AKB Props. LLC v. Rubberball Prods. LLC

• Decision Date: 15 April 2021
• Docket Number: No. 20190659-CA,20190659-CA
• Citation: AKB Props. LLC v. Rubberball Prods. LLC, 487 P.3d 465 (Utah App. 2021)
• Parties: AKB PROPERTIES LLC, Appellant, v. RUBBERBALL PRODUCTIONS LLC, MLA Properties LLC, and Mark L. Andersen, Appellees.
• Court: Utah Court of Appeals

487 P.3d 465

AKB PROPERTIES LLC, Appellant,

v.RUBBERBALL PRODUCTIONS LLC, MLA Properties LLC, and Mark L. Andersen, Appellees.

No. 20190659-CA

Court of Appeals of Utah.

Filed April 15, 2021

Jefferson W. Gross, Salt Lake City, S. Ian Hiatt, and J. Adam Sorenson, Attorneys for Appellant

Peter H. Donaldson, Lehi, Matthew J. Orme, and Cole Crowther, Salt Lake City, Attorneys for Appellees

Judge Diana Hagen authored this Opinion, in which Judges Gregory K. Orme and Ryan M. Harris concurred.

Opinion

HAGEN, Judge:

¶1 In this contract dispute, AKB Properties LLC (AKB) appeals the entry of summary judgment in favor of Rubberball Productions LLC, MLA Properties LLC, and Mark L. Andersen (collectively, the Andersen Parties). AKB contends the district court erred in concluding that there were no genuine issues of material fact regarding an alleged oral modification of an agreement between AKB and the Andersen Parties. We agree. Because more than one reasonable inference can be drawn from the material facts at issue, we reverse and remand.

BACKGROUND

¶2 Alan K. Bailey and Mark L. Andersen (the Owners) created Rubberball Productions LLC (the Company) in the 1990s to specialize in the sale of stock photography. Andersen owned fifty-one percent of the Company, and Bailey owned forty-nine percent. At some point before 2006, the Owners each transferred their respective interests in the Company to individually owned limited liability companies named after their own initials: Andersen's interest went to MLA Properties LLC (MLA), and Bailey's to AKB.

¶3 In 2006, the Company was reorganized with MLA and AKB as its only members, and the parties entered into a written buy-sell agreement (the Agreement), which established a contractual structure for buying out a deceased Owner's interest in the Company. The Agreement contemplated that the Company would take out an insurance policy on the life of each Owner, with the Company paying the premiums and being the designated beneficiary. Upon the death of either Owner, a buyout of MLA's or AKB's respective interest would be accomplished by paying the deceased's estate from the proceeds of the applicable life insurance policy.

¶4 The Agreement provided that the Company was valued at $4,000,000, unless and until a value was "reestablished by the Owners executing a written instrument." After twenty-five months, if no written instrument had set such a purchase price, the purchase price would be "the value which is established by mutual agreement between the buyer and sellers, or if no mutual agreement can be arrived at, ... [by] an independent qualified appraiser." But if the buyout provision was triggered by an Owner's death, the Agreement provided that "until changed hereafter in a writing by the Company and the Owners," the purchase price "shall be an amount equal to the greater of the amount described" above "or the amount of insurance proceeds available to the Company or the remaining Owners. If no life insurance proceeds are received by the Company or the remaining Owners, for any reason whatsoever, the purchase price shall be as described" above.

¶5 As intended by the Agreement's buyout provisions, the Company purchased two $2,000,000 life insurance policies, one insuring the life of each of the Owners (the Allianz Policies). The Company paid the premiums and was listed as the beneficiary on both policies. It is undisputed that "the purpose of the Allianz [Policies] was to provide funds whereby the surviving [Owner] would buy out the membership interests of the deceased [Owner]."

¶6 In 2012, the Company purchased two additional $2,000,000 insurance policies, one on the life of each Owner (the Ohio Policies). Neither Ohio Policy named the Company as the beneficiary.¹ It is undisputed that "when the Ohio Policies were acquired in 2012, the purpose of those policies was not to provide funds to purchase the membership interests of a deceased [Owner]"; rather, it was to benefit directly the estate of either Owner upon that Owner's death.

¶7 Bailey passed away in 2016, and his family's trust received the $2,000,000 payout from the Ohio Policy. Shortly after Bailey's death, the estate's trustee contacted Andersen to inquire about the purchase of Bailey's interest in the Company pursuant to the buyout provision of the Agreement. According to Andersen, at some point he informed the trustee that the Owners had agreed to an oral modification of the Agreement in 2015 under which the Owners arranged to allow the Allianz Policies to lapse, with the understanding that the proceeds from the Ohio Policies would accomplish the buyout of a deceased Owner's interest in the Company (the Oral Modification). Nevertheless, Andersen agreed to engage an appraiser to determine the Company's value as contemplated by the Agreement. After the appraiser completed the valuation, Andersen offered the trustee a buyout amount to resolve the dispute, but the parties were not able to reach a resolution.

