Thorp v. Charlwood

2021 UT App 118THE UTAH COURT OF APPEALS
DANIEL T. THORP,
Appellant,
v.
TIMOTHY P. CHARLWOOD,
Appellee.
Opinion
No. 20190981-CA
Filed November 4, 2021
Third District Court, Silver Summit Department
The Honorable Kent R. Holmberg
The Honorable Richard Mrazik
No. 190500272
Paul W. Jones and William B. Ingram,
Attorneys for Appellant
Paxton R. Guymon and Lauren P. Johnson,
Attorneys for Appellee
JUDGE GREGORY K. ORME authored this Opinion, in which
JUDGES MICHELE M. CHRISTIANSEN FORSTER and JILL M. POHLMAN
concurred.
ORME, Judge:
¶1 Timothy P. Charlwood purchased a house, remodeled it,
and sold it to Daniel T. Thorp. A full ten years later, Thorp began
noticing several issues with the property. Most significantly, the
deck appeared to be structurally failing. Following an inspection,
a contractor determined that the deck was constructed in a
negligent manner.
¶2 Thorp sued Charlwood, alleging defective construction,
negligent misrepresentation, and fraudulent misrepresentation.
The district court dismissed the complaint on the ground that
Thorp v. Charlwood
the economic loss rule barred Thorp’s claims. The court later
awarded attorney fees to Charlwood. Thorp appeals, and we
affirm.
BACKGROUND1
¶3 In February 2005, Charlwood purchased property located
in Park City, Utah (the Property). Almost immediately,
“Charlwood began a construction project of completely
remodeling and expanding the square footage of the home on
the Property.” After completing the project, Charlwood listed
the Property for sale. One listing stated, “This beautiful log
home was originally built in 1991 and has been completely
remodeled and expanded in 2005–2006.”
¶4 In April 2007, Thorp made an offer to purchase the
Property. Charlwood accepted the offer, and the two entered
into a Real Estate Purchase Agreement (the REPC). The REPC
expressly incorporated a Seller’s Property Condition Disclosure
form (the Seller’s Disclosures) but indicated that Thorp’s
“obligation to purchase under this Contract . . . IS NOT
conditioned upon [his] approval of the content of all the
Seller[’s] Disclosures.”
¶5 The Seller’s Disclosures provided that it was a “legally
binding document” and that
1. “On appeal from a motion to dismiss under Utah Rule of Civil
Procedure 12(b)(6), we review the facts only as they are alleged
in the complaint. As a result, we accept the factual allegations in
the complaint as true and consider all reasonable inferences to be
drawn from those facts in a light most favorable to the plaintiff.”
Erickson v. Canyons School Dist., 2020 UT App 91, n.1, 467 P.3d
917 (quotation simplified).
20190981-CA 2 2021 UT App 118Thorp v. Charlwood
SELLER IS OBLIGATED UNDER LAW TO
DISCLOSE TO BUYERS DEFECTS IN THE
PROPERTY KNOWN TO SELLER THAT
MATERIALLY AND ADVERSELY AFFECT THE
VALUE OF THE PROPERTY THAT CANNOT BE
DISCOVERED BY A REASONABLE INSPECTION
BY AN ORDINARY PRUDENT BUYER.
The Seller’s Disclosures required Charlwood to disclose
whether he was “aware of any past or present” problems with,
among other things, the following: the roof, including repairs;
interior features, including flooring; exterior features; termites,
dry rot, and pests; additions and remodels; structural items and
soils; use of the Property; other moisture conditions; and
“violations of any local, state, or federal law or regulation.”
Other than indicating that he had rebuilt the roof in 2005 and
engaged in a “complete remodel” of the Property, Charlwood
checked “No” to each question related to the aforementioned
categories. The Seller’s Disclosures also indicated that by
signing, Charlwood “verifies that [he] has prepared this
disclosure form and that the information contained herein is
accurate and complete to the best of [his] actual knowledge as of
the date signed . . . below.”
¶6 In May 2007, the parties closed on the Property,
and Thorp took possession. A little over ten years later,
toward the end of 2017, Thorp noticed that “the deck on the side
of the Property was drastically sloped and appeared to be
failing structurally.” Thorp contacted several contractors, who,
based on their visual inspections, “speculated that there
appeared to be an issue with the footings that was causing
them to sink and thereby causing additional damage to the
deck and the structure of the home.” But the contractors
indicated that they could not know for sure until they removed
the deck. Following the deck’s removal, a contractor’s
investigation “revealed that the construction of the deck was
20190981-CA 3 2021 UT App 118Thorp v. Charlwood
completed in a defective and negligent way,” that the
“conditions were hidden/latent,” and that the conditions “were
only discovered because the materials were removed to remedy
the problem.”
