Bichler v DEI

2009 UT 63
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
----oo0oo----
Benedict Bichler, 	No. 20061162
Plaintiff and Appellee,
v.
F I L E D
DEI Systems, Inc.,
Defendant and Appellant. 	September 29, 2009
---
Third District, Salt Lake
The Honorable Ann Boyden
No. 060904754
Attorneys: 	Craig Carlile, Brent D. Wride, Gregory S. Roberts,
Provo, for appellee
M. David Eckersley, Salt Lake City, for
appellant
---
PARRISH, Justice:
INTRODUCTION
¶1 	Delta Equipment Industrial Systems, Inc. (“DEI”)
appeals the district court’s summary judgment dismissing DEI’s
setoff counterclaim and ruling that DEI is in unlawful detainer
of property owned by Benedict Bichler (“Bichler”). 	Specifically,
DEI challenges the district court’s determination that (1) DEI
lacked a valid basis for asserting a claim of setoff and (2)
DEI’s claim of setoff was an improper counterclaim or defense to
Bichler’s claim of unlawful detainer.
¶2 	We hold that DEI had a valid basis for asserting an
equitable claim of setoff and that the district court erred by
finding that DEI could not bring its claim of setoff within the
unlawful detainer action. 	We nonetheless uphold the district
court’s grant of summary judgment resolving the issue of
possession of Bichler’s property because DEI’s claim of setoff
does not directly relate to the issue of possession.

No. 20061162 	2
BACKGROUND
¶3 	In May 2003, DEI Systems, Inc. entered into a lease
agreement (the “Lease”) with Bichler wherein Bichler leased
certain real property to DEI. 	No other entities or individuals
were parties to the Lease except Bichler and DEI. 	The Lease
required that DEI pay Bichler rent on the first day of each
month. 	Any failure to pay rent within the time provided could
potentially result in a material default under the terms of the
Lease. 	Paragraph 25 of the Lease, entitled “Estoppel
Certificate,” required DEI, upon Bichler’s request, to certify
that it had no offsets against enforcement of the Lease or to
confirm such claims in writing.
¶4 	One year into the lease, in May 2004, DEI, Bichler, and
David Bevan entered into a purchase agreement (the “Purchase
Agreement”) with Environmental Services Group, Inc. (“ESG”).
Pursuant to the Purchase Agreement, ESG agreed to purchase eighty
percent of DEI shares previously owned by Bichler and Bevan. 	The
Purchase Agreement provided ESG with the right “to set-off
against any payments due and owing to [Bichler and Bevan] . . .
any and all amounts that may become due and payable from time to
time to [ESG] by [Bichler and Bevan] pursuant to the terms of
this Agreement.” 	In conjunction with the Purchase agreement,
Bichler and Bevan entered into separate individual employment
agreements (the “Employment Agreements”) with DEI whereby Bichler
and Bevan were employed by and made directors of DEI.
¶5 	Shortly after executing the Purchase Agreement, DEI and
ESG determined that Bichler and Bevan had breached (1) their
duties as officers of DEI, (2) the Employment Agreements, and (3)
the representations, warranties, and covenants of the Purchase
Agreement. 	Based on these alleged breaches, DEI and ESG sent
several letters demanding that Bichler and Bevan defend,
indemnify, and hold DEI and ESG harmless for alleged losses
caused by Bichler and Bevan. 	In January 2006, DEI indicated
that, pursuant to the setoff provision in the Purchase Agreement,
it was going to exercise its right to set off its rent obligation
under the Lease against the alleged losses caused by Bichler and
Bevan. 	Accordingly, beginning in February of 2006, DEI stopped
paying rent, although it continues to occupy the leased premises.
¶6 	On February 2, 2006, Bichler and Bevan filed an action
seeking a declaratory judgment that they did not owe any defense
or indemnity obligations to ESG or DEI and that they did not
breach the Purchase Agreement. 	DEI and ESG answered and asserted
counterclaims for breaches of the Purchase Agreement, the
Employment Agreements, and fiduciary duties. 	Additionally, DEI

3 	No. 20061162
asserted the right to set off rent payments due or owing to
Bichler against any losses caused by Bichler. 	That action, with
all of its claims and counterclaims, remains pending in Third
District Court and has been stayed pending resolution of this
appeal.
