Russell/Packard Development, Inc. v. Carson
| Decision Date | 18 September 2003 |
| Docket Number | No. 20020546-CA.,20020546-CA. |
| Citation | 2003 UT App 316,78 P.3d 616 |
| Parties | RUSSELL/PACKARD DEVELOPMENT, INC., a California corporation; and Lawrence M. Russell, an individual, Plaintiffs and Appellants, v. Joel M. CARSON, an individual; William Bustos, an individual; and John Thomas, an individual, Defendants and Appellees. |
| Court | Utah Court of Appeals |
Heather S. White, Michael R. Carlston, and R. Brent Stephens, Snow Christensen & Martineau, Salt Lake City, for Appellants.
Keith W. Meade, Cohne Rappaport & Segal, and Craig G. Adamson, Dart Adamson, Donovan & Hansen, Salt Lake City, for Appellees.
Before Judges BILLINGS, BENCH, and THORNE.
¶ 1 Russell/Packard Development, Inc., and Lawrence Russell (collectively, Russell) appeal from the district court's order granting motions to dismiss in favor of Joel Carson, William Bustos, and John Thomas. We reverse and remand.
¶ 2 In 1996, Lawrence Russell was the principal shareholder and chief executive officer of Russell/Packard Development, Inc., a California corporation1 engaged in real estate development in California. When Mr. Russell became interested in developing residential real estate in Utah, he teamed with John Thomas (Thomas), a Utah real estate agent and a managing member of Premier Homes, L.C., to organize a Utah limited liability company called PRP Development, L.C. (PRP). Thomas was the manager of PRP and hence a fiduciary of Russell and PRP. PRP began pursuing real estate development activities in Utah.
¶ 3 In 1996, Saratoga Springs Development, L.C. (Saratoga), a company owned by Lynn Wardley, was developing and marketing land for residential construction. Saratoga owned seventy-two undeveloped twin-home lots (the lots) in the city of Saratoga Springs, Utah. Saratoga retained the brokerage services of Wardley Better Homes and Gardens Brokerage Co. (Wardley) to market and sell the lots. Dan Cary (Cary), a Wardley agent, was the listing agent for the lots. Joel Carson (Carson) and William Bustos (Bustos) were also real estate agents with Wardley. Unbeknownst to Russell, Carson had a business relationship with Bustos and Bustos had previously engaged in real estate dealings with Thomas. Also unbeknownst to Russell, Thomas owed Bustos money from previous business dealings. Thomas retained Carson on behalf of PRP and Russell to locate and review real estate proposals for purchase and development by PRP. As such, Carson became a fiduciary of PRP.
¶ 4 In the summer of 1996, Carson, Thomas, and Bustos learned of the availability of the Saratoga lots. At the urging of Carson and Bustos, Thomas approached Cary about purchasing the lots from Saratoga through PRP.
¶ 5 However, in the fall of 1996, Carson, Thomas, and Bustos, through an entity known as CMT, Inc. (CMT), made a separate offer to purchase the lots from Saratoga for $25,000 per lot. Carson told Cary that CMT was affiliated with or owned by Russell and PRP. Throughout the negotiations, Carson and Thomas, through their actions and representations to Saratoga, created the appearance that PRP was actively pursuing the purchase of the lots. Consequently, Wardley and Saratoga believed they were negotiating the purchase of the lots with PRP directly. To further disguise CMT's illegitimacy, Carson, Thomas, and Bustos misappropriated Russell's proprietary plans to develop the lots and presented them to Saratoga as their own. As a result of the same conduct, Russell erroneously believed CMT was owned by, affiliated with, or part of Saratoga.
¶ 6 In fact, during the negotiations and execution of the PRP contract, CMT was merely a fictitious name used by Carson, Thomas, and Bustos, having no legal status in Utah or elsewhere.2 On November 4, 1996, CMT and Saratoga executed a real estate contract listing Cary as the agent for Saratoga and Carson as the agent for CMT. The CMT contract was signed by Saratoga's authorized agent and by "Charles Perez" on behalf of CMT.3 Saratoga and CMT closed on the CMT contract the same day they executed it, with Saratoga still erroneously believing it was contracting with PRP through PRP's affiliate, CMT. The title company CMT used to close the transaction received an earnest money wire in the amount of $10,000 from an entity known as Poe Investments, L.C. (Poe), whose members were Carson and Bustos.4 At closing, Bustos received a check for part of this $10,000 earnest money payment.
