McCleve Properties, LLC v. D. Ray Hult Family Ltd. Partnership ( 2013 )

2013 UT App 185_________________________________________________________
THE UTAH COURT OF APPEALS
MCCLEVE PROPERTIES, LLC,
Plaintiff, Appellee, and Cross‐appellant,
v.
D. RAY HULT FAMILY LTD. PARTNERSHIP AND D. RAY HULT,
Defendants, Appellants, and Cross‐appellees.
Memorandum Decision
No. 20110594‐CA
Filed July 26, 2013
Third District, Salt Lake Department
The Honorable Stephen L. Henriod
The Honorable Robert K. Hilder1
No. 070905164
Jon C. Heaton and M. David Eckersley, Attorneys
for Appellants
Bruce J. Nelson and Jeffrey S. Williams, Attorneys
for Appellee
JUDGE STEPHEN L. ROTH authored this Memorandum Decision,
in which JUDGES WILLIAM A. THORNE JR. and
MICHELE M. CHRISTIANSEN concurred.
ROTH, Judge:
¶1 D. Ray Hult Family Ltd. Partnership and D. Ray Hult
(collectively, Hult) appeal from the district court’s entry of partial
1
All of the decisions from which the parties appeal were
made by Judge Stephen L. Henriod, but because “[n]o final
Court Order of disposition ha[d] been issued,” there was no final
order for purposes of seeking appellate review. The parties
therefore stipulated to a final order, which was entered by Judge
Robert K. Hilder.
McCleve Properties v. D. Ray Hult Family
summary judgment in favor of McCleve Properties, LLC (McCleve)
and its subsequent award of income tax‐related damages to
McCleve. McCleve cross‐appeals, asserting that the district court
erroneously denied its request for additional damages for loss of
use and delayed amortization. We affirm the grant of summary
judgment and the district court’s denial of loss of use and
amortization damages. We reverse the award of tax‐related
damages and remand for further proceedings consistent with this
decision.
¶2 The background facts are undisputed. In 2004, Marshall
Industries, Inc. (Marshall) rented commercial space (the Premises)
from Hult pursuant to a lease agreement (the Lease) with a term of
nine years. According to the Lease, Marshall could not “assign this
Lease or sublet the Premises or any part thereof with out the prior
written consent of [Hult].” The Lease also contained a provision
(the purchase option) affording Marshall or its assigns “an ‘Option
to Purchase’ the Premises, which option may be exercised during
a window of time from March 1, 2005, through the end of February
2007.” To exercise that option, Marshall, or its assignee, was
required to give Hult “written notice of intent to purchase the
Premises and then complete the purchase transaction within 120
days thereafter, unless [Hult] requests that the closing date . . . be
extended for up to sixty (60) days.” The Lease also contemplated
that Marshall would “reasonably cooperate with [Hult] on [a]
Section 1031 tax deferred exchange.”
¶3 On October 30, 2006, Marshall notified Hult, by a notarized
letter printed on Marshall letterhead, that it had “assign[ed the]
‘Option to Purchase’ outlined in [the Lease] to McCleve.” The
Marshall letter was signed by Dennis J. Savage, as President of
Marshall, and by Randall D. McCleve, as General Partner of
McCleve. The letter did not seek written permission for the
assignment but simply noted that Marshall had assigned the
20110594‐CA 2 2013 UT App 185McCleve Properties v. D. Ray Hult Family
purchase option. The next day, Mr. McCleve, again in his capacity
as McCleve’s General Partner, sent Hult, on McCleve letterhead
and with notarized signature, a “written notice that the purchase
option is being exercised as per the [L]ease.” In the letter, McCleve
explained that it intended to employ a section 1031 exchange in the
purchase of the Hult property in order to attain a tax deferral on
the proceeds of other rental property it had sold. McCleve advised
that to accomplish its purpose, “[t]his exchange must take place no
later than March 31, 2007,” but the closing could occur sooner if
Hult so desired. The letter further stated that McCleve was
exercising the purchase option pursuant to the assignment from
Marshall and that a copy of the “[w]ritten notice of this assignment
is included.” A copy of the assignment was attached to the letter.
