Crowther v. Carter

• Decision Date: 04 January 1989
• Docket Number: No. 870524-CA,870524-CA
• Citation: 767 P.2d 129
• Parties: Steven D. CROWTHER, Trustee for Computer Service of Southern Utah Pension Trust, Plaintiff and Respondent, v. Murlan D. CARTER, Defendant and Appellant.
• Court: Utah Court of Appeals

Page 129

767 P.2d 129

Steven D. CROWTHER, Trustee for Computer Service of Southern Utah Pension Trust, Plaintiff and Respondent, v. Murlan D. CARTER, Defendant and Appellant.

No. 870524-CA.

Court of Appeals of Utah.

Jan. 4, 1989.

Michael Westfall (Argued), Gallian & Westfall, St. George, for defendant and appellant.

James L. Shumate (Argued), Cedar City, for plaintiff and respondent.

Before BILLINGS, JACKSON and ORME, JJ.

OPINION

JACKSON, Judge:

Murlan D. Carter ("Carter") appeals from a May 1987 district court judgment and order directing that the parties' limited partnership be dissolved and its assets sold if not reacquired by Carter by a date certain. The primary issues on appeal are: (1) whether the trial court erred as a matter of law in concluding the partnership agreement unambiguously set forth the percentage of ownership interest to be granted respondent in return for payment of a trust deed note secured by partnership property; and (2) whether there is sufficient evidence to support the court-ordered dissolution of the limited partnership. ¹ We affirm.

In July 1982, Carter (as general partner) and Crowther (on behalf of the trust as limited partner) entered into a twenty-year limited partnership agreement for the general purpose of developing and selling real estate, primarily a mobile home park. Under Paragraph 5 of the agreement, Carter agreed to contribute to the partnership his equity under a real estate contract in land that was to be the site of the development. Pursuant to the first part of Paragraph 6 of the agreement, entitled "Capital Contributions of the Limited Partner," Crowther agreed to perform the following as his "initial capital contribution" to the partnership: (a) pay off a $17,000 trust deed evidencing a debt owed by Carter; (b) "use his best efforts" to substitute himself as obligor on a first trust deed note to First Security Bank on the mobile home park property ("the property") constituting the primary partnership asset; and (c) "use his best reasonable efforts" to obtain a letter of credit or other bond or security required as a precondition to the property's development.

Pursuant to the second section of Paragraph 6, the limited partner also agreed to contribute "additional cash or property" to the partnership, at Carter's request, in the form of: (A) payment of the outstanding balance owed ($95,500) on the contract to purchase the property, thereby paying off the first trust deed note on the property referred to above; (B) payment of $7,000 in back taxes on the property; (C) payment of $15,000 in mechanics' liens filed against the property; and (D) payment of $5,000 for sewer work on the property.

Carter's first issue on appeal involves the interpretation of the following language in the partnership agreement immediately after the provisions for the initial and additional capital contributions by the limited partner:

It is the intention of the GENERAL PARTNER and the LIMITED PARTNER to this Agreement, that in return for LIMITED PARTNER's initial investment of SEVENTEEN THOUSAND DOLLARS ($17,000.00) and his attempts to substitute himself in place of [another of Carter's limited partnerships] on a 1st Trust Deed Note with First Security Bank, and his best effort to provide a Letter of Credit or other bond or security to finance the developments to the above-described real property, the LIMITED PARTNER shall have and hereby is given a twenty percent (20%) ownership interest in the real property and project described above. Further, in the event that LIMITED PARTNER is required to contribute any more cash to the development of the project, LIMITED PARTNER shall receive one (1) additional percentage point of ownership interest for each ONE THOUSAND DOLLARS ($1,000.00) of additional cash which he contributes to the project. Fractions of ONE THOUSAND DOLLAR ($1,000.00) contributions will buy LIMITED PARTNER an equal fraction of ownership.

A subsequent provision permitted Carter to reduce or eliminate the limited partner's ownership interest by paying back, within five years, all or part of the limited partner's total contribution to the project, plus interest on that contribution calculated quarterly at one and one-half percent above the prime interest rate.

Despite his efforts, respondent was not substituted on the trust deed note to First Security Bank. Nonetheless, in May 1983 Crowther paid off that note and a warranty deed was executed placing title to the property in Carter, who then signed a note to Crowther for $132,535.54 secured by a deed of trust on the property. Appellant Carter made only one interest payment on this note. Two years later, Crowther filed suit seeking, as alternative relief, foreclosure pursuant to the May 1983 trust deed or sale of the partnership assets and dissolution of the partnership. After bench trial, the court concluded the provision quoted above was unambiguous and, based on the initial and additional contributions made by the limited partner, found respondent entitled to more than a 100 percent ownership interest in the partnership.

If a contract is ambiguous and the trial court finds facts regarding the parties' intentions based on evidence extrinsic to the contract itself, those findings may not be set aside on appeal unless they are clearly erroneous under Utah Rule of Civil Procedure 52(a). Porter v. Groover, 734 P.2d 464, 465 & n. 1 (Utah 1987); Circle Airfreight v. Boyce Equipment, 745 P.2d 828 (Utah Ct.App.1987). However, a trial court's interpretation of the words of an unambiguous, integrated contract is a question of law, which is reviewed on appeal for correctness. Kimball v. Campbell, 699 P.2d 714, 716 (Utah 1985). See Buehner Block Co. v. UWC Assocs., 752 P.2d 892 (Utah 1988). Whether ambiguity exists in a contract is itself a question of law. Faulkner v. Farnsworth, 665 P.2d 1292, 1293 (Utah 1983). Contract language is considered ambiguous if the words used to express the meaning and intention of the parties are "insufficient in a sense that the contract may be understood to reach two or more plausible meanings." Metropolitan Property & Liab. Ins. Co. v. Finlayson, 751 P.2d 254, 257 (Utah Ct.App.1988) (quoting Central Sec. Mut. Ins. Co. v. DePinto, 235 Kan. 331, 681 P.2d 15, 17 (1984)).

In this appeal, Carter does not claim the trial court clearly erred in determining Crowther had complied with his obligation ((b), above) to use his best efforts to substitute himself as obligor on the first trust deed note. Instead, he contends the trial court erroneously concluded the partnership agreement provision, quoted above, unambiguously entitled the limited partner to an additional one percent ownership interest for each thousand dollars actually paid to retire the first trust deed note on the property. Carter maintains that the agreement is ambiguous and a "reasonable" interpretation of it would construe the Trustee's actual payment of the first trust deed note under paragraph 6(A) as substitute performance in lieu of requirement (b) of the limited partner's initial contribution, thus entitling respondent to only a twenty percent ownership interest. No reasonable person, he insists, would have given the limited partner a twenty percent ownership interest in property allegedly worth $556,000 in exchange for $17,000 and unsuccessful efforts of the limited partner to substitute itself as obligor on the first trust deed note.

The problem with appellant's position is that he would have us read requirement (b), one of three preconditions to respondent's entitlement to a twenty percent ownership interest, as obliging Crowther to be successful in his efforts to be...