Bennett v. Huish

• Decision Date: 25 January 2007
• Docket Number: No. 20050499-CA.,20050499-CA.
• Parties: Tim P. BENNETT; Dale R. Bennett; and Bennett and Economy Sanitation, Inc., Plaintiffs and Appellees, v. Grant S. HUISH and Utah Funding and Loan, Inc., Defendants and Appellants.
• Court: Utah Court of Appeals

155 P.3d 917

2007 UT App 19

Tim P. BENNETT; Dale R. Bennett; and Bennett and Economy Sanitation, Inc., Plaintiffs and Appellees, v. Grant S. HUISH and Utah Funding and Loan, Inc., Defendants and Appellants.

No. 20050499-CA.

Court of Appeals of Utah.

January 25, 2007.

Gerry B. Holman, Dunn & Dunn, Salt Lake City, for Appellants.

Chris L. Schmutz, Schmutz Mohlman & Rohbock, Bountiful, for Appellees.

Before Judges BILLINGS, McHUGH, and THORNE.

OPINION

THORNE, Judge:

¶ 1 Defendants Grant S. Huish and Utah Funding and Loan, Inc. (Utah Funding) appeal the trial court's ruling that Defendants committed conversion of loan proceed funds and that Huish breached his fiduciary duty to Plaintiffs. Defendants also appeal the trial court's order awarding judgment, punitive damages, and prejudgment interest to Plaintiffs Tim P. Bennett; Dale R. Bennett; and Bennett and Economy Sanitation, Inc. We affirm.

BACKGROUND

¶ 2 Plaintiffs Tim P. Bennett and Dale R. Bennett are brothers who operated Bennett and Economy Sanitation, Inc., a sanitation business. In 1999, they decided to expand their business to include a salvage operation. Plaintiffs located a lot on Beck Street to accommodate their business expansion and contacted Kary Austin, a mortgage broker, to acquire a $1.2 million loan for them. Austin learned that the lot was scheduled to be sold at a tax sale and began looking for a "hard money" loan until a conventional loan could be obtained. Austin contacted Huish, who had experience with hard money loans, to assist them in obtaining a lender for such a loan.

¶ 3 Huish located a lender, UTCO Associates, Ltd. (UTCO), and met with Plaintiffs and Austin at the closing to explain the terms of the loan. Huish informed Plaintiffs that the loan would be due in ninety days with late payment penalty fees of 10% of the principal balance and the normal rate at that time of 18% interest that would be accelerated to 36% upon default. Plaintiffs, while not finding the terms acceptable, decided to undertake the loan due to the pending tax sale and representations by Huish that he had a long-term replacement loan that could be closed within the next 30 to 45 days. Huish did not guarantee that there was such a loan, and Plaintiffs signed an affidavit of "no take-out commitment" which indicated that no replacement loan was guaranteed or committed by UTCO or any of its lenders. Plaintiffs entered into the loan agreement (the Beck Street Loan), brokered by Huish, with Robert Kent of UTCO for $1.2 million. The Beck Street Loan was secured by trust deeds on several properties owned by Plaintiffs.

¶ 4 Plaintiffs made timely interest payments but were unable to make the loan's balloon payment, requiring them to pay an extension fee of $18,000 to avoid default. Huish negotiated the extension fee,¹ and disbursed $12,000 of the fee to UTCO and the remaining $6000 to Utah Funding,² one of Huish's companies. Later, upon being advised by Huish to reduce the loan principal to attract a long-term lender, Plaintiffs mortgaged their homes, which reduced the loan by approximately $227,000. Plaintiffs also mortgaged another piece of property and wrote Utah Funding a check for $93,308. Huish kept $19,000 as an extension fee and paid $74,308 to UTCO.

¶ 5 On November 3, 2000, Plaintiffs entered into a loan with Waterpro, Inc. (the Waterpro Loan), brokered by Huish, for $70,000 to bring the Beck Street Loan current. Huish prepared a closing statement that directed the title company to disburse $27,995.98 to Utah Funding for "30 day Loan extension Beck Street," $13,977.99 to Synergetics³ for "Interest payment Beck Street," and $20,674.92 to Plaintiffs. Of the $27,995.98 disbursed for the Beck Street Loan extension, approximately $9314 went to UTCO and $18,628 to Utah Funding.

¶ 6 In December the balloon payment on the Beck Street Loan again became due. Huish had still not obtained a long-term loan and Plaintiffs did not have the funds to make the payment. Thus, Huish informed Plaintiffs that a $50,000 rollover would be needed.⁴ Thereafter, Plaintiffs filed for Chapter 11 protection, and requested that Huish return the $27,995.98 that they alleged he was holding for them to pay future extension fees for the Beck Street Loan. Huish refused to return the money and Plaintiffs filed a complaint against Defendants alleging breach of fiduciary duty, violation of express trust, imposition of constructive trust, conversion, and fraud, seeking return of the $27,955.98 plus attorney fees, costs, punitive damages, and prejudgment interest.

