AKB Properties v. Rubberball Productions , 2021 UT App 48 ( 2021 )

2021 UT App 48THE UTAH COURT OF APPEALS
AKB PROPERTIES LLC,
Appellant,
v.
RUBBERBALL PRODUCTIONS LLC, MLA PROPERTIES LLC,
AND MARK L. ANDERSEN,
Appellees.
Opinion
No. 20190659-CA
Filed April 15, 2021
Fourth District Court, Provo Department
The Honorable Christine S. Johnson
No. 180400242
Jefferson W. Gross, S. Ian Hiatt, and
J. Adam Sorenson, Attorneys for Appellant
Peter H. Donaldson, Matthew J. Orme, and
Cole Crowther, Attorneys for Appellees
JUDGE DIANA HAGEN authored this Opinion, in which
JUDGES GREGORY K. ORME and RYAN M. HARRIS concurred.
HAGEN, Judge:
¶1 In this contract dispute, AKB Properties LLC (AKB)
appeals the entry of summary judgment in favor of Rubberball
Productions LLC, MLA Properties LLC, and Mark L. Andersen
(collectively, the Andersen Parties). AKB contends the district
court erred in concluding that there were no genuine issues of
material fact regarding an alleged oral modification of an
agreement between AKB and the Andersen Parties. We agree.
Because more than one reasonable inference can be drawn from
the material facts at issue, we reverse and remand.
AKB Properties v. Rubberball Productions
BACKGROUND
¶2 Alan K. Bailey and Mark L. Andersen (the Owners)
created Rubberball Productions LLC (the Company) in the 1990s
to specialize in the sale of stock photography. Andersen owned
fifty-one percent of the Company, and Bailey owned forty-nine
percent. At some point before 2006, the Owners each transferred
their respective interests in the Company to individually owned
limited liability companies named after their own initials:
Andersen’s interest went to MLA Properties LLC (MLA), and
Bailey’s to AKB.
¶3 In 2006, the Company was reorganized with MLA and
AKB as its only members, and the parties entered into a written
buy-sell agreement (the Agreement), which established a
contractual structure for buying out a deceased Owner’s interest
in the Company. The Agreement contemplated that the
Company would take out an insurance policy on the life of each
Owner, with the Company paying the premiums and being the
designated beneficiary. Upon the death of either Owner, a
buyout of MLA’s or AKB’s respective interest would be
accomplished by paying the deceased’s estate from the proceeds
of the applicable life insurance policy.
¶4 The Agreement provided that the Company was valued
at $4,000,000, unless and until a value was “reestablished by the
Owners executing a written instrument.” After twenty-five
months, if no written instrument had set such a purchase price,
the purchase price would be “the value which is established by
mutual agreement between the buyer and sellers, or if no mutual
agreement can be arrived at, . . . [by] an independent qualified
appraiser.” But if the buyout provision was triggered by an
Owner’s death, the Agreement provided that “until changed
hereafter in a writing by the Company and the Owners,” the
purchase price “shall be an amount equal to the greater of the
amount described” above “or the amount of insurance proceeds
available to the Company or the remaining Owners. If no life
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insurance proceeds are received by the Company or the
remaining Owners, for any reason whatsoever, the purchase
price shall be as described” above.
¶5 As intended by the Agreement’s buyout provisions, the
Company purchased two $2,000,000 life insurance policies, one
insuring the life of each of the Owners (the Allianz Policies). The
Company paid the premiums and was listed as the beneficiary
on both policies. It is undisputed that “the purpose of the Allianz
[Policies] was to provide funds whereby the surviving [Owner]
would buy out the membership interests of the deceased
[Owner].”
¶6 In 2012, the Company purchased two additional
$2,000,000 insurance policies, one on the life of each Owner (the
Ohio Policies). Neither Ohio Policy named the Company as the
beneficiary. 1 It is undisputed that “when the Ohio Policies were
acquired in 2012, the purpose of those policies was not to
provide funds to purchase the membership interests of a
deceased [Owner]”; rather, it was to benefit directly the estate of
either Owner upon that Owner’s death.