¶4 Hult responded on November 20, 2006, with a letter
addressed to Randall D. McCleve at Marshall’s address. Hult
confirmed receipt of the McCleve letter “notifying . . . that you are
going to exercise your Purchase Option as per” the Lease and
explained that Hult “anticipate[d] waiting for a March 2007
closing,” although it would evaluate whether an earlier date was
possible. Hult expressed no concern with Marshall’s assignment of
the purchase option to McCleve without Hult’s written consent,
nor did Hult acknowledge that the anticipated closing in March
2007 would occur beyond the 120‐day period specified by the
option for completing the purchase once the option was exercised.
In March 2007, McCleve contacted Hult to make arrangements for
the closing. In response, Hult’s attorney informed McCleve, for the
first time, that Hult would not participate in any closing,
apparently because the closing date was outside the purchase
option’s120‐day closing period, which had ended on February 28,
2007.
¶5 McCleve then filed this suit, seeking specific performance
and damages resulting from breach of contract. The parties filed
20110594‐CA 3 2013 UT App 185McCleve Properties v. D. Ray Hult Family
cross‐motions for summary judgment, with Hult asserting that
McCleve had failed to strictly comply with the terms of the Lease
either in obtaining the assignment or in exercising the purchase
option and McCleve claiming both that it had timely exercised the
purchase option and that Hult had waived any claim that the
assignment was void. McCleve attached to its motion copies of the
Lease and the three letters. In support of its opposition to
McCleve’s motion for summary judgment and its own cross‐
motion, Hult attached the affidavit of D. Ray Hult, in which Mr.
Hult stated, in pertinent part,
2. At no time was I asked to, nor in fact did I, consent
to any assignment of any of the rights or obligations
contained in the Lease between [Hult] and
[Marshall].
....
4. On November 20, 2006, I prepared a letter
addressed to Marshall Industries, Inc.
acknowledging receipt of the written Notice.
5. At the time I wrote the letter of November 20, 2006,
I did not review the underlying Option contained in
the Lease and was not aware that it required the
completion of the purchase within one hundred
twenty (120) days from receiving written notice.
6. At no time did I intend to waive any of the
requirements of the Option to Purchase and fully
intended that it be exercised in conformity with its
terms.
20110594‐CA 4 2013 UT App 185McCleve Properties v. D. Ray Hult Family
¶6 Following argument, the district court granted McCleve’s
motion, concluding that Hult had waived strict compliance with
the terms of the Lease. Specifically, in response to Hult’s claim that
the Lease required Hult’s permission to assign the option
provision, the court said, “No one sought [Hult’s] permission
. . . [but t]he undisputed material facts before the Court,
demonstrate an inference of relinquishment, because [Hult]’s letter
made no attempt to assert the Lease’s requirement that [Hult’s]
permission must be first obtained.” The court further explained
that Hult’s use of “your” in describing McCleve’s intent to
“exercise your Purchase Option” “show[ed] that [Hult] accepted
the assignment, and offered little resistance to the fact that
[McCleve] was ‘going to exercise’ that option” instead of Marshall,
especially when viewed in light of the fact that Hult “expressed an
anticipated closing date that met the requirements of [McCleve]’s
prior letter.” Regarding Hult’s claim that the purchase option was
exercised outside the window contemplated by the Lease, the court
stated,
[Hult] signed the Lease agreement and agreed to its
terms. [Hult] agreed to [McCleve’s] request for a
March 2007 closing and again made utterly no
attempt to enforce the provisions of the Lease . . . .
This letter manifested [Hult]’s acquiescence to
[McCleve’s] assertion of its right to exercise the
purchase option in March 2007. The totality of the
circumstances, make patent, that as a matter of law,
[Hult] extended the deadline and waived [its] right
to now claim [McCleve] did not follow the Lease’s
[purchase option] deadlines.
¶7 While the court granted summary judgment to McCleve on
the issue of Hult’s waiver of the Lease requirements, the court
declined to make a contemporaneous award of specific
performance or damages “because issues of material fact remain as
20110594‐CA 5 2013 UT App 185McCleve Properties v. D. Ray Hult Family
to what the appropriate remedies are[] and whether the remedy
should be damages or specific performance.” McCleve
subsequently moved for an order of specific performance, which
the court granted, and other damages, on which the court reserved
its ruling. When Hult then refused to complete the sale, McCleve
moved for an order to compel. The court ordered Hult to close the
sale of the Premises, found Hult in contempt, and awarded
McCleve its attorney fees, costs, and expenses resulting from Hult’s
delay in completing the purchase transaction. After the transaction
was completed, McCleve filed a motion seeking additional
damages from Hult’s breach of the Lease and its earlier contempt
in failing to close. McCleve estimated its total damages, including
“(1) interest on tenant security deposits, (2) closing costs, (3) cash
flow payments, (4) amortization benefits, (5) income taxes paid,
and (6) attorneys’ fees,” at $144,000. The court ”granted
[McCleve]’s damages for (1) interest on security deposits,
(2) closing costs, (3) income taxes paid, and (4) attorney’s fees,”
which amounted to an award of $83,354.
