Martin v. Rasmussen ( 2014 )

2014 UT App 200_________________________________________________________
THE UTAH COURT OF APPEALS
GARY MARTIN AND BETHANN MARTIN ,
Plaintiffs and Appellees,
v.
SHANE RASMUSSEN AND TERRILYN RASMUSSEN ,
Defendants and Appellants.
Opinion
No. 20121058-CA
Filed August 21, 2014
Third District Court, West Jordan Department
The Honorable Charlene Barlow
No. 100424681
Bruce M. Pritchett Jr., Attorney for Appellants
Michael C. Van, Clay A. Alger, and Robert T.
Spjute, Attorneys for Appellees
JUDGE JOHN A. PEARCE authored this Opinion, in which JUDGES
GREGORY K. ORME and J. FREDERIC VOROS JR. concurred.
PEARCE, Judge:
¶1 Shane and Terrilyn Rasmussen appeal from the district
court’s order enforcing a settlement offer that they had made to
Gary and Bethann Martin pursuant to rule 68 of the Utah Rules of
Civil Procedure. The district court’s order also awarded attorney
fees to the Martins pursuant to Utah Code section 78B-5-825. We
affirm the district court’s enforcement of the settlement offer but
reverse its attorney fee award.
Martin v. Rasmussen
BACKGROUND
¶2 The Rasmussens live next door to the Martins in Sandy,
Utah. The Martins have owned their property since 2005. The
Rasmussens purchased their property, which a developer had been
using as a model home, in 2009. When the Rasmussens purchased
the home, they were aware that the Martins believed that a fence
the developer had erected between the two properties encroached
upon the Martins’ property line by five feet. Indeed, the Martins
ensured that any potential buyer would be aware of their dispute
with the developer by hanging a banner advertising their
contention that the fence was misplaced. The developer assured the
Rasmussens that the fence was properly located on the model
home property. The developer also referred the Rasmussens to the
plat map, which satisfied them that the fence was on their side of
the boundary.
¶3 Thereafter, the Martins and the Rasmussens engaged in an
increasingly rancorous disagreement about the fence and the
property line. Their dispute resulted in litigation when the Martins
sued the Rasmussens in 2010. The Martins’ complaint asserted nine
causes of action, including a quiet title claim regarding the
disputed five-foot strip of land, as well as causes of action for
assault, intentional infliction of emotional distress, and malicious
prosecution. The Martins additionally sought punitive damages
and attorney fees. The Rasmussens filed an answer, and later an
amended answer, denying substantially all of the Martins’
allegations and asserting twelve counterclaims, including
defamation, intentional infliction of emotional distress, and abuse
of process.
¶4 On June 11, 2012, the Rasmussens made an offer of
judgment pursuant to rule 68 of the Utah Rules of Civil Procedure.
The Rasmussens’ offer proposed to resolve the litigation by
transferring four feet of the disputed five-foot strip of land to the
Martins. Specifically, the offer provided,
20121058-CA 2 2014 UT App 200Martin v. Rasmussen
(1) The Rasmussens will convey to the [Martins] 4
feet of the disputed “5-Foot Strip” . . . . This
conveyance will be by quitclaim deed.
(2) Neither party will pay the other party anything
else, or undertake to perform any other act for the
other party.
(3) The foregoing terms will constitute a full and final
resolution of all claims between the parties.
(4) This offer will remain open until 5:00 pm MDT on
Monday, June 25, 2012, at which time it will
automatically expire by its terms.
Notwithstanding the offer’s express June 25 expiration date, the
Rasmussens attempted to revoke the offer on June 22 and replace
it with an offer that would convey only a two-foot strip of the
disputed land to the Martins. However, on June 25, the Martins
accepted the original four-foot offer. Shortly thereafter, they filed
a motion entitled Plaintiffs’ Motion to Enforce Offer of Judgment
Pursuant to Rule 68. See Utah R. Civ. P. 68(c) (“Upon acceptance,
either party may file the offer and acceptance with a proposed
judgment . . . .”).
