Black Diamond Fin. LLC v. Big Cottonwood Pine Tree Water Co.
| Decision Date | 11 June 2020 |
| Docket Number | No. 20190237-CA,20190237-CA |
| Parties | BLACK DIAMOND FINANCIAL LLC, Appellant and Cross-appellee, v. BIG COTTONWOOD PINE TREE WATER COMPANY, Appellee and Cross-appellant, and Vicki Kincaid, Appellee. |
| Court | Utah Court of Appeals |
Erik A. Olson and Kevin Paulsen, Salt Lake City, Attorneys for Appellant and Cross-appellee
John A. Snow and Alex B. Leeman, Salt Lake City, Attorneys for Appellee and Cross-appellant Big Cottonwood Pine Tree Water Company
Michael F. Skolnick, Salt Lake City, and Jeremy Speckhals, Attorneys for Appellee Vicki Kincaid
Opinion
Christiansen Forster, Judge:
¶1 Black Diamond Financial LLC (Black Diamond) appeals the district court's grant of summary judgment in favor of Vicki Kincaid, its grant of Big Cottonwood Pine Tree Water Company's (Big Cottonwood) motion to strike Black Diamond's supplemental disclosures, and its grant of summary judgment in favor of Big Cottonwood on the issue of damages. We affirm.
¶2 In the 1980s, the Pine Tree subdivision was built in Big Cottonwood Canyon. Big Cottonwood is a nonprofit corporation responsible for administering water rights to shareholders living in Pine Tree. The water is supplied by Salt Lake City Corporation pursuant to a Water Supply Permit and Agreement entered in 1984.
¶3 When Big Cottonwood was established, its bylaws stated that each lot-owner, or "member," would be issued a share of stock that would entitle them to connect only their own cabin to the main water line. The member's lot number was to "be specified on the share certificate" and was to "be transferable only at such time as said lot is transferred and only to the transferee or transferees of said lot." If a share certificate was surrendered for transfer, Big Cottonwood was to cancel the certificate and issue a new one, but it was not permitted to issue a new certificate "until the former certificate for a like number of shares shall have been surrendered and cancelled." The bylaws further provided that shares are "not transferrable to another lot" and that "if [a] member, at the time of transfer of [a] lot, does not transfer the share to the transferee of the lot, ownership of the share shall automatically revert to" Big Cottonwood, which would "hold the share for the benefit of the transferee or subsequent transferee of said lot." As a matter of practice, Big Cottonwood "did not implement any system for checking the title of a particular lot when it was asked to issue a new water share stock certificate" but instead "simply assumed that the person asking for the new water share also had an interest in the property."
¶4 In 2005, Steven Rollins obtained Lot 25 in Pine Tree, along with its water share, represented by Share Certificate No. 59. Between 2003 and 2009, Rollins and the previous owners of Lot 25 paid Big Cottonwood assessments on the water share and used the water. At the time he purchased Lot 25, Rollins was in a relationship with Kincaid. Rollins borrowed money from Kincaid to remodel the property and promised to repay her out of the proceeds when the property was sold. When Rollins was unable to sell the property for a satisfactory price, he entered into a new agreement with Kincaid in which he agreed, among other things, to transfer his water share to her in exchange for forgiving the loan. At the time, "both Rollins and Kincaid ... were unaware of the provisions of [Big Cottonwood's] Articles and Bylaws that prohibited Rollins from conveying to Kincaid his share of [Big Cottonwood] stock unless he also conveyed to her title to Lot 25."
¶5 Rollins signed the water share for Lot 25 over to Kincaid, and she asked Big Cottonwood to issue a new share in her name. After Kincaid paid a processing fee, Big Cottonwood canceled Rollins's Share Certificate No. 59 and issued Share Certificate No. 63 to Kincaid.
¶6 In 2011, Rollins's lender foreclosed on Lot 25. The lender began marketing the property but was soon informed that the water share had previously been transferred to Kincaid and that Lot 25 therefore had no water service. In 2013, Black Diamond expressed interest in purchasing Lot 25. The real estate agent "informed Black Diamond that the property did not come with water, but Black Diamond pursued the matter anyway, hoping to get the property for a much lower price." Black Diamond believed that it could obtain water from another source but also had a " ‘common sense’ understanding ... that water shares in the Pine Tree Subdivision ‘had to stay’ with the land" so that if it "became the owner of the lot it would have some right to the water."
