Myler v. Blackstone Financial Group Business Trust , 766 Utah Adv. Rep. 29 ( 2014 )

2014 UT App 187_________________________________________________________
THE UTAH COURT OF APPEALS
LARRY MYLER,
Plaintiff and Appellant,
v.
BLACKSTONE FINANCIAL GROUP BUSINESS TRUST ,
Defendant and Appellee.
Opinion
No. 20130246-CA
Filed August 7, 2014
Third District Court, Salt Lake Department
The Honorable Robert P. Faust
No. 120906291
Heather A. McDougald, Attorney for Appellant
Sean A. Monson, Attorney for Appellee
SENIOR JUDGE RUSSELL W. BENCH authored this Opinion, in
which JUDGES MICHELE M. CHRISTIANSEN and JOHN A. PEARCE
concurred.1
BENCH, Senior Judge:
¶1 Larry Myler appeals from the district court’s grant of
summary judgment in favor of Blackstone Financial Group
Business Trust (Blackstone). We affirm.
1. The Honorable Russell W. Bench, Senior Judge, sat by special
assignment as authorized by law. See generally Utah Code Jud.
Admin. R. 11-201(6).
Myler v. Blackstone Financial Group
BACKGROUND
¶2 In 2004, Midtown Joint Venture, LC (Midtown) was formed
to develop the Midtown Village Project in Orem, Utah (Midtown
Village). In order to secure financing for the project, Midtown
obtained construction loans from Blackstone’s predecessors-in-
interest, as evidenced by a promissory note and deed of trust. In
March 2007, Myler, who was serving as a member and manager of
Midtown, executed a personal guarantee on the loans (the
Guarantee). At the same time, another individual involved in the
project, Jerry Moyes, signed a similar personal guarantee on the
loans (the Moyes Guarantee). Midtown Village was ultimately
abandoned as a result of the economic turmoil of 2008. Myler faced
financial difficulties of his own and ultimately filed for bankruptcy.
¶3 In June 2011, Blackstone filed a lawsuit against Midtown and
a number of other defendants, alleging various claims relating to
the misappropriation of funds in connection with Midtown Village
(the defalcation action). Myler was not a party to this suit. In
October 2011, Blackstone reached a settlement agreement with
some defendants, including Midtown, Jerry and Vickie Moyes, and
First American Title Insurance Company (the Settlement
Agreement).
¶4 Two provisions of the Settlement Agreement are relevant to
the resolution of this case. First, section 1.C of the Settlement
Agreement released most of the defendants in the defalcation
action from any claims arising out of or related to the title policies,
loans, defalcation action, Moyes Guarantee, or development of
Midtown Village. It also provided that “dealings or transactions
unrelated to the Midtown Village” were excluded from the release.
Midtown was explicitly excluded from release under this
provision. Second, section 2 of the Settlement Agreement required
Midtown to deliver a Deed in Lieu of Foreclosure to Blackstone,
which was to fully satisfy Midtown’s obligations under the loans.
Once the foreclosure process was accomplished via the Deed in
Lieu, Blackstone was to release “Midtown, and its officers, past or
present employees, members, managers, agents, representatives,
insurers, and attorneys . . . as if Midtown had been specifically
20130246-CA 2 2014 UT App 187Myler v. Blackstone Financial Group
identified” in section 1.C. However, section 2 contained a caveat
providing that “[n]othing contained in [the Settlement] Agreement
or in the Deed in Lieu” was to “be interpreted or construed in any
way” that would cancel the indebtedness or “preclude Blackstone
from enforcing any and all rights and remedies against or with
respect to the Midtown Village and other security under and by
virtue of the Trust Deed or any other instrument given to further
secure the indebtedness evidenced by the Note.”
¶5 A month after the Settlement Agreement was reached,
Blackstone amended its complaint in the defalcation action to add
Myler as a defendant, asserting claims of fraudulent conveyance
and unjust enrichment. Soon afterward, however, Blackstone was
informed by Myler’s counsel that Myler had filed for bankruptcy
protection, so Blackstone voluntarily dismissed Myler from the
defalcation action. In March 2012, Blackstone filed a motion in
bankruptcy court to reopen Myler’s bankruptcy case. Blackstone
also filed an adversary complaint alleging, first, that Myler had
incurred a debt to Blackstone through fraud by using the
construction loans for his personal use (the section 523 claim), see
11 U.S.C. § 523 (2012), and, second, that Myler had committed
fraud on the bankruptcy court by failing to disclose assets (the
section 727 claim), see id. § 727. The bankruptcy court dismissed
Blackstone’s adversary complaint because it was untimely.
