Fisher v. Davidhizar ( 2018 )

2018 UT App 153THE UTAH COURT OF APPEALS
DARWIN C. FISHER, CHERYL FISHER, AND OFFICE
MANAGEMENT CONSULTANTS LC,
Appellants,
v.
LAVERN DAVIDHIZAR,
Appellee.
Opinion
No. 20160647-CA
Filed August 16, 2018
Fifth District Court, St. George Department
The Honorable Wallace A. Lee
No. 020500856
Emily Adams, Attorney for Appellants
Bryan J. Pattison and Timothy O. Hemming,
Attorneys for Appellee
JUDGE DIANA HAGEN authored this Opinion, in which
JUDGES KATE A. TOOMEY and DAVID N. MORTENSEN concurred.
HAGEN, Judge:
¶1 This appeal arises from a lawsuit between David Fisher
(David) 1 and Dr. Lavern Davidhizar (Davidhizar), in
which David sued Davidhizar for breach of a settlement
agreement, and Davidhizar counterclaimed for fraudulent
inducement. After summary judgment in favor of David on the
breach of contract claim, but before trial on the
remaining issues, David declared bankruptcy. David’s parents,
1. Because David Fisher and the Appellants, Darwin and Cheryl
Fisher, share a last name, we refer to David by his first name for
clarity, with no disrespect intended by the apparent informality.
Fisher v. Davidhizar
Darwin and Cheryl Fisher (collectively, the Fishers), and David’s
bankruptcy estate (the bankruptcy estate) entered into a
Purchase Agreement, assigning to the Fishers all proceeds
from the pending lawsuit. Ultimately, a jury found that
David had fraudulently induced the settlement agreement and
awarded damages and attorney fees to Davidhizar. On
appeal, the Fishers challenge the district court’s determination
that they are liable for this award by virtue of the
Purchase Agreement. Because we conclude that, in entering into
the Purchase Agreement, the Fishers did not assume
liability for Davidhizar’s counterclaim, we reverse and
remand to the district court for further proceedings consistent
with this opinion.
BACKGROUND
¶2 David and his business partner owned and operated
Office Management Consultants, LC (OMC), a billing
company that leased disc decompression tables to medical
providers. Davidhizar agreed to loan $101,000 to OMC
to purchase two such tables, but when OMC failed to make
loan payments, a dispute arose over ownership of the tables.
OMC and Davidhizar entered into a settlement agreement to
resolve the dispute. Soon thereafter, Davidhizar repudiated
the settlement agreement, stating that he “wasn’t going to
follow through with the agreement, because it had been
misrepresented.”
¶3 David and OMC sued Davidhizar, alleging breach of the
settlement agreement. Davidhizar’s answer raised a
counterclaim for fraudulent inducement. David and OMC filed a
motion for summary judgment on the breach of contract claim,
which the district court granted, reserving the issue of damages
for trial. Before a trial could be held on the amount of David’s
20160647-CA 2 2018 UT App 153Fisher v. Davidhizar
damages as well as the merits of Davidhizar’s fraudulent
inducement counterclaim, 2 David filed for bankruptcy.
¶4 The Fishers and the bankruptcy estate both asserted an
interest in the pending lawsuit and eventually entered into a
Purchase Agreement to resolve the dispute. The Purchase
Agreement recited the Fishers’ contention that, prior to filing for
bankruptcy, David had “assigned all proceeds from the
Davidhizar Action to [them].” It also recited the trustee’s
contrary position that the bankruptcy estate’s property included
“any assignment to the Fishers by [David] of any proceeds from
the Davidhizar Action[].” The express purpose of the Purchase
Agreement was “to settle any dispute with respect to the
ownership of the causes of action asserted in the Davidhizar
Action.” As part of the Purchase Agreement, the Fishers
“agree[d] to accept[] any and all interest of the Bankruptcy
Estate in and to the Davidhizar Action and to the causes of
action and claims asserted by [David] therein.” 3 The Fishers then
moved to substitute themselves as plaintiffs and to remove
David as plaintiff in the lawsuit against Davidhizar. The court
granted the motion.
¶5 Because the Fishers never moved to substitute themselves
as counter-defendants, David remained the sole named
counter-defendant in the lawsuit. Davidhizar later moved the
2. The district court initially struck Davidhizar’s fraudulent
inducement counterclaim, concluding that the claim had not
been pleaded with particularly. This court reversed and
remanded. See Fisher v. Davidhizar, 2011 UT App 270, ¶¶ 5, 12,
263 P.3d 440.
3. When quoting the Purchase Agreement, we have corrected the
misspelling of Davidhizar’s name. Brackets have not been used
to signal this correction.
