Sorensen v. Crossland

2024 UT App 41

THE UTAH COURT OF APPEALS

CANDICE CROSSLAND SORENSEN,
Appellant,
v.
STEVEN G. CROSSLAND AND LORI A. MAY,
Appellees.

Opinion
No. 20220756-CA
Filed March 28, 2024

Third District Court, Salt Lake Department
The Honorable Mark S. Kouris
No. 180902903

Ralph C. Petty, Attorney for Appellant
Matthew N. Olsen and M. Tyler Olsen,
Attorneys for Appellees

JUDGE DAVID N. MORTENSEN authored this Opinion, in which
JUDGES GREGORY K. ORME and MICHELE M. CHRISTIANSEN
FORSTER concurred.

MORTENSEN, Judge:

¶1 A father and mother stole from their daughter by taking
settlement funds of $133,000 awarded to her and buying
themselves a house. Fifteen years later, the daughter discovered
the theft and sued, obtaining a judgment of nearly $279,000. In the
meantime, the parents divorced and the father remarried. The
daughter then filed the present action, maintaining that her father
fraudulently transferred funds to his new wife for less than
equivalent value, all while paying nothing on the judgment and
being insolvent. The matter came before the district court for trial.
Midway through the examination of the daughter’s first witness,
the district court raised a legal issue, suspended the presentation
Sorensen v. Crossland

of witnesses and evidence, and ordered supplemental briefing.
The district court indicated that a future hearing would be held.
But no such hearing occurred, and instead the district court
entered a ruling—the effect of which was the dismissal of the
daughter’s case. The daughter appeals, claiming legal error and a
deprivation of due process. We agree and reverse.

BACKGROUND

¶2 Candice Crossland Sorensen, who was born in 1989,
received about $133,000 in a medical malpractice settlement when
she was a minor. The funds were placed into accounts managed
by her parents, Steven G. Crossland and Cindi R. Crossland. In
1999, Steven and Cindi used these funds to purchase a house. 1 The
0F

property was titled in the parents’ names only, and Candice
moved into the house with her parents.

¶3 In 2014, when Candice learned of the use of her settlement
money, she sued Steven and Cindi. This suit was not resolved
until March 2018, at which point a judgment was entered against
Steven and Cindi, jointly and severally, in the amount of nearly
$279,000, with a judgment interest rate of 3.76%. No payments
were ever made to Candice, and Candice did not attempt to collect
the judgment.

¶4 Steven and Cindi divorced in January 2015, prior to the
entry of the judgment, and in September 2015, Steven met and
began living with Lori A. May. Steven moved into a property Lori
was renting, and he paid Lori $700 monthly toward rent. Lori and
Steven split the remaining expenses for utilities, car payments,
and groceries. In July 2016, Steven and Lori ceased renting and

1. Because some of the parties share the same surname, we
employ given names for all parties.

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Sorensen v. Crossland

purchased a house, for which Steven made the mortgage payment
while Lori shouldered other living expenses. 2 1F

¶5 In May 2018, Candice initiated this action against Steven
and Lori for fraudulent transfer, 3 arguing that Steven gave money
2F

to Lori (1) without receiving anything of value in exchange,
(2) “with the intent to hinder, delay, and defraud” Candice, and
(3) while he was insolvent or about to become insolvent shortly
after the transfer.

¶6 Extensive discovery was conducted, including the taking
of depositions from Candice, Steven, and Lori. Candice also
subpoenaed copies of Steven’s and Lori’s bank statements.

