Pugh v. NORTH AMERICAN WARRANTY SERVICES

• Decision Date: 04 May 2000
• Docket Number: No. 981712-CA.,981712-CA.
• Citation: 2000 Utah Ct. App. 121,1 P.3d 570
• Parties: David PUGH, Plaintiff and Appellee, v. NORTH AMERICAN WARRANTY SERVICES, INC., Defendant and Appellant.
• Court: Utah Court of Appeals

1 P.3d 570

2000 Utah Ct. App. 121

David PUGH, Plaintiff and Appellee, v. NORTH AMERICAN WARRANTY SERVICES, INC., Defendant and Appellant.

No. 981712-CA.

Court of Appeals of Utah.

May 4, 2000.

Robert W. Hughes, Salt Lake City, and Mark P. Cohen, Oak Brook, Illinois, for Appellant.

Kendall S. Peterson, Peterson, Reed, LLC, Salt Lake City, for Appellee.

Before GREENWOOD, P.J., ORME, and WILKINS, JJ.¹

OPINION

ORME, Judge:

¶ 1 Defendant North American Warranty Services, Inc. appeals the trial court's judgment awarding plaintiff David Pugh damages and attorney fees for North American's breach of its vehicle service contract with Pugh. We affirm and remand so that Pugh may additionally recover attorney fees incurred on appeal.

BACKGROUND

¶ 2 Plaintiff Pugh purchased a used 1990 Ford Thunderbird automobile on November 16, 1995. At the same time, Pugh purchased a Vehicle Service Contract from North American. This contract covered any breakdown for two years or 24,000 miles, whichever came first. Under the terms of the contract, North American agreed to fix each breakdown that should occur during the warranty period by "provid[ing] such repair or replacement (plus labor) [it]self, or reimburs[ing] an authorized repair facility to do so."

¶ 3 On May 26, 1997, with only five miles remaining on the service contract, Pugh experienced transmission trouble on the road between St. George and Cedar City.² Pugh's Thunderbird was towed to Parkway Motors in Cedar City. Parkway inspected the vehicle's transmission pan and discovered metal shavings or filings, discolored transmission fluid that smelled burnt, and evidence that transmission fluid had leaked out of the rear housing seal.

¶ 4 Pugh immediately reported the breakdown to North American, which sent its agent to inspect the vehicle. Parkway's mechanics informed the agent of the metal flecks found in the transmission pan, the burnt fluid, and the leaks in the rear housing seal.

¶ 5 The agent, pursuant to instructions given to him by North American, instructed Parkway's mechanics to reinstall the transmission pan so that he could test drive the vehicle. After driving the vehicle for 11 miles, the agent noted only that the transmission shifted roughly into overdrive. In his report to North American, he indicated that the cause of the car's failure was "[o]il leaked from trans seal." Based on the agent's investigation and report, North American authorized only the replacement of the rear transmission seal.

¶ 6 Pugh, through his attorney, wrote to North American on June 11, 1997, informing it that both he and Parkway's mechanics felt that the repairs authorized by North American were inadequate and that the entire transmission needed to be repaired or replaced. In spite of this, North American continued to refuse to authorize any further repairs, during which time Pugh's vehicle remained at Parkway's garage.

¶ 7 On November 24, 1997, the parties entered into an "Interim Agreement," in which they agreed to share the cost of tearing down and inspecting the transmission. North American further agreed to pay all inspection and repair costs if it was determined that the transmission was in need of repair.

¶ 8 Two days later, Parkway's mechanics tore down the transmission, and the agent, again sent by North American to inspect the vehicle, concluded that the transmission was, indeed, in need of substantial repairs. On January 15, 1998, North American gave Parkway authorization to repair Pugh's transmission, but only on the condition that Pugh pay for the repairs himself, after which North American would reimburse him. This procedure was directly contrary to that outlined in the Vehicle Service Contract, requiring North American to do the repairs itself or directly pay a third-party repair facility, such as Parkway. Pugh refused to pay for the repair costs out of his own pocket, and the parties remained deadlocked. Meanwhile, Pugh's Thunderbird remained in something of a vehicle purgatory in Parkway's garage.

¶ 9 On April 22, 1998, nearly a year after the transmission failure first occurred, North American finally agreed to pay Parkway for the repair costs. North American sent a check to Parkway, but withheld one-half of the tear down costs ($165.00) and $60.00 for a freight charge for a part needed for the repair. These deductions violated the parties' 1997 "Interim Agreement," in which North American had agreed to pay all of the tear down and repair costs if it were shown that the transmission itself needed repairs. During this entire ordeal, Pugh continued to make payments on the vehicle.

