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Timothy v. Pia, Anderson, Dorius, Reynard & Moss LLC

Court of Appeals of Utah

February 23, 2018

Paul Timothy and Janice Timothy, Appellants,
Pia, Anderson, Dorius, Reynard & Moss LLC and Brennan Moss, Appellees.

         Third District Court, Salt Lake Department The Honorable Todd M. Shaughnessy No. 120905780

          Nelson Abbott, Attorney for Appellants

          J. Ryan Mitchell, John P. Mertens, and William O. Kimball, Attorneys for Appellees

          Judge Michele M. Christiansen authored this Opinion, in which Judge Gregory K. Orme and Senior Judge Stephen L. Roth concurred. [1]



         ¶1 Paul Timothy and Janice Timothy (collectively, Creditors) appeal the district court's grant of summary judgment in favor of Pia, Anderson, Dorius, Reynard & Moss LLC (Law Firm) and Brennan Moss (collectively, Appellees). We affirm.


         ¶2 In 2002, Creditors brought suit against Thomas Keetch and Teri Keetch (collectively, Debtors) alleging, among other things, breach of contract and fraud. The case ultimately resulted in a 2009 judgment in Creditors' favor.[2]

         ¶3 In July 2009, approximately four months after entry of the judgment, all of Debtors' bank accounts were closed.[3] Then, in March 2010, Teri Keetch's high-school-aged son (Son) opened a bank account.[4] The district court later determined that both Teri Keetch and Son had access to all of the money in the account and that "[m]uch of the money in [Son's] bank account belonged to [Debtors]."[5]

         ¶4 On February 12, 2011, Son wrote a check for $50, 000 from "his" account, payable to Law Firm. The check's memo line read "Terry Keetch." Law Firm deposited the check into its trust account around March 15, 2011. The district court later found that the $50, 000 was Debtors' money.

          ¶5 Four days before Law Firm deposited the $50, 000 into its trust account, Debtors and Creditors attended a supplemental hearing to determine whether Debtors had assets that could be applied to the judgment. Brennan Moss, an attorney from Law Firm, represented Debtors at the hearing. During the hearing, Thomas Keetch testified that "he did not have a checking account, but that friends and family, specifically [Son], 'cashed' checks for him." Teri Keetch testified that she had no assets.[6]

         ¶6 On March 16, 2011, after the $50, 000 was deposited into Law Firm's trust account, Thomas Keetch signed an addendum to a real estate purchase contract, which stated that Debtors would "place in a trust [with] their attorney, Brennan Moss, a sum of no less than 30, 000" to help secure a home Debtors wanted to purchase. Subsequently, Law Firm transferred $20, 000 from the trust account to a title company for Debtors as a down payment on the home. Two months later, at the request of Debtors, Law Firm transferred an additional $20, 560.75 out of its trust account and paid $2, 745 to itself, $16, 451.75 to one of Debtors' family members, and $1, 364 to Creditors.[7] The payment to Creditors was made in response to a court order entered on May 27, 2011.

         ¶7 In August 2012, Creditors filed suit against Appellees. Creditors later filed an amended complaint, alleging various theories of fraudulent transfer against Law Firm, participation in wrongful conduct against Moss individually, and civil conspiracy against Appellees collectively. Appellees filed a motion for summary judgment, arguing that Law Firm was not a transferee under Utah's Uniform Fraudulent Transfer Act. See Utah Code Ann. §§ 25-6-1 to -14 (LexisNexis 2013).[8] The district court agreed and granted Appellees' motion for summary judgment, concluding that

[b]ecause the relevant provisions of the Utah Uniform Fraudulent Transfer Act were modeled on federal Bankruptcy law, the court is persuaded that "transferee" as used in the Act is most logically defined in the manner it has been defined in the Bankruptcy context. That is, a "transferee" must exercise dominion or control over the transferred asset. Here, the law firm did not-and could not- exercise dominion and control over funds held in the firm's trust account. The Rules of Professional Conduct explicitly prevent a law firm from using those funds at their discretion. Accordingly, the Law Firm was not a "transferee" within the meaning of the Act and the Judgment Creditors' fraudulent conveyance claims fail as a matter of law. Those claims are hereby dismissed with prejudice.

         Appellees then filed a second motion for summary judgment, arguing that Creditors' claim that Appellees "conspired to assist [Debtors] in transfers that violated the [Uniform Fraudulent Transfer Act]" was "insufficient to support [Creditors'] civil conspiracy claim because it is not a valid tort claim against [Appellees]." The district court observed that

[a]lthough the question has not been addressed by Utah's appellate courts, the majority view appears to be that state and federal statutes governing "fraudulent" conveyances are not based on tort principles. Moreover, and perhaps more important, the majority view appears to be that tort principles, such as civil conspiracy and aiding and abetting, cannot be used to get around the statutory limits of fraudulent conveyance actions; namely, those that limit the reach of such statutes to "transferees."

         The court was "persuaded that if presented with the question, Utah's appellate courts would . . . not permit civil conspiracy, aiding and abetting, or similar theories to extend the reach of the Utah Uniform Fraudulent [Transfer] Act." Consequently, the district court granted Appellees' second motion for summary judgment and dismissed Creditors' remaining claims with prejudice. Creditors appeal.


         ¶8 Creditors contend that the district court erred in granting Appellees' motions for summary judgment. First, Creditors argue that "[a] law firm that receives money into its [trust] account is a transferee as defined by the Utah Fraudulent Transfer Act" and that the district court "erroneously determined that a transferee is defined by bankruptcy law rather than by Utah Statute." Second, Creditors contend that "[v]iolation of the Utah Fraudulent Transfer Act may serve as a predicate act to support a claim for civil conspiracy."

         ¶9 We review "a [district] court's legal conclusions and ultimate grant or denial of summary judgment for correctness, and view[] the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (citations and internal quotation marks omitted). Likewise, "[w]e review a district court's interpretation and application of a statute for correctness." Robinson v. Robinson, 2016 UT App 32, ¶ 35, 368 P.3d 147.



         ¶10 Creditors first contend that "[a] law firm that receives money into its [trust] account is a transferee as defined by the Utah Fraudulent Transfer Act."

         ¶11 Utah's Uniform Fraudulent Transfer Act (the Act), see Utah Code Ann. §§ 25-6-1 to -14 (LexisNexis 2013), was designed to prevent fraudulent transfers of assets by debtors who seek to defraud creditors or avoid debts by placing assets beyond creditors' reach, see Bradford v. Bradford, 1999 UT App 373, ¶ 14, 993 P.2d 887. Pursuant to section 25-6-5 of the Act, 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 conditions without receiving reasonably equivalent value in exchange. Utah Code Ann. ยง 25-6-5(1). If a transfer is demonstrated to be fraudulent, the Act provides creditors with various remedies "for relief ...

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