Matthews v. Olympus Construction

2009 UT 29
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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In re Olympus Construction, L.C., 	No. 20070956
David C. Matthews,
Petitioner,
v.
F I L E D
Olympus Construction, L.C.,
Respondent. 	May 19, 2009
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Third District, Salt Lake
The Honorable Tyrone E. Medley
No. 020904299
Attorneys: 	Dwayne A. Vance, Park City, for petitioner
Steven T. Waterman, Brent D. Wride, Steven C. Strong,
Salt Lake City, for respondent
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On Certiorari to the Utah Court of Appeals
WILKINS, Justice:
INTRODUCTION
¶1 	We granted certiorari on two questions: (1) whether the
court of appeals correctly construed and applied relevant
provisions of the Utah Revised Limited Liability Company Act in
holding that the district court could extend the period for
rejecting Petitioner’s claim; and (2) whether the court of
appeals erred in affirming the district court’s award of attorney
fees and in imposing additional fees for the appeal. 	We hold
that the district court could extend the period for rejecting
Petitioner’s claim, but that attorney fees were not properly
imposed because Petitioner’s claim was not without merit.
Accordingly, we affirm in part and reverse in part.
BACKGROUND

No. 20070956 	2
¶2 	In 1998 Olympus Construction retained Petitioner David
C. Matthews, on behalf of Re/Max Brokers, L.C., to assist in the
purchase of a piece of property in Summit County, Utah. 	Olympus
paid Matthews a $200 commission when purchase closed that
December. 	Matthews asserts that at that time an agent of Olympus
promised an additional $100,000 commission upon the future sale
of the property, although the promise was not recorded in
writing. 	The property was sold in 2003 as part of dissolution
proceedings for Olympus, but no additional commission was paid to
Matthews or Re/Max. 	The intervening history is relevant.
¶3 	In 1999 Matthews and his wife Jane, also a real estate
agent, terminated their business relationship with Re/Max and
with their supervising principal broker, Fred B. Law. 	Matthews
and his wife formed their own real estate company with Jane as
licensed principal broker. 	Matthews asserts that at that time
Mr. Law orally assigned his right to collect the $100,000
commission from Olympus to Jane, who then orally assigned her
right to Matthews.
¶4 	In 2002 Olympus filed for judicial dissolution in the
Third District Court, which the court granted. 	The court
redesignated the assigned custodian as a receiver, who later
resigned and was replaced with a successor receiver. 	The court
ordered the successor receiver to “wind up the business and
affairs of Olympus as provided in Part 13 of the Utah Limited
Liability Company Act.” 	In December 2003 the receiver filed to
establish a claim bar date and claim-filing procedures, including
procedures for providing notice to potential claimants. 	The
court approved the claim filing procedures and set June 30, 2004
as the claim bar date. 	At this time, the court had not yet
approved procedures for resolution of claims.
¶5 	Matthews filed a notice of claim for the $100,000 real
estate commission, in his own name, on June 30, 2004. 	On October
6, 2004, more than ninety days after Matthews filed his claim,
the receiver requested withdrawal of the claim. 	In November 2004
the receiver filed to establish claim resolution procedures,
including an extended claim rejection date. 	Matthews opposed
this motion and requested payment of his claim because the
receiver failed to reject his claim within ninety days of
receiving it, as provided by Utah Code section 48-2c-1305(4).
The district court denied Matthews’ motion and in March 2005 set
a new deadline for claim rejections. 	The receiver then formally
rejected Matthews’ claim. 	In the subsequent claim adjudication
proceedings, the district court granted the receiver’s summary
judgment motion, finding that Matthews’ claim was barred by the