¶7 Thorp also discovered additional problems with the
Property, including “incorrect pitching of the roof over the deck
for water drainage, roof vents of inadequate size for the roof,
flagstone facing on the exterior of the home that overlaps and
covers logs (masonry to log contact creating additional rot),
negligent electrical work, collapsed fireplace chimney lining
where the old roof and added roofline meet, and the 130-yard
added driveway sliding off the hill.”
¶8 Thorp sued Charlwood in 2019, asserting three causes
of action: defective construction, negligent misrepresentation,
and fraudulent misrepresentation. In his complaint, Thorp
alleged that “Charlwood is a real estate developer” and that
he “reports through an online profile . . . that he has been
a professional real estate developer since January 1984.”
He further alleged that Charlwood did not obtain a building
permit for the project, that he never obtained a certificate
of substantial completion or a certificate of occupancy, and
that he never used the Property as his principal residence.
He also asserted that “[b]ecause Charlwood was the owner
of the Property and because he performed and was responsible
for the Construction Project, [his] representations [in] the Seller’s
Disclosures were known or should have been known
to Charlwood as being untrue, false, or materially inaccurate at
the time he made them to Thorp.” Finally, Thorp alleged that
“Charlwood fraudulently concealed the above defects and
negligence from the Construction Project by making the
representations in the Seller’s Disclosures.”
20190981-CA 4 2021 UT App 118Thorp v. Charlwood
¶9 Charlwood moved to dismiss the complaint, arguing that
the economic loss rule barred Thorp’s claims.2 Charlwood’s
motion also included a request for attorney fees.
¶10 In opposing the motion, Thorp argued, among other
things, that the economic loss rule did not apply because there
was “no contract for construction and design work made
between the parties,” and therefore “[t]he duty at issue is a legal
duty that does not arise from any contract.” Thorp further
argued that the economic loss rule did not bar his claims
because, as he put it, “the Seller’s Disclosures were for the
express purpose of Charlwood complying with his independent
duty as a contractor-seller,” meaning his “duties were not
entirely subsumed with the REPC.” Next, pointing to the
provision in the REPC that stated Thorp’s “obligation to
purchase under this Contract . . . IS NOT conditioned upon [his]
approval of the content of the Seller’s Disclosures,” Thorp
argued that a breach of contract claim was not available to him.
Therefore, the application of the economic loss rule to his claims
would deprive him of “a remedy by due course of law” in
violation of the Open Courts Clause of the Utah Constitution. See
Utah Const. art. I, § 11.
¶11 Following a hearing, the district court issued a decision
(the Memorandum Decision) granting Charlwood’s “Motion to
Dismiss in the entirety.” The court determined that the economic
loss rule barred Thorp’s claims because they were “not premised
upon any independent duty that exists apart from the REPC.”
2. “The economic loss rule is a judicially created doctrine” that
“prevents recovery of economic damages under a theory of tort
liability when a contract covers the subject matter of the
dispute.” Reighard v. Yates, 2012 UT 45, ¶¶ 14, 19, 285 P.3d 1168(quotation simplified).
20190981-CA 5 2021 UT App 118Thorp v. Charlwood
The court further ruled “that there is no legal or factual basis
to support [Thorp’s] theory that [Charlwood] assumed the
role of a contractor-seller and the potentially heightened
duties that go along with this role.” In support of this
conclusion, the court noted that “the Verified Complaint does
not allege that [Charlwood] was the developer or original
builder of the home.” The court further pointed to Thorp’s
acknowledgement that there was no contract between the parties
for construction services and stated that “[w]hile [Charlwood] is
alleged to have developed other properties, his role in these
other transactions has no bearing on the transaction involving
[Thorp] and does not mean that [Charlwood] acted as a
‘contractor-seller’ in this instance.” Next, addressing Thorp’s
argument that a claim for breach of contract was unavailable to
him, the court noted that Thorp’s “unconditional obligation to
purchase the [Property] did not trigger the application of
common law duties, particularly where such duties would
directly contradict the terms of the REPC.” Lastly, the court held
that Utah Code section 78B-4-513 barred Thorp’s defective
construction claim because it “is undisputed that there is no
contract between [the parties] that could support the claim.” The
Memorandum Decision concluded by stating that it “will stand
as the Order of the Court and no further Order is required.”
Although the issue was briefed by the parties, the court did not
address Charlwood’s request for attorney fees in the
Memorandum Decision.
¶12 Two days after the district court issued the Memorandum
Decision, Thorp filed a notice of appeal. A week later,
Charlwood filed a motion seeking an award of attorney fees in
accordance with rule 73 of the Utah Rules of Civil Procedure.
Among other things, Charlwood based his request on the REPC,
which provides that “[i]n the event of litigation or binding
arbitration to enforce this Contract, the prevailing party shall be
entitled to costs and reasonable attorney fees.”
