Soter's, Inc. v. Deseret Federal Sav. & Loan Ass'n
| Decision Date | 29 July 1993 |
| Docket Number | No. 920015,920015 |
| Parties | SOTER'S, INC., Summit Park Co., Gregory S. Soter, and Julie R. Soter, Plaintiffs, v. DESERET FEDERAL SAVINGS & LOAN ASSOCIATION and Continental Federal Savings & Loan, Defendants and Cross-Claim Plaintiff, v. Sherwin KNUDSEN, dba Tri-K General Contractors, and United Pacific Insurance Co., Cross-Claim Defendants. |
| Court | Utah Supreme Court |
J. Kevin Bird, Provo, for Soter's, Inc.
Lowell V. Summerhays, Murray, for Kevin Bird.
Duane H. Gillman, Salt Lake City, for Summit Park Co.
William H. Fowler, Salt Lake City, for Duane H. Gillman.
David D. Loreman, Elko, Nevada, for Eva Soter.
Stanford B. Owen, P. Bruce Badger, Salt Lake City, for Deseret Federal Sav. & Loan and Resolution Trust Corp.
Bruce A. Maak, Gregory D. Phillips, Glen E. Davies, Salt Lake City, for Continental Federal Sav. & Loan and Resolution Trust Corp.
Robert W. Hughes, William R. Russell, Salt Lake City, for Sherwin Knudsen and Tri-K General Contractors.
Graham Dodd, M. Karlynn Hinman, Salt Lake City, and Peter C. Haley, Valerie A. Andersen, San Francisco, CA, for United Pacific Ins. Co.
This case is before the court for the determination of several issues of Utah law following certification from the United States District Court for the District of Utah pursuant to rule 41 of the Utah Rules of Appellate Procedure. The certifying federal court is faced with determining the consequences of a state court's jury verdict in a later-removed federal case. The question presented for us by the certification is whether the state court correctly stated the requirements for waiver under Utah law when it framed jury instructions and special interrogatories. We conclude that the state trial court misapprehended the Utah law of waiver and that the waiver instructions and interrogatories misstated the law.
The facts are relatively straightforward. This action originated in state district court when Soter's, Inc., a construction developer, filed an action against lenders Deseret Federal Savings & Loan and Continental Federal Savings & Loan. The claim arose from the lenders' alleged failure to fund construction of a condominium project in Summit County under a construction loan agreement.
Deseret Federal cross-complained against Tri-K General Contractors for failure to complete the project on time. Tri-K was brought into the action through its construction contract with Soter's under which Soter's, as general contractor, had assigned its rights to Deseret Federal. The construction contract required substantial completion of the project by December 31, 1984. Deseret Federal also cross-complained against United Pacific Insurance Company under a performance bond which had guaranteed Tri-K's performance under the contract with Soter's. As one of two named obligees under the bond, Deseret Federal alleged that United Pacific had breached its duties under the bond because Tri-K had failed to complete the project on time and because United Pacific had failed to honor the resulting bond claim.
Trial was held from May 11 to May 26, 1988. Evidence was presented on Tri-K's claim that Deseret Federal had waived the contract provision requiring Tri-K to substantially complete the project by December 31, 1984. Evidence was also presented on the claim by Soter's that Deseret Federal had waived the right to require completion of the project by a certain date.
So that the jury could resolve these two claims, the court instructed it on the definition of waiver, stating:
A waiver is the intentional relinquishment of a known right. To constitute a waiver, there must be an existing right, benefit or advantage, a knowledge of its existence, and an intention to relinquish it. To constitute waiver, one's actions or conduct must be distinctly made, must clearly display in some unequivocal manner any intent to waive, and must be inconsistent with any other intent.
(Emphasis added.) Based on the last sentence of this instruction, the court submitted three special interrogatories for each of the waiver claims. Those respecting Tri-K's claim of waiver read as follows:
22. Has Tri-K established by a preponderance of the evidence that Deseret Federal acted in such a manner as to distinctly relinquish the right under the Construction Contract to have the Camelot Condominium Project completed on or before December 31, 1984?
23. Has Tri-K established by a preponderance of the evidence that Deseret Federal clearly displayed in some unequivocal manner an intent to relinquish the right under the Construction Contract to have the Camelot Condominium Project completed on or before December 31, 1984?
24. Has Tri-K established by a preponderance of the evidence that any evidence of an intent by Deseret Federal to relinquish the right under the Construction Contract to have the Camelot Condominium Project completed on or before December 31, 1984, was inconsistent with any other intent?
(Emphasis added.)