1 Section 78B-5-825 of the Utah Code provides for an award
of attorney fees to a prevailing party if the action was both 1)
“without merit” and 2) “not brought or asserted in good faith.”
Utah Code Ann. § 78B-5-825 (2008). 	Whether a claim was “not
brought or asserted in good faith” is a question of fact that we
review under a clearly erroneous standard. 	In re Sonnenreich,
2004 UT 3, ¶ 45, 86 P.3d 712. 	However, we need not reach the
second element here because we find Matthews’ claim to not be
“without merit.”
2 Utah Code Ann. §§ 48-2c-101 to -1902 (2002).
3 	No. 20070956
statute of frauds and Utah broker licensing statutes. 	The
district court also awarded attorney fees to Olympus based on the
finding that Matthews’ claim was without merit and had been
pursued in bad faith.
¶6 	Matthews appealed. 	The court of appeals affirmed the
district court’s actions and awarded attorney fees to Olympus on
appeal. 	We then granted certiorari.
STANDARD OF REVIEW
¶7 	“We review the court of appeals’ interpretation of the
relevant statute[s] for correctness, according no deference to
its conclusions.” 	Regal Ins. Co. v. Canal Ins. Co., 2004 UT 19,
¶ 5, 93 P.3d 99.
¶8 	With regard to the award of attorney fees, whether a
claim is “without merit” is a question of law we review for
correctness. 1 	In re Sonnenreich, 2004 UT 3, ¶ 45, 86 P.3d 712.
ANALYSIS
I. 	THE DISTRICT COURT HAD AUTHORITY TO EXTEND THE DEADLINE FOR
REJECTION OF CLAIMS AGAINST OLYMPUS
¶9 	We first address the issue of whether, under the Utah
Revised Limited Liability Company Act, 2 the district court had
authority to extend the period for the receiver to reject
Matthews’ claim.
¶10 	To interpret a statute, we always look first to the
statute’s plain language in an effort to give effect to the
legislature’s intent, to the degree it can be so discerned. 	See,
e.g., In re Kunz, 2004 UT 71, ¶ 8, 99 P.3d 793 (“Pursuant to
general principles of statutory interpretation, ‘we . . . look
first to the . . . plain language,’ recognizing that ‘our primary

No. 20070956 	4
goal is to give effect to the legislature’s intent in light of
the purpose the statute was meant to achieve.’” (quoting Evans v.
State, 963 P.2d 177, 184 (Utah 1998) (alteration in original)));
State v. Hunt, 906 P.2d 311, 312 (Utah 1995) (“The best evidence
of the true intent and purpose of the Legislature in enacting the
Act is the plain language of the Act.” (quotation marks
omitted)).
¶11 	Part 12 of the Act governs dissolution of a limited
liability company, and part 13 governs the winding up of a
dissolved company. 	In order to determine the breadth of the
district court’s authority in the dissolution process, we
consider both.
A. 	Part 13 Winding-Up Procedures Are Not Dispositive
¶12 	Matthews argues that Utah Code section 1305 is
dispositive. 	We disagree. 	Part 13 governs the winding up of a
dissolved limited liability company. 	Utah Code Ann. §§ 48-2c-
1301 to -1309 (2007). 	Under subsection 1304, a dissolved company
is required, if able, to “pay or make reasonable provision to pay
all claims and obligations,” including those that are
“contingent, conditional, or unmatured” and known to the company,
and all those that are “known to the company but for which the
identity of the claimant is unknown.” 	§ 48-2c-1304(1). 	The Act
then provides procedures for disposing of those claims, either by
notification, in section 1305, or by publication, in section
1306. 	Both sections address giving notice to potential claimants
and the subsequent deadlines for bringing and addressing claims.
¶13 	Section 1305 provides procedures for the company to
dispose of known claims by providing notification of dissolution
to potential claimants. 	§ 48-2c-1305(2). 	It allows the company
to set a date by which claims must be received or they are barred
(“claim bar date”). 	§ 48-2c-1305(3)(a). 	A claim is also barred
if, after the company provides written notice of rejection within
ninety days of receiving the claim, the claimant does not
commence an enforcement proceeding within another ninety days.
§ 48-2c-1305(3)(b). 	Thus, a company may be protected by placing
limits on the filing of claims.
¶14 	On the other hand, the statute also protects claimants.
In addition to mandating that notice be given, “[c]laims which
are not rejected by the dissolved company in writing within 90
days after receipt of the claim by the dissolved company shall be
considered approved.” 	§ 48-2c-1305(4). 	It is under this
statutory provision that Matthews argues his claim has been
approved. 	It is undisputed that Olympus failed to reject

5 	No. 20070956
Matthews’ claim within ninety days of receiving it. 	Accordingly,
Matthews’ claim would be “considered approved” if Olympus was
bound to follow that statutory provision. 	However, we are not
persuaded that Olympus was so bound. 	The statutory scheme
provides some options in the winding-up process.
¶15 	Section 1305(1) provides, “A dissolved company in
winding up may dispose of the known claims against it by
following the procedures described in this section.” 	(Emphasis
added.) 	Use of the provisions of this section is permissive
rather than mandatory. 	That is, a dissolved company may elect to
follow the procedures in this section or it may choose another
route.
¶16 	Even though section 1305 is permissive, however, once a
dissolved company has elected to dispose of claims according to
its provisions, the company is bound by every provision of the
section. 	The dissolved company reaps the benefit of the claim
bar date and procedures but is also bound to reject claims within
the specified ninety-day period or lose the right to do so. 	In
essence, it gets the protections but is also bound by the limits.
¶17 	Section 1305 contemplates a non-judicial dissolution.
In contrast, in a judicially supervised dissolution, the court
directs the winding-up process, as provided for in part 12. 	We
turn next to a discussion of that section and its effect on the
provisions of part 13.
B. 	Part 12 Grants Broad Authority to the District Court in
Directing Winding-Up Procedures
¶18 	Olympus argues that Utah Code sections 48-2c-1210 to
-1212, governing judicially supervised dissolution, grant the
district court broad authority to direct the procedures for
winding up a dissolved company. 	We agree.
¶19 	Part 12 of the Act governs dissolution. 	Utah Code Ann.
§§ 48-2c-1201 to -1214 (2007). 	It provides for three types of
dissolution: voluntary, administrative, and judicial. 	It also
directs that a dissolved company shall wind up its affairs “as
provided in Part 13 of this chapter.” 	§ 48-2c-1203(1).
Accordingly, a voluntarily dissolved company is required to
dispose of claims in conformity with either section 1305 or
section 1306. 	Since each section is permissive, the dissolved
company may choose either or both.
¶20 	In an administrative dissolution, the company must
similarly follow the provisions of part 13, but is more

