Equitable Life & Cas. Ins. Co. v. Ross

• Decision Date: 10 March 1993
• Docket Number: No. 910746-CA,910746-CA
• Citation: 849 P.2d 1187
• Court: Utah Court of Appeals
• Parties: EQUITABLE LIFE & CASUALTY INSURANCE CO., a Utah corporation, Plaintiff and Appellee, v. David E. ROSS II, Defendant and Appellant.

Page 1187

849 P.2d 1187

EQUITABLE LIFE & CASUALTY INSURANCE CO., a Utah corporation Plaintiff and Appellee, v. David E. ROSS II, Defendant and Appellant.

No. 910746-CA.

Court of Appeals of Utah.

March 10, 1993.

Rehearing Denied April 13, 1993.

Mark A. Larsen, Salt Lake City, for defendant and appellant.

Warren Patten, P. Bruce Badger, and Bruce D. Reemsnyder, Salt Lake City, for plaintiff and appellee.

Before RUSSON, Associate Presiding Judge, and BENCH and GARFF, JJ.

OPINION

RUSSON, Associate Presiding Judge:

David E. Ross II appeals the trial court's orders awarding summary judgment and attorney fees to Equitable Life & Casualty Insurance Co. (Equitable). We affirm.

FACTS

On appeal from an order granting summary judgment, we review the facts in the light most favorable to the non-moving party. Allen v. Prudential Property and Casualty Ins. Co., 839 P.2d 798, 799 (Utah 1992).

In 1986, Bennett Leasing Company (Bennett) attempted a hostile takeover of Equitable by attempting to purchase the stock of David E. Ross II, his wife Connie Ross, his sister Betsy Ross Rapps, and his uncle Galen Ross (collectively, the selling group). R. Earl Ross, Equitable's chief executive officer, and E. Roderick Ross, Equitable's president, opposed the attempted purchase by Bennett. The dispute was resolved when the selling group agreed to sell their stock to Equitable in exchange for cash and Equitable preferred stock convertible to cash.

After considerable negotiation over several months, Equitable sent an offer to the selling group by letter dated September 25, 1987. That offer provided for an increase in the purchase price of the stock and added:

This increase in purchase price is being made hand in hand with the acceptance of the agreement as enclosed. Any changes made with the agreement will result in the decrease of the proposed purchase price. In other words, a premium is being paid to eliminate argument over the minute terms of the agreement.

The selling group did not accept the agreement as enclosed, but instead prepared, signed, and sent its own offer to Equitable on October 30, 1987. Equitable signed the agreement on November 4, and sent it back to the selling group, with a letter clarifying a few points, which letter was approved by the selling group. The final contract documents consisted of the agreement, an addendum, an escrow agreement, and the letter of clarification.

However, at closing on December 2, 1987, David E. Ross II asserted that an agreement for him to perform consulting services for Equitable, which had been included in earlier drafts of the agreement, should have been included in the final contract documents, but was not. Equitable responded that no such agreement was to be included, to which Ross replied that without same there would be no contract. An impasse was avoided when the parties agreed to "close around the issue" of the consulting agreement, and both Ross and Equitable added handwritten statements to the agreement. Ross wrote:

[B]y signing this instrument I do not waive any right or claim to pursue the Consulting Agreement pursuant to the agreement between the parties. Not given for any acceptance of any funds. In addition, acceptance of any funds pursuant to the agreement shall not be construed as a waiver of any kind.

Equitable added:

By following this directive, Equitable Life and Casualty Insurance Company does not admit or imply that there exists any "Consulting Agreement" or understanding regarding any consulting agreement. In addition, Equitable Life and Casualty Insurance Company takes the position that receipt of funds and participation herein by David E. Ross is a waiver of rights, if any exist, by David E. Ross. Acceptance of the cash down payment by Daniel Jackson, esquire trustee account, is not a waiver of rights by David E. Ross.

The stock certificates were subsequently delivered to Equitable.

However, when the time came for David E. Ross II to endorse the stock certificates, he refused to do so, claiming a right to rescind the agreement. In response, Equitable filed a complaint for specific performance of the agreement. Ross counterclaimed for rescission of the agreement, alleging mutual and unilateral mistake and seeking damages for breach of contract and fraud. Equitable filed a motion for partial summary judgment enforcing the agreement and thereby dismissing Ross's counterclaim for rescission, which motion was granted.

The matter then proceeded to trial to the bench on David E. Ross II's remaining claim of damages against Equitable for breach of contract. Following Ross's opening statement, Equitable moved for dismissal of the case. The court, treating the motion as a motion for summary judgment, considered the depositions and exhibits marked by the parties for trial, and granted Equitable's motion. Equitable subsequently requested and received attorney fees and costs.

