Mountain States Broadcasting Co. v. Neale

• Decision Date: 20 June 1989
• Docket Number: No. 880192-CA,880192-CA
• Citation: 783 P.2d 551
• Parties: MOUNTAIN STATES BROADCASTING COMPANY, a corporation, and Dan Lacy, an individual, Plaintiffs, Appellants and Cross-Respondents, v. Sterrett NEALE and Neale Broadcast Alliance, Defendants, Respondents and Cross-Appellants.
• Court: Utah Court of Appeals

Page 551

783 P.2d 551

MOUNTAIN STATES BROADCASTING COMPANY, a corporation, and Dan Lacy, an individual, Plaintiffs, Appellants and Cross-Respondents, v. Sterrett NEALE and Neale Broadcast Alliance, Defendants Respondents and Cross-Appellants.

No. 880192-CA.

Court of Appeals of Utah.

June 20, 1989.

Rehearing Denied July 20, 1989.

Don R. Petersen, Leslie W. Slaugh, Provo, for plaintiffs, appellants and cross-respondents.

Stephen L. Henriod, Marilynn P. Fineshriber, Salt Lake City, for defendants, respondents and cross-appellants.

OPINION

Before DAVIDSON, GREENWOOD, and ORME, JJ.

ORME, Judge:

This appeal arises from a dispute over the purchase of two radio stations and their assets. Mountain States Broadcasting Company, the corporate purchaser, and Dan Lacy, Mountain States' president and guarantor of the promissory note given for the purchase price, commenced this action seeking a declaration of their entitlement to certain offsets against the note balance otherwise due. Neale Broadcast Alliance ("NBA"), the corporate seller, and Sterrett Neale, NBA's president and guarantor of the seller's performance, were named as defendants. NBA counterclaimed for the entire note balance. Both parties successfully secured certain aspects of the relief they sought, but now appeal various decisions of the trial court. We affirm in substantial part, but reverse and remand in limited respects.

FACTS

NBA owned and operated radio stations KONI and KTMP in Utah County. On November 21, 1981, NBA agreed to sell these stations to Mountain States, and the parties entered into an Asset Purchase Agreement. In June 1982, the sale transaction closed and Mountain States delivered a promissory note for the deferred portion of the purchase price to NBA. The purchase agreement provided that NBA warranted "all of the personal property listed in Schedule 2 which is presently in active use in the operation of the Stations will be in good repair and working order unless otherwise noted" on the schedule. Following the closing, Dan Lacy inspected the premises of both radio stations and the personal property found thereon. Lacy compiled a list of items mentioned on Schedule 2 that were, in his opinion, either missing or inoperable. Accordingly, Mountain States claimed a substantial offset against the note balance.

After making two small payments on the note, Mountain States and Lacy brought this action seeking a judicial determination of their entitlement to the claimed offsets for the allegedly missing or inoperable equipment. Mountain States deposited a check for $89,587.16, the balance then due on the note, with the court. ¹ NBA disputed the propriety of any offset and counterclaimed for the entire amount due and owing on the note, including interest.

Following a bench trial, the court found that the items claimed to be missing were either excluded from the sale or had been found, so that "no material items" were missing. However, the court found that a "control design brain" and two carousels used in the operation of the stations were not in "good repair and working order" at the time of transfer. Accordingly, the court awarded Mountain States an offset of $6,000, the approximate amount the court concluded was necessary to restore those items to the condition warranted.

NBA was awarded a judgment on its counterclaim for the entire amount due on the note, less the offset. Relying on language in the promissory note, the court concluded that interest due on the unpaid balance should be compounded monthly. Finding each side had prevailed to some extent, the trial court also awarded both sides their attorney fees in full.

On appeal, Mountain States claims: 1) It is entitled to further offsets against the purchase price to compensate for missing or inoperable equipment or to reflect the proper measure of damages; 2) the court erred in compounding the interest on unpaid interest installments; and 3) the court erred in awarding both sides attorney fees because only plaintiffs were "the prevailing party" as contemplated by the purchase agreement. ²

NBA cross-appeals, challenging the propriety of any offset and claiming that they, not plaintiffs, are entitled to attorney fees as "the prevailing party."

MISSING AND INOPERABLE EQUIPMENT

The parties' claims concerning the proper offset amount are essentially a challenge to the trial court's findings of fact. Specifically, Mountain States argues the findings concerning the amounts attributable to missing and inoperable equipment are not supported by the evidence but are instead significantly higher. NBA argues the evidence does not support the findings in support of even a $6000 offset.