¶7 	In March 2006, Bichler commenced this action against
DEI alleging unlawful detainer due to DEI’s failure to pay rent
under the Lease. 	DEI answered, asserting its alleged right of
setoff as one of its affirmative defenses. 	Bichler subsequently
moved for summary judgment, asserting that DEI’s alleged right of
setoff was not a proper defense to the unlawful detainer action.
¶8 	In granting Bichler’s motion for summary judgment, the
district court held that “DEI’s claim of setoff arising under the
Purchase Agreement is not a proper counterclaim under Utah’s
unlawful detainer statute.” 	Additionally, the district court
found that the offset provision in the Purchase Agreement did not
belong to DEI, but rather to ESG, and that the Purchase Agreement
did not amend or modify the terms or obligations under the Lease,
and therefore DEI lacked a valid basis to claim a right of
setoff. 	DEI appealed. 	We have jurisdiction pursuant to Utah
Code section 78A-3-102(3)(j) (2008).
ISSUES AND STANDARD OF REVIEW
¶9 	DEI asks us to determine whether the district court
erred in granting Bichler’s motion for summary judgment when it
found that (1) DEI lacked a valid basis to assert a claim of
setoff and (2) DEI’s claim of setoff was not a proper defense or
counterclaim to Bichler’s unlawful detainer action.
¶10 	Whether the district court appropriately granted or
denied summary judgment is a question of law that we review for
correctness, giving no deference to its legal conclusions.
Parduhn v. Bennett, 2002 UT 93, ¶ 5, 61 P.3d 982. 	In reviewing a
summary judgment ruling, we “view the facts and all reasonable
inferences drawn therefrom in the light most favorable to the
non-moving party.” 	Dowling v. Bullen, 2004 UT 50, ¶ 7, 94 P.3d
915.
ANALYSIS
I. 	DEI HAS A VALID BASIS FOR ASSERTING A CLAIM OF SETOFF
¶11 	Bichler argues that DEI has no valid basis for
asserting a right of setoff in the unlawful detainer action
because neither the Lease nor the Purchase Agreement gives DEI a
contractual right to offset payments of rent against losses

No. 20061162 	4
allegedly caused by Bichler. 	DEI argues that even assuming it
does not have a contractual right of setoff, it may still assert
a counterclaim of setoff as a matter of law because the doctrine
of setoff arises in equity. 	We first determine whether DEI has a
contractual right of setoff. 	Finding that DEI does not have such
a right, we then address whether it nonetheless has a basis to
assert an equitable right of setoff.
A. 	DEI Does Not Have a Contractual Right of Setoff
¶12 	DEI argues that both the Lease Agreement and the
Purchase Agreement provide it with a contractual right of setoff.
We use the principles of contract interpretation to interpret the
terms of the Lease and the Purchase Agreement. 	“The underlying
purpose in construing or interpreting contractual provisions is
to determine the intentions of the parties.” 	IHC Health Servs.
v. D & K Mgmt., 2008 UT 73, ¶ 44, 196 P.3d 588 (internal
quotation marks omitted). 	Absent ambiguity, we look only “to the
language of the contract to determine its meaning and the intent
of the contracting parties.” 	Café Rio, Inc. v. Larkin-Gifford-
Overton, LLC, 2009 UT 27, ¶ 25, 207 P.3d 1235.
¶13 	DEI argues that paragraph 25 of the Lease provides it
with a contractual right to offset rents. 	We disagree. 	The
Lease clearly identifies Bichler as Lessor and DEI as Lessee of
the property. 	In relevant part, paragraph 25 of the Lease,
entitled “Estoppel Certificate,” provides that “Lessee shall,
within fifteen (15) days after Lessor’s request, execute and
deliver to Lessor a written declaration in a form adequate for
recording . . . certifying that there are no defenses or offsets
against the enforcement of this lease by the Lessor, or stating
those claimed by Lessee.” 	Contrary to DEI’s assertion, paragraph
25 does not provide it with a contractual right of setoff.
Rather, it merely provides a process whereby Bichler may require
DEI to certify to a third party, through an estoppel certificate,
that the Lease is valid and that DEI does not intend to assert
any legal defense or offset to enforce the Lease. 	At most, the
language of the Lease recognizes that DEI may have an equitable
right to setoff apart from the provisions of the Lease.