Parallel interrogatories were asked regarding the claim of waiver asserted by Soter's. As to Tri-K's claim, the jury answered "yes" to interrogatories 22 and 23 but "no" to number 24. However, with regard to the claim of waiver, the jury answered "yes" to all three questions posed.
During the month following the verdict, the parties filed motions addressing what effect the jury's responses to the special interrogatories should have. On April 18, 1989, the trial court executed a set of findings of fact and conclusions of law, as well as an order, a judgment, and a decree of foreclosure. Because of the jury's negative answer to interrogatory 24, the court awarded judgment for Deseret Federal against Tri-K and United Pacific, jointly and severally, for an amount equivalent to the project completion costs. The court stayed execution on the judgment until post-trial motions had been heard.
Before the post-trial motions could be decided, Deseret Federal was placed in receivership under the direction of the Resolution Trust Corporation ("RTC"). The RTC removed the case to the United States District Court for the District of Utah under 28 U.S.C. § 1441. That court concluded that resolution of this matter hinges on the legal concept of waiver but found that Utah law in this area is ambiguous. Consequently, the court then certified the following questions to this court:
1. What is the burden of proof necessary to establish waiver under Utah law?
a. Is there one standard generally applicable to all situations involving waiver?
b. Are there two different applicable standards depending on whether waiver is alleged from a party's action or conduct, or a party's inaction or silence?
1) Where waiver is alleged from a party's action or conduct, must the action or conduct of that party unequivocally show an intent to waive or at least be inconsistent with any other intent?
2) Where waiver is alleged from a party's silence or failure to act, must the silence or failure to act on the part of that party be unequivocal and inconsistent with any other intent?
2. Were the jury instructions given in the instant case consistent with Utah law on the law of waiver?
3. Were the special interrogatories asked in the instant case consistent with Utah law on the law of waiver?
We now address those questions.
Having reviewed our case law on the issue of waiver, we agree with the federal court's conclusion that our cases are ambiguous. In fact, we find that the language in some of our cases has incorrectly stated the law, understandably leading to the erroneous instructions and interrogatories given by the state court.
We start with Phoenix Inc. v. Heath, 90 Utah 187, 194, 61 P.2d 308, 311-12 (1936). There, we stated:
A waiver is the intentional relinquishment of a known right. To constitute a waiver, there must be an existing right, benefit, or advantage, a knowledge of its existence, and an intention to relinquish it. [The relinquishment] must be distinctly made, although it may be express or implied.
(Emphasis added) (citations omitted); American Sav. & Loan Ass'n v. Blomquist, 21 Utah 2d 289, 292, 445 P.2d 1, 3 (1968); see also Bjork v. April Indus., Inc., 547 P.2d 219, 220 (Utah 1976). In writing the legal standard for waiver, we routinely used this formulation until Hunter v. Hunter, 669 P.2d 430 (Utah 1983).
Hunter involved a claim of waiver implied from silence or inaction. In reversing the trial court's finding of waiver under the facts of the case, the majority restated the legal elements articulated in Phoenix but then elaborated on Phoenix by stating:
To constitute waiver, one's actions or conduct must be distinctly made, must evince in some unequivocal manner an intent to waive, and must be inconsistent with any other intent. See [American Sav. & Loan Ass'n v. Blomquist, 21 Utah 2d at 292, 445 P.2d at 3 (quoting Phoenix Ins. Co. v. Heath, 90 Utah at 194, 61 P.2d at 311-12) ]. See also, e.g., Waterway Terminals Co. v. P.S. Lord Mechanical Contractors, 242 Or. 1, 406 P.2d 556 (1965); Wagner v. Wagner, 95 Wash.2d 94, 621 P.2d 1279 (1980).
669 P.2d at 432. Although Hunter 's elaboration on Phoenix 's waiver definition appeared to make the legal standard for waiver more restrictive, succeeding decisions continued to quote and apply Phoenix 's legal definition. See Parks v. Zions First Nat'l Bank, 673 P.2d 590, 604-05 (Utah 1983); Morgan v. Quailbrook Condominium Co., 704 P.2d 573, 578 (Utah 1985); Plateau Mining Co. v. Division of State Lands & Forestry, 802 P.2d 720, 730 (Utah 1990).
That move back to Phoenix might have resolved the question but for the creation of the Utah Court of Appeals in 1987. Our treatment of our own precedent and dictum is routinely less reverential than that accorded by other Utah state courts. This approach has led us, on occasion, to be less than consistent in the manner in which we state legal principles, a result that has been increasingly fraught with complicating potential since the court of...
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