2016 UT App 231
THE UTAH COURT OF APPEALS
IOTA LLC AND CALIFORNIA BENEFIT INC.,
Appellees,
v.
DAVCO MANAGEMENT COMPANY LC AND DAVID FISHER,
Appellants.
Opinion
No. 20130552-CA
Filed November 25, 2016
Fifth District Court, St. George Department
The Honorable James L. Shumate
No. 080502981
Darwin C. Fisher, Attorney for Appellants
Paul D. Veasy, Alan S. Mouritsen, and Douglas C.
Naftz, Attorneys for Appellees
JUDGE STEPHEN L. ROTH authored this Opinion, in which JUDGES
J. FREDERIC VOROS JR. and KATE A. TOOMEY concurred.1
ROTH, Judge:
¶1 This case returns to us after we vacated a contempt
judgment and remanded to the district court in Iota, LLC v. Davco
Mgmt. Co. (Iota I), 2012 UT App 218, 284 P.3d 681. That decision
was based on a procedural defect, and on remand Iota LLC and
California Benefit Inc. (collectively, Iota) cured the defect. The
district court entered a new contempt judgment, from which
1. After hearing the arguments, Judge James Z. Davis passed
away and did not participate in the consideration of this case.
Judge Kate A. Toomey, having reviewed the briefs and listened
to a recording of the oral arguments, substituted for Judge Davis
and participated fully in this decision.
Iota v. Davco Management Company
Davco Management Company LC and David Fisher2
(collectively, Davco) now appeal. We affirm.
BACKGROUND
¶2 A full account of the background in this case is available
in Iota I, 2012 UT App 218, ¶¶ 2–9. In summary, Davco
contracted with Iota for the purchase of two apartment
complexes in St. George, Utah. The sale was owner-financed and
Davco executed a promissory note to Iota for each property, both
with maturity dates in December 2007. Payment of the notes was
secured by trust deeds for each property. Among other things,
the trust deeds granted Iota a security interest in the form of an
assignment of the rents and other sources of revenue associated
with the apartments on the two properties in the event of a
default.
¶3 By September of 2008, the promissory notes were long
past due and negotiations to resolve the defaults had proved
unsuccessful. Davco stopped making payments on the notes,
which triggered foreclosure on the properties and this lawsuit.
During the initial stage of this suit, Iota moved ex parte for an
order requiring Davco to deposit all apartment rents into court.
The motion was based on Utah Rule of Civil Procedure 67,
which provides that a court may order a party to deposit with
the clerk of court ‚any money or other thing‛ that is shown by
admissions in the pleadings or ‚upon the examination of a
party,‛ to belong to or be ‚due to another party.‛
¶4 The district court issued an order on November 5, 2008
(the Ex Parte Order) requiring Davco Management and Fisher to
2. Although David Fisher is not listed as an appellant on the
caption of the opening brief in this case, the notice of appeal
listed both Davco Management and Fisher as appellants, and
counsel’s signature block confirms that he represents both Davco
Management and Fisher.
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Iota v. Davco Management Company
deposit with the court all rents collected. Davco was properly
served and neither filed an objection nor moved to have it set
aside. Davco Management, through Fisher, collected and
retained apartment rental payments and other revenue from
September 2008 until the foreclosure sale was completed in
February 2009. However, Davco deposited money with the court
only once, in August 2009, when it remitted $33,805.33. The
single deposit was considerably less than the amount Davco had
collected after the Ex Parte Order was entered, and Davco made
the deposit only after ‚the Court made clear [in a hearing
attended by Fisher] its displeasure with Davco’s and David
Fisher’s failure to pay collected rents . . . into the Court.‛
¶5 Following the foreclosure sale of the properties, Iota
sought deficiency judgments against Davco and to recover the
rents and other revenue that Davco collected between September
1, 2008, and February 20, 2009. In addition, Iota argued in its trial
brief that both Davco Management and Fisher should be held in
contempt for failing to comply with the Ex Parte Order. Davco
responded to the contempt argument by challenging the court’s
contempt jurisdiction on the basis that Iota had failed to file an
affidavit of the facts constituting contempt as required by Utah
Code subsection 78B-6-302(2). Davco also moved to have the Ex
Parte Order struck, asserting that the trial court failed to comply
with Utah Rule of Civil Procedure 67 in issuing it. The court
denied both motions.