¶7 The action was set for a two-day bench trial, but the
proceeding lasted only a half day. It began with the testimony of
Steven, which was interrupted by the lunch break. Once back in
session, the court ordered the parties to prepare briefs addressing
the law on fraudulent transfer. Specifically, the court seemed to
be concerned that Candice had not made any previous effort to
collect the debt, which—in the court’s view—removed her claim
from the realm of fraudulent transfer. In reference to the money
Steven owed Candice, the court stated,

I don’t believe that there is a legal obligation to pay
the debt [from the judgment]. I think there’s

2. The record is unclear as to what happened to the equity in the
home purchased by Steven and Cindi.

3. The Fraudulent Transfer Act as been renamed to the Voidable
Transactions Act. See JENCO LC v. SJI LLC, 2023 UT App 151, ¶ 20
n.4, 541 P.3d 321. However, we will use the nomenclature
employed by the district court.

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Sorensen v. Crossland

probably a moral obligation, but I don’t think
there’s a legal obligation.

And the reason I think that is because once the debt
is there, the law gives the creditor a number of tools
by which to go get that debt. I mean, the creditor
literally could seize personal assets and sell them,
they could foreclose on homes, they could attach
bank accounts, they could garnish wages. Those are
all the tools that debt collectors have to go out and
get this debt.

Fraudulent transfer is, I think, a whole different
chapter in . . . that we’ve got a collector trying to
[collect on the debt], but the debtor is playing games
with hiding the money or moving the title
somewhere else, or doing whatever he can to avoid
those methods. But I think the process starts with
[debt collection] methods . . . .

I don’t think . . . there have been collection efforts in
this case . . . . I don’t know what has brought us to
here. But I do believe, I know that the monthly rental
payments and so forth that [Steven] is paying [Lori]
to live in the house and so forth, I don’t believe those
are unlawful transfers.

Given this concern, the court instructed the parties to prepare
supplemental briefing on whether Steven “paying half his rent by
paying” Lori was “somehow a fraudulent transfer.” The court
indicated that once the supplemental briefing was completed,
Candice was to file a request to submit and the court would “then
go and schedule a hearing.”

¶8 As it turns out, no request to submit was filed, but the court
nevertheless issued a ruling—without the benefit of another
hearing. Candice never had the opportunity to complete her

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Sorensen v. Crossland

examination of Steven, call Lori as a witness (as she had indicated
she would do in her disclosures), and rest her case.

¶9 The court’s ruling was premised on this point:

There was no evidence that [Candice] had initiated
the traditional methods to satisfy [the] judgment.
Nor that [Candice] provided evidence of even
sending personal demand letters or placing similar
phone calls. Instead, [Candice’s] argument is that
[Steven and Lori] did not pay the outstanding
judgments, but instead continued to live their lives
and satisfy their routine expenses.

From the lack of effort to collect the judgment, the court
concluded that Candice had proved “no instance” that “any of
[Steven and Lori’s] use of money was [done] with ‘actual intent to
hinder, delay, or defraud’ [Candice’s] collection efforts” under the
Uniform Voidable Transactions Act. See Utah Code § 25-6-
202(1)(a) (“A transfer made or obligation incurred by a debtor is
voidable as to a creditor, whether the creditor’s claim arose before
or after the transfer was made or the obligation was incurred, if
the debtor made the transfer or incurred the obligation . . . with
actual intent to hinder, delay, or defraud any creditor of the
debtor . . . .”). In other words, because Candice had not shown that
any “pending collection effort was thwarted” by Steven and Lori’s
expenditures, her claim of fraudulent transfer necessarily failed.
Another current of the court’s reasoning was that Candice had not
shown that any of Steven and Lori’s purchases were
“unreasonable,” implying that such a showing was necessary to
establish an intent to defraud.

¶10 Candice subsequently filed a motion to amend the findings
and a motion for a new trial. Candice’s motions were based on the
assertions that (1) Steven’s examination was interrupted by the
lunch break and never completed, (2) Lori was never “examined

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Sorensen v. Crossland

and no evidence was entered in relation to her testimony” even
though Candice had intended to call her, and (3) Candice did not
“rest [her] case or indicate that [she] had completed [her]
presentation of evidence to the court.” Given the “state of the
proceeding when the trial was recessed,” Candice argued that
many of the court’s factual findings and conclusions of law were
“unjustified.” She asserted that “[w]ithout the opportunity to
present the remainder of her evidence, the Court [could not] make
accurate and comprehensive findings and conclusions” and that
she would, accordingly, suffer “the denial of her due process
rights.” The court denied both motions. Candice appeals.

