Cougar Canyon v. Cypress

2019 UT App 47
THE UTAH COURT OF APPEALS
C OUGAR C ANYON LOAN , LLC,
Appellee,
v.
THE C YPRESS F UND, LLC; C YPRESS M ANAGEMENT, LLC;
O LYMPUS C APITAL A LLIANCE, LLC; C YPRESS C APITAL III, LLC;
R OBERT N. B AXTER ; AND BLAIR M. WALKER ,
Appellants.
Opinion
No. 20170413-CA
Filed March 28, 2019
Third District Court, Salt Lake Department
The Honorable Robert P. Faust
No. 130907106
Troy L. Booher, Clemens A. Landau, and Michael J.
Teter, Attorneys for Appellants
Jefferson W. Gross and S. Ian Hiatt, Attorneys
for Appellee
JUDGE GREGORY K. O RME authored this Opinion, in which
JUDGES K ATE A PPLEBY and JILL M. POHLMAN concurred.
ORME, Judge:
¶1 	Following a complicated series of transactions involving
bridge lending,1 Cougar Canyon Loan, LLC (Cougar) brought
1. A bridge loan is “[a] short-term loan that is used to cover costs
until more permanent financing is arranged or to cover a portion
of costs that are expected to be covered by an imminent sale.”
Bridge Loan, Black’s Law Dictionary 1020 (9th ed. 2009). Bridge
loans typically have terms of “up to one year, have relatively
high interest rates and are usually backed by some form of
(continued…)

Cougar Canyon v. Cypress
20170413-CA 	2 	2019 UT App 47
suit against The Cypress Fund, LLC; Cypress Management, LLC;
Olympus Capital Alliance, LLC; Cypress Capital III, LLC; Robert
N. Baxter; and Blair M. Walker (collectively, Cypress). Cougar
alleged, among other things, violations of the Utah Uniform
Securities Act, see Utah Code Ann. §§ 61-1-1 to -206 (LexisNexis
2018),2 and breach of the implied covenant of good faith and fair
dealing. Following a jury verdict in Cougar’s favor on both
counts, Cypress moved for a new trial, asserting that the verdict
was “contrary to law,” see Utah R. Civ. P. 59(a)(7), which motion
the trial court denied. We affirm the trial court’s denial of
Cypress’s motion for a new trial and further conclude that it did
not err in holding Robert N. Baxter in contempt for transferring
funds in violation of the court’s order.
¶2 	To make a long story short,3 Cypress approached Cougar
in 2009 about participating as co-lender on a loan associated
with a real estate development project in Trinidad, Colorado (the
Trinidad Project). Cypress had committed to loan $4.8 million4
(…continued)
collateral, 	such 	as 	real 	estate 	or 	inventory.” 	Bridge 	Loan
Definition, Investopedia, https://www.investopedia.com/terms/b/
bridgeloan.asp [https://perma.cc/GXF7-UJQJ].
2. Because the statutory provisions in effect at the relevant time
do not differ in any way material to our analysis from those now
in effect, we cite the current version of the Utah Code for
convenience.
3. “On appeal, we review the record facts in a light most
favorable to the jury’s verdict and recite the facts accordingly.
We present conflicting evidence only as necessary to understand
issues raised on appeal.” USA Power, LLC v. PacifiCorp, 2016 UT
20, ¶ 8 n.3, 372 P.3d 629 (quotation simplified).
4. For ease of reference, we often use approximations in this
opinion when referring to dollar amounts.