20160647-CA 3 2018 UT App 153Fisher v. Davidhizar
district court to order the Fishers to assume liability for the
fraudulent inducement counterclaim should he be awarded any
damages or attorney fees. The district court granted the motion,
reasoning that the Purchase Agreement “conveyed David’s
entire legal share in the present case,” which “included not only
David’s rights and benefits associated with this matter, but also
his liabilities and risks.”
¶6 The case proceeded to trial on three issues: (1) David’s
damages on his breach of contract claim; (2) Davidhizar’s
fraudulent inducement counterclaim; and (3) Davidhizar’s
damages, if any. After hearing all of the evidence, the jury found
that David had fraudulently induced Davidhizar to enter the
settlement agreement, and it awarded him $78,600 in damages.
Given that the settlement agreement was fraudulently induced,
the jury determined that Davidhizar was not liable for any
damages arising from David’s breach of contract claim.
¶7 After the jury issued its verdict, the district court awarded
$110,993 in attorney fees to Davidhizar. The court based its
award on the settlement agreement’s attorney fee provision and
Utah Code section 78B-5-826 (the reciprocal attorney fees
statute). The Fishers appeal.
ISSUES AND STANDARDS OF REVIEW
¶8 We address two issues in this appeal. 4 The Fishers first
contend the district court erred in holding them liable on
Davidhizar’s counterclaim. Specifically, they argue that under
the plain language of the Purchase Agreement, they purchased
4. Because we conclude that the Fishers did not assume liability
for the counterclaim, we do not reach their alternative contention
that Davidhizar failed to prove damages.
20160647-CA 4 2018 UT App 153Fisher v. Davidhizar
only David’s claim in the lawsuit, not his liability for the
counterclaim. The district court’s interpretation of a contract is a
legal question that we review for correctness. See Mind & Motion
Utah Invs., LLC v. Celtic Bank Corp., 2016 UT 6, ¶ 15, 367 P.3d 994.
¶9 The Fishers also contend that, if they prevail on appeal,
we should remand the issue of attorney fees to the district court
to reconsider its prior award to Davidhizar. “Whether attorney
fees are recoverable is a question of law, which we review for
correctness.” R.T. Nielson Co. v. Cook, 2002 UT 11, ¶ 16, 40 P.3d
1119. But because the question of which party is the prevailing
party depends on the context of each case, “it is appropriate to
leave this determination to the sound discretion of the trial
court.” Id. ¶ 25. “We therefore review the trial court’s
determination as to who was the prevailing party under an
abuse of discretion standard.” Id.
ANALYSIS
I. Liability for the Counterclaim
¶10 The Fishers and Davidhizar both contend—for different
reasons—that the Purchase Agreement is unambiguous. We
agree with the Fishers’ interpretation of the Purchase Agreement
and conclude that the plain language of its recitals and transfer
provision unambiguously transferred only David’s interest in
any proceeds from the lawsuit, not his potential liability for
Davidhizar’s counterclaim.
¶11 To interpret the Purchase Agreement, we apply general
principles of contract law. See Walters v. Wal-Mart Stores, Inc., 703
F.3d 1167, 1172 (10th Cir. 2013) (applying contract law to a
settlement agreement). “The underlying purpose in construing
or interpreting a contract is to ascertain the intentions of the
parties to the contract.” State v. Bruun, 2017 UT App 182, ¶ 24,
20160647-CA 5 2018 UT App 153Fisher v. Davidhizar
405 P.3d 905 (quotation simplified). “[W]hether an assignment of
the entire contract includes an assumption of liabilities depends
on the terms of the assignment and the parties’ intent.” Winegar
v. Froerer Corp., 813 P.2d 104, 108 (Utah 1991). “[T]he best
indication of the parties’ intent is the ordinary meaning of the
contract’s terms.” Mind & Motion Utah Invs., LLC v. Celtic Bank
Corp., 2016 UT 6, ¶ 24, 367 P.3d 994. Accordingly, if we conclude
that “the language within the four corners of the contract 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. (quotation simplified).
¶12 The Fishers contend that the parties’ intent to assign only
the bankruptcy estate’s interest in David’s causes of action
against Davidhizar is unambiguously expressed in three
recitals—recitals D, E, and F—which frame the dispute that
prompted the Fishers and the bankruptcy estate trustee to enter
into the Purchase Agreement. Recital D sets forth the Fishers’
contention that, prior to filing for bankruptcy, David had
“assigned all proceeds from the Davidhizar Action to [them].”
