Shar's Cars, LLC v. Elder

• Decision Date: 29 July 2004
• Docket Number: No. 20030082-CA.,20030082-CA.
• Citation: 97 P.3d 724,2004 UT App 258
• Parties: SHAR'S CARS, L.L.C., a Utah limited liability company; and Jeffrey D. Birschbach, Plaintiffs, Appellants, and Cross-appellees, v. Deloy ELDER and Bruce Rutherford, Defendants, Appellees, and Cross-appellants.
• Court: Utah Court of Appeals

97 P.3d 724

2004 UT App 258

SHAR'S CARS, L.L.C., a Utah limited liability company; and Jeffrey D. Birschbach, Plaintiffs, Appellants, and Cross-appellees, v. Deloy ELDER and Bruce Rutherford, Defendants, Appellees, and Cross-appellants.

No. 20030082-CA.

Court of Appeals of Utah.

July 29, 2004.

Steven G. Loosle, Kruse, Landa, Maycock & Ricks, LLC, Salt Lake City, for Appellants.

John K. Rice, Midvale, for Appellees.

Before Judges GREENWOOD, ORME, and THORNE.

OPINION

GREENWOOD, J.

¶ 1 Third-party plaintiffs, Shar's Cars, L.L.C., (Shar's Cars) and Jeffrey Birschbach (collectively Plaintiffs), appeal a judgment entered in their favor against third-party defendant Deloy Elder in the amount of $22,500. Plaintiffs argue that the trial court erred by (1) concluding that Elder is not liable for debts incurred by the partnership he originally established with Bruce Rutherford (the Elder/Rutherford partnership) after August 31, 1998, (2) concluding that Elder is liable for only one-half of the partnership's obligations prior to August 1998, and (3) awarding damages based upon the partnership's net loss, rather than the partnership's unpaid expenses as of August 31, 1998.

¶ 2 Elder cross-appeals raising four issues. Elder argues that the trial court erred by (1) determining that Elder breached the contract, (2) deciding that the subsequent agreement between Shar's Cars and Bruce Rutherford did not constitute a full release of Elder's liability, (3) concluding that damages were capable of determination with reasonable certainty, and (4) denying his motion to dismiss at the conclusion of Plaintiffs' case in chief. We affirm in part, and reverse in part.

BACKGROUND

¶ 3 This appeal arises from a breach of contract suit originally filed by Brasher's Auto Auction against Shar's Cars, Birschbach, and others. Shar's Cars and Birschbach answered and filed a third party complaint against Elder and Rutherford. Because he failed to file an answer, a default judgment was eventually entered against Rutherford.¹ The third-party suit was tried in December 2002. At the end of Plaintiffs' case, Elder's motion to dismiss was denied. At the conclusion of the trial, a judgment was entered against Elder in favor of Plaintiffs in the amount of $22,500.

¶ 4 In January 1998, Birschbach and his wife obtained a dealer's license to sell cars, and created Shar's Cars. At the same time, Elder and his partner Rutherford were in the business of wholesaling cars. While at an auto auction in early 1998, Birschbach met Elder and eventually Birschbach, Elder, and Rutherford entered into an oral agreement. Under the agreement, Elder and Rutherford would use Birschbach's dealer's license and continue their business selling cars both retail and wholesale. The agreement also provided that the Elder/Rutherford partnership would operate separately from Birschbach's wife's business, paying its own expenses, and distributing its profits between the two partners. However, in consideration for the use of the dealer's license, the partnership would pay Birschbach $100 for every car sold retail, pay the operating expenses of Shar's Cars, and help Birschbach learn how to purchase cars at auctions. The parties agreed that the Elder/Rutherford partnership would operate under the name Shar's Cars.

¶ 5 Under the agreement, Elder managed the dealership and maintained the financial records. In June 1998, Birschbach extended a loan to the Elder/Rutherford partnership for $25,000 to be paid back within thirty to sixty days. On or about August 15, 1998, Elder left the business and ended his partnership with Rutherford. Rutherford notified Birschbach of the dissolution of the partnership. Shortly thereafter, Rutherford and Birschbach met and agreed to carry on the business together. At that time, Birschbach was told that the Elder/Rutherford partnership was "down" between $5000 and $10,000. At the conclusion of the Elder/Birschbach partnership, the bank account was closed, and the remaining balance of $29,267.27 was either transferred to Birschbach and Rutherford's new business account, or used to pay off partnership debts. The repayment of the $25,000 loan to the partnership was extended and Rutherford agreed to make monthly payments on the debt.

¶ 6 In mid-October 1998, Birschbach was contacted by a State investigator concerning cars that were sold without delivering proper title. The investigator told Birschbach that as the dealer of record, he had full responsibility. Birschbach then began paying off the debts and clearing titles on the cars that had been sold. He also closed down Shar's Cars.

