Fisher v. Davidhizar

• Decision Date: 18 August 2011
• Docket Number: No. 20090752–CA.,20090752–CA.
• Citation: 2011 UT App 270,263 P.3d 440,689 Utah Adv. Rep. 18
• Parties: David FISHER, individually and on behalf of Office Management Consultants, LC, Plaintiff, Appellee, and Cross-appellant,v.Lavern DAVIDHIZAR, Defendant, Appellant, and Cross-appellee.
• Court: Utah Court of Appeals

263 P.3d 440

689 Utah Adv. Rep. 18

2011 UT App 270

David FISHER, individually and on behalf of Office Management Consultants, LC, Plaintiff, Appellee, and Cross-appellant,

v.Lavern DAVIDHIZAR, Defendant, Appellant, and Cross-appellee.

No. 20090752–CA.

Court of Appeals of Utah.

Aug. 18, 2011.

Robert S. Clark, Michael T. Hoppe, and Robyn L. Wicks, Salt Lake City, for Appellant and Cross-appellee.Darwin C. Fisher, St. George, for Appellee and Cross-appellant.Before Judges DAVIS, VOROS, and CHRISTIANSEN.

OPINION

CHRISTIANSEN, Judge:

¶ 1 Defendant Dr. Lavern Davidhizar appeals the trial court's dismissal of his claims for negligent misrepresentation and fraud and his affirmative defense of fraud (collectively, the fraud claims). We reverse and remand. Plaintiffs David Fisher and Office Management Consultants, LC (collectively, OMC) appeal the trial court's denial of its motion to strike and of its denial of OMC's motion for summary judgment as to Davidhizar's fraud claims. We affirm.

BACKGROUND

¶ 2 Fisher and Eugene Coder owned and operated Office Management Consultants, LC, which was formed in part to generate income by leasing tables to medical providers for use in treating disc decompression. In August 2001, Davidhizar contributed $100,000 to help OMC finance two tables (the tables). In October 2001, Davidhizar claimed to have a partnership interest with OMC in the tables. OMC disputed his claim. To resolve what interests each party had in the tables, the parties arranged a meeting in February 2002. Prior to and during the meeting, Davidhizar alleged that OMC and its representatives had made and continued to make statements about the amount of income generated by the tables under contract and the status of those contracts.¹ At the meeting, Davidhizar entered into a written settlement agreement (the Agreement) with OMC. The Agreement transferred ownership of OMC, the tables, and some of OMC's assets to Davidhizar in return for Davidhizar assuming OMC's debt and certain other financial obligations.

¶ 3 Although Davidhizar accepted some of the equipment, software, and supplies per the Agreement, nine days after entering into the Agreement, Davidhizar notified OMC of his intent not to fulfill the terms of the Agreement. Thereafter, Davidhizar failed to assume or pay the debts, building lease, or operating expenses, and failed to take control and operate OMC. In spite of these failures, in April 2002, utilizing one of OMC's tables, Davidhizar, Coder, and Dennis McOmber formed a new company and placed the table with one of OMC's clients. In May 2002, OMC filed its complaint seeking damages for Davidhizar's breach of the Agreement.² Davidhizar did not dispute that he had breached the Agreement but claimed as an affirmative defense that his breach was justified by OMC's fraudulent behavior. Davidhizar also filed a counterclaim for, inter alia, negligent misrepresentation and fraud.

¶ 4 In April 2005, OMC filed two motions for summary judgment. Shortly after the motions were filed, Davidhizar's counsel filed a motion to withdraw and a motion seeking an extension of time to file opposition memoranda to OMC's summary judgment motions. OMC objected to the withdrawal of Davidhizar's counsel. In September 2005, the trial court granted the motion to allow Davidhizar's counsel to withdraw but denied Davidhizar's request for an extension of time to file opposition memoranda to OMC's summary judgment motions. Nevertheless, after Davidhizar obtained new counsel, but before the hearing on OMC's summary judgment motions, Davidhizar filed opposition memoranda. OMC filed a motion to strike the memoranda, which the trial court denied. The trial court granted OMC's motion for summary judgment on the breach of contract claim and denied OMC's motion for summary judgment on Davidhizar's fraud claims.