¶5 The Rasmussens opposed the motion to enforce, arguing
that they had revoked their original offer before the Martins
accepted it. The Rasmussens also argued that the four-foot offer
was illegal because if they conveyed four feet of their property,
they would violate a Sandy City zoning ordinance mandating a
20,000-square-foot minimum lot size. The district court ruled that
the Rasmussens’ original offer was irrevocable under rule 68 of the
Utah Rules of Civil Procedure. The district court also rejected the
Rasmussens’ illegality argument, concluding that the Rasmussens
should have considered the zoning requirements before making
their offer and that “a variance can be sought from Sandy City in
order to relieve [the Rasmussens] from the consequences of their
offer.” Accordingly, the district court entered an order enforcing
the Rasmussens’ original offer and requiring the Rasmussens to
convey four feet of the disputed strip of land to the Martins.
20121058-CA 3 2014 UT App 200Martin v. Rasmussen
¶6 The district court also awarded the Martins the attorney fees
they had incurred enforcing the offer. The district court justified its
attorney fee award with a finding that “[the Rasmussens’]
opposition to the motion [to enforce] is without merit and the rule
68 offer was made in bad faith.” The Martins’ counsel filed an
affidavit of attorney fees to support the claimed fees, but the
document was not notarized. When this deficiency was brought to
his attention, the Martins’ counsel promptly filed a properly
notarized affidavit. That same day, the district court awarded the
Martins attorney fees in the amount of $24,416.44.
¶7 The Rasmussens now appeal from the district court’s final
order determining that the original rule 68 offer was enforceable,
awarding attorney fees, and dismissing the case with prejudice.
ISSUES AND STANDARDS OF REVIEW
¶8 The Rasmussens argue that the district court erred in
ordering them to perform under their original rule 68 settlement
offer because it compelled the Rasmussens to violate Sandy City
zoning ordinances. They also argue that the district court’s
instruction that they could comply with the zoning ordinances by
obtaining a variance contradicts the settlement offer’s provision
that “[n]either party will . . . undertake to perform any other act for
the other party.” These issues present questions of law, the district
court’s resolution of which we review for correctness. See LD III,
LLC v. BBRD, LC, 2009 UT App 301, ¶ 13, 221 P.3d 867 (“Issues of
formation, construction, and enforceability of a settlement
agreement are governed by state contract law . . . .” (citation and
internal quotation marks omitted)).
¶9 The Rasmussens also challenge the district court’s award of
attorney fees to the Martins, arguing that the Rasmussens’
opposition to the motion to enforce did not lack merit and that the
fee award was not supported by sufficient findings and a valid fee
affidavit. “Whether attorney fees should be awarded in a particular
20121058-CA 4 2014 UT App 200Martin v. Rasmussen
case is a question of law, reviewed for correctness.” Purkey v.
Roberts, 2012 UT App 241, ¶ 12, 285 P.3d 1242 (citation and internal
quotation marks omitted); see also North Fork Special Serv. Dist. v.
Bennion, 2013 UT App 1, ¶ 14, 297 P.3d 624 (“The trial court’s
determination that an action lacks merit . . . is a question of law,
which we review for correctness.” (omission in original) (citation
and internal quotation marks omitted)).
ANALYSIS
I. Enforcement of the Settlement Offer
¶10 The Rasmussens first argue that the district court erred in
ordering them to perform under their original rule 68 settlement
offer because they believe they cannot do so without committing
a criminal offense. If the Rasmussens transfer the four-foot strip of
property, the size of their lot will fall to under 20,000 square feet.
The Rasmussens argue that this would violate a Sandy City zoning
ordinance mandating a minimum lot size. A violation of the zoning
ordinances constitutes a Class C misdemeanor and, thus, a criminal
offense. See Sandy City, Utah, Land Development Code § 15A-02-
01(C) (2008).