¶8 AKB filed a complaint alleging breach of the Agreement, among other claims. The Andersen Parties counterclaimed, seeking a declaratory judgment that the proceeds from the Ohio Policy satisfied the Agreement's buyout provision as altered by the Oral Modification. AKB moved for partial summary judgment on the Andersen Parties’ counterclaim arguing that, even if the Oral Modification occurred, it was invalid as a matter of law. The Andersen Parties also moved for summary judgment, seeking declaratory relief on its counterclaim and dismissal of AKB's complaint.

¶9 In support of their cross-motion for summary judgment, the Andersen Parties filed two declarations, one from Andersen and one from the Company's office manager. According to the declarations, the Allianz Policies were due to expire in 2015 and in order to renew the policies the Company would have had to pay premiums that were nearly 1,500 percent higher than before. The office manager and Andersen attest that they discussed the matter with Bailey at a regular biweekly Company meeting in March 2015, at which only Andersen, Bailey, and the office manager were present. At that meeting, according to the declarations, Bailey "suggested replacing the Allianz Policies with the pre-existing personal Ohio Policies, and allowing the Ohio Policies to satisfy [the Agreement's] buyout mechanism." Both Andersen and the office manager attest that the Owners orally agreed to allow the Allianz Policies to lapse and agreed "that the Ohio Policies would be used to satisfy the insurance funded buyout provision of the [Agreement]." In a separate deposition, Andersen acknowledged that, under the alleged Oral Modification, the deceased Owner's beneficiary would receive the same $2,000,000 life insurance payout from the Ohio Policy that it would have received in any event, even without the Oral Modification, and that the deceased Owner's interest in the Company would transfer to the surviving Owner without any additional compensation.

¶10 No written record exists of the 2015 meeting or the Oral Modification. Andersen described the conversation with Bailey as "pretty brief" and

pretty casual in that neither one of us felt like it was ever going to be required—needed. I mean, no one thinks—neither one of us thought either one of us was going to die. So there wasn't—you know, we didn't open up the documents and look at them in detail with counsel and—try to understand whether or not the policies worked.

¶11 The district court granted summary judgment in favor of the Andersen Parties. AKB now appeals that judgment.²

ISSUE AND STANDARD OF REVIEW

¶12 AKB contends that the district court erred in granting summary judgment to the Andersen Parties because triable issues of material fact remain regarding the existence, terms, and enforceability of the alleged Oral Modification.³ "Summary judgment is appropriate ‘if the moving party shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law.’ " Berger v. Ogden Reg'l Med. Ctr. , 2020 UT App 85, ¶ 16, 469 P.3d 1127 (quoting Utah R. Civ. P. 56(a) ). "We review the trial court's conclusions of law for correctness, including its conclusion that there are no material fact issues." Rusk v. Harstad , 2017 UT App 27, ¶ 3, 393 P.3d 341 (per curiam) (cleaned up). In doing so, we view "the facts and all reasonable inferences in a light most favorable to the party opposing the motion." Id. (cleaned up).

ANALYSIS

¶13 In this appeal, we must determine whether a reasonable jury could reject the Andersen Parties’ claim that the Owners agreed to an Oral Modification altering the Agreement so that the Ohio Policies’ proceeds would satisfy the insurance-funded buyout of the deceased Owner's interest in the Company. If so, a genuine dispute of material fact remains for trial. Because we conclude that the evidence could support a reasonable inference that no such Oral Modification occurred, we reverse the district court's ruling granting the Andersen Parties’ motion for summary judgment.

¶14 Summary judgment is an important tool of judicial efficiency in district courts because it "allows the parties to pierce the pleadings to determine whether a material issue of fact exists that must be resolved by the factfinder." Lamb v. B & B Amusements Corp. , 869 P.2d 926, 928 (Utah 1993). To defeat summary judgment, however, the nonmoving party "is required only to show that there is a material issue of fact" for trial. Id. "Affidavits and depositions submitted in support of and in opposition to a motion for summary judgment may be used only to determine whether a material issue of fact exists, not to determine whether one party's case is less persuasive than another's or is not likely to succeed in a trial on the merits." Id.

¶15 While "an opponent of a motion for summary judgment must timely file responsive affidavits raising factual issues or risk the trial court's conclusion that there are no factual issues[,] ... it is not...