¶7 Bailey passed away in 2016, and his family’s trust
received the $2,000,000 payout from the Ohio Policy. Shortly
after Bailey’s death, the estate’s trustee contacted Andersen to
inquire about the purchase of Bailey’s interest in the Company
pursuant to the buyout provision of the Agreement. According
to Andersen, at some point he informed the trustee that the
Owners had agreed to an oral modification of the Agreement in
2015 under which the Owners arranged to allow the Allianz
Policies to lapse, with the understanding that the proceeds from
the Ohio Policies would accomplish the buyout of a deceased
1. The Ohio Policy on Bailey listed the Bailey Family Irrevocable
Trust as the beneficiary, and the Ohio Policy on Andersen listed
Denise Andersen as the beneficiary.
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Owner’s interest in the Company (the Oral Modification).
Nevertheless, Andersen agreed to engage an appraiser to
determine the Company’s value as contemplated by the
Agreement. After the appraiser completed the valuation,
Andersen offered the trustee a buyout amount to resolve the
dispute, but the parties were not able to reach a resolution.
¶8 AKB filed a complaint alleging breach of the Agreement,
among other claims. The Andersen Parties counterclaimed,
seeking a declaratory judgment that the proceeds from the Ohio
Policy satisfied the Agreement’s buyout provision as altered by
the Oral Modification. AKB moved for partial summary
judgment on the Andersen Parties’ counterclaim arguing that,
even if the Oral Modification occurred, it was invalid as a matter
of law. The Andersen Parties also moved for summary
judgment, seeking declaratory relief on its counterclaim and
dismissal of AKB’s complaint.
¶9 In support of their cross-motion for summary judgment,
the Andersen Parties filed two declarations, one from Andersen
and one from the Company’s office manager. According to the
declarations, the Allianz Policies were due to expire in 2015 and
in order to renew the policies the Company would have had to
pay premiums that were nearly 1,500 percent higher than before.
The office manager and Andersen attest that they discussed the
matter with Bailey at a regular biweekly Company meeting in
March 2015, at which only Andersen, Bailey, and the office
manager were present. At that meeting, according to the
declarations, Bailey “suggested replacing the Allianz Policies
with the pre-existing personal Ohio Policies, and allowing the
Ohio Policies to satisfy [the Agreement’s] buyout mechanism.”
Both Andersen and the office manager attest that the Owners
orally agreed to allow the Allianz Policies to lapse and agreed
“that the Ohio Policies would be used to satisfy the insurance
funded buyout provision of the [Agreement].” In a separate
deposition, Andersen acknowledged that, under the alleged Oral
Modification, the deceased Owner’s beneficiary would receive
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the same $2,000,000 life insurance payout from the Ohio Policy
that it would have received in any event, even without the Oral
Modification, and that the deceased Owner’s interest in the
Company would transfer to the surviving Owner without any
additional compensation.
¶10 No written record exists of the 2015 meeting or the Oral
Modification. Andersen described the conversation with Bailey
as “pretty brief” and
pretty casual in that neither one of us felt like it
was ever going to be required—needed. I mean, no
one thinks—neither one of us thought either one of
us was going to die. So there wasn’t—you know,
we didn’t open up the documents and look at them
in detail with counsel and—try to understand
whether or not the policies worked.
¶11 The district court granted summary judgment in favor of
the Andersen Parties. AKB now appeals that judgment. 2
ISSUE AND STANDARD OF REVIEW
¶12 AKB contends that the district court erred in granting
summary judgment to the Andersen Parties because triable
issues of material fact remain regarding the existence, terms, and
enforceability of the alleged Oral Modification. 3 “Summary
2. AKB does not appeal the denial of its motion for partial
summary judgment.
3. On appeal, AKB raises a second issue concerning the
admissibility of the Andersen Parties’ declarations, but
recognizes that we need not reach that issue to reverse. Because
we agree with AKB that, even assuming the admissibility of the
(continued…)
20190659-CA 5 2021 UT App 48AKB Properties v. Rubberball Productions
judgment is appropriate ‘if the moving party shows that there is
no genuine dispute as to any material fact and the moving party
is entitled to judgment as a matter of law.’” Berger v. Ogden Reg’l
Med. Ctr., 2020 UT App 85, ¶ 16, 469 P.3d 1127 (quoting Utah R.
