Pavoni v. Nielsen

• Citation: 2000 Utah Ct. App. 74,999 P.2d 595
• Decision Date: 16 March 2000
• Docket Number: No. 990179-CA.,990179-CA.
• Parties: Justin F. PAVONI and Kimberly A. Pavoni, individuals, Plaintiffs and Appellants, v. C. Michael NIELSEN, an individual; and Does 1 through 10, inclusive, Defendants and Appellees.
• Court: Utah Court of Appeals

999 P.2d 595

2000 Utah Ct. App. 74

Justin F. PAVONI and Kimberly A. Pavoni, individuals, Plaintiffs and Appellants, v. C. Michael NIELSEN, an individual; and Does , inclusive, Defendants and Appellees.

No. 990179-CA.

Court of Appeals of Utah.

March 16, 2000.

Alan L. Sullivan and David N. Wolf, Snell & Wilmer, Salt Lake City, and Richard A. Schneider, King & Spalding, Atlanta, Georgia, for Appellants.

Thomas R. Karrenberg, Jon V. Harper, and Victoria Coombs Bushnell, Anderson & Karrenberg, Salt Lake City, for Appellees.

Before GREENWOOD, P.J., BILLINGS, J., and GARFF, S.J.¹

OPINION

BILLINGS, Judge:

¶ 1 Justin and Kimberly Pavoni appeal the trial court's grant of a directed verdict in favor of defendant Michael Nielsen, and the resulting attorney fee award to Nielsen as the prevailing party under an indemnity agreement. We reverse and remand.

BACKGROUND

¶ 2 On review of a directed verdict, "we `examine the evidence in the light most favorable to the losing party.'" Fibro Trust, Inc. v. Brahman Fin., Inc., 1999 UT 13, ¶ 13, 974 P.2d 288 (quoting Brehany v. Nordstrom, Inc., 812 P.2d 49, 57 (Utah 1991)). We recite the facts accordingly.

¶ 3 In the spring of 1992, the Pavonis negotiated with Nielsen to purchase a twenty acre lot in the Red Hawk development near Park City (the property). During negotiations, the Pavonis told Nielsen of their desire to build a house on a specific site on the property, between a developed access road and a jeep trail running across the property. Nielsen assured the Pavonis that their building site would work, and the parties agreed on a purchase price of $115,000.

¶ 4 The parties entered into an earnest money agreement reflecting the negotiated terms and purchase price. The earnest money agreement incorporated by reference an addendum providing that the seller must approve the building site and that "Seller agrees to install additional 3-inch gravel from the driveway entrance on [the property] to 20 feet beyond . . . the home site within 120 days from the date of closing. Seller will widen and straighten the driveway entrance as discussed with [buyer] on May 30th, 1992."

¶ 5 The earnest money agreement also contained an abrogation clause: "Except for express warranties made in this Agreement, execution and delivery of final closing documents shall abrogate this Agreement."

¶ 6 Before closing the purchase in July of 1992, Nielsen informed the Pavonis of a lis pendens and an easement litigation affecting the property. Adjoining landowners, the Calls, had filed a lis pendens claiming a prescriptive right-of-way over several Red Hawk lots, including the Pavonis' intended property. Nielsen assured the Pavonis there was no cause for concern about the litigation.

¶ 7 Nielsen agreed to indemnify the Pavonis for any damages or losses sustained as a result of the Call litigation. Nielsen and the Pavonis signed an indemnity agreement which provided: "Seller [Nielsen] does hereby agree to indemnify, defend, save and hold harmless, Buyer [Pavonis] from and against any and all claims, demands, damages, losses, liens, liabilities, penalties, fines, costs and expenses, (including attorney's fees), if any, arising directly or indirectly from or out of [the Call lawsuit]." The indemnity agreement contained a separate attorney fees clause for fees incurred in enforcing the agreement: "If any legal action arises under this Agreement or by reason of any asserted breach of it, [t]he prevailing party shall be entitled to recover all costs and expenses, including reasonable attorney's fees, incurred in enforcing or attempting to enforce . . . this Agreement, including costs incurred prior to commencement of legal action."

¶ 8 After purchasing the property, the Pavonis retained an architect to design a home for the specific site on which they wished to build. In addition, they contracted for a survey of the property and home site. The Pavonis paid the architect $5,500 for preliminary plans, a survey, and design specifications.

¶ 9 After the Pavonis purchased the property, the parties to the Call litigation tried to negotiate a resolution to the dispute over the easement. The Pavonis, not named in the Call lawsuit but clearly affected by it, had independent counsel to represent their interests in the negotiations. Under the indemnity agreement, Nielsen paid $2000 to the Pavonis for attorney fees. Nielsen included a note with the check stating the amount was an estimate of fees and requesting the Pavonis to notify him if the amount was insufficient. Nielsen received no notice of additional amounts of specific attorney fees due. However, in April of 1994, prior to the resolution of the easement dispute, Nielsen received a demand letter for $150,000 in unspecified damages from an attorney retained by the Pavonis to pursue claims against Nielsen on the indemnity agreement.