20190981-CA 6 2021 UT App 118Thorp v. Charlwood
¶13 Following a hearing, the court granted Charlwood’s
motion in part, awarding half the attorney fees requested.3 The
court ruled that its silence on Charlwood’s attorney fees request
in the Memorandum Decision was “not a denial of
[Charlwood’s] request for attorney fees.” The court further held
that Charlwood’s “assertion of the affirmative defense of the
economic loss doctrine is an action ‘to enforce’ the [REPC] . . .
and, therefore, [Charlwood] is entitled to recover attorney fees
related to that defense.” Based on this, the court awarded half
the attorney fees Charlwood incurred in bringing his motion to
dismiss and all the attorney fees associated with his rule 73
motion.
¶14 Following that ruling, Thorp properly amended his notice
of appeal to include the court’s award of attorney fees.
ISSUES AND STANDARDS OF REVIEW
¶15 Thorp challenges the district court’s dismissal of his
complaint. “The propriety of a trial court’s decision to grant or
deny a motion to dismiss under rule 12(b)(6) of the Utah Rules of
Civil Procedure is a question of law that we review for
correctness.” Erickson v. Canyons School Dist., 2020 UT App 91,
¶ 6, 467 P.3d 917 (quotation simplified). But because “dismissal
of a complaint is proper only if it is clear from the allegations
that the plaintiff would not be entitled to relief under the set of
facts alleged or under any facts it could prove to support its
claim, on review we accept all facts alleged as true, and indulge
all reasonable inferences in favor of the plaintiff.” Id. (quotation
simplified).
3. A different judge ruled on Charlwood’s motion for attorney
fees. Thorp explains that this is “because of the Third District
Court’s rotation schedule” in Summit County.
20190981-CA 7 2021 UT App 118Thorp v. Charlwood
¶16 Thorp next argues that the court’s dismissal of his claims
violated the Open Courts Clause of the Utah Constitution. He
claims the dismissal denied him a “remedy by due course of
law.” Utah Const. art. I, § 11. “Constitutional issues are
questions of law that we review for correctness.” Ho v.
Department of Com., 2020 UT App 37, ¶ 13, 462 P.3d 808(quotation simplified).
¶17 Lastly, Thorp challenges the court’s award of attorney
fees to Charlwood. “Whether attorney fees are recoverable in an
action is a question of law, which we review for correctness.”
Martin v. Kristensen, 2019 UT App 127, ¶ 31, 450 P.3d 66(quotation simplified), aff’d, 2021 UT 17, 489 P.3d 198. Likewise,
“whether the [court’s] findings are sufficient to support the
award is a question of law reviewed for correctness.” Foote v.
Clark, 962 P.2d 52, 55 (Utah 1998). But the “calculation of
reasonable attorney fees is in the sound discretion of the trial
court and will not be overturned in the absence of a showing of a
clear abuse of discretion.” Dixie State Bank v. Bracken, 764 P.2d
985, 988 (Utah 1988) (quotation simplified).
ANALYSIS
I. Economic Loss Rule
¶18 “The economic loss rule is a judicially created doctrine
that marks the fundamental boundary between contract law,
which protects expectancy interests created through agreement
between the parties, and tort law, which protects individuals
and their property from physical harm by imposing a duty of
reasonable care.” SME Indus., Inc. v. Thompson, Ventulett,
Stainback & Assocs., 2001 UT 54, ¶ 32, 28 P.3d 669. Put differently,
“[t]he economic loss rule prevents recovery of economic
20190981-CA 8 2021 UT App 118Thorp v. Charlwood
damages under a theory of tort liability when a contract covers
the subject matter of the dispute.”4 Reighard v. Yates, 2012 UT 45,
¶ 14, 285 P.3d 1168. A principal reason behind the rule is that
“when a party is merely suing to recover the benefit of its
contractual bargain, there is no inherent unfairness in limiting
that party to a breach-of-contract claim.” HealthBanc Int’l, LLC v.
Synergy Worldwide, Inc., 2018 UT 61, ¶ 21, 435 P.3d 193 (quotation
simplified). To the contrary, “it seems problematic for a court to
make a better contract for [the parties] than the one they
negotiated—by importing tort remedies into the deal.” Id.
¶19 The initial inquiry under the economic loss rule is
“whether a duty exists independent of any contractual
obligations between the parties.” Davencourt at Pilgrims Landing
Homeowners Ass’n v. Davencourt at Pilgrims Landing, LC, 2009 UT
65, ¶ 27, 221 P.3d 234 (quotation simplified). If a tort claim is
based on a legal duty that is independent of the contract, the
economic loss rule will not bar the claim. Id. But “[i]f the tort
alleges a breach of a duty that the contract itself imposes, then
the claim is barred; the plaintiff can sue only for contract-based
remedies.” KTM Health Care Inc. v. SG Nursing Home LLC, 2018
UT App 152, ¶ 71, 436 P.3d 151.