Civ. P. 56(a)). “We review the trial court’s conclusions of law for
correctness, including its conclusion that there are no material
fact issues.” Rusk v. Harstad, 2017 UT App 27, ¶ 3, 393 P.3d 341(per curiam) (cleaned up). In doing so, we view “the facts and all
reasonable inferences in a light most favorable to the party
opposing the motion.” Id. (cleaned up).
ANALYSIS
¶13 In this appeal, we must determine whether a reasonable
jury could reject the Andersen Parties’ claim that the Owners
agreed to an Oral Modification altering the Agreement so that
the Ohio Policies’ proceeds would satisfy the insurance-funded
buyout of the deceased Owner’s interest in the Company. If so, a
genuine dispute of material fact remains for trial. Because we
conclude that the evidence could support a reasonable inference
that no such Oral Modification occurred, we reverse the district
court’s ruling granting the Andersen Parties’ motion for
summary judgment.
¶14 Summary judgment is an important tool of judicial
efficiency in district courts because it “allows the parties to
pierce the pleadings to determine whether a material issue of
fact exists that must be resolved by the factfinder.” Lamb v. B & B
Amusements Corp., 869 P.2d 926, 928 (Utah 1993). To defeat
summary judgment, however, the nonmoving party “is required
only to show that there is a material issue of fact” for trial. Id.(…continued)
declarations, genuine issues of material fact preclude summary
judgment, we do not reach the second issue raised on appeal.
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“Affidavits and depositions submitted in support of and in
opposition to a motion for summary judgment may be used only
to determine whether a material issue of fact exists, not to
determine whether one party’s case is less persuasive than
another’s or is not likely to succeed in a trial on the merits.” Id.
¶15 While “an opponent of a motion for summary judgment
must timely file responsive affidavits raising factual issues or
risk the trial court’s conclusion that there are no factual issues[,]
. . . it is not always required that the opposing party proffer
affidavits in order to avoid judgment against him.” Frisbee v. K
& K Constr. Co., 676 P.2d 387, 389–90 (Utah 1984) (cleaned up).
Where the nonmoving party “submits no documents in
opposition, the moving party may be granted summary
judgment only if appropriate, that is, if [the moving party] is
entitled to judgment as a matter of law.” Id. at 390 (cleaned up).
For example, “[w]here the moving affidavit shows on its face
that there is a material issue of fact, summary judgment may not
be entered, even if responsive affidavits are not filed.” Id.Similarly, the moving party is not entitled to summary
judgment, even in the absence of a single counter affidavit, if
“[v]arious conflicting inferences material to the outcome of the
case can be drawn from the facts.” See Goodnow v. Sullivan, 2002
UT 21, ¶ 13, 44 P.3d 704. When such conflicting inferences exist,
the factfinder should be allowed “after hearing all relevant
evidence, to draw those inferences which seem most
reasonable.” Id.
¶16 The Utah Supreme Court recently reaffirmed that, even
when “the only direct evidence” is offered by the moving party,
that party is not necessarily entitled to judgment as a matter of
law. See Jones v. Mackey Price Thompson & Ostler, 2020 UT 25,
¶ 52, 469 P.3d 879. Instead, “circumstantial evidence may also be
considered.” Id. In Jones, the court reversed a directed verdict
dismissing the plaintiff’s fraudulent transfer claim because there
was a sufficient evidentiary basis on which the jury could have
found for the plaintiff. Id. ¶ 51. Although the only direct evidence
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of motive supported the defense’s position that the purpose of
the transfer was tax avoidance, id. ¶ 42, the court held that “there
was ample circumstantial evidence in the record to support a jury
determination (by clear and convincing evidence) that at least
one of [the defendant’s] motives was to hinder or delay [the
plaintiff],” id. ¶ 52 (emphasis added). In particular, the court
noted that the surrounding circumstances called into question
the credibility of the defense witnesses and that a reasonable jury
could have discounted their testimony. Id. ¶¶ 54–55.
¶17 Similarly, “at the summary judgment stage, the district
court must view all facts and reasonable inferences in the light
most favorable to the nonmoving party.” Jeppesen v. Bank of Utah,
2018 UT App 234, ¶ 16, 438 P.3d 81 (cleaned up). Just as in the
directed verdict context, this standard effectively precludes
summary judgment unless “reasonable jurors, having been
properly instructed by the trial court, would be unable to come
to any other conclusion.” USA Power, LLC v. PacifiCorp, 2010 UT
31, ¶ 32, 235 P.3d 749 (cleaned up). If circumstantial evidence
supports reasonable conflicting inferences, a triable issue of
material fact exists.