David E. Ross II appeals, raising the following issues: (1) Were there sufficient material facts to establish his right to rescission under a theory of unilateral mistake, and if so, did he relinquish that right?; (2) Were there sufficient material facts to establish a breach of contract action, entitling him to either rescission or damages?; and (3) Were attorney fees properly awarded to Equitable under the contract and, if so, were such fees reasonable?

STANDARD OF REVIEW

Summary judgment is only proper "when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Baldwin v. Burton, 850 P.2d 1188, 1192 (Utah 1993) (footnote omitted); see Utah R.Civ.P. 56(c). "On an appeal from a summary judgment, we construe the evidentiary material submitted on the motion and all reasonable inferences to be drawn therefrom in a light most favorable to the party opposing the motion." Thurston v. Box Elder County, 835 P.2d 165, 166 (Utah 1992) (citations omitted). "We review the district court's legal conclusions for correctness." Id. (citation omitted).

UNILATERAL MISTAKE

David E. Ross II argues that the trial court erred in granting Equitable's pre-trial motion for summary judgment because there were sufficient material facts to establish his right to rescission under a theory of unilateral mistake. Equitable responds that the trial court properly granted summary judgment because Ross cannot establish his right to rescission on the basis of unilateral mistake under any set of facts. We agree.

In Klas v. Van Wagoner, 829 P.2d 135 (Utah App.1992), we outlined the four criteria that must be satisfied before rescission based on unilateral mistake will be granted:

1. The mistake must be of so grave a consequence that to enforce the contract as actually made would be unconscionable.

2. The matter as to which the mistake was made must relate to a material feature of the contract.

3. Generally the mistake must have occurred notwithstanding the exercise of ordinary diligence by the party making the mistake.

4. It must be possible to give relief by way of rescission without serious prejudice to the other party except the loss of his bargain. In other words, it must be possible to put him in status quo.

Id. at 138-39 (quoting Grahn v. Gregory, 800 P.2d 320, 327 (Utah App.1990), cert. denied, 843 P.2d 516 (Utah 1991)).

As to the first criterion, there are two kinds of unconscionability: procedural and substantive. Id. at 139. Procedural unconscionability centers on the "relative positions of the parties and the circumstances surrounding the execution of the contract," Jones v. Johnson, 761 P.2d 37, 39 (Utah App.1988) (quoting Bekins Bar V Ranch v. Huth, 664 P.2d 455, 461 (Utah 1983)), and occurs "where there is an absence of meaningful choice and where lack of education or sophistication results in no opportunity to understand the terms of the agreement." Id. (citing Resource Management Co. v. Weston Ranch and Livestock Co., 706 P.2d 1028, 1042 (Utah 1985)). "Substantive unconscionability occurs when contract terms are 'so lopsided as to unfairly oppress or surprise an innocent party,' or where there is 'an overall imbalance in rights and responsibilities imposed by the contract, excessive price or a significant cost-price disparity, or terms which are inconsistent with accepted mores of commercial practice.' " Klas, 829 P.2d at 139 (quoting Jones, 761 P.2d at 40).

Applying the foregoing to the facts of this case, we are not convinced that the alleged mistake was so grave as to make enforcement of the contract unconscionable. First, as to procedural unconscionability, there is no indication in the facts that the relative positions of the parties resulted in unequal bargaining positions. To the contrary, the facts show that the parties continually negotiated from equal positions. Nor do the facts indicate that there was an absence of meaningful choice on David E. Ross II's behalf, or that he suffered any lack of education or sophistication that resulted in an inability to understand the terms of the agreement. Instead, the facts show that the parties engaged in many highly sophisticated negotiations, in which numerous substantive changes were made to the agreement. Thus, there was no procedural unconscionability.

Nor was there substantive unconscionability. Utah appellate courts have consistently held that:

sellers and buyers should be able to contract on their own terms without the indulgence of paternalism by the courts in the alleviation of one side or another from the effects of a poor bargain. They should be permitted to enter into contracts that may actually be unreasonable or which may lead to hardship on one side.

Park Valley Corp. v. Bagley, 635 P.2d 65, 67 (Utah 1981) (citation omitted); accord Klas, 829 P.2d at 139-40. This is especially true when the parties are dealing at arms length. Park Valley Corp., 635 P.2d at 67.

In the case at bar, extensive negotiations took place in which numerous items were added to and deleted from the...