¶8 Hult now appeals the district court’s decision to grant
summary judgment to McCleve on the issue of waiver and to deny
Hult’s own motion for summary judgment on this issue. Both
parties appeal the damages award. Hult contends that the court
erred in awarding McCleve $52,096 in compensation for additional
income taxes McCleve paid as a result of its contemplated section
1031 exchange having been thwarted by Hult’s failure to close,
asserting that such damages “could not have been contemplated by
the parties to the contract” because McCleve itself was not a party
to the original Lease agreement. For its part, McCleve argues that
the court erred in not awarding additional damages, specifically
McCleve’s loss of use of the Premises and the loss of principal
amortization on the loan it took out to pay for the Premises
between the time McCleve should have acquired the Premises in
March 2007 and the time that McCleve actually acquired it in July
2008.
20110594‐CA 6 2013 UT App 185McCleve Properties v. D. Ray Hult Family
I. Summary Judgment
¶9 “Summary judgment is proper only where ‘there is no
genuine issue as to any material fact and . . . the moving party is
entitled to a judgment as a matter of law.’” Peterson v. Coca‐Cola
USA, 2002 UT 42, ¶ 7, 48 P.3d 941 (quoting Utah R. Civ. P. 56(c)).
“However, unlike most cases, the legal conclusions underlying a
trial court’s grant of summary judgment on a waiver issue are
reviewed with some measure of deference.” IHC Health Servs., Inc.
v. D & K Mgmt., Inc., 2003 UT 5, ¶ 6, 73 P.3d 320. “Waiver is an
intensely fact dependent question.” Id. ¶ 7. This means that
[i]n a waiver case decided on a motion for summary
judgment, we must first inquire whether there are
disputed material facts. If there are no disputed
material facts, we consider all undisputed material
facts in the light most favorable to the nonmoving
party before determining whether the trial court’s
decision on the application of the law of waiver to
those facts falls within the bounds of its discretion.
Id. ¶ 6 (citation omitted).
¶10 “‘A waiver is the intentional relinquishment of a known
right. To constitute waiver, there must be [(1)] an existing right,
benefit or advantage, [(2)] a knowledge of its existence, and [(3)] an
intention to relinquish it.’” Geisdorf v. Doughty, 972 P.2d 67, 72
(Utah 1998) (quoting Soter’s, Inc. v. Deseret Fed. Sav. & Loan Ass’n,
857 P.2d 935, 940 (Utah 1993)). A waiver may be express or
implied, but it must be distinctly made under the totality of the
circumstances. Id. In the contract context, a waiver “occurs when
a party to a contract intentionally acts in a manner inconsistent
with its contractual rights, and, as a result, prejudice accrues to the
opposing party or parties to the contract.” Mid– America Pipeline Co.
v. Four–Four, Inc., 2009 UT 43, ¶ 17, 216 P.3d 352 (citation and
20110594‐CA 7 2013 UT App 185McCleve Properties v. D. Ray Hult Family
internal quotation marks omitted). The Utah Supreme Court,
however, has cautioned “trial courts to be especially careful in their
examination of the evidence in questions of waiver and option
performances, especially where . . . waiver is merely implied.”
Geisdorf, 972 P.2d at 72. Nevertheless, even though the optionee
ordinarily must act “precisely according to the terms of the option”
when it seeks to exercise a purchase option, id. at 70 (citation and
internal quotation marks omitted), strict compliance may be
excused by the optionor’s waiver so long as that waiver is distinctly
made in a manner that is “unambiguous,” id. at 72.