¶6 Iota prevailed at trial on its breach of contract and
deficiency claims and successfully urged the court to hold Davco
Management and Fisher in contempt for failing to comply with
the Ex Parte Order. The court entered deficiency judgments
against Davco (calculated as the difference between the proceeds
of the trustee’s sale and the unpaid balance of the promissory
notes) and awarded Iota its attorney fees. The district court
made two other rulings relevant to the current appeal. First, it
concluded that Davco’s failure to remit rents and other revenues
to Iota after it defaulted on the promissory notes was a violation
of the trust deeds’ requirement to do so. Second, it held both
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Davco Management and Fisher in contempt for their failure to
comply with the Ex Parte Order. The court entered a separate
contempt judgment in the amount of $71,119.17 for revenues
withheld, plus attorney fees.
¶7 In Iota I, this court affirmed the deficiency judgments.
However, we vacated the contempt judgment against Davco
Management and Fisher. Our decision turned on the
requirement that, ‚[w]hen the contempt is not committed in the
immediate view and presence of the court or judge, an affidavit .
. . shall be presented . . . of the facts constituting the contempt.‛
Utah Code Ann. § 78B-6-302(2) (LexisNexis 2012). We
determined that Iota never filed an affidavit, and as a
consequence, ‚we reverse*d+ the trial court’s contempt rulings
against Davco and Fisher for lack of jurisdiction and remand[ed]
to the trial court for additional proceedings, on the contempt
matter only . . . .‛ Iota I, 2012 UT App 218, ¶ 40. Further,
‚because we reverse*d+ the contempt rulings on jurisdictional
grounds, we determine[d] that any error relating to the trial
court’s Ex Parte Order was harmless‛ and therefore did not
address Davco’s challenges to the order on the merits. Id.
¶8 On remand, Iota filed an affidavit in support of its
allegations of contempt against Davco, and the district court
scheduled an evidentiary hearing to address the matter. At the
hearing, the court took notice of the evidence, facts, and orders
of the court from the prior contempt proceedings, ‚except for
those portions reversed by [this court in Iota I+.‛ In addition,
Fisher testified for Davco Management as its managing member
and on his own behalf, and Iota presented the testimony of its
officer, Richard T. Murset.3 At the conclusion of the hearing, the
district court again held both Davco Management and Fisher in
contempt based on a review of Iota I, briefing and testimony
3. Murset is a managing member of Iota LLC and vice president
of California Benefit Inc.
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Iota v. Davco Management Company
from the postappeal hearing, and evidence from the prior
proceedings.
¶9 In its second contempt order, the district court concluded
that the affidavit filed by Iota satisfied the statute’s requirement
and that the jurisdictional issue identified in Iota I had thus been
satisfied. The court also concluded that the collateral bar
doctrine precluded Davco from arguing that the Ex Parte Order
was improperly issued:
Davco and David Fisher violated Utah Code
Annotated § 78B-6-301 by knowingly disobeying
this Court’s Ex Parte Order in failing to turn over
the rents to the court clerk for further disposition
by Order of this Court. David Fisher, on behalf of
himself and his company, Davco, has knowingly
and wrongfully retained the security deposits and
has failed to deliver those amounts to Iota . . . to
apply towards Plaintiffs’ debt obligations.
The district court found Davco Management and Fisher in
contempt and entered judgment against both in the sum of
$116,025.02, which included the amount of the withheld rents
and other revenues as well as Iota’s attorney fees incurred in the
contempt proceedings both before and after Iota I. Davco
appeals.
ANALYSIS
¶10 Davco raises multiple challenges to the district court’s
decision finding Davco Management and Fisher in contempt for
failure to comply with the Ex Parte Order. Specifically, Davco
contends that the district court either erred or abused its
discretion by: (1) holding Davco in contempt based on an
unclear and ambiguous Ex Parte Order; (2) awarding Iota
damages; (3) finding Davco in contempt of court; (4) affirming
its prior judgment for contempt; (5) awarding Iota its attorney
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Iota v. Davco Management Company
fees and costs incurred in the preremand proceedings; (6)
finding that the Order was valid and lawful; (7) denying Davco’s
motion to strike the Order; (8) taking judicial notice of all the
facts, orders, and documents from the principal case; and (9)
denying Davco the opportunity to present evidence showing
that Iota’s calculation of the withheld rents was wrong.
¶11 The issues fall into three categories: those challenging the
validity of the Ex Parte Order, those challenging the district
court’s finding that Davco was in contempt for violating the Ex
Parte Order, and those challenging the district court’s award of
attorney fees to Iota. We address them in that order.
