Burton Lumber & Hardware Co. v. Graham

• Decision Date: 30 May 2008
• Docket Number: No. 20060912-CA.,20060912-CA.
• Citation: 2008 UT App 207,186 P.3d 1012
• Parties: BURTON LUMBER & HARDWARE COMPANY, Plaintiff and Appellee, v. Michael GRAHAM, Defendant and Appellant.
• Court: Utah Court of Appeals

186 P.3d 1012

2008 UT App 207

BURTON LUMBER & HARDWARE COMPANY, Plaintiff and Appellee, v. Michael GRAHAM, Defendant and Appellant.

No. 20060912-CA.

Court of Appeals of Utah.

May 30, 2008.

David G. Harlow, Provo, for Appellant.

Richard D. Burbidge, Salt Lake City, for Appellee.

Before Judges BENCH, DAVIS, and ORME.

OPINION

DAVIS, Judge:

¶ 1 Defendant Michael Graham appeals from the trial court's judgments, which awarded actual damages, punitive damages, and attorney fees and costs to Burton Lumber & Hardware Company (Burton Lumber). We affirm.

BACKGROUND

¶ 2 Graham owned and operated a business that manufactured wall panels for residential housing. Burton Lumber and Graham entered into an agreement (the Agreement) whereby Burton Lumber purchased Graham's wall panel plant and agreed to employ Graham as the general manager of the plant. During the drafting of the Agreement, Graham, who was advised by an attorney and a CPA, tried to negotiate different employment terms but eventually agreed that he would be an at-will employee who could be terminated without cause at any time. Under the Agreement, Burton Lumber was to pay a fixed price for the business assets and inventory, as well as a salary, quarterly bonuses, and half of the plant's profits over the following three years to Graham. Burton Lumber was also to assume Graham's obligations under the lease for the building where the plant was located. The Agreement was finalized, and Burton Lumber took ownership of the plant on March 19, 2001.

¶ 3 In late July 2001, it appeared from Burton Lumber's records that one of its customers, Hamlet Homes, had failed to make payment for two invoices. Burton Lumber began to look into the matter, and Hamlet Homes responded by submitting a copy of the check it had used to pay those invoices. Graham's superiors at Burton Lumber talked with Graham, who claimed to not know what had happened to the check. After further investigation, Burton Lumber discovered that Graham had picked up the check for $7,293 from Hamlet Homes in early June 2001, had cashed it, and had deposited part of it into his wife's bank account and the remainder into his account.

¶ 4 Thereafter, in August 2001, the president and vice-president of Burton Lumber met with Graham to confront him about the check and to terminate him. Graham eventually admitted that the check belonged to Burton Lumber and stated that he would repay the amount within three days; he also agreed to turn in the company truck he had been using. Graham did neither, although Burton Lumber was eventually able to recover the truck. Burton Lumber also sent Graham a letter proposing to apply his final salary check toward the amount he owed and requesting that Graham respond if he did not agree with such action. Graham never replied, and as a result, his salary check was applied to his debt. According to the Agreement, because Graham was terminated, he was no longer entitled to his unaccrued bonus for the third quarter or any of the promised future shares of the plant's profits (although no such profits were realized in any event.)

¶ 5 After Graham was terminated, he took several items that, according to the Agreement, belonged to Burton Lumber. Additionally, sometime after Graham's termination, Burton Lumber determined that Graham had been paid for expense reimbursements that were not proper business expenses. Burton Lumber also learned that while Graham was employed as the plant's general manager, he had been personally renting a generator to contractors on Burton Lumber jobs. On at least one occasion, Graham included the rental amount on a bid and Burton Lumber ended up collecting for the rental. Graham then had a subcontractor make a phony invoice to Burton Lumber for the rental charge amount. Burton Lumber issued a check to the subcontractor, who wrote Graham a check for that amount. Thus, Graham received a secret, improper payment from the job.

¶ 6 On September 7, 2001, Graham served a notice to vacate on Burton Lumber, demanding that Burton Lumber vacate the plant building by October 1, 2001. Although Burton Lumber had agreed to assume the lease obligations, it agreed to vacate but notified Graham that it would need a few more weeks beyond the deadline to completely vacate. Graham agreed, and Burton Lumber moved the plant into a bigger building on October 25, 2001, having paid all the October 2001 rent.

