Fehr v. Stockton

• Decision Date: 06 July 2018
• Docket Number: No. 20160996-CA,20160996-CA
• Citation: Fehr v. Stockton, 427 P.3d 1190 (Utah App. 2018)
• Parties: Thompson E. FEHR, Appellant, v. John H. STOCKTON, Appellee.
• Court: Utah Court of Appeals

427 P.3d 1190

Thompson E. FEHR, Appellant,

v.John H. STOCKTON, Appellee.

No. 20160996-CA

Court of Appeals of Utah.

Filed July 6, 2018

Thompson E. Fehr, Ogden, and John T. Anderson, Salt Lake City, Attorneys for Appellant

Margaret H. Olson, Salt Lake City, Attorney for Appellee

Judge Jill M. Pohlman authored this Opinion, in which Judge Diana Hagen concurred.Judge Gregory K. Orme concurred, with opinion.

Opinion

POHLMAN, Judge:

¶1Thompson E. Fehr appeals the district court’s order dismissing with prejudice his complaint filed against John H. Stockton.Fehr also seeks review of the district court’s judgment awarding attorney fees to Stockton.We reverse the dismissal, vacate the attorney fees award, and remand for further proceedings.

BACKGROUND

¶2 Fehr alleges that he performed legal services for Stockton pursuant to an oral agreement between Fehr and Stockton’s agent.Specifically, Fehr claims Stockton retained him on an hourly basis to protect Stockton’s intellectual property through the filing and prosecution of several patent applications concerning a retractable hose extension for a vacuum.Fehr characterized his method of accounting as an "open account," whereby he would enter (1) debits on the account as he performed legal services and paid patent maintenance fees for Stockton, and (2) credits on the account as he received payments from Stockton or Stockton’s agent.Fehr alleges that he performed legal services for Stockton "[b]eginning on or about January 7, 2003, and continuing through January 20, 2015," and that he"periodically provided [Stockton] invoices showing fees earned, costs advanced, and payments received."The district court reasonably inferred from these allegations that Fehr sent Stockton "periodic invoices from 2003–2015."See generallyHudgens v. Prosper, Inc. , 2010 UT 68, ¶ 14, 243 P.3d 1275(indicating that in ruling on a motion to dismiss, courts draw "all reasonable inferences [from the complaint’s allegations] in the light most favorable to the plaintiff"(quotation simplified)).

¶3 In June 2015, Fehr sued Stockton to collect amounts he claims are due and owing under the parties’ alleged oral agreement.He asserted a claim for breach of contract and alternative claims for quantum meruit.¹

¶4 In response, Stockton moved to dismiss the complaint.He argued that Fehr’s claim for breach of an oral contract was barred by the four-year statute of limitations applicable to oral contracts.Similarly, Stockton argued that the doctrine of laches barred Fehr’s equitable claims.Stockton also argued that the parties’ alleged oral agreement "is void under the statute of frauds" because, by its alleged terms, it could not be performed within one year.SeeUtah Code Ann. § 25-5-4(1)(a)(LexisNexis 2013).Finally, Stockton argued that Fehr brought the suit in bad faith and requested that the court award him attorney fees under Utah’s bad faith attorney fees statute, Utah Code section 78B-5-825.

¶5The district court granted Stockton’s motion to dismiss with prejudice.It concluded that Fehr’s complaint was time-barred because his arrangement with Stockton pursuant to the parties’ alleged oral contract did "not meet the definition of [an] open account."The court further concluded, without discussion, that the complaint was "barred by the ... statute of frauds."The court did not separately address Fehr’s equitable claims or Stockton’s arguments that the claims were barred by the laches doctrine.

¶6 After further briefing and in a separate order, the court granted Stockton’s motion for bad faith attorney fees under section 78B-5-825.The court found that the case"was without merit, frivolous and had little or no weight in law or fact," and that Fehr "lacked subjective good faith in filing the case."

¶7 Fehr filed a timely notice of appeal, claiming error in the dismissal of his claims with prejudice and in the award of attorney fees to Stockton.

