Wardley Better Homes and Gardens v. Cannon, 20010245.

Decision Date11 October 2002
Docket NumberNo. 20010245.,20010245.
Citation61 P.3d 1009,2002 UT 99
PartiesWARDLEY BETTER HOMES AND GARDENS, Plaintiff and Respondent, v. Tracy CANNON, Cannon Associates, Inc., a Utah corporation, Leland J. Mascaro, and Sheri Mascaro, Defendants and Petitioners.
CourtUtah Supreme Court

Steven B. Smith, William G. Wilson, Salt Lake City, for plaintiff.

Mark O. Morris, David N. Wolf, Salt Lake City, for petitioners.

Leland J. Mascaro and Sheri Mascaro, defendants pro se.

On Certiorari to the Utah Court of Appeals

HOWE, Justice.


¶ 1 We granted certiorari to review a court of appeals decision affirming the trial court's denial of petitioner Tracy Cannon's motion for attorney fees made under Utah Code Ann. § 78-27-56 (1996). Wardley Better Homes & Garden v. Cannon, 2001 UT App 48, 21 P.3d 235.


¶ 2 Arles Hansen, an agent of respondent real estate brokerage Wardley Better Homes and Gardens, fraudulently changed the duration of four real estate listing agreements between Wardley and property sellers Leland and Sheri Mascaro. The agreements gave Wardley the exclusive right to list the Mascaros' property for sale and required the Mascaros to pay the brokerage a seven percent commission if it found a buyer who would purchase the property for the Mascaros' asking price. ¶ 3 Hansen and the Mascaros signed the agreements November 14, 1993, with the mutual understanding that they would expire the next day, November 15, 1993. They filled out the dates in the first agreement to reflect this understanding; they left the spaces for an expiration date in the other three agreements blank. After obtaining the Mascaros' signatures on each of the listing agreements, Hansen altered the expiration date of the first agreement from November 15, 1993, to November 15, 1994, and wrote the same fraudulent date in the blank spaces of the other three listing agreements.

¶ 4 Subsequently, in 1994, the Mascaros entered into a year-long listing agreement with the real estate brokerage Cannon Associates, Inc., through Tracy Cannon, its principal broker. Ultimately, the Mascaros sold their property to Tracy Cannon, individually, and she received a commission of $115,338.16 for her work as an agent on the sale.

¶ 5 Upon learning that the Mascaros had sold their property, Wardley filed this action against them, alleging that the Mascaros had breached their contract by not paying Wardley a commission when presented with a qualified buyer. The Mascaros counterclaimed, alleging negligence, fraud, and breach of contract. Eventually, Wardley amended its complaint to include causes of action against Tracy Cannon and Cannon Associates, Inc. ("Cannon") for unlawful interference with contract in violation of Utah Code Ann. §§ 61-2-11(15), (18), and 61-2-17(4) (1993 & Supp.1996), interference with a prospective economic relationship, and conversion.

¶ 6 Deposition testimony indicated that Wardley's decision to bring suit against the Mascaros and Cannon was made jointly by Hansen, Hansen's wife, who was also a Wardley agent, and Dougan Jones and Ken Tramp, brokers and co-managers of the Wardley office out of which the Hansens operated. Under an agreement with Wardley, the Hansens, who still worked for Wardley at that time, were obligated to pay eighty percent of the litigation costs, and Wardley was obligated to pay the other twenty percent. After a bench trial, the court ruled against Wardley on all claims, holding that Wardley had failed to establish any cause of action against Cannon. The court found further that Hansen had fraudulently induced the Mascaros to sign the listing agreements by assuring them that the agreements would be limited to one day.

¶ 7 Following the trial, Cannon and the Mascaros moved for an award of attorney fees pursuant to section 78-27-56 of the Utah Code, which provides:

(1) In civil actions, the court shall award reasonable attorney's fees to a prevailing party if the court determines that the action or defense to the action was without merit and not brought or asserted in good faith, except under Subsection (2).
(2) The court, in its discretion, may award no fees or limited fees against a party under Subsection (1), but only if the court:
(a) finds the party has filed an affidavit of impecuniosity in the action before the court; or
(b) the court enters in the record the reason for not awarding fees under the provisions of Subsection (1).

Utah Code Ann. § 78-27-56 (1996).

¶ 8 The trial court denied Cannon's motion. It reasoned that because Wardley "represented that it did not have knowledge of Hansen's fraudulent acts" and because Wardley did not pursue "its claims to hinder, delay, defraud, or otherwise take unconscionable advantage of Cannon," the case was not brought in bad faith and was not without merit. Cannon appealed, and we transferred the case to the court of appeals.

