Dugan v. Jones
| Citation | 615 P.2d 1239 |
| Decision Date | 23 July 1980 |
| Docket Number | No. 16334,16334 |
| Parties | Carl C. DUGAN and Louise Dugan, husband and wife, Plaintiffs and Counterclaimants, v. Luther Eugene JONES and Betty Elvira Jones, husband and wife, Defendants, Counterclaimants, Third-Party Plaintiffs and Appellants, v. O. B. OBERHANSLY, Lester Clan Stilson and United Farm Agency, a Utah Corporation, Third-Party Defendants and Respondents. |
| Court | Supreme Court of Utah |
J. Kent Holland of Hanson, Russon, Hanson & Dunn, Salt Lake City, Ray E. Nash, Vernal, for plaintiffs and counterclaimants.
Jackson Howard, Provo, for third-party defendants and respondents.
Dugans, the plaintiffs, brought this action to foreclose on a note and mortgage executed by the Joneses. Defendants filed a counterclaim and third-party complaint against the realtors, alleging fraud, negligent misrepresentation, breach of contract, and breach of fiduciary duty. The trial court, having refused defendants' request for a jury, found for plaintiffs on their foreclosure action, dismissed defendants' counterclaim, and allowed them no recovery on their third-party complaint. This cause is reversed and remanded for a new trial on all issues in accordance with this opinion. Costs to Joneses.
The factual background of this lawsuit is as follows: On February 11, 1972, O. B. Oberhansly, a real estate salesman for United Farm Agency, took an exclusive listing on the property of Carl C. and Louise Dugan, located in Jensen, Utah. The listing, signed by Mr. Dugan, was for a store and out-buildings on 22 and 3/4 acres of flat terrain, 18 of which was tillable. The property was further described as having 12 acres of native pasture and 8 of irrigated improved pasture. The United Farm Agency catalogue for Spring 1973, incorporated the description in the listing. It further stated the property had a 1/4 mile river frontage and was situated in proximity to a number of tourist attractions, including Dinosaur Land. Luther E. and Betty Jones, then living in Morgan Hill, California, responded to the listing, and visited the property on February 20, 1973, in company with Oberhansly. The Dugans were living on the property and were operating the store. The following day, the Joneses made an offer to purchase the property for $50,000 and executed a deposit receipt and agreement of sale with the Dugans. The agreement stated the amount of land involved was approximately 22 and 3/4 acres. In accordance with the agreement, the Joneses paid $500 in earnest money; in April 1973, $4,500; and an additional $3,500 at the date of possession in June. They assumed an existing mortgage for $5,000, and purchased the inventory of the store for some $10,000.
The parties closed the transaction on July 2, 1973, in the office of the Dugans' attorney. The closing documents contained a legal description of the land the Joneses were purchasing but no statement as to the number of acres involved. In reality, the total acreage conveyed to the Joneses was not 22 and 3/4, but approximately 6.9 acres. The Joneses entered into possession of the premises and made monthly payments under the note until November 1976. They discovered the discrepancy in acreage in September 1976, when an appraiser looked over the land, and the plot plan, as part of an effort by the Joneses to obtain a campground franchise. In November 1976, on the advice of counsel, the Joneses, with notice to the Dugans, began making their mortgage payments into a bank account.
In January 1977, the Dugans filed a complaint seeking foreclosure of the mortgage. The Joneses answered, and filed a counterclaim and third-party complaint, naming as counterclaim defendants the Dugans; and as Third-party defendants Oberhansly, his broker, Lester Clan Stilson, and United Farm Agency. The counterclaim, as later amended, sets forth three counts, the first for fraud and deception, the second for negligent misrepresentation, and the third for breach of contract. As damages, the Joneses claimed $96,000 based on the discrepancy in acreage; $75,000 consequential damages for being prevented from affiliating with United Campgrounds; 1 $50,000 for breach of an alleged representation Dugans would release or subordinate from the mortgage a parcel large enough for the Joneses to build a new house; and $50,000 punitive damages. In their amended third-party complaint, the Joneses asserted against Oberhansly claims of fraud and deceit; negligent misrepresentation; breach of fiduciary duty toward the Joneses; and breach of fiduciary duty toward the Dugans. In their claim against Stilson and United Farm Agency, Joneses asserted Oberhansly acted within the scope of his authority, and Stilson and United Farm breached their duty to supervise properly their agent. The third-party complaint repeated the demands for actual, consequential, and punitive damages.