¶18 In Fox v. Allstate Insurance Company, 453 P.2d 701 (Utah
1969), for instance, our supreme court reversed the district
court’s summary judgment ruling even though the nonmoving
party could not directly refute the facts contained in the moving
party’s affidavit and deposition testimony. Specifically, the
plaintiff testified that he had purchased a boat with cash from a
stranger, with no witnesses and without receiving a bill of sale
or any other writing documenting the transaction. Id. at 386–87.
According to the plaintiff, two days after insuring the boat for
$2,000, he went alone to Utah Lake where the boat struck a
submerged object. Id. at 387. He testified that an ensuing
windstorm battered the seventeen-foot boat with three- to four-
foot waves and the boat could not stay afloat, though he
managed to swim safely to shore. Id. No sunken boat was ever
recovered. Id. When the insurance company refused to pay the
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claim for the purported loss of the boat, the plaintiff sued and
the district court granted his motion for summary judgment. Id.
at 384.
¶19 The supreme court reversed and remanded the case for
trial because the plaintiff’s testimony did “not overcome the
issue of whether he owned the boat which he insured with the
defendant or whether he lost a boat at all.” Id. at 387. The court
noted that, even if the only evidence admitted at a later trial was
the plaintiff’s deposition, “[t]he issues would be for the jury’s
determination” and would preclude a directed verdict. Id. The
mere “fact that the defendant was not able to produce negative
evidence would not entitle the plaintiff to win as a matter of
law.” Id. To illustrate this point, the court offered the following
example:
If the law were otherwise, anyone could allege that
he ate a mouse which was in a can of pork and
beans, and while he might or might not be able to
recover on the trial of the action against the canner
and distributor of the food, he could win on
a motion for summary judgment simply because
there could not be a counter affidavit filed saying
that there was no mouse in the can. All that a
defendant could do in a situation such as is
supposed above or in this case would be to rely on
circumstantial evidence and the wisdom and
honesty and good judgment of the jury to arrive at
a correct verdict.
Id. at 387–88.
¶20 The instant case presents comparable evidentiary
challenges given that Bailey, the only other witness who could
dispute the alleged Oral Modification, is deceased. Much like the
case of the missing boat or the hypothetical mouse in a can of
pork and beans, AKB as the nonmoving party cannot, because of
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circumstances outside its control, refute the Andersen Parties’
declarations by way of direct evidence. 4 Instead, in this situation,
whether there exists a question of material fact that precludes
summary judgment depends on whether competing inferences
can be reasonably drawn from the circumstantial evidence. Cf.
USA Power, 2010 UT 31, ¶¶ 56, 65 (holding that in “[a] claim for
breach of a confidentiality agreement” and misappropriation of
trade secrets a party “cannot always present direct evidence”
and that to survive summary judgment, the party must therefore
rely on other circumstantial evidence from which a jury could
reasonably infer a breach).
¶21 Here, even assuming the Andersen Parties’ declarations
were admissible, there was more than enough circumstantial
evidence to cast doubt on the veracity of those declarations. The
district court recognized that the determination of witness
credibility falls squarely in the purview of the factfinder, but it
nonetheless made findings that no credibility issues existed
because Andersen’s declaration was consistent with the office
manager’s declaration; AKB did not offer “any evidence, either
through affidavit or otherwise,” refuting the content of those
declarations; and AKB raised only a “meager inference” that the
affiants might be self-interested. The district court’s reasoning
fails to account for the reasonable inferences that a jury could
draw from the circumstantial evidence.
4. The circumstances of this case are distinct from a situation in
which living witnesses exist who might be able to refute the
movant’s evidence but the nonmovant has not bothered to seek
their input. In that situation, depending on the specific facts and
the reasonableness of the inferences that might be drawn from
the circumstantial evidence, a nonmovant may not be able to
survive summary judgment merely by casting doubt on the
movant’s direct evidence.
