David and Bonnie Silva were divorced in 2010. They owned fifteen parcels of real property which were all part of their marital estate. Four of these properties were held jointly, one was held by David, and ten were held by Bonnie.
The trial court made an equitable division of the properties and ordered the parties to execute quit claim deeds to each other in order to effectuate the equitable division. The final order provided that if either party failed to execute the quit claim deed as ordered by the court, the other party could seek a court order transferring the property at issue.
In June 2010 Bonnie executed a quit claim deed to David, purporting to transfer the property on Dennis Drive. However, when David went to record the deed at the county recorder’s office, he discovered that title to the property was held in Bonnie’s name as trustee of a trust known as the Consolidated Trust. He discovered that about one week prior to the filing of the divorce Bonnie had transferred title to herself and her daughters as trustees of the Consolidated Trust.
After this discovery David sent a revised quit claim deed to Bonnie. However, Bonnie again transferred the property, this time to one of her daughters as trustee of the Consolidated Trust.
David filed a Motion for Contempt. However, he claimed that he did not know how to contact Bonnie and that multiple attempts to have her served by a constable had been unsuccessful. Based on this, he was granted an order allowing alternate service.
Ultimately, David obtained a default judgment against Bonnie in the amount of $219,000, which attached to three of the properties. The clerk of court issued a writ of execution on the three properties. The court also entered judgment against Bonnie in favor of David in the amount of $50,000 for attorney fees and costs.
Later in that same month, Bonnie’s attorney entered an appearance in the case and filed a Rule 60(b) Motion to set aside the default judgment on the grounds of excusable neglect, and to quash the writ of execution.
In her affidavit, Bonnie alleged that she had not received actual notice of the proceedings and that, after 13 years of marriage, David had many ways in which he could have given her actual notice of the case, including by telephone, email, or through their adult children.
At the motion hearing, Bonnie’s attorney conceded that the alternate service had been carried out in accordance with the law. However, he pointed out that David could easily have given Bonnie actual notion of his legal case. David did not refute this allegation.
The court ruled in favor of David, holding that alternate service had been proper and that Bonnie had not shown there would be irreparable harm from the sheriff’s sale. The court did not specifically address Bonnie’s argument of excusable neglect.
Four days after this ruling the properties were sold at a sheriff’s sale. Bonnie file a motion for temporary restraining order (TRO), a motion to void the sale, and a motion to join the purchasers.
The court denied the TRO on the grounds that Bonnie had not proved the required elements for relief. It denied the motion to join the purchasers on the grounds that Bonnie had only cited rules that apply before a judgment is entered. It denied the motion to void the sheriff’s sale on the grounds that it had already ruled at the TRO hearing that notice of the sale had been proper.
Bonnie appealed and the Utah Court of Appeals issued an opinion on July 28, 2017. This opinion was subsequently vacated and a rehearing was granted.
Bonnie argued that the district court had erred in denying her Rule 60(b) motion to set aside the default judgment and in denying her motion to void the sheriff’s sale due to certain irregularities.
The Court noted the standard of review for each issue was whether or not the district court had abused its discretion.
With respect to her Rule 60(b) motion, Bonnie emphasized the excusable neglect prong of the Rule. The Court, citing James v. Layton/Oklund, 2009 UT 39, paragraphs 17, 25, 214 P.3d. 859, noted that this inquiry is a flexible one wherein the trial court is granted wide discretion “to consider all relevant factors and give each factor that it determines it deserves.” In this inquiry, “the question is always whether the relief sought is justified under the principles of fundamental fairs in light of the particular facts.” Id., paragraph 17. Utah courts are fairly “indulgent toward setting a judgment aside where there is reasonable justification or excuse for the defendant’s failure to answer and when timely application is made.” Miller v. Martineau & Co., 1999 UT App. 216, paragraph 35, 983 P.2d. 1107 (quotation simplified).
In the instant case the trial court focused on the fact that alternate service had been accomplished according to law and that the default judgment was therefore technically correct. However, the court failed to address Bonnie’s argument of excusable neglect. Rule 60(b) is designed to afford litigants a chance to seek relief from a final order or judgment if the motion is timely, there is a basis for granting relief (i.e., fraud, mistake, inadvertence, newly discovered evidence, or excusable neglect), and they can prove a meritorious defense. See Menzies v. Galetka, 2006 UT 81, paragraph 64, 150 P.3d 480.
The Court noted that if Bonnie’s unrefuted allegation that David could easily have given her actual notice of the lawsuit, this would likely constitute a reason justification for setting aside the default judgment.
The Court next addressed the issue of the sheriff’s sale. A court may set aside a sheriff’s sale if 1) the debtor’s property is sole at a grossly inadequate price, and 2) there were irregularities in the sale that caused the price inadequacy or created some other unfairness during the redemption period caused by the conduct of the party benefitted by the sale. See Pyper v. Bond, 2011 UT 45, paragraph 15, 288 P.3d. 575.
Bonnie asserted two irregularities with the sheriff’s sale. First, notice was not served upon her attorney as required by Rule 5 of the Utah Rules of Civil Procedure. Second, the sheriff’s sale disposed of all three properties together, rather than as separate parcels, thus contributing to the inadequacy of the sales price. Utah R. Civ. P. 69B(d) states that “The property shall be sold in such parcels as are likely to bring the highest price. Severable lots of real property shall be sold separately.”
The Court found these arguments persuasive and vacated the district court’s rulings and remanded for the district court to fully address Bonnie’s arguments. The Court found that neither party had shown entitlement to attorney fees, which can only be awarded pursuant to contract or statute, or for an equitable reason such as where a party acts in bad faith or vexatiously.
See Silva v. Silva, 2018 UT App. 210.