¶11 Hult claims that the district court erred in determining that
it had unambiguously waived its right to enforce the Lease’s
assignment and purchase option provisions by means of the Hult
letter. Hult’s claim rests on two interdependent arguments. First,
it asserts that Mr. Hult’s affidavit statement “denying the intent to
waive” the requirements for an assignment under the Lease,
regardless of anything to the contrary in the Hult letter, raises an
issue of fact sufficient to survive summary judgment. Second, Hult
asserts that it could not have waived its right to enforce the time
restrictions governing exercise of the purchase option when,
because Mr. Hult had not read the Lease for some time, he was not
even aware of the relevant Lease provisions at the time he wrote
the letter.2 Thus, we are presented with a question of whether
2
At oral argument before this court, Hult focused on a
third basis for reversing the grant of summary judgment to
McCleve: Hult was confused about who was exercising the
purchase option because it thought Mr. McCleve was acting on
behalf of Marshall, for which he was an agent. Hult asserted that
the fact that the November 20, 2006 Hult letter was addressed to
Mr. McCleve at Marshall Industries evidenced that confusion.
Hult did not make this argument to the district court. Conse‐
(continued...)
20110594‐CA 8 2013 UT App 185McCleve Properties v. D. Ray Hult Family
Hult’s unambiguous acceptance of the Marshall letter assigning the
Lease purchase option to McCleve and the McCleve letter’s terms
for exercising that option can be overcome by Hult’s purported
lack of actual intention to waive strict compliance with the Lease
terms. See generally id. (requiring a waiver to be intentional,
although it may be implied).
¶12 In the context of contract formation, the Utah appellate
courts have held that “each party has the burden to read and
understand the terms of a contract before he or she affixes his or
her signature to it.” John Call Eng’g, Inc. v. Manti City Corp., 743 P.2d
1205, 1208 (Utah 1987) (reversing the trial court’s determination
that there was no “meeting of the minds” as a result of the city’s
failure to read the contract terms). “[S]ophisticated business parties
are charged with knowledge of the terms of the contracts they enter
into”; as a consequence, such parties are “not permitted to show
that [they] did not know [a contract’s] terms, and in the absence of
fraud or mistake [they] will be bound by all its provisions, even [if
they have] not read the agreement and do not know its contents.”
ASC Utah, Inc. v. Wolf Mountain Resorts, LC, 2010 UT 65, ¶ 28, 245
P.3d 184 (citation and internal quotation marks omitted); accord
2
(...continued)
quently, it is unpreserved for our review. See 438 Main St. v. Easy
Heat, Inc., 2004 UT 72, ¶ 51, 99 P.3d 801 (“[I]n order to preserve
an issue for appeal[,] the issue must be presented to the trial
court in such a way that the trial court has an opportunity to rule
on that issue . . . . Issues that are not raised at trial are usually
deemed waived.” (alterations in original) (citations and internal
quotation marks omitted)). In addition, we generally decline to
consider an argument made for the first time during oral argu‐
ment. See, e.g., In re Gregory, 2011 UT App 170, ¶ 10, 257 P.3d 495(refusing to consider “unbriefed argument raised for the first
time at oral argument”).
20110594‐CA 9 2013 UT App 185McCleve Properties v. D. Ray Hult Family
John Call Eng’g, 743 P.2d at 1208 (“A party may not sign a contract
and thereafter assert ignorance or failure to read the contract as a
defense.”); cf. Copper State Leasing Co. v. Blacker Appliance &
Furniture Co., 770 P.2d 88, 93 (Utah 1988) (explaining that, absent
misrepresentation, a party to a contract has an obligation “to take
reasonable steps to inform himself, and to protect his own
interests” (citation and internal quotation marks omitted)).
¶13 These principles of contract formation and enforcement
were applied in the waiver context in ASC Utah, Inc. v. Wolf
Mountain Resorts, LC, 2010 UT 65, 245 P.3d 184. In that case, the
Utah Supreme Court considered whether the district court
properly determined that the defendant, Wolf Mountain, had
waived its right to assert an arbitration provision in the underlying
contract. Id. ¶¶ 9, 26–31. Wolf Mountain contended that “it could
not relinquish a ‘known’ right because it originally believed that it
did not have the right to pursue arbitration.” Id. ¶ 26. The supreme
court disagreed, stating that the underlying contract contained a
clear arbitration provision and that Wolf Mountain, as a
“sophisticated business part[y],” could not claim its own
misunderstanding or ignorance of the contract provision as a
defense when its “actions . . . clearly manifest[ed] an intent to
pursue litigation rather than arbitration.” Id. ¶¶ 27–28, 31; see also
Geisdorf, 972 P.2d at 68–69, 72–73 (holding that a landlord had not
waived her right to strictly enforce a lease option agreement when
she failed to notify the tenant that the renewal option could only be
exercised in writing, based on its reasoning that the commercial
lessee had an obligation to read the contract and take reasonable
steps to protect his own interest). We do not see any reason why
these principles would not be applicable to the analysis of waiver
in the purchase option context.
