Cerritos Trucking Co. v. Utah Venture No. 1, 17185

• Decision Date: 18 March 1982
• Docket Number: No. 17185,17185
• Citation: 645 P.2d 608
• Parties: CERRITOS TRUCKING CO., a California corporation, and Cerritos Trucking Co., Donald E. Heimark, James B. Fleming and William L. Fariester dba Cerritos Associates, a partnership, Plaintiffs and Respondents, v. UTAH VENTURE NO. 1, William J. Lowenberg, Fern E. Lowenberg, and Utah Development Company, Inc., a Utah corporation, Defendants and Appellants. UTAH DEVELOPMENT COMPANY, INC., a corporation and William J. Lowenberg, Cross-Plaintiffs and Appellants, v. BETTILYON REALTY COMPANY, a corporation, and Edmond O. Dunahoo, Cross-Defendants and Respondents.
• Court: Utah Supreme Court

Page 608

645 P.2d 608

CERRITOS TRUCKING CO., a California corporation, and Cerritos Trucking Co., Donald E. Heimark, James B. Fleming and William L. Fariester dba Cerritos Associates, a partnership, Plaintiffs and Respondents, v. UTAH VENTURE NO. 1, William J. Lowenberg, Fern E. Lowenberg, and Utah Development Company, Inc., a Utah

corporation, Defendants and Appellants.

UTAH DEVELOPMENT COMPANY, INC., a corporation and William J.

Lowenberg, Cross-Plaintiffs and Appellants, v. BETTILYON REALTY COMPANY, a corporation, and Edmond O.

Dunahoo, Cross-Defendants and Respondents.

No. 17185.

Supreme Court of Utah.

March 18, 1982.

Robert A. Peterson, Salt Lake City, for defendants and appellants.

Joseph C. Rust, Salt Lake City, for Dunahoo.

Gary A. Weston, Salt Lake City, for Bettilyon.

HOWE, Justice:

Plaintiffs Cerritos Trucking Co. and its successor in interest, Cerritos Associates, (Cerritos) brought this action for damages and for specific performance of an option to purchase real property. The defendants, William J. Lowenberg, Utah Venture No. 1, and Utah Development Company, Inc., sought rescission of the option, and damages from the plaintiffs and from the cross-defendants, Bettilyon Realty Company and Edmond O. Dunahoo, on the basis of alleged misrepresentation, mutual mistake and breach of fiduciary duty. The trial court granted motions by the plaintiffs and by the cross-defendants for a directed verdict. Defendants appeal.

In 1977 the defendant Lowenberg purchased a parcel of real estate located at the International Center near the Salt Lake City International Airport. ¹ Thereafter he began constructing a warehouse on the property. As the warehouse was nearing completion, Lowenberg contacted several realtors to assist him in finding tenants. Among the realtors he contacted was Gerald Daughtrey of Bettilyon Realty Company.

Fiber Sciences, a subsidiary of EDO, a publicly traded New York Corporation, had contacted Bettilyon Realty and requested help in locating warehouse space in Salt Lake City. Fiber Sciences was engaged in the manufacturing of water and waste tank systems for aircraft. In April of 1978 Bettilyon's representative, Gerald Daughtrey, showed the officers of Fiber Sciences the Lowenberg property along with other properties. Edmond O. Dunahoo, the president of Fiber Sciences and one of the cross-defendants herein, determined that the Lowenberg property was acceptable for their manufacturing and warehouse needs. When, however, the officers of Fiber Sciences presented a purchase proposal to the parent corporation, EDO, they were informed that Fiber Sciences should lease and not purchase. An offer to lease a portion of the warehouse was subsequently presented to Lowenberg by Fiber Sciences through Daughtrey. The offer was rejected by Lowenberg and no subsequent offers were made by Fiber Sciences.

Later that same month, Dunahoo met with Donald Heimark, an officer of Cerritos. Heimark became interested in purchasing the Lowenberg property for investment purposes with the possible participation in the purchase by some of the officers of Fiber Sciences in their individual capacities. Heimark was a personal friend of Dunahoo and a "handshake agreement" was entered whereby Cerritos would obtain a lease with an option to purchase, and the officers of Fiber Sciences would participate in the purchase and ownership of the property to an extent to be later determined.

Daughtrey then submitted to Lowenberg a written proposal on behalf of Cerritos for the lease of the warehouse with an option to purchase it. A verbal agreement was reached and Lowenberg instructed his attorney to draft the necessary documents. On April 28, 1978 Cerritos and Lowenberg executed the lease containing an option to purchase in favor of Cerritos. Shortly thereafter Cerritos sublet a portion of the warehouse to Fiber Sciences. Later, in the summer of 1978 EDO informed Dunahoo and the other officers of Fiber Sciences that they could not participate in the purchase of the property since it would present a conflict of interest which would require disclosure to EDO's shareholders.

