AGTC Inc. v. CoBon Energy LLC , 447 P.3d 123 ( 2019 )

2019 UT App 124THE UTAH COURT OF APPEALS
AGTC INC. AND ALPINE COAL CO. INC.,
Appellants,
v.
COBON ENERGY LLC,
Appellee.
Opinion
No. 20170992-CA
Filed July 18, 2019
Fourth District Court, Provo Department
The Honorable James R. Taylor
No. 060402937
E. Scott Savage and Stephen R. Waldron, Attorneys
for Appellants
Wm. Kelly Nash, Douglas B. Thayer, Kimberly N.
Baum, and Troy L. Booher, Attorneys for Appellee
JUDGE MICHELE M. CHRISTIANSEN FORSTER authored this Opinion,
in which JUDGES GREGORY K. ORME and RYAN M. HARRIS
concurred.
CHRISTIANSEN FORSTER, Judge:
¶1 AGTC Inc. and Alpine Coal Co. Inc. (collectively, A&A)
appeal the district court’s grant of summary judgment to CoBon
Energy LLC (CoBon) on their contract and unjust enrichment
claims. We reverse and remand for further proceedings.
AGTC Inc. v. CoBon
BACKGROUND 1
¶2 To pursue certain tax credits related to the manufacture of
synthetic fuels from coal (synfuel), Covol Technologies Inc.
(Covol) and Intermountain Consumer Professional Engineers
(ICPE) partnered to form CoBon. ICPE’s principals included
Steven Nash, Robert Nash, and Anton Tonc, each licensed
professional engineers. Using technology developed by Covol,
with assistance from ICPE, CoBon planned to develop facilities
that would take small and unmarketable pieces of coal known as
coal fines—a waste product of coal manufacturing—and bind
them together to form marketable coal briquettes. 2
¶3 After establishing a synfuel production facility, CoBon
envisioned selling that facility to a buyer who would make and
sell synfuel briquettes. This production would entitle the buyer
to claim the associated tax credits. As part of the facility
transaction, CoBon would receive a share of the tax credits from
the buyer in addition to certain royalty and proprietary
technology fees. Before any of this could happen, however,
CoBon needed to identify sources of coal fines, find suitable
locations for facilities, and negotiate the purchase of coal fines
and sale of coal briquettes. But neither Covol nor ICPE had coal
industry experience or contacts.
¶4 In November 1995, CoBon contacted A&A and requested
its assistance in presenting projects to coal companies and
getting facility projects under contract. Mark Rodak, a consultant
1. “In reviewing a district court’s grant of summary judgment,
we view the facts and all reasonable inferences drawn therefrom
in the light most favorable to the nonmoving party and recite the
facts accordingly.” Far West Bank v. Robertson, 2017 UT App 213,
¶ 2 n.4, 406 P.3d 1134 (quotation simplified).
2. This process is typically referred to as “coal fines
agglomeration.”
20170992-CA 2 2019 UT App 124AGTC Inc. v. CoBon
and the principal of Alpine Coal, had significant mining
engineering education and training as well as experience in
various roles in the mining industry. Richard Visovsky, a
consultant and the principal of AGTC, also had significant
mining engineering training and education and had experience
in synfuel development. Neither of these individuals was a
licensed professional engineer.
¶5 In March 1996, A&A entered into a consulting agreement
with Covol—the company licensing the coal fines bonding
technology. Four months later, Covol terminated the consulting
agreement with A&A and renegotiated its relationship with
CoBon. Under the new arrangement, Covol agreed to license its
coal fines bonding technology to CoBon who, using that license,
could pursue development of its own synfuel facilities.
Additionally, ICPE was removed as a principal of CoBon and
replaced by Steven Nash and Robert Nash. In anticipation of
receiving its license from Covol, CoBon entered into its own
agreement with A&A, first orally and then in a formal written
agreement (the Consulting Agreement).
¶6 Over several years, A&A provided consulting and
assistance to CoBon in its endeavor to establish synfuel facilities.
A&A communicated with coal companies and vendors on
CoBon’s behalf. A&A brought in several potential project hosts
and worked toward the goal of securing synfuel development
projects. Ultimately, A&A devoted approximately 6,000 hours
consulting for CoBon, which resulted in the completion of
several synfuel projects generating approximately $69 million in
tax credit payments and other revenue to CoBon.
