Petersen v. Petersen

• Decision Date: 31 October 1985
• Docket Number: No. 18851,18851
• Citation: 709 P.2d 372
• Parties: Cathleen Louise PETERSEN, Plaintiff and Respondent, v. Arnold Barr PETERSEN, Defendant and Appellant.
• Court: Utah Supreme Court

Page 372

709 P.2d 372

Cathleen Louise PETERSEN, Plaintiff and Respondent, v. Arnold Barr PETERSEN, Defendant and Appellant.

No. 18851.

Supreme Court of Utah.

Oct. 31, 1985.

Gordon Strachan, Ronald E. Nehring, Salt Lake City, for defendant and appellant.

J. Ray Barrios, Donn E. Nelson, Salt Lake City, for plaintiff and respondent.

HALL, Chief Justice:

Defendant Arnold Barr Petersen appeals a decision of the district court enforcing two promissory notes executed by defendant in favor of plaintiff Cathleen Petersen, refusing to enforce an agreement between plaintiff and Barr Development, Inc., and not granting interest on certain money judgments in favor of defendant.

Cathleen and Arnold Barr Petersen married in 1954 and divorced for the first time in March 1976. As part of the property division, plaintiff received the family home and several real estate contracts. The parties remarried in May 1976. In a prenuptial agreement, the parties provided that in the event of a subsequent divorce each would retain those assets brought into the marriage, including any appreciation of those assets. Under this agreement, plaintiff retained sole ownership of the family home, even though defendant resided there during the second marriage.

After the remarriage, defendant took over responsibility for managing plaintiff's real estate contracts and making mortgage, tax, and insurance payments on the family home. Taken together, the real estate contract income and expenses, and the payments made on the family home, produced a negative cash flow. Defendant personally paid $11,730.54 to keep plaintiff's obligations current.

Further, shortly after the remarriage, the parties began to construct additions to the family home. Defendant supplied the materials, acquiring them through Barr Development, Inc., a construction company of which he was president. Defendant, plaintiff, and their two teenaged sons supplied the labor. Over a period of three years, the patio was expanded, and a family room, a guest house, a gymnasium, and a greenhouse were constructed. At trial, an independent remodeling contractor testified that all of the additions, totalling 4,778 square feet, would have cost between $45,000 and $55,000, including materials and labor, if performed by his company.

In May and June 1977, plaintiff made two loans of $23,274 and $41,247, respectively, to defendant. To secure the loans, defendant executed promissory notes in favor of plaintiff. The interest on each note was 18%, payable annually, with principal due in ten years. Plaintiff raised the loan money by mortgaging several of her real estate contracts. Defendant apparently used the money to finance operations of Barr Development. During the term of the second marriage, no interest payments were made by defendant on the promissory notes.

In August 1978, when the construction of the additions to the Petersen home were substantially completed, plaintiff signed an agreement with Barr Development, wherein Barr Development agreed to construct an addition to her home totalling approximately 1,800 square feet. According to the terms of the agreement, plaintiff was to pay Barr Development $65,000 for construction of the addition.

In 1981, plaintiff again filed for divorce. Unable to resolve certain property disputes, the case went to trial. On appeal, the major issue before this Court concerns the parties' obligations under the two agreements, i.e., the promissory notes and the construction agreement.

The trial court in a divorce action has substantial discretion in adjusting the financial and property interests of the parties. ¹ This Court will overturn the trial court's actions only when the evidence clearly preponderates to the contrary or where the trial court has clearly abused its discretion or misapplied principles of law. ²

At trial, the judge made the following findings pertinent to the instant appeal. The court found that the prenuptial agreement signed by the parties was intended to be given full force and effect and that the parties intended that each retain not only the assets brought into the marriage, but also any appreciation in those assets. The trial court found, however, that equity would entitle defendant to recover the value of the materials he contributed to the home additions, $30,938.66, and the excess amounts he had paid on plaintiff's contracts and house payments over and above the income generated, $11,730.54.

The trial court also found that the promissory notes executed in favor of plaintiff by defendant should have full force and effect and that plaintiff should be awarded judgment for interest past due on the notes, $54,357.31.

Next, the trial court found that there was no meeting of the minds between the parties regarding the agreement between Barr Development and plaintiff, that the parties did not intend to discharge defendant's obligations under the promissory notes through the agreement, and that no oral contract existed between the parties to this action regarding the construction of the additions to plaintiff's home.

Finally, the trial court ruled as a matter of law that the agreement between Barr Development and plaintiff was unenforceable between the parties to the divorce action.

On appeal, defendant argues that the construction of the additions to plaintiff's home was intended by the parties to be an accord and satisfaction of defendant's obligations on the promissory notes.

An accord and satisfaction arises when the parties to a contract agree that a certain performance offered in substitution of the performance originally agreed upon will discharge the obligation created under the original agreement. ³ The elements essential to contracts generally must be present in an accord and satisfaction, including proper subject matter, offer and acceptance, competent parties, and consideration. ⁴ The party alleging accord and satisfaction has the burden of proving every necessary element. ⁵

In order for an accord and satisfaction to have effect, it must be clear that the parties intended an accord and satisfaction and what the extent and scope of their agreement was. ⁶ Further, where, as here, two claims based on different types of transactions are involved, settlement of one does not result in an accord and satisfaction of the other without a clear expression of the parties evidencing such an intent. ⁷

In the instant case, the trial court specifically found that there had been no meeting of the minds between the parties regarding the agreement between Barr Development and plaintiff and that the parties did not agree that defendant's obligations under the promissory notes were discharged by reason of the obligation plaintiff incurred with Barr Development. Although obviously disputed, there was substantial evidence adduced at trial which would support the court's finding. ⁸

Plaintiff testified at trial that the stated purpose of the agreement between her and Barr Development was for defendant to be able to show the $65,000 contract on Barr Development corporate books for tax purposes. She claimed that no mention was ever made of intending the agreement to affect defendant's liability on the promissory notes. Although defendant disputed this testimony, it is undisputed that the agreement did not evidence a shred of intent that it operate as an accord and satisfaction of defendant's obligations under the promissory notes. Thus, defendant failed to prove that he had made known to plaintiff an intent to consider plaintiff's agreement with Barr Development an accord and satisfaction of defendant's liability on the promissory notes.

Defendant next contends that even if no accord and satisfaction is found in this case, the trial court should have offset the principal of the promissory notes by the full value of the construction agreement.

In the findings of fact and conclusions of law, the trial court specifically ruled as a conclusion of law that the agreement between Barr Development and plaintiff was unenforceable between the parties to the divorce action. The trial judge reasoned that if there was any cause of action on the agreement, it would be by Barr Development against plaintiff, not by defendant, as an individual, against plaintiff. Since Barr Development was not a party to the divorce action, the...