¶ 9 Before the court of appeals, Cannon relied on Hodges v. Gibson Products Co., 811 P.2d 151 (Utah 1991), asserting that Hansen's knowledge of his own fraud—specifically his knowledge that the listing agreements were intended by both parties to be for only one day—should be imputed to Wardley. Cannon argued further that once knowledge of Hansen's fraud was imputed to Wardley, Wardley's action to enforce what it knew, by imputation, to be nonexisting contractual obligations was without merit and brought in bad faith. Thus, Cannon asserted, the trial court should have awarded her attorney fees. ¶ 10 The court of appeals rejected Cannon's argument and affirmed the trial court's denial of attorney fees. Wardley Better Homes & Garden v. Cannon, 2001 UT App 48, ¶¶ 7-12, 21 P.3d 235. It held that because a finding of bad faith is a factual question, on appeal Cannon was required to marshal the evidence supporting the trial court's finding that Wardley did not act in bad faith. Id. at ¶ 7 (citing Valcarce v. Fitzgerald, 961 P.2d 305, 312 (Utah 1998)). Because Cannon failed to marshal the evidence in support of that finding, the court of appeals concluded that it must assume the record supported the trial court's finding and that such an assumption was "fatal" to Cannon's appeal. Id.

¶ 11 The court of appeals also rejected Cannon's argument on the merits, holding that Hansen's knowledge could not be imputed to Wardley for the purpose of determining entitlement to attorney fees. Id. at ¶¶ 8-11, 21 P.3d 235. "[V]icarious liability," it reasoned, "[is] a theory ordinarily applied only in tort and in limited circumstances to punitive damages," id. at ¶ 8, and "[t]here is no legal support for [Cannon's] claim that vicarious liability should be applied in a manner that imputes the agent's knowledge to the principal to answer for the principal's own actions." Id. at ¶ 11. Thereafter, Cannon petitioned for, and we granted, certiorari.


¶ 12 "We review the court of appeals' decision for correctness, and give its conclusions of law no deference." Newspaper Agency Corp. v. Auditing Div., 938 P.2d 266, 267 (Utah 1997).


¶ 13 Cannon asserts that the court of appeals erred by holding (1) that Cannon's failure to marshal the evidence was fatal to her appeal; (2) that Hansen's knowledge may not be imputed to Wardley; and (3) that, in any event, Cannon was not entitled to attorney fees under section 78-27-56 of the Utah Code. We address each issue in turn.


¶ 14 Cannon argues that the court of appeals erred by holding that Cannon's failure to marshal the evidence was fatal to her appeal. To mount a successful challenge to a trial court's findings of fact, an appellant must marshal the evidence supporting the trial court's findings. See, e.g., Cornish Town v. Koller, 758 P.2d 919, 922 (Utah 1988)

. Challenges to a trial court's legal determinations, however, do not require an appellant to marshal the evidence. Here, Cannon does not attack the trial court's factual findings. Instead, she contends that the trial court erred as a matter of law by refusing to impute knowledge of Hansen's conduct to Wardley. Cannon is correct that whether an agent's knowledge should be imputed to his principal raises a legal question. See Hodges, 811 P.2d at 159 (imputing knowledge of an agent to his principal "as a matter of law"). Consequently, Cannon's failure to marshal the evidence should not have been fatal to her appeal. Thus, the court of appeals erred in summarily rejecting Cannon's appeal on that basis.


¶ 15 Cannon next contends that the court of appeals erred by refusing to impute Hansen's knowledge of his own fraudulent conduct to Wardley.

A. Imputation of Knowledge Generally

¶ 16 Under longstanding Utah law, "the knowledge of [an] agent concerning the business which he is transacting for his principal is to be imputed to his principal." First Nat'l Bank v. Foote, 12 Utah 157, 168, 42 P. 205, 207 (1895). A principal is imputed with "[a]n agent's knowledge of matters within the scope of his or her authority [because] ... it is presumed that such knowledge will be disclosed to the principal." Macris v. Sculptured Software, Inc., 2001 UT 43, ¶ 21, 24 P.3d 984. This rule is broad, encompassing "`all notice or knowledge relating to the subject-matter of the agency which the agent acquires or obtains while acting as such agent and within the scope of his authority.'" Latses v. Nick Floor, Inc., 99 Utah 214, 222, 104 P.2d 619, 623 (1940) (emphasis added) (quoting 2 F. Mechen, Law of Agency § 1813, at 1397 (2d ed.1914)); see also 3 C.J.S. Agency § 432 (1973) ("[A] principal is affected with constructive knowledge, regardless of his actual knowledge, of all material facts of which his agent receives notice or acquires knowledge while acting in the course of his employment and within the scope of his authority, although the agent does not in fact inform his principal thereof." (emphasis added)).

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