¶11 “A court may not by its ruling entreat a party to take
criminal action.” Peterson v. Sunrider Corp., 2002 UT 43, ¶ 40, 48
P.3d 918. The Utah Supreme Court has explained that, although a
contract is not automatically unenforceable merely because it
violates a statute or other law, “[it] must be held unenforceable if
enforcement would compel the party seeking to avoid the contract
to violate a penal statute.” Id. Relying on these statements, the
Rasmussens argue that the settlement offer cannot be enforced
because it requires them to run afoul of the Sandy City zoning
ordinances and thereby commit a Class C misdemeanor. See id.¶¶ 40–41 (holding that a contract was unenforceable if, on remand,
the trial court determined that the contract required a party to
commit a felony).
20121058-CA 5 2014 UT App 200Martin v. Rasmussen
¶12 The district court’s ruling recognized, however, that the
Rasmussens could seek a variance from the minimum lot size
requirement. Sandy City provides a procedure for obtaining such
a variance. See Sandy City, Utah, Land Development Code § 15A-
35-02 (2008). Further, the Martins presented affidavit evidence that
during their previous negotiations with the developer, Sandy City
had indicated that it “would grant a variance, unless [the Martins]
did not agree to the variance.”1
¶13 Despite the potential availability of a variance—and Sandy
City’s apparent willingness to grant a variance—the Rasmussens
insist that “it would be repugnant to the law to have the court itself
order parties to commit criminal violations.” This assertion ignores
the legal significance of a variance. Pursuant to the Sandy City
Land Development Code, the variance procedure allows a
landowner to seek “a waiver or modification of the requirements
of the land use ordinance as applied to a parcel of property.” Sandy
City, Utah, Land Development Code § 15A-35-02(A). Once such a
“waiver or modification” is in place, the relevant zoning provision
no longer applies to the affected parcel. Thus, if the Rasmussens
can secure a variance to the minimum lot size requirement, their
compliance with the settlement offer would not violate the Sandy
City Land Development Code.
¶14 In light of the potential availability of a zoning variance, the
district court did not err in requiring the Rasmussens to perform as
they had promised in their original rule 68 settlement offer. Courts
have recognized that parties who contract to perform an act that
would violate a zoning ordinance can be expected to avail
1. In the same affidavit, the Martins averred that the City Attorney
reiterated at a 2008 meeting “that Sandy City would not enforce
their zoning requirements . . . as long as the parties reached a
settlement and a variance was agreed to by [the Martins].” The
Rasmussens have not argued on appeal that these statements were
inadmissible as hearsay or for any other reason.
20121058-CA 6 2014 UT App 200Martin v. Rasmussen
themselves of variance procedures so that they can perform their
contractual obligations and comply with the law. See Young v. Texas
Co., 331 P.2d 1099, 1100–01 (Utah 1958) (stating that parties’ illegal
intent cannot be inferred from “a zoning ordinance which makes
the contemplated use illegal at the time the lease is executed . . .
where it is possible to obtain a change in the zoning ordinance so
that the use can be made legal”); 12 Havemeyer Place Co. v. Gordon,
820 A.2d 299, 308 (Conn. App. Ct. 2003) (“‘Parties may bind
themselves to a contract that calls on its face for a use of property
that violates the zoning laws because, due to the possibility of
obtaining a variance, such a bargain is not against public policy or
public morals.’” (quoting Entrepreneur, Ltd. v. Yasuna, 498 A.2d
1151, 1158 (D.C. 1985))); cf. L.C. Canyon Partners, LLC v. Salt Lake
Cnty., 2011 UT 63, ¶ 13, 266 P.3d 797 (relying, in part, on the
existence of a variance procedure to reject due process challenge to
minimum lot size requirement).
