Merrick Young Inc. v. Wal–mart Real Estate Bus. Trust, 20090227–CA.

• Decision Date: 19 May 2011
• Docket Number: No. 20090227–CA.,20090227–CA.
• Parties: MERRICK YOUNG INCORPORATED, a Utah Corporation; and Clyde G. Seely, an individual, Plaintiff, Appellant, and Cross-appellee,v.WAL–MART REAL ESTATE BUSINESS TRUST, a Delaware Business Trust; The American Insurance Company, a Nebraska corporation; et al., Defendants and Appellees,andEngineered Structures, Inc., an Idaho corporation, Defendant, Appellee, and Cross-appellant.
• Court: Utah Court of Appeals

257 P.3d 1031

682 Utah Adv. Rep. 37

2011 UT App 164

MERRICK YOUNG INCORPORATED, a Utah Corporation; and Clyde G. Seely, an individual, Plaintiff, Appellant, and Cross-appellee,

v.WAL–MART REAL ESTATE BUSINESS TRUST, a Delaware Business Trust; The American Insurance Company, a Nebraska corporation; et al., Defendants and Appellees,andEngineered Structures, Inc., an Idaho corporation, Defendant, Appellee, and Cross-appellant.

No. 20090227–CA.

Court of Appeals of Utah.

May 19, 2011.

E. Scott Savage, Stephen R. Waldron, and Kyle C. Thompson, Salt Lake City, for Appellant and Cross-appellee.Clark B. Fetzer, Salt Lake City, and Kim Trout and Vicky J. Elkin, Boise, Idaho, for Appellees and Cross-appellant.Before Judges THORNE, VOROS, and ROTH.

OPINION

ROTH, Judge:

¶ 1 Plaintiff Merrick Young Incorporated (Merrick Young) challenges the trial court's dismissal with prejudice of its claims (the Wal–Mart project claims) against Defendants Engineered Structures, Inc. (ESI), Wal–Mart Real Estate Business Trust, and the American Insurance Company. The trial court entered the order of dismissal based on the stipulation of Defendants and involuntary Plaintiff Clyde G. Seely, who the trial court determined was the real owner of the Wal–Mart project claims.

¶ 2 ESI cross-appeals the trial court's denial of its motion for sanctions against Merrick Young under rule 11 of the Utah Rules of Civil Procedure. The rule 11 motion alleged that Merrick Young wrongfully continued to prosecute the Wal–Mart project claims after they had been conveyed to Seely. ESI contends that the denial was erroneous because the trial court failed to make findings to support its ruling or, in the alternative, because the court's conclusion that rule 11 had not been violated lacked evidentiary support.

¶ 3 We affirm the dismissal of the Wal–Mart project claims on the basis that a 2004 settlement agreement unambiguously transferred ownership of the Wal–Mart project claims to Seely. With respect to the cross-appeal, we affirm the denial of the rule 11 motion for sanctions on the basis that the issue has not been preserved for appeal.

BACKGROUND

¶ 4 Merrick Young is a construction company that does business primarily in southern Utah. In the early 2000s, Merrick Young became involved in a number of road projects unrelated to this suit (the other projects), which were bonded by Developers Surety and Indemnity Company (Developers). Developers ultimately paid a number of claims on the other projects and sued Merrick Young and its principals for indemnity under the bonds. That case was resolved by a 2004 Settlement Agreement, Mutual Release, and Assignment (the Settlement Agreement) among Developers, Merrick Young and its principals, and Seely. The question of whether Merrick Young or Seely owns the claims in this case, that is, which of them is the real party in interest and the proper plaintiff, has become the case's central issue and its resolution turns on interpretation of asset-transfer provisions in the Settlement Agreement.

¶ 5 The Settlement Agreement was entered into in spring 2004, among Merrick Young and its principals, Merrick and Stephanie Young (collectively, the Indemnitors); Stephanie Young's father, Seely; and Developers. Pursuant to the Settlement Agreement, assets belonging to the Indemnitors were transferred to Developers and then to Seely, who in turn paid $150,000 to Developers to resolve Developers' claims against the Indemnitors. According to Merrick Young, the Settlement Agreement unambiguously provides that only certain assets, excluding the Wal–Mart project claims, were subject to the Settlement Agreement and thus transferred to Seely. Alternatively, Merrick Young asserts that the Settlement Agreement is ambiguous regarding its intention to transfer ownership of the Wal–Mart project claims and the trial court should have received parol evidence to ascertain its meaning, rather than granting Defendants' motion for dismissal with prejudice. See generally Wade v. Stangl, 869 P.2d 9, 12 (Utah Ct.App.1994) (“Contract language may be ambiguous if it is unclear, omits terms, or if the terms used to express the intention of the parties may be understood to have two or more plausible meanings.” (internal quotation marks omitted)). Defendants argue that the trial court correctly interpreted the Settlement Agreement to unambiguously transfer to Seely all of Merrick Young's assets, other than those specifically reserved to Developers. According to Defendants' interpretation, Seely is the real party in interest with regard to the Wal–Mart project claims by virtue of the Settlement Agreement transfer. With Seely's permission, Defendants therefore moved for—and received—dismissal with prejudice of the Wal–Mart project claims. The question for our review is whether the Settlement Agreement does in fact transfer the Wal–Mart project claims to Seely.

