Pyper v. Reil

• Decision Date: 18 October 2018
• Docket Number: No. 20170503-CA,20170503-CA
• Citation: 437 P.3d 493
• Parties: Robert Reed PYPER, Appellant, v. John REIL and Meridian Title Company, Appellees.
• Court: Utah Court of Appeals

437 P.3d 493

Robert Reed PYPER, Appellant,

v.John REIL and Meridian Title Company, Appellees.

No. 20170503-CA

Court of Appeals of Utah.

Filed October 18, 2018

Thor B. Roundy, Salt Lake City, and Cory B. Mattson, Attorneys for Appellant

D. Joseph Cartwright, Attorney for Appellee John Reil

Rachael L. Ortiz and Garreth Long, Attorneys for Appellee Meridian Title Company

Judge Jill M. Pohlman authored this Opinion, in which Judges Michele M. Christiansen Forster and David N. Mortensen concurred.

Opinion

POHLMAN, Judge:

¶1 This dispute arises out of a failed financial transaction in which Plaintiff Robert Reed Pyper executed a promissory note and a trust deed securing that note. Pyper brought various claims against Defendants Uriah Kennedy and John Reil, who were both present when Pyper signed the documents, alleging that they defrauded him. Pyper also brought a negligence claim against Defendant Meridian Title Company, who acted as the escrow agent for the transaction. The district court granted summary judgment to Meridian and dismissed Pyper’s claim against it. After a bench trial on the remaining claims, the district court entered judgment against Kennedy but dismissed Pyper’s claims against Reil.

¶2 Pyper raises two issues on appeal. First, he contends that the district court erred in concluding that he had not proven his claim for civil conspiracy against Reil. Second, he contends that the district court erred in granting summary judgment to Meridian on the ground that Meridian, as the escrow agent, had no duty to stop Pyper from entering the deal even if it knew or suspected fraud was occurring. We affirm.

BACKGROUND

¶3 In October 2012, Plaintiff Pyper pledged real property as collateral for a loan to another entity in the amount of $445,401.50. Defendant Kennedy promised Pyper that in exchange for his pledge of collateral, Pyper would be paid $5,000 monthly until the loan was fully repaid to the lender. Kennedy also promised Pyper that he would receive $250,000 after the loan’s repayment. The purported purpose of the loan was to fund the acquisition of a company called Seaich Corporation, and Pyper understood that the loan proceeds would be invested in that company.

¶4 Defendant Reil cosigned the loan as a borrower with Pyper. Reil also believed that he was helping to obtain a loan to fund the acquisition of Seaich. Pyper and Reil never met or communicated before or after meeting on October 19, 2012, to close the loan transaction. Reil’s representations to Pyper at the October 19 closing were limited to general assurances that "[e]verything will be ok" and that "[t]his will work out."

¶5 Defendant Meridian Title Company was the escrow agent for the transaction. A representative of Meridian was present at the October 19 closing, along with Pyper, Kennedy, and Reil. At the closing, Pyper executed a note in the amount of $445,401.50 and a trust deed conveying his property securing the note. Following the lender’s instructions, Meridian wired $400,000 to the specified account. The recipient of the funds was an unrelated company called Agro Chem Tech.

¶6 The principal amount of the loan was never repaid and Pyper received no repayment bonus. Similarly, Pyper never received the promised monthly payments.

¶7 Pyper filed a lawsuit arising out of the failed transaction, contending that he was the victim of breach of contract, undue influence, civil conspiracy, and securities fraud by Kennedy and Reil. He also brought a negligence action against Meridian. Pyper did not challenge the loan itself but rather alleged that the funds were invested inappropriately in another company, and that Kennedy and Reil promised to repay him for the loan. He also alleged that Meridian acted negligently in closing the loan transaction and disbursing the funds to another company when, based on what Pyper alleges the Meridian representative observed, Meridian should have recognized that a fraud was occurring. As a basis for his claim against Meridian, Pyper asserted that Meridian owed him two specific duties: (1) the duty "to safeguard and preserve the loan proceeds and assure that those funds were transferred according to a lawful contract and for a lawful purpose," and (2) the duty "to protect [Pyper] from entering into a verbal agreement for the delivery of the loan proceeds to a third party" when it "knew or should have known" that Pyper "was the victim of fraud or undue influence."