¶7 After failing to obtain water through other means, Black Diamond sued Big Cottonwood and Kincaid, (1) seeking a declaratory judgment that Rollins's transfer of the water share to Kincaid was void, that the share automatically reverted back to Big Cottonwood upon the attempted transfer, and that Big Cottonwood must issue the share to Black Diamond; (2) asserting that Big Cottonwood breached its articles and bylaws and its duty of good faith by issuing Share Certificate No. 63 to Kincaid and that Black Diamond, as a third-party beneficiary of the contract, suffered losses as a result; and (3) asserting that Kincaid intentionally interfered with Black Diamond's potential economic relationships by refusing to transfer her water share to Black Diamond.
¶8 Black Diamond provided initial disclosures in which it stated that it had not yet calculated its damages. The disclosures asserted that one of Black Diamond's intended witnesses, its principal Brandon Wixom, would testify regarding damages. When deposed, Wixom was asked how he had been damaged. He responded, When asked more specifically how he would calculate damages, he responded that "it could be done very easily" based on "lack of rent for ... X amount per month, over the time that it's been unable to be rented."
¶9 Kincaid moved for summary judgment on the ground that she was a protected purchaser under Utah Code section 70A-8-303. Black Diamond and Big Cottonwood filed cross motions for partial summary judgment on Black Diamond's breach of contract claim. The district court granted summary judgment in favor of Kincaid on Black Diamond's claims against her because it agreed with Kincaid that she was a protected purchaser. On the other hand, the district court granted summary judgment in favor of Black Diamond on the breach of contract issue, concluding that Black Diamond was a third-party beneficiary under the bylaws, that Big Cottonwood had breached the bylaws, and that Big Cottonwood was therefore liable for any damages caused by the breach. The court determined that specific performance was not available because Kincaid was a protected purchaser but left open the question of what damages Black Diamond sustained as a result of the breach of contract.
¶10 Following the court's ruling on summary judgment and after the close of fact discovery, Black Diamond served supplemental disclosures on Big Cottonwood, which included a new theory and computation of damages based on the devaluation of Lot 25 caused by the property's lack of access to water. Big Cottonwood moved to strike the supplemental disclosures as untimely, asserting that the only method of calculating damages that Black Diamond had ever provided was Wixom's deposition statement that he would calculate damages based on "lack of rent for ... X amount per month, over the time that it's been unable to be rented." The district court granted Big Cottonwood's motion to strike and limited Black Diamond's argument and presentation of evidence of damages to "lost rental value of the subject property."1
¶11 After completing expert discovery, Big Cottonwood moved for summary judgment on the issue of damages, asserting that Black Diamond had "suffered no recoverable damages." The district court granted Big Cottonwood's motion, concluding that Black Diamond sustained "no actual harm ... because the lack of water for Lot 25 was factored into the purchase price." Further, the district court concluded that Black Diamond, having purchased Lot 25 knowing that it did not have access to water, should have known "that Lot 25 was not rentable without water" and could not have expected to "be able to rent the property and generate rental income." Because Black Diamond could not establish that it had suffered damage, the district court granted Big Cottonwood's motion for summary judgment and "awarded nominal damages in the amount of $1.00" based on Big Cottonwood's "breach of its bylaws." Black Diamond now appeals.
¶12 Black Diamond first argues that the district court erred in granting summary judgment in favor of Kincaid on the issue of whether she was a protected purchaser under the Utah Uniform Commercial Code. "Because a district court's ruling on summary judgment is a question of law, we review it for correctness." Rupp v. Moffo , 2015 UT 71, ¶ 5, 358 P.3d 1060.
¶13 Next, Black Diamond asserts that the district court erred in striking the supplemental disclosures it filed to supplement its computation of damages against Big Cottonwood. "While interpretations of the Utah Rules of Civil Procedure are questions of law reviewed for correctness, we recognize that trial courts have a great deal of deference in matters of discovery." Arreguin-Leon v. Hadco Constr. LLC , 2018 UT App 225, ¶ 15, 438 P.3d 25 (quotation simplified), cert. granted , 455 P.3d 1055 (Utah 2019). "We therefore review discovery orders for abuse of discretion and will not find abuse of discretion absent an erroneous conclusion of law or where there is no evidentiary basis for the...
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