I. The Validity of the Ex Parte Order
¶12 Davco asserts that the Ex Parte Order was invalid and
unenforceable because it failed to comply with rule 67 of the
Utah Rules of Civil Procedure and, as a consequence, the district
court should have struck it.4 We first consider whether the
district court properly concluded that the collateral bar doctrine
blocked Davco’s motion to strike the Ex Parte Order; only if that
decision was incorrect need we consider the merits of Davco’s
argument that the order was invalid. The applicability of the
collateral bar doctrine presents a question of law that we review
for correctness. Cf. PC Riverview LLC v. Cao, 2016 UT App 178,
¶ 5 n.3, 381 P.3d 1185. We agree with the district court that the
collateral bar doctrine precludes Davco from waiting until after
it violated the Ex Parte Order to challenge its validity.
A. The Collateral Bar Doctrine
¶13 ‚Under the collateral bar doctrine, a party may not
challenge a district court’s order by violating it. Instead, he must
move to vacate or modify the order, or seek relief in [an
appellate court+.‛ United States v. Cutler, 58 F.3d 825, 832 (2d Cir.
4. This description of Davco’s contentions encompasses both its
sixth and seventh arguments on appeal.
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Iota v. Davco Management Company
1995). ‚If he fails to do either, ignores the order, and is held in
contempt, he may not challenge the order unless it was
transparently invalid or exceeded the district court’s
jurisdiction.‛ Id.
¶14 On remand, Iota restarted the contempt proceeding by
filing the affidavit required to correct the procedural problem we
identified in Iota I. The district court held an evidentiary hearing
to consider anew whether Davco should be held in contempt for
failure to deposit rents in violation of the Ex Parte Order. At that
hearing, the court considered Davco’s motion to strike the Ex
Parte Order based on the argument that the order failed to
comply with the requirements of Utah Rule of Civil Procedure
67. In its written ruling the court found that, after the Ex Parte
Order was entered and served on Davco Management and
Fisher in November 2008, neither ‚filed an objection‛ nor
‚moved to have *the order+ set aside.‛ It also found that Davco
thereafter failed to deposit collected rents into the court as the Ex
Parte Order required until August 7, 2009, when Davco
deposited $33,805.33 in response to the court’s expressed
‚displeasure with Davco’s . . . failure to pay.‛ The court further
noted that Davco did not ‚raise[] a challenge to the validity of
the Ex Parte Order until the time of trial, almost eighteen months
after the Ex Parte Order was issued and after the order had
already been violated.‛ Because they ‚chose to ignore the Ex
Parte Order‛ rather than bring a timely challenge to its validity,
the district court determined that Davco’s ‚challenge[] to the
Court’s order of contempt [is] barred by the collateral bar
doctrine.‛
¶15 Utah appellate courts have not addressed the collateral
bar doctrine in modern times, other than nonbinding dicta in Iota
I, 2012 UT App 218, ¶¶ 37–38, 284 P.3d 681.5 However, our
5. In Iota I, Judge Davis offered guidance on the collateral bar
doctrine to the district court. 2012 UT App 218, ¶¶ 37–38, 284
P.3d 681. However, Judges Voros and McHugh did not join in
(continued<)
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Iota v. Davco Management Company
supreme court acknowledged the fundamentals of the doctrine
as early as 1932 in Utah Power & Light Co. v. Richmond Irrigation
Co., 13 P.2d 320, 324 (Utah 1932) (‚A party may question the
order which he is charged with refusing to obey, only insofar as
he can show it to be absolutely void . . . .‛ (citation and internal
quotation marks omitted)). And several years later in Liquor
Control Commission v. McGillis, the supreme court stated that ‚the
mere fact that an [order] was not justified by the facts of the
particular case or was erroneous or improvident in any way is
no defense‛ to violating the order. 65 P.2d 1136, 1141 (Utah
1937). Based on these acknowledgments, we are convinced that
the collateral bar doctrine applies in Utah even if our precedent
has not explicitly used that term, and we look to other courts for
guidance on the application of this widely recognized doctrine.
¶16 ‚The orderly and expeditious administration of justice by
the courts requires that ‘an order issued by a court with
jurisdiction over the subject matter and person must be obeyed
by the parties until it is reversed by orderly and proper
proceedings.’‛ Maness v. Meyers, 419 U.S. 449, 459 (1975)
(quoting United States v. United Mine Workers of Am., 330 U.S. 258,
293 (1947)). The collateral bar doctrine follows directly from that
premise; the doctrine ‚provides that a party may not challenge a
court’s order by violating it.‛ 17 C.J.S. Contempt § 24 (2016).
Indeed, the legitimacy of the judicial process itself would be
jeopardized if parties were free to determine for themselves
when and how to obey court orders. See id. (noting that the
collateral bar rule ‚advances important societal interests in an
orderly system of government, respect for the judicial process
and the rule of law, and the preservation of civil order‛ to
‚protect the authority of the courts when they address close
questions and to create a strong incentive for parties to follow
(