E & H Land, Ltd. v. Farmington City ( 2014 )

2014 UT App 237_________________________________________________________
THE UTAH COURT OF APPEALS
E&H LAND, LTD.,
Plaintiff and Appellant,
v.
FARMINGTON CITY,
Defendant and Appellee.
Opinion
No. 20130288-CA
Filed October 2, 2014
Second District Court, Farmington Department
The Honorable Glen R. Dawson
No. 120700541
Stanford P. Fitts and Casey W. Jones, Attorneys
for Appellant
Jody K. Burnett and George A. Hunt, Attorneys
for Appellee
JUDGE STEPHEN L. ROTH authored this Opinion, in which JUDGES
MICHELE M. CHRISTIANSEN and JOHN A. PEARCE concurred.
ROTH, Judge:
¶1 This case involves a contract dispute between E&H Land,
Ltd. (E&H) and Farmington City. Farmington purchased a
narrow strip of land that crossed E&H’s property in 2011 as part
of a development plan connecting two streets in Davis County—
Clark Lane and Park Lane. E&H argues that the parties’ real
estate purchase agreement (the REPC) requires Farmington to
use the land to build a roadway and an intersection. Farmington
argues that the agreement allows the city to build the
intersection wherever it thinks best. The district court granted
E&H Land v. Farmington City
Farmington’s motion for summary judgment, concluding that
the REPC was unambiguous and that there was no language
obligating Farmington to construct an intersection in any
particular location. We conclude that the REPC is ambiguous on
that question, and we remand to the district court to consider
extrinsic evidence of the parties’ intent.
BACKGROUND1
¶2 Farmington contacted E&H in May 2010 to discuss
Farmington’s plans to extend Park Lane west across E&H’s land
to connect it to Clark Lane. After some preliminary negotiations,
E&H sent Farmington a proposal in July 2010 requesting
‚*m+ultiple guaranteed access points *to the new road+ with no
more than 220* feet+ of separation from road intersections.‛ The
Mayor replied by letter in September, informing E&H that
Farmington ‚cannot guarantee the number or location of
potential property access points without knowing how the
property will develop.‛
¶3 According to E&H, city officials then met with E&H’s
representatives in October 2010 and agreed, in a face-to-face
meeting, that the new intersection ‚would be centered along
E&H’s *e+astern property line.‛ This location would essentially
leave both E&H and an adjacent property owner with two
halves of two different intersection corners, making these areas
difficult to develop. Dave Millheim, Farmington’s city manager
at the time, sent an email in December 2010 encouraging E&H
and the neighboring property owner to ‚work out . . . property
transfers‛ so that each owner would ‚get control of the
1. When reviewing a decision to grant summary judgment, we
must ‚review the facts and all reasonable inferences drawn
therefrom in the light most favorable to the nonmoving party,‛
and we recite the facts accordingly. Hale v. Beckstead, 2005 UT 24,
¶ 2, 116 P.3d 263 (citation and internal quotation marks omitted).
20130288-CA 2 2014 UT App 237E&H Land v. Farmington City
respective corners‛ of the intersection after the road was
complete.2
¶4 One month later, E&H entered into the REPC with
Farmington to sell the city about 1.5 acres. Exhibits A and B to
the REPC contain a legal description of the conveyed parcel and
a plat map of the property. The exhibits show a narrow strip of
land extending northeast from Clark Lane across the southeast
corner of E&H’s land that abruptly flares outward to form a
shape resembling half of an intersection on E&H’s eastern
boundary. The parties’ dispute in this case hinges on the
interpretation of paragraph 6 of the REPC, which provides,
6. Property Improvements. It is
specifically understood by the Parties that
[Farmington] is purchasing the Property with the
intent that it will be used for a realignment of the
future Park Lane extension. Any current or future
owners of parcels abutting the Property shall be
required to install any public improvements
necessary to serve those parcels and [E&H] shall
have no obligation to such subsequent purchaser
other than those obligations customarily imposed
under ordinance or common law.
The agreement also contains an integration clause, providing
that the REPC, and ‚any exhibits incorporated by reference,
constitutes the final expression of the parties’ agreement and is a
complete and exclusive statement of the terms of that
agreement‛ that ‚supersedes all prior or contemporaneous
negotiations, discussions and understandings, whether oral or
written or otherwise.‛
2. As we discuss later, it is not necessary to examine extrinsic
evidence to determine whether the parties’ contract is facially
ambiguous. See infra ¶¶11–13. We have described the parties’
preliminary negotiations only to provide context to frame their
arguments on appeal.
