Harding v. Atlas Title Insurance Agency, Inc.

IN THE UTAH COURT OF APPEALS
‐‐‐‐ooOoo‐‐‐‐
Lynn Harding and Eileen Harding, ) OPINION
)
Plaintiffs and Appellants, ) Case No. 20100999‐CA
)
v. )
) FILED
Atlas Title Insurance Agency, Inc.; ) (August 23, 2012)
Randy Kidman; Dave White; Scott )
Wilson; Jeremy Larkin; Pecan Ridge ) 2012 UT App 236Partners, LLC; Scott Nielson; and Roger )
Cater, )
)
Defendants and Appellees. )
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Fifth District, St. George Department, 090501506
The Honorable James L. Shumate
Attorneys: Samuel G. Draper, St. George, for Appellants
Bryan J. Pattison, St. George, for Appellees Atlas Title Insurance
Agency, Inc.; Randy Kidman; and Dave White
Heath H. Snow and Stephen R. Schwendiman, St. George, for Appellees
Scott Wilson and Jeremy Larkin
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Before Judges Voros, Orme, and Davis.
DAVIS, Judge:
¶1 Lynn and Eileen Harding appeal the trial court’s grant of summary judgment in
favor of Atlas Title Insurance Agency, Inc. (Atlas Title); Randy Kidman; Dave White;
Jeremy Larkin; and Scott Wilson (collectively, Atlas),1 in which it determined that the
Hardings could not demonstrate the proximate cause element of the various causes of
action without resorting to speculation. We reverse and remand.
BACKGROUND
¶2 On December 5, 2006, Pecan Ridge Partners, LLC (Pecan Ridge) purchased ten
acres of property (the Initial Property) from the Hardings for $1,150,000. The Hardings
seller‐financed part of the purchase price and were given a trust deed from Pecan Ridge
to secure the sum of $800,633.11, which was to be recorded in second position after
another trust deed held by a group of investors to secure the sum of $372,713.67. Atlas
conducted the closing on the sale but failed to record the Hardings’ trust deed until
September 11, 2007. Before the Hardings’ trust deed was recorded, two additional trust
deeds were recorded on the property, securing a total of $1,391,000, so by the time the
Hardings’ trust deed was recorded, it was in the fourth position of priority.
¶3 In a separate transaction, Pecan Ridge executed a second trust deed in favor of
the Hardings on a second piece of property (the Second Property) to secure the sum of
$750,000. In April 2008, Pecan Ridge and the Hardings entered into a new transaction
wherein the Hardings exchanged their interest in the Initial Property and the Second
Property for an interest in a third parcel of property (the Final Property) to secure the
sum of $1,500,633.10, which interest was to be in second position to another interest
securing the sum of $625,000. However, Pecan Ridge was ultimately unable to obtain
sufficient funding for its development project and defaulted on the loan secured by the
$625,000 trust deed. The holder of that trust deed foreclosed on the Final Property and
extinguished the Hardings’ interest in that property.
¶4 The Hardings sued Atlas for breach of contract, breach of good faith and fair
dealing, breach of fiduciary duty, civil conspiracy, negligence, and conversion, seeking
nearly $2,500,000 in damages. Atlas brought two motions for summary judgment: the
1. Kidman and White are employees of Atlas, and Larkin and Wilson are principals of
Pecan Ridge Partners, LLC, which is not a party to this appeal. Although Larkin and
Wilson are not directly connected with Atlas, we refer to all of the defendants
collectively as “Atlas” for convenience.
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first on the conspiracy claim, and the second alleging that the Hardings could not
demonstrate the proximate cause element with respect to the remaining claims. The
trial court granted summary judgment in favor of Atlas on the conspiracy claim, and
the Hardings do not challenge that ruling on appeal. The trial court also granted
summary judgment in favor of Atlas on the other claims based on its conclusion that
“determining causation on the facts and evidence presented could not be done without
engaging in impermissible speculation.”2 The Hardings challenge this determination on
appeal.