¶7 CoBon began paying A&A for its assistance under the
Consulting Agreement in 2001 but stopped making payments
the following year. In response to A&A’s demand to continue
payments, CoBon filed a lawsuit in a Utah district court,
alleging, among other things, that A&A breached the Consulting
Agreement. In response, A&A asserted several counterclaims,
including claims for breach of contract and unjust enrichment
against CoBon. In 2009, CoBon amended its reply to A&A’s
20170992-CA 3 2019 UT App 124AGTC Inc. v. CoBon
counterclaims to argue that A&A was barred from asserting its
contract claims by Utah’s “non-recovery rule,” which bars
unlicensed professionals from seeking enforcement of contracts
for professional services where the licensing requirements have
been enacted with the purpose of protecting the public. See
George v. Oren Ltd. & Assocs., 672 P.2d 732, 735 (Utah 1983).
¶8 In 2016, CoBon moved for partial summary judgment on
A&A’s unjust enrichment claim. CoBon asserted that because
both parties had previously admitted that the Consulting
Agreement was a binding and enforceable contract, A&A could
not pursue its unjust enrichment claim. See Ashby v. Ashby, 2010
UT 7, ¶ 14, 227 P.3d 246 (“[A] prerequisite for recovery on an
unjust enrichment theory is the absence of an enforceable
contract governing the rights and obligations of the parties
relating to the conduct at issue.”). A&A opposed the motion on
the ground that several of CoBon’s “contentions and defenses,”
including its contention that A&A was barred from recovering
under the Consulting Agreement by the non-recovery rule, 3 “go
to the validity, enforceability and scope of the Consulting
Agreement.” Because CoBon’s defenses had not been abandoned
or rejected, A&A argued that dismissing its equitable claims
“would be premature and prejudicial.” The district court
disagreed and dismissed A&A’s unjust enrichment claim on the
ground that the parties had previously acknowledged the
validity of the contract.
3. As discussed infra ¶¶ 19–23, the district court expressed no
opinion regarding whether a party barred from enforcing a
contract under the non-recovery rule could maintain a cause of
action under an equitable theory of unjust enrichment. While we
ultimately need not reach this question, we are inclined to agree
with CoBon that such a result would be inconsistent with the
public policy behind the non-recovery rule. Further, a
determination that a party is barred from enforcing a contract is
different from a determination that the contract itself is
unenforceable.
20170992-CA 4 2019 UT App 124AGTC Inc. v. CoBon
¶9 One month before a scheduled trial on the remaining
issues, CoBon and A&A each moved for summary judgment
regarding CoBon’s assertion that the Consulting Agreement was
an unenforceable engineering services contract under the non-
recovery rule. After briefing and argument on the motions, the
court first concluded that the Consulting Agreement was
ambiguous regarding “whether the parties intended A&A to
provide engineering services.” As a result of that determination,
the court considered extrinsic evidence of the parties’ intent,
ultimately concluding that a number of A&A’s tasks agreed to in
the Consulting Agreement “required the application of
engineering training and experience uniquely possessed by
A&A.” It therefore concluded that the Consulting Agreement
was a contract for engineering services and that A&A was
barred from recovering under the contract because Rodak and
Visovsky were not licensed professional engineers. Accordingly,
the district court granted CoBon’s motion for summary
judgment and denied A&A’s. A&A now appeals.
ISSUES AND STANDARD OF REVIEW
¶10 A&A asserts that the district court erred in granting
summary judgment in favor of CoBon on A&A’s contract and
unjust enrichment claims. With respect to the contract claims,
A&A asserts that the district court erred in determining that the
Consulting Agreement was ambiguous, that it was intended to
be an engineering services contract, and that A&A could not
enforce the contract due to its lack of licensing. 4 With respect to
the unjust enrichment claim, A&A argues that dismissal was
premature because the court had not yet disposed of CoBon’s
4. Because we agree with A&A that its lack of licensing did not
affect its ability to enforce the contract under the facts of this case
and reverse the district court’s summary judgment ruling on that
basis, we do not address A&A’s other arguments regarding the
contract claim.
20170992-CA 5 2019 UT App 124AGTC Inc. v. CoBon
various claims regarding the enforceability of the contract.
Summary 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.” Utah R.
Civ. P. 56(a). “We review the trial court’s grant of summary
judgment for correctness, considering only whether the trial
court correctly applied the law and correctly concluded that no
disputed issues of material fact existed.” In re Evan O. Koller
Revocable Living Trust, 2018 UT App 26, ¶ 8, 414 P.3d 1099(quotation simplified).