20130288-CA 3 2014 UT App 237E&H Land v. Farmington City
¶5 One year later, before any construction had occurred,
Farmington began considering a proposal to ‚shift the location
of the intersection . . . further to [the] north,‛ entirely off E&H’s
property. E&H claimed that shifting the location of the
intersection would decrease the value of its property by
$500,000. Farmington eventually decided to move the
intersection, citing an engineering report that recommended the
move for safety reasons. E&H sued Farmington for fraud,
negligent misrepresentation, breach of contract, breach of the
covenant of good faith and fair dealing, and promissory
estoppel. Its complaint also requested reformation of the REPC
based on a mutual mistake. Farmington moved for summary
judgment on all claims, arguing that no language in the contract
required it to build the intersection in a particular location and
that the integration clause prohibited the court from considering
‚prior or contemporaneous discussions, negotiations, or
understandings‛ to the contrary. The district court granted
Farmington’s motion and denied E&H’s rule 56(f) motion for
additional discovery. E&H now appeals.
ISSUES AND STANDARDS OF REVIEW
¶6 E&H argues that the district court incorrectly granted
summary judgment to Farmington on E&H’s claims for breach
of contract, reformation due to mutual mistake, promissory
estoppel, and breach of the covenant of good faith and fair
dealing.3 Summary judgment is warranted ‚if the pleadings,
depositions, answers to interrogatories, and admissions on file,
3. E&H also appeals the district court’s denial of its rule 56(f)
motion. However, because we conclude that summary judgment
was inappropriate, we need not address the merits of the rule
56(f) motion. See Utah R. Civ. P. 56(f) (providing that a court may
deny a motion for summary judgment ‚*s+hould it appear from
the affidavits of a party opposing the motion that the party
cannot for reasons stated present by affidavit facts essential to
justify the party’s opposition‛ and ‚order a continuance to
permit affidavits to be obtained‛).
20130288-CA 4 2014 UT App 237E&H Land v. Farmington City
together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.‛ Utah R. Civ. P. 56(c). We
review a district court’s decision to grant summary judgment for
correctness. Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600.
¶7 The merits of several of E&H’s claims hinge on the district
court’s interpretation of the REPC. ‚The interpretation of a
contract is a question of law, which we review for correctness,
giving no deference to the ruling of the [district] court.‛ McNeil
Eng’g & Land Surveying, LLC v. Bennett, 2011 UT App 423, ¶ 7,
268 P.3d 854 (citation and internal quotation marks omitted).
‚Likewise, the determination of whether a contract is facially
ambiguous is a question of law, which we review for
correctness.‛ Id.ANALYSIS
¶8 The parties’ central dispute in this case boils down to the
meaning of the words in paragraph 6 of the REPC: ‚It is
specifically understood by the Parties that [Farmington] is
purchasing the Property with the intent that it will be used for a
realignment of the future Park Lane extension.‛ E&H argues that
the parties used those words to refer to a roadway and an
intersection that Farmington had agreed to build across E&H’s
land to connect Clark Lane and Park Lane. Farmington denies
that the parties ever reached an agreement about the location of
the intersection and argues that the language of the contract does
not reasonably support any other conclusion. Paragraph 6, with
our emphasis, provides,
6. Property Improvements. It is
specifically understood by the Parties that
[Farmington] is purchasing the Property with the
intent that it will be used for a realignment of the future
Park Lane extension. Any current or future owners
of parcels abutting the Property shall be required to
install any public improvements necessary to serve
20130288-CA 5 2014 UT App 237E&H Land v. Farmington City
those parcels and [E&H] shall have no obligation to
such subsequent purchaser other than those
obligations customarily imposed under ordinance
or common law.