¶14 	DEI also argues that it has a contractual right of
setoff under the terms of the Purchase Agreement. 	The Purchase
Agreement entitles the “Purchaser” to “set-off against any
payments due and owing to the Shareholders . . . any and all
amounts that may become due and payable from time to time to
Purchaser by the Shareholders pursuant to the terms of this
Agreement . . . .” 	The Purchase Agreement defines ESG as the
“Purchaser” and Bichler and Bevans as the “Shareholders.” 	DEI,

5 	No. 20061162
Bichler, and Bevans are also identified collectively as the
“Sellers.” 	Nowhere does the Purchase Agreement define DEI as a
“Purchaser.” 	Thus, based on the plain language of the Purchase
Agreement, DEI does not have a contractual right to setoff
arising from amounts due to its breach. 	That right belongs
solely to ESG as the “Purchaser.” 	Because we find that DEI has
no contractual right to setoff under the lease or the Purchase
Agreement, we next must address whether DEI has an equitable
right of setoff.
B. 	DEI Has an Equitable Right of Setoff as a Matter of Law
¶15 	DEI argues that even if its claim of setoff is not
based in contract, it nonetheless has an equitable right of
setoff. 	We agree. 	“The doctrine of setoff . . . is essentially
an equitable one requiring that the demands of mutually indebted
parties be set off against each other and that only the balance
be recovered in a judicial proceeding by one party against
another.” 	20 Am. Jur. 2d Counterclaim, Recoupment, and Setoff
§ 6 (2008) (internal citations omitted). 	“The right to set-off
exists independently of statute and rests upon the inherent power
of a court to do justice to the parties before it. 	It is an
equitable right founded on equitable principles.” 	80 C.J.S. Set-
off and Counterclaim § 5 (2000).
¶16 	With the adoption of the Utah Rules of Civil Procedure
in 1950, “the distinctions between recoupment, setoff, and
counterclaim” were “dissolved in Utah.” 	Mark VII Fin.
Consultants Corp. v. Smedley, 792 P.2d 130, 133 (Utah Ct. App.
1990). 	Indeed, “[a] ‘setoff’ is [merely] a counterclaim which a
defendant may have against a plaintiff to be used in full or
partial satisfaction of whatever is owed.” 	Id. at 132 	(citing
Studley v. Boylston Nat’l Bank, 229 U.S. 523, 528 (1913)).
Therefore, to determine whether DEI has a basis for asserting an
equitable right of setoff, we need only determine whether DEI has
a cognizable counterclaim against Bichler that, if successful,
would entitle DEI to a monetary recovery.
¶17 	DEI contends that it has valid counterclaims against
Bichler for alleged breaches of the Purchase Agreement, the
Employment Agreement, and fiduciary duties owed as a director of
DEI. 	We address each of these claims in turn.
¶18 	DEI asserts that ESG and DEI are in essence the same
party in interest under the Purchase Agreement and, therefore, a
violation of the Purchase Agreement by Bichler can be recovered
by either DEI or ESG. 	We disagree. 	Under the plain terms of the
Purchase Agreement, DEI and ESG are not the same party in

1 Although DEI initially pled the right to setoff as a
defense and not as a counterclaim seeking affirmative relief,
that distinction is not material. 	See Mark VII Fin. Consultants
Corp. v. Smedley, 792 P.2d 130, 133 n.2, (Utah Ct. App. 1990)
(citing J.W. Moore, Moore’s Federal Practice, § 8:27[3] (2d ed.
1989)).
No. 20061162 	6
interest. 	The Purchase Agreement identifies ESG as “Purchaser,”
and Bichler and DEI collectively as “Sellers.” 	Bichler is also
identified as a “Shareholder.” 	In general, the duties and
obligations in the Purchase Agreement flow between the purchaser
on the one hand and the shareholders and sellers on the other.
While the terms of the Purchase Agreement might conceivably
contain provisions that create mutual obligations between DEI as
a seller and Bichler as a shareholder, DEI has not brought to our
attention any such provisions. 	Therefore, we find that DEI has
failed to demonstrate that it has a cognizable counterclaim based
on a breach of the Purchase Agreement.