¶20 Although originally a judicially created doctrine, see SME
Indus., 2001 UT 54, ¶ 32, in 2008, our Legislature codified the
economic loss rule in Utah Code section 78B-4-513, see Hayes v.
Intermountain GeoEnvironmental Services Inc., 2019 UT App 112,
4. A separate branch of the economic loss rule “bars recovery of
economic losses in negligence actions unless the plaintiff can
show physical damage to other property or bodily injury.”
HealthBanc Int’l, LLC v. Synergy Worldwide, Inc., 2018 UT 61, ¶ 12,
435 P.3d 193 (quotation simplified). Because this branch applies
where there is no contract between the parties, see id., it is
inapplicable here, and we do not discuss it further.
20190981-CA 9 2021 UT App 118Thorp v. Charlwood
¶ 8, 446 P.3d 594, cert. granted, 455 P.3d 1061 (Utah 2019). The
statute limits actions for defective design or construction to
breach of contract claims brought “by a person in privity of
contract with the original contractor, architect, engineer, or the
real estate developer.”5 Utah Code Ann. § 78B-4-513(1), (4)
(LexisNexis 2018). The common law version of the rule
“continues to apply in situations that are beyond the scope of the
statute.” Hayes, 2019 UT App 112, ¶ 8.
¶21 Thorp argues the district court erred in ruling that the
economic loss rule barred his claims for negligent
misrepresentation and fraudulent misrepresentation.6 Regarding
5. The statute exempts from this limitation actions for defective
design or construction that “include damage to other property or
physical personal injury if the damage or injury is caused by the
defective design or construction.” Utah Code Ann.
§ 78B-4-513(2) (LexisNexis 2018).
6. In his principal brief, Thorp does not challenge the district
court’s dismissal of his claim for defective construction. It is not
until his reply brief that Thorp argues that the court erred in
concluding that the statutory version of the economic loss rule
barred that claim on the rationale that it was “undisputed that
there is no contract between [the parties] that could support the
claim for defective construction.” See id. § 78B-4-513(4) (“[A]n
action for defective design or construction may be brought only
by a person in privity of contract with the original contractor,
architect, engineer, or the real estate developer.”). Thorp argues
that although “he does not have a contract for design or
construction services with Charlwood,” he “does have a privity
of contract with Charlwood through the REPC.” But because
Thorp raises this argument for the first time in his reply brief, we
do not address it further. See Allen v. Friel, 2008 UT 56, ¶ 8, 194
P.3d 903 (“Issues raised by an appellant in the reply brief that
(continued…)
20190981-CA 10 2021 UT App 118Thorp v. Charlwood
his negligent misrepresentation claim, he contends that
Charlwood owed common law duties that were “independent of
the contracts that buyers and sellers make.” See Smith v.
Frandsen, 2004 UT 55, ¶ 11, 94 P.3d 919 (“[A] duty to disclose is a
necessary element of the tort of negligent misrepresentation.”).
He also contends that the rule does not apply to his claim for
fraudulent misrepresentation on the theory that this claim does
not completely overlap with a breach of contract claim.
A. Negligent Misrepresentation
¶22 The economic loss rule applies where a duty exists that
overlaps with those contemplated in a contract. Reighard v. Yates,
2012 UT 45, ¶ 21, 285 P.3d 1168. See HealthBanc Int’l, LLC v.
Synergy Worldwide, Inc., 2018 UT 61, ¶ 10, 435 P.3d 193 (“[W]here
the party’s tort claim is a mere duplication of its breach of
contract claim, there is no exception to the economic loss rule.
The tort claim is barred.”); KTM Health Care Inc. v. SG Nursing
Home LLC, 2018 UT App 152, ¶ 76, 436 P.3d 151 (“[T]ort claims
. . . are barred by the economic loss rule if those claims are
grounded in the same duties that exist by virtue of the parties’
contract.”). Conversely, “when a duty exists that does not
overlap with those contemplated in a contract, the economic loss
rule does not bar a tort claim because the claim is based on a
recognized independent duty of care and thus does not fall
within the scope of the rule.” Reighard, 2012 UT 45, ¶ 21
(quotation simplified). Thorp contends that Charlwood owed
two duties that were independent of the REPC.
(…continued)
were not presented in the opening brief are considered waived
and will not be considered by the appellate court.”) (quotation
simplified).
