Armed Forces Ins. Exchange v. Harrison

• Decision Date: 25 April 2003
• Docket Number: No. 990662.,990662.
• Citation: 70 P.3d 35,2003 UT 14
• Parties: ARMED FORCES INSURANCE EXCHANGE, a Kansas corporation, Plaintiff and Appellee, v. Judi HARRISON, an individual, Restoration Systems, Inc., a Utah corporation, and John Does 1-5, Defendants and Appellant.
• Court: Utah Supreme Court

70 P.3d 35

2003 UT 14

ARMED FORCES INSURANCE EXCHANGE, a Kansas corporation, Plaintiff and Appellee, v. Judi HARRISON, an individual, Restoration Systems, Inc., a Utah corporation, and John Does 1-5, Defendants and Appellant.

No. 990662.

Supreme Court of Utah.

April 25, 2003.

Richard A. Van Wagoner, David L. Pinkston, D. Jason Hawkins, Salt Lake City, for plaintiff.

Joseph C. Rust, Salt Lake City, for defendant.

DURRANT, Associate Chief Justice.

¶ 1 In this appeal, we are called upon to review a trial court's finding of fraud against Judi Harrison, president of Restoration Systems, Inc. ("RSI"). Following a five-day bench trial, the trial court found RSI liable to Armed Forces Insurance Exchange ("AFIE") on several theories, including fraud, and awarded damages. Shortly afterwards, the trial court entered a judgment against Harrison, finding her personally liable to AFIE on the claim of fraud, and awarded damages. Only Harrison appeals from the court's judgment. She asserts numerous points of error in her attack on the trial court's conclusion that she is liable for fraud. We remand to the trial court for it to complete its findings of fact.

BACKGROUND

¶ 2 "`On appeal from a bench trial, "[f]indings of fact ... shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses." We relate the facts accordingly, granting due deference to the trial court's resolution of factual disputes.'" Roderick v. Ricks, 2002 UT 84, ¶ 2, 54 P.3d 1119 (alteration in original) (quoting Tanner v. Carter, 2001 UT 18, ¶ 2, 20 P.3d 332 (quoting Utah R. Civ. P. 52(a))).

I. THE METCALF PROJECT

¶ 3 On May 11, 1993, a fire occurred at the home of Colonel Donald and Sidella Metcalf. In extinguishing the fire, the fire department cut apart the roof and doused the house with water, causing water damage to the interior of the home. The Metcalfs, who held a first-party homeowner's insurance policy with AFIE, notified AFIE of their loss. After receiving this notification, AFIE retained a local adjusting company, C.W. Reese Co. ("Reese"), to serve as its agent for this claim.

¶ 4 After consulting with Reese, Colonel Metcalf entered into a contract with RSI to do the restoration work. RSI was, at the time, a corporation engaged in the restoration of damaged homes and buildings. Harrison was the president, director, and sole shareholder of RSI. Initially, RSI estimated that it could restore the structure and contents of the Metcalfs' home for $89,305.76. Subsequently, RSI submitted several additional estimates to AFIE through Reese, requesting payment for additional costs associated with the restoration of the Metcalfs' home. In total, RSI billed AFIE $311,342.85 for work done on the Metcalfs' home. Of this billed amount, AFIE paid $272,638.17. In addition to the amount billed to AFIE, RSI billed the Metcalfs directly in the amount of $15,492.50 for certain upgrades RSI provided in addition to the restoration work.¹ By combining RSI's billings to the Metcalfs and to AFIE, the trial court determined that RSI billed a total of $326,335.37² for restoration work on the Metcalfs' home.

¶ 5 RSI submitted each of its estimates to Greg Peters, an adjustor for Reese, AFIE's local agent. After reviewing each estimate, Peters recommended that AFIE reimburse RSI for the full amount. AFIE requested Peters to review the amounts claimed on the February 1994 and July 1994 estimates and to check for duplications. Following his examination of the estimates and invoices provided by RSI, including three subcontractor invoices fabricated by RSI, Peters found no duplication and recommended that AFIE provide full payment. AFIE sent checks based on these recommendations. Additionally, three of AFIE's own employees also reviewed the RSI estimates and failed to discover any double billing, although one employee did discover a nine dollar mistake.

¶ 6 Sometime in December 1994, RSI left the Metcalf job. However, some of the restoration work was not yet completed, so the Metcalfs retained other contractors to correct and finish the restoration of their home. In February 1995, AFIE sued RSI and Harrison under several contract and tort theories.