¶19 	Additionally, DEI argues that is has a valid
counterclaim against Bichler for allegedly violating the
Employment Agreement and breaching fiduciary duties as a director
of DEI. 	The Employment Agreement involves two parties: Bichler
and DEI. 	Pursuant to the Employment Agreement, Bichler owed DEI
specific obligations and duties. 	A violation of these duties
would entitle DEI to sue Bichler and conceivably recover monetary
damages. 	Therefore, DEI has a cognizable counterclaim against
Bichler for an alleged breach of the Employment Agreement.
Similarly, as a director of DEI, Bichler owed certain duties to
DEI, and DEI has a right to sue Bichler individually for breach
of any of those duties. 	Accordingly, DEI also has a cognizable
counterclaim against Bichler for the alleged breach of fiduciary
duties. 	We therefore conclude that DEI has a valid basis for
asserting an equitable right of setoff with regard to its claims
that Bichler violated the Employment Agreement and breached
fiduciary duties as a director of DEI.
¶20 	Having determined that DEI has a valid basis for
asserting an equitable right of setoff, we now determine whether
these claims are properly raised as counterclaims within an
action for unlawful detainer.
II. 	RULE 13 GOVERNS COUNTERCLAIMS IN AN UNLAWFUL DETAINER ACTION
¶21 	DEI argues that the district court erred when it found
that DEI’s claim of setoff was an improper counterclaim or
defense 1 to Bichler’s unlawful detainer action. 	Bichler, on the
other hand, argues that our case law narrowly construes

7 	No. 20061162
admissible counterclaims in unlawful detainer actions in order to
“provide a speedy resolution of the issue of possession.” 	P.H.
Investment v. Oliver, 818 P.2d 1018, 1020 (Utah 1991). 	Our prior
cases addressing proper counterclaims in unlawful detainer
actions have been less than clear. 	We therefore take this
opportunity to elucidate and provide direction on this issue.
¶22 	Prior to our 1950 adoption of the Utah Rules of Civil
Procedure, this court espoused the general common law rule that
“neither a counterclaim nor cross-complaint of any kind is
permissible in an action in unlawful detainer.” 	Dunbar v.
Hansen, 250 P. 982, 984 (Utah 1926) (internal quotation marks
omitted); see also Forrester v. Cook, 292 P. 206, 212 (Utah
1930). 	This rule was premised on the policy of providing “a more
expeditious proceeding” to settle disputes regarding the lawful
possession of realty. 	Dunbar, 250 P. at 984 (internal quotation
marks omitted).
¶23 	In 1950, we adopted the Utah Rules of Civil Procedure
in order to “simplify and expedite procedure and to consolidate
litigation wherever that could be done without confusion or
prejudice to the rights of litigants.” 	White v. Dist. Court, 232
P.2d 785, 785 (Utah 1951). 	Shortly thereafter, we held that
whether a counterclaim “may be asserted in an [unlawful detainer]
action is purely a procedural matter” that is governed by “the
provisions of Rule 13 of the New Rules governing counterclaims.”
Id. 	Our decision in White rejected any prior limitations on
bringing counterclaims in actions for unlawful detainer in favor
of following the newly adopted provisions of the rules of civil
procedure.
¶24 	When the White decision was issued, rule 13 of the Utah
Rules of Civil Procedure included only subsections (a) and (b).
While other subsections have been added to rule 13, the language
in subsections (a) and (b) remains the same. 	Subsection (a)
governs compulsory counterclaims and mandates that a counterclaim
that “arises out of the transaction or occurrence that is the
subject-matter of the opposing party’s claim” be brought within
the same action or it will be barred. 	Utah R. Civ. P. 13(a); see
also, Nu-Med USA, Inc. v. 4LifeResearch, L.C., 2008 UT 50, ¶ 9,
190 P.3d 1264. 	On the other hand, subsection (b) of rule 13
governs permissive counterclaims and provides that “[a] pleading
may state as a counterclaim any claim against an opposing party
not arising out of the transaction or occurrence that is the
subject-matter of the opposing party’s claim.” 	Utah R. Civ. P.