Recital E describes the trustee’s contrary contention that the
bankruptcy estate’s property included “any assignment to the
Fishers by [David] of any proceeds from the Davidhizar
Action[].” Recital F then explains that, in entering into the
Purchase Agreement, the Fishers and the trustee aimed “to settle
any dispute with respect to the ownership of the causes of action
asserted in the Davidhizar Action,” that is, who owned David’s
claims against Davidhizar. When recital F is read in conjunction
with recitals D and E—which mention proceeds but not
liabilities 5—it is clear the Purchase Agreement’s sole purpose
5. “Proceeds” are defined as “the value of land, goods, or
investments when converted into money[ or] the amount of
money received from a sale,” Proceeds, Black’s Law Dictionary
(continued…)
20160647-CA 6 2018 UT App 153Fisher v. Davidhizar
was to transfer to the Fishers ownership of potential proceeds
from David’s causes of action. Where the Purchase Agreement
expressly refers to proceeds and David’s causes of action but
makes no reference to liabilities or claims against David, the
plain language of the Purchase Agreement provides no basis to
conclude that the Fishers assumed liability for Davidhizar’s
counterclaim against David.
¶13 Davidhizar nevertheless contends that the term
“Davidhizar Action,” as defined by the Purchase Agreement,
encompasses the entire state court action, including not only
David’s claim but Davidhizar’s counterclaim as well. In
response, the Fishers contend that in the transfer provision,
“Davidhizar Action” is modified by a preceding clause, which
provides that “the Fishers agree to accept[] any and all interest of
the Bankruptcy Estate in and to the Davidhizar Action.”
According to the Fishers, the bankruptcy estate’s interest in the
lawsuit was limited to potential assets. In support of their
argument, the Fishers refer to recital C, which states that
“[p]ursuant to 11 U.S.C. § 541(a),” the bankruptcy estate
acquired “all of [David’s] legal and equitable interests in
property, including any and all interest in the Davidhizar
Action.”
¶14 We agree that reference to section 541(a) in recital C of the
Purchase Agreement supports the Fishers’ argument. Upon
filing a petition for bankruptcy, a debtor’s property is
transferred into an estate. See 11 U.S.C. § 541(a) (2012). Under
section 541(a), this property includes anything that falls into
seven broad categories. Id. Significantly, these categories include
(…continued)
(10th ed. 2014), while “liability” is defined as “[a] financial or
pecuniary obligation in a specified amount,” Liability, Black’s
Law Dictionary (10th ed. 2014).
20160647-CA 7 2018 UT App 153Fisher v. Davidhizar
only a debtor’s assets, which is to say, interests in property that
the trustee can liquidate and sell to satisfy the debtor’s debts. See
id. While potential proceeds from a debtor’s causes of action
would be considered an asset, potential liability on a
counterclaim would not. See Parker v. Wendy’s Int’l, Inc., 365 F.3d
1268, 1272 (11th Cir. 2004) (stating that “a pre-petition cause of
action is the property of the Chapter 7 bankruptcy estate”); see
also 11 U.S.C. § 101(12) (2012) (defining “‘debt’” as “liability on a
claim”). The plain language of both the transfer provision and
recital C confined the bankruptcy estate’s interest in the
“Davidhizar Action” to assets that the estate had acquired
pursuant to section 541, which included, among other things,
“the causes of action and claims asserted by [David].” 6
¶15 Finally, Davidhizar contends that “[t]he Fishers’
interpretation of [the Purchase Agreement] also violates
well-established principles of contract interpretation by
rendering much of [the transfer provision] meaningless.” The
transfer provision provides that “the Fishers agree to accept[]
any and all interest of the Bankruptcy Estate in and to the
Davidhizar Action and to the causes of action and claims
asserted by [David] therein.” (Emphasis added.) Davidhizar
argues that, under the Fishers’ interpretation of the transfer
provision, the phrases “in and to the Davidhizar Action” and “to
the causes of action and claims asserted by [David] therein”
would be redundant. To address this perceived redundancy,
Davidhizar contends that the phrase “in and to the Davidhizar
Action” should be interpreted to mean that the Fishers
“stepp[ed] into David’s shoes as litigant,” thereby accepting his
rights and liabilities.
6. Our holding in this case should not be construed to address
whether a bankruptcy estate trustee could ever transfer an
interest in a potential liability or debt.
20160647-CA 8 2018 UT App 153Fisher v. Davidhizar
¶16 In interpreting a contract, we “consider each contract
provision in relation to all of the others, with a view toward
giving effect to all and ignoring none.” Glenn v. Reese, 2009 UT
80, ¶ 10, 225 P.3d 185 (quotation simplified). In other words, “we
look for a reading that harmonizes the provisions and avoids
rendering any provision meaningless.” Encon Utah, LLC v. Fluor
Ames Kraemer, LLC, 2009 UT 7, ¶ 28, 210 P.3d 263.