¶ 10 Pugh filed this action for breach of the service contract soon after North American first denied his demand to have the transmission repaired in 1997. After a bench trial some months later, the court determined that North American had breached its service contract with Pugh and awarded him $225.00 in repair costs;³ $185.00 in towing and emergency travel costs, minus any such amounts already paid by North American; $6,750.00 for Pugh's loss of the vehicle's use; and $6,739.75 in attorney fees and costs. North American appeals.

ISSUES AND STANDARDS OF REVIEW

¶ 11 Initially, North American challenges several of the trial court's Findings of Fact supporting its award of damages to Pugh for loss of the use of his vehicle. However, North American has failed to provide us with a transcript of the proceedings below. As a result, we are unable to review the evidence presented and thus cannot determine whether the trial court's challenged findings were based on sufficient evidence. See Horton v. Gem State Mut., 794 P.2d 847, 849 (Utah Ct.App.1990)

. Appellant bears the burden of "providing us with an adequate record to preserve its arguments for review." Id. Absent such a record, we will "`presume that the judgment was supported by sufficient evidence.'" Id. (quoting State v. Nine Thousand One Hundred Ninety-Nine Dollars, 791 P.2d 213, 217 (Utah Ct.App.1990)).

¶ 12 Although the parties submitted a set of stipulated facts to the trial court, which is in the record, the court also heard Pugh's testimony, heard opening and closing arguments by counsel, and held discussions with counsel. In fact, the court stated, with our emphasis, that it based its Findings of Fact and Conclusions of Law on "the stipulated facts, and also on the evidence at trial, the applicable law, and the arguments of counsel." While there are admittedly some gaps between the stipulated facts and the facts found by the trial court, we have no choice but to assume they were filled by Pugh's testimony, documentary evidence received during his testimony, or concessions made by North American.

¶ 13 The only two remaining issues concern North American's contention that awarding attorney fees to Pugh was improper. First, North American argues the trial court incorrectly classified the Vehicle Service Contract between North American and Pugh as an insurance contract. We review a trial court's interpretation of an unambiguous contract under the correctness standard, giving no particular deference to the trial court's ruling. See LMV Leasing, Inc. v. Conlin, 805 P.2d 189, 192 (Utah Ct.App. 1991)

. Second, North American argues the award of attorney fees was improper because the court failed to make the necessary finding that it had breached the implied duty to perform in good faith. "Whether attorney fees are recoverable in an action is a question of law, which we review for correctness." A.K. & R. Whipple Plumbing & Heating v. Aspen Constr., 1999 UT App 87, ¶ 11, 977 P.2d 518,

cert. denied, 994 P.2d 1271 (Utah 1999).⁴

VEHICLE SERVICE CONTRACT AS CONTRACT OF INSURANCE

¶ 14 The general rule in Utah is that a party may recover attorney fees only when provided for by statute or contract. See, e.g., Turtle Management, Inc. v. Haggis Management,Inc., 645 P.2d 667, 671 (Utah 1982)

; Collier v. Heinz, 827 P.2d 982, 983 (Utah Ct.App.1992). Our courts have carved out a narrow exception to this rule in the insurance context. See Canyon Country Store v. Bracey, 781 P.2d 414, 420 (Utah 1989); Zions First Nat'l Bank v. National Am. Title Ins. Co., 749 P.2d 651, 657 (Utah 1988) (citing Beck v. Farmers Ins. Exch., 701 P.2d 795, 802 (Utah 1985)); Collier, 827 P.2d at 984. When an insurance company breaches the implied covenant to perform its obligations in good faith, the insured can recover his or her attorney fees as consequential damages of the breach. See Collier, 827 P.2d at 984; Zions, 749 P.2d at 657. North American challenges the trial court's conclusion that the service contract was a contract of insurance.

¶ 15 The question of what makes a contract a "contract of insurance" for purposes of this narrow exception has never been answered by Utah's appellate courts. The Utah Insurance Code defines insurance as "an arrangement, contract, or plan for the transfer of a risk or risks from one or more persons to one or more other persons." Utah Code Ann. § 31A-1-301(48)(a)(i) (Supp. 1999). Black's Law Dictionary defines insurance as, inter alia, "[a]n agreement by which one party for a consideration promises to pay money or its equivalent or to do an act valuable to other party upon destruction, loss, or injury of something in which other party has an interest." Black's Law Dictionary 721 (5th ed.1979).

¶ 16 Under either of these definitions, the Vehicle Service Contract issued by North American to Pugh was an insurance contract. Both parties agree that the sole purpose of the contract was to shift the risk of financial loss due to vehicle breakdown from Pugh to North American. Pugh paid North American to obtain this peace of mind: If his car should break down during the warranty period, North American would absorb the cost of any necessary repairs. It is all but conceded by North American that the contract served the exact same purpose as an insurance contract, although styled as a Vehicle Service Contract rather than as ...