2. Larkin and Wilson joined only in the civil conspiracy summary judgment motion,
but the trial court granted them summary judgment on the other claims as well and
they join in defending that decision on appeal. Larkin and Wilson additionally contend
that the Hardings did not present “any allegation against [them] which would indicate
that either of them personally and/or individually engaged in any conduct meeting the
elements of the[] causes of action” alleged by the Hardings apart from the civil
conspiracy claim, and that “[w]ithout any facts or evidence implicating [them], the
District Court’s Summary Judgment Order should stand.” We interpret this argument
as asserting that even if we determine that proximate cause should have been
considered by a jury, we should affirm the trial court’s summary judgment ruling with
respect to Larkin and Wilson on the alternative ground that other elements of the claims
against them were not demonstrated as a matter of law. See generally Bailey v. Bayles,
2002 UT 58, ¶ 10, 52 P.3d 1158 (“It is well settled that an appellate court may affirm the
judgment appealed from if it is sustainable on any legal ground or theory apparent on
the record, even though such ground or theory differs from that stated by the trial court
to be the basis of its ruling or action . . . .” (internal quotation marks omitted)).
Although Larkin and Wilson are principals of Pecan Ridge, the Hardings maintain that
they participated in Atlas Title’s failure to record the Hardings’ interest in the Initial
Property. On appeal, Larkin and Wilson have failed to make any specific argument
regarding which elements of the other claims, apart from proximate cause, cannot be
proven. Thus, we decline to consider Larkin and Wilson’s alternative argument on
appeal. See generally State v. Garner, 2002 UT App 234, ¶ 8, 52 P.3d 467 (“It is well
established that Utah appellate courts will not consider claims that are inadequately
briefed.”).
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ISSUE AND STANDARD OF REVIEW
¶5 The Hardings maintain that the undisputed facts support a reasonable inference
of proximate cause and that their proximate cause argument does not depend on
speculation.3 “Because summary judgment is granted as a matter of law, we review the
trial court’s ruling for correctness.” Scott v. HK Contractors, 2008 UT App 370, ¶ 6, 196
P.3d 635 (internal quotation marks omitted). “We examine the evidence in the light
most favorable to the losing party, and if that evidence and the reasonable inferences drawn
therefrom would support a judgment in favor of the losing party, we must reverse.”
Goebel v. Salt Lake City S. R.R. Co., 2004 UT 80, ¶ 10, 104 P.3d 1185 (emphasis added).
ANALYSIS
¶6 “Generally, the question of proximate cause raises an issue of fact to be
submitted to the jury for its determination.” Harline v. Barker, 912 P.2d 433, 439 (Utah
1996) (internal quotation marks omitted). Thus, “if there is any doubt about whether
something was a proximate cause of the plaintiff’s injuries, the court must not decide
the issue as a matter of law.” Goebel, 2004 UT 80, ¶ 12. Nevertheless, “proximate cause
issues can be decided as a matter of law” in two circumstances: “(i) when the facts are
so clear that reasonable persons could not disagree about the underlying facts or about
the application of a legal standard to the facts, and (ii) when the proximate cause of an
injury is left to speculation so that the claim fails as a matter of law.” Harline, 912 P.2d
at 439.
3. The Hardings also argue that there are several disputed material facts that would
preclude summary judgment: whether the Hardings “provide[d] Atlas . . . with written
recording instructions regarding the recording of the trust deed against the Initial
Property,” whether Atlas’s failure to record their trust deed on the Initial Property was
inadvertent, and whether the trust deed was “immediately recorded” after the
oversight was brought to Atlas’s attention. However, none of these facts are material to
the question of proximate cause, on which the trial court’s summary judgment ruling
turns, and in any event, this argument is rendered moot by our reversal of the trial
court’s summary judgment ruling on the other ground argued by the Hardings.
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I. The Hardings’ Proximate Cause Argument Is Not Speculative.