Cougar Canyon v. Cypress
20170413-CA 	3 	2019 UT App 47
for the funding of the Trinidad Project, and Cougar eventually
agreed to finance half of that sum in exchange for a note from
Cypress in the principal amount of $2.8 million. However, of the
$4.8 million that Cypress had agreed to extend for the funding of
the Trinidad Project, the project ultimately received only $1.7
million—$1.5 million of which Cougar funded. The Trinidad
Project borrower eventually defaulted on the loan and, following
a sequence of events, Cougar initiated the current action against
Cypress on October 17, 2013, asserting securities fraud and other
claims.
¶3 	In bringing its claim for securities fraud against Cypress,
Cougar 	alleged 	that 	Cypress 	“made 	untrue 	statements 	of
material facts regarding the value and nature of the collateral
that would be pledged” to secure Cougar’s loan and “made
untrue 	statements 	of 	material 	facts 	regarding 	[Cougar’s]
approximately 50/50 participation in the [Trinidad Project loan].”
¶4 	Following a four-day trial in 2017, the jury returned a
special verdict in favor of Cougar on its securities fraud and
breach-of-the-implied-covenant claims, awarding $4 million and
$1 million in damages, respectively. Because the damage awards
were duplicative, the trial court entered judgment in favor of
Cougar in the sum of $4 million, plus postjudgment interest,
costs, and attorney fees. Cypress subsequently filed post-trial
motions seeking judgment notwithstanding the verdict, a new
trial, and to set aside the judgment. See Utah R. Civ. P. 50,
59, 60(b). 	The 	trial 	court 	denied 	the 	motions, 	and 	Cypress
appeals.
¶5 	At oral argument, Cypress’s appellate counsel, who was
not trial counsel, astutely recognized that the briefing in this case
was 	unfocused 	and 	unduly 	complex. 	Counsel 	accordingly
repackaged Cypress’s position on appeal to showcase a single
potentially dispositive argument: that the trial court erred in
denying Cypress’s rule 59 motion for a new trial because the

Cougar Canyon v. Cypress
20170413-CA 	4 	2019 UT App 47
verdict was “contrary to law.”5 See id. R. 59(a)(7). Specifically, he
argued that the two-year statute of limitations barred Cougar’s
securities fraud claim. See Utah Code Ann. § 61-1-22(7)(a)(ii)
(LexisNexis 2018) (providing that a claim brought under the
Utah Uniform Securities Act is barred after “the expiration of
two 	years 	after 	the 	discovery 	by 	the 	plaintiff 	of 	the 	facts
constituting the violation”).
¶6 	Cypress premises its argument on Cougar’s receipt of two
emails more than two years before Cougar brought suit. In
March 2009, Cypress sent an email to Cougar detailing issues
with some of the collateral securing the loan. And in March 2011,
Cypress sent an email detailing the parties’ current percentage
interest in the Trinidad Project loan, which was not 50/50. The
2011 email was sent to an administrative assistant,6 but Richard
Miller, the owner of the entity that manages Cougar, never
reviewed it. Cypress argues that the emails conferred sufficient
5. In its briefing, Cypress raised a number of issues dealing with
Cougar’s breach-of-good-faith-and-fair-dealing claim. As both
parties have recognized, the $1 million jury award on that claim
was duplicative of the $4 million award on Cougar’s securities
fraud 	claim. 	Accordingly, 	we 	would 	address 	Cypress’s
good-faith-and-fair-dealing arguments only if we took issue with
the 	jury’s 	securities 	fraud 	verdict, 	which 	we 	do 	not, 	as
hereinafter explained.
6. The parties hotly dispute the role this employee played at
Cougar. 	Cougar 	asserts 	that 	she 	was 	an 	“administrative
assistant” who lacked the “requisite background understanding
of 	the 	transaction” 	and 	therefore 	“did 	not 	understand 	[the
email’s] 	import.” 	Conversely, 	Cypress 	contends 	that 	her
knowledge was corporate knowledge because “[s]he was an
accountant” who “regularly sent emails in which she revealed
her expertise and substantive role in managing the loan.” In
view of our resolution of the appeal, the distinction proves to be
unimportant.

