed a second amended complaint (Second Amended Complaint) to correct the total amount of alleged indebtedness to $3, 426, 701.91. Utah First filed an affidavit claiming that the Original Complaint mistakenly referenced $1, 819, 774.97 as the "outstanding payoff balance" when that sum represented only Utah First's 52 percent interest.[1] The Second Amended complaint corrected the amount of alleged indebtedness to include RADC's 48 ...


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