Bonneville v. Green River Development

• Decision Date: 24 May 2007
• Docket Number: No. 20060219-CA.,20060219-CA.
• Parties: BONNEVILLE DISTRIBUTING COMPANY, a Utah corporation, Plaintiff, Appellant, and Cross-appellee, v. GREEN RIVER DEVELOPMENT ASSOCIATES, INC., a Utah corporation; William S. Greaves; and Stanley De Waal, Defendants, Appellees, and Cross-appellants.
• Court: Utah Court of Appeals

164 P.3d 433

2007 UT App 175

BONNEVILLE DISTRIBUTING COMPANY, a Utah corporation, Plaintiff, Appellant, and Cross-appellee, v. GREEN RIVER DEVELOPMENT ASSOCIATES, INC., a Utah corporation; William S. Greaves; and Stanley De Waal, Defendants, Appellees, and Cross-appellants.

No. 20060219-CA.

Court of Appeals of Utah.

May 24, 2007.

Richard D. Burbidge and Stephen B. Mitchell, Salt Lake City, for Appellant.

George A. Hunt and Kurt M. Frankenburg, Salt Lake City, for Appellees.

Before GREENWOOD, Associate Presiding Judge, and DAVIS and McHUGH, JJ.

OPINION

GREENWOOD, Associate Presiding Judge:

¶ 1 Bonneville Distributing Company (Bonneville) appeals the trial court's rulings that (1) dissolution of a joint venture was proper; (2) Bonneville was not entitled to a share of profits or hauling fees; and (3) neither party was entitled to attorney fees. Green River Development Associates, Inc. (Green River) cross-appeals, also challenging the trial court's determination regarding attorney fees. Green River further asserts that the trial court erred in awarding accounting damages to Bonneville. Although we reverse two of the trial court's rulings, we affirm the ultimate result.

BACKGROUND

¶ 2 Bonneville and Green River engaged in a joint venture (the Joint Venture) for the sole purpose of operating the West Winds Truck Stop (the Truck Stop). Initially, the Joint Venture was between Green River and Triangle Oil, Inc. (Triangle). However, in April 1987, Triangle experienced severe financial problems after, among other things, the Internal Revenue Service (IRS) issued a federal tax lien against Triangle for $1,166,206.13 in unpaid taxes. The IRS issued another tax lien against Triangle in May 1989 for $627,991.32. As a result of its financial distress, on January 1, 1990, Triangle assigned its interest in the Joint Venture to Bonneville, which, prior to this assignment, was a shell corporation with no assets. Green River consented to the assignment. Triangle also transferred most of the service stations it owned and its operating assets, including fuel trucks and trailers, to Hardy Enterprises, Inc. (Hardy).

¶ 3 Under the Joint Venture agreement (the Agreement), Green River was responsible for overseeing the operations of the Truck Stop, and Bonneville was responsible for arranging "all motor fuel . . . necessary . . . to accommodate [the Truck Stop's] needs." Regarding compensation, the Agreement stated that Bonneville would receive one-half cent per gallon of all fuel sold and that it would be "paid bi-monthly a sum equal to such common carrier freight rates as are regularly charged for the delivery of motor fuel to the facility from the various points of acquisition."¹ In addition, each venturer would be allocated the net profits or net losses on a quarterly basis. The Agreement further stated that "[e]ach of the Venturers shall have an equal ownership and voice in the joint venture."

¶ 4 The Joint Venture leased the property on which the Truck Stop was located from Green River as an independent entity. Originally, the lease was for a two-year term, but was extended for an additional ten-year term, to expire on December 31, 1995. Upon the expiration of the ten-year term, the lease provided for an automatic five-year renewal period, commencing January 1, 1996, and continuing through December 31, 2000, unless the lessor, Green River, received written notice at least ninety days prior to December 31, 1995, that the lease would not be renewed.²

¶ 5 In 1992, the relationship between Green River and Bonneville began to unravel, first emerging with a dispute between Bonneville and Hardy. Hardy was one of several companies that provided fuel to the Truck Stop from 1987 until 1992. This relationship was based on an agreement between Hardy and Triangle, entered into before Triangle assigned its rights in the Joint Venture to Bonneville.