¶9 The REPC does not define ‚Park Lane extension,‛ but
exhibit A to the contract—which contains a legal description of
the conveyed parcel—is entitled, ‚Park Lane Extension Over E
and H Property.‛ And E&H points out that two drawings of the
parcel in exhibit B depict a ‚narrow strip‛ of land that cuts
‚across E&H’s property‛ before flaring into a ‚lead-off‛ portion
on the other end of its land that is shaped like half of an
intersection. E&H argues that the drawings and legal description
‚illustrate that Farmington purchased the exact land necessary‛
to build a roadway and intersection connecting Clark Lane and
Park Lane on E&H’s land, so paragraph 6 ‚obligates Farmington
to use the [p]urchased *p+roperty for‛ both ‚the *r+oadway and
[i]ntersection.‛ In the alternative, E&H argues that the parties’
prior written communications demonstrate that ‚the REPC is at
a minimum, ambiguous‛ about the location of the intersection.
E&H urges us to consider extrinsic evidence to determine if
there is a facial ambiguity even though the REPC has an
integration clause. See Ward v. Intermountain Farms Ass’n, 907
P.2d 264, 268 (Utah 1995) (‚When determining whether a
contract is ambiguous, any relevant evidence must be
considered.‛).
¶10 Farmington maintains that ‚*n+o statement, paragraph or
sentence‛ in the REPC ‚contain*s+ any mention of the proposed
location of the intersection between Park Lane and Clark Lane.‛
Consequently, Farmington argues that there is unambiguously
no ‚agreement respecting the location of the intersection . . . that
*Farmington+ somehow breached.‛ Further, Farmington points
out that the REPC has an integration clause, which provides that
the REPC is ‚the final expression of the parties’ agreement and is
a complete and exclusive statement of the terms of that
agreement.‛ In light of that clause, Farmington maintains, it is
inappropriate to consider any extrinsic evidence that would
create an obligation about which the REPC is conspicuously
20130288-CA 6 2014 UT App 237E&H Land v. Farmington City
silent. We conclude that extrinsic evidence is not necessary to
determine that the REPC is facially ambiguous with respect to
whether the parties agreed to the location of the intersection. As
a consequence, we also conclude that the district court
inappropriately granted Farmington summary judgment on the
breach of contract, breach of covenant of good faith and fair
dealing, and mutual mistake claims.
I. Ambiguity in the Contract
¶11 E&H argues that the district court ‚erred by not
considering the relevant extrinsic evidence that E&H presented
which clearly demonstrated that the REPC was, at a minimum,
ambiguous.‛ E&H urges us to consider a variety of emails
between the parties that it argues demonstrate that ‚E&H sold
its land to Farmington based upon the understanding that
Farmington would use it to build‛ a roadway and an
intersection. In support, E&H cites a line of cases indicating that
courts should consider extrinsic evidence of the parties’ intent to
determine if otherwise unambiguous terms are susceptible to ‚at
least two plausible meanings.‛ See, e.g., Ward, 907 P.2d at 268
(‚When determining whether a contract is ambiguous, any
relevant evidence must be considered.‛); McNeil Eng’g & Land
Surveying, LLC, 2011 UT App 423, ¶ 14 (‚In determining whether
the term ‘employment’ is ambiguous, we consider relevant
extrinsic evidence.‛).
¶12 E&H is correct that ‚*u+nder Utah law, if the initial review
of the plain language of the contract, within its four corners,
reveals no patently obvious ambiguities, the inquiry into
whether an ambiguity exists does not end there.‛ See State v.
Davis, 2011 UT App 74, ¶ 4, 272 P.3d 745 (citation and internal
quotation marks omitted). Courts may examine extrinsic
evidence that uncovers ‚a latent ambiguity‛ that is not apparent
from ‚the face of the instrument.‛ Watkins v. Henry Day Ford,
2013 UT 31, ¶ 28, 304 P.3d 841 (citations and internal quotation
marks omitted). Here, however, it is not necessary to consider
extrinsic evidence because we determine that the language in the
REPC is facially ambiguous.
20130288-CA 7 2014 UT App 237E&H Land v. Farmington City
¶13 Unlike latent ambiguities, facial ambiguities are apparent
from the face of a document. Id. ¶ 27. A facial ambiguity may
exist because the contract is ‚unclear, it omits terms, or the terms
used to express the intention of the parties may be understood to
have two or more plausible meanings.‛ Saleh v. Farmers Ins.
