Tooele Assocs. Ltd. v. Tooele City

• Decision Date: 02 August 2012
• Docket Number: No. 20100504–CA.,20100504–CA.
• Citation: 284 P.3d 709,714 Utah Adv. Rep. 24,2012 UT App 214
• Parties: TOOELE ASSOCIATES LIMITED PARTNERSHIP, Plaintiff, Appellant, and Cross-appellee, v. TOOELE CITY, Defendant, Appellee, and Cross-appellant.
• Court: Utah Court of Appeals

284 P.3d 709

714 Utah Adv. Rep. 24

2012 UT App 214

TOOELE ASSOCIATES LIMITED PARTNERSHIP, Plaintiff, Appellant, and Cross-appellee,

v.TOOELE CITY, Defendant, Appellee, and Cross-appellant.

No. 20100504–CA.

Court of Appeals of Utah.

Aug. 2, 2012.

Bruce R. Baird, Paxton R. Guymon, and Lauren Parry Johnson, Salt Lake City, for Appellant and Cross-appellee.

George M. Haley and Christopher R. Hogle, Salt Lake City, for Appellee and Cross-appellant.

Before Judges VOROS, ORME, and THORNE.

OPINION

VOROS, Associate Presiding Judge:

¶ 1 Tooele Associates Limited Partnership sued Tooele City over the development of a planned residential community. The City counterclaimed. Following a three-week trial, the jury returned a special verdict finding that the City had caused Tooele Associates $22.5 million in damages, and Tooele Associates had caused the City $1.82 million in damages. The City moved for entry of judgment awarding damages in its favor and no damages for Tooele Associates; Tooele Associates opposed the motion and moved for entry of judgment in its favor. The trial court ruled that the jury's special verdict was irreconcilably inconsistent, struck the verdict, and declared a mistrial. Tooele Associates petitioned for interlocutory appeal and the City cross-petitioned. We granted those petitionswith respect to the issues discussed below. We now reverse the trial court's post-trial ruling and remand.

BACKGROUND

¶ 2 Tooele Associates entered into a series of agreements with the City involving the development of a planned residential community known as Overlake. Among other things, the agreements required Tooele Associates to build certain public improvements and required the City to provide culinary water for the development. However, as the trial court stated, this “development of massive proportions” led to “disputes of a similar scale.” Although the present dispute encompasses a range of alleged acts and omissions on both sides, we recount only the portion of the dispute relevant to the resolution of this appeal.

¶ 3 Central to this dispute are two sets of documents: a Development Agreement, which set forth the basic rights and obligations of the parties relating to the development, and several Bond Agreements, which obligated Tooele Associates to complete and to provide security for the completion of certain public improvements.¹ Tooele Associates sued the City, alleging breach of the Development Agreement and breach of the covenant of good faith and fair dealing. The City counterclaimed, alleging breach of the Development Agreement and Bond Agreements.²

¶ 4 Many of Tooele Associates' specific allegations of breach focus on public improvements it was required to build under the Development Agreement and Bond Agreements. Tooele Associates claimed that the City breached the Development Agreement and the covenant of good faith and fair dealing in several ways. These included misapplying the City's public improvement ordinances in relation to Overlake, requiring the public improvements to meet standards not clearly set forth in any agreement and not required of other similarly situated developers, creating arbitrary and incomplete punch lists of items that needed to be fixed for the public improvements to be considered complete, slowing or refusing to make final inspections of the public improvements, refusing to recognize prior admissions that certain public improvements were complete, and ultimately refusing to accept certain public improvements as complete. Tooele Associates also claimed that the City's refusal to extend the Development Agreement after the initial ten-year period constituted breach. Tooele Associates claimed that these and other alleged breaches prevented it from completing the development and realizing the financial benefit of the culinary water to be provided by the City.

¶ 5 The City denied the allegations of breach and argued, among other things, that Tooele Associates failed to complete the public improvements and that this failure constituted a material breach that excused the City from providing any benefits under the agreement. The City also claimed damages for incomplete public improvements. In response, Tooele Associates alleged that the City waived any claim or defense based on incomplete public improvements.

¶ 6 Following a three-week trial in June 2009, the jury returned a special verdict addressing thirty-three questions submitted by the court. In sum, on Tooele Associates' claims, the jury found that the City had materially breached the Development Agreement and the covenant of good faith and fair dealing in eight specific ways. On the City's affirmative defense of excuse, the jury found that Tooele Associates had materially breached the Development Agreement in two ways, but that the City had waived its claim of material breach. On the City's counterclaims, the jury found that Tooele Associates' failure to complete public improvements was a breach—without specification of materiality—of both the Development Agreement and the Bond Agreements, and that these breaches were not waived. The jury found Tooele Associates' damages to be $22.5 million and the City's damages to be $1.82 million.