¶17 Davidhizar’s proposed interpretation of the transfer
provision does not eliminate the redundancy. Even if
“Davidhizar Action” were interpreted to include both the claims
and counterclaims, the phrase “and to the causes of action and
claims asserted by [David] therein” would be redundant, at least
as to David’s claims. The only way to eliminate the redundancy
would be to read “Davidhizar Action” as referring only to
David’s liability for the counterclaim. But recital B defines
“Davidhizar Action” as “a lawsuit pending in the Fifth Judicial
District Court in and for Washington County, State of Utah,
David Fisher, individually and on behalf of Office Management
Consultants, L.C. vs. Lavern Davidhizar, an individual, Case No.
020500856.” This definition necessarily would include the claims
that David, individually and on behalf of OMC, has asserted
against Davidhizar. On the other hand, neither recital B nor the
transfer provision mentions Davidhizar’s counterclaim. To
harmonize both phrases, we agree with the Fishers’
interpretation that the phrase “in and to the Davidhizar Action”
generally identifies that lawsuit, while the phrase “to the causes
of action and claims asserted by [David] therein” clarifies the
part of the lawsuit to which the Purchase Agreement pertains.
¶18 Because the Purchase Agreement, by its terms, transferred
only the bankruptcy estate’s interest in David’s potential
proceeds from the Davidhizar Action, the district court erred in
interpreting the agreement to transfer to the Fishers both
potential proceeds and potential liabilities. Accordingly, we
20160647-CA 9 2018 UT App 153Fisher v. Davidhizar
reverse the court’s order imposing liability on the Fishers for
Davidhizar’s counterclaim against David.
II. Attorney Fees
¶19 The Fishers contend that we should remand this case to
the district court to reconsider its attorney fees award because
“Davidhizar will have no longer wholly prevailed” if we
conclude they are not liable on the counterclaim. 7 Because the
district court awarded attorney fees to Davidhizar based on a
determination that he was the prevailing party, the Fishers argue
that a remand is necessary for the district court to consider this
question in light of the outcome of this appeal.
¶20 “In Utah, attorney fees are awardable only if authorized
by statute or contract.” R.T. Nielson Co. v. Cook, 2002 UT 11, ¶ 17,
40 P.3d 1119 (quotation simplified). Here, the district court
awarded $110,993 in attorney fees and costs to Davidhizar under
both the settlement agreement’s attorney fees provision and the
reciprocal attorney fees statute. See Utah Code Ann. § 78B-5-826
(LexisNexis 2012). Although the Fishers contend that the district
court erred in basing its attorney fees award on the void
settlement agreement, they concede that the court correctly
applied the reciprocal attorney fees statute. Under that statute,
7. Davidhizar contends that because the Fishers acknowledge
that the attorney fees issue was unpreserved, we should reject
their request for remand on this basis. However, because the
Fishers’ attorney fees issue depended on the outcome of this
appeal, it would have been futile to raise such a challenge below.
See In re adoption of K.A.S., 2016 UT 55, ¶ 56 n.4, 390 P.3d 278(Lee, J., dissenting) (noting that “[t]he rule of preservation
incorporates a principle of reasonableness” that includes the
“doctrine of futility”; “our courts accordingly excuse a failure to
object where doing so would be futile”).
20160647-CA 10 2018 UT App 153Fisher v. Davidhizar
courts have discretion to award attorney fees and costs to the
party that prevails in a civil action based on a written contract if
that contract allows at least one party to recover those fees. See
id.¶21 The district court concluded that Davidhizar was the
prevailing party because he successfully defended against the
breach of contract claim and succeeded on his fraudulent
inducement counterclaim. On appeal, however, the Fishers have
established that they did not assume liability for the
counterclaim. Accordingly, they argue that the prevailing party
in this action is an open question and a remand is therefore
prudent. We agree.
¶22 As explained, supra ¶ 9, the district court is better suited
to determine which party, if any, is the prevailing party in light
of the outcome of this appeal. See R.T. Nielson Co., 2002 UT 11,
¶ 25. We thus remand this case to the district court for the
limited purpose of determining if either party is entitled to
attorney fees as the prevailing party.
CONCLUSION
¶23 We conclude that, under the plain language of the
Purchase Agreement, the Fishers did not assume liability for
Davidhizar’s counterclaim. We therefore reverse the district
court’s order imposing liability on the Fishers. In addition,
because we conclude that the outcome of this appeal may change
the award of attorney fees, we vacate and remand this case to the
district court for the limited purpose of determining which
party, if any, is the prevailing party.
20160647-CA 11 2018 UT App 153