Steenblik v. Lichfield

• Decision Date: 03 November 1995
• Docket Number: No. 930358,930358
• Citation: 906 P.2d 872
• Parties: Blue Sky L. Rep. P 74,074 Lawanna W. STEENBLIK, individually and as trustee of the Lawanna W. Steenblik Family Trust Plan, Plaintiff and Appellee, v. Aaron LICHFIELD, Robert I. Rasmussen, Scott Craw, Zephor Planning Corporation dba Zephor Advisors, Inc., and Debra Rasmussen, Defendants and Appellant.
• Court: Utah Supreme Court

Page 872

906 P.2d 872

Blue Sky L. Rep. P 74,074

Lawanna W. STEENBLIK, individually and as trustee of the Lawanna W. Steenblik Family Trust Plan, Plaintiff and Appellee, v. Aaron LICHFIELD, Robert I. Rasmussen, Scott Craw, Zephor Planning Corporation dba Zephor Advisors, Inc. and Debra Rasmussen, Defendants and Appellant.

No. 930358.

Supreme Court of Utah.

Nov. 3, 1995.

L. Rich Humpherys and David C. Richards, Salt Lake City, for Steenblik.

Raymond N. Malouf, Logan, and R. Stephen Marshall, and Matthew M. Durham, Salt Lake City, for Lichfield.

STEWART, Associate Chief Justice:

Plaintiff Lawanna Steenblik sued Zephor Planning Corporation, a financial planning company through which she invested and lost her life savings, and four individuals connected with Zephor in various capacities. Appellant Aaron Lichfield was Zephor's vice-president and a director. He was also a financial planner. The other individual defendants were Robert I. Rasmussen, Zephor's president, a director, and a financial planner; his wife, Debra Rasmussen, the corporate secretary; and Scott Craw, a financial planner. Steenblik alleged violations of Utah's Uniform Securities Act, common law fraud, constructive fraud, and negligence. The jury found all defendants liable. Only Lichfield appeals.

I. FACTS

Steenblik's association with defendants began on the day of her husband's death. Rasmussen, who held a local ecclesiastical position in addition to his positions at Zephor, came to her home to console her married son, Steven. Shortly after her husband's funeral, Steenblik, at the urging of her son, contacted Rasmussen for advice on investing her life savings and the insurance proceeds from her husband's death. Rasmussen reviewed all Steenblik's assets and in December 1987 developed a financial plan for her. The first page of the plan stated, "Prepared By: Zephor Advisors Inc.," and the plan referred to "the Zephor Corporation" throughout. Unknown to Steenblik, Zephor's corporate authority had been suspended by the State of Utah in November 1987.

In January 1988, Rasmussen invited Steenblik to his office. Outside the building stood a sign identifying the business as Zephor. At the Zephor office, Rasmussen convinced her to invest a total of $45,000 in three companies, Equi-Healthcare, Equi-Development, and PLD Interior. At this point, Steenblik had not met Aaron Lichfield, nor is there any evidence that he knew of the above three investments made in January.

On April 27, 1988, Rasmussen encouraged Steenblik to lend money to Healthcare Professional Services (HPS) and Fairway, Inc. At the Zephor offices, Rasmussen introduced her to Aaron Lichfield, who, in addition to being vice-president of Zephor, was president of HPS and treasurer of Fairway. Rasmussen also had a personal interest in both HPS and Fairway. Steenblik was assured that HPS was a sound investment. However, no one disclosed the fact that HPS was a proposed start-up company that had no clients, operating history, assets, or stock. In fact, HPS was not even incorporated for another two months. To induce Steenblik to loan HPS $20,000, both Rasmussen and Lichfield signed a loan disclosure statement purporting to secure the debt with HPS preferred stock.

At the same meeting, Steenblik was also persuaded to lend $35,000 to Fairway, Inc. Fairway has never been a corporation. The only evidence of its existence as a company of any kind was a "corporate" bank account at First Interstate Bank of Utah. The signature card authorized Rasmussen, as Fairway's president, and Lichfield, as its treasurer, to withdraw money. The card was signed by both men. The loan was purportedly secured by nonexistent preferred stock.

On October 20, 1988, Steenblik again met both Rasmussen and Lichfield at the Zephor offices, where they induced her to lend another $8,000 to HPS. They signed a loan disclosure statement purporting to secure the loan with HPS stock. They also sold her $3,000 of what they claimed was valuable stock in Rex Mining Company, an Arizona corporation that had been dissolved. Both Rasmussen and Lichfield were principals in Rex Mining. They told Steenblik that the value of the stock was backed by the company's mining equipment, when, in fact, the company owned no equipment. Lichfield signed the stock purchase agreement for Rex Mining.

Steenblik frequently called Rasmussen to check on her investments. When Rasmussen was out, Lichfield responded to her calls and continually assured her that her investments were safe and secure.

