Ong Intern. (U.S.A.) Inc. v. 11th Ave. Corp.

• Decision Date: 06 April 1993
• Docket Number: 920066,Nos. 910522,s. 910522
• Citation: 850 P.2d 447
• Court: Utah Supreme Court
• Parties: ONG INTERNATIONAL (U.S.A.) INC., a Nevada corporation; D & D Management, a Utah corporation; and David L. Alldredge, an individual, Plaintiffs and Appellees, v. 11TH AVENUE CORPORATION, a Utah corporation, fka Salt Lake Memorial Mausoleum, and Keith E. Garner, an individual, Defendants and Appellants.

Page 447

850 P.2d 447

ONG INTERNATIONAL (U.S.A.) INC., a Nevada corporation; D &amp D Management, a Utah corporation; and David L Alldredge, an individual, Plaintiffs and Appellees, v. 11TH AVENUE CORPORATION, a Utah corporation, fka Salt Lake Memorial Mausoleum, and Keith E. Garner, an individual, Defendants and Appellants.

Nos. 910522, 920066.

Supreme Court of Utah.

April 6, 1993.

Robert S. Campbell, Clark W. Sessions, Dean C. Andreasen, Joann Shields, Salt Lake City, for plaintiffs and appellees.

John K. Mangum, Arthur H. Nielsen, Clark R. Nielsen, Gary A. Weston, Salt Lake City, for defendants and appellants.

HALL, Chief Justice:

Defendants 11th Avenue Corporation and Keith Garner appeal from a jury verdict awarding plaintiffs Ong International Inc., D & D Management, and David Alldredge damages for fraudulent misrepresentation. The judgment includes rescission of two contracts for the sale of a partnership, repayment to Ong International Inc. of the original $1,240,220 invested in the partnership, consequential damages of $1,165,220, and punitive damages of $1,800,000. We affirm the verdict.

I. FACTS

"Where evidence is in conflict in a jury trial, we assume that the jury believed those facts that support its verdict, and we view the facts and the reasonable inferences that arise from those facts in a light most supportive of the jury's verdict." ¹ We therefore recite the following facts in a light most favorable to the jury's verdict.

Defendant Keith Garner, a Utah developer, is the principal shareholder of defendant 11th Avenue Corporation. In 1979, 11th Avenue purchased the Salt Lake Memorial Mausoleum located above the Salt Lake City Cemetery. The Mausoleum provides facilities for above-ground interment. It consists of a main building of indoor interment compartments called "crypts," which are constructed of concrete, with pipes providing ventilation to the outside.

From 1984 through 1987, defendants constructed five outdoor pavilion structures, known as "pods," for further interment facilities. Each pod contains 102 crypts, for a total of 510. Of the 510 new crypts, the first 51 were made of concrete; the next 153 were constructed of a mixture of poured concrete and wood; and the remaining 306 were constructed of wood only, including plywood and chipboard. The individual crypts were then covered with a marble facing that had to be removed to see the construction components.

Garner first met plaintiff David Alldredge in 1965 in Hong Kong, where Alldredge was serving a mission for the Church of Jesus Christ of Latter-Day Saints ("L.D.S. Church"). Garner was then president of the Hong Kong Mission, and Alldredge acted as his assistant. At that time, Alldredge also became acquainted with Elder Marion D. Hanks, an L.D.S. Church general authority, who presided over the region encompassing Hong Kong. Alldredge developed a great respect for Hanks and Garner and for their positions of leadership within the L.D.S. Church. Alldredge later became a general manager of the International Bank of Asia in Hong Kong. His duties included matching potential investors with business opportunities. While in that position, he met Ong Ka Thai ("Ong"), chairman of the board of plaintiff Ong International Inc., who became Alldredge's client.

Garner and Alldredge met again in Provo in 1986. That encounter led to discussions concerning possible joint ventures between Garner and Ong. In April of 1987, Ong and Alldredge travelled to the United States to discuss an unrelated business venture with Garner. While in Salt Lake City, Garner gave them a tour of the Mausoleum, including a "model crypt" made of concrete. Garner told Alldredge that the model was representative of all the crypts on the property, including those located in the outdoor pavilions.