¶14 Here, there is no dispute that the Lease clearly describes
both the requirement that Marshall obtain the consent of Hult
before making any assignment and the requirements for exercise
20110594‐CA 10 2013 UT App 185McCleve Properties v. D. Ray Hult Family
of the purchase option. Marshall’s October 30, 2006 letter to Hult
stated that Marshall had “assign[ed the] ‘Option to Purchase’
outlined in [the Lease] to McCleve Properties, LLC.” And
McCleve’s own letter, dated October 31, 2006, reiterated that
“Marshall Industries, Inc. has assigned this purchase option to
McCleve Properties, Inc.” and attached a copy of the assignment
itself. At that point, Hult had unequivocal notice that the purchase
option had been assigned and that the assignment had occurred
without Hult’s prior consent. McCleve’s letter further informed
Hult “that the purchase option is being exercised as per the
[L]ease” to facilitate a section 1031 exchange, which had to “take
place no later than March 31, 2007.” The outer bounds of the
closing period that McCleve thus described was clearly beyond the
120‐day period in which the purchase transaction must be
completed under the terms of the Lease. The two letters left no
room for doubt that the purchase option had been assigned to
McCleve and that McCleve was exercising the option.3 Hult’s
written response was itself unambiguous, noting no objection to
the assignment having been made without Hult’s consent and
unequivocally (though with some regret) acknowledging
McCleve’s exercise of the purchase option on the terms McCleve
set forth. Indeed, Hult itself designated March—clearly beyond the
option’s 120‐day closing period—as its preferred time frame for
closing. By unequivocally acknowledging Marshall’s assignment
of the purchase option to McCleve, accepting McCleve’s exercise
of the option, and suggesting a closing date outside the 120‐day
3
Indeed, other than the claim, raised for the first time at
oral argument, that Hult did not understand that Mr. McCleve
was exercising the purchase option on behalf of McCleve Proper‐
ties, LLC, and not as an agent for Marshall, Hult has not asserted
that the Marshall or McCleve letters misled or deceived it about
Marshall’s and McCleve’s intentions concerning the assignment
and exercise of the purchase option.
20110594‐CA 11 2013 UT App 185McCleve Properties v. D. Ray Hult Family
closing window, Hult performed “intentional[] acts in a manner
inconsistent with its contractual rights.” See Mid–America Pipeline
Co., 2009 UT 43, ¶ 17. Furthermore, “as a result” of Hult’s
unambiguous acceptance of McCleve’s terms for exercise of the
purchase option, which did not conform to the requirements of the
Lease, “prejudice accrue[d] to” McCleve when Hult later attempted
to enforce the Lease as written. See id. Under these facts, the district
court correctly determined that Hult had waived its right to strictly
enforce the pertinent Lease provisions. Waiver eliminated Hult’s
defense to McCleve’s breach of contract claims, rendering
summary judgment in favor of McCleve appropriate. We therefore
affirm the district court’s summary judgment in favor of McCleve
and denial of Hult’s motion for summary judgment.
II. Damages
¶15 We now consider the parties’ claims regarding the district
court’s damages award.
A. Income Tax Liability
¶16 Hult contends that the district court erred in awarding
McCleve $52,096 in general damages for income taxes it owed as a
result of the failed tax‐deferred section 1031 exchange. Hult argues
that such damages were not general damages, but consequential
damages, which required a showing by McCleve that the damages
were “within the contemplation of the parties at the time they
contracted,” see Castillo v. Atlanta Gas Co., 939 P.2d 1204, 1209 (Utah
Ct. App. 1997) (citation and internal quotation marks omitted).
Hult contends that “any damages flowing from the failed exchange
could not have been contemplated by the parties to the contract”
because “the purported assignee of the contract wasn’t a party to
20110594‐CA 12 2013 UT App 185McCleve Properties v. D. Ray Hult Family
the agreement when it was entered.”4 McCleve does not challenge
Hult’s contention that the income tax liability it incurred was more
in the nature of consequential damages than general damages, but
it nevertheless contends that the award was proper because Hult
was told that McCleve planned to acquire the Premises as part of
a section 1031 exchange when McCleve notified Hult of its intent
to exercise the purchase option.
