Lefavi v. Bertoch

• Decision Date: 13 January 2000
• Docket Number: No. 981392-CA.,981392-CA.
• Citation: 994 P.2d 817,2000 Utah Ct. App. 5
• Parties: Bruce A. LEFAVI, an individual, Plaintiff and Appellee, v. Richard K. BERTOCH, an individual; and William E. Poulson, an individual, Defendants and Appellants.
• Court: Utah Court of Appeals

994 P.2d 817

2000 Utah Ct. App. 5

Bruce A. LEFAVI, an individual, Plaintiff and Appellee, v. Richard K. BERTOCH, an individual; and William E. Poulson, an individual, Defendants and Appellants.

No. 981392-CA.

Court of Appeals of Utah.

January 13, 2000.

Ronald C. Barker, Salt Lake City, for Appellants.

Douglas E. Griffith, Kesler & Rust, Salt Lake City, for Appellee. Before GREENWOOD, Associate P.J., BENCH, and ORME, J.

OPINION

GREENWOOD, Associate Presiding Judge:

¶ 1 Richard K. Bertoch and William E. Poulson appeal from a judgment awarding damages with prejudgment interest to Bruce A. Lefavi, claiming the trial court erred in determining Lefavi's proportional share of investment proceeds and in awarding prejudgment interest. We affirm.

BACKGROUND¹

¶ 2 In mid-1975, an unregistered partnership, Richard's Street Development Company (Richard's Street), acquired an interest in real property located near the airport in Las Vegas, Nevada (the Las Vegas Property). Bertoch and Poulson each owned an interest in Richard's Street.² Dasco, Inc., a Nevada corporation, and Dudley Smith, a Nevada resident, held the remaining interest in the Las Vegas Property. By 1978, the Las Vegas Property consisted of three parcels of property known to the parties as Lots 8, 10, and 11.

¶ 3 On July 19, 1978, Bertoch met with Lefavi to discuss the possibility of Lefavi becoming an investor and acquiring an interest in the Las Vegas Property. Bertoch told Lefavi that if he invested he would be participating in Bertoch and Poulson's joint interest in the Las Vegas Property. Bertoch further represented that when the properties were sold, Lefavi would be reimbursed for his investment, plus 8% per annum interest and a pro-rata share of the profits, which would be determined by the total monies invested by Lefavi compared to the total monies invested by Bertoch and Poulson.

¶ 4 Based on these assertions, Lefavi gave Bertoch an initial investment of $6,600. The agreement among the parties was memorialized in a memorandum drafted and signed by Bertoch, dated July 19, 1978. In 1979, the terms of the investment were changed to a purely proportional basis. The trial court found that under this agreement, memorialized in a memorandum dated April 19, 1979:

Lefavi's investment of a proportional interest in the Las Vegas Properties was to be determined as follows: the total proceeds received by Bertoch and Poulson from the sale or lease of the Las Vegas Properties, less reasonable and anticipated closing costs and other expenses relating to such closings, resulting in proceeds which would then be divided among Bertoch, Poulson, and Lefavi in proportion to the total monies each had actually contributed to the Las Vegas Properties.

Between July 1978 and December 1980, Lefavi made additional payments, investing a total of $68,875.

¶ 5 In June 1983, Lot 10 was sold. Bertoch and Poulson told Lefavi that no proceeds from the sale were paid to any of the investors because all the sale proceeds were used to pay other debts, encumbrances, and obligations against the remaining parcels of property. Notwithstanding this representation, Bertoch and Poulson each received proceeds from the sale of Lot 10, and each reported those proceeds on their 1983 tax returns.

¶ 6 In 1985, portions of Lots 8 and 11 were sold. After this sale, Bertoch and Poulson each reported monies received from the sale on their 1985 tax returns. In December 1988, Bertoch and Poulson sold the remaining portions of the Las Vegas Property to Las Vegas Resorts, Inc. Las Vegas Resorts, Inc., paid a portion of the sales price by transferring 28,650,000 shares of restricted stock in Las Vegas Resorts, Inc. to Bertoch and Poulson. Again, Bertoch and Poulson each reported proceeds from this sale on their 1989 tax returns. ¶ 7 Between 1983 and 1991, when Lefavi inquired about the status of his investment, Bertoch and Poulson told him no sales had occurred after the sale of Lot 10. In September 1991, Lefavi, unaware of the sale of Lots 8 and 11, approached Bertoch, requesting that his name be placed on Clark County records as a partial owner of the Las Vegas Property. At this time, Bertoch told Lefavi the properties had been sold and that no proceeds were distributed to either Bertoch or Poulson as a result of the sales. Bertoch also told Lefavi the only consideration he and Poulson received was restricted stock in Las Vegas Resorts, Inc. Bertoch presented Lefavi with two stock certificates, totaling 716,250 shares of Las Vegas Resorts stock, 10% of Bertoch and Poulson's holdings. Bertoch represented to Lefavi that the stock certificates constituted a 100% reimbursement of Lefavi's interest in the Las Vegas Property and that no further proceeds had been received by Bertoch and Poulson.