Cougar Canyon v. Cypress
20170413-CA 	5 	2019 UT App 47
actual or inquiry notice upon Cougar to trigger the running of
the two-year statute of limitations for its securities fraud claim,
which would have elapsed by the time Cougar commenced its
action in October 2013.
¶7 	Ordinarily, “we review an appellant’s allegations of legal
error under [rule] 59(a)(7) [of the Utah Rules of Civil Procedure]
for correctness,” but “reverse and order a new trial only if we
(1) identify a legal error that would be grounds for a new trial
under [rule] 59(a)(7) and (2) determine that the error resulted in
prejudice necessitating a new trial.” ASC Utah, Inc. v. Wolf
Mountain Resorts, LC, 2013 UT 24, ¶ 23, 309 P.3d 201 (quotation
simplified). But this issue was not preserved for appeal by trial
counsel.
¶8 	Although a party may advance a new argument in its
motion for a new trial, “the trial court may refuse to consider the
merits of the argument because it may find the issue waived.”
State v. Pinder, 2005 UT 15, ¶ 46, 114 P.3d 551 (quotation
simplified). And should the trial court “refuse[] to address the
merits of the newly advanced argument, the issue remains
unpreserved for appellate review and may be addressed only if
the 	challenging 	party 	can 	show 	plain 	error 	or 	exceptional
circumstances.” Id. See also Tschaggeny v. Milbank Ins. Co., 2007
UT 37, ¶ 30, 163 P.3d 615 (stating that raising an issue in a
post-trial 	motion 	does 	not 	cure 	preservation 	defects); 	Clark
Props., Inc. v. JDW–CM, LLC, 2012 UT App 163, ¶ 9, 282 P.3d 1009
(“Insofar as [the appellant] suggests that it preserved [a] claim
by raising 	it 	in 	its motion for new trial, that fact alone is
inadequate 	to 	preserve 	an 	issue 	for 	appellate 	review.”)
(emphasis added).
¶9 	In the present case, the trial court addressed Cypress’s
multiple post-trial motions in a single memorandum decision. In
denying Cypress’s motion for a new trial, the court briefly
addressed Cypress’s argument based on the sufficiency of the
evidence, 	see 	Utah 	R. 	Civ. 	P. 	59(a)(6), 	by 	stating 	that 	the
argument 	failed 	because 	Cypress 	had 	not 	marshaled 	the

Cougar Canyon v. Cypress
20170413-CA 	6 	2019 UT App 47
evidence 	supporting 	the 	jury’s verdict. 	The 	court 	made 	no
specific mention of Cypress’s contention that the verdict was
“contrary to law,” see id. R. 59(a)(7), other than to state that
Cypress failed to cite to the record where it had preserved its
remaining issues—thereby implicitly refusing to reach the merits
of that specific argument. And because “courts are required to
explain 	the 	basis 	for 	their 	decisions 	only 	when 	they 	grant
motions for a new trial—not when they deny such motions,”
ASC Utah, 2013 UT 24, ¶ 21 (emphasis in original), the court did
not commit legal error in declining to address the merits of that
particular 	argument. 	Cypress’s 	rule 	59(a)(7) 	argument 	is
therefore unpreserved for appeal.
¶10 	We typically review unpreserved issues only when a
valid exception to the preservation rule applies. See State v.
Johnson, 2017 UT 76, ¶ 15, 416 P.3d 443. Cypress contends that
the plain error doctrine applies to its rule 59(a)(7) argument. To
establish plain error, a defendant must show that “(i) an error
exists; (ii) the error should have been obvious to the trial court;
and (iii) the error is harmful.” Id. ¶ 20 (quotation simplified).
¶11 	Cypress argues that the trial court plainly erred by failing
to properly instruct the jury regarding the two-year statute of
limitations 	applicable 	to 	Cougar’s 	securities 	fraud 	claims.
Specifically, 	Cypress 	contends 	that 	the 	court 	should 	have
instructed the jury “that Cougar is imputed to know or ought to
know that which its agent [i.e., the administrative assistant]
knows or ought to know.” Because we conclude that any alleged
error in the jury instructions was not “obvious to the trial court,”
Cypress has failed to carry its burden of establishing plain error.7
7. Because Cypress has failed to show that the alleged error
“should have been obvious to the trial court,” State v. Johnson,
2017 UT 76, ¶ 20, 416 P.3d 443 (quotation simplified), we do not
address the merits of Cypress’s rule 59(a)(7) argument nor the
extent to which the alleged error prejudiced Cypress, see id.

