Radman v. Flanders Corp.
Decision Date | 25 October 2007 |
Docket Number | No. 20060479-CA.,20060479-CA. |
Citation | 2007 UT App 351,172 P.3d 668 |
Parties | Ivan RADMAN, Janet Radman, Donna Smylie, Peter Radman, Joanne Crook, Bronte Clark, Martin Radman, and Jordan Radman, Plaintiffs and Cross-appellees, v. FLANDERS CORPORATION, a North Carolina corporation, Defendant and Cross-appellant. Flanders Corporation, a North Carolina corporation, et al., Counterclaim and Third-party Plaintiffs, and Appellee, v. Ivan Radman, Janet Radman, Donna Smylie, Peter Radman, Joanne Crook, Bronte Clark, Martin Radman, and Jordan Radman, Counterclaim Defendants and Appellants. |
Court | Utah Court of Appeals |
David M. Connors, Jennifer A. Brown, and Nicole C. Squires, Salt Lake City, for Appellants and Cross-appellees.
Clark Waddoups, Jonathan O. Hafen, and Michael D. Black, Salt Lake City, for Appellee and Cross-appellant.
Before BENCH, P.J., BILLINGS and DAVIS, JJ.
¶ 1 Plaintiffs and Counterclaim Defendants Ivan Radman, Janet Radman, Donna Smylie, Peter Radman, Joanne Crook, Bronte Clark, Martin Radman, and Jordan Radman (collectively, the Radmans) appeal various aspects of the trial court's decision on the counterclaim presented below. Defendant and Counterclaim Plaintiff Flanders Corporation (Flanders) appeals the court's decision regarding the Radmans' original claim. We affirm.
¶ 2 In November 1997, the parties entered into an Agreement and Plan of Merger (the Agreement) whereby Flanders exchanged some of its restricted capital stock for all the stock of G.F.I., Inc. (GFI), a company owned by the Radmans that manufactured fiberglass and fiberglass air filters. Because the stock shares transferred by Flanders were restricted, the Radmans could not sell the shares for at least one year after the merger. To address the possibility that the stock trading prices might drop during this period, the Agreement contained a clause entitled "Market Protection" (the Market Protection Clause) that provided that the Radmans would receive additional compensation if such a drop were to occur.1 When the Radmans were finally able to sell their shares, the trading price had fallen significantly below the $8.00 per share that it had been at the time of merger. Thus, the Radmans sought to enforce the Agreement's Market Protection Clause and obtain compensation for the full shortfall amount. Although Flanders did tender some additional shares of stock in an effort to comply with the Agreement, the value of these shares was not enough to fully compensate the Radmans for the shortfall amount, as the Radmans believed was required by the Agreement.
¶ 3 The Radmans brought this action against Flanders in May 2001, seeking damages for the uncompensated shortfall amount. Flanders counterclaimed, alleging, inter alia, that the Radmans had breached several warranties contained in the Agreement. The Radmans were successful on their claim regarding the uncompensated shortfall amount and were awarded damages in the amount of $547,904.50. Flanders, too, was successful on its breach-of-warranties counterclaim, and the trial court awarded damages of $1,162,528.00. The trial court then determined that both parties had prevailed and awarded them the reasonable attorney fees incurred in connection with their prevailing claims. Thus, in the end, Flanders received a net award of $696,446.90. Both parties now appeal.