ANALYSIS
I. Contract Claims
¶11 A&A first argues that the district court erred in
interpreting the “non-recovery rule” to preclude A&A from
enforcing the Consulting Agreement. Assuming, without
deciding, that the Consulting Agreement is a contract for
engineering services, 5 we agree with A&A that CoBon cannot
5. The “practice of engineering” in Utah encompasses a broad
array of activity, including any
service or creative work, the adequate performance
of which requires engineering education, training,
and experience in the application of special
knowledge of the mathematical, physical, and
engineering sciences to the service or creative work
as consultation, investigation, evaluation,
planning, design, and design coordination of
engineering works and systems, planning the use
of land and water, facility programming,
performing engineering surveys and studies, and
the review of construction for the purpose of
monitoring compliance with drawings and
specifications; any of which embraces these
(continued…)
20170992-CA 6 2019 UT App 124AGTC Inc. v. CoBon
invoke the non-recovery rule under the circumstances of this
case.
¶12 The Utah Code requires that anyone working as a
professional engineer first obtain a license. Utah Code Ann. § 58-
22-301(1) (LexisNexis 2016) (“A license is required to engage in
the practice of professional engineering . . . .”). The general
purpose of legislation requiring professional engineers to be
licensed “is to provide for the qualification, registration and
licensing of persons who hold themselves out to the public as
having qualifications in specialized areas which affect the public
health, safety or welfare.” Cannon v. Gardner, 611 P.2d 1207, 1210
(Utah 1980). For this reason, the non-recovery rule generally
precludes an unlicensed engineer from enforcing a contract for
professional engineering services. 6 See George v. Oren Ltd.
(…continued)
services or work, either public or private, in
connection with any utilities, structures, buildings,
machines, equipment, processes, work systems,
projects, and industrial or consumer products or
equipment of a mechanical, electrical, hydraulic,
pneumatic, or thermal nature, and including other
professional services as may be necessary to the
planning, progress, and completion of any
engineering services.
Utah Code Ann. § 58-22-102(9)(a) (LexisNexis Supp. 2018).
6. This rule was previously codified with respect to both
contractors, see Utah Code Ann. § 58-55-604 (LexisNexis 2016),
and engineers, see id. § 58-22-20 (Allen Smith 1955); id. § 58-22-11
(Michie 1986) (provision renumbered). However, while the non-
recovery rule remains codified with respect to contractors, the
Utah Legislature repealed the engineering provision in 1992
when it enacted a new Professional Engineers and Land
Surveyors Licensing Act. See Professional Eng’rs & Land
Surveyors Licensing Act, ch. 183, § 11, 1992 Utah Laws 697, 701.
(continued…)
20170992-CA 7 2019 UT App 124AGTC Inc. v. CoBon
& Assocs., 672 P.2d 732, 735 (Utah 1983) (“If the purpose of
licensing is to protect the public, then the general rule in this
State is that the party who does not obtain a license, but is
required to do so, cannot obtain relief to enforce the terms of his
contract—including payment thereunder . . . .” (quotation
simplified)); accord Pacific Chromalox Div. v. Irey, 787 P.2d 1319,
1325 (Utah Ct. App. 1990).
¶13 Nevertheless, the non-recovery rule is “not applied
unconditionally, but only under circumstances in which the
party from whom the contractor seeks to recover is in the class
the legislature intended to protect.” Pacific Chromalox, 787 P.2d at
1326 (quotation simplified); see also George, 672 P.2d at 735.
“Laws intended for protecting the public are not intended to
become an unwarranted shield for the avoidance of a just
obligation and should not allow a [party] to take the benefit of
an unlicensed plaintiff’s labor and refuse to pay for it.” Pacific
Chromalox, 787 P.2d at 1326 (quotation simplified). Therefore,
“unless it is shown that the party from whom the unlicensed
contractor seeks to recover is within the class of persons whom
the licensing statute is designed to protect, the rule will not be
applied.” George, 672 P.2d at 735. “Thus, the pivotal issue in this
case is whether [CoBon] occupied a protected status.” See id.
¶14 One class of individuals that has been explicitly
prohibited from benefiting from the non-recovery rule is those
“licensed in the same trade or profession as the unlicensed
practitioner.” Pacific Chromalox, 787 P.2d at 1326 (“A litigant is
not a member of the class the legislature intended to protect if
the required protection is in fact afforded by another means,
(…continued)
The non-recovery rule with respect to engineers is now entirely a
creation of common law. In their briefs, neither party contests
the existence of a common-law non-recovery rule for engineers,
and neither party takes the position that the 1992 repeal of the
engineering statute affected the viability of the rule.
20170992-CA 8 2019 UT App 124AGTC Inc. v. CoBon
such as the litigant being licensed in the same trade or profession
as the unlicensed practitioner.” (quotation simplified)); see also
Fillmore Products, Inc. v. Western States Paving, Inc., 561 P.2d 687,
690 (Utah 1977). Such individuals are not in the same class as the
“lay public” that the non-recovery rule is intended to protect,
because they are “presumed to possess expertise” in the relevant
field that enables them to protect themselves. See Pacific
Chromalox, 787 P.2d at 1326; see also Fillmore, 561 P.2d at 690
(explaining that a licensed contractor has “expertise in the
contracting business and is therefore informed of the necessity
for licensing therein and the purpose behind licensing, viz., the
protection of the public”).