20190981-CA 11 2021 UT App 118Thorp v. Charlwood
1. Duty of Sellers of Real Property
¶23 The first common law duty independent of the REPC that
Thorp contends Charlwood owed him was the duty sellers of
real property owe “to disclose material known defects that
cannot be discovered by a reasonable inspection by an ordinary
prudent buyer.” See Hermansen v. Tasulis, 2002 UT 52, ¶ 25, 48
P.3d 235. But the Seller’s Disclosures, which the REPC expressly
incorporated, thereby making them part of the contract,
specifically imposed a duty to “disclose to buyers defects in the
property known to seller that materially and adversely affect the
value of the property that cannot be discovered by a reasonable
inspection by an ordinary prudent buyer.” This language
mirrors the common law tort duty almost verbatim. See id.Furthermore, in his complaint, Thorp cited several sections of
the Seller’s Disclosures pertaining to the alleged defects in the
Property and stated that “the above representations from the
Seller’s Disclosures were known or should have been known to
Charlwood as being untrue, false, or materially inaccurate at the
time he made them to Thorp.” And although more directly
pertaining to his claim of fraudulent misrepresentation, Thorp
alleged that “Charlwood fraudulently concealed the above
defects and negligence from the Construct[ion] Project by
making the representations in the Seller’s Disclosures.”
Charlwood’s alleged breaches of the Seller’s Disclosures were
therefore central to Thorp’s complaint. See Grynberg v. Questar
Pipeline Co., 2003 UT 8, ¶ 53, 70 P.3d 1 (“The fact that the exact
same conduct is described in both the contract and tort claims,
and the exact same facts and circumstances are at play, is
indicative of the overlapping duties in this case.”).
¶24 Thorp argues that “[t]he REPC does not expressly warrant
the specific conditions of the Property that are the subject of the
Complaint, namely footings, posts, and support for the deck and
20190981-CA 12 2021 UT App 118Thorp v. Charlwood
roof.”7 But this argument directly contradicts Thorp’s complaint,
in which Thorp asserted that the Seller’s Disclosures required
Charlwood to disclose known defects related to the roof,
“exterior elements of the Property,” structural support, and
other problems such as dry rot and water damage. And even
assuming the common law duty extends to building permits (or
lack thereof), cf. Davencourt at Pilgrims Landing Homeowners Ass’n
v. Davencourt at Pilgrims Landing, LC, 2009 UT 65, ¶ 44, 221 P.3d
234 (“No common-law duty exists that creates a duty to conform
to building codes.”), the Seller’s Disclosures also required
Charlwood to disclose any known “past or present violations of
any local, state, or federal law or regulation.” We therefore
conclude that Charlwood’s contractual duty to disclose known
defects on the Property completely overlapped with his common
law duty to do the same. Thus, the economic loss rule bars
Thorp from pursuing this claim via a tort theory.
7. In support of this argument, Thorp points to a provision in the
Seller’s Disclosures stating that it “is not a warranty of any kind”
and a provision in the REPC in which Thorp waived his right to
cancel the purchase based on, among other things, his
disapproval of the content of the Seller’s Disclosures. But the
common law duty requires only that the seller disclose known
material defects that a buyer could not uncover through a
reasonable inspection—it does not implicate warranties. See
Hermansen v. Tasulis, 2002 UT 52, ¶ 25, 48 P.3d 235. And
concerning Thorp’s agreement to purchase the Property
regardless of what the Seller’s Disclosures revealed, Thorp cites
no authority to support the assertion that common law duties at
odds with the terms of a contract may save a party from a bad
bargain. To the contrary, one of the purposes of the economic
loss rule is to prevent a party from seeking to gain a better
bargain than the one the party negotiated “by importing tort
remedies into the deal.” HealthBanc Int’l, LLC v. Synergy
Worldwide, Inc., 2018 UT 61, ¶ 21, 435 P.3d 193.
20190981-CA 13 2021 UT App 118Thorp v. Charlwood
2. Duty of Developer-Sellers and Contractor-Sellers
¶25 The second duty Thorp asserts Charlwood owed was the
duty developer- and contractor-sellers have “to disclose
information known to [them] concerning real property . . . when
that information is material to the condition of the property
purchased by the buyer.” See Yazd v. Woodside Homes Corp., 2006
UT 47, ¶ 35, 143 P.3d 283. This duty exists because “a
contractor-seller possesses a high degree of knowledge and
expertise compared to a home buyer” that “leads the home
purchaser to rely on the contractor-seller’s expertise.”
Davencourt, 2009 UT 65, ¶ 30 (quotation simplified).
¶26 Thorp contends that in rejecting this argument, the
district court erroneously concluded that “the Verified
Complaint does not allege that [Charlwood] was the developer
or original builder of the home.” He points to his complaint
where he alleged that Charlwood “is a real estate developer,”
that Charlwood “did not occupy the Property as his principal
residence during any time that he owned the Property,” and that
Charlwood “reports through an online profile . . . that he has
been a professional real estate developer since January 1984.”
Based on these allegations, Thorp asserts that he is entitled to a
reasonable inference that Charlwood was the developer of the
Property and therefore owed him this duty. See Erickson v.