¶17 “Damages recoverable for breach of contract include both
general [or direct] damages, i.e., those flowing naturally from the
breach, and consequential [or special] damages, i.e., those
reasonably within the contemplation of, or reasonably foreseeable
by, the parties at the time the contract was made.” Beck v. Farmers
Ins. Exch., 701 P.2d 795, 801 (Utah 1985). In other words, general
damages are “those resulting from the ordinary and obvious
purpose of the contract,” which in the case of an option agreement
“would be the ‘loss of the bargain’ represented by the difference
between the market value of the [property] and the option price.”
Ranch Homes, Inc. v. Greater Park City Corp., 592 P.2d 620, 624 (Utah
1979); see also 22 Am. Jur. 2d Damages § 41 (2003) (“In contract cases,
general damages are those that flow naturally from the breach of
a contract . . . [and] include such items as loss of the bargain . . . .”
(citations omitted)). By definition then, the category of general
damages does not seem to include adverse tax consequences that
stemmed from McCleve’s inability to complete a planned section
1031 property exchange as a result of Hult’s refusal to convey the
4
Hult also asserts that McCleve did not actually incur any
unexpected income taxes, as a section 1031 exchange merely
defers the payment of taxes, rather than eliminate them. Hult
does not make an argument for reversing the damages award on
that basis, however, but instead asserts that McCleve’s
“mischaracterization” of the tax consequences of a section 1031
exchange “is actually irrelevant” to this appeal.
20110594‐CA 13 2013 UT App 185McCleve Properties v. D. Ray Hult Family
Premises after McCleve exercised the purchase option. Rather, such
damages “arise from the special circumstances of the case” and are
therefore consequential or special damages. Ranch Homes, 592 P.2d
at 624; see also 22 Am. Jur. 2d Damages § 41 (“Special damages, on
the other hand, are other foreseeable damages within the
reasonable contemplation of the parties at the time the contract was
made . . . [and] flow . . . from unusual circumstances which were
known to the parties when they contracted.” (citation omitted)).
¶18 Therefore, to recover its tax losses as consequential
damages, McCleve had to prove “(1) that [the tax loss] damages
were caused by the contract breach; (2) that [those] damages ought
to be allowed because they were foreseeable at the time the parties
contracted; and (3) the amount of consequential damages within a
reasonable certainty.” See Mahmood v. Ross, 1999 UT 104, ¶ 20, 990
P.2d 933. Although the briefing suggests that McCleve satisfied its
burden as to the first and third factors, the parties present
conflicting facts on the question of whether McCleve’s tax liability
was foreseeable at the time the parties contracted. See Ranch Homes,
592 P.2d at 624 (explaining that for damages to be foreseeable,
“[m]ere knowledge of possible harm is not enough; the defendant
must have reason to foresee, as a probable result of the breach, the
damages claimed”). And because the district court awarded the tax
liability as general damages, it did not undertake any analysis of
foreseeability in its written minute entries or order regarding
damages. Without any findings relating to the foreseeability of the
tax consequences if Hult failed to perform the purchase option
agreement, this court is not equipped to assess the propriety of the
award for tax liability as consequential damages. Accordingly, we
remand the case to the district court for the limited purpose of
assessing whether McCleve’s tax liability as a consequence of the
failed 1031 exchange ought to be assessed against Hult as
consequential damages.
20110594‐CA 14 2013 UT App 185McCleve Properties v. D. Ray Hult Family
¶19 On remand, the district court will likely be presented with
the question of when the contemplation of tax consequences from
a failed option contract had to occur in order to meet the
foreseeability prong of the consequential damages analysis. For
example, must the kind of loss McCleve suffered in connection
with the exercise of the option agreement have been foreseeable to
Marshall and Hult at the time they entered into the Lease or only
at the time McCleve sought to exercise the purchase option?
Ordinarily, we would endeavor to provide the district court with
guidance on a legal issue likely to arise on remand. See Wilson v.
IHC Hosps., Inc., 2012 UT 43, ¶ 79, 289 P.3d 369. Neither party,
however, has addressed this question in briefing, and we therefore
believe it is better to leave this issue for the district court to address
in the first instance based on appropriate briefing by the parties. See
State v. James, 819 P.2d 781, 795 (Utah 1991) (noting that appellate
courts only provide guidance for purposes of remand on “[i]ssues
that are fully briefed” (emphasis added)); Medley v. Medley, 2004 UT
App 179, ¶ 11 n.6, 93 P.3d 847 (declining, “in the exercise of judicial
discipline—if not judicial economy—” to provide guidance on
remand where there was “no consensus” on “what any such
guidance should be”). Accordingly, we remand to the district court
for factual and legal determinations on this issue.
