Hansen v. Green River Group
| Decision Date | 28 January 1988 |
| Docket Number | No. 860140-CA,860140-CA |
| Parties | Brent D. HANSEN, Kathleen P. Hansen, Kent D. Hansen, and Sylvia V. Hansen, Plaintiffs and Appellants, v. GREEN RIVER GROUP, a Utah general partnership, Boyd Hansen, Ramon D. Pratt, Nolan Wathen, Arthur Melville, Marsha Utaine, Brent P. Pratt, and Synvest Corporation, a Nevada corporation, Defendants and Respondents. |
| Court | Utah Court of Appeals |
Jackson Howard (argued), Danielle Eyer Davis, Howard, Lewis & Petersen, Provo, for plaintiffs and appellants.
George M. Harmond, Jr. (argued), Price, for Melville and Utain.
Dale R. Kent, Salt Lake City, for Green River Group.
Before JACKSON, BILLINGS and GREENWOOD, JJ.
This litigation arose from real estate transactions involving the Green River Motel. Plaintiffs ("Hansens"), as sellers, obtained a judgment and decree of foreclosure against Synvest Corporation ("Synvest"), as buyer. The judgment included amounts for delinquent payments, interest, attorney fees, and waste. On appeal, Hansens seek to have the Green River Group partnership ("Group") and individual defendants Boyd Hansen and Ramon Pratt included in the judgment. We affirm.
Joyce Nations sold the Green River Motel to buyers Woodruff and Strong by uniform real estate contract on November 5, 1975. On September 1, 1980, Hansens acquired their interest by quitclaim deed. At the same time, Hansens (as sellers) and Synvest (as buyer) executed a uniform real estate contract for the motel; the sale price was $645,000, with $150,000 down. By December of 1980, Synvest (as seller) and Group (as buyer) had executed another uniform real estate contract for the motel; the sale price was $565,000, with $70,000 down. Hansens continued to make payments to Nations although their payments from Synvest were sporadic. Synvest's payments from Group were also sporadic; the last one was made in December, 1983. On February 29, 1984, Synvest and Group executed an agreement rescinding their contract, and Group quitclaimed its interest back to Synvest.
Hansens subsequently filed this action requesting a decree of foreclosure and damages for waste to the premises. After bench trial, Hansens' judgment was entered against Synvest on May 3, 1985, with an order directing a foreclosure sale of the motel. 1 Their causes of action were dismissed as to all other defendants. Hansens' post-trial motion to amend the judgment to include all defendants was denied.
On appeal, Hansens propose a potpourri of theories as grounds for reversal: (1) the Synvest-Group contract was an assignment and assumption of the Hansen-Synvest contract; (2) Hansens were third-party beneficiaries of the Synvest-Group contract; (3) the general partners of Group are liable to Hansens because Group is the alter ego of Synvest; and (4) in any event, Group committed waste upon the motel property for which damages must be assessed.
The trial court's interpretation of the words of the parties' contract is reviewed by this court as a question of law under a correctness standard. Kimball v. Campbell, 699 P.2d 714, 716 (Utah 1985); Seashores Inc. v. Hancey, 738 P.2d 645, 647 (Utah App.1987). However, if the contract is ambiguous and the trial court makes factual findings about the intent of the parties based on extrinsic evidence, our review is strictly limited. If those findings are supported by substantial, competent evidence in the record, they are not clearly erroneous under Utah R.Civ.P. 52(a) and we will not disturb them on appeal. Id.; Porter v. Groover, 734 P.2d 464, 465 (Utah 1987).
Hansens claim that a filled-in uniform real estate contract (the Synvest-Group contract) evolved into an express assignment of all rights and duties and an express assumption of all debt and payment obligations of a prior similar contract (the Hansen-Synvest contract). The genesis of the idea is found in the language inserted in blank lines at paragraph 20 of both printed forms: "Buyer agrees to abide and be bound by the conditions that appear in all underlying contract [sic]."
The trial court found this language in the Synvest-Group contract was not an assumption by Group of the obligation to make Synvest's payments to Hansens or an assignment by Synvest of the Hansen-Synvest contract. We agree. Although the terms of the two uniform real estate contracts were basically the same, there was $80,000 difference in the consideration to be paid. The Synvest-Group contract created only an obligation in Group to pay its own purchase price to the seller, Synvest. If Synvest and Group had intended otherwise, there would have been no reason for them to execute a new and separate uniform real estate contract; 2 instead, they could have merely executed a simple assignment and assumption of the Hansen-Synvest contract, as did the parties in Prudential Fed. Savings & Loan Ass'n v. King, 22 Utah 2d 379, 453 P.2d 697 (1969), on which appellants misguidedly rely. Furthermore, if Synvest and Group actually intended that Group should make the payments to Hansens, such a provision should have and could have been stated in the contract with specificity. 3 Notably absent are the usual words of either an assumption or an assignment, such as "assumes," "agrees to pay," "assigns," "transfers" or "conveys."