13(b) (emphasis added); see also, Faux v. Mickelsen, 725 P.2d
1372, 1374 (Utah 1986) (discussing the limits of permissive
counterclaims in small claims court actions); Mark VII Fin.

2 Because the Utah Rules of Civil Procedure are patterned
after the Federal Rules of Civil Procedure, where there is little
Utah law interpreting a specific rule, we may look to the Federal
Rules of Civil Procedure for guidance. 	See 438 Main Street v.
Easy Heat, Inc., 2004 UT 72, ¶ 64, 99 P.3d 801.
No. 20061162 	8
Consultants Corp. v. Smedley, 792 P.2d 130, 132-33 (Utah Ct. App.
1990). 	The use of the word “may” in rule 13(b)
is not intended to confer any discretion upon
the court with respect to a permissive
counterclaim; rather, it gives the litigant a
choice either to assert or not to assert a
permissive counterclaim. 	If he elects to
plead it, the court must entertain it so long
as it is within the court’s subject matter
jurisdiction.
Montecatini Edison, S.P.A. v. Ziegler, 486 F.2d 1279, 1282 (D.C.
Cir. 1973); accord Switzer Bros. v. Locklin, 207 F.2d 483, 488
(7th Cir. 1953) (“Both the words ‘compulsory’ in paragraph (a)
and ‘permissive’ in paragraph (b) are descriptive of the rights
of the pleader. 	Neither has any bearing upon the right or duty
of the court when a counterclaim is presented.”); United States
ex rel. Kashulines v. Thermo Contracting Corp., 437 F.Supp. 195,
199 (D.N.J. 1976) (“Rule 13(b) by its terms grants [a party] an
unqualified right to interpose these unrelated claims, and the
court possesses no discretion to reject them.”); Power Tools &
Supply, Inc. v. Cooper Power Tools, Inc., No. 05-cr-73615-DT,
2007 U.S. Dist. LEXIS 29571, at *9 (April 20, 2007) (“[O]nce
properly pleaded, a court has no discretion to refuse to consider
a permissive counterclaim.”). 2
¶25 	Since our decision in White, we have considered the
issue of proper counterclaims in unlawful detainer actions in
Lincoln Fin. Corp. v. Ferrier, 567 P.2d 1102 (Utah 1977) and P.H.
Investment v. Oliver, 818 P.2d 1018, 1020 (Utah 1991). 	Bichler
argues that our decisions in these more recent cases narrow the
scope of proper counterclaims in unlawful detainer actions to
those claims that arise out of the same “transaction or
occurrence” as the subject matter of the complaint as required by
subsection (a) of rule 13. 	To the degree that Lincoln or P.H.
Investment suggest that counterclaims in unlawful detainer
actions are limited beyond the scope of what is allowed under
rule 13, we disavow that suggestion. 	Indeed, “nothing in the
Utah unlawful detainer statute prohibits the assertion of any
defense or counterclaim by the defaulting tenant-defendant.”
P.H. Investment, 818 P.2d at 1020. 	Rather, as we stated in

9 	No. 20061162
White, whether a counterclaim “may be asserted in an [unlawful
detainer] action is purely a procedural matter” that is governed
by Utah Rule of Civil Procedure 13. 	White, 232 P.2d at 174.
Rule 13 allows for compulsory and permissive counterclaims, and
both may be properly pleaded in an unlawful detainer action.
¶26 	Here, Bichler commenced an unlawful detainer action
against DEI, claiming that DEI failed to pay rent due under the
Lease. 	DEI counterclaimed alleging a right to set off the rent
payments against losses caused by Bichler. 	In granting Bichler’s
motion for summary judgment, the district court ruled that DEI’s
claim of setoff was an improper counterclaim under Utah’s
unlawful detainer statute because the claim did not arise out of
the same transaction or occurrence as the Lease.
¶27 	The district court’s reasoning unduly restricts the
scope of permissible counterclaims in unlawful detainer actions
by limiting such claims to those that fall within the scope of
compulsory counterclaims under Utah Rule of Civil Procedure
13(a). 	As discussed above, rule 13 applies in its entirety to
counterclaims brought in unlawful detainer actions. 	While DEI’s
claim of setoff may fail to satisfy the requirements of a
compulsory counterclaim, it certainly falls within the scope of a
permissive counterclaims under rule 13(b). 	We therefore hold
that the district court erred in dismissing DEI’s claim of setoff
based on its determination that the counterclaim was improper in
an unlawful detainer action.