Exch., 2006 UT 20, ¶ 15, 133 P.3d 428 (citation and internal
quotation marks omitted). ‚In interpreting a contract, [w]e look
to the writing itself to ascertain the parties’ intentions, and we
consider each contract provision . . . in relation to all of the
others, with a view toward giving effect to all and ignoring
none.‛ WebBank v. American Gen. Annuity Serv. Corp., 2002 UT 88,
¶ 18, 54 P.3d 1139 (alteration and omission in original) (citation
and internal quotation marks omitted). If the contractual terms
are ‚unambiguous, the parties’ intentions are determined from
the plain meaning‛ of the words the parties used to describe
their agreement. Id. ¶ 19. But if a ‚judge determines that the
contract is facially ambiguous, parol evidence of the parties’
intentions should be admitted.‛ Daines v. Vincent, 2008 UT 51,
¶ 25, 190 P.3d 1269 (citation and internal quotation marks
omitted).
¶14 The dispute in this case involves two potential layers of
ambiguity. First, does the REPC impose an obligation on
Farmington to use the conveyed property for the Park Lane
extension? And second, if it does, does paragraph 6 of the REPC
bind Farmington to a particular configuration of the project that
places the intersection on the land it purchased from E&H? We
consider each question in turn and conclude that the REPC is
facially ambiguous as to both.
¶15 As we have already noted, paragraph 6 of the REPC
provides, ‚It is specifically understood by the Parties that
[Farmington] is purchasing the Property with the intent that it
will be used for a realignment of the future Park Lane
extension.‛ The word ‚understood‛ has two possible meanings
in this context that have different legal consequences. First,
‚understood‛ can mean that a matter is ‚fully apprehended‛—a
recognition or acknowledgment of some future possibility that
falls short of an actual agreement. See Webster’s Third New Intern’l
20130288-CA 8 2014 UT App 237E&H Land v. Farmington City
Dictionary 2490 (1993). But the word can also signify that a
matter is ‚agreed upon,‛ id., especially ‚*a+n agreement . . . of an
implied or tacit nature,‛ Black’s Law Dictionary 1665 (9th ed.
2009) (defining ‚understanding‛).4 Parties often place
‚understandings‛ of the first kind in the recitals section of a
contract to indicate ‚the purposes and motives of the parties‛
even though recitals ‚do not ordinarily form any part of the real
agreement.‛ See 17A Am. Jur. 2d Contracts § 383 (2004). Instead,
the purpose of such clauses is to exert ‚a material influence in
construing the contract and determining the intent of the
parties.‛ Id. Here, paragraph 6 appears in the body of the REPC
in the midst of other paragraphs that set forth contractual
obligations, which suggests that the first sentence of paragraph 6
is meant to describe obligations rather than simply a description
of the context in which the contract has been made.
¶16 But the wording of the REPC also supports at least one
plausible alternative interpretation. Paragraph 6 does not state
that the parties executed the REPC with a specific understanding
that Farmington would use the conveyed property for the Park
Lane extension. Rather, it states that Farmington purchased
E&H’s land ‚with the intent‛ to do so. ‚Intent‛ means ‚*t+he
state of mind accompanying an act‛ or ‚the mental resolution or
determination to do it.‛ Black’s Law Dictionary 881 (9th ed. 2009).
Stated another way, parties that ‚intend‛ to do something
‚desire that a consequence will follow‛ from their actions. Bryan
A. Garner, Garner’s Dictionary of Legal Usage 468 (3d ed. 2011).
Use of the word ‚intent‛ may therefore reflect the parties’
recognition of a particular plan that Farmington had in mind
4. Garner’s Dictionary of Legal Usage observes that
‚understanding is a vague word sometimes used in drafting as a
weaker word than agreement or contract.‛ Bryan A. Garner,
Garner’s Dictionary of Legal Usage 911 (3d ed. 2011). It counsels
attorneys to ‚use the word agreement‛ if the parties intend to
make one because ‚*p+hrases such as It is the parties’
understanding that or In accordance with the parties’ understanding
are subject to a variety of interpretations—and ought therefore to
be avoided.‛ Id.