The trial court properly concluded that the Synvest-Group contract was not an assignment to and an assumption by Group of Synvest's rights and duties under the Hansen-Synvest contract.
Hansens next challenge the trial court's conclusion that they were not third-party beneficiaries of the Synvest-Group contract. As a general rule, the rights of third-party beneficiaries are determined by the intentions of the parties to the subject contract. Tracy Collins Bank & Trust v Dickamore, 652 P.2d 1314, 1315 (Utah 1982) (citing 2 S. Williston, A Treatise on the Law of Contracts § 356 (1981)).
Where it appears from the promise or the contracting situation that the parties intended that a third party receive a benefit, then the third party may enforce his rights in the courts and is deemed a donee beneficiary. Where, however, no intention to make a gift appears and performance of the promise satisfies or recognizes an actual or supposed duty of the promisee to the beneficiary, then the third party may still recover as a creditor beneficiary.... But where any benefits to a person are incidental to the performance of the promise and such person is neither a donee nor a creditor beneficiary, he is a stranger to the promise and may assert no rights thereunder.
Id. (citation omitted).
The trial court concluded there was no evidence Group intended its contract with Synvest to be for the benefit of Hansens and that Group's performance under its contract would only incidentally benefit Hansens. On appeal, Hansens assert that the Synvest-Group contract was intended to benefit them as "creditor beneficiaries," again relying on the following language inserted in paragraph 20 of the parties' uniform real estate contract: "Buyer agrees to abide and be bound by the conditions that appear in all underlying contract" [sic].
We agree with the trial court that there is nothing in the contract or the circumstances of its making to show that Synvest and Group intended their contract to benefit Hansens. "For a third-party beneficiary to have a right to enforce a right, the intention of the contracting parties to confer a separate and distinct benefit upon the third party must be clear." Rio Algom Corp. v. Jimco Ltd., 618 P.2d 497, 506 (Utah 1980). The contract does not mention Hansens or call for payment by Group of Synvest's obligation to Hansens. See Schwinghammer v. Alexander, 21 Utah 2d 418, 446 P.2d 414, 415 (1968). Unlike the document in Continental Bank & Trust Co. v. Stewart, 4 Utah 2d 228, 291 P.2d 890 (1955), the Synvest-Group contract did not even refer specifically to Synvest's debt to Hansens. Finally, as stated above, there was no assignment and assumption of the Hansen-Synvest contract.
Here, Group promised to pay Synvest a sum of money. In a separate contract, Synvest had promised to pay Hansens another sum of money. Group did not promise to fulfill Synvest's obligations to Hansens. Evidence that some of the partners in Group knew of the Hansen-Synvest contract does not compel the conclusion that Hansens were anything other than incidental beneficiaries of the Synvest-Group contract. As such, they were not entitled to enforcement of it. Rio Algom Corp., 618 P.2d at 506.
Next, Hansens attack the trial court's finding that Synvest was not the alter ego of Group. 4 They argue that the lower court erred in failing to conclude from the evidence that Synvest Corporation was a sham that merely provided a corporate shield for the real parties in interest, i.e., the general partners of Group.
In Messick v. PHD Trucking Serv., Inc., 678 P.2d 791, 794 (Utah 1984), the Utah Supreme Court reaffirmed its prior adoption of the following two-part test for determining when disregard of the corporate entity is justified:
[T]here must be a concurrence of two circumstances: (1) there must be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, viz., the corporation is, in fact, the alter ego of one or a few individuals; and (2) the observance of the corporate form would sanction a fraud, promote injustice, or an inequitable result would follow.
Norman v. Murray First Thrift & Loan Co., 596 P.2d 1028, 1030 (Utah 1979). Significant
factors in a determination of "unity of interest and ownership" were recently enumerated by this court as:
(1) under-capitalization of a one-man corporation; (2) failure to observe corporate formalities; (3) nonpayment of dividends; (4) siphoning of corporate funds by the dominant stockholder; (5) nonfunctioning of other officers or directors; (6) absence of corporate...
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