ISSUES AND STANDARDS OF REVIEW

¶8 Fehr raises two issues on appeal.The first is whether the district court erred in dismissing his complaint."A Rule 12(b)(6) motion to dismiss admits the facts alleged in the complaint but challenges the plaintiff’s right to relief based on those facts."Oakwood Village LLC v. Albertsons, Inc. , 2004 UT 101, ¶ 8, 104 P.3d 1226(quotation simplified)."Under a rule 12(b)(6) dismissal, our inquiry is concerned solely with the sufficiency of the pleadings, and not the underlying merits of the case."Id.(quotation simplified).We assume the truth of the factual allegations in the complaint and draw "all reasonable inferences therefrom in the light most favorable to the plaintiff."Hudgens v. Prosper, Inc. , 2010 UT 68, ¶ 14, 243 P.3d 1275(quotation simplified)."We review a decision granting a motion to dismiss for correctness, granting no deference to the decision of the district court."Bylsma v. R.C. Willey , 2017 UT 85, ¶ 10, 416 P.3d 595(quotation simplified).We likewise review the district court’s subsidiary legal determinations for correctness.SeeState v. Huntington-Cleveland Irrigation Co. , 2002 UT 75, ¶¶ 11–12, 52 P.3d 1257(explaining that appellate courts review for correctness the district court’s determination of whether a statute of limitations has expired);Bennett v. Huish , 2007 UT App 19, ¶ 9, 155 P.3d 917("The applicability of the statute of frauds is a question of law to be reviewed for correctness."(quotation simplified) ).

¶9 The second issue is whether the district court erred in awarding attorney fees to Stockton under the bad faith attorney fees statute."We review a [district] court’s grant of attorney fees under the bad faith statute as a mixed question of law and fact."Fadel v. Deseret First Credit Union , 2017 UT App 165, ¶ 16, 405 P.3d 807(quotation simplified)."A finding of bad faith is a question of fact and is reviewed by this court under the clearly erroneous standard."Id.(quotation simplified)."The ‘without merit’ determination is a question of law, and therefore we review it for correctness."Id.(quotation simplified).

ANALYSIS

I.Dismissal of Fehr’s Complaint

¶10The district court dismissed Fehr’s complaint on two independent grounds.First, the court ruled that Fehr’s complaint was barred by the four-year statute of limitations applicable to oral contracts and open accounts.SeeUtah Code Ann. § 78B-2-307(LexisNexis Supp. 2017).Second, the court concluded that the complaint was barred by the statute of frauds.We conclude that the court erred in both respects.

A.The Statute of Limitations

¶11 Fehr contends that the district court erred in dismissing his complaint on timeliness grounds, asserting that because his last charge to Stockton "was within four years of the [filing] of the Complaint," his suit was not time-barred.The district court concluded that Fehr’s breach of contract claim was barred by the four-year statute of limitations found in Utah Code section 78B-2-307.That section states, in relevant part:

An action may be brought within four years: (1) after the last charge is made or the last payment is received: (a) upon a contract, obligation, or liability not founded upon an instrument in writing; ... or (c) on an open account for work, labor or services rendered, or materials furnished ....

In applying this statute, the court determined that the facts Fehr pleaded about his arrangement with Stockton did not meet the definition of an "open account" and for that reason Fehr’s claim was time-barred.We disagree with the court’s ultimate conclusion.

¶12The statute of limitations operates to bar claims based on, among other things, an oral contract or an open account where the plaintiff brings a claim more than four years "after the last charge is made or the last payment is received."Id.§ 78B-2-307(1).Here, the court determined, and the parties agree, that Fehr’s claim against Stockton for breach of contract is based on an alleged oral agreement.Thus, the four-year statute of limitations is relevant to this case.But the question of whether the statute bars Fehr’s claim does not, as the court determined, turn on whether Fehr’s method of accounting for services performed and payments received under the contract is properly characterized as an "open account."Rather, the pertinent question is whether Fehr brought this action within four years of Fehr’s last charge or receipt of the last payment.Seeid.And the answer to that question, based on Fehr’s allegations, is yes.

¶13 Fehr alleges that he last charged Stockton under the alleged agreement in January 2015.²Fehr sued Stockton in June 2015—five months later.Thus, based on Fehr’s allegations and the reasonable inferences drawn therefrom, Fehr’s complaint for breach of an alleged oral contract is timely because he filed it within a few months of making the last charge—well within the four-year limitations period.SeeState v. Huntington-Cleveland Irrigation Co. , 2002 UT 75, ¶ 17, 52 P.3d 1257(interpreting an earlier, but substantively similar, version of the relevant statute of limitations, and explaining that "[a] cause of action for breach of contract for failure to make a payment ... accrues only after a charge is made ... and thus the limitation period begins to run when the ... charge is made").We therefore reverse the district court’s decision to the contrary.

¶14 However, it is important to note that in reversing the district court’s determination that Fehr’s complaint was time-barred in its entirety, we do not conclude that the entirety of Fehr’s claim was timely filed.In Huntington-Cleveland , a case on which Fehr heavily relies, our supreme court held that the applicable "limitation period may expire on some assessments but not on others.Specifically, [a party] cannot challenge every assessment made ... in perpetuity. ...[O]nly payments due or assessments charged within the four years prior to filing the lawsuit can be the basis for a contractual claim."Id.¶ 20(quotation simplified).In other...