¶28 	Having determined that the district court erred in
dismissing DEI’s permissive counterclaims, we now address the
impact of that error in this case.
III. 	THE DISTRICT COURT DID NOT ERR IN GRANTING SUMMARY JUDGMENT
ON THE ISSUE OF POSSESSION
¶29 	Notwithstanding our determination above, we find that
the district court did not err in granting Bichler’s motion for
summary judgment on the issue of possession because DEI’s
permissive counterclaim does not directly relate to the issue of
possession. 	Bichler argues that permissive counterclaims should
not be allowed in actions for unlawful detainer because they
delay the speedy resolution of the issue of possession. 	We are
unpersuaded by Bichler’s argument. 	While we recognize that one
of the primary purposes of the unlawful detainer statute is to
provide a speedy resolution on the issue of possession, this
policy is best served by following our rules of civil procedure
instead of carving out narrow exceptions. 	Specifically, rule
54(b) of the Utah Rules of Civil Procedure provides a means

No. 20061162 	10
whereby the issue of possession can be speedily resolved while
still allowing both parties to bring all legitimate claims such
that “all of whatever controversy exists between the parties may
be settled as simply and expeditiously as possible.” 	Lincoln
Fin. Corp. v. Ferrier, 567 P.2d 1102, 1104 (Utah 1977).
¶30 	In relevant part, rule 54(b) provides:
When more than one claim for relief is
presented in an action, whether as a claim,
counterclaim, cross-claim, or third-party
claim, . . . the court may direct the entry
of a final judgment as to one or more but
fewer than all of the claims . . . upon an
express determination by the court that there
is no just reason for delay and upon an
express direction for the entry of judgment.”
Utah R. Civ. P. 54(b). 	Normally, the entry of final judgment on
a separate claim is proper under rule 54(b) when “the facts
underlying [the separate claim are] . . . different than those
underlying other claims in the action.” 	Kennecott Corp. v. State
Tax Comm’n, 814 P.2d 1099, 1103 (Utah 1991). 	Recognizing the
important public policy of providing a speedy resolution of the
issue of possession, we hold that in an unlawful detainer action
with multiple claims or counterclaims, a rule 54(b) entry of
final judgment resolving the issue of possession is proper when
it includes all claims and counterclaims that are necessary to
determine lawful possession of the property.
¶31 	In this case, the trial court’s grant of summary
judgment effectively resolved all claims and counterclaims by
ruling that DEI is in unlawful detainer of Bichler’s property and
by dismissing DEI’s setoff counterclaim on the basis that it was
improper in an unlawful detainer action. 	Therefore, Bichler did
not need to request a rule 54(b) entry of final judgment in order
to seek appellate review. 	Nonetheless, given our clarification
as to the scope of proper counterclaims in unlawful detainer
actions it is appropriate to treat this case as if Bichler had
brought such a motion. 	However, had the district court allowed
the counterclaims, Bichler could nevertheless have obtained a
speedy resolution of the possession issue by seeking entry of
final judgment on that issue under rule 54(b) because DEI’s
permissive counterclaims did not directly relate to the issue of
possession.
¶32 	Before directing an entry of final judgment under rule
54(b) on the issue of possession, the court must resolve all

11 	No. 20061162
claims relating to possession. 	Our prior case law indicates that
a counterclaim raising a breach of a warranty of habitability
must be addressed in determining lawful possession. 	See P.H.
Investment v. Oliver, 818 P.2d 1018, 1021 (Utah 1991) (discussing
a claim of breach of warranty of habitability within an unlawful
detainer action). 	Similarly, a claim of wrongful or retaliatory
eviction would of necessity go to the issue of lawful possession.
See Building Monitoring Sys., Inc. v. Paxton, 905 P.2d 1215, 1218
(Utah 1995) (finding that retaliatory eviction is an affirmative
defense to an unlawful detainer action). 	Here, we are in essence
asked to determine whether a right of setoff must be decided
prior to determining lawful possession of realty.