Canyons School Dist., 2020 UT App 91, n.1, 467 P.3d 917 (stating
that in reviewing a motion to dismiss under rule 12(b)(6) of the
Utah Rules of Civil Procedure, courts “accept the factual
allegations in the complaint as true and consider all reasonable
inferences to be drawn from those facts in a light most favorable
to the plaintiff”) (quotation simplified).
¶27 But the complaint recognized that Charlwood was not the
original builder of the home on the Property. The complaint
stated that the home was originally built in 1991 and that soon
after purchasing the Property some fourteen years later,
20190981-CA 14 2021 UT App 118Thorp v. Charlwood
Charlwood began “remodeling and expanding the square
footage of the home on the Property.” Thorp further
acknowledged, both in the district court and on appeal, that no
contract for construction services existed between the parties.
Given these facts, Thorp has not met his burden of persuasion
that the terms “developer-seller” and “contractor-seller,” as
contemplated by this common law duty, apply to those who
undertake to remodel and sell an already-existing home.
¶28 In support of his assertion that Charlwood was the
developer of the Property, Thorp cites Loveland v. Orem City
Corp., 746 P.2d 763 (Utah 1987); Yazd, 2006 UT 47; and
Davencourt, 2009 UT 65. But those cases do not establish that a
developer- or contractor-seller’s disclosure duties apply to
remodeling projects. In Loveland, our Supreme Court determined
that “where land is subdivided and sold for the purpose of
constructing residential dwelling houses,” the developer owes a
duty to “disclose to his purchaser any condition which he knows
or reasonably ought to know makes the subdivided lots
unsuitable for such residential building.” 746 P.2d at 769
(emphasis added) (quotation otherwise simplified). In Yazd, the
Court held that a developer-contractor of new construction owed
a duty to disclose to the purchaser known material information
regarding unsuitable soil conditions. 2006 UT 47, ¶¶ 30, 35. The
Court reasoned that “[m]odern home construction requires a
high degree of knowledge and expertise” and “that the disparity
in skill and knowledge between home buyers and
builder-contractors leads buyers to rely on the
builder-contractor’s expertise.” Id. ¶ 24. Finally, Davencourt also
involved new construction in which a developer contracted with
a builder to construct homes that the developer then sold. 2009
UT 65, ¶¶ 2–3, 33. In the absence of privity of contract between
the builder and the homeowners’ association, the Court held that
the builder was not liable for negligent construction because the
parties “lack[ed] the legal relationship necessary to find a duty.”
Id. ¶ 47.
20190981-CA 15 2021 UT App 118Thorp v. Charlwood
¶29 In sum, each of these cases imposed a developer- or
contractor-seller duty on those involved in the new construction
of residential homes. It is doubtful that the heightened duty
extends to those undertaking remodeling and improvement of
an existing home because it is unlikely that buyers of remodeled
homes rely on the seller’s skill to the same degree as with new
construction. In any event, Thorp does not meaningfully address
this issue. Instead, he largely assumes that Charlwood’s
remodeling of the Property qualified him as a developer- or
contractor-seller for purposes of the duty. Accordingly, he has
not met his burden of persuasion on this question nor
demonstrated reversible error on the part of the district court.
See Utah R. App. P. 24(a)(8).
B. Fraudulent Misrepresentation
¶30 Fraud-based torts are also subject to the economic loss
rule. HealthBanc Int’l, LLC v. Synergy Worldwide, Inc., 2018 UT 61,
¶¶ 13, 16, 435 P.3d 193. “If the ‘bad acts’ (even intentional ones)
are covered by a contract, they remain in the realm of contract
law.” Id. ¶ 20. Accordingly, the economic loss rule bars even
intentional torts where the claim “overlaps completely with a
contract claim” because a breach of contract claim would allow
the wronged party to recover for the same conduct. Id. ¶¶ 9–10.
¶31 Thorp asserts that the economic loss rule does not bar his
claim for fraudulent misrepresentation because he “does not
plead an overlapping contract claim in the Verified Complaint
that is ‘entirely duplicative’ of his tort claims. Rather, [he] pleads
claims that arise from duties independent of the REPC (or any
other contract).” Because we concluded above that the duties he
pleaded were duplicative of the REPC, we conclude that Thorp’s
fraudulent misrepresentation claim also “overlaps completely
with a contract claim” and is accordingly barred by the economic
loss rule. See id. ¶ 9.