¶ 7 After the CMT contract closed on November 4, 1996, Thomas—acting for PRP— made an offer to purchase the lots from CMT for $30,000 per lot. PRP and CMT executed a real estate contract (the PRP contract) on November 8, 1996. Thomas signed on behalf of PRP. "Charles Perez" again signed on behalf of CMT. Carson acted as the real estate agent for both PRP and CMT on the PRP contract. The terms of the PRP contract were identical to those of the CMT contract, except that the price per lot was $5,000 higher. By failing to reveal to Russell, PRP, and Saratoga that they were acting as agents and principals for CMT at the same time they were acting as agents and fiduciaries of Russell and PRP, Carson, Thomas, and Bustos successfully effectuated a "flip purchase and sale," and pocketed $360,000 in the process. Neither Russell nor Saratoga knew what had occurred. However, CMT was listed as the seller both in the PRP contract and in the chain of title on the lots.
¶ 8 In spring 2000, an accountant for Saratoga questioned CMT's true role in the 1996 transactions involving the lots.5 Suspecting a "flip purchase and sale" had occurred, Saratoga initiated discussions with Russell wherein Russell learned for the first time that CMT was not an agent for Saratoga. Subsequently, Russell conducted further investigation concerning the ownership and control of CMT and the circumstances surrounding PRP's purchase of the lots.
¶ 9 On November 30, 2001, Russell filed a complaint against Carson, Thomas, and Bustos alleging fraud, breach of fiduciary duty as to Carson and Thomas, civil conspiracy to defraud, commercial bribery, unjust enrichment, conversion and misappropriation of proprietary property, breach of principal-agent relationship as to Carson and Thomas, and intentional interference with prospective economic relations. Carson, Thomas, and Bustos filed motions to dismiss asserting a number of grounds for dismissal. On June 10, 2002, the district court dismissed Russell's claims with prejudice. Russell appeals.
¶ 10 Russell argues the district court erred in dismissing its claims against Carson, Thomas, and Bustos (collectively, the Appellees). "When determining whether a trial court properly granted a rule 12(b)(6) motion to dismiss, we accept the factual allegations in the complaint as true and consider them and all reasonable inferences to be drawn from them in a light most favorable to the plaintiff." Saint Benedict's Dev. Co. v. Saint Benedict's Hosp., 811 P.2d 194, 196 (Utah 1991). "Because the propriety of a 12(b)(6) dismissal is a question of law, we give the trial court's ruling no deference and review it under a correctness standard." Russell v. Standard Corp., 898 P.2d 263, 264 (Utah 1995) (quotations and citations omitted). We "will affirm the trial court's decision only if it appears [Russell] cannot prove any set of facts in support of [its] claims." Dansie v. Anderson Lumber Co., 878 P.2d 1155, 1156 (Utah Ct.App.1994).6
¶ 11 Under Utah law, Russell's claim for fraud is subject to a three-year statute of limitations. See Utah Code Ann. § 78-12-26(3) (2002). Russell's claims for breach of fiduciary duty, civil conspiracy, unjust enrichment, conversion and misappropriation, breach of principal-agent relation, and intentional interference with prospective economic relations (collectively, the four-year claims) are subject to a four-year statute of limitations. See id. § 78-12-25(3) (2002). Russell concedes that, absent tolling, its fraud claim expired on November 7, 1999, its four-year claims expired on November 7, 2000, and thus its November 30, 2001 complaint was untimely.
¶ 12 In most cases "a cause of action accrues" and the "statutes of limitations begin running upon the happening of the last event necessary to complete the cause of action." Spears v. Warr, 2002 UT 24, ¶ 33, 44 P.3d 742 (quotations and citations omitted). Moreover, "mere ignorance of the existence of a cause of action does not prevent the running of the statute of limitations." Warren v. Provo City Corp., 838 P.2d 1125, 1129 (Utah 1992) (quotations and citations omitted). Russell concedes that, absent tolling through application of the discovery rule, "the point at which [Russell] reasonably should [have] known" of its legal injuries is November 8, 1996, the day PRP and CMT executed the PRP contract. Spears, 2002 UT 24 at ¶ 32, 44 P.3d 742.
¶ 13 However, in some cases, "the discovery rule tolls the limitations period until facts forming the basis for the cause of action are discovered." Id. Utah courts apply the discovery rule
(1) in situations where the discovery rule is mandated by statute; (2) in situations where a plaintiff does not become aware of the cause of action because of the defendant's concealment or misleading conduct; and (3) in situations where the case presents exceptional circumstances and the application of the general rule would be irrational or unjust, regardless of any showing that the defendant has prevented the discovery of the cause of action.
Id. (quoting Warren, 838 P.2d at 1129). Russell contends the limitation periods were tolled because: (1) the discovery rule applies to a claim for fraud by statutory mandate; and (2) the Appellees' concealment justifies application of the concealment prong of the discovery rule to Russell's four-year claims.
1. Fraudulent Concealment
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