¶ 6 In approximately December 1992, Bonneville terminated the hauling agreement with Hardy and informed Green River that Bonneville would "make arrangements for the procurement of all motor fuels . . . to the . . . Truck Stop pursuant to the Joint Venture Agreement." In response, Green River sent a letter to Bonneville suggesting that it make arrangements for a new supplier "immediately." Specifically, Green River suggested that Bonneville make arrangements with Newby-Holt Oil Company, or another company that had "multiple refinery sources in Utah as well as Grand Junction, Colorado and Bloomfield, New Mexico." Rather than engaging another distributor, Bonneville sent a letter to Green River explaining that Bonneville was "ready, willing and able to supply and deliver motor fuel pursuant to the Joint Venture Agreement." The letter also stated that Bonneville wanted to be notified "immediately of all future orders of motor fuel so that it can timely supply and deliver it to [the Truck Stop]." Bonneville, however, does not dispute that it was unable to provide all of the Truck Stop's fuel needs by itself because it had only two trucks and did not have the capacity to haul fuel from anywhere other than Salt Lake City.

¶ 7 In spite of Green River's request for Bonneville to make arrangements with a new distributor, no such arrangements transpired. As a result, from December 1992 forward, Green River made all arrangements for the supply and transportation of fuel to the Truck Stop through third parties, without any assistance from Bonneville. Green River also stopped paying Bonneville the one-half cent per gallon of fuel sold and, instead, escrowed that amount in its attorney's trust account.

¶ 8 In April 1993, Bonneville filed suit against Green River; Bill Greaves, president of Green River; and Stanley De Waal, the Joint Venture's certified public accountant (CPA), alleging breach of contract and breach of fiduciary duty. The suit derived from an accounting disagreement, which will be discussed later, and Green River's refusal to purchase fuel through Bonneville. Shortly after the suit was filed, Green River's attorney contacted the IRS to inform it that Green River had previously been involved in a Joint Venture with Triangle, that Triangle assigned its rights in the Joint Venture to Bonneville, and that Green River possibly had money payable to Bonneville, which may be subject to the IRS's tax lien against Triangle. Green River informed Bonneville about its interaction with the IRS and suggested that the parties meet and "discuss dissolution of the joint venture on an appropriate basis."

¶ 9 After various meetings and correspondences between Green River and the IRS, the IRS asserted that the Triangle tax liens attached to Bonneville's Joint Venture interest. Moreover, IRS district counsel informed Green River that if the Joint Venture was dissolved, payment for Bonneville's interest should be made to the IRS.

¶ 10 On December 15, 1995, the IRS served Green River with another notice of levy on wages, salary, and other income in the amount of $3,774,075.27 to satisfy the tax lien against Triangle. Shortly thereafter, on December 28, 1995, Greaves, as managing partner of the Joint Venture, sent a letter to Bonneville informing it that the Joint Venture was dissolved, effective December 31, 1995. The letter stated that "[t]his dissolution is based upon the fact that Green River Development Associates ... has elected not to renew the underlying ground lease to the Truck Stop property which in turn causes a termination of the Joint Venture arrangement by virtue of paragraph 3 of the Joint Venture Agreement."³ Green River also sent Bonneville a Plan for Dissolution and Winding Up Operation of West Winds Truck Stop Joint Venture (the Plan). The Plan indicated that dissolution was a result of (1) the expiration of the lease; (2) litigation between the joint venturers; and (3) the IRS levies "respecting the partnership interest of Triangle Oil/Bonneville Distributing Company."⁴ The Plan also provided that the interest of Triangle/Bonneville be tendered to the IRS. Bonneville did not consent to the Plan; however, not surprisingly, the IRS consented to being paid Bonneville's share under the Plan.

¶ 11 After dissolution, Green River continued to operate the Truck Stop as a sole proprietor. Neither party disputes that Green River failed to give written notice to Bonneville, or to itself as lessor, at least ninety days prior to the expiration of the lease extension, that the Joint Venture would not be renewing the lease. Furthermore, it is undisputed that Green River did not consult with Bonneville about its decision to terminate the lease and dissolve the Joint Venture.

¶ 12 In November 1996, all parties agreed to dismissal without prejudice to Bonneville's pending state court action so that Bonneville could file a new action asserting claims arising out of the Joint Venture's dissolution. The United States was joined as a counterclaim defendant by Green River in a quiet title declaratory judgment claim arising from the IRS tax liens on Bonneville's Joint Venture interest. See United States v. Triangle Oil, 277 F.3d 1251, 1254 (10th Cir.2002). Green River asserted, inter alia, that Bonneville had no standing to sue because it lost its interest in the Joint Venture when the IRS liens attached. See id. at 1254-55. The United States removed the case to federal court, where it was consolidated with a related case filed by the United States. The district court granted summary judgment in favor of Green River, concluding that "the IRS's actions in this case deprived Bonneville of any ownership interest in the joint venture and therefore deprived Bonneville of the ability to bring [any state law] claims." Id. at 1255. Bonneville appealed the federal district court's summary judgment against it to the Tenth Circuit. The Tenth Circuit held "that the IRS had every right to agree to the dissolution plan," but the court refused to hold that "by accepting the proceeds of the dissolution, [the IRS]...