In November 1988, Rasmussen urged Steenblik to lend $12,000 to Green Construction Co. Rasmussen was a principal in Green Construction. Steenblik explained that her only remaining money was tied up in an individual retirement account and that she would suffer severe interest and tax penalties for early withdrawal. When Rasmussen assured her that all penalties would be covered if she made the loan, she agreed. Lichfield went to Steenblik's home to deliver a promissory note and collect the money. Although Lichfield was not a principal in Green Construction, Rasmussen had promised Lichfield a share in the company if Lichfield helped raise capital. When Lichfield arrived at plaintiff's home, Steenblik noted some irregularities in the promissory note and initially refused to go through with the loan. To obtain the money, Lichfield altered the instrument to plaintiff's satisfaction and collected the $12,000.

Lichfield's relationship with Rasmussen and Zephor continued until March 1989, when Lichfield resigned. In his letter of resignation, Lichfield complained that he could no longer manage to cover Zephor's and Rasmussen's numerous overdue and unsatisfied obligations.

After Steenblik's money was exhausted, the payments to her from the investments stopped. Unable to recover either the principal or the interest on her loans and investments, Steenblik sued. A jury found Lichfield liable for violation of the Utah Uniform Securities Act, for common law fraud, and for negligence and awarded Steenblik $50,000 in damages against Lichfield. ¹ The jury also found that the damages were the proximate result of Lichfield's "reckless or intentional" violations of the Act, which entitled plaintiff to treble damages, reasonable attorney fees, and costs pursuant to Utah Code Ann. § 61-1-22(2). In addition, the jury found Lichfield vicariously liable to Steenblik for 20% of Rasmussen's and Zephor's negligence for a total of $26,914.95 and awarded her an additional $50,000 in punitive damages against Lichfield. On this appeal, Lichfield argues that the jury verdict was against the clear weight of the evidence with respect to the claims (1) under the Act, including the finding that he recklessly or intentionally violated the Act, (2) for vicarious liability, and (3) for punitive damages. Lichfield also argues that the vicarious liability award against him wrongfully gave plaintiff a double recovery. In addition, he contends that the trial court's treble damage award under the Act was duplicative of the jury's punitive damage award. Finally, Lichfield argues that the court committed reversible error by allowing plaintiff's expert to testify about Lichfield's intent. We affirm the judgment except for the punitive damages award, which duplicates the treble damages awarded under the Act.

To support a claim that the jury verdict is against the clear weight of the evidence, an appellant must marshal all of the evidence that supports the findings and demonstrate that when viewed in the light most favorable to the verdict, there is insufficient evidence to support it. In re Estate of Beesley, 883 P.2d 1343, 1349 (Utah 1994); State v. Germonto, 868 P.2d 50, 55 (Utah 1993); Von Hake v. Thomas, 705 P.2d 766, 769 (Utah 1985). All reasonable inferences must be drawn in favor of the verdict. See Von Hake, 705 P.2d at 769. If the evidence taken in the light most favorable to the verdict supports the verdict, we will affirm. See Germonto, 868 P.2d at 55.

II. VIOLATION OF UTAH UNIFORM SECURITIES ACT

Lichfield attacks the verdict finding him liable for violating the Utah Uniform Securities Act. He argues (1) that Zephor's corporate authority was suspended in November 1987, prior to any of Steenblik's investments, (2) that his position with Zephor as a director and an officer was terminated when Zephor's corporate authority was suspended, and (3) that his personal involvement with Steenblik was so nominal that he had no legal liability. Lichfield contends that the evidence shows he had no knowledge that Rasmussen had induced Steenblik to invest through Zephor and that he assumed that plaintiff was Rasmussen's personal client, not Zephor's. He further claims that although he continued to be involved in various business dealings with Rasmussen after Zephor was suspended, he did so only on an informal, ad hoc basis, not as a principal of Zephor. In short, Lichfield argues that the evidence shows that his relationship was severed with Zephor and Rasmussen to such an extent that the jury could not reasonably find him liable under the Act.

Contrary to Lichfield's contentions, the evidence clearly shows that Lichfield's relationship with Zephor continued after the suspension of its corporate authority. In a letter to Rasmussen dated March 6, 1989, Lichfield complained that work for Zephor was consuming "at least 50%" of Lichfield's time and that "[a]s you may perceive, I am sick of making excuses for you [Rasmussen] and Zephor, so I QUIT." Lichfield complained about his involvement with other businesses including Rex Mining, Green Construction, and HPS, and he withdrew from them also. Significantly, he referred to these companies as "Zephor skeletons."

Lichfield also had personal involvement with Steenblik's investments that manifested a continuing relationship with Zephor. He met with Steenblik in April, October, and November 1988. During those three meetings, Steenblik was induced to invest $78,000...