¶7 Here, the trial court based its summary judgment ruling on its determination that
causation could not be established “without engaging in impermissible speculation.”
We acknowledge that “[j]urors may not speculate as to possibilities; they may, however,
make justifiable inferences from circumstantial evidence to find . . . proximate cause.”
Lindsay v. Gibbons & Reed, 27 Utah 2d 419, 497 P.2d 28, 31 (1972). “While it is sometimes
subtle, there is in fact a difference between drawing a reasonable inference and merely
speculating about possibilities.” State v. Hester, 2000 UT App 159, ¶ 16, 3 P.3d 725,
abrogated on other grounds by State v. Clark, 2001 UT 9, ¶ 14, 20 P.3d 300. “‘[A]n inference
is a deduction as to the existence of a fact which human experience teaches us can
reasonably and logically be drawn from proof of other facts.’” Id. (quoting Manchester v.
Dugan, 247 A.2d 827, 829 (Me. 1968)). “On the other hand, speculation is defined as the
‘act or practice of theorizing about matters over which there is no certain knowledge.’”
Id. (quoting Black’s Law Dictionary 1407 (7th ed. 1999)). The difference lies in the
existence of underlying facts supporting the conclusion. In the case of a reasonable
inference, there is at least a foundation in the evidence upon which the ultimate
conclusion is based; in the case of speculation, there is no underlying evidence to
support the conclusion. Thus, so long as there exists sufficient evidence upon which a
reasonable inference regarding proximate cause may be drawn, summary judgment is
inappropriate. See Scott, 2008 UT App 370, ¶ 16 (explaining that a plaintiff “ought to
have the opportunity to present its theory to the jury if it is supported by facts in the
record and allow the jury to draw its own conclusions”).
¶8 Keeping these principles in mind, the cases cited by Atlas, in which it was
determined that the issue of proximate cause was too speculative to go before a jury, are
distinguishable from the case at hand. For example, in Goebel v. Salt Lake City Southern
Railroad Co., 2004 UT 80, 104 P.3d 1185, the plaintiff theorized that a protuberance in the
roadway at a railroad crossing caused him to veer into a narrow gap that had grown
between two field panels at the crossing where his bicycle, which had relatively narrow
wheels, became stuck and crashed. See id. ¶¶ 6, 13. The supreme court rejected this
theory of proximate cause as impermissibly speculative, explaining “that the existence
of the protuberance [did not] necessarily force[ the plaintiff] to steer into the gap” and
that the plaintiff “could have steered his bicycle into the gap regardless of whether the
protuberance existed at all.” Id. ¶ 13. Compare Mitchell v. Pearson Enters., 697 P.2d 240,
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244‐46 (Utah 1985) (acknowledging that negligence in hotel security could theoretically
be a proximate cause of crimes committed in a hotel, such as where an assailant posed
as a bellboy to gain access to a victim’s room, but determining that where there was no
evidence of forced entry and the victim could not testify, the evidence could not,
without speculation, support an inference that the assailant had somehow breached the
hotel’s negligent security measures in order to gain access to the victim), and Thurston v.
Workers Comp. Fund, 2003 UT App 438, ¶ 20, 83 P.3d 391 (rejecting a plaintiff’s argument
that the decedent’s suicide was the result of negligence on the part of his home care
workers because there was “no expert testimony or lay opinion that addresse[d]
proximate cause” apart from guesses about what might have prevented the suicide),
with Scott, 2008 UT App 370, ¶¶ 17‐18 (determining that witness testimony that traffic
direction within a construction site was “confusing,” coupled with the injured driver’s
statement “that the barricades were confusing and caused her to travel in the wrong
direction,” was sufficient evidence to support an inference that the contractor’s
negligence in directing traffic caused the driver to drive into an open trench).