¶15 At the time the parties entered into the Consulting
Agreement, Steven and Robert Nash were the principals of
CoBon. Both Nashes were licensed professional engineers. Along
with ICPE, including Anton Tonc, who was also a licensed
professional engineer, the Nashes assisted Covol in developing
its proprietary coal fines bonding technology. Moreover, the
Consulting Agreement obligated A&A to “perform services on
behalf of CoBon in accordance with the express directives and
authorizations of, and subject to the approval of, CoBon.” In
other words, A&A’s efforts were subject to the supervision and
approval of the Nashes—two licensed professional engineers. Cf.
Fillmore, 561 P.2d at 690 (declining to apply the non-recovery
rule where “the entire sewer project was under the supervision
of a licensed project engineer, . . . all of the work had to meet the
specifications and requirements of the general contract and . . .
all of the work had to be approved and accepted by the project
engineer before any payment was made”). Led by licensed
engineers, CoBon possessed inherent protection against any
possible fraud or incompetence resulting from unlicensed
consultants performing the work of licensed professionals.
¶16 CoBon attempts to distinguish its situation from the
general rule that licensed individuals cannot benefit from the
non-recovery rule by pointing out that CoBon’s principals were
licensed electrical and mechanical engineers rather than licensed
20170992-CA 9 2019 UT App 124AGTC Inc. v. CoBon
mining engineers and asserts that CoBon was therefore not
engaged in the “same trade or profession” as A&A. See Pacific
Chromalox, 787 P.2d at 1326. But in light of the reasoning for the
exception to the non-recovery rule, we are convinced that this
phrase should be interpreted broadly such that professional
engineers of any type may be classified within the same trade or
profession. The overarching consideration is not whether the
party from whom the unlicensed contractor seeks to recover has
the exact same technical knowledge and expertise as that
expected of the contractor, but whether that party “is within the
class of persons whom the licensing statute is designed to
protect,” see George, 672 P.2d at 735, that is, the “lay public,” see
Pacific Chromalox, 787 P.2d at 1326. Given the “harshness of
declaring contracts of non-licensees void or unenforceable,” see
Fillmore, 561 P.2d at 689, a licensed professional engineer’s
awareness “of the necessity for licensing . . . and the purpose
behind licensing,” see id. at 690, is sufficient to take the licensed
professional engineer out of “the class of persons whom the
licensing statute is designed to protect,” see George, 672 P.2d at
735.
¶17 It is clear from CoBon’s business plan for the projects that
it was aware that Rodak and Visovsky were not professional
engineers. Under the heading “Management Team,” the
business plan states, “The key CoBon management and
consulting team consists of four individuals. Their backgrounds
consist of marketing, corporate development financial,
engineering and design, construction and construction
management and operation and maintenance experience. CoBon
believes this team provides a solid management background and
furthers the probability of the Project’s success.” The business
plan then goes on to outline the respective qualifications and
responsibilities of Rodak, Visovsky, and the Nashes. Steven and
Robert Nash are identified as professional engineers by the
shorthand “P.E.” following their names and are identified as
being licensed in eight and fifteen states, respectively. On the
other hand, the document is silent as to any licensing acquired
by Rodak and Visovsky, instead listing their experience and
20170992-CA 10 2019 UT App 124AGTC Inc. v. CoBon
education. It is apparent from this document that CoBon was
aware that Rodak and Visovsky were not professional engineers,
yet CoBon was nevertheless confident in their ability to fulfill the
objectives of their employment. Cf. Kennoy v. Graves, 300 S.W.2d
568, 570 (Ky. 1957) (refusing to apply the non-recovery rule
where a licensed engineer “was in a position to know, and did
know, the qualifications of” the unlicensed engineer). Although
clearly understanding the relevance of licensing, CoBon elected
to enlist A&A’s consulting services in the absence of such
licensing. Under these circumstances, “[n]o public policy would
be served by allowing [CoBon] to invoke” the non-recovery rule.
See Loader v. Scott Constr. Corp., 681 P.2d 1227, 1229 (Utah 1984).
Rather, it would permit CoBon “to take the benefit of an
unlicensed plaintiff’s labor and refuse to pay for it.” Pacific
Chromalox, 787 P.2d at 1326 (quotation simplified).