In order to challenge a trial court's findings of fact, a party "must marshal the evidence in support of the findings and then demonstrate that despite this evidence, the trial court's findings are so lacking in support as to be 'against the clear weight of the evidence,' thus making them 'clearly erroneous.' " In re Bartell, 776 P.2d 885, 886 (1989) (emphasis added) (quoting State v. Walker, 743 P.2d 191, 193 (Utah 1987). See also, e.g., Scharf v. BMG Corp., 700 P.2d 1068, 1070 (Utah 1985); Henderson v. For-Shor Co., 757 P.2d 465, 468 (Utah Ct.App.1988). Appellants often overlook or disregard this heavy burden. When the duty to marshal is not properly discharged, we refuse to consider the merits of challenges to the findings and accept the findings as valid. See, e.g., Deeben v. Deeben, 772 P.2d 972, 972 n. 1, (Utah Ct.App.1989); Demetropoulos v. Vreeken, 754 P.2d 960, 963 (Utah Ct.App.1988); West Valley City v. Borrego, 752 P.2d 361, 364-65 (Utah Ct.App.1988); Fitzgerald v. Critchfield, 744 P.2d 301, 304 (Utah Ct.App.1987); Harker v. Condominiums Forest Glen, Inc., 740 P.2d 1361, 1362 (Utah Ct.App.1987). Here, the parties have done an admirable job of marshaling the evidence. Indeed, the benefits of the requirement are demonstrated by the fact that Mountain States, after its careful review of the evidence, candidly concedes the adequacy of the evidence to support the findings as to all but five of its original claims for missing or inoperable equipment. Furthermore, Mountain States' five remaining challenges are well supported by precise and thorough references to record evidence supporting the particular finding as well as evidence supporting Mountain States' challenge. Accordingly, we turn to the merits of those challenges.

After carefully reviewing the marshalled evidence, we conclude the trial court's factual findings regarding the alleged missing equipment are sufficiently supported by the evidence, with only two minor exceptions. We have been shown no evidence on which the trial court could have relied in denying the claims for the missing oscilloscope and a noise and distortion meter. Thus, we hold on the undisputed evidence in the record that Mountain States is entitled to additional offsets in the amount of $120 for the oscilloscope and $377.80 for the noise and distortion meter.

Additionally, both Mountain States and NBA challenge the trial court's findings supporting its award of damages to Mountain States for inoperable equipment. The evidence readily supports the majority of the findings in this regard, but those concerning the control design brain and two carousels present closer questions. Mountain States claims the $3,000 award based on the cost to repair the control design brain is insufficient as the evidence demonstrates that the brain is beyond repair. Thus, Mountain States contends replacement cost is the appropriate measure of its damages. On the other hand, NBA contends the evidence demonstrates the control design brain and carousels were as warranted and the court should not have awarded any such damages to Mountain States.

The court received a wide range of testimony regarding the condition of the control design brain and carousels. However, the evidence does not compel a finding that the equipment was beyond repair, as Mountain States contends, nor that it was in the condition warranted at the time of sale, as NBA contends. The middle ground taken by the trial court, namely that this equipment was not as warranted but could be repaired, has ample evidentiary support. Of course, in view of the divergent positions taken by the parties at trial, the evidence concerning repair costs is somewhat sparse. It appears that in formulating its ultimate award, the court relied on an evaluation report prepared by an electronics technician suggesting approximate repair costs. ³ The award is consistent with the estimates contained in the report. Thus, we find sufficient evidence to support the court's award to Mountain States of a $6000 offset for equipment in disrepair, and we affirm it.

INTEREST

Mountain States next contends the trial court erred in awarding compound interest to NBA on the unpaid interest installments. See generally 45 Am.Jur.2d Interest and Usury § 76 (1969) ("Compound interest means interest on interest, in that accrued interest is added periodically to the principal, and interest is computed upon the new principal thus formed; it is to be distinguished from the mere allowance of interest on overdue installments of interest, which is not strictly compound interest."). The court relied on the following provision in the promissory note as the basis for its award:

This Note shall bear interest upon the unpaid principal balance hereof from the date hereof until paid, at a rate of ten percent (10%) per annum. Should interest not be paid when due, it shall thereafter bear like interest as the principal.

In Utah, compound interest is not favored by the law. Watkins & Faber v. Whiteley, 592 P.2d 613, 616 (Utah 1979) (per curiam). The court's award here can be affirmed only if we conclude the parties expressly agreed to compound interest by the terms of the above provision. In this regard, we observe that the note does not explicitly provide that interest on unpaid...