Diversified Holdings, LC v. Turner

• Decision Date: 27 December 2002
• Docket Number: No. 20010021., No. 20000730
• Parties: DIVERSIFIED HOLDINGS, L. C., Plaintiff, Appellee and Cross-Appellant, v. Gilbert R. TURNER, Richard M. Knapp, University Properties, Inc., a Utah Corporation, The Haws Companies, a Utah Corporation, dba The Haws Companies Real Estate Services, Robert M. West, Jr., and John Does 1 through 4, Defendants, Appellants, and Cross-Appellees.
• Court: Utah Supreme Court

63 P.3d 686

2002 UT 129

DIVERSIFIED HOLDINGS, L. C., Plaintiff, Appellee and Cross-Appellant, v. Gilbert R. TURNER, Richard M. Knapp, University Properties, Inc., a Utah Corporation, The Haws Companies, a Utah Corporation, dba The Haws Companies Real Estate Services, Robert M. West, Jr., and John Does , Defendants, Appellants, and Cross-Appellees.

Nos. 20000730, 20010021.

Supreme Court of Utah.

December 27, 2002.

Blake S. Atkin, Salt Lake City, for plaintiff.

D. Miles Holman, Jeffrey N. Walker, Salt Lake City, for defendants.

DURHAM, Chief Justice:

INTRODUCTION

¶ 1 After a trial on claims of negligence and fraud, the trial court remitted the amounts of the jury's verdicts regarding both compensatory and punitive damages. The defendants have appealed and plaintiffs have cross-appealed, both challenging the amount of the damage awards. We affirm in part and reverse in part.

BACKGROUND

¶ 2 "On appeal, we recite the facts from the record in the light most favorable to the jury's verdict...." State v. Daniels, 2002 UT 2, ¶ 2, 40 P.3d 611. This case arises from a real estate transaction in which the plaintiff, Diversified Holdings (Diversified), was manipulated into paying substantially more for a property than was necessary. Two of the defendants, Gilbert Turner (Turner) and Richard Knapp (Knapp), represented the purchase price of a building in which Diversified was interested as $785,000, when in fact a third defendant, University Properties, which was owned by Knapp, was acquiring that property (for the purpose of selling it to Diversified) for $700,000. Turner and Knapp informed Diversified that they would sell the property for $10,000 more than they had (through University Properties) paid for it, and persuaded Diversified to pay a higher price than it had expected. The final defendant, the Haws Companies Real Estate Services (Haws), employed both Turner and Knapp as real estate agents, failed to train or supervise them properly, and made little or no effort to correct their conduct even after its discovery of their fraudulent behavior. The undisputed testimony of two expert witnesses regarding the regulation of the real estate industry attributed to Haws numerous improprieties and oversights in supervision, training, and response to irregularities. Several weeks after the sale, Diversified became aware of problems associated with the purchase of the building and began the inquiries that culminated in this lawsuit.

¶ 3 A jury found all four defendants jointly and severally liable for fraud damages, and awarded negligence and punitive damages against each defendant individually. Upon the defendants' motion, the trial judge remitted the negligence and punitive damages against each defendant except Haws. On appeal, the defendants allege a number of errors by the trial court and argue that the remitted award remains excessive. The plaintiffs cross-appeal, arguing that the jury's original awards should be restored.

STANDARD OF REVIEW

¶ 4 The claims we reach here are governed by different standards of review. A trial judge's discretion under Utah Rule of Civil Procedure 59 to propose a remittitur of compensatory damages is considerable. Crookston v. Fire Ins. Exch., 817 P.2d 789, 803-04 (Utah 1991) (Crookston I). Having been present for all phases of the trial, the trial judge is in the best position to ascertain if the jury has "exceeded its proper bounds," and we will reverse "only if there is no reasonable basis for the decision." Id. at 804, 805 (citations omitted).

¶ 5 Awards of punitive damages are assessed with regard to the seven factors enumerated in Crookston I. Id. at 808. In light of the recent United States Supreme Court holding that federal due process requires de novo review of punitive damage awards appealed on constitutional grounds, Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 432, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001), we have adopted a de novo standard for reviewing both awards of punitive damages by juries and also adjustments of those awards by trial courts. Campbell v. State Farm Mut. Auto. Ins. Co., 2001 UT 89, ¶ 13, 432 Utah Adv. Rep. 44, 65 P.3d 1134, cert. granted, 535 U.S. 1111, 122 S.Ct. 2326, 153 L.Ed.2d 158 (2002).

¶ 6 We review a trial court's decision to admit or exclude evidence under Rule 403 of the Utah Rules of Evidence under an abuse of discretion standard, and will not overturn a lower court's determination of admissibility unless it is "beyond the limits of reasonability." State v. 633 East 640 North, 942 P.2d 925, 930 (Utah 1997) (quoting State v. Hamilton, 827 P.2d 232, 239-40 (Utah 1992)).