¶8 Meridian moved for summary judgment, arguing that it did not owe Pyper a duty to protect him from fraud. Meridian contended that the duty it owed to Pyper as the escrow agent was limited to following the escrow instructions, which it did. And it urged the court to reject the suggestion in Schoepe v. Zions First National Bank , 750 F.Supp. 1084 (D. Utah 1990), that an escrow agent owes the "additional duty" of informing a principal to a transaction that he "was being defrauded by his partners."

¶9 In his opposition to summary judgment, Pyper argued that the standards developed by the title insurance industry established the duty of care Meridian owed him, and that the parties’ experts (as well as the court in Schoepe ) accurately described the scope of the duty, which included a duty "to disclose fraud that the escrow agent should have detected during the course of the transaction." Pyper then asserted that Meridian "breached the duty of care that it owed" to him and that the various facts related to the closing established that a "reasonable escrow agent" would have concluded that Pyper "did not understand the transaction and that a fraudulent activity was occurring."

¶10 After hearing arguments, the district court granted Meridian’s motion. It accepted Pyper’s argument that, as part of the escrow agent’s fiduciary role, the agent had a duty to disclose facts "that would reasonably indicate a fraud was occurring." Nevertheless, the court observed that "recognizing a duty to disclose facts indicating fraud does not equate to a duty to halt a transaction where fraud is known or suspected," and it determined that, by arguing breach based solely on Meridian’s knowledge of facts suggesting fraud and Pyper’s general lack of understanding, Pyper sought to impose on an escrow agent a duty beyond disclosure—specifically, a duty "to interpose its informed judgment for a principal’s, or to perform the principal’s due diligence." The court rejected the existence of such a duty, concluding that an escrow agent "is not required to prevent a suspicious transaction when the principal is equally aware of all the facts," or to "exercise independent judgment and decline to follow [closing and disbursement] instructions" that are signed by the principal. The court concluded that Meridian had "no duty to police how Pyper spent the loan funds" and that Pyper could not "hold Meridian liable for following his instructions." Accordingly, the court concluded that Pyper’s negligence claim against Meridian failed as a matter of law.

¶11 Pyper’s remaining claims were eventually tried to the bench. Kennedy was not present at trial and no one appeared on his behalf. Following the trial, the court entered its findings of fact and conclusions of law. Among other things, the court found that Kennedy, in some capacity, promised Pyper the repayment of the loan principal to the lender, along with additional monthly payments to Pyper of $5,000 until repayment, and $250,000 to Pyper out of profits following repayment. The court further found that Reil "believed that he was helping to obtain loans in order to fund the acquisition of Seaich"; that "[t]here are no facts establishing a conspiracy or any actionable conspiracy"; and that Pyper "has not proven by clear and convincing evidence that John Reil was part of a conspiracy as alleged. There is not sufficient evidence of an unlawful purpose or any agreement on such purpose by John Reil."

¶12 Based on those and other findings, the court concluded that Pyper "ha[d] not proven any claim for conspiracy against John Reil." The court further found that Pyper had not proven any other of his claims and dismissed them with prejudice. Additionally, the court entered judgment against Kennedy. Pyper appeals, challenging the district court’s decisions with regard to Meridian and Reil.

ISSUES AND STANDARDS OF REVIEW

¶13 Pyper contends that the district court erred in concluding that he had failed to prove his conspiracy claim against Reil. Because Pyper does not challenge the court’s findings of fact but instead contends only that the court failed to analyze the facts under the proper legal standard, we review the district court’s ultimate conclusion for correctness. See Purkey v. Roberts , 2012 UT App 241, ¶ 11, 285 P.3d 1242 (stating that "[w]hether the trial court applied the proper legal standard for [a tort claim] is an issue of law, which we review for correctness").

¶14 Pyper also challenges the district court’s grant of summary judgment to Meridian, claiming that the court erred in determining that an escrow agent does not owe a duty to stop an escrow transaction where the agent observes facts that would lead a reasonable escrow agent to conclude that the agent was facilitating a fraud against one of the parties to the transaction. Summary judgment is appropriate "if the moving party shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Utah R. Civ. P. 56(a). "An appellate court reviews a trial court’s legal conclusions and ultimate grant or denial of summary judgment for correctness ...." Howick v. Salt Lake City Corp. , 2018 UT 20, ¶ 5, 424 P.3d 841 (quotation simplified).

ANALYSIS

I. Pyper’s Conspiracy Claim Against Reil

¶15 Pyper contends that the district court erred in concluding that he had not proven his claim against Reil for civil conspiracy. In particular, Pyper attacks the district court’s conclusion that "Reil’s actions in furtherance of the [pertinent] transaction ... did not...