20190981-CA 16 2021 UT App 118Thorp v. Charlwood
II. Open Courts Clause
¶32 The Open Courts Clause of the Utah Constitution
provides that individuals “shall have remedy by due course of
law” for injuries sustained to their “person, property, or
reputation.” Utah Const. art. I, § 11. Our Supreme Court has
articulated a three-part test to determine whether a statute
violates this clause by abrogating legal remedies recognized at
common law. First, courts must determine “whether the
legislature has abrogated a cause of action.” Waite v. Utah Labor
Comm’n, 2017 UT 86, ¶ 19, 416 P.3d 635. If so, courts must next
determine “whether the law provides an injured person an
effective and reasonable alternative remedy.” Id. (quotation
simplified). If no such remedy exists, “abrogation of the remedy
or cause of action may be justified only if there is a clear social or
economic evil to be eliminated and the elimination of an existing
legal remedy is not an arbitrary or unreasonable means for
achieving the objective.” Id. (quotation simplified).
¶33 Despite this rather specific construct, “Thorp is not taking
a position on constitutionality of any statute potentially at issue
in this case.” Rather, he asserts that the district court’s
application of the common law economic loss rule to bar his tort
claims violated the Open Courts Clause because he was denied a
“remedy by due course of law.” He argues that because he “has
valid tort claims as pled in the Verified Complaint that are based
on legal duties that are not based in contract,” he was left
without an “effective and reasonable alternative remedy.”
¶34 Without a challenge to a specific statute, we are
unconvinced that the Open Courts Clause applies to the case
before us. But even assuming it does, as discussed in more detail
in section I above, the legal duties to which Thorp refers
completely overlapped with those the REPC imposed, thereby
triggering the application of the economic loss rule. And the
“economic loss rule prevents recovery of economic damages
20190981-CA 17 2021 UT App 118Thorp v. Charlwood
under a theory of tort liability when a contract covers the subject
matter of the dispute.” Reighard v. Yates, 2012 UT 45, ¶ 14, 285 P.3d
1168 (emphasis added). Accordingly, there was no violation of
the Open Courts Clause because an adequate alternative remedy
existed in the form of a breach of contract claim.
¶35 Thorp contends that “he does not possess a breach of
contract claim” because “the REPC was expressly not
conditioned upon Thorp’s approval of the Seller’s Disclosures.”
Specifically, the REPC stated that Thorp’s “obligation to
purchase under this Contract . . . IS NOT conditioned upon [his]
approval of the content of all the Seller’s Disclosures.” But even
assuming that this provision amounted to a waiver of a breach of
contract claim based on Charlwood’s allegedly false or
inadequate disclosures, Thorp offers no authority or analysis in
support of his assertion that a voluntary contractual waiver of a
claim violates the Open Courts Clause.8 Accordingly, he has not
met his burden of persuasion on this issue, and we thus see no
reversible error on the part of the district court. See Utah R. App.
P. 24(a)(8) (“The argument must explain, with reasoned analysis
supported by citations to legal authority and the record, why the
party should prevail on appeal.”).
III. Attorney Fees
¶36 Next, Thorp challenges the district court’s award of
attorney fees to Charlwood. First, he argues that the court lacked
8. Although Thorp is adamant that his purchase obligation was
not “conditioned upon [his] approval of the content of the Seller’s
Disclosures,” it does not follow that he would be precluded from
contractual redress if one or more of those disclosures proved to
be false within a timeframe amenable to litigation consistent
with the governing statute of limitations.
20190981-CA 18 2021 UT App 118Thorp v. Charlwood
jurisdiction to make the award. Second, he contends that
Charlwood was not entitled to attorney fees under the REPC.
A. Jurisdiction
¶37 Thorp contends that the district court’s silence on the
issue of attorney fees in the Memorandum Decision was “not an
oversight.” Instead, he asserts that the court’s statement that “no
further Order is required” was the “Court’s final decision
declining to award Charlwood his attorney fees in this case” and
constituted a “final appealable order.” Thorp further
characterizes Charlwood’s request for attorney fees, made under
rule 73 of the Utah Rules of Civil Procedure, as if it were a
motion for reconsideration of the court’s alleged earlier denial of
attorney fees. And because Charlwood filed the rule 73 motion
after Thorp had already filed a notice of appeal, Thorp asserts
that the district court was divested of jurisdiction to reconsider
the matter. At first blush, this argument appears meritorious, but
closer consideration reveals its flaws.
¶38 “Generally, when a party files a timely notice of appeal,
the court that issued the judgment loses jurisdiction over the
matters on appeal.” Myers v. Utah Transit Auth., 2014 UT App
294, ¶ 15, 341 P.3d 935 (quotation simplified). See Hi-Country
Estates Homeowners Ass’n v. Foothills Water Co., 942 P.2d 305, 306
(Utah 1996) (per curiam) (“An appeal divests the trial court of
jurisdiction and transfers it to the appellate court, where it
remains until the trial court regains jurisdiction.”). But “even
where a trial court is otherwise divested of jurisdiction due to an
appeal, the trial court retains the power to act on collateral
matters.” Saunders v. Sharp, 818 P.2d 574, 578 (Utah Ct. App.
