District Court, St. George Department The Honorable Jeffrey
C. Wilcox No. 120500400
J. Tobler, Attorney for Appellants
J. Pattison, Attorney for Appellee
Michele M. Christiansen Forster authored this Opinion, in
which Judges Kate Appleby and Jill M. Pohlman concurred.
CHRISTIANSEN FORSTER, JUDGE
Chad Eskelsen and Lorna Eskelsen appeal from the trial
court's judgment in favor of Theta Investment Company
(Theta). We affirm.
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.
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.
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
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. 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.
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'
Mr. Tobler also sent a letter to JVC Leasing in care of Mr.
Jennings. That letter stated that the Eskelsens "have
elected to be admitted as members of VC Holdings, and are now
managers of the same. Thus all notices from JVC Leasing, LC,
and payments or distributions for VC Holdings, LLC's
31.8% interest in JVC Leasing, LC, shall be paid to the
Eskelsens at the address listed below." The letter did
not include a copy of the Foreclosure Letter sent to the
Hansens or the loan documents between the Eskelsens and the
Hansens. In addition, the letter did not state that Mr.
Hansen would be removed as manager of VC Holdings.
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.
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.
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.
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.
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.
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 in JVC Leasing. In
return, JVC Leasing conveyed a 31.8% interest in the Property
to VC Holdings. VC Holdings then sold its 31.8% interest in
the Property to Theta for $236, 337. After satisfying the
$54, 270 debt VC Holdings owed to JVC Leasing, Theta placed
$180, 000 in escrow with Southern Utah Title. Mr. Hansen
instructed Southern Utah Title to release the $180, 000 to a
company called ME Jenkins Management LLC. Mr. Hansen later
testified that he used the money for personal expenses
instead of repaying the Eskelsens.
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'
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.
After trial, the Eskelsens filed a motion to amend and make
additional findings pursuant to rule 52(b) of the Utah Rules
of Civil Procedure. The trial court granted the motion in
part and denied it in part. The court granted the
Eskelsens' motion to amend several clerical errors, such
as replacing "Theta" with "JENCO" and
"2015" with "2011." But the court
"otherwise denied" their motion. The Eskelsens
AND STANDARDS OF REVIEW
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.
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. "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.
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 have notice of the Eskelsens' superior claim." A
finding that Theta had notice of the Eskelsens' claim,
they assert, means Theta could not have been a good faith
transferee. See Utah Code Ann. § 25-6-9(1)
(LexisNexis Supp. 2015) (stating that a fraudulent transfer
"is not voidable . . . against a person that took in
good faith and for a reasonably equivalent value"). The
Eskelsens also contend that the trial court erred in
determining that Mr. Hansen had authority to act on behalf of
VC Holdings on March 29, 2011. Theta correctly observes that
this issue "depends entirely on the trial court's
determination of whether Theta had notice or knowledge of any
restrictions on [Mr. Hansen's] authority[, ] which is a
fact question." See 4447 Assocs. v. First Sec.
Fin., 889 P.2d 467, 471 (Utah Ct. App. 1995). "A
determination concerning whether a party had notice or
knowledge of a particular transaction or occurrence is a
finding of fact and will not be set aside" absent clear
error. Id. (quotation simplified); see also
Utah R. Civ. P. 52(a)(4) ("Findings of fact, whether
based on oral or other evidence, must not be set aside unless
clearly erroneous, and the reviewing court must give due
regard to the trial court's opportunity to judge the
credibility of the witnesses.").
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).
Fifth, the Eskelsens contend that the trial court erred by
denying in part their motion to amend and make additional
findings of fact under rule 52(b) of the Utah Rules of Civil
Procedure. We review the trial court's underlying factual
findings for clear error and its ultimate grant or denial of
a motion to amend or make additional findings for abuse of
discretion. See Express Recovery Servs. Inc. v.
Reuling, 2015 UT App 299, ¶ 22, 364 P.3d 766
("We review the trial court's denial of a motion to
amend a judgment for an abuse of discretion." (quotation
simplified)); see also Utah R. Civ. P. 52(a)(4).
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.
Utah's Uniform Fraudulent Transfer Act (the Act)
"affords remedies for 'creditors' against
'debtors' who have engaged in fraudulent transfers of
property." See Utah Code Ann. § 25-6-303
(LexisNexis 2013). Generally, 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 specified circumstances without receiving
reasonably equivalent value in exchange. See id.
§ 25-6-5(1). Under the Act, a creditor may seek to undo
or void a debtor's transfer, for example, that
fraudulently "plac[es] assets beyond [the]
creditors' reach." Timothy v. Pia, Anderson,
Dorius, Reynard & Moss LLC, 2018 UT App 31, ¶
11, 424 P.3d 937, cert. granted, 421 P.3d 439 (Utah
2018); see also Utah Code Ann. §§ 25-6-1
to -14 (LexisNexis 2013).
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." Utah Code Ann. § 25-6-2(4), (6). A
"claim" under the Act is "a right to payment,
whether or not the right is reduced to judgment."
Id. § 25-6-2(3). The Act may afford relief if
the parties' circumstances meet these definitions. As
relevant here, a creditor may seek a remedy under the ...