20130288-CA 9 2014 UT App 237E&H Land v. Farmington City
and desired to carry out but to which it was unwilling to commit
contractually when the REPC was executed. That is, the first
sentence of paragraph 6 discussing the parties’ ‚understanding‛
that Farmington intended to build a road on the conveyed parcel
may simply be recital-like language that provides context for the
parties’ agreement over the installation of public
improvements. Paragraph 6 provides that E&H ‚shall have no
obligation‛ to ‚install any public improvements necessary to
serve‛ parcels ‚abutting the Property.‛ That burden, according
to paragraph 6, falls on ‚current or future owners of parcels
abutting the Property.‛
¶17 Consequently, despite the placement of paragraph 6 in
the body of the REPC, instead of its recitals section, the parties’
use of the words ‚understanding‛ and ‚intent‛ make the legal
effect of that paragraph unclear. It might mean that the parties
specifically understood that Farmington purchased E&H’s land
with a plan to use it for the Park Lane extension and agreed to
implement that plan. It is also possible, however, that the parties
simply hoped that Farmington’s plan to use the land for the
project would come to fruition but understood that Farmington
was not in a position to commit contractually, so they included
this language in paragraph 6 as a non-binding expression of the
context in which the purchase of E&H’s property had arisen—in
other words as no more than a recital. Thus, because ‚the terms
used to express the intention of the parties may be understood to
have two or more plausible meanings,‛ they are facially
ambiguous. See Saleh, 2006 UT 20, ¶ 15 (citation and internal
quotation marks omitted).
¶18 Having concluded that one plausible reading of the
contract requires Farmington to use E&H’s land for the
‚realignment of the future Park Lane extension,‛ we must now
consider whether those terms can reasonably be read to
encompass a particular configuration of the project that requires
placement of an intersection on the eastern boundary of E&H’s
land. Unfortunately, the REPC does not define the term
‚realignment of the future Park Lane extension‛ with any clarity.
Exhibit A, which contains a legal description of the conveyed
20130288-CA 10 2014 UT App 237E&H Land v. Farmington City
parcel, is entitled ‚Park Lane Extension Over E and H Property.‛
And exhibit B is a ‚Map of Property‛ that graphically depicts the
legal description, showing bare boundaries without an
explanation of how those boundaries might relate to any
proposed configuration of the project. Together, the exhibits
show a narrow strip of land that cuts in a northeasterly direction
across E&H’s property from Clark Lane before flaring into a
wider portion at the eastern border of E&H’s property to
resemble half of an intersection. As we have discussed, one
plausible reading of the contract is that Farmington actually
agreed to use this narrow, irregularly shaped parcel ‚for a
realignment of the future Park Lane extension.‛ But beyond
whatever the shape of the parcel itself might suggest, the REPC
does not discuss any details of the configuration of that project.
¶19 E&H argues that it would never have sold ‚the narrow
strip of land and lead-off that cuts through the middle of its
parcel‛ without an agreement that Farmington would use it ‚for
a roadway and intersection.‛ It also points to other language in
paragraph 6 that obligates future owners to ‚install any public
improvements necessary to serve those parcels.‛ Farmington
maintains that even if it is obligated to use the land for a
roadway, the REPC simply ‚contain*s+ no reference whatsoever
to any duty respecting placement or location of the intersection
of Clark Lane and Park Lane.‛
¶20 In light of the language of paragraph 6 and the shape of
the parcel depicted in the exhibits, we conclude that the REPC is
reasonably susceptible to either interpretation. Farmington is
correct that the agreement has no language that describes a
configuration of the Park Lane extension that requires
Farmington to build an intersection in a particular location. It is
therefore possible that although Farmington agreed to ‚use[]‛
E&H’s land for the project, it had not finalized plans for the
intersection and purchased the lead-off portion to preserve one
of several potential options for the intersection’s location
without intending to bind itself to the location depicted. ‚Park
Lane extension‛ may therefore refer generally to a road
connecting Clark Lane and Park Lane without encompassing a
20130288-CA 11 2014 UT App 237E&H Land v. Farmington City
specific configuration for the final project. But the shape of the
parcel also plausibly suggests that Farmington was very careful
to purchase only the land it needed to complete the Park Lane
extension and that its plans included an intersection on the
eastern boundary of E&H’s land. As we have already noted, the
legal description of the parcel is entitled, ‚Park Lane Extension
Over E and H Property,‛ which may indicate that the parties had
reached a final agreement about the configuration of the project
and the placement of the intersection—reflected in the shape of
the conveyed parcel—and agreed that Farmington would
‚use[]‛ the property according to that understanding.