¶ 7 Burton Lumber brought this action to recover the several amounts owed by Graham, including the remaining portion of the Hamlet Homes check, the value of the converted property, the secret payment, and the improperly claimed business expenses. Burton Lumber further claimed that Graham had defrauded it into purchasing his business. In its complaint, Burton Lumber also requested awards of punitive damages and attorney fees. Graham responded and counter-claimed, arguing that the Agreement is unconscionable, his termination was in bad faith and without cause, Burton Lumber converted his personal property, Burton Lumber was unjustly enriched, and Burton Lumber damaged and did not timely vacate the plant building. After a summary judgment proceeding in which the trial court dismissed Graham's claim that the Agreement is unconscionable, the remaining claims were tried in November 2004. The trial court entered judgment in favor of Burton Lumber on all its claims with the exception of its fraud and improper reimbursement claims. The trial court also determined that Burton Lumber was entitled to punitive damages and attorney fees, which amounts were determined after an evidentiary hearing on those matters. Graham now appeals virtually every trial court determination in favor of Burton Lumber.

ISSUES AND STANDARDS OF REVIEW

¶ 8 The bulk of Graham's arguments on appeal challenge the trial court's factual findings. "Findings of fact, whether based on oral or documentary evidence, 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." Utah R. Civ. P. 52(a). "`A finding is "clearly erroneous" when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" State v. Walker, 743 P.2d 191, 193 (Utah 1987) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)).

¶ 9 Graham also argues that the Agreement, or at least one paragraph of it, is unconscionable. This is a question of law, which we review for correctness. See Sosa v. Paulos, 924 P.2d 357, 360 (Utah 1996).

¶ 10 Graham additionally challenges the award of punitive damages to Burton Lumber. "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) (internal quotation marks omitted).

¶ 11 Finally, Graham argues that the trial court erred in awarding attorney fees under Utah Code section 78-27-56, which allows attorney fees to be awarded against a party whose action or defense is without merit and is brought in bad faith, see Utah Code Ann. § 78-27-56(1) (2002). This is a mixed question of fact and law: "As to whether the party lacked good faith, the trial court must make a factual finding of a party's subjective intent. In addition, the trial court must conclude, as a matter of law, that the action was without merit." Pennington v. Allstate Ins. Co., 973 P.2d 932, 939 n. 3 (Utah 1998).

ANALYSIS

I. The Challenged Findings of Fact

¶ 12 Many of Graham's arguments are, either directly or indirectly, challenges to the trial court's findings of fact. To successfully challenge such findings, "an appellant must first marshal all the evidence supporting the finding[s] and then demonstrate that the evidence is legally insufficient to support the findings even in viewing it in the light most favorable to the court below." Reid v. Mutual of Omaha Ins. Co., 776 P.2d 896, 899 (Utah 1989); see also Utah R.App. P. 24(a)(9).

The process of marshaling is ... fundamentally different from that of presenting the evidence at trial. The challenging party must temporarily remove its own prejudices and fully embrace the adversary's position; he or she must play the devil's advocate. In so doing, appellants must present the evidence in a light most favorable to the trial court and not attempt to construe the evidence in a light favorable to their case. Appellants cannot merely present carefully selected facts and excerpts from the record in support of their position. Nor can they simply restate or review evidence that points to an alternate finding or a finding contrary to the trial court's finding of fact.

Chen v. Stewart, 2004 UT 82, ¶ 78, 100 P.3d 1177 (citations and internal quotation marks omitted).

¶ 13 Graham wholly fails to fulfill the "rigorous and strict" marshaling requirement, see id. ¶ 79. In some instances, he does not even directly challenge the findings of fact but, rather, in making his legal arguments implies that the findings were opposite of that which the trial court actually found. For those findings that Graham does directly challenge, he essentially reargues the evidence and asserts that the findings are incorrect because the evidence supporting them is "self-serving" and "controverted."¹ But such recharacterizations of the evidence are ineffectual on appeal because it is the trial court's role to assess credibility and to assign weight to conflicting evidence. See 438 Main St. v. Easy Heat, Inc., 2004 UT 72, ¶ 75, 99 P.3d 801 ("When reviewing a district court's findings of fact on appeal, we do not undertake an independent assessment of the evidence presented during the course of trial and reach our own separate findings with respect to that...