Cougar Canyon v. Cypress
20170413-CA 	7 	2019 UT App 47
¶12 	The jury was given the following instruction, approved
by Cypress at trial, regarding Cypress’s statute of limitations
defense:
The statute of limitations governs the amount of
time in which a party may bring a claim after the
discovery of that claim. For securities fraud, the
statute of limitations is two (2) years. [Cougar] filed
its complaint on October 17, 2013. If you find that
[Cougar] 	knew 	of 	the 	alleged 	securities 	fraud
before 	October 	17, 	2011, 	you 	must 	find 	that
[Cougar’s] securities fraud claim fails in violation
of the statute of limitations.
Cypress argues that this instruction was insufficient because
“[t]he 	jury 	could 	do nothing 	with 	the 	statute 	of 	limitation
instruction and undisputed facts without being told, as well, that
an agent’s knowledge is imputed to the corporation.”8 Citing
State v. Dean, 2004 UT 63, 95 P.3d 276 (amended opinion),
Cypress contends that the erroneous omission of this additional
instruction should have been obvious to the trial court because
“the law governing the error was clear at the time the alleged
error was made.” Id. ¶ 16.
8. Cypress does not address how this jury instruction was
insufficient or erroneous as concerns the 2009 email in which it
purportedly 	brought 	the 	issues 	surrounding 	some 	of 	the
collateral to Cougar’s attention. Instead, it asserts that the email
in and of itself was sufficient to trigger the running of the statute
of limitations, as a matter of law. But this was a factual question
that 	was 	directly 	addressed 	by 	the 	jury 	that, 	by 	rejecting
Cypress’s statute of limitations defense and returning a verdict
in favor of Cougar, necessarily found that the email did not
confer sufficient actual or inquiry notice upon Cougar that fraud
was afoot.

Cougar Canyon v. Cypress
20170413-CA 	8 	2019 UT App 47
¶13 	To the extent that the trial court erroneously instructed
the jury regarding the statute of limitations and that error
resulted in a verdict that was contrary to law, such error would
have been far from obvious to the trial court given Cypress’s
conduct at trial. Cypress never proposed the instruction that it
now faults the trial court for not providing, nor did it object to
the manner in which the court instructed the jury concerning the
statute 	of 	limitations. 	To 	the 	contrary, 	Cypress 	not 	only
stipulated to the relevant jury instruction but requested it.9
Moreover, Cypress has not directed us to anything in the record
that shows it alerted the court to its statute of limitations
argument based on the administrative assistant’s receipt of the
2011 email. Prior to trial, Cypress never moved the court for
summary judgment based on its discovery of the 2011 email.
Nor, following the conclusion of Cougar’s case-in-chief, did
Cypress 	move 	the 	court 	for 	judgment 	as 	a 	matter 	of 	law
pursuant to rule 50 based on its statute of limitations argument.10
See Utah R. Civ. P. 50(a). Indeed, the 2011 email was never even
admitted into evidence at trial—it was only briefly alluded to
during the direct- and cross-examination of Richard Miller, the
owner of the entity that manages Cougar.
¶14 	Against this backdrop, Cypress fails to address how the
existence of the 2011 email and its allegedly dispositive legal
implications should have been obvious to the trial court. Given
9. The error, then, was not only not obvious but may also have
been invited. See generally Kerr v. Salt Lake City, 2013 UT 75, ¶ 44,
322 P.3d 669 (“The invited error doctrine prevents a party from
taking advantage of an error committed at trial when that party
led 	the 	trial 	court 	into 	committing 	the 	error.”) 	(quotation
simplified).
10. At oral argument, Cypress clarified that, in making its rule
59(a)(7) argument, it relied exclusively on evidence presented by
Cougar at trial, thus avoiding any duty to marshal the evidence
supporting the verdict in making its argument.