¶33 	Within a lease agreement, parties could conceivably
create a contractual right to set off payments of rent against
losses caused by the lessor or incorporate a lease agreement into
a subsequent agreement between the same parties that included a
similar right of setoff. 	In such a case, a court would have to
entertain the claim of setoff before determining the right to
possession because it would directly relate to the lessee’s
obligation to pay rent. 	However, that is not this case here
where DEI does not have any contractual right to set off rent
payments against losses caused by Bichler. 	As previously
discussed, neither the Lease nor the Purchase Agreement provide
DEI with a contractual right to set off payments of rent against
unrelated losses caused by Bichler. 	Instead, DEI has equitable
claims of setoff arising from Bichler’s alleged breach of the
Employment Agreement and his alleged breach of fiduciary duties
as a director of DEI. 	Because DEI’s equitable claim of setoff
does not relate to the issue of possession, the district court
need not decide this claim before ruling on the issue of
possession. 	Similarly, had the district court not dismissed
DEI’s permissive counterclaims, the district court could have
directed the entry of final judgment on the issue of possession
under rule 54(b).
CONCLUSION
¶34 	DEI has a valid basis for asserting equitable claims of
setoff against Bichler for the alleged breach of the Employment
Agreement and the alleged breach of his fiduciary duties as a
director of DEI. 	Rule 13 of the Utah Rules of Civil Procedure
applies to unlawful detainer actions and does not bar DEI from
asserting its equitable claims of setoff in the unlawful detainer
action. 	The district court erred in its determination that DEI’s
setoff claim was improper in dismissing those claims. 	We
therefore reverse that dismissal and order that DEI’s equitable

3 We note that DEI has also asserted its claims against
Bichler for breach of the Employment Agreement and fiduciary duty
claims in a separate action. 	Given the nature of permissive
counterclaims under rule 13 of Utah Rules of Civil Procedure, we
leave it to DEI’s discretion as to where to pursue these claims.
No. 20061162 	12
claim of setoff, as set forth in Part I of this opinion, be
reinstated within the unlawful detainer action. 3
¶35 	The district court did not err, however, in granting
Bichler’s motion for summary judgment on the issue of possession
where DEI’s claim of setoff does not directly relate to that
issue. 	We accordingly affirm the district court’s order granting
summary judgment on the issue of possession, including the
district court’s determination regarding outstanding rent,
interest, late charges, and attorneys’ fees incurred in
litigating the issue of possession.
---
¶36 	Associate Chief Justice Durrant and Justice Wilkins
concur with Justice Parrish’s opinion.
---
NEHRING, Justice, concurring:
¶37 	While I concur in the Majority’s result, I write
separately because I believe that, in some instances, a claim of
equitable setoff may be so intertwined with a tenant’s obligation
to pay rent as to require suspension of a preliminary
determination of possession pending adjudication of the equitable
setoff claim.
¶38 	Utah’s unlawful detainer statute states that a tenant
“holding real property for a term less than life” is guilty of an
unlawful detainer if the tenant “continues in possession . . .
after default in the payment of any rent.” 	Utah Code § 78B-6-
802(1) & (1)(c) (2008). 	The Majority today concedes that some
counterclaims pled by a tenant claimed to be in unlawful detainer
may go directly to the issue of whether the tenant is entitled to
lawful possession of the leased premises. 	In this case the
Majority has concluded that DEI has valid equitable claims of
setoff, but “[b]ecause DEI’s equitable claim of setoff does not
relate to the issue of possession, the district court need not
decide this claim before ruling on the issue of possession.”

13 	No. 20061162
¶39 	I do not contest that DEI’s equitable claim of setoff
does not relate to the issue of possession. 	The Majority’s
holding, however, chooses not to acknowledge the possibility that
instances could arise where a tenant’s equitable claim of setoff
is directly related to its obligation to pay rent. 	Even without
a contractual agreement contemplating an offset of rent, the
extent of the parties’ interaction as evidenced by their
relationship, understandings, and conduct could result in a
“dependence of covenants” such that a breach of a promise between
the parties “is directly relevant to the issue of possession.”
P.H. Inv. v. Oliver, 818 P.2d 1018, 1021 (Utah 1991).