¶ 5 Thereafter, the parties continued to prepare for trial. At a pretrial hearing held on August 23, 2007, only four days before trial was scheduled to begin, OMC filed a motion in limine wherein it requested that the trial court dismiss Davidhizar's fraud claims because they were not pleaded with particularity as required by rule 9 of the Utah Rules of Civil Procedure. Davidhizar responded by filing a motion to amend his pleadings. He argued that leave should be granted to amend the pleadings to conform to the evidence because the facts supporting his defense and claims had been effectively litigated through the summary judgment motions. See Utah R. Civ. P. 15(b). The trial court stated, “I really don't have any difficulty in implying into the pleadings of fraud in the inducement plan. It's been spoken of for years in this litigation. It has been [alluded] to either directly or indirectly for years.” Despite that statement, the trial court determined that the fraud claims were not pleaded with particularity as required by rule 9(b) of the Utah Rules of Civil Procedure and granted OMC's motion in limine The trial court then denied Davidhizar's motion to amend determining that it was untimely because the motion had been filed past the motion deadline in the scheduling order. The trial court determined that because Davidhizar had not amended the pleadings or filed a motion to amend before the scheduling order deadline, Davidhizar's fraud claims should be dismissed as a sanction under rule 37 of the Utah Rules of Civil Procedure for failure to comply with the scheduling order. Alternatively, the trial court determined that even if it were to grant the motion to amend, Davidhizar still could not prevail because he could not prove his fraud claims by clear and convincing evidence.

¶ 6 After the trial court dismissed Davidhizar's fraud claims, a bench trial was held for the limited purpose of determining damages incurred by OMC. The trial court ultimately entered judgment against Davidhizar in excess of $800,000. Both parties now appeal.

ISSUES AND STANDARDS OF REVIEW

¶ 7 Davidhizar challenges the trial court's dismissal of his fraud claims, arguing that the trial court erred in not applying rule 15(b) of the Utah Rules of Civil Procedure because the parties had litigated the fraud claims throughout the case despite the lack of particularity in the complaint. ³ Pursuant to rule 15(b), once an issue has been tried, as the trial court determined it was here, that issue “must be treated as if it were properly raised in the pleadings.” Armed Forces Ins. Exch. v. Harrison, 2003 UT 14, ¶ 24, 70 P.3d 35. We review the trial court's declination of the application of rule 15(b) for correctness.

¶ 8 In its cross-appeal, OMC argues that the trial court erred in denying its motion for summary judgment on Davidhizar's fraud claims. “An appellate court reviews a trial court's ‘legal conclusions and ultimate grant or denial of summary judgment’ for correctness and views ‘the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party.’ ” Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (citations omitted). OMC also argues that the trial court erred in refusing to strike Davidhizar's opposition memorandum to OMC's motion for summary judgment on the fraud claims. “As a general rule, ‘[t]rial courts have broad discretion in managing the cases assigned to their courts.’ ” Posner v. Equity Title Ins. Agency, Inc., 2009 UT App 347, ¶ 23, 222 P.3d 775 (alteration in original) (citation omitted), cert. denied, 230 P.3d 127 (Utah 2010); see also Hartford Leasing Corp. v. State, 888 P.2d 694, 702 (Utah Ct.App.1994) ( “ ‘[A] trial judge is accorded broad discretion in determining how a [case] shall proceed in his or her courtroom.’ ” (alterations in original) (citation omitted)).

ANALYSIS

I. The Trial Court Erred in Dismissing Davidhizar's Fraud Claims.

¶ 9 Davidhizar argues that the trial court erred in not applying rule 15(b) of the Utah Rules of Civil Procedure because the parties had litigated the specific facts of his fraud claims throughout the case. Rule 15(b) provides, in part,

When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendments of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial on these issues.

Utah R. Civ. P. 15(b). Rule 15 has two relevant subsections: (a) and (b).⁴ Subsection (a) instructs the trial court to freely grant the motion to amend “when justice so requires,” id. R. 15(a), and, therefore, gives the trial court discretion to deny such a motion.⁵

See

Daniels v. Gamma W. Brachytherapy, LLC, 2009 UT 66, ¶¶ 58, 60, 221 P.3d 256. However, if the trial court determines that the party had notice of the claim presented and did not object to the introduction of evidence related to the claim, then the trial court has no discretion under subsection (b) and “must ... treat[ the claim] as if it were properly raised in the pleadings.” See Armed Forces Ins. Exch., 2003 UT 14, ¶ 24, 70 P.3d 35; see also Zions First Nat'l Bank v. Rocky Mountain Irrigation, Inc., 795 P.2d 658, 663 (Utah 1990) (“Our rules of civil procedure require that the pleadings be conformed to the evidence presented at trial when no objection is made to the introduction of such evidence.” (emphasis added)); Clark v. Second Circuit Court, 741 P.2d 956, 957 (Utah 1987) (“The parties' failure to move to amend the pleadings to conform to the evidence does not affect the fact that those issues were in fact tried by the consent of the parties and were therefore properly before the court.”); cf. Utah R. Civ. P. 54(c)(1) (“[E]very final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings.”).

¶ 10 OMC suggests that the...