Mounteer Enters., Inc. v. Homeowners Ass'n for the Colony at White Pine Canyon

• Decision Date: 05 June 2018
• Docket Number: No. 20170165,20170165
• Parties: MOUNTEER ENTERPRISES, INC., Appellee, v. HOMEOWNERS ASSOCIATION FOR THE COLONY AT WHITE PINE CANYON, Appellant.
• Court: Utah Supreme Court

422 P.3d 809

MOUNTEER ENTERPRISES, INC., Appellee,

v.HOMEOWNERS ASSOCIATION FOR THE COLONY AT WHITE PINE CANYON, Appellant.

No. 20170165

Supreme Court of Utah.

Filed June 5, 2018

Joseph E. Wrona, Jared C. Bowman, Park City, for appellee.

Troy L. Booher, Beth E. Kennedy, Salt Lake City, for appellant.

Associate Chief Justice Lee authored the opinion of the Court, in which Chief Justice Durrant, Justice Himonas, Justice Pearce, and Justice Petersen joined.

On Direct Appeal

Associate Chief Justice Lee, opinion of the Court:

¶1 The Homeowners Association for the Colony at White Pine Canyon (HOA) hired Mounteer Enterprises, Inc. to provide snow removal services. The contract required Mounteer to maintain a certain amount of insurance coverage. And when the HOA discovered that Mounteer had failed to purchase the required insurance, the HOA terminated the contract.

¶2 Mounteer filed suit, asserting that the HOA had waived its right to terminate the contract on that ground. It reasoned that the HOA had effectively waived the insurance requirement by accepting Mounteer's certificates of insurance and by making payments to Mounteer despite its noncompliance. The HOA responded by pointing to an antiwaiver clause in the contract—a provision stating that the HOA's failure to notice a deficiency in Mounteer's insurance coverage cannot be construed as a waiver of the insurance provision.

¶3 The HOA moved for summary judgment on the antiwaiver issue and moved to exclude evidence relating to a previous contract between the parties. The district court denied both motions and a subsequent motion for judgment notwithstanding the verdict.

¶4 We reverse the district court's denial of the HOA's motion for judgment notwithstanding the verdict. We hold that a party may implicitly waive an antiwaiver provision through conduct, but there must be clear intent to waive both the underlying provision and the antiwaiver provision. And we conclude that the HOA's failure to insist on performance of the insurance provision here does not establish such clear intent.

I

¶5 In 2006, the Homeowners Association for the Colony at White Pine Canyon entered into a four-year contract with Mounteer Enterprises, Inc. for snow removal services at its development in Park City, Utah. The contract required Mounteer to maintain $7 million of aggregate liability insurance with (1) a general liability policy for $1 million per occurrence and $5 million in the aggregate and (2) an umbrella policy for $1 million per occurrence and $2 million in the aggregate.

¶6 The contract provided that if Mounteer failed to purchase the necessary insurance the HOA could immediately terminate the contract, withhold payments until Mounteer cured the default, or purchase the required insurance and deduct the premiums from payments due to Mounteer. The contract also contained an antiwaiver provision. That provision stated that "[f]ailure of the [HOA] to demand such certificate or other evidence of full compliance with these insurance requirements or failure of the [HOA] to identify a deficiency in the form that is provided shall not be construed as a waiver of Mounteer's obligation to maintain such insurance."

¶7 During the four-year contract ending in November 2010 Mounteer submitted four insurance certificates to the HOA. Each certificate showed only $5 million of aggregate liability insurance coverage. And the HOA paid Mounteer for its services despite this deficiency. In 2010 the two parties entered into a new four-year contract with substantially similar terms, including identical insurance requirements and antiwaiver provision. The major difference between the contracts was a reduction in the mileage Mounteer would be servicing, as the HOA gave part of its snow removal business to another company.

¶8 Three months into the 2010 contract, the HOA asked Mounteer to surrender over three miles of the roadway Mounteer was contracted to service. When Mounteer refused, the HOA told Mounteer that it planned to find a way to terminate the contract. The HOA then terminated the contract after finding that Mounteer had purchased only $5 million of insurance coverage.

¶9 Mounteer sued for breach of contract and breach of the implied covenant of good faith and fair dealing. It asserted that the HOA had implicitly waived its right to require strict compliance with the insurance provision when the HOA approved the certificates of insurance and paid Mounteer every billing cycle. And it claimed that this conduct was enough to overcome the existence of the antiwaiver provision.