¶18 Because CoBon does not fall in the class of individuals
permitted to invoke the non-recovery rule against an unlicensed
engineer, A&A is not barred from recovering under the contract.
The district court therefore erred in granting summary judgment
to CoBon on this basis.
II. Unjust Enrichment Claim
¶19 A&A also argues that the district court erred in granting
summary judgment to CoBon on A&A’s unjust enrichment
claim. Unjust enrichment “is designed to provide an equitable
remedy where one does not exist at law.” American Towers
Owners Ass’n v. CCI Mech., Inc., 930 P.2d 1182, 1193 (Utah 1996),
abrogated on other grounds by Davencourt at Pilgrims Landing
Homeowners Ass’n v. Davencourt at Pilgrims Landing, LC, 2009 UT
65, 221 P.3d 234. Therefore, “if a legal remedy is available, such
as breach of an express contract, the law will not imply the
equitable remedy of unjust enrichment.” Id.
¶20 In opposing CoBon’s motion for summary judgment on
the unjust enrichment claim, A&A pointed to a number of
arguments asserted by CoBon that A&A claimed “go to the
validity, enforceability and scope of the Consulting Agreement.”
20170992-CA 11 2019 UT App 124AGTC Inc. v. CoBon
CoBon contested A&A’s assertion that these arguments
concerned the enforceability of the contract, representing that
CoBon’s arguments instead focused on questions of contract
interpretation, breach of contract, and the parties’ relative duties
under the contract.
¶21 In ruling on the motion, the district court did not examine
whether the remaining claims actually concerned the
enforceability of the contract. Nevertheless, the court concluded
that the Consulting Agreement is a valid contract as a matter of
law because both parties had previously acknowledged “that the
contract had been negotiated and signed by both [parties].”
Based on this conclusion, the court determined that A&A could
not maintain a cause of action for unjust enrichment.
¶22 “Because a claim should be dismissed only if it appears to
a certainty that the plaintiff would be entitled to no relief under
any state of facts which could be proved in support of the claim,
a district court should not dismiss alternative equitable claims if
the existence or applicability of a contract remain in dispute.”
Northgate Village Dev., LC v. Orem City, 2014 UT App 86, ¶ 50, 325
P.3d 123 (quotation simplified). The fact that the parties
acknowledged and agreed that a contract existed between them
does not necessarily lead to the conclusion that it was an
enforceable contract that effectively governed their rights and
obligations with respect to the subject matter of the case. See
Selvig v. Blockbuster Enters., LC, 2011 UT 39, ¶ 30, 266 P.3d 691(“Where an express contract covering the subject matter of the
litigation exists, recovery for unjust enrichment is not available.”
(quotation simplified)); Ashby v. Ashby, 2010 UT 7, ¶ 14, 227 P.3d
246 (“[A] prerequisite for recovery on an unjust enrichment
theory is the absence of an enforceable contract governing the
rights and obligations of the parties relating to the conduct at
issue.”).
¶23 Because the district court made no determination
regarding whether A&A’s remaining claims and defenses dealt
with the enforceability of the Consulting Agreement, we are
concerned that its ruling left the door open to such claims at trial
20170992-CA 12 2019 UT App 124AGTC Inc. v. CoBon
while foreclosing A&A’s ability to pursue an equitable remedy if
the court were ultimately to determine that the Consulting
Agreement is unenforceable. 7 Thus, the district court
prematurely dismissed A&A’s unjust enrichment claim while
questions regarding the validity of the contract remained
unresolved.
CONCLUSION
¶24 Because CoBon does not fall into the class of individuals
the non-recovery rule was intended to protect, the rule does not
preclude A&A from pursuing its contract claims, regardless of
whether the contract is construed as a contract for professional
engineering services. Further, because the district court made no
determination regarding whether claims and defenses at issue
implicated the enforceability of the contract, its grant of
summary judgment to CoBon on A&A’s unjust enrichment claim
was premature. Accordingly, we reverse the district court’s
summary judgment rulings and remand for further proceedings.
7. For example, A&A asserted that one of CoBon’s defenses
“could result in the Court deciding there was no meeting of the
minds as to the contract’s essential terms,” rendering the
contract unenforceable. See Lebrecht v. Deep Blue Pools & Spas Inc.,
2016 UT App 110, ¶ 13, 374 P.3d 1064 (“Under the principles of
basic contract law, a contract is not formed unless there is a
meeting of the minds.” (quotation simplified)). If A&A is correct
in its characterization of CoBon’s defense, and if the court
ultimately found that there was no meeting of the minds, then
the court’s summary judgment ruling would leave A&A without
either a legal or an equitable remedy.
20170992-CA 13 2019 UT App 124