In November of 1987, Garner called Alldredge in Hong Kong and invited Ong to invest in the Mausoleum project. Garner told Alldredge that Elder Hanks owned 25 percent of the project and would sell that interest to Ong. Garner followed the phone call with a letter reiterating the business offer and again mentioning Hanks' ownership of stock in the Mausoleum. In December of 1987, Alldredge received a more comprehensive tour of the Mausoleum grounds. He was again shown the concrete model crypt and told that all the crypts on the property were made of solid concrete and were waterproof, fireproof, and earthquake proof. Alldredge was shown the outdoor pavilions but did not walk inside the individual pods. ²

In April of 1988, Ong and his wife flew to Salt Lake City and were given a tour of the Mausoleum. They were shown the model concrete crypt and the crypts where Hanks and his wife were supposedly going to be interred. Garner told Ong and his wife that the model was representative of all the crypts on the property. Garner never mentioned to Ong that a majority of the outdoor crypts were made of wood. Based on Garner's representations and a separate investigation of the financial viability of the Mausoleum, Ong International Inc., D & D Management (Alldredge's management corporation), and 11th Avenue Corporation entered into a partnership agreement on May 13, 1988. Ong International Inc. initially invested $800,000 in return for a 50 percent ownership in the partnership. Alldredge, through D & D Management, was assigned management duties for the partnership. He moved from Hong Kong to Salt Lake City in the summer of 1988 to assume those duties.

During the next year, Garner and Alldredge developed difficulties in their business relationship. Alldredge testified that Garner would not let Alldredge assume key managerial functions that he was entitled to perform pursuant to the partnership agreement. Those difficulties finally became insurmountable, and the parties decided to terminate the Mausoleum partnership. The parties entered a partnership redemption agreement on February 28, 1989, whereby Ong International Inc. purchased Garner's interest in the Mausoleum for $440,000. The redemption agreement included a clause (the "Release"), drafted by Ong's attorney, that released the parties from all claims and causes of action based on their association with the partnership.

Alldredge continued to manage the Mausoleum after the redemption agreement was signed, acting as Ong's agent rather than as a partner. In May of 1990, over a year later, Alldredge decided to inspect the crypts. After removing the marble facing on several of them, he discovered that a large number of the crypts were made of plywood and wood two-by-fours and four-by-fours. Some of the crypts were ventilated by means of a drainage hole drilled through the bottom piece of plywood, which would allow any escaping liquids to drain down and gasses to go up, into other crypts. Many of the crypts had no ventilation of any kind. Upon discovering that the crypts were not all concrete, Alldredge immediately contacted the Mausoleum's insurance companies and attorney to inform them of the fact. Since May of 1990, none of the wooden or mixed wood and concrete crypts have been sold.

Plaintiffs initiated this suit in June of 1990, after making a demand on defendants to rescind the partnership and redemption agreements. At trial, Ong testified that Ong International Inc. would not have invested in the Mausoleum if it had known of the wooden crypts. Both Ong and Alldredge testified that they would not have signed the redemption agreement containing the release if they had known that the representations about the outdoor crypts were false. Plaintiffs' experts testified that they had never heard of wood crypts being used anywhere else in the United States, that the crypts did not measure up to industry standards, and that the wood crypts must be replaced in order to make the crypts saleable.

Plaintiffs presented testimony that the building permit issued by Salt Lake City for construction of the crypts was revoked in January of 1987 and that a certificate of occupancy was never issued for the new crypts. Further, the crypt plans submitted to Salt Lake City by Garner's architect indicated that the crypts would be built of concrete, not wood.

Plaintiffs also called Hanks, who stated that he has never held an ownership interest of any sort in the Mausoleum. ³ Hanks also testified that in October of 1988, he and his wife received an unsolicited gift certificate for two crypts in the Mausoleum from Garner. He and his wife already owned a plot in the cemetery and retained the certificate only out of courtesy to Garner. Hanks never authorized use of his name by Garner for any purpose.

On appeal from a jury verdict in plaintiffs' favor, defendants allege that the trial court erred by (1) ruling, as a matter of law, that the Release contained in the redemption agreement is unenforceable; (2) refusing to grant defendants' motion in limine to exclude mention of Garner's wealth at trial before a prima facie finding of liability for punitive damages was made; and (3) making numerous erroneous evidentiary rulings and prejudicial comments, thereby depriving defendants of a fair trial. Defendants also allege that the jury verdict and damage award were the result of passion and prejudice and that the trial court's award of costs to plaintiffs was an abuse of discretion. We address each issue in turn.

II. RELEASE OF LIABILITY

The redemption agreement executed by the parties on February 28, 1989, included the following:

13.2 Release by The Partnership. Except as otherwise provided in this agreement, the Partnership, its partners, their respective agents, officers, employees, successors, assigns and heirs, and each of them, forever discharge SLMM, its agents, officers and employees from any and all claims, demands, rights of action or causes of action, whether known or unknown, howsoever arising, which in any way are based upon or related to SLMM's association with the Partnership.

Defendants claim that this language unambiguously bars plainti...