¶21 So, assuming that the parties intended to bind
Farmington to construct the Park Lane extension across the E&H
property, the contract’s language and exhibits leave us with a
question about the scope of Farmington’s obligation that does
not seem resolvable within the four corners of the REPC. And
because the reach of the term ‚realignment of the future Park
Lane extension‛ is unclear and the language seems to support
‚two or more plausible meanings‛ when read in light of the
exhibits to the contract, we conclude that the REPC is ambiguous
about whether Farmington may build the intersection on the
border of E&H’s property or must do so. See Saleh v. Farmers Ins.
Exch., 2006 UT 20, ¶ 15, 133 P.3d 428 (citation and internal
quotation marks omitted). When an ambiguity exists, the intent
of the parties becomes ‚a question of fact‛ upon which ‚parol
evidence of the parties’ intentions should be admitted.‛ Daines v.
Vincent, 2008 UT 51, ¶ 25, 190 P.3d 1269 (citation and internal
quotation marks omitted). We therefore reverse the district
court’s decision granting summary judgment to Farmington on
the breach of contract claim and remand for the court to consider
extrinsic evidence of the parties’ intent.
20130288-CA 12 2014 UT App 237E&H Land v. Farmington City
II. Other Claims
¶22 E&H also argues that its claims for breach of the covenant
of good faith and fair dealing, promissory estoppel, and
reformation due to mutual mistake should survive summary
judgment. We agree that the breach of the covenant of good faith
and fair dealing and reformation due to mutual mistake claims
should survive summary judgment. However, we conclude that
the district court properly awarded Farmington summary
judgment on the promissory estoppel claim.
A. Breach of the Covenant of Good Faith and Fair Dealing
¶23 The district court’s dismissal of E&H’s covenant of good
faith and fair dealing claim hinged on its determination that
there was no ‚language in the REPC‛ that ‚required placement
of the intersection of Park Lane and Clark Lane at a specific
location on the boundary of *E&H’s+ property.‛ This was
consistent with the court’s approach to the resolution of E&H’s
breach of contract claim because the covenant of good faith and
fair dealing cannot ‚establish new, independent rights or duties
to which the parties did not agree ex ante.‛ Oakwood Vill. LLC v.
Albertsons, Inc., 2004 UT 101, ¶ 45, 104 P.3d 1226. But in light of
our determination that the REPC is ambiguous about the
placement of the intersection, there is a factual issue about
whether the contract obligates Farmington to construct an
intersection on the border of E&H’s property. Consequently, on
remand, E&H may be able to demonstrate that Farmington
‚intentionally destroy[ed] or injure[d] [E&H’s] right to receive
the fruits of the contract.‛ See id. ¶ 43 (citation and internal
quotation marks omitted). Summary judgment on this claim was
therefore premature.
B. Reformation Due to Mutual Mistake
¶24 The district court rejected E&H’s reformation due to
mutual mistake claim because it concluded that the claim ‚did
not seek to invalidate the REPC but merely to amend it and
substitute terms‛ contrary to the Utah Supreme Court’s decision
20130288-CA 13 2014 UT App 237E&H Land v. Farmington City
in Tangren Family Trust v. Tangren, 2008 UT 20, 182 P.3d 326. In
Tangren, our supreme court observed that ‚extrinsic evidence is
appropriately considered, even in the face of a clear integration
clause, where the contract is alleged to be a forgery, a joke, a
sham, lacking in consideration, or where a contract is voidable
for fraud, duress, mistake, or illegality.‛ Id. ¶ 15. To its
memorandum opposing summary judgment, E&H attached
numerous affidavits and emails that it argued demonstrated that
the parties had agreed on the placement of the intersection.
Farmington submitted an affidavit from a city official purporting
to show the contrary. Based on the Tangren decision, the district
court refused to consider any extrinsic evidence of the parties’
intent and awarded Farmington summary judgment on the
reformation claim. We conclude that the district court should
have considered extrinsic evidence of the parties’ intent.