¶ 7 During the initial discovery period, RSI claimed that several pertinent documents relating to the Metcalf project were taken in a burglary. These documents included a Job Cost Detail Report ("JCDR"), which was an internal document maintained by RSI for each of its projects to keep a record of the actual costs associated with that project. Though it claimed that certain source documents were lost as a result of the burglary, RSI was nevertheless able to recreate the JCDR in June 1995. AFIE contended that the burglary had been staged. During discovery, Harrison and RSI provided this recreated JCDR and the source documents they claimed to have used in the recreation process to AFIE by August 1995. No more than a month later, when it deposed Chris Stavheim, RSI's accounting clerk, AFIE knew that the JCDR was recreated. Harrison admitted that parts of the recreated JCDR were a "best-shot effort" based on a review of the information available to them at the time of the recreation. Three of the subcontractor invoices RSI provided AFIE in support of the JCDR were fabricated by RSI.

II. PROCEEDINGS BEFORE THE TRIAL COURT

¶ 8 On February 2, 1996, RSI and Harrison filed a motion for summary judgment against AFIE and for partial summary judgment against the Metcalfs. In this motion, RSI and Harrison argued that Harrison could not be held personally liable because she acted only in her capacity as president of RSI and was thus shielded by the corporate veil. Moreover, they asserted that no circumstances existed to justify piercing the corporate veil in order to hold Harrison liable under the equitable doctrine of alter ego. In response to this argument, AFIE and the Metcalfs contended that Harrison could be held liable for her own personal torts and that she had provided insufficient evidence to justify a grant of summary judgment in her favor on the alter ego theory. While the trial court ultimately denied RSI and Harrison's motion for summary judgment, it did conclude that "there [were] no genuine issues of material fact and defendant Judi Harrison [was] entitled to judgment as a matter of law on any claim or effort to pierce the corporate veil."

¶ 9 Following the five-day bench trial, held in March 1997, the court found RSI liable to AFIE under four different theories: fraud, breach of contract, unjust enrichment, and constructive trust. Prior to the trial court rendering judgment, Harrison filed a petition for bankruptcy protection under Chapter 7 of the United States Bankruptcy Code, which automatically stayed any legal proceeding and rendered the trial court unable to enter judgment against her. Subsequently, the bankruptcy court entered an order modifying the automatic stay, which allowed the trial court to enter its Findings of Fact and Conclusions of Law against Harrison.

¶ 10 In its Findings of Fact and Conclusions of Law, the trial court held Harrison liable for fraud only. It determined that she was jointly and severally liable with RSI to AFIE and the Metcalfs in the amount of $143,056.82 for fraud.³ It also held Harrison jointly and severally liable with RSI to AFIE and the Metcalfs for their attorney fees and costs in the amount of $172,143.51. Additionally, the trial court found Harrison jointly and severally liable with RSI for expenses AFIE and the Metcalfs incurred for services provided by construction and forensic accounting experts in the amount of $35,949. Finally, the trial court held Harrison jointly and severally liable with RSI for $5,000 in punitive damages to AFIE and $5,000 in damages to the Metcalfs for slander of title.

¶ 11 Though the trial court held RSI and Harrison jointly and severally liable, only Harrison appealed the trial court's decision. On appeal, she argues that the trial court (1) erred in denying her motion for summary judgment, (2) erred in entering a judgment of fraud against her because AFIE failed to establish the elements of fraud by clear and convincing evidence, (3) erred in entering a judgment of fraud where the court's own findings insufficiently established the elements of fraud, (4) erred in basing its findings of fraud on a document prepared after litigation commenced, (5) erred in its measure of fraud-based damages, (6) erred in assessing the same damages against her that were assessed against RSI even though she was found liable for fraud only, (7) erred in awarding attorney fees against her, (8) erred in failing to apportion attorney fees among the various causes of action, (9) erred in assessing against her AFIE's expense of retaining and consulting experts, and (10) erred in awarding expert expenses to AFIE absent compliance with Utah Rule of Civil Procedure 54(d)(2).

¶ 12 We have jurisdiction to hear this matter pursuant to Utah Code Ann. § 78-2-2(3)(j) (2002).

ANALYSIS

I. THE FRAUD ALLEGATIONS IN THE COMPLAINT

¶ 13 We first review the trial court's refusal to grant Harrison's motion for summary judgment. "A trial court's decision to grant or deny a motion for summary judgment is a legal one and will be reviewed for correctness. Therefore, [this issue] will be reviewed de novo, giving no deference to the trial court's conclusions." Salt Lake City v. Silver Fork Pipeline Corp., 913 P.2d 731, 733 (Utah 1995) (citations omitted). ¶ 14 Prior to trial, Harrison filed a motion for summary judgment claiming, among other things, that AFIE's complaint failed to plead fraud⁴ with the factual particularity required by rule 9(b) of the Utah Rules of Civil Procedure. She now asserts that the denial of the motion was error. She argues that AFIE failed to plead fraud with particularity in its complaint against her because it focused on RSI's actions, not hers. Furthermore...