¶ 7 Elder was not involved in the closure of the business or repayment of any of the Elder/Rutherford debts, with one exception. In July 1998, Elder, on behalf of the partnership, signed a check for $21,600 to Garff Leasing representing payment for a truck. This check bounced. After notifying Birschbach of the bounced check in late November 1998, Garff Leasing agreed to accept repayment from Elder and Rutherford. Each signed a note promising to pay one-half of the check amount. Garff Leasing also required Birschbach to guarantee the notes. Elder paid his half of the bounced check, but Rutherford did not.

¶ 8 At trial, both sides called expert witnesses to testify about damages. Plaintiffs' expert, Macey Buker, testified that he only had access to three of the five accounts related to the business operations. He testified that his analysis was not complete because the financial records available were not complete. Nonetheless, Buker prepared a balance sheet showing that the partnership had liabilities of $193,040.86 and assets of $36,541.77 as of December 31, 1998. Mr. Buker testified that he believed Elder was responsible for $48,635.13 under the Elder/Rutherford partnership agreement. Mr. Buker was unable to adequately determine which liabilities occurred before Elder left the partnership and which occurred after.

¶ 9 Elder's expert, Jeffrey Jensen, also tried unsuccessfully to prepare financial statements as of August 31, 1998, the time Elder left the partnership. Jensen agreed that the inadequacies of the records only allowed him to estimate. Jensen calculated that as of August 31, 1998, the business had a net loss of $35,105.61; however, Jensen testified that there was an error factor in his analysis, and the real amount could be anywhere from $25,000 to $50,000.

¶ 10 At the end of trial, the trial court found that a breach of contract had occurred because all of the expenses were not paid. The court found that Elder was not responsible for any liabilities occurring after he left in August 1998. The trial court found Plaintiffs' damages expert's testimony unhelpful because he did not estimate liabilities and assets for the period ending August 1998. Based on the calculations of Elder's expert, the court found $45,000 in damages, and ordered Elder to pay half, totaling $22,500.

ISSUES AND STANDARDS OF REVIEW

Plaintiffs' Issues

¶ 11 Plaintiffs first argue that the trial court erred by releasing Elder from partnership debts incurred after he left in August 1998. "[W]e will review the underlying facts under the deferential clear error standard." MacKay v. Hardy, 973 P.2d 941, 944 (Utah 1998). However, no deference is given to the trial court's resolution of the "legal effect" of those facts. Id.

¶ 12 Plaintiffs next assert that the trial court erred by concluding that Elder was liable for only one-half of the partnership's obligations. "Questions about the legal adequacy of findings of fact and the legal accuracy of the trial court's statements present issues of law, which we review for correctness, according no deference to the trial court." In re C.K., 2000 UT App 11, ¶ 17, 996 P.2d 1059.

¶ 13 Finally, Plaintiffs argue that the trial court erred by awarding damages based on the partnership's net losses as of August 31, 1998, rather than on the partnership's unpaid expenses. "We review the trial court's decision to award damages under a standard which gives the court considerable discretion, and will not disturb its ruling absent an abuse of discretion." Lysenko v. Sawaya, 1999 UT App 31, ¶ 6, 973 P.2d 445.

Elder's Issues

¶ 14 Elder, in his cross-appeal, first argues that the trial court erred in concluding that he breached the partnership agreement. A trial court's determination that one party is in breach of contract is usually a mixed question of fact and law. "Factual findings made by the trial court will be upheld unless they are clearly erroneous. Legal conclusions are reviewed for correction of error." Mostrong v. Jackson, 866 P.2d 573, 577 (Utah Ct.App.1993) (citations omitted).

¶ 15 Elder next asserts that the trial court erred in deciding that the subsequent agreement between Shar's Cars and Rutherford did not constitute a full release of liability under the theories of novation, executory accord, accord and satisfaction, release, waiver, or estoppel. This also presents a mixed question of fact and law. "Factual findings made by the trial court will be upheld unless they are clearly erroneous. Legal conclusions are reviewed for correction of error." Id.

¶ 16 Next, Elder argues that the trial court erred in concluding that damages were capable of determination with reasonable certainty. The trial court's decision to award damages is reviewed giving the court "considerable discretion, and [we] will not disturb its ruling absent an abuse of discretion." Lysenko, 1999 UT App 31, at ¶ 6, 973 P.2d 445. "When considering testimony regarding valuation of property, the trial court `is entitled to give conflicting opinions whatever weight [it] deems appropriate.'" Morgan v. Morgan, 854 P.2d 559, 564 (Utah Ct.App.1993) (alteration in original) (citation omitted). ¶ 17 Finally, Elder argues that the trial court erred in denying his motion to dismiss at the conclusion of Plaintiffs' case in chief. "`We review the [trial] court's denial of [Elder's] ...