¶25 The district court misread Tangren. It is true that Tangren
recognized that ‚mistake‛ is one of several grounds upon which
courts may consider ‚extrinsic evidence in support of an
argument that the contract is not . . . valid‛ despite a clear
integration clause, id., and it is also true that E&H has alleged
mutual mistake to reform the REPC rather than attack its
validity. But the issue in Tangren was whether parol evidence
was admissible to demonstrate whether or not a contract was
integrated, not whether a mutual mistake warranted reformation
of the parties’ agreement. Id. ¶¶ 8–9. And Utah law is clear that
‚*a+ mutual mistake of fact can provide the basis for equitable
rescission or reformation of a contract even when the contract
appears on its face to be a complete and binding integrated
agreement.‛ Burningham v. Westgate Resorts, Ltd., 2013 UT App
244, ¶ 12, 317 P.3d 445 (emphasis added) (citation and internal
quotation marks omitted). ‚A mutual mistake occurs when both
parties, at the time of contracting, share a misconception about a
basic assumption or vital fact upon which they based their
bargain,‛ id. (citation and internal quotation marks omitted), and
subsequently fail to reduce their actual intent to writing, FDIC v.
Taylor, 2011 UT App 416, ¶ 47, 267 P.3d 949. See also Peterson v.
Coca-Cola USA, 2002 UT 42, ¶ 19, 48 P.3d 941 (noting that mutual
mistake ‚warrants the reformation‛ of a contract where, among
20130288-CA 14 2014 UT App 237E&H Land v. Farmington City
other things, ‚the instrument as made failed to conform to what
the parties intended‛ (citation and internal quotation marks
omitted)). Consequently, the district court erred when it
determined that the REPC’s integration clause precluded any
consideration of extrinsic evidence to resolve E&H’s reformation
due to mutual mistake claim and when it granted summary
judgment without considering the various affidavits and emails
the parties submitted.
¶26 Farmington nevertheless maintains that the reformation
claim fails because the common law doctrine of merger and the
REPC’s abrogation clause ‚eliminate*+ the contract and merg*e+
it into the‛ deed, so there is ‚no contract to reform.‛ The REPC
does indeed have an abrogation clause, which provides, ‚Except
for those paragraphs in this Agreement expressly surviving the
Closing, and the express warranties contained in this
Agreement, execution and delivery of the final closing
documents shall abrogate this Agreement.‛ And Farmington is
also correct that in real estate transactions, the merger doctrine
generally requires that on ‚delivery and acceptance of a deed*,+
the provisions of the underlying contract for the conveyance are
deemed extinguished or superseded by the deed.‛ Secor v.
Knight, 716 P.2d 790, 792 (Utah 1986).
¶27 The merger doctrine, however, applies ‚when the acts to
be performed by the seller in a contract relate only to the
delivery of title to the buyer.‛ Davencourt at Pilgrims Landing
Homeowners Ass’n v. Davencourt at Pilgrims Landing, LC, 2009 UT
65, ¶ 65, 221 P.3d 234 (citation and internal quotation marks
omitted). Obligations that are ‚collateral‛ to delivery and
acceptance of the deed ‚are not extinguished by *conveyance+.‛
Id. ¶ 66. And because an abrogation clause is a ‚contractual
statement of the common law doctrine of merger,‛ Utah courts
have routinely applied this ‚collateral rights‛ exception in the
face of contracts containing abrogation clauses.5 Maynard v.
5. Mutual mistake, contractual ambiguity, and fraud are also
exceptions to the merger doctrine. Maynard v. Wharton, 912 P.2d
446, 450 (Utah Ct. App. 1996).
20130288-CA 15 2014 UT App 237E&H Land v. Farmington City
Wharton, 912 P.2d 446, 450 (Utah Ct. App. 1996); see also Secor,
716 P.2d at 792; Embassy Group, Inc. v. Hatch, 865 P.2d 1366, 1371–
72 (Utah Ct. App. 1993). To determine if an obligation is
collateral, Utah courts examine (1) ‚whether the act involve[s] a
different subject matter or is collateral to the conveyance [of
title]‛ and (2) ‚whether the parties intended the act to be
collateral.‛ Davencourt, 2009 UT 65, ¶ 66 (alterations in original)
(citation, emphasis, and internal quotation marks omitted). The
second factor is only relevant ‚if the question of the collateral
nature remains‛ after analyzing the first factor. Id. (citation and
internal quotation marks omitted).
¶28 Here, if the district court determines that the REPC
obligates Farmington to construct a roadway and intersection,
the subject matter of that obligation is qualitatively different
than simple delivery and acceptance of the deed. In Davencourt
at Pilgrims Landing Homeowners Ass’n v. Davencourt at Pilgrims
Landing, LC, 2009 UT 65, 221 P.3d 234, the Utah Supreme Court
concluded that ‚warranties regarding the quality of
construction‛ were collateral to the conveyance of title. Id. ¶ 69.
