State v. Bruun

Decision Date28 September 2017
Docket NumberNos. 20140295-CA,20140296-CA,s. 20140295-CA
Citation405 P.3d 905
Parties STATE of Utah, Appellee, v. Allan BRUUN and James Diderickson, Appellants.
CourtUtah Court of Appeals

Clifton W. Thompson, Attorney for Appellant Allan Bruun

Karra J. Porter and J.D. Lauritzen, Salt Lake City, Attorneys for Appellant James Diderickson

Sean D. Reyes, Ryan D. Tenney, and Jeffrey S. Gray, Salt Lake City, Attorneys for Appellee

Judge Stephen L. Roth authored this Opinion, in which Judge Gregory K. Orme and Senior Judge Pamela T. Greenwood concurred.1

Opinion

ROTH, Judge:

¶ 1 Allan Bruun and James Diderickson appeal their convictions on multiple counts of theft and one count each of a pattern of unlawful activity. They further appeal the restitution the district court ordered for those convictions. We affirm.2

BACKGROUND3

¶ 2 In 1989, a Utah County couple (the Victims) bought forty-two acres of land in Saratoga Springs. Although they sold approximately thirteen acres over the years, they retained twenty-nine acres (the Property) as a "nest egg" to fund their retirement.

¶ 3 In August 2007, the Victims entered into two agreements with Bruun and Diderickson (collectively, Defendants) to develop the Property. First, pursuant to a Real Estate Purchase Agreement (REPC), the Victims agreed to sell the Property to Equity Partners LLC, a company in which Defendants held interests through another company, Four Winds Development Group LLC (Four Winds).4 The purchase price was $3.5 million, with $750,000 to be paid to the Victims up front. Second, the Victims and Defendants formed Tivoli Properties LLC (Tivoli) to develop the Property, with Equity Partners owning a 75% interest in the company and the Victims together owning the remaining 25% interest. In connection with the formation of Tivoli, the parties executed an operating agreement (the Operating Agreement or the Agreement) setting out their respective interests and describing, among other things, the purpose, structure, and powers of Tivoli. Equity Partners was designated as Tivoli's Managing Member.

¶ 4 Although under the REPC the Victims were to be paid $750,000 as a down payment toward the purchase of the Property, once the Operating Agreement was signed, Defendants informed the Victims that they were not able to "come up with the money to make the purchase price and continue with [the] purchase agreement as it was." Defendants persuaded the Victims to put the Property up as collateral for a "hard-money loan" to "create some revenue" to begin development. Defendants then entered into a short-term, high-interest loan for the $750,000, which was secured by the Property. Approximately $350,000 of the $750,000 was used to pay off existing mortgages and taxes on the Property, and the remaining money was "put into a checking account ... for Tivoli Properties." This deposit constituted Tivoli's only operating funds and, according to the prosecution, was intended to fund the initial development, which primarily consisted of completing the "entitlement" process through which the city of Saratoga Springs would approve the development of the Property. The Victims understood that once entitlement was obtained from Saratoga Springs, Tivoli would secure a construction loan with better terms to replace the hard-money loan and fund the actual development of the Property. In accordance with the Operating Agreement, the Victims began receiving monthly distributions from Tivoli's funds as this process went forward.

¶ 5 Unbeknownst to the Victims, Equity Partners entered into a joint venture agreement between Tivoli and Hidden Acres LLC, another of Defendants' companies, for development of property located in Centerville, Utah. The Victims were aware of a Hidden Acres project because Defendants had taken them to visit the property at one point, but they were not told that Tivoli had entered into an agreement to develop the Hidden Acres property, nor did they consent to it. In May 2008, Defendants informed the Victims that they were not able to pay the Victims their regular distributions. When asked why, Defendants responded with a "rough draft of what was spent on what" but they did not provide any receipts. The Victims then accessed the Tivoli account themselves and discovered that the remaining balance had been reduced to only $1,083. They reviewed the check-payment history over the previous six months and discovered that Defendants had spent thousands of dollars on expenses that appeared to be unrelated to the development of the Property. For example, there were several checks written to Four Winds for thousands of dollars in management fees; a check for more than $30,000 related to a lot closing at the Hidden Acres development; an earnest money check for purchase of another property; and payments for equipment, landscaping, and dump fees unrelated to the Property. Defendants had not sought the Victims' consent for any of these expenditures, nor were the Victims aware of them until their own investigation.

