Cantamar, L.L.C. v. Champagne

• Decision Date: 03 August 2006
• Docket Number: No. 20050778-CA.,20050778-CA.
• Citation: 142 P.3d 140,2006 UT App 321
• Parties: THE CANTAMAR, L.L.C., Plaintiff and Appellee, v. Carlton J. CHAMPAGNE; Lon E. Williams; and Data Systems International, Inc., Defendants and Appellants.
• Court: Utah Court of Appeals

142 P.3d 140

2006 UT App 321

THE CANTAMAR, L.L.C., Plaintiff and Appellee, v. Carlton J. CHAMPAGNE; Lon E. Williams; and Data Systems International, Inc., Defendants and Appellants.

No. 20050778-CA.

Court of Appeals of Utah.

August 3, 2006.

Rehearing Denied September 18, 2006.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

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

Stephen C. Tingey, Benjamin J. Kotter, Ray Quinney & Nebeker, Salt Lake City, for Appellee.

Before Judges BILLINGS, McHUGH, and THORNE.

OPINION

BILLINGS, Judge:

¶ 1 Defendants Carlton J. Champagne, Lon E. Williams, and Data Systems International, Inc. (collectively, DSI) appeal the trial court's grant of summary judgment to Plaintiff The Cantamar, LLC (Cantamar). On appeal, DSI maintains the trial court erred in concluding the contract between the parties was unambiguous and integrated as a matter of law. DSI also argues the trial court erred in not addressing the existence of a condition precedent and in declining to consider DSI's claim of fraudulent inducement. Finally, DSI contends that genuine issues of material fact exist as to whether the contract's default interest rate constitutes an unenforceable penalty and as to whether a unilateral or mutual mistake occurred. We affirm in part and reverse and remand in part.¹

BACKGROUND

¶ 2 On January 11, 2002, DSI met with Troy Thuett (Thuett), a loan broker, with whom DSI had worked for nearly two years to obtain an investment and loans for DSI. At this meeting, DSI executed a promissory note (the Note), agreeing to pay Cantamar $269,285.07 plus interest. The Note constituted a refinancing of prior obligations DSI owed Commercial Lending Group, a separate lender from Cantamar.

¶ 3 Under the Note's terms, DSI agreed that prior to May 11, 2002 (the Due Date), interest would accrue on the principal at a rate of 8% per annum, and after the Due Date, interest would accrue at a rate of 30% per annum.² The terms of the Note also stated that: "[t]he unpaid principal and accrued interest [was] payable in monthly installments of $1,795.23, beginning on February 11, 2002, and continuing until [the Due Date], at which time the remaining unpaid principal and interest [were] due in full"; DSI "promise[d] to pay a late charge of $250.00 for each installment that remain[ed] unpaid more than 10 day(s) after [the] Due Date"; "[i]f any installment [was] not paid when due, the remaining unpaid principal balance and accrued interest [would] become due immediately at the option of [Cantamar]"; "[i]f any payment obligation under th[e] Note [was] not paid when due, [DSI] promise[d] to pay all costs of collection, including reasonable attorney fees, whether or not a lawsuit [was] commenced as part of the collection process." DSI members Williams and Champagne signed the Note, and on January 17, 2002, they "both together and individually unconditionally guarantee[d] all the obligations of [DSI] under th[e] Note."

¶ 4 At the time of the Due Date, DSI had made interest payments for the months of February, March, April, and May 2002. On the Due Date, DSI did not pay the principal owed under the Note, and DSI has not made an interest payment since May 2002. The current amount owing on the Note is the principal amount of $269,285.07 plus $47,124.89 in interest accrued up to and including December 11, 2002, plus all interest that has accrued thereafter at a rate of 30% per annum until DSI pays the principal in full.

¶ 5 On January 13, 2003, Cantamar brought an action against DSI to collect on the Note. DSI answered Cantamar's complaint on February 11, 2003. On June 17, 2003, Cantamar moved for summary judgment. In May 2004, the trial court denied Cantamar's motion for summary judgment, concluding there were issues of material fact and expressing concern as to "the issue of integration and the issue of condition[] precedent," where DSI alleged a prior or contemporaneous oral agreement under which DSI was not required to repay the loans until Thuett obtained a $15 million investment for DSI. After the trial court's denial of its motion for summary judgment, Cantamar deposed Champagne, the chief executive officer of DSI; Brian Bingel, the acting president and chief operating officer of DSI; and Gary Smith, a former employee of DSI. DSI deposed Glenn Britt, the managing member of Cantamar. At the conclusion of these depositions, on May 3, 2005, Cantamar renewed its motion for summary judgment. On September 6, 2005, the trial court granted Cantamar's renewed motion for summary judgment, concluding that: DSI was obligated as maker of the Note; Champagne and Williams were liable as guarantors of the Note; the Note was unambiguous; the Note was an integrated agreement as a matter of law; DSI's "alleged condition precedent to the effectiveness of the Due Date ha[d] failed, making the Note due and payable in full"; "DSI [was] in default under the terms of the Note"; and DSI, Champagne, and Williams were jointly and severally liable to Cantamar for $269,285.07 in unpaid principal, $47,124.89 in interest up to and including December 11, 2002, any further interest accrued after December 11, 2002, at the contract rate of 30%, $30,243 in attorney fees, and $1,373.87 in legal costs. DSI appeals.