1991). See id. (“Where any action by the trial court is not likely to
modify a party’s rights with respect to the issues raised on
appeal, the trial court could act.”) (quotation simplified).
20190981-CA 19 2021 UT App 118Thorp v. Charlwood
¶39 But we need not decide whether the issue of attorney fees
in this case constitutes a collateral matter because we disagree
with Thorp’s assertion that the Memorandum Decision included
a denial of Charlwood’s request for attorney fees and therefore
was a final appealable order. Thorp’s assertion that the court’s
silence on the issue of attorney fees was “not an oversight” but
rather an intentional denial of attorney fees is belied by the
court’s own statement that it was granting Charlwood’s motion
to dismiss—which included a request for attorney fees—“in the
entirety.”9 Based on this language, and without evidence to the
contrary, the most reasonable interpretation of the court’s silence
is that the court inadvertently neglected to address the attorney
fees request. Indeed, we cannot conceive of a reason for a court
to remain silent on an issue that it directly considered and
decided, electing instead merely to imply its ruling.
¶40 Because the court did not rule on the attorney fees request
in the Memorandum Decision, it could not be a final appealable
order. Rule 54 of the Utah Rules of Civil Procedure defines
“Judgment” as “a decree or order that adjudicates all claims and
the rights and liabilities of all parties or any other order from
which an appeal of right lies.” Utah R. Civ. P. 54(a). The rule
further provides that “any order or other decision, however
designated, that adjudicates fewer than all the claims or the
rights and liabilities of fewer than all the parties does not end the
action as to any of the claims or parties, and may be changed at
any time before the entry of judgment adjudicating all the claims
and the rights and liabilities of all the parties.” Id. R. 54(b). See
Giusti v. Sterling Wentworth Corp., 2009 UT 2, ¶ 34, 201 P.3d 9669. Indeed, assuming the court was deliberately silent, as Thorp
insists, the more reasonable interpretation in light of this
language would be that the court granted the attorney fees
request, as it was part of the motion the court “granted in the
entirety.”
20190981-CA 20 2021 UT App 118Thorp v. Charlwood
(“[A] decision is final when it ends the controversy between the
parties.”). Accordingly, regardless of the court’s designation, the
Memorandum Decision was not a final, appealable order
because the court did not adjudicate “all claims and the rights
and liabilities” of the parties when it neglected to address
Charlwood’s request for attorney fees. Utah R. Civ. P. 54(a).
¶41 With few exceptions, “an appellate court does not have
jurisdiction to consider an appeal unless the appeal is taken from
a final order or judgment that ends the controversy between the
litigants.” Copper Hills Custom Homes, LLC v. Countrywide Bank,
FSB, 2018 UT 56, ¶ 10, 428 P.3d 1133 (quotation simplified).
Accordingly, the issue of whether the attorney fees request was a
collateral matter is irrelevant because, in the absence of a final
judgment, jurisdiction over any aspect of the litigation never
transferred from the district court to the appellate courts, despite
Thorp’s purported notice of appeal, until final judgment was
entered. We therefore conclude that the district court had
jurisdiction to award attorney fees to Charlwood.
B. Attorney Fees under the REPC
¶42 “If the legal right to attorney fees is established by
contract, Utah law clearly requires the court to apply the
contractual attorney fee provision and to do so strictly in
accordance with the contract’s terms.” Express Recovery Services
Inc. v. Olson, 2017 UT App 71, ¶ 8, 397 P.3d 792 (quotation
simplified).
¶43 The relevant provision of the REPC states, “In the event of
litigation or binding arbitration to enforce this Contract, the
prevailing party shall be entitled to costs and reasonable
attorney fees.” Here, the issue presented is whether Charlwood’s
invocation of the economic loss rule to defend against Thorp’s
tort claims was an action “to enforce” the REPC. Thorp argues
that Charlwood’s invocation of the economic loss rule “is
20190981-CA 21 2021 UT App 118Thorp v. Charlwood
premised merely on the ‘existence’ of a contract and not the
enforcement of any contractual obligation.”
¶44 As discussed in section I above, Thorp’s complaint relied
heavily on Charlwood’s alleged misrepresentations in the
Seller’s Disclosures. Indeed, Thorp pointed to several sections of
the Seller’s Disclosures and stated that “the above
representations from the Seller’s Disclosures were known or
should have been known to Charlwood as being untrue, false, or
materially inaccurate at the time he made them to Thorp” and
that “Charlwood fraudulently concealed the above defects and
negligence from the Construct[ion] Project by making the
representations in the Seller’s Disclosures.” Thus, although
Thorp ultimately brought causes of action sounding in tort, his
complaint relied on specific provisions of the Seller’s Disclosures
(