Hi-Country Estates v. Bagley & Co.

• Decision Date: 27 March 2008
• Docket Number: No. 20060139-CA.,20060139-CA.
• Citation: Hi-Country Estates v. Bagley & Co., 182 P.3d 417, 2008 UT App 105 (Utah App. 2008)
• Court: Utah Court of Appeals
• Parties: HI-COUNTRY ESTATES HOMEOWNERS ASSOCIATION, a Utah corporation, Plaintiff, v. BAGLEY & COMPANY, a Utah corporation; J. Rodney Dansie; and Gerald Bagley, Defendants. Foothills Water Company, a Utah corporation; J. Rodney Dansie; The Dansie Family Trust; Richard P. Dansie; Boyd W. Dansie; Joyce M. Taylor; and Bonnie R. Parkin, Counterclaimants, Appellants, and Cross-appellees, v. Hi-Country Estates Homeowners Association, a Utah corporation, Counterclaim Defendants, Appellees, and Cross-appellants.

182 P.3d 417

2008 UT App 105

HI-COUNTRY ESTATES HOMEOWNERS ASSOCIATION, a Utah corporation, Plaintiff, v.BAGLEY & COMPANY, a Utah corporation; J. Rodney Dansie; and Gerald Bagley, Defendants.

Foothills Water Company, a Utah corporation; J. Rodney Dansie; The Dansie Family Trust; Richard P. Dansie; Boyd W. Dansie; Joyce M. Taylor; and Bonnie R. Parkin, Counterclaimants, Appellants, and Cross-appellees, v.Hi-Country Estates Homeowners Association, a Utah corporation, CounterclaimDefendants, Appellees, and Cross-appellants.

No. 20060139-CA.

Court of Appeals of Utah.

March 27, 2008.

Rehearing Denied April 28, 2008.

Raymond J. Etcheverry and Angie Nelson, Salt Lake City, for Appellants and Cross-appellees.

Dale F. Gardiner, Salt Lake City, for Appellees and Cross-appellants.

Before THORNE, Associate P.J., DAVIS and ORME, JJ.

OPINION

DAVIS, Judge:

¶ 1 Counterclaim PlaintiffsFoothills Water Company, J. Rodney Dansie, the Dansie Family Trust, Richard P. Dansie, Boyd W. Dansie, Joyce M. Taylor, and Bonnie R. Parkin(the Dansies) appeal several of the trial court's determinations.Counterclaim DefendantHi-Country Estates Homeowners Association(the Association) filed a cross-appeal challenging other determinations.We affirm.

BACKGROUND¹

¶ 2This case revolves around a water system that supplies water to the Hi-Country Estates Subdivision.From 1973 to 1985, Gerald Bagley operated and made improvements to the water system, first in his capacity as an individual, then as a partner of Bagley and Company, and finally as a principal of Foothills Water Company(Foothills).In 1977, Bagley, apparently in his individual capacity, and Jesse Dansie entered into a well lease agreement (the Well Lease), which allowed Bagley to connect the water system to Dansie's well and draw water from Dansie's well for a ten-year period.Water lines were installed to transfer the water from the well to the water system, as well as to transport water to property owned by Dansie.As part of the Well Lease, Dansie had the right to receive water from the water system at no cost through five residential hook-ups, and the right to receive up to fifty additional hook-ups at no cost.The Well Lease was amended in July 1985, giving Dansie the right to receive up to twelve million gallons of water per year from the water system at no cost for as long as the system was operable.

¶ 3 This protracted litigation began in March 1985, with the Association bringing an action to quiet title in the water system against Bagley, Bagley and Company, and Dansie.Bagley counterclaimed under an unjust enrichment theory for reimbursement of costs related to the operation and maintenance of the water system, should title to the water system be quieted in the Association.Defendants also counterclaimed for enforcement of the Well Lease.

¶ 4 In June 1985, Bagley created Foothills and began to manage the water system through this entity.Toward the end of the year, Bagley transferred all interest and stock in Foothills to Dansie; and the following January, Bagley assigned to Foothills all of his rights related to the water system.Also in June 1985, Foothills applied to the Public Service Commission(the PSC) to operate the water system as a public utility; and the PSC granted a certificate of convenience and necessity.The following year, the PSC held rate-setting hearings and determined that, notwithstanding the terms of the Well Lease, in order for the Dansies to obtain their free water, they would need to pay the pro-rata costs for power, chlorination, and water testing.

¶ 5 Title in the water system was eventually quieted in the Association.In 1994, shortly after the Association assumed control of the water system, the Association disconnected the water lines to the Dansie property when the Dansies allegedly refused to pay the costs required by the 1986 PSCorder.The Dansies thereafter built a temporary water system to service their property and claimed breach of contract based on the severance of the water systems.In 1996, the PSC revoked the water system's status as a public utility.