¶ 7 A bench trial was held on February 24, 2005. The trial court found that Huish had a duty to disclose that he was taking a commission from the extension fees, and that he violated his fiduciary duty by failing to disclose that he was taking a commission from the Waterpro Loan proceeds. Furthermore, the trial court found that Defendants converted those funds by refusing to return the amount not used to further extend the Beck Street Loan. The trial court concluded Plaintiffs were entitled to judgment in the amount of $18,643.98, plus statutory interest and $50,000 in punitive damages.

ISSUES AND STANDARDS OF REVIEW

¶ 8 Defendants first argue that the trial court erred in admitting parol evidence regarding an oral agreement, contrary to the plain meaning of the closing statement, because the statement was an unambiguous integrated agreement. As matters of law, both the issues pertaining to ambiguity and admittance of parol evidence present questions of law which we review under a correctness standard, granting no particular deference to the trial court. See Oliphant v. Estate of Brunetti, 2002 UT App 375, ¶ 14, 64 P.3d 587 (addressing determinations of ambiguity); Spears v. Warr, 2002 UT 24, ¶ 18, 44 P.3d 742 (addressing admittance of parol evidence). In determining "whether [the parties] adopted a writing . . . as a complete integration of their agreement, we incorporate a clearly erroneous standard of review." Spears, 2002 UT 24 at ¶ 18, 44 P.3d 742.

¶ 9 Defendants next argue that the statute of frauds bars enforcement of the alleged oral agreement because they claim the agreement constituted an escrow agreement and pertained to a conveyance of land. "The applicability of the statute of frauds is a question of law to be reviewed for correctness." Id. at ¶ 23.

¶ 10 Defendants also contend that the trial court erred in concluding that Defendants committed conversion and that Huish breached his fiduciary duty. "Whether the trial court properly applied the law of conversion is a legal question, which we review for correctness." Fibro Trust, Inc. v. Brahman Fin., Inc., 1999 UT 13, ¶ 19, 974 P.2d 288. Whether a party breached a fiduciary duty is a mixed question of fact and law in which we grant the trial court ample discretion. See C & Y Corp. v. General Biometrics, Inc., 896 P.2d 47, 53 (Utah Ct.App. 1995).

¶ 11 Defendants further contend that the trial court erred in awarding punitive damages and prejudgment interest to Plaintiffs. "Whether punitive damages [should be] awarded is generally a question of fact within the sound discretion of the [fact finder], and will not be disturbed absent an abuse of discretion." ProMax Dev. Corp. v. Mattson, 943 P.2d 247, 259 (Utah Ct.App. 1997) (alterations in original) (quotations and citation omitted). "A trial court's decision to grant or deny prejudgment interest presents a question of law which we review for correctness." Smith v. Fairfax Realty, Inc., 2003 UT 41, ¶ 16, 82 P.3d 1064 (quotations and citation omitted).

¶ 12 Lastly, Defendants claim that the trial court erred in finding Huish personally liable for acts in the course and scope of his employment. "For a mixed question of law and fact, which requires a trial court to determine whether a given set of facts comes within the reach of a given rule of law, we [still] review legal questions for correctness, [but] we may . . . grant a trial court discretion in its application of the law to a given fact situation." Covey v. Covey, 2003 UT App 380, ¶ 19, 80 P.3d 553 (alterations and omission in original) (quotations and citations omitted).

ANALYSIS

I. Parol Evidence

¶ 13 Defendants claim that the trial court erred in admitting parol evidence regarding an oral agreement contrary to the plain meaning of the closing statement, arguing that the closing statement was an unambiguous integrated agreement. "The parol evidence rule operates in the absence of fraud to exclude [prior and] contemporaneous conversations, statements, or representations offered for the purpose of varying or adding to the terms of an integrated contract." Novell, Inc. v. Canopy Group, Inc., 2004 UT App 162, ¶ 10, 92 P.3d 768 (alteration in original) (quotations and citation omitted). In applying the parol evidence rule, the court must first "determine whether the agreement is integrated." Hall v. Process Instruments & Control, Inc., 890 P.2d 1024, 1027 (Utah 1995).

A. Integrated Agreement

¶ 14 Defendants assert that the closing statement was an integrated agreement because it was signed by Plaintiffs, detailed the final distribution of the loan proceeds, and did not reference any other document. Defendants further assert that because the agreement was integrated the trial court erred in allowing testimony pertaining to a separate oral agreement. Whether evidence is admissible is a question of law, which we review for correctness, incorporating a clearly erroneous standard of review for the subsidiary factual determination of whether the parties adopted a writing as a complete integration of their agreement. See Spears v. Warr, 2002 UT 24, ¶ 18, 44 P.3d 742.

¶ 15 "An agreement is integrated where the parties thereto adopt a writing or writings as the final and complete expression of the agreement." Smith v. Osguthorpe, 2002 UT App 361, ¶ 17, 58 P.3d 854 (quotations and citation omitted). In determining whether the writing was intended by the parties to be...