¶ 8 In December 1991, Lefavi contacted Dudley Smith, another owner of the Las Vegas Property, and learned for the first time that the sale of the properties had yielded substantial proceeds. Lefavi then filed suit to recover his share of the proceeds from the sale of the Las Vegas Property.

¶ 9 During trial, the parties presented conflicting evidence regarding the amounts of money each had invested in the Las Vegas Property. Bertoch and Poulson admitted they had failed to keep complete accounting records. As a result, each party employed accounting experts to determine the contested amount. During the trial, the parties entered into a stipulation regarding the appropriate accounting method, the amounts each had contributed to the Las Vegas Property investment, and the proceeds received from the sale of the properties.

¶ 10 The stipulation included both minimum and maximum damages to which Lefavi was entitled because a number of claimed offsets, expenditures, and payments remained disputed. The maximum damages calculation was based on only the undisputed investment figures. The parties agreed that Bertoch and Poulson invested $1,440,367.95 in the Las Vegas Property and that Lefavi invested $68,875. The parties also agreed that Bertoch and Poulson received $3,203,875 from the sale of the Las Vegas Property and $96,158 as proceeds from a sublease on one of the lots, totaling $3,300,033 in proceeds. The stipulation calculated Lefavi's proportional share based on these undisputed amounts as 5.27% of the total profit, or $166,880.

¶ 11 The stipulation also included a minimum damages calculation based on expenditures allegedly made by Bertoch and Poulson and alleged payments to Lefavi. Among the disputed credits were commission and buy-out costs related to the Richard's Street partnership. Additional disputed amounts included general and administrative expenses. Bertoch and Poulson argued Lefavi's total damage award should be reduced by the amounts listed in the additional fact disputes section of the stipulation.

¶ 12 At trial, the parties presented evidence and testimony on these disputed amounts. The trial court found there was insufficient credible or admissible evidence to support Bertoch and Poulson's claims of other payments to Lefavi, adjustments to the parties' proportional interests, or offsets and expenses that would reduce Lefavi's entitlement to damages.³ The trial court entered a judgment in favor of Lefavi, finding breach of contract, fraud, conversion, and breach of fiduciary duties. In awarding damages to Lefavi, the trial court accepted the maximum damages calculation in the parties' stipulation.

¶ 13 The trial court used the parties' stipulated figures to determine that Lefavi's proportional share of the profits was 5.27%, or $98,004. Based on these findings, the trial court awarded Lefavi his original investment, plus his proportional share of the proceeds, minus the proceeds paid to Lefavi in the form of Las Vegas Resorts, Inc. stock, for a total net award of $159,717. The trial court further determined that prejudgment interest was applicable and necessary in order to fully compensate Lefavi and to prevent unjust enrichment. The trial judge awarded prejudgment interest, calculated from the dates on which proceeds were received by Bertoch and Poulson, totaling $96,482. Bertoch and Poulson appeal the trial court's calculation of damages as well as its award of prejudgment interest.

CALCULATION OF DAMAGES

¶ 14 Bertoch and Poulson assert that the trial court erred in calculating each party's proportional share of the Las Vegas Property investment by misapplying the damages stipulation, failing to apply buy-out and commission costs, omitting credit payments made to Lefavi, and failing to correct mathematical errors. Bertoch and Poulson argue the appropriate standard of review is correctness because they challenge the trial court's application of the stipulation rather than the trial court's findings of fact. See Bess v. Jensen, 782 P.2d 542, 544 (Utah Ct.App.1989)

(citations omitted) ("When a trial court relies on stipulated facts to decide a case this Court does not apply the clearly erroneous standard, but will sustain the lower court's decision only if convinced of its correctness.").

¶ 15 Although Bertoch and Poulson correctly cite the standard of review for factual findings based on stipulated facts, see id., this standard is not applicable in this instance. The trial court adopted the maximum damages calculation set forth in the stipulation, but the findings Bertoch and Poulson challenge were not based on the stipulation. The stipulation itemized the amounts claimed to have been paid as buy-out and commission costs and alleged payments to Lefavi, indicating that the applicability of these amounts was disputed. The trial court then made the factual findings at issue based on the evidence presented rather than the stipulation. Bertoch and Poulson's arguments all relate to the trial court's failure to accept their description of their investment in the Las Vegas Property. Consequently, their challenges address findings of fact made by the trial court after considering evidence and...