¶ 6 Around the time the Victims discovered the expenditures from the Tivoli capital account, they found out Tivoli had not made a single payment on the hard-money loan, which was then coming due. To keep the lender from foreclosing on the Property, Defendants asked the Victims to sign an agreement to increase the balance on the short-term loan by another $100,000. One of the Victims refused to sign and instead filed a notice of default in an attempt to get the Property back and to keep it from being auctioned by the hard-money lender.

¶ 7 In November 2008, the Victims and Defendants, along with Equity Partners, Four Winds, Tivoli, and other interested parties, entered into a settlement agreement (the Settlement). As part of the Settlement, the Victims received title to the Property and $174,000, which represented proceeds from the sale of .60 acres of the Property to the Utah Department of Transportation (UDOT). In return, the Victims paid $25,000 to Equity Partners and agreed to release that company from all claims related to its management of Tivoli.

¶ 8 About two and a half years later, in May 2011, the State charged Defendants with a number of criminal offenses related to their dealings with the Victims—twenty-eight counts of theft of varying degrees, targeting individual checks written from the Tivoli operating account, and one count of engaging in a pattern of unlawful activity.

¶ 9 Of central importance in the case was whether Defendants were authorized to make the expenditures represented in the checks. During preliminary hearing proceedings, Defendants argued that the Operating Agreement authorized the expenditures as a matter of law. The magistrate determined, however, that "believable evidence exists to support a conclusion that the checks were unauthorized" under the Operating Agreement and bound Defendants over on the charges.

¶ 10 At trial, Defendants repeated their argument that the Operating Agreement authorized the expenditures, and they note on appeal that "much of the trial was consumed with witnesses reading aloud, and then offering their interpretations of, various language of the Operating Agreement." Indeed, Defendants explained to the jury that the Operating Agreement was "the brains, ... the rules, ... the code book for how [members] conduct [themselves]" and that the jurors would read the Agreement and see for themselves that the "purpose of [Tivoli] ... wasn't just to do the entitlement on [the Property]." Bruun also testified that he believed Defendants were authorized to make the contested expenditures as well as enter into the Hidden Acres joint venture on the basis of their management authority under the Operating Agreement's terms. The State countered that "Tivoli Properties was established with the express purpose of developing [the Property]" and that Defendants spent "nearly a quarter million dollars" "for other purposes," such as "landscaping, dumping, [and] heavy equipment" unrelated to the Property, as well as "other real estate development projects that the Defendants had up in Davis County." The State elicited extensive testimony from the Victims regarding their understanding of particular provisions of the Operating Agreement relevant to the question of whether the disputed checks were authorized. The State also presented an expert forensic accountant, who opined that the Operating Agreement and other representations made during the parties' association did not authorize the majority of the expenditures at issue.

¶ 11 The trial court admitted the Operating Agreement as an exhibit at trial and provided it to the jurors to use, together with other evidence adduced at trial, to determine whether the various contested expenditures amounted to thefts. Defendants did not request that the court provide a jury instruction construing the Operating Agreement and did not object to the lack of any contract interpretation instructions.

¶ 12 Each of the twenty-eight counts of theft the State brought against Defendants related to individual checks drawn on the Tivoli account. For each of Defendants, the State voluntarily dismissed two counts during trial, and the jury returned not-guilty verdicts on fourteen counts and guilty verdicts on twelve counts. The checks the jury determined to be thefts all represented expenditures for development projects other than the Property. For example, the jury determined that the lot closing payment and the equipment, landscaping, and dump fee expenditures were thefts. The jury also convicted Defendants on the one count of pattern of unlawful activity. As part of their sentences, the trial court ordered Defendants to jointly and severally pay restitution in an amount equal to the value of the checks the jury determined constituted thefts—$189,574.33.

¶ 13 Defendants appeal their convictions and the restitution order.

ISSUES

¶ 14 Defendants raise five claims of error. First, they argue that the trial court should have determined as a matter of law that the...

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