¶9 Unlike in Goebel, where the narrow gap was not such that the cyclist would have
necessarily avoided it in the absence of the protuberance, the Hardings allege here that
their decision to enter into the deal on the Final Property can be explained only by the
fact that they had essentially lost their interest in the Initial Property as a result of
Atlas’s actions. The Hardings’ causation argument is not speculative; it simply permits
the jury to draw a logical inference from the facts. Specifically, the Hardings assert that
if not for the fact that their interest in the Initial Property was dissolved by Atlas’s
failure to record the Hardings’ interest before the other two interests securing a total of
$1,391,000 were recorded ahead of that interest, it would have been illogical for them to
have given up a second place interest in the Initial Property, where an interest securing
only $372,713.67 had priority over theirs and where they had the resources to redeem
that property in case the first priority creditor foreclosed, for a second place interest in
the Final Property, where their interest was behind an interest securing $625,000 and
they lacked the resources to protect their interest. Accepting this inference, which has a
foundation in the evidence, as true, see Goebel, 2004 UT 80, ¶ 10, we cannot say that the
Hardings were necessarily as likely to have “steered their bicycle into the gap,” that is,
given up their interest in the Initial Property in exchange for the interest in the Final
Property, if their interest in the Initial Property had remained in second position as they
anticipated. Atlas may be able to present contrary evidence that the Hardings would
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have willingly traded their interest in the Initial Property for the interest they ultimately
gained in the Final Property even had they been in second position with respect to the
Initial Property as intended. However, a jury should be permitted to weigh the
evidence and determine which inference is most appropriate in light of that evidence.
See Scott, 2008 UT App 370, ¶ 16.
II. Reasonable Persons Could Disagree as to Proximate Cause.
¶10 Atlas alternatively contends that “reasonable persons could not disagree,”
Harline, 912 P.2d at 439, about whether Atlas’s actions caused the Hardings’ damages.
Atlas asserts that the Hardings’ action of voluntarily giving up their interest in the
Initial Property in exchange for an interest in the Final Property was an intervening act
that released it from liability. Atlas admits that had Pecan Ridge defaulted on the Initial
Property, Atlas may have been liable to the Hardings for losses they sustained with
respect to the Initial Property as a result of the second and third place creditors being
ahead of the Hardings in priority. But because the Hardings entered into a new deal
with Pecan Ridge and were in second position with respect to the Final Property—a
position they voluntarily accepted and which Atlas maintains was equal to their
position with respect to the Initial Property—Atlas argues that any loss the Hardings
sustained on their investment in the Final Property cannot be attributed to Atlas and is
merely the result of “[t]he economy crash[ing] and real estate funding dr[ying] up.”
¶11 However, we find unpersuasive Atlas’s suggestion that a second position
priority with respect to the Final Property was necessarily equal to a second position
priority with respect to the Initial Property where the amount owed to the first position
creditor, and thus, the amount necessary to redeem, was significantly greater on the
Final Property than the Initial Property. It is not only the Hardings’ position of priority
that is relevant, but also the dollar amount in priority ahead of their interest. With
respect to the Initial Property, the Hardings expected to be behind only $372,713.67.
When Atlas failed to record the Hardings’ trust deed, they ended up behind
$1,763,713.67. In an attempt to improve that position—in which the amount ahead of
the Hardings in priority exceeded the $1,150,000 for which the Initial Property was
originally sold—the Hardings accepted a second place position with respect to the Final
Property in which they were behind $625,000. It is this attempt to mitigate their
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damages4 that the Hardings allege was necessitated by Atlas’s failure to record. While
their new position was better than the one in which they were left with respect to the
Initial Property when their trust deed was not recorded as it should have been, their
ability to protect their interest in the Final Property was not as strong as their ability to
protect their position with respect to the Initial Property had their trust deed been
recorded immediately, as required.5 Essentially, it is the damage attributable to the
Hardings’ loss of their ability to protect their interest in the property in case of
foreclosure that they allege was proximately caused by Atlas. Thus, if the jury finds
that the Hardings would not have traded their interest if not for Atlas’s failure to
record, then Atlas could properly be found to have proximately caused the losses
suffered by the Hardings as a result of their holding a second place interest in the Final
Property rather than a second place interest in the Initial Property.