ISSUE AND STANDARD OF REVIEW

¶11 Candice argues that the district court violated her right to
a fair and meaningful trial under the due process clause of the
Utah Constitution. See Utah Const. art. I, § 7. “Constitutional
issues, including questions regarding due process, are questions
of law that we review for correctness.” Salt Lake City Corp. v. Jordan
River Restoration Network, 2012 UT 84, ¶ 47, 299 P.3d 990 (cleaned
up). 4
3F

ANALYSIS

¶12 Truth be told, we are not sure what happened here. But we
are sure that something seriously amiss occurred when Candice
was not provided with the opportunity to fully present her case.

4. Candice also asserts that the district court erred in denying her
motions to amend the findings and for a new trial. Because we
resolve this appeal on the first issue, we have no need to address
these other claims of error.

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¶13 We agree with Candice that her due process rights to a fair
and meaningful trial were denied. There is no question that
Candice never completed her presentation of evidence through
the examination of Steven and Lori. Indeed, in its order denying
Candice’s two post-trial motions, the district court stated that
“[a]fter reviewing the audio recording” of the trial, it found that
Candice’s claim that she “presented only a portion of the
examination” of Steven “to be true, albeit out of context.” “To
provide context,” the court stated that Candice’s examination of
Steven consisted entirely of “having [Steven] go line-by-line
through his check register and explain each transaction” and that
“the balance of this testimony would be to continue the trip
through [Steven’s] check register.” It appears that the court
concluded that such evidence would not be helpful, and it was at
this point that the court instructed the parties to prepare
supplemental briefing because the court could “[n]ot
understand[]” how these transactions could be the “basis for the
fraudulent conveyance claims.” The district court’s explanation
fails, however, to address why, despite the court not
understanding how the transactions would support Candice’s
claims, it did not allow the witness to complete his testimony; nor
did the district court explain why no other witnesses or evidence
would be allowed. 5 Candice also never rested her case in this trial
4F

5. That is not to say that a district court could never curtail the
presentation of evidence that the court found unhelpful. See Utah
R. Evid. 611(a) (“The court should exercise reasonable control
over the mode and order of examining witnesses and presenting
evidence so as to: (1) make those procedures effective for
determining the truth; (2) avoid wasting time; and (3) protect
witnesses from harassment or undue embarrassment.”). For
example, the district court could have solicited a proffer of the
remainder of Candice’s case in chief. See State v. Boyd, 2001 UT 30,
¶ 36, 25 P.3d 985 (“A proffer is a mechanism by which a party may
(continued…)

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precipitously terminated by the court. The proceeding was simply
suspended, as far as we can tell, but never reconvened.

¶14 “No principle is more fundamental to the integrity of a
society that claims allegiance to the rule of law than the principle
that a person may not be deprived of his property without first
being afforded due process of law.” Brigham Young Univ. v. Tremco
Consultants, Inc., 2007 UT 17, ¶ 28, 156 P.3d 782. “Due process of
law requires” that a court “hears before it condemns, proceeds
upon inquiry, and renders judgment only after trial.” Riggins v.
District Court, 51 P.2d 645, 660 (Utah 1935) (cleaned up).

¶15 This principle is repeatedly embodied in the Utah Rules of
Civil Procedure. “In all actions tried upon the facts without a jury
. . . the court must find the facts specially and state separately its
conclusions of law. The findings and conclusions must be made
part of the record and may be stated in writing or orally following
the close of the evidence.” Utah R. Civ. P. 52(a)(1) (emphasis added).
And a court is allowed to make a judgment on partial findings
only if “a party has been fully heard on an issue during a nonjury
trial.” Id. R. 52(e) (emphasis added).