Cougar Canyon v. Cypress
20170413-CA 	9 	2019 UT App 47
how the case was tried, there was nothing in the parties’ course
of conduct to suggest to the court that an error had occurred,
plain or otherwise. Quite the opposite, Cypress’s conduct and
stipulation to all of the jury instructions would have lulled the
court into a sense that the trial was moving forward as it should,
pending 	ultimate 	resolution 	by 	a 	properly 	instructed 	jury.
Despite this, Cypress basically asserts that the court should have,
on its own initiative, realized that an email that was never
entered into evidence and was only fleetingly mentioned in the
course of a four-day trial merited an additional jury instruction.
We conclude that such a scenario would have been anything but
obvious 	to 	the 	trial 	court. 	Cypress 	has 	therefore 	failed 	to
establish plain error.
¶15 	As a final point on appeal,11 Robert N. Baxter, one of the
principals of Cypress Capital III, LLC, argues that the trial court
abused its discretion in holding him in contempt. See Utah Code
Ann. § 78B-6-301(5) (LexisNexis 2018). “When reviewing a [trial]
court’s decision to find a party in contempt, we review the [trial]
court’s 	findings 	of 	fact 	for 	clear 	error 	and 	its 	legal
determinations for correctness.” Rosser v. Rosser, 2019 UT App
25, ¶ 9 (amended opinion) (quotation simplified).
¶16 	Following the jury verdict and during the pendency of
Cougar’s motion for attorney fees, the trial court granted a
stipulated motion (the Stay Order) that, among other things,
prohibited any of the Cypress parties from “(i) engaging in
transactions outside the ordinary course of their business and
(ii) transferring 	any 	of 	the 	judgment 	debtors’ 	assets.”
Nonetheless, a few weeks following entry of the Stay Order,
11. 	Cypress 	seeks 	an 	award 	of 	attorney 	fees 	on 	appeal.
“Ordinarily, we award appellate attorney fees and costs when a
party was awarded fees and costs below and then prevails on
appeal.” Tobler v. Tobler, 2014 UT App 239, ¶ 48, 337 P.3d 296.
Because Cypress was not awarded fees below and has not
prevailed on appeal, we deny its request for attorney fees.

Cougar Canyon v. Cypress
20170413-CA 	10 	2019 UT App 47
Baxter transferred $230,000 out of one of his and his wife’s joint
money market accounts to a recently formed company owned by
his wife, Sprout Funding Partners, LLC. After Cougar learned of
the transfer, it sent a letter to Cypress advising that it would seek
contempt sanctions against Cypress unless the transferred funds
were paid over to Cougar. Baxter, his wife, and their company,
Baxter 	Properties, 	LLC, 	then 	filed 	a 	motion 	to 	interplead
$115,000 of the transferred funds and sought a determination
that the funds belonged to Baxter Properties—and not to the
Baxters. Cougar subsequently filed a motion seeking a contempt
determination against Baxter. Following an evidentiary hearing
on both motions, the trial court determined that the transferred
funds 	belonged 	to 	the 	Baxters—not 	Baxter 	Properties—and,
pursuant to Utah Code section 78B-6-301(5), held Baxter in
contempt for his violation of the Stay Order.
¶17 	Generally, “to prove contempt for failure to comply with
a 	court 	order 	it 	must 	be 	shown 	that 	the 	person 	cited 	for
contempt knew what was required, had the ability to comply,
and intentionally failed or refused to do so.” LD III, LLC v.
BBRD, LC, 2013 UT App 115, ¶ 14, 303 P.3d 1017 (quotation
simplified). 	Baxter 	does 	not 	challenge 	the 	trial 	court’s
determination that he knew of and had the ability to comply
with the Stay Order. Rather, he argues that the trial court erred
in finding that the transferred funds did not belong to Baxter
Properties.
¶18 	Baxter 	correctly 	recognizes 	that, 	at 	the 	evidentiary
hearing, 	he 	bore 	the 	burden 	of 	rebutting, 	by 	clear 	and
convincing evidence, the presumption that funds in a bank
account belong to the owners of that account. See Peterson v.
Peterson, 	571 	P.2d 	1360, 	1362 	(Utah 	1977). 	But 	instead 	of
discussing the evidence supporting the trial court’s finding that
he failed to overcome the presumption that the transferred funds
belonged to him, Baxter highlights the evidence that supports
his contention that the funds belonged to Baxter Properties. He
argues 	that 	this 	“evidence 	clearly 	and 	convincingly
demonstrate[d] that the $230,000 on deposit in the account was