¶ 6 After nearly twenty years of district court determinations, appeals by the parties, and remands by appellate courts, trial on the remaining issues was held in early 2005.The trial court then issued a Final Judgment on those remaining issues on January 5, 2006, which (1) ruled that the Well Lease was an enforceable contract and was not, as the Association had argued, void because of public policy or unconscionability; (2) dismissed the Dansies' breach of contract claims because the Dansies refused to pay the costs set forth by the 1986 PSCorder and because the Dansies had failed to prove damages that were proximately caused by the separation of the water systems or to mitigate their alleged damages; and (3) refused to award attorney fees the Dansies claimed under the terms of the Well Lease.A separate order was signed on the same day, fixing an award amount of $16,334.99 to Foothills for improvements made to the water system between the years 1981 and 1985, the court having previously determined in a separate memorandum decision that Foothills was entitled to such an award.

¶ 7 The Dansies appeal the dismissal of their breach of contract claims, arguing that they did offer to pay the necessary costs and that they did prove damages caused by the severing of the water systems.Further, the Dansies argue that the trial court should have granted them attorney fees under the terms of the Well Lease.The Association cross-appeals, arguing that the Well Lease is not enforceable because of public policy concerns and the doctrine of unconscionability.The Association also appeals the amount awarded to the Dansies as reimbursement for improvements, arguing that the trial court incorrectly relied on a prior PSC finding in determining that amount.

ISSUES AND STANDARDS OF REVIEW

¶ 8 The Association argues that the Well Lease is void as against public policy and that it is also unconscionable.These are legal questions, which we review for correctness, giving no deference to the trial court's determination on the matters.SeeSosa v. Paulos,924 P.2d 357, 360(Utah1996)("The determination of whether a contract is unconscionable is . . . a question of law for the court."(citingResource Mgmt. Co. v. Weston Ranch & Livestock Co.,706 P.2d 1028, 1041(Utah1985)));Russ v. Woodside Homes, Inc.,905 P.2d 901, 904, 906-07(Utah Ct.App.1995)(reviewing for correctness the question of whether a contract provision was void because it violated public policy).

¶ 9 The Dansies contest the trial court's determinations that the Association did not breach the Well Lease and that, in any event, the Dansies did not prove any damages that were proximately caused by the alleged breach.Our analysis focuses on the damages determination, which is a question of fact reviewed under a clear error standard.SeeJudd ex rel. Montgomery v. Drezga,2004 UT 91, ¶ 34, 103 P.3d 135(recognizing that "damages are a question of fact");State v. Pena,869 P.2d 932, 935(Utah1994)("Trial courts are given primary responsibility for making determinations of fact.Findings of fact are reviewed by an appellate court under the clearly erroneous standard.").

¶ 10 The Association also contests the amount awarded to the Dansies as reimbursement for improvements made to the water system, essentially arguing that a finding in the 1986 PSCorder is insufficient evidence to support the amount of the trial court's award."When an appellant is essentially challenging the legal sufficiency of the evidence, a clearly erroneous standard of appellate review applies. . . .We review the evidence in a light most favorable to the trial court's findings and affirm if there is a reasonable basis for doing so."Reinbold v. Utah Fun Shares,850 P.2d 487, 489(Utah Ct.App.1993).

¶ 11 Finally, the Dansies contest the trial court's refusal to award attorney fees under the terms of the Well Lease."Whether a party may recover attorney fees in an action is a question of law that we review for correctness."Ault v. Holden,2002 UT 33, ¶ 46, 44 P.3d 781(citingWarner v. DMG Color, Inc.,2000 UT 102, ¶ 21, 20 P.3d 868).

ANALYSIS

I.Public Policy

¶ 12 The Association argues that the Well Lease is void as a matter of public policy.Specifically, the Association argues that the provisions for free water and water connections violate "the public policy that a water company may not charge unreasonable, preferential, or discriminatory rates."As support for this argument, the Association points to sections of the Utah Code which provide that charges by a public utility be "just and reasonable,"Utah Code Ann. § 54-3-1(2000), and that a public utility may not be preferential in its treatment of persons and entities, seeid.§ 54-3-8(1)(Supp.2007).The Association further relies on the 1986 PSCorder, arguing that the order determined the Well Lease to be "`grossly unreasonable.'"But the Association is no longer a public utility, and thus, neither these statutes nor the PSC order is currently applicable to the Association.²And we do not see any indication that the public policy regarding the operation of public utilities should extend to agreements between private parties contracting for water service.

¶ 13 The Association also argues that the Well Lease violates "the public policy that the state's scarce water resources should be managed by public entities."In support, the Association points to the Utah Constitution, which gives municipalities the power to purchase or lease public utilities, seeUtah Const. art. XI, § 5(b), as well as section 17A-2-1401(7)(d) of the Utah Code, which states the policies of water conservancy districts, seeUtah Code Ann. § 17A-2-1401(7)(d)(2004)(repealed 2007).The Association argues that the Well Lease, specifically the Dansies' right of refusal, violates these policies because it...