Additionally, a related agreement between a landlord and tenant
that establishes a right to a setoff of rent that proves to be
otherwise unenforceable may be at issue. 	In such a case, an
equitable claim under the unenforceable agreement may directly
relate to a tenant’s obligation to pay rent.
¶40 	A final adjudication of possession before a
determination of the counterclaim’s merits would produce unjust
results in the situations described above. 	This court reasoned
in P.H. Investment that if a tenant could not bring a breach of
the warranty of habitability as a defense or counterclaim to an
unlawful detainer claim, “the tenant would be required to vacate
before being able to raise the breach, a result entirely
inconsistent with the policy behind our adoption of the implied
warranty.” 	818 P.2d at 1021. 	Similarly, a determination of
possession before further investigation into whether a tenant’s
claim of equitable setoff sufficiently relates to its obligation
to pay rent could cause irreversible harm to a tenant. 	See Nork
v. Pac. Coast Med. Enter.’s, Inc., 73 Cal. App. 3d 410, 414 (Cal.
App. 1997) (listing proper equitable defenses to an unlawful
detainer action brought for failure to pay rent). 	Like the
counterclaims of breach of the warranty of habitability and
retaliatory eviction, a counterclaim of equitable setoff may
similarly resemble an affirmative defense to an allegation of
failure to pay rent rather than a permissive counterclaim. 	See
Lincoln Fin. Corp. v. Ferrier, 567 P.2d 1102, 1104 (Utah 1977)
(acknowledging that controversies presented in the context of an
unlawful detainer action “may be settled as simply and
expeditiously as possibly by allowing all legitimate claims,
defenses and counterclaims relating thereto in one action”
(emphasis added)); Mark VII Fin. Consultants Corp. v. Smedley,
792 P.2d 130, 133 n.2 (Utah Ct. App.1990) (“At times, though, a
defendant may desire to use recoupment or set-off defensively,
rather than as the basis for a counterclaim seeking affirmative
relief, and he may properly do so.” (quoting J.W. Moore, Moore’s
Federal Practice § 8:27[3] (2d ed. 1989))).

4 I recognize that section 78B-6-810 was not enacted by the
legislature until 2007. 	Reference to this section is meant only
to illustrate the procedure courts may use in unlawful detainer
actions going forward.
No. 20061162 	14
¶41 	I recognize, as does the Majority, that the purpose of
the unlawful detainer statutory scheme is designed to speedily
determine the issue of possession. 	P.H. Inv., 818 P.2d at 1020.
An adjudication on the merits of an equitable setoff claim before
a determination of possession however will not always contravene
the objectives of an unlawful detainer action. 	If a case
contains an equitable claim of setoff sufficiently tied to the
obligation to pay rent, the unlawful detainer statute provides a
mechanism for the court to determine which party may remain in
lawful possession of the premises for the pendency of the
litigation. 	Utah Code section 78B-6-810 states that “[i]n an
action for unlawful detainer where the claim is for nonpayment of
rent, . . . the court shall hold an evidentiary hearing, upon
request of either party.” 	Utah Code Ann. § 78B-6-810
(2)(a)(2008). 4 	It is at the evidentiary hearing that “the court
shall determine who has the right of occupancy during the
litigation’s pendency.” 	Id. § 78B-6-810(2)(b)(I). 	This section
allows the court to adjudicate the issues between the parties on
the merits “if the court determines that all issues between the
parties can be adjudicated without further proceedings.” 	Id.
§ 78B-6-810(2)(b)(ii). 	If the court determines that a tenant’s
permissive counterclaim of equitable setoff directly relates to
whether the tenant is in unlawful detainer, the court may
preliminarily decide the issue of occupancy during the pendency
of the litigation under section 78B-6-810(2)(b).
¶42 	By correctly stating that DEI’s counterclaim of
equitable setoff does not directly relate to possession, the
Majority’s opinion may have the unintended effect of constricting
the range of circumstances under which counterclaims and defenses
to unlawful detainer are relevant to a determination of
possession. 	The world of real property law relies on written
agreements to define the rights between the parties. 	Equitable
claims from time to time may, however, require further inquiry
before a court may deprive the tenant of its right to possession.
---
¶43 	Chief Justice Durham concurs in Justice Nehring’s
opinion.