ANALYSIS

I. INTEGRATION CLAUSE AND RECOVERY FOR FRAUD

¶ 7 Defendants argue that plaintiff's decision to affirm a contract containing a merger clause after the fraud was discovered precludes them from suing for fraud. They maintain that the defrauded party must rescind the contract to preserve the right to sue for fraud; if the aggrieved party elects to affirm the contract, that party is then limited to the remedies available under the contract. Jury instruction 41 expressly contradicted this position at trial, informing the jury that "[a]n integration clause in a contract between the parties does not bar recovery for fraud or negligent misrepresentation." Although given an opportunity to do so, counsel not only failed to object to this instruction, but also affirmatively indicated that the argument now raised on appeal would not be made.¹

¶ 8 The rules of civil procedure require a party to preserve an objection to a jury instruction for appeal absent special circumstances; unless a "party objects to an instruction or the failure to give an instruction, the instruction may not be assigned as error except to avoid a manifest injustice." Utah R. Civ. P. 51(d). While Rule 51(d)

does permit us to review instructional errors in the interests of justice ... "it is incumbent upon the aggrieved party to present a persuasive reason" for exercising that discretion ... and this requires "showing special circumstances warranting such a review."

Crookston I, 817 P.2d 789, 799 (quoting Hansen v. Stewart, 761 P.2d 14, 17 (Utah 1988)). The rule applies in both criminal and civil contexts; we observe the "general rule that `issues not raised at trial cannot be argued for the first time on appeal.'" Monson v. Carver, 928 P.2d 1017, 1022 (Utah 1996) (quoting State v. Lopez, 886 P.2d 1105, 1113 (Utah 1994)). The defendants on appeal do not address the waiver issue however, and do not make a showing that there are special circumstances justifying this court's review. The issue was therefore not preserved for appeal.

II. THE EXCESSIVENESS OF THE NEGLIGENCE AWARD

¶ 9 The trial court remitted the jury's total award against all defendants of $210,000 in negligence damages to $65,000 under Utah Rule of Civil Procedure 59(a)(6),² finding there was no evidence that plaintiff had suffered more than that as a result of defendants' negligence. The court reached the remitted amount by subtracting the amount Diversified paid for the property ($785,000) from the (revised) evaluation of its worth offered by the principal who represented Diversified in the sale ($650,000). From the resulting difference of $135,000, the judge subtracted $70,000 attributable to fraudulent misrepresentation, and $1,336 interest charged on a loan that was part of the scheme. The remaining $65,000, according to the trial court, could be sustained as damages resulting from the defendants' negligence in not working zealously to obtain the best purchase price for their clients. The trial court found that there "was no other evidence of damage presented or argued to the jury."

¶ 10 Plaintiff cross-appeals on the propriety of the negligence award, arguing that there was other evidence on which the jury properly could have based its original $210,000 award of negligence damages. Plaintiff is precluded from raising this argument, however, by our case law. Having opted to accept the remittitur of negligence damages made by the trial court instead of having a new trial, plaintiff cannot now challenge the amount of the damages on cross-appeal. In Dalton v. Herold, 934 P.2d 649 (Utah 1997), we held that a party who accepts an adjusted amount cannot thereafter appeal the propriety of the order.³ We relied in part on Donovan v. Penn Shipping Co., 429 U.S. 648, 97 S.Ct. 835, 51 L.Ed.2d 112 (1977), where the United States Supreme Court held that "a plaintiff in federal court, whether prosecuting a state or federal cause of action, may not appeal from a remittitur order he has accepted."⁴Id. at 650, 97 S.Ct. 835.

¶ 11 In Terry v. Zions Coop. Mercantile Institution, 605 P.2d 314 (Utah 1979), rev'd on other grounds, 678 P.2d 298 (Utah 1984), this court noted an exception to the general rule, that "[w]here the party who moves for the reduction, i.e. the defendant, institutes an appeal of the lower court proceedings, the plaintiff should be free to cross-appeal the amount of remittitur, notwithstanding the fact that he has previously accepted the reduced amount." Id. at 326. That exception does not apply in the instant case. Defendants have not assigned as error the amount of negligence damages as remitted by the trial court. Defendants have assailed the amount of punitive damages, and plaintiff is therefore free to argue in favor of the amounts found and assessed by the jury. However, plaintiff cannot on cross-appeal assail the negligence damages which were remitted by the trial court, which amount plaintiff accepted in lieu of a new trial, and which amount defendants do not seek to disturb.

III. THE EXCESSIVENESS OF THE PUNITIVE DAMAGE AWARD

¶ 12 In Crookston I, we identified seven factors which aid a finder of fact in the first instance and a reviewing court on a motion for a new trial or on appeal in determining the appropriate scope of an award of punitive damages. A jury, trial court, or appellate court must...