ISSUE AND STANDARD OF REVIEW

¶ 6 On appeal, DSI argues the trial court improperly granted Cantamar's motion for summary judgment. Under Utah Rule of Civil Procedure 56(c), "summary judgment is only appropriate where `there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law.'" Ford v. American Express Fin. Advisors, Inc., 2004 UT 70, ¶ 9, 98 P.3d 15 (quoting Utah R. Civ. P. 56(c)) (other quotations and citation omitted). Because "[t]he propriety of a trial court's summary judgment order is a matter of law," Russell v. Lundberg, 2005 UT App 315, ¶ 9, 120 P.3d 541, "`we need review only whether the trial court erred in applying the relevant law and whether a material fact was in dispute,'" Ford, 2004 UT 70 at ¶ 9, 98 P.3d 15 (quoting WebBank v. American Gen. Annuity Serv. Corp., 2002 UT 88, ¶ 13, 54 P.3d 1139). "On review of a grant of summary judgment, we view the facts, and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." McEwan v. Mountain Land Support Corp., 2005 UT App 240, ¶ 10, 116 P.3d 955.

ANALYSIS

¶ 7 DSI asks this court to reverse the trial court's grant of Cantamar's motion for summary judgment because the trial court erroneously concluded the Note is unambiguous and integrated as a matter of law, did not address the existence of a condition precedent, and failed to consider DSI's fraudulent inducement claim. DSI also contends this court should reverse because genuine issues of material fact exist as to whether the default interest rate DSI agreed to under the terms of the Note constitutes an unenforceable penalty and as to whether a unilateral or mutual mistake occurred in the parties' omission of a written provision in the Note referencing the alleged oral agreement. We consider each claim.

I. Integration and Condition Precedent

¶ 8 DSI contends the trial court erroneously determined the Note is integrated as a matter of law. Therefore, DSI claims this court should reverse and remand to the trial court to determine whether, in light of all relevant evidence, including parol evidence, the Note is integrated and whether that integration is complete or partial.

¶ 9 Utah courts have held that "[a]bsent fraud or other invalidating causes, the integrity of a written contract is maintained by not admitting parol evidence to vary or contradict the terms of the writing once it is determined to be an integration." Union Bank v. Swenson, 707 P.2d 663, 665 (Utah 1985). "An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement." Restatement (Second) of Contracts § 209(1) (1981). An integrated agreement may be completely or partially integrated. See Novell, Inc. v. Canopy Group, Inc., 2004 UT App 162, ¶ 15, 92 P.3d 768; see also Restatement (Second) of Contracts § 210(1)-(2) (distinguishing between partially and completely integrated agreements).

¶ 10 Regardless of "whether [an agreement is] completely or partially integrated, evidence of prior or contemporaneous agreements or discussions is not admissible to contradict terms of the written agreement." Novell, 2004 UT App 162 at ¶ 15, 92 P.3d 768 (quotations and citations omitted). However, where a party seeks to introduce supplementary rather than contradictory evidence, its ability to do so depends on whether the agreement is partially or completely integrated. While a party cannot introduce supplementary terms to a completely integrated agreement, see Restatement (Second) of Contracts § 216(1), when an agreement is partially integrated, "[p]arol evidence not inconsistent with the writing is admissible to show what the entire contract really was, by supplementing, as distinguished from contradicting, the writing." Novell, 2004 UT App 162 at ¶ 15, 92 P.3d 768 (quotations and citations omitted). Where a party seeks to introduce supplementary terms to a partially integrated agreement, "parol evidence to prove the part not reduced to writing is admissible, although it is not admissible as to the part reduced to writing." Id.

¶ 11 Thus, before a trial court applies the parol evidence rule, it must determine as questions of fact: (1) whether the agreement is integrated and, if so, (2) whether that integration is complete or partial. See Eie v. St. Benedict's Hosp., 638 P.2d 1190, 1194 (Utah 1981) ("`[T]he court must determine as a question of fact whether the parties did in fact adopt a particular writing or writings as the final and complete expression of their bargain.'" (quoting Bullfrog Marina, Inc. v. Lentz, 28 Utah 2d 261, 501 P.2d 266 (1972)))....