Sometime in January of 1979 Lowenberg learned that neither Fiber Sciences nor any of its officers would be participating in the purchase of the warehouse. On February 28, 1979 Cerritos exercised its option to purchase the property and tendered payment for the property. Lowenberg refused to convey the property claiming that he had granted the option to Cerritos on a representation made to him by Daughtrey that some of the officers of Fiber Sciences would participate in the purchase thereof along with Cerritos. Lowenberg claimed that but for that representation, he would not have granted an option to sell the property. He maintained that he had agreed to sell at a lower price in an effort to curry future business favors from Fiber Sciences.

When Lowenberg refused to perform, plaintiffs brought this action to enforce the option and to recover damages amounting to the difference between Lowenberg's mortgage payment on the property and Cerritos' lease payment, which plaintiffs continued to tender after Lowenberg refused to honor the option. Lowenberg counterclaimed against the plaintiffs for a rescission of the option based on misrepresentation and cross-claimed against Bettilyon alleging that it and Dunahoo had breached fiduciary duties owing him.

After both parties had presented their evidence to a jury, Cerritos, Dunahoo and Bettilyon made motions for a directed verdict. The motions were granted and defendants' counterclaims and cross-claims were dismissed. Defendants appeal claiming that the trial judge erred in granting the motions for directed verdict since evidence was presented from which the jury could have found in their favor on their claims of misrepresentation and breach of duties of trust and confidence. Defendants also allege that the trial judge erred by applying the wrong legal standard to the motions for directed verdict and by signing findings of fact and conclusions of law subsequent to the granting of the motion.

A motion for directed verdict is a method of testing the legal sufficiency of the evidence presented. This Court has often stated that in deciding a motion for a directed verdict all evidence must be considered by the trial court in the light most favorable to the party against whom it is directed. Kim v. Anderson, Utah, 610 P.2d 1270 (1980); Asay v. Rappleye, Utah, 593 P.2d 132 (1979). The case should not be taken from the jury by the granting of the motion where there is any substantial dispute in the evidence. Flynn v. W. P. Harlin Construction Co., 29 Utah 2d 327, 509 P.2d 356 (1973). On appeal we apply these same rules. See Kim, supra, and cases cited therein.

Defendants claim that a representation was made to Lowenberg that it was presently intended and agreed upon by Cerritos and the officers of Fiber Sciences that they would jointly participate in the purchase of the property. Lowenberg maintains that this was a representation of a present state of mind, intention and agreement, that he relied upon it to his detriment and he should now be relieved from the option he granted to the plaintiffs. The jurisprudence of this state has long recognized as actionable deceit a promise accompanied by the present intention not to perform it, made for the purpose of deceiving the promissee, thereby inducing him to act where otherwise he would not have done so, and by virtue of which he parts with his money or property. Papanikolas v. Sampson, 73 Utah 404, 274 P. 856 (1929). In Hull v. Flinders, 83 Utah 158, 27 P.2d 56 (1933), we followed that rule, recognizing it to be the majority rule in this country. We quoted with approval the following from 12 R.C.L. 262:

The rule is based on the theory that one who promises another to do something in the future as a condition or inducement to him to do anything, impliedly asserts a present intent to carry out his promise; that the intention to deceive is a condition of mind, which, when it exists, is as much a fact as is a condition of the body, notwithstanding that it is much more difficult to prove; and that, therefore, a misstatement of a man's mind is a misstatement of fact.

83 Utah at 163, 27 P.2d at 57. We again recognized the rule in Nielson v. Leamington Mines & Exploration Corp., 87 Utah 69, 48 P.2d 439 (1935); State v. Bruce, 1 Utah 2d 136, 262 P.2d 960 (1953); Berkeley Bank For Cooperatives v. Meibos, Utah, 607 P.2d 798 (1980). See also annotations on this subject at 51 A.L.R. 46, 68 A.L.R. 635, 91 A.L.R. 1295, 125 A.L.R. 879.

The application of that rule avails the defendants nothing because they do not contend that when the representation was made to Lowenberg that the officers of Fiber Sciences would participate in the purchase of his property, those officers and Heimark had no intention of keeping that agreement. The evidence reflects nothing but good faith on their part and that it was not until several months after the option was granted that the parent company, EDO, disapproved of the plan of the officers to participate which led to its abandonment.

Defendants urge us...