No. 20070956 	6
specifically directed “to give notice to claimants in the manner
provided in Sections 48-2c-1305 and 48-2c-1306.” 	§ 48-2c-
1207(3)(a)(i)-(ii) (emphasis added). 	Thus, administratively
dissolved companies may not choose between the two sections but
are required to dispose of claims by both notification and
publication.
¶21 	When a company is judicially dissolved, the Act
requires the court to direct the winding-up process “in
accordance with Part 13.” 	§ 48-2c-1213(2). 	It does not,
however, specify the use of 1305 or 1306. 	Thus, the overseeing
court may choose to employ either or both. 	In addition, the Act
gives a court granting a decree of dissolution the authority to
appoint a receiver to wind up and liquidate the company’s affairs
and to “describe the powers and duties of the receiver
. . . in its appointing order.” 	§ 48-2c-1212(1), (3). 	The Act
thereby grants the court broad authority to direct the winding-up
process. 	Thus, the court may choose to adopt sections 1305
and/or 1306 to dispose of claims, but it is not required to do
so. 	It may also fashion a more suitable procedure through the
use of a receiver.
¶22 	Matthews argues that the legislature intended for all
dissolved companies to be governed by part 13 of the Act,
including sections 1305 and 1306, and that it would be unjust to
allow judicially dissolved companies appointing receivers the
authority to do otherwise. 	We agree that part 13 governs every
dissolved company. 	However, when read with part 12, it appears
the legislature meant to allow judicially supervised dissolutions
more flexibility.
¶23 	When a company is judicially dissolved under the Act,
the overseeing court is not required to adopt the provisions of
either, or both, sections 1305 or 1306 to dispose of claims
against the company. 	If the court does adopt either section, it
is bound to follow every provision of the adopted section. 	If it
does not, it may fashion its own claim disposition procedures
pursuant to the broad authority granted by part 12 of the Act.
C. 	The District Court Did Not Adopt Section 1305
¶24 	As discussed, Olympus was bound to reject Matthews’
claim within ninety days of receipt only if the district court
adopted section 1305 of the Act for the disposition of known
claims. 	It did not adopt section 1305, as evidenced by the
court’s actions.

7 	No. 20070956
¶25 	In addition to filing a decree of dissolution, in May
2003 the district court appointed a receiver to carry out the
winding-up activities. 	The court’s appointing order provided:
[T]he Receiver may dispose of known and
unknown claims against Olympus by notice
and/or publication, may set dates for the
barring of such claims and may accept or
reject claims all as provided in Utah Code
Ann. Sections 48-2c-1305 and 1306. 	To the
extent permitted by law, all claims filed
against Olympus shall be adjudicated and
determined by this Court in and as part of
this proceeding.
(Emphasis added.) 	According to the order, the court allowed the
receiver to use the provisions of sections 1305 and 1306 to
dispose of claims, but did not require it. 	Also, the court
specifically retained the power to adjudicate and determine all
claims. 	From this language and the following subsequent actions
of the court, we hold that the court did not expressly adopt
section 1305 but intended to fashion its own procedures.
¶26 	Pursuant to the authority granted in the appointing
order, in February 2004 the receiver moved for, and the court
approved, claim filing procedures, including notice and
publication procedures, and the court set a claim bar date of
June 30, 2004. 	Matthews argues that by asking for a claim bar
date and notice and claim filing procedures, Olympus was electing
to follow section 1305 as allowed by the district court.
However, in its approval order the court did not address
procedures for dealing with timely filed claims. 	The court also
did not provide for a claim rejection deadline, nor for notifying
potential claimants of the deadline for responding to a claim
rejection. 	Further, the approved claim notice form provided a
claim definition that differed from the definition used in
section 1305 by including contingent claims. 	These differences
are inconsistent with adoption of section 1305. 	Olympus was not
electing to follow section 1305, nor was the court adopting use
of section 1305 in setting a claim bar date and other claim
filing procedures.
¶27 	Additional actions of the court provide further support
for our holding. 	In May 2004 the court issued an order granting
settlement authority to the receiver. 	Specifically, the receiver
was authorized to determine “which [c]laims to pursue for
settlement” as opposed to using “other options such as waiting to
address such claims until a later date or proceeding to litigate