¶ 10 In July of 1994, Nielsen settled the Call lawsuit on behalf of the Red Hawk owners named in the suit. The settlement permitted the Calls an easement along the jeep trail traversing the Pavonis' property and exiting onto the adjoining land.

¶ 11 The Pavonis were dissatisfied with the easement settlement. Informed through acquaintances that a prospective buyer was interested in the property, the Pavonis had the property appraised in July of 1994. The property was appraised at $285,000, with "no apparent adverse easements." In September of 1994, the Pavonis sold the property for $282,500, "split[ting] the difference" between the appraised price and the buyer's initial offer.

¶ 12 After selling the property, the Pavonis filed this suit alleging that Nielsen breached both the earnest money agreement and the indemnity agreement.² The Pavonis claimed that Nielsen failed to install gravel or straighten the driveway entrance as warranted in the earnest money agreement. Additionally, they claimed that Nielsen failed to indemnify them for all costs, damages, or losses incurred as a result of the Call litigation.

¶ 13 At trial in September 1998, Nielsen moved for a directed verdict on all claims after the Pavonis presented their case. The trial court concluded that, as a matter of law, the earnest money agreement had been abrogated by the deed and closing documents, and granted a directed verdict on that claim. Additionally, the court concluded that the Pavonis had failed to show any damages under the indemnity agreement. Thus, the court granted a directed verdict on all claims brought under the indemnity agreement and granted Nielsen attorney fees as the prevailing party under the indemnity agreement. The Pavonis appeal.

ISSUE AND STANDARD OF REVIEW

¶ 14 The Pavonis assert the trial court erred in granting the directed verdicts because the Pavonis produced competent evidence of damages for which they were entitled to indemnity, and because the earnest money agreement contained collateral warranties surviving the deed. In reviewing a directed verdict, appellate courts use the same standard as the trial court, evaluating whether "the evidence at trial raised a question of material fact which precluded judgment as a matter of law." Mahmood v. Ross, 1999 UT 104, ¶ 16, 990 P.2d 933. A directed verdict is appropriate only when, after viewing the evidence in the light most favorable to the nonmoving party, "the court is able to conclude, as a matter of law, that reasonable minds would not differ on the facts to be determined from the evidence presented." Id. at ¶ 18 (citation omitted). Courts are not free to weigh the evidence, see id., but may direct the verdict where "reasonable minds would agree that no substantial evidence supported each element of the cause of action." Fibro Trust, Inc. v. Brahman Fin., Inc., 1999 UT 13, ¶ 13, 974 P.2d 288. Appellate courts will reverse a directed verdict when the evidence presented at trial is "sufficient to permit a reasonable jury to find for the nonmovant." Gilbert v. Ince, 1999 UT 65, ¶ 14, 981 P.2d 841.

ANALYSIS

I. The Indemnification Agreement

¶ 15 The Pavonis argue the trial court erred in granting a directed verdict on their claims brought under their indemnity agreement with Nielsen. The Pavonis argue that they presented competent evidence showing they suffered damages covered under the agreement, including loss of value to the property, attorney fees, and architect fees, and that the trial court ignored that evidence when it granted a directed verdict for Nielsen.

¶ 16 Under a contract to indemnify for damages or loss, an action does not arise until the indemnitee has actually incurred a loss. See Boise-Payette Lumber Co. v. Phoenix Indem. Co., 3 Utah 2d 150, 280 P.2d 448, 451 (1955)

; see also Balboa Ins. Co. v. Zaleski, 12 Conn.App. 529, 532 A.2d 973, 976 (1987). Thus, the Pavonis have the burden of producing evidence showing they actually incurred a loss that would entitle them to indemnification under the agreement.

A. Loss of Value to Property

¶ 17 The Pavonis claim they were damaged because the Call easement reduced the value of their lot. To withstand the directed verdict, the Pavonis must "produce a sufficient evidentiary basis to establish the fact of damages." Sawyers v. FMA Leasing Co., 722 P.2d 773, 774 (Utah 1986). Damages cannot be awarded based solely on possibility or conjecture. See Jamison v. Utah Home Fire Ins. Co., 559 P.2d 958, 961-62 (Utah 1977)

. Thus, the Pavonis were required to produce competent evidence that the property lost value due to the easement.

¶ 18 The Pavonis point to Nielsen's testimony that land without easements is generally more valuable than land with easements and Nielsen's speculation that the value of Pavoni's property may have been reduced by "a couple of thousand dollars." However, such testimony is insufficient to establish that the Pavonis actually suffered damages due to loss of value because of the easement.

¶ 19 The evidence produced at trial showed that the property was appraised for $285,000 in the absence of any apparent...