¶10 The HOA moved for summary judgment. It argued that it had not waived the insurance requirement by its conduct because the antiwaiver provision expressly foreclosed a finding of such waiver. The HOA also filed a motion in limine, seeking to exclude evidence that Mounteer had purchased $5 million of aggregate liability insurance every year from 2006 to 2010 and had submitted certificates of insurance to that effect.

¶11 The district court denied both motions. It first held that the HOA's "pattern of inaction from 2006 to 2011" was relevant to show "an intent to relinquish the right to demand strict compliance with the insurance provisions." It also held that "[i]t is within the jury's power to find that [an antiwaiver] provision was itself waived or modified by the parties' agreement or conduct." (Internal quotation marks omitted). And it accordingly instructed the jury that "[t]he existence of an anti-waiver provision is merely one factor to consider in determining whether a party has waived its right under the agreement, and a no-waiver provision can itself be waived."

¶12 The jury found the HOA liable for breach of contract and awarded Mounteer $578,000 in damages. The district court then awarded Mounteer attorney fees and costs as the prevailing party.

¶13 The HOA filed this appeal. It challenges the district court's denial of its motion for judgment notwithstanding the verdict, a question we review for correctness. See USA Power, LLC v. PacifiCorp , 2016 UT 20, ¶ 29, 372 P.3d 629. It also appeals the denial of its motion in limine.

II

¶14 We reverse the district court's denial of the motion for judgment notwithstanding the verdict without reaching the HOA's motion in limine argument. We find that the HOA did not waive its right to require $7 million in insurance coverage and to terminate the contract immediately upon default.

¶15 We conclude first that Mounteer must establish a clear waiver of both the insurance provision and the antiwaiver provision. We accept that conduct alone can impliedly waive a contractual provision even with the existence of an antiwaiver provision; but we hold that such conduct must evidence an intentional relinquishment of the party's contractual rights. And we conclude that the mere failure to enforce the underlying contractual provision does not rise to this level. We turn second to the question whether Mounteer must show proof of prejudice to prevail on its waiver claim. And we conclude that prejudice is not an element of waiver.

A

¶16 The contract between the parties clearly states that the HOA could terminate the contract in the event Mounteer failed to purchase $7 million of aggregate liability insurance. Mounteer looks for a way around this language by an appeal to the doctrine of waiver. This doctrine looks to the conduct or communication of the parties to determine whether the HOA waived its right to insist on performance under the contract.

¶17 Courts do not lightly consider a contract provision waived, however. A party may establish waiver only where there is an "intentional relinquishment of a known right." Wilson v. IHC Hosps., Inc. , 2012 UT 43, ¶ 61, 289 P.3d 369 (citation omitted). Such waiver can be express or implied. Id. ¶ 62. And though waiver may be implied, the party asserting implied waiver must establish that the other party "intentionally act[ed] in a manner inconsistent with its contractual rights...." Meadow Valley Contractors, Inc. v. State Dep't. of Transp. , 2011 UT 35, ¶ 45, 266 P.3d 671 (citation omitted).

¶18 So if the otherwise-breaching party can show that the other party intentionally waived its rights under the contract, noncompliance with the relevant provision will not be construed as a breach. This is because a waiver of a contract provision is itself a modification of the agreement between the parties, and when established should have as much binding power as the contract itself. Thus, waiver prevents a "waiving party from lulling the other party into a belief that strict compliance with a contractual duty will not be required" and then enforcing its contractual rights upon default. 13 WILLISTON ON CONTRACTS § 39:15 (4th ed. 2018).

¶19 The calculus changes, however, when a contract also contains an antiwaiver provision. Antiwaiver provisions aim to give contracting parties flexibility in enforcing their rights under the contract—enforcement that would often be to the detriment of the other party—without "result[ing] in a complete and unintended loss of its contract rights if it later decides that strict performance is desirable." Id. § 39:36. So if the specific language of the antiwaiver clause expressly precludes parties from construing certain conduct as a waiver of contractual rights, courts must enforce this provision as part of the parties' agreement. When a contract contains an antiwaiver provision, a party cannot waive a contractual right merely by failing to enforce the provision establishing that right. See id.

¶20 The bite of an antiwaiver provision, however, is tempered by the general view that a party may waive a contract provision despite the existence of an antiwaiver clause. See id. Even an antiwaiver provision is subject to waiver, in other words. After all, parties always have the right to modify their rights by amending the contract, and waiver of an antiwaiver provision is just such an intentional modification of the contract.

¶21 For these reasons a...