Cougar Canyon v. Cypress
20170413-CA 	11 	2019 UT App 47
the property of Baxter Prop[erties].” Because Baxter has not
“adequately marshaled the evidence” or “otherwise . . . carr[ied]
[his] burden in demonstrating clear error,12 we presume that the
evidence supports the trial court’s finding” that the transferred
funds belonged to him and his wife. See Grimm v. DxNA LLC,
2018 UT App 115, ¶ 17, 427 P.3d 571. See also State v. Nielsen, 2014
UT 10, ¶ 42, 326 P.3d 645 (“[A] party challenging a factual
finding or sufficiency of the evidence to support a verdict will
almost certainly fail to carry its burden of persuasion on appeal
if it fails to marshal [the evidence].”). We therefore conclude that
the trial court did not err in holding Baxter in contempt.
¶19 	Cougar requests an award of attorney fees incurred on
appeal. “A party entitled by contract or statute to attorney fees
below and that prevails on appeal is entitled to fees reasonably
incurred on appeal.” Federated Capital Corp. v. Abraham, 2018 UT
App 117, ¶ 15, 428 P.3d 21 (quotation simplified). The trial court,
pursuant 	to 	Utah 	Code 	section 	61-1-22, 	awarded 	Cougar
reasonable attorney fees incurred in pursuing its securities fraud
claim 	against 	Cypress. 	See 	Utah 	Code 	Ann. 	§ 	61-1-22(1)(b)
(LexisNexis 2018). Because Cougar has prevailed on appeal, we
award Cougar reasonable attorney fees incurred in defending
the jury’s verdict on appeal. Additionally, as part of its contempt
order against Baxter, the trial court awarded Cougar attorney
fees 	“in 	connection 	with 	the 	filing 	of 	[Cougar’s] 	Motion
regarding contempt and in responding to the [Baxters’] Motion
to Interplead.” Because those fees were awarded as a sanction,
see Gardner v. Gardner, 2012 UT App 374, ¶ 32, 294 P.3d 600
12. In noting that Baxter focuses on the evidence supporting his
contention rather than on the evidence supporting the trial
court’s finding, and in concluding that Baxter has thus not
carried his burden of persuasion, we imply no criticism of
counsel. Very often such an approach simply reflects counsel’s
considered opinion that diverting the appellate court’s attention
from that evidence is more likely to lead to success on appeal
than focusing on it, especially if such evidence is strong.

Cougar Canyon v. Cypress
20170413-CA 	12 	2019 UT App 47
(holding that attorney fees awarded as a result of contemptuous
behavior 	are 	sanctions), 	“we 	decline 	[Cougar’s] 	request 	for
attorney fees incurred on appeal” in defending the order of
contempt entered against Baxter “on this ground,” Maxwell v.
Woodall, 2014 UT App 125, ¶ 11, 328 P.3d 869. See also Liston v.
Liston, 2011 UT App 433, ¶ 27 n.6, 269 P.3d 169 (denying an
award of attorney fees on appeal because the district court
awarded the fees as “a sanction for [Appellant’s] conduct during
litigation”).
¶20 	In 	conclusion, 	we 	affirm 	the 	trial 	court’s 	denial 	of
Cypress’s motion for a new trial because any alleged error
regarding the two-year statute of limitations instruction could
not have been “obvious” to the trial court given Cypress’s
conduct during trial. We also affirm the court’s order holding
Baxter in contempt given Baxter’s failure to establish that the
trial court clearly erred in finding that the transferred funds
belonged to the Baxters. We remand for the limited purpose of
determining reasonable attorney fees incurred by Cougar in
connection with defending the jury’s verdict on appeal.