¶15 The Rasmussens argue that this case is distinguishable from
Young v. Texas Co., 331 P.2d 1099 (Utah 1958), because the lease in
Young expressly required the lessor to obtain any necessary
variances. As the Rasmussens point out, the Utah Supreme Court
has relied on this distinction to affirm a district court’s refusal to
enforce a lease that called for the use of property in violation of a
zoning ordinance. See Sine v. Rudy, 493 P.2d 299, 300 (Utah 1972)
(“[In Young], both parties knew of the zoning restrictions, and one
of them, as a term of the lease, agreed to obtain clearance thereof
as part of the consideration,—quite dissimilar from the facts
here.”).
¶16 The absence of an express requirement that the Rasmussens
obtain a variance does not preclude an application of Young to the
facts of this case. Sine v. Rudy did not directly involve a challenge
to the legality of the contract; rather, the “nub” of that case was
“mistake, or possibly lack of consideration.” Id. at 299. The relevant
holding of Young is not that parties must contractually assign the
responsibility to obtain a variance, but rather that the potential for
a variance provides a safety valve for parties to attempt to comply
20121058-CA 7 2014 UT App 200Martin v. Rasmussen
with the law and their contractual obligations. See 331 P.2d at
1100–01; cf. Entrepreneur, Ltd., 498 A.2d at 1159 (stating that, in the
absence of an express term, “it will be presumed [that] the parties
contemplated that a license would be obtained” (alteration in
original) (citation and internal quotation marks omitted)). Because
the Rasmussens may seek a variance from the minimum lot size
requirement, the district court’s enforcement order does not
“entreat [them] to take criminal action,” Peterson v. Sunrider Corp.,
2002 UT 43, ¶ 40, 48 P.3d 918, and we will not reverse the district
court’s order on that basis.
¶17 The Rasmussens next argue that when the district court
stated that they could seek a variance to cure the potential
illegality, the court rewrote the settlement offer to insert a new,
additional term. They also rely on the settlement offer’s provision
that “[n]either party will pay the other party anything else, or
undertake to perform any other act for the other party.” (Emphasis
added.) The Rasmussens argue that obtaining a zoning variance
would involve “‘undertak[ing] to perform . . . other act[s]’” that
were “expressly ruled out” in the settlement offer.
¶18 The Rasmussens cite case law for the proposition that a
settlement agreement is a contract between the parties that the
courts should not alter. For example, in a case involving the effect
of a settlement agreement, the Utah Supreme Court has stated,
It is a long-standing rule in Utah that persons dealing
at arm’s length are entitled to contract on their own
terms without the intervention of the courts to
relieve either party from the effects of a bad bargain.
This Court will not rewrite a contract to supply terms
which the parties omitted.
Hal Taylor Assocs. v. Unionamerica, Inc., 657 P.2d 743, 749 (Utah
1982) (citations omitted); see also Palmer v. Davis, 808 P.2d 128, 132
(Utah Ct. App. 1991) (“This court cannot rewrite the contract
because [the] appellant failed to include language to protect her
20121058-CA 8 2014 UT App 200Martin v. Rasmussen
rights.”). However, the district court did not rewrite the
Rasmussens’ settlement offer. As the Martins assert in their brief,
the Rasmussens’ argument ignores the full language of the relevant
part of the offer. The offer does not strictly limit the Rasmussens’
possible obligations to the property transfer. Rather, the offer
precludes the Rasmussens from having to perform any additional
actions “for the other party.”
¶19 We see nothing in the settlement offer’s language that would
absolve the Rasmussens of responsibility to undertake whatever
ancillary actions might be necessary to perform what they agreed
to perform. If a zoning variance is necessary to fulfill the
requirement that the Rasmussens complete the land transfer, then
obtaining that variance is best viewed as part of the obligation to
transfer the land, not as an additional undertaking. As a necessary
aspect of the required land transfer, it is not “any other act” within
the offer’s language, and it is certainly not an act undertaken “for
the other party.” In these circumstances, the district court’s
observation that the Rasmussens could seek a zoning variance
cannot be properly characterized as rewriting the settlement offer
or adding additional or inconsistent terms.