III. The Hardings’ Decision to Enter into a New Agreement with Pecan Ridge Does Not
Preclude a Finding that Their Damages Were Proximately Caused by Atlas.
¶12 In a final attempt to escape responsibility, Atlas asserts that the Hardings should
have taken other steps to recover their original interest, such as “refus[ing] to release
their trust deeds against the Initial [Property] and [Second Property] until they were
paid in full on the underlying obligation,” “insist[ing] on additional security in the form
of personal guarantees from the principals of Pecan Ridge,” or “insist[ing] that Atlas . . .
fix the error” by working to get the second and third place interests on the Initial
Property subordinated to the Hardings’ interest. Atlas argues that the Hardings’
decision to enter into a new agreement with Pecan Ridge, rather than pursue their
4. According to the Hardings, this attempt to mitigate was made in the context of Pecan
Ridge informing the Hardings “that Pecan Ridge would go under if the reconveyance
was not done,” an event that, in light of their fourth place priority, would certainly have
resulted in the loss of the Hardings’ entire interest in the Initial Property.
5. The Hardings also gave up their second place interest securing $750,000 in the
Second Property in exchange for the interest in the Final Property. The amount of the
first place interest on the Second Property is unclear from the record, but it is a sum that
the finder of fact may find relevant on remand.
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remedies against Atlas or give Atlas an opportunity to cure its breach, severed the
causal link between Atlas’s actions and the Hardings’ ultimate damages.
¶13 In support of this argument, Atlas cites Mahmood v. Ross, 1999 UT 104, 990 P.2d
933, in which a landowner lost his property to foreclosure because he was unable to
make the final balloon payment on a loan. See id. ¶ 11. The landowner asserted that he
would not have lost his property had a judgment debtor not breached their settlement
agreement by failing to make certain payments on the loan on the landowner’s behalf.
See id. ¶ 27. However, the court pointed out that notices of default entered against the
landowner as a result of the judgment debtor’s failure to pay were “ultimately cured or
canceled long before the balloon payment’s due date,” that it was the landowner’s
failure to refinance or sell the property and thereby make the balloon payment that
resulted in his loss of the property, and that, while the judgment debtor’s breach may
have “adversely impacted [the landowner’s] credit,” the landowner presented no
evidence to indicate that the breach prevented the landowner from refinancing. See id.
¶¶ 27‐28.
¶14 Unlike in Mahmood, a case that was permitted to go to the jury, where there was
no evidence showing a causal link between the judgment debtor’s failure to pay the
bank and the landowner’s failure to make the balloon payment, the Hardings have
presented evidence showing that their decision to give up their interest in the Initial
Property in exchange for the interest in the Final Property was made in response to
Atlas’s failure to timely record their interest in the Initial Property. Furthermore, while
the Mahmood court did recognize the landowner’s failure to mitigate his harm, see id.
¶ 37, it did not determine that such a failure would necessarily preclude a finding of
proximate cause, as Atlas suggests the Hardings’ alleged failure to mitigate should do
here.6 As the Hardings explain, “[i]f the Hardings failed to mitigate damages or
6. Atlas interprets the trial court’s discussion of mitigation as suggesting that a finding
of proximate cause is precluded by a failure to mitigate. However, this does not appear
to have been the Mahmood court’s focus in discussing the mitigation evidence. Rather,
the supreme court focused on what the landowner’s specific failures indicated about
proximate cause, pointing out that the evidence demonstrating a failure to mitigate
“also show[ed] that [the judgment debtor]’s default did not cause [the landowner]’s loss
(continued...)
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contributed to the loss, the jury needs to determine the extent of the Harding[s’] fault
and what effect that has on damages,” but the Hardings’ actions do not nullify Atlas’s
role in causing their damages.