¶6 Myler filed the present action against Blackstone in
September 2012. Myler alleged that, as a member and manager of
Midtown, he was a third-party beneficiary of the Settlement
Agreement and that Blackstone’s various legal actions against him
breached the terms of the Settlement Agreement’s release
provisions. Blackstone responded that the actions it brought
against Myler were excluded from the release because they were
either brought pursuant to the Guarantee or were unrelated to
Midtown Village. Blackstone filed a motion to dismiss or, in the
alternative, for summary judgment, and Myler filed a cross-motion
for summary judgment.
¶7 Following a hearing on the motions, the district court
granted Blackstone’s motion and denied Myler’s. The court
20130246-CA 3 2014 UT App 187Myler v. Blackstone Financial Group
determined that the Settlement Agreement did not release Myler’s
liability under the Guarantee and that Blackstone therefore did not
breach the Settlement Agreement by adding Myler to the
defalcation action or by pursuing the section 523 claim.2 The court
further determined that because the section 727 claim was
unrelated to Midtown Village or the loans, it was not barred by the
Settlement Agreement. The court also awarded Blackstone $14,870
in attorney fees. Myler appeals.
ISSUE AND STANDARD OF REVIEW
¶8 Myler argues that the district court erred in granting
summary judgment to Blackstone. “We review ‘a trial court’s legal
conclusions and ultimate grant or denial of summary judgment for
correctness.’” Blosch v. Natixis Real Estate Capital, Inc., 2013 UT App
214, ¶ 12, 311 P.3d 1042 (quoting Orvis v. Johnson, 2008 UT 2, ¶ 6,
177 P.3d 600).
2. The district court’s ruling and the parties’ arguments on appeal
contain little to no discussion regarding whether the claims against
Myler in the defalcation action and the adversary complaint were
actually based on the Guarantee rather than on Myler’s personal
fraudulent actions. By framing the determinative question on
appeal as whether the Settlement Agreement released Myler from
his obligations under the Guarantee, the parties have largely
assumed that the claims were based on the Guarantee. Myler
himself raises the possibility that the defalcation claims were based
in tort rather than contract only in passing and does not develop
that argument. Thus, we decline to consider it further and assume,
without deciding, that the defalcation claims and the section 523
claim were based on the Guarantee. See generally State v. Thomas,
961 P.2d 299, 304 (Utah 1998) (“It is well established that a
reviewing court will not address arguments that are not adequately
briefed.”).
20130246-CA 4 2014 UT App 187Myler v. Blackstone Financial Group
ANALYSIS
¶9 “In interpreting contracts, Utah courts first look at the
language within the four corners of the contract [and determine
whether the contract] is unambiguous.” Tom Heal Commercial Real
Estate, Inc. v. Overton, 2005 UT App 257, ¶ 8, 116 P.3d 965(alteration in original) (citation and internal quotation marks
omitted). “If the language is unambiguous, the parties’ intentions
are determined from the plain meaning of the contractual
language, and the contract may be interpreted as a matter of law.”
Id. (citation and internal quotation marks omitted).
¶10 Myler asserts that the Settlement Agreement
unambiguously releases him from liability under the Guarantee
because he is a member and manager of Midtown. Myler’s
argument relies primarily on the provision in section 2 indicating
that once foreclosure was accomplished, Midtown and its affiliates
were to be released “as if Midtown had been specifically identified”
in section 1.C. He asserts that the language in section 2 providing
for the continuing existence of the indebtedness and reserving
Blackstone’s right to pursue other security was effective only until
the Deed in Lieu was delivered and foreclosure was accomplished.
According to Myler, because Midtown became a section 1.C
releasee after foreclosure, the foreclosure also “eradicated the
[section 2] preservations of claims with respect to the Note, the
Trust Deed, and the other security instruments.” Myler also argues
that no remaining indebtedness exists on the loans because
Midtown’s obligations under the loans were deemed to be fully
satisfied by the foreclosure. We disagree with Myler’s
interpretation of the Settlement Agreement.
¶11 The caveat in section 2 reserving Blackstone’s right to
pursue other security plainly applies to the entire Security
Agreement, including section 1.C, and there is nothing in the
language of that caveat, suggesting, as Myler argues, that it could
be extinguished by foreclosure. To the contrary, section 2 provides,
“Nothing contained in this Agreement or in the Deed in Lieu . . . shall be
interpreted or construed in any way” to (1) “release, impair, or
affect the continuing existence” of Midtown’s indebtedness or (2)
20130246-CA 5 2014 UT App 187Myler v. Blackstone Financial Group
“preclude Blackstone from enforcing any and all rights and
remedies against or with respect to the Midtown Village and other
security under and by virtue of the Trust Deed or any other
instrument given to further secure the indebtedness evidenced by
the Note.” (Emphasis added.) This provision was sufficient to
reserve Blackstone’s right to pursue recovery from Myler under the
Guarantee. See Horman v. Gordon, 740 P.2d 1346, 1354 (Utah Ct.
App. 1987) (recognizing that a creditor may reserve his right
against a surety when releasing a principal (citing Restatement
(First) of Security § 122 (1941))). The fact that the Settlement
Agreement explicitly released Moyes from liability under the
Moyes Guarantee further suggests that the parties did not intend
to release Myler from liability under the Guarantee. See Utah Code
Ann. § 78B-5-822 (LexisNexis 2012) (“A release given by a person
seeking recovery to one or more defendants does not discharge any
other defendant unless the release so provides.”); Child v. Newsom,
892 P.2d 9, 11–12 (Utah 1995) (construing section 78B-5-822 to
require “some degree of specificity” in describing the defendants
to be released and determining that boilerplate language releasing
“all other persons, firms and corporations” was not sufficiently
specific to effectuate a release (internal quotation marks omitted)).
¶12 Additionally, the Guarantee provided that Myler would
“remain liable for any deficiency remaining after foreclosure”
regardless of whether Midtown’s liability was discharged. The
Guarantee further provided that Myler’s obligations under the
Guarantee could be affected by nothing “except full payment and
discharge of the [i]ndebtedeness.” (Emphasis added.) Although the
Deed in Lieu may have satisfied Midtown’s obligation, as far as
Blackstone was concerned, satisfaction of an obligation is not
necessarily the same thing as full payment. Cf. Town & Country v.
Stevens, 2014 UT App 172, ¶ 15 (holding that a reorganization plan
entered in connection with a bankruptcy, under which the
borrower would be able to satisfy its obligation to a lender, did not
alter the guarantors’ obligation to satisfy the debt as outlined in the
original promissory note). Indeed, the Settlement Agreement itself
made this distinction when it provided that “[n]othing” in the
Settlement Agreement or the Deed in Lieu “shall be interpreted or
construed in any way to release, impair, or affect the continuing
20130246-CA 6 2014 UT App 187Myler v. Blackstone Financial Group
existence of the indebtedness” and that while the delivery of the
Deed in Lieu “shall be deemed to be sufficient consideration to
effect a satisfaction of any obligation of Midtown with respect to the
amounts due under the Loans,” it “shall not be deemed to be a
cancellation of such indebtedness.” (Emphasis added.) In other
words, Blackstone’s agreement not to pursue a deficiency judgment
against Midtown was not to be construed as a recognition that the
debt had been paid in full. In reviewing the Settlement Agreement
as a whole, we are convinced that it unambiguously reserves
Blackstone’s right to bring an action against Myler pursuant to the
terms of the Guarantee. See generally ELM, Inc. v. M.T. Enters., Inc.,
968 P.2d 861, 863 (Utah Ct. App. 1998) (explaining that contracts
“should be read as a whole, in an attempt to harmonize and give
effect to all of the contract provisions”).
¶13 Myler also challenges the district court’s conclusion that
“Blackstone’s claim under section 727 of the Bankruptcy Code was
unrelated to Midtown or the loans.” Section 727 provides that
making false statements in an audit or failing to disclose assets,
among other things, are grounds for revoking a bankruptcy
discharge. See 11 U.S.C. § 727(d) (2012). Blackstone’s section 727
claim is based on its allegation that after the bankruptcy petition
was filed, Myler established a new company, transferred assets
from another company to the new company, and then sold an
interest in the new company without disclosing the proceeds of the
transaction to the bankruptcy trustee. These companies were
unrelated to Midtown Village, as was Myler’s alleged failure to
fully disclose his assets to the bankruptcy court, and the Settlement
Agreement explicitly excluded “dealings or transactions unrelated
to the Midtown Village” from the release. Thus, we agree with the
district court that Blackstone did not breach the Settlement
Agreement by asserting the section 727 claim.
CONCLUSION
¶14 We determine that Blackstone’s claims in the defalcation
action and its section 523 claim, brought pursuant to the Guarantee,
were not released by the Settlement Agreement. The section 727
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claim was likewise not subject to the release because it was
unrelated to Midtown Village. Thus, Blackstone did not breach the
Settlement Agreement by bringing these claims, and the district
court correctly determined that Blackstone was entitled to
summary judgment. We also grant Blackstone’s request for
attorney fees because it was awarded fees in the district court and
has prevailed on appeal. See Valcarce v. Fitzgerald, 961 P.2d 305, 319
(Utah 1998) (“[W]hen a party who received attorney fees below
prevails on appeal, the party is also entitled to fees reasonably
incurred on appeal.” (citation and internal quotation marks
omitted)). We therefore affirm and remand for the district court to
calculate Blackstone’s reasonable fees incurred on appeal.
20130246-CA 8 2014 UT App 187