¶20 We conclude that the settlement offer was not unenforceable
due to illegality and that the district court did not impermissibly
alter the terms of the offer. As these are the only arguments that the
Rasmussens raise on appeal to challenge the district court’s
enforcement of the offer, we affirm the district court’s enforcement
order.2
2. The Rasmussens argued below that they had revoked their
settlement offer before the Martins accepted it. The district court
ruled that the express terms of rule 68 of the Utah Rule of Civil
Procedure do not permit a party to revoke a settlement offer made
under that rule. The Rasmussens do not appeal that portion of the
ruling.
20121058-CA 9 2014 UT App 200Martin v. Rasmussen
II. Attorney Fees
¶21 The Rasmussens next challenge the district court’s award of
attorney fees to the Martins. The district court awarded the Martins
“attorney fees for enforcing the settlement offer,” which the court
later determined to be $24,416.44. The district court reasoned that
the Martins had prevailed, the Rasmussens’ opposition to the
enforcement of the offer of judgment was without merit, and “the
rule 68 offer was made in bad faith.” The Rasmussens argue that
the fee award was inappropriate because their opposition to the
enforcement motion had merit. They also argue that the district
court failed to make factual findings about the reasonableness of
the fees requested and that the award was not supported by a valid
affidavit.
¶22 The district court did not expressly identify the source of its
authority to grant attorney fees in this case, but the parties appear
to agree that the fee award was made pursuant to Utah Code
section 78B-5-825. See generally Bilanzich v. Lonetti, 2007 UT 26, ¶ 11,
160 P.3d 1041 (“Generally, attorney fees are awarded only when
authorized by contract or by statute.”). Section 78B-5-825 provides,
with certain exceptions not applicable here, that “[i]n civil actions,
the court shall award reasonable attorney fees to a prevailing party
if the court determines that the action or defense to the action was
without merit and not brought or asserted in good faith.” Utah
Code Ann. § 78B-5-825(1) (LexisNexis 2012). The district court’s fee
award tracked this statutory language, relying on the three
elements of prevailing status, lack of merit, and bad faith.
¶23 Relying on section 78B-5-825, the Rasmussens argue that the
district court erred in concluding that their opposition to the
Martins’ enforcement motion was without merit.3 “In determining
3. The Rasmussens do not contend that Utah Code section
78B-5-825 is wholly inapplicable here because the district court was
(continued...)
20121058-CA 10 2014 UT App 200Martin v. Rasmussen
whether there is merit to a claim, an appellate court focuses on
whether the claim was ‘frivolous or of little weight or importance
having no basis in law or fact.’” North Fork Special Serv. Dist. v.
Bennion, 2013 UT App 1, ¶ 56, 297 P.3d 624 (quoting Warner v.
DMG Color, Inc., 2000 UT 102, ¶ 22, 20 P.3d 868). If the Rasmussens
are correct that their opposition to the enforcement motion had
merit, then the attorney fee award must be reversed without
consideration of the district court’s finding that they acted in bad
faith. See id. (“Where an appellate court finds as a matter of law
that a party’s claim has merit, it need not reach the second, factual
‘bad faith’ element of section 78B-5-825.” (citing In re Olympus
Constr., 2009 UT 29, ¶ 8 n.1, 215 P.3d 129)).
¶24 We agree with the Rasmussens that their opposition to the
enforcement motion cannot be deemed “without merit” for
purposes of section 78B-5-825. Although their illegality argument
was ultimately unsuccessful below and on appeal, it did not
completely lack a basis in law or fact. The Rasmussens relied on the
Utah Supreme Court’s prohibition on the enforcement of contracts
that compel the violation of a criminal law, see Peterson v. Sunrider
Corp., 2002 UT 43, ¶¶ 40–41, 48 P.3d 918, and provided the district
court with additional federal authority applying the illegality
3. (...continued)
concerned only with their resistance to enforcement of the
settlement they had offered and not with their defense of the
action. Because the parties agree that section 78B-5-825 governs the
propriety of the trial court’s fee award in this case, we evaluate the
award against the requirements of that section. We note, however,
that “[t]he plain language of section 78B-5-825 expressly limits the
award of attorney fees to situations where a party prevails with
regard to an ‘action.’” Dahl v. Harrison, 2011 UT App 389, ¶ 42, 265
P.3d 139; see id. (explaining that the word “action” as used in
section 78B-5-825 “is a term of art, basically meaning a lawsuit, and
a motion—an optional part of a lawsuit—clearly does not equate
to an ‘action’”).