CONCLUSION
¶15 Thus, we conclude that the trial court erred in granting summary judgment in
favor of Atlas based on the Hardings’ alleged inability to demonstrate proximate cause
with respect to the breach of contract, breach of good faith and fair dealing, breach of
fiduciary duty, negligence, and conversion causes of action. We therefore reverse the
trial court’s summary judgment ruling with respect to those claims and remand for
further proceedings.
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James Z. Davis, Judge
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VOROS, Associate Presiding Judge (concurring):
¶16 I concur in the majority opinion. I write separately only to explain why, in my
judgment, Mahmood v. Ross, 1999 UT 104, 990 P.2d 933, does not require affirmance.
6. (...continued)
of the . . . property.” Mahmood v. Ross, 1999 UT 104, ¶ 37, 990 P.2d 933. It was this lack
of a link between the judgment debtor’s default and the landowner’s loss, as
demonstrated in part by the mitigation evidence, that made summary judgment on the
proximate cause issue appropriate, not the landowner’s failure to mitigate in and of
itself. Here, we do not agree with Atlas that the Hardings’ failure to take the steps
recommended by Atlas above, see supra ¶ 12, similarly demonstrates that the causal link
between Atlas’s actions and the Hardings’ loss cannot be shown.
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¶17 The present case does resemble Mahmood. In both cases, the plaintiffs of their
own volition moved from a bad situation caused by defendants to another situation that
also came to a bad end. However, Mahmood’s loss was within his control, and in fact
resulted from his own action. He defaulted on the Equitable loan even though he could
have sold half the property, made the balloon payment, and retained the other half of
the property. See id. ¶¶ 36–37. “This evidence,” the supreme court concluded, “not
only demonstrates that Mahmood failed to mitigate his damages, but it also shows that
Ross’s default did not cause Mahmood’s loss of the . . . property.” Id. ¶ 37. That
Mahmood could have prevented his own loss is thus central to the rationale of
Mahmood.
¶18 Atlas points to no equivalent act on the part of the Hardings. While Mahmood
lost his property because he defaulted, the Hardings maintain that they lost their
security interest in the Final Property because Pecan Ridge defaulted. I would not
extend the holding of Mahmood to a situation where plaintiffs could not prevent their
loss. Of course, Defendants are free on remand to contend that the Hardings are at least
partially to blame for their damages. Even the Hardings recognize that “[i]f the
Hardings failed to mitigate damages or contributed to the loss, the jury needs to
determine the extent of the Harding[s’] fault and what effect that has on damages.”
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J. Frederic Voros Jr.,
Associate Presiding Judge
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ORME, Judge (concurring in part and dissenting in part):
¶19 I concur in the court’s opinion as it pertains to all of the defendants except for
Larkin and Wilson. I would affirm the entry of summary judgment in their favor.
¶20 I come at the subject dealt with in note 2 of the lead opinion from a different
perspective. In my view, the Hardings have demonstrated on appeal that the trial court
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erred in granting summary judgment to the other defendants, for the reasons ably
explained in the lead opinion. They have not persuaded me, however, that there was
any such error with respect to Larkin and Wilson. They were not employees of Atlas
Title and could in no way, given the legal theories still in play, be responsible for its
negligent failure to record the Hardings’ initial trust deed in accordance with the
escrow instructions entrusted to it.
¶21 Insofar as the Hardings claimed that some connivance among Larkin, Wilson,
and Atlas Title induced Atlas Title not to discharge its escrow duties with fidelity, that
claim was resolved against them with the entry of summary judgment on their civil
conspiracy claims. And as noted in the lead opinion, that aspect of the decision below
has not been appealed by the Hardings. Accordingly, with the demise of the Hardings’
civil conspiracy claims, there is no viable legal theory for how Larkin and Wilson are
legally responsible for Atlas Title’s negligence. In my view, then, Larkin and Wilson
should be let off the hook at this point and spared the expense and inconvenience of
further litigation.
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Gregory K. Orme, Judge
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