B. Loss of Use of the Premises
¶20 McCleve challenges the district court’s denial of damages for
its loss of use of the Premises as consequential damages.
Specifically, McCleve requested $63,738 in compensation for
“positive cash flow from rents [it would have] received” had the
conveyance occurred as scheduled in March 2007. To support its
claim, McCleve attached to its damages memorandum a chart, in
which it quantified the monthly net “positive cash flow” it had
expected to receive each month after making a “hypothetical loan
payment” and collecting rent. McCleve did not offer any factual
basis or other foundation for the rental rate or other figures it
20110594‐CA 15 2013 UT App 185McCleve Properties v. D. Ray Hult Family
presented. The district court, in its written ruling, declined to
award McCleve damages for the loss of use of the Premises
because it failed to “produce a sufficient evidentiary basis to
establish the fact of damages” when it “provided [only] a computer
generated table, listing a hypothetical loan payment and principal
and interest based on the hypothetical loan” without “any
foundation for . . . the hypothetical information.” (Citation
omitted.)
¶21 McCleve now challenges the district court’s ruling on the
basis that its damages were foreseeable at the time the contract was
made and reasonably certain. The district court’s ruling, however,
rejected McCleve’s claim not because the loss of use damages it
claimed were not recoverable as consequential damages, but
because McCleve failed to provide an evidentiary foundation for
those damages. Because McCleve failed to challenge the basis of
the court’s ruling and because such an evidentiary decision appears
to be within the court’s discretion, we affirm the court’s denial of
the loss of use damages. See generally Benns v. Career Serv. Review
Office, 2011 UT App 362, ¶ 2, 264 P.3d 563 (per curiam) (“If an
appellant does not challenge the lower court’s basis for its
judgment, the lower court’s determination is placed beyond the
reach of further appellate review . . . .”); State v. Burke, 2011 UT App
168, ¶ 17, 256 P.3d 1102 (“A trial court’s determination that there
was [or was not] a proper foundation for the admission of evidence
. . . [is reviewed for] an abuse of discretion.” (omission and second
alteration in original) (citation and internal quotation marks
omitted)).
C. Amortization
¶22 Finally, McCleve contends that the district court
inappropriately denied its claim for consequential damages
resulting from the loss of amortization benefits it would have
enjoyed had the sale occurred in March 2007 rather than sixteen
20110594‐CA 16 2013 UT App 185McCleve Properties v. D. Ray Hult Family
months later as it actually did. According to McCleve, because “[a]
portion of the loan payments amortizes the unpaid principal of the
loan, reducing the amount of the loan each month,” it would have
reduced its total loan balance by $15,824 between March 2007,
when the sale should have occurred, and July 2008, when the sale
actually took place. McCleve, however, has not lost any of the
benefit of amortization but merely has had the benefit delayed, i.e.,
it reduced the loan balance and built up equity between July 2008
and November 2009 as it would have between March 2007 and July
2008. Even if such damages were recoverable in principle, an issue
that we do not decide, McCleve did not provide any evidence to
the district court to demonstrate any loss caused by the delay, for
example that the later interest rate was higher or even that there
was a net loss based on present value principles. We therefore
affirm the district court’s denial of amortization damages.
III. Conclusion
¶23 In summary, Hult unambiguously accepted McCleve’s clear
statement that it would exercise the Lease’s purchase option, which
was assigned to it by Marshall, and suggested a closing date
outside the time frame contemplated by the Lease. This conduct
evidenced Hult’s intent to waive strict compliance with the Lease
provisions. Thus, there were no material facts in dispute regarding
Hult’s breach of the contract, and summary judgment was properly
awarded to McCleve.
¶24 We reverse the award of income tax damages to McCleve
because the court analyzed their appropriateness under the general
damages standard and remand for consideration under the
consequential damages standard. Other damages to McCleve were
appropriately denied where McCleve failed to provide an
evidentiary basis for the loss of use damages and the amortization
benefits of purchasing the Premises were merely delayed, rather
than lost.
20110594‐CA 17 2013 UT App 185McCleve Properties v. D. Ray Hult Family
20110594‐CA 18 2013 UT App 185