¶ 4 First, the Radmans contest the trial court's allowance of and reliance on extrinsic evidence of pre-Agreement conversation between the parties. "Whether evidence is admissible is a question of law, which we review for correctness, incorporating a `clearly erroneous' standard of review for subsidiary factual determinations." State v. Diaz, 859 P.2d 19, 23 (Utah Ct.App.1993). Second, the Radmans assert that even if this evidence was appropriately admitted, the trial court's method of assessing breach-of-warranty damages was incorrect and unsupported by the evidence. Mahana v. Onyx Acceptance Corp., 2004 UT 59, ¶ 25, 96 P.3d 893 (citation omitted). Third, the Radmans argue that the trial court erred by offsetting Flanders's unliquidated award against the Radmans' liquidated award before calculating any prejudgment interest. This is a question of law, which we review for correctness. See Saleh v. Farmers Ins. Exch., 2006 UT 20, ¶ 28, 133 P.3d 428 . Finally, the Radmans claim that we should reverse under the cumulative error doctrine, which requires us to apply the standard of review applicable to each underlying claim of error, each of which here is an abuse of discretion review.2
¶ 5 Flanders primarily contests the trial court's interpretation of the Market Protection Clause, arguing that the trial court erred in concluding that the clause was ambiguous and in considering extrinsic evidence of the parties' intent to "completely rewrite[ ]" the clause. Nielsen v. Gold's Gym, 2003 UT 37, ¶ 6, 78 P.3d 600 (citation omitted). Flanders also argues that the trial court erred in determining that both parties prevailed below and in awarding attorney fees accordingly. The question of which party is the prevailing party is a question for the trial court, and we therefore review the trial court's determination on this matter for abuse of discretion. See R.T. Nielson Co. v. Cook, 2002 UT 11, ¶ 25, 40 P.3d 1119. However, the court's interpretation of binding case law on this matter is a question of law, reviewed for correctness. See Houghton v. Department of Health, 2005 UT 63, ¶ 32, 125 P.3d 860.
¶ 6 The Radmans assert that in relation to the counterclaim below, the trial court erred in several aspects, including using extrinsic evidence inappropriately, using an improper and unsupported method to determine damages, and refusing to award prejudgment interest. The Radmans also point to several other alleged errors in the context of a cumulative error argument. We address each argument in turn.
¶ 7 The Radmans argue that the trial court inappropriately considered extrinsic evidence in its determination that the Radmans breached the Agreement's warranties regarding the operating condition of certain equipment, specifically, electric melters. The Radmans assert that the Agreement's integration clause and the court's rulings that the warranties were unambiguous prohibited any sort of reliance on extrinsic evidence. The Radmans are correct in their argument that once a contract has been found to be unambiguous, the trial court may not rely on extrinsic evidence to determine the intent of the parties or to vary the terms of the agreement. See View Condo. Owners Ass'n v. MSICO, LLC, 2005 UT 91, ¶ 27, 127 P.3d 697 (); Winegar v. Froerer Corp., 813 P.2d 104, 108 (Utah 1991) (). Extrinsic evidence may, however, appropriately be considered for other purposes. See, e.g., Eggett v. Wasatch Energy Corp., 2001 UT App 226, ¶ 26, 29 P.3d 668 (, )aff'd, 2004 UT 28, 94 P.3d 193. Here, it appears that any pre-Agreement statements relied on by the trial court were used not for altering the terms of the Agreement or for determining what the parties intended by the language of the warranties, but rather, the statements were appropriately used to assess whether the Radmans had actually breached those unambiguous warranties.
¶ 8 In the Agreement, the Radmans warranted that the assets being transferred were "in good operating condition and repair, ordinary wear and tear excepted." The trial court determined that this warranty was unambiguous and that it required "that the equipment performs the function expected of a similar piece of equipment in the industry to the standards of the industry, modified to take into account the effects of the equipment's age and prior wear." See Utah State Med. Ass'n v. Utah State Employees Credit Union, 655 P.2d 643, 645 (Utah 1982) ( ). The Radmans do not contest this interpretation, but argue that because the trial court determined that the warranty was unambiguous, the court was not allowed to rely on pre-Agreement statements to determine whether the equipment was in good operating condition.
¶ 9 We agree that in determining whether the equipment was in good operating condition, it would have been inappropriate for the trial court to have required the equipment to conform exactly to specific numbers mentioned in pre-Agreement statements. Such would, indeed, add terms to the Agreement. It was, however, appropriate for the trial court to use extrinsic evidence for other purposes, including to determine what good operating condition generally was for the electric melters, i.e., what was...
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