Prudential Capital Group Co. v. Mattson
| Decision Date | 20 November 1990 |
| Docket Number | No. 890038-CA,890038-CA |
| Citation | 802 P.2d 104 |
| Parties | PRUDENTIAL CAPITAL GROUP CO., fka Prudential Leasing Company, Plaintiff and Appellee, v. John E. MATTSON, Defendant and Appellant. John E. MATTSON, Third-Party Plaintiff and Appellant, v. KEY AIRLINES, Third-Party Defendant and Appellee. |
| Court | Utah Court of Appeals |
Denver C. Snuffer, Jr. (argued), Maddox, Nelson & Snuffer, Murray, for defendant and appellant.
J. Bruce Reading, Marlon L. Bates (argued), Scalley & Reading, Salt Lake City, for plaintiff and appellee, Prudential Capital Group.
Gifford W. Price (argued), Salt Lake City, for third-party defendant and appellee, Key Airlines.
Before GARFF, JACKSON, and BULLOCK. 1 JJ.
Mattson, defendant and third party plaintiff, appeals from a judgment against him for breach of contract on a lease for an aircraft. He is the lessee in a lease agreement with plaintiff/appellee, Prudential Capital Group Co. (Prudential), and a sublessor in a lease agreement with third-party defendant/appellee, Key Airlines (Key), involving the same aircraft.
The parties engaged in a complex transaction involving the sale, lease and sublease of a 1982 Cessna Golden Eagle 421C aircraft. The transaction proceeded as follows: Key sold the aircraft to Prudential. Prudential leased the aircraft to Mattson for a period of eighty-two months. The lease required Mattson to (1) make eighty-two monthly payments of $11,458.40 plus a final payment of $340,000.00; (2) pay all property taxes; (3) pay late fees on rental payments more than five days late; (4) pay twenty-four percent interest per annum on all unpaid monthly rental payments; and (5) pay court costs and reasonable attorney fees. Mattson subleased the aircraft back to Key for a period of twenty-seven months. Both leases contained integration clauses. The purpose of this arrangement was to create a tax shelter for Mattson. However, to qualify for the shelter, the sublease had to be for a period of time less than half the depreciable life of the aircraft, which for tax purposes was five years. Under the sublease, Key agreed to pay the property taxes during the term of the lease. When Key did not renew its sublease, Mattson could no longer make his payments and defaulted on his lease to Prudential. He also refused to pay the property taxes for 1985 and 1986. Prudential, pursuant to the terms of the agreement, terminated the lease and accelerated the monthly payments. It then repossessed and sold the aircraft for $259,772.00 and brought this action against Mattson for damages pursuant to the lease agreement.
The lower court awarded Prudential judgment, which included fifty-eight months of future lease payments totaling $664,587.20, a guaranteed residual of $340,000.00, late charges of $5,156.10, attorney fees of $17,079.00, court costs of $90.75, and prejudgment interest from date of sale to date of judgment at the agreed rate amounting to $246,461.69. The court then deducted proceeds from the sale of the airplane of $259,772.00 and the security deposit of $34,000.00, for a total net damage award of $979,602.74. 2
Mattson argues that the judgment amount awarded under the lease acceleration clause is an unconscionable penalty and that he should have been ordered to pay only the net present value of the future lease payments, which he asserts to be $315,363.42, rather than the amount awarded. His second argument is that the trial court inappropriately ordered Key to pay the property taxes directly to Prudential rather than to him. His final claim is that the sublease with Key was modified by oral promises that Key would pay the property taxes and also allow a trade-in allowance of $510,750.00, and therefore the trial court was inconsistent when it enforced the claim for property taxes against Key but did not enforce the other oral representations made at the time of the contract.
This case involves the interpretation of an integrated lease and sublease, which Mattson asserts was modified by extrinsic evidence. If the contract is interpreted only by the words, it is a question of law and we accord the trial court's construction no particular weight. However, if the contract is ambiguous, and the trial court takes extrinsic evidence to determine the intent of the parties, then our review is strictly limited. Kimball v. Campbell, 699 P.2d 714, 716 (Utah 1985); 50 West Broadway Assocs. v. Redevelopment Agency of Salt Lake, 784 P.2d 1162 (Utah 1989); Copper State Leasing Co. v. Blacker Appliance & Furniture Co., 770 P.2d 88 (Utah 1988). Because Mattson urges that a finding or a conclusion is unsupported by or is contrary to the evidence, he is required by Rule 11(e)(2) of the Rules of Appellate Procedure to include in the record a transcript of all evidence relevant to such finding or conclusion. Because Mattson did not file a transcript, we assume the correctness of the findings, Fackrell v. Fackrell, 740 P.2d 1318, 1319 (Utah 1987). We review the court's legal conclusions for consistency with the findings, giving them no deference. Scharf v. BMG Corp., 700 P.2d 1068, 1070 (Utah 1985). Wilderness Bldg. Systems, Inc. v. Chapman, 699 P.2d 766, 769 (Utah 1985); Sawyers v. Sawyers, 558 P.2d 607, 608-09 (Utah 1976).
Where an appellant challenges the amount of damages awarded under the contract, we affirm the court's award of damages if there is substantial record evidence to support it. Ringwood v. Foreign Auto Works, Inc., 786 P.2d 1350, 1360 (Utah Ct.App.1990) (citations omitted).
The lower court found that both Prudential and Mattson entered into the lease agreement with the intention to be bound by it, that Mattson understood the terms and conditions of the agreement, that he had the counsel of an attorney and a certified public accountant, that he made monthly lease payments of $11,458.40 to Prudential through October 20, 1986, and that Prudential was entitled to a judgment against Mattson for $979,602.74, representing the damages resulting from Mattson's breach of the lease. This amount includes, among other things, $664,587.20 representing fifty-eight months of future lease payments and $246,461.69 for prejudgment interest.
Appellant disputes the calculation of the outstanding lease payments. He asserts that he produced documents at trial showing the present value of the lease to be $315,363.42. Prudential counters that Mattson's evidence as to present value was computed incorrectly. Absent a transcript, we accept the trial court's findings as to the proper method to calculate damages according to the contract.
We are left then to consider the unconscionability of the damages. Utah courts have consistently upheld the right of people to contract on their own terms without the paternalistic intervention of the courts to relieve a party from the effects of a bad bargain. Carlson v. Hamilton, 8 Utah 2d 272, 332 P.2d 989, 990 (1958). Specifically, provisions for liquidated damages have been upheld the same as other terms in the contract, except where the amount of liquidated damages "bears no reasonable relationship to the actual damage or is so grossly excessive as to be entirely disproportionate to any possible loss that might have been contemplated that it shocks the conscience...." In such cases, the stipulation will not be enforced. Warner v....
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...716 (Utah 1985); accord 50 West Broadway Assocs. v. Redevelopment Agency, 784 P.2d 1162, 1171 (Utah 1989); Prudential Capital Group Co. v. Mattson, 802 P.2d 104, 106 (Utah App.1990). Appellant's prejudgment interest issue is a question of law which we review for correctness. See Vali Conval......