¶16 That did not happen here. Candice was never “fully heard”
on her fraudulent transfer claim. Not only was she unable to
complete her examination of Steven, but she was never afforded
the opportunity even to begin her examination of Lori, who was
disclosed as a witness. We are hard pressed to see how Candice
was heard in a way that would satisfy her due process rights.
Additionally, we note that the district court, shortly after it
instructed the parties to submit supplemental briefing, expressly
stated that it would “schedule a hearing” upon receiving
Candice’s notice to submit. But Candice filed no such request, and

create an appellate record of what the evidence would have
shown.”). With that record, we might have been able to determine
whether Candice’s claims could have entitled her to a judgment.

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the court did not schedule such a hearing. Given the procedural
posture of the case, Candice had every reason to believe that she
would be afforded the opportunity to complete her presentation
of evidence and then rest her case, and it must have come as a
surprise to her that the court issued its ruling prematurely.

¶17 Accordingly, we reverse the court’s ruling and remand this
matter for further proceedings to allow Candice the opportunity
to complete her presentation of evidence.

¶18 Because this matter is being remanded, and where the
district court will likely face the same question about the
applicability of Utah’s fraudulent transfer law, we provide the
following guidance. See In re A. Dean Harding Marital & Family
Trust, 2023 UT App 81, ¶ 149, 536 P.3d 38 (offering guidance
regarding an issue ancillary to the reason for remand). The court
repeatedly mentioned that Candice never made any efforts to
collect on the judgment, the implication being that she could not
show an intent to defraud, hinder, or delay without having first
made such an effort. But we point out that there is no requirement
that a person attempt any collection efforts prior to filing a
fraudulent transfer action. See Utah Code § 25-6-202(1). The
Uniform Voidable Transactions Act expressly states that a creditor
can pull back transfers “whether the creditor’s claim arose before
or after the transfer was made or the obligation was incurred.” Id.
In other words, the debt does not necessarily have to be liquidated
to support a fraudulent transfer claim. The only requirement is
that the debt exist, even if it’s on an unliquidated or a contingent
basis. Here, there is no question that Steven’s debt to Candice
existed before the alleged fraudulent transfers were made. The
debt arose the moment that Candice was entitled to the medical
malpractice settlement money. Indeed, Steven admitted in his
deposition that he knew Candice was entitled to the money but
due to his and Cindi’s actions, the money was not available:

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Counsel: [A]s part of [Candice’s medical malpractice]
settlement, there was a sum of approximately
$133,000 that went into a trust account that was
controlled by her parents, you and Cindi, that was
paid for by the doctors; correct?

Steven: Yes.

Counsel: Now, the understanding was, I guess, that
when Candice reached the age of 18 years old, that
that money would become hers; is that correct?

Steven: Correct.

....

Counsel: Now, at the time Candice turned 18 or
thereafter, those funds . . . that you and Cindi
controlled . . . were not made available to her, were
they?

Steven: No . . . .

Counsel: And the reason was because they had been
utilized for the purchase of the [first house]; is that
correct?

Steven: Correct.

And it was well after Steven was aware of his indebtedness to
Candice (she turned eighteen in 2007) that he made the alleged
fraudulent transactions associated with the purchase of the
second house with Lori in 2016. To put it plainly, Candice was
under no obligation to engage in collection efforts when, as here,
the debtor was well aware of his obligation. Indeed, it seems to us
that any expenditures Steven made after Candice was entitled to
medical malpractice settlement money could potentially—if

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supported by evidence that they were made with an intent to
hinder, delay, or defraud—be the basis for a fraudulent transfer
claim.

CONCLUSION

¶19 We conclude that Candice’s due process rights were
abridged when the district court issued a ruling in the context of
a trial without affording Candice the opportunity to complete her
presentation of evidence. We reverse the district court’s order
dismissing her case and remand this matter for proceedings
consistent with this opinion.

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