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¶22 The Agreement provides a detailed written framework
for accomplishing a buyout in the event of an Owner’s death and
specifies the purchase price “until changed hereafter in a writing
by the Company and the Owners.” Under the terms of the
Agreement, a buyout could not be accomplished through the
proceeds of a life insurance policy payable to the deceased
Owner’s estate because the Agreement specified that the
purchase price was the “amount of insurance proceeds available
to the Company or the remaining Owners” and that, if “no life
insurance proceeds are received by the Company or the
remaining Owners, for any reason whatsoever, the purchase
price shall be” determined as provided in other parts of the
Agreement. (Emphasis added.)
¶23 Although the Andersen Parties claimed that these terms
were later modified and presented evidence to support that
allegation, the record also contains sufficient circumstantial
evidence from which the jury could reject the contention that the
Oral Modification occurred. Based on the existence of the written
Agreement and its express terms, a jury could reasonably infer
that the matter was of importance to the Owners and that any
modification would have occurred in writing and not in the
“brief” and “casual” oral conversation Andersen described. The
jury is entitled to weigh the absence of any writing
memorializing the alleged Oral Modification in determining
whether it occurred. This creates a triable issue of fact.
¶24 The Agreement also reflects the Owners’ intent that the
deceased Owner’s interest would be purchased using insurance
proceeds available to either the Company or the surviving
Owner. Indeed, the Andersen Parties admitted that the Allianz
Policies were in place to satisfy the insurance-funded buyout
option in the Agreement and that the Ohio Policies, which
named each Owner’s respective personal beneficiary rather than
the Company, were not purchased for that purpose. Andersen
also admitted that the Bailey family trust would have received
the proceeds of the Ohio Policy in any event, even without the
20190659-CA 11 2021 UT App 48AKB Properties v. Rubberball Productions
Oral Modification. A jury could reasonably conclude that the
Owners would not have agreed that, in the event of their own
deaths, their interest would be transferred to the surviving
Owner, rather than to their heirs, without any additional
compensation. The evidence supports a reasonable inference that
the Owners would not have given up their contractual rights in
this manner and calls into question the credibility of the
Andersen Parties’ position.
¶25 Finally, a reasonable jury could consider the parties’
conduct after Bailey’s death in determining whether the Oral
Modification occurred. In opposition to the Andersen Parties’
motion for summary judgment, AKB pointed to the “fact that
Andersen proceeded with the valuation procedure found in [the
Agreement] after Bailey’s death as if there was no oral
agreement satisfying the buy-out provision.” Evidence in the
record shows that Andersen agreed to the trustee’s request to
have an independent appraiser assess the value of the Company,
as the Agreement required in the event that “no life insurance
proceeds are received by the Company or the remaining
Owners.” Following that appraisal, Andersen presented a
buyout offer to the trustee, but the parties did not reach an
agreement. While Andersen’s willingness to engage in
negotiations is not incompatible with his declaration that he
believed and asserted that the buyout provision had been
satisfied, the jury is entitled to weigh this evidence, along with
the other surrounding circumstances, in determining whether
the facts alleged in the Andersen Parties’ declarations were
truthful.
¶26 In concluding that no genuine issue of material fact
prevented summary judgment, the district court relied heavily
on our decision in JENCO LC v. Perkins Coie LLP, 2016 UT App
140, 378 P.3d 131. In that case, we noted that “while an appellant
who is challenging a summary judgment entered against it is
entitled to all favorable inferences, it is not entitled to build a
case on the gossamer threads of whimsy, speculation and
20190659-CA 12 2021 UT App 48AKB Properties v. Rubberball Productions
conjecture.” Id. ¶ 15 (cleaned up). But this is not such a case.
Based on the circumstantial evidence—including the existence
and terms of the written Agreement, the failure to memorialize
the alleged Oral Modification, the lack of a plausible explanation
as to why the Owners would relinquish their contractual rights,
and Andersen’s efforts to comply with the Agreement after
Bailey’s death—a jury might reasonably choose to disbelieve the
Andersen Parties’ declarations. Because there are triable issues of
material fact as to the existence, terms, and enforceability of the
alleged Oral Modification, we reverse the district court’s
judgment in favor of the Andersen Parties.
CONCLUSION
¶27 The circumstantial evidence in the record creates genuine
issues of material fact regarding the Oral Modification, thereby
precluding summary judgment. Accordingly, we reverse and
remand for further proceedings.
20190659-CA 13 2021 UT App 48