3 Utah Code section 78-27-56 was renumbered by the 2008
Legislature as section 78B-5-825. 	As the language remains the
same except for a minor stylistic change, we cite to the most
current version.
No. 20070956 	8
and defend against” the claims. 	No reference was made to the
ninety-day claim rejection deadline set forth in section 1305.
In March 2005 the court approved detailed claim resolution
procedures, which, among other things, set a claim objection
deadline and again stated that all claims were to be resolved by
court order.
¶28 	The district court did not adopt section 1305.
Accordingly, Olympus was not bound to reject Matthews’ claim
within ninety days of receiving the claim, and the district court
was empowered to set an extended deadline.
II. 	ATTORNEY FEES WERE IMPROPERLY AWARDED BECAUSE MATTHEWS’
CLAIM WAS NOT WITHOUT MERIT
¶29 	In reviewing the district court’s award of attorney
fees, we apply the statutorily mandated, two-pronged test.
Section 78B-5-825 of the Utah Code provides that “[i]n civil
actions, the court shall award reasonable attorney fees to a
prevailing party if the court determines that the action or
defense to the action was without merit and not brought or
asserted in good faith.” 	Utah Code Ann. § 78B-5-825(1) (2008). 3
Accordingly, a finding of both lack of merit and bad faith are
required to award attorney fees.
¶30 	We first look at whether Matthews’ claim was without
merit. 	To determine whether a claim is without merit, we look to
whether it was “‘frivolous’” or “‘of little weight or importance
having no basis in law or fact.’” 	Warner v. DMG Color, Inc.,
2000 UT 102, ¶ 22, 20 P.3d 868 (quoting Cady v. Johnson, 671 P.2d
149, 151 (Utah 1983)).
¶31 	Matthews argued before the district court that his
claim against Olympus should be considered approved under Utah
Code section 1305(4), which requires a judicially dissolved
company to reject a claim within ninety days of a timely filed
notice of claim. 	Utah Code Ann. § 48-2c-1305(4) (2002). 	Olympus
argued that this provision did not apply because neither Olympus
nor the court specifically invoked it. 	This question is one of
first impression, unanswered until now since we had not
previously interpreted the statute. 	Further, because the
district court chose to incorporate parts of section 1305 into
its claim resolution procedures, it was unclear whether the

4 Olympus also argues that Matthews’ original claim for a
real estate commission was without merit. 	Because the promise
for $100,000 upon sale of the property was not recorded in a
signed writing, it clearly violates the statute of frauds. 	See
Utah Code Ann. § 25-5-1 (1998). 	However, even a legally
deficient claim, if not timely rejected, may form the basis for a
meritorious challenge, as here.
9 	No. 20070956
entire section must then be followed. 	As such, Matthews’ claim
was not frivolous, had a basis in law and fact, and therefore was
not without merit. 4
¶32 	Because we find Matthews’ claim before the district
court and on appeal to be not without merit, we reverse the award
of attorney fees both at the district court and on appeal.
CONCLUSION
¶33 	We conclude that the court of appeals correctly
interpreted the Utah Revised Limited Liability Company Act in
holding that the district court had authority to set an extended
deadline for rejection of claims against Olympus. 	Although part
13 of the Act applies to all dissolutions, sections 1305 and 1306
are permissive and binding only once adopted. 	Part 12 of the Act
allows the overseeing court in a judicial dissolution the
flexibility to fashion its own claim disposition procedures in
place of adopting section 1305 or section 1306. 	In this case,
the district court’s actions evidenced its intent not to adopt
section 1305.
¶34 	We also conclude that it was improper to award attorney
fees against Matthews. 	Matthews’ argument, that Olympus was
bound by section 1305 and that failure to reject his claim
according to the deadline provided in that section constituted
approval of his claim, was an undecided issue of first impression
and was grounded in law. 	It therefore had sufficient merit to
avoid sanctions.
¶35 	Affirmed in part and reversed in part.
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¶36 	Chief Justice Durham, Associate Chief Justice Durrant,
Justice Parrish, and Justice Nehring concur in Justice Wilkins’
opinion.