If the obligation to assure that a structure meets some minimum
level of quality survives the deed, we see no reason why an
obligation to develop a parcel of land should be treated any
differently. And the fact that Farmington intended to build the
Park Lane extension sometime after purchasing E&H’s land
provides further support for that conclusion. See id. ¶ 73 (noting
that ‚*a+n act performed after the delivery of the deed can, by
itself, show the parties intended the contract terms to be
collateral‛). We therefore conclude that neither the merger
doctrine nor the abrogation clause bar E&H’s reformation due to
mutual mistake claim.
C. Promissory Estoppel
¶29 E&H argues that the district court erred when it granted
Farmington summary judgment on the promissory estoppel
claim. ‚Promissory estoppel is an equitable claim for relief‛ that
compensates a party who has detrimentally relied on another’s
promise. Andreason v. Aetna Cas. & Sur. Co., 848 P.2d 171, 174–75
20130288-CA 16 2014 UT App 237E&H Land v. Farmington City
(Utah Ct. App. 1993). The promise must be sufficiently clear and
definite that the person making the promise should reasonably
expect the other party to rely on it. Id. Like unjust enrichment
and other equitable remedies, promissory estoppel is available
only to a party who has no right to relief under an enforceable
contract. Mile High Indus. v. Cohen, 222 F.3d 845, 859 (10th Cir.
2000) (noting that ‚‘promissory estoppel’ is an affirmative cause
of action or defense, which arises in instances where no formal
contract exists and the party seeking promissory estoppel is
attempting to prove the existence of an enforceable promise or
agreement‛); see also R.J. Daum Constr. Co. v. Child, 247 P.2d 817,
823 (Utah 1952) (‚There is a recognized doctrine of promissory
estoppel usually involving offers to make a gift, where although
accepted, no binding contract results because there is no
consideration.‛).
¶30 Of course, a plaintiff who believes it is entitled to relief
under a contract is free to assert both breach of contract and
promissory estoppel claims in a complaint. ‚Our rules of civil
procedure do not limit the number of claims or defenses a party
may plead,‛ nor is there any requirement that claims be
consistent with one another. Northgate Vill. Dev., LC v. Orem City,
2014 UT App 86, ¶ 48, 325 P.3d 123 (citing Utah R. Civ. P. 8(e)).
‚But at later stages of the proceeding, consistency requirements
limit the freedom the parties enjoyed at the pleading stage.‛ Id.For example, this court recently observed that ‚though the
parties ‘may raise alternative theories on breach of contract and
quantum meruit at the pleading stage, once the court has
determined that a valid contract governed the parties’
relationship, that generally precludes a quantum meruit claim.’‛
Id. ¶ 49 (quoting Importers Serv. Corp. v. GP Chems. Equity, LLC,
652 F. Supp. 2d 1292, 1303 (N.D. Ga. 2009), aff’d, 476 F. App’x 717
(11th Cir. 2012)).
¶31 Here, neither party has argued that the REPC is invalid or
inapplicable to their dispute. And the district court determined
at summary judgment that the REPC was valid and enforceable.
Once a court determines ‚that an enforceable contract exists and
governs the subject matter of the dispute,‛ the plaintiff is no
20130288-CA 17 2014 UT App 237E&H Land v. Farmington City
longer free to maintain inconsistent legal claims for breach of
contract and equitable claims for promissory estoppel or unjust
enrichment. Id. We therefore conclude that the district court
properly granted Farmington summary judgment on E&H’s
promissory estoppel claim.
CONCLUSION
¶32 We affirm the district court’s dismissal of the promissory
estoppel claim. However, we conclude that the REPC is
ambiguous regarding the parties’ understanding as to the
location of the intersection and therefore reverse the district
court’s decision granting Farmington summary judgment on the
breach of contract and breach of the covenant of good faith and
fair dealing claims. We also reverse the district court’s decision
granting summary judgment on the reformation due to mutual
mistake claim. On remand, the district court should consider
relevant extrinsic evidence of the parties’ intent both to resolve
an ambiguity in the REPC and to determine if reformation is
warranted due to a mutual mistake.
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20130288-CA 18 2014 UT App 237