On appeal, the Joneses claim they were entitled to have a jury determine the factual issues raised in their claims for fraud, negligent misrepresentation and breach of duty. We agree.
In State Bank of Lehi v. Woolsey, 2 this Court denied the mortgagor, in a foreclosure proceeding, the right to a jury trial for legal issues concerning the underlying debt for which the mortgage was given as security. We explained the mortgagee's interest is not an estate, but a mere lien, an appendage of the debt, incapable of being separated from the debt and transferred by itself. The mortgagee has no legal remedy on the mortgage, no power to recover possession of the land, and can enforce the lien against the land in no legal action. The court of equity grants relief by enforcement of the lien, viz., by sale of the premises and application of the proceeds upon the debt. The right asserted by the mortgagee in a foreclosure proceeding is equitable, and this equitable right does not exist separately or independently of the underlying obligation. Thus, the threshold question for the chancellor in a foreclosure proceeding involves the issues concerning the underlying indebtedness. The court in order to determine if the mortgagee be entitled to a decree of foreclosure must necessarily determine there is a debt secured by a mortgage. If there be no debt there is nothing upon which the power of the court could be exercised. There can be no initial step towards a decree of foreclosure without resolving the question of the mortgagor's indebtedness.
It was pointed out there is a distinction between exclusive equity jurisdiction and concurrent equity jurisdiction. In the latter, a party may seek two unrelated remedies, viz., damages (a legal remedy), and an injunction, an equitable remedy. In such a case, the equity court has concurrent jurisdiction over the demand for an award of damages, which is not a prerequisite to granting an injunction. In contrast, in a foreclosure proceeding, the mortgagee's right to a money judgment is not a separate matter, but a prerequisite to the equitable relief demanded.
The Joneses by electing to seek damages, rather than rescission, have affirmed the underlying note and mortgage. The legal issues which they sought to have submitted to the jury involved questions that are independent and unrelated to the amount of indebtedness of their promissory note for which the mortgage constituted security.
This case is analogous to Valley Mortuary v. Fairbanks, 3 wherein the plaintiff had brought an action to enjoin the defendant from operating a mortuary in breach of a covenant not to compete and for damages for violations of the agreement. The trial court denied the defendant a jury trial on the issues of fact arising from the action for damages, holding the main object of the action was injunctive relief and that the damage claims were incidental. This Court reversed and remanded for a new trial on the damages issue, stating:
"When in this state, a plaintiff in his complaint states two complete causes of action one entitling him to equitable relief and the other entitling him to legal relief as the plaintiff has done in the instant case, . . . there is no persuasive reason why either party should not be entitled, upon timely demand, to a jury to determine the issues of fact raised by the legal causes of action." 4
In the present action, plaintiff is asserting the equitable claim and defendant is asserting the legal claims, rather than the plaintiff asserting both types of claims. This difference does not change our conclusion. In Valley Mortuary, the court cited a California decision, Connell v. Bowes, 5 in which the court, after stating the rule in California allows a jury trial of legal issues raised in a complaint which also states equitable issues, extended the rule "to cases where the complaint states a purely equitable cause of action and the defendant cross-complains for legal relief." 6 We hold similarly, where plaintiff brings a foreclosure action and defendant counterclaims and files a third-party complaint alleging unrelated counts of fraud, negligent misrepresentation and breach of duty, defendant is entitled, upon timely request, to have a jury decide its legal claims.
Defendants claim they should have been allowed to call expert witnesses at trial to aid the trier of fact in determining the amount of damages. We agree and hold the trial court abused its discretion, under the circumstances of this case, in excluding testimony from defendants' experts.
On January 24, 1978, the trial court held a pretrial conference at which it was decided the parties would exchange, at least 15 days before trial, the names of expert witnesses to be called concerning damages. The court did not have any of the parties submit a pretrial order, nor did it prepare one itself. When the trial was held almost 11 months later, defendants had not provided an expert witness list. Upon objection of counsel for third-party defendants, the court excluded defendants' experts from testifying. The effect of the court's...
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