¶ 7 After the jury returned the special verdict, the City moved for entry of judgment in its favor. Based on the jury's finding that Tooele Associates breached the Bond Agreements by not completing the public improvements, the City argued that Tooele Associates could not recover any damages because the Bond Agreements allowed the City to withhold approval for future development phases in the event of incomplete public improvements (the Bond Agreement defense). Tooele Associates opposed the City's motion and moved for entry of judgment in its favor.

¶ 8 Faced with competing claims that the jury verdict favored each party, the trial court carefully examined the special verdict for inconsistencies and requested supplemental briefing on the issue. Each party argued below, and argues now on appeal, that the verdict is consistent in its favor. The trial court ruled the verdict irreconcilably inconsistent.

ISSUE AND STANDARD OF REVIEW

¶ 9 Tooele Associates and the City each claim that the trial court erred by finding the jury verdict irreconcilably inconsistent. We review for correctness a trial court's determination of whether a special verdict is inconsistent. See Neff v. Neff, 2011 UT 6, ¶¶ 76, 86, 247 P.3d 380 (apparently applying a correctness standard of review); Dishinger v. Potter, 2001 UT App 209, ¶¶ 28–30, 47 P.3d 76 (same); see also Norris v. Sysco Corp., 191 F.3d 1043, 1047 (9th Cir.1999) (“We review a district court's determination regarding a claim that the jury's verdict is internally inconsistent de novo.”).

ANALYSIS

¶ 10 Our duty is to reconcile special verdicts if possible. “ ‘Where the possibility of inconsistency in jury interrogatories or special verdicts exists, [we] will not presume inconsistency; rather, [we] will seek to reconcile the answers if possible.’ ” Neff, 2011 UT 6, ¶ 76, 247 P.3d 380 (alterations in original) (quoting Bennion v. LeGrand Johnson Constr. Co., 701 P.2d 1078, 1083 (Utah 1985)). “ ‘When reviewing claims that a jury verdict is inconsistent, we must accept any reasonable view of the case that makes the jury's answers consistent.’ ” Id. ¶ 49 n. 20 (quoting Heno v. Sprint/United Mgmt. Co., 208 F.3d 847, 852 (10th Cir.2000)). “Accordingly, a jury's verdict will be sustained, even in the face of possible inconsistency, if the judgment can ‘be read harmoniously.’ ” Id. ¶ 76 (quoting Bennion, 701 P.2d at 1083). Therefore, “the question for this court is whether it is reasonable to construe the jury's verdict with regard to these claims in a manner that gives effect to all of the jury's responses on the special verdict form.” Id. Otherwise stated, “[g]iven the choice of two competing reasonable alternatives, we are bound to adopt the construction of the verdict that does not nullify the jury's answers.” Id. ¶ 85.

¶ 11 When reconciling apparent inconsistencies on a special verdict form, “the answers to the questions are to be construed in the context of the surrounding circumstances of the case and in connection with the pleadings, instructions, and issues submitted.” Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure: Civil § 2510 (3d ed. 2011); see also Neff, 2011 UT 6, ¶ 85, 247 P.3d 380 (noting the importance of the jury instructions in the court's attempt to reconcile responses on a special verdict form). Furthermore, we presume that the jury followed the jury instructions. See Moore v. Burton Lumber & Hardware Co., 631 P.2d 865, 869 (Utah 1981); State v. Nelson, 2011 UT App 107, ¶ 4, 253 P.3d 1094 (“In the absence of the appearance of something persuasive to the contrary, we assume that the jurors were conscientious in performing ... their duty, and that they followed the instructions of the court.” (citation and internal quotation marks omitted)), cert. denied,255 P.3d 684 (Utah 2011). Finally, if special verdicts may be reconciled, the trial court should apply the law and render a verdict consistent with the jury's findings. SeeUtah R. Civ. P. 58A(a) ( “If there is a special verdict or a general verdict accompanied by answers to interrogatories returned by a jury, the court shall direct the appropriate judgment, which the clerk shall promptly sign and file.” (emphasis added)); Dishinger, 2001 UT App 209, ¶ 17, 47 P.3d 76 (“ ‘[I]n [the] case of a special verdict, the jury only finds the facts, and the court applies the law thereto and renders the verdict.’ ” (second alteration in original) (citation omitted)).

¶ 12 In the present case, the trial court identified two apparent inconsistencies in the special verdict. However, we hold that the special verdict is reconcilable. The key to reconciling the special verdict lies in the distinction between material and nonmaterial breach.

¶ 13 A party must show material breach to prevail...