¶ 6 Merrick Young filed this case in 2001 in an effort to collect from Defendants amounts it claimed were due and owing on a retaining wall subcontract associated with the construction of a Wal–Mart superstore in Washington County, Utah. Named as defendants were ESI, the general contractor on the Wal–Mart project; Wal–Mart Real Estate Business Trust, the owner of the land on which the project was being developed; and American Insurance Company, the company that issued the construction surety bond. ESI counterclaimed, asserting that Merrick Young had breached the retaining wall subcontract by providing materials below specification and failing to make payment to its material suppliers.¹

¶ 7 While this case was pending, Developers sued the Indemnitors to recover payments it had made on claims against the construction bonds Developers had issued on the other projects (the Developers suit). In connection with the issuance of the bonds, the Indemnitors and Developers had entered into an Indemnity Agreement under which Merrick Young secured its obligations by assigning all its assets to Developers upon the occurrence of a default. This assignment included not only Merrick Young's rights in the construction contracts on the other projects but also in “ ‘all sums due or to become due on all other contracts, covenants and agreements whether bonded or unbonded, in which the ... Indemnitor[s] ha[ve] any interest, together with any notes, accounts receivable or chose in action related thereto.’ ” (Emphasis added.) ²

¶ 8 On March 18, 2003, pursuant to the Indemnity Agreement and based on “a substantial likelihood” that it would “prevail on the merits,” Developers obtained an order in the Developers suit for a prejudgment writ of attachment and garnishment (the attachment order) that permitted it “to execute, attach, and garnish ... the accounts receivable, assets, interests, money, stocks, memberships, bonds, real property, and personal property in which the Indemnitors have an interest, including but not limited to,” the specific assets and categories of assets described in an eight-paragraph list.³ About a year later, Developers, the Indemnitors, and Seely entered into the Settlement Agreement to resolve the Developers suit. In that agreement, the Indemnitors “assigned, transferred, and set over to Developers” all their interests in the “Indemnitors' Assets,” and Developers, for its part, “assign [ed], transfer[red], and set[ ] over” all its interests in the “Indemnitors' Assets” (other than the Black Ridge Drive project, which Developers retained), along with its interest in the Developers suit, to Seely in return for his payment of $150,000 to Developers. The scope of the asset transfer to Seely, that is, whether the Settlement Agreement term “Indemnitors' Assets” included the Wal–Mart project claims, is the central issue on which the motion for dismissal in the present case turned.

¶ 9 In the recitals section of the Settlement Agreement, Merrick Young and Developers describe the circumstances that led to their agreement, including, in paragraph F, a reference to the Developers suit that quotes at length from the attachment order. The term “Indemnitors' Assets,” which is used throughout the balance of the Settlement Agreement to refer to the core property interests being “assigned, transferred, and set over” by the Indemnitors, first to Developers, and then to Seely, is introduced in brackets in the midst of that quote. Because of its importance to our resolution of the issue, we reproduce the following portion of that language from the attachment order, with emphasis on the words that we see as particularly pertinent:

“IT IS FURTHER HEREBY ORDERED, ADJUDGED AND DECREED that pursuant to U [tah] R[ules of] C[ivil] P[rocedure] 64C and ... 64D, Developers may execute, attach and garnish, in the amount of $540,668.61, the accounts receivable, assets, interests, money, stocks, memberships, bonds, real property, and personal property in which the Indemnitors have an interest, including but not limited to, the following:

1. [The Youngs' Washington County Residence]

....

The above real property ... and any funds obtained from its sale, including all other assets of the Indemnitors.

2. Funds due and owing to [the] Indemnitors ... for the project known as Black Ridge Drive....

3. Funds due and owing to [the] Indemnitors ... for the project known as River Road....

4. Funds due and owing to [the] Indemnitors ... for the project known as I–15 Sevier River Northward Project....

5. Funds due and owing to [the] Indemnitors ... for the project known as UDOT I–15 North Interchange....

6. Any equity in any other real property, business or asset in which any Indemnitor has an interest.

7. Any money, stocks, bonds, or other assets of any Indemnitor.

8. Any interest in Black Ridge Commercial Center, LLC; Black Ridge, LLC, or any other partnership, limited partnership, limited liability company, sole proprietorship, corporation, or other business entity in which any Indemnitor has an interest, and any real...