20121058-CA 11 2014 UT App 200Martin v. Rasmussen
argument to a settlement reached under the federal version of rule
68, see Perkins v. U.S. W. Commc’ns, 138 F.3d 336, 340 n.5 (8th Cir.
1998). Below, the potential availability of a variance was not argued
until the Martins raised it in their reply memorandum. The
Rasmussens argued at the motion hearing that their ability to
obtain a variance was speculative and that they should not be
required “to go to some uncertain lengths to see if they can get
around [the] illegality.”4 The Rasmussens also argued to the district
court that they had effectively revoked their offer prior to its
acceptance and that the court should not enforce the offer to avoid
manifest injustice. In light of these considerations, the Rasmussens’
opposition to the enforcement motion was not without merit, and
the district court erred in concluding that it was.
¶25 Because we determine that the Rasmussens’ opposition to
the Martins’ motion to enforce the settlement offer did not lack
merit for purposes of Utah Code section 78B-5-825, we must
reverse the district court’s attorney fee award.5 See Bennion, 2013
UT App 1, ¶ 56 (reversing attorney fee award where party’s claims
“were neither ‘frivolous’ nor ‘of little weight or importance having
no basis in law or fact’” (citation omitted)). As a result of this
reversal, the Martins are not entitled to fees on appeal even if they
could be deemed the prevailing party, because they have no longer
received their attorney fees below. See Robertson's Marine, Inc. v. I4
4. The Martins did not identify Young v. Texas Co., 331 P.2d 1099(Utah 1958), as authority for their position that the variance
procedure cured any illegality problem until they filed their brief
with this court. When the Martins raised Young on appeal, the
Rasmussens attempted to distinguish it with Sine v. Rudy, 493 P.2d
299 (Utah 1972), as discussed above. See supra ¶¶ 15–16.
5. Given our disposition of the attorney fee issue on this basis, we
need not address the merits of the Rasmussens’ argument that the
attorney fee award was not supported by a valid affidavit and
adequate findings of reasonableness.
20121058-CA 12 2014 UT App 200Martin v. Rasmussen
Solutions, Inc., 2010 UT App 9, ¶ 8, 223 P.3d 1141 (“The general rule
is that when 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)).
¶26 The Martins have also requested attorney fees incurred on
appeal under rule 33 of the Utah Rules of Appellate Procedure. See
Utah R. App. P. 33(a) (allowing for the award of appellate attorney
fees when an appeal is “frivolous”). In light of our determination
that the Rasmussens’ illegality argument does not lack merit and
our resulting reversal of the district court’s attorney fee award, the
Rasmussens’ appeal cannot be deemed frivolous. We therefore
deny the Martins’ request for fees under rule 33.
CONCLUSION
¶27 We conclude that the Rasmussens’ settlement offer is not
unenforceable for illegality even though it requires the Rasmussens
to reduce their lot size below the minimum size Sandy City’s
zoning ordinances require. Sandy City has a variance procedure,
and if the Rasmussens obtain a variance then there will be no
violation of the zoning requirements and no criminal action by the
Rasmussens. Further, the district court’s reference to the variance
procedure did not add a term to the Rasmussens’ offer. However,
the district court did err in awarding attorney fees under Utah
Code section 78B-5-825, because the Rasmussens’ opposition to the
Martins’ enforcement motion did not lack merit. For these reasons,
we affirm the district court’s enforcement of the Rasmussens’
original rule 68 settlement offer, reverse the award of attorney fees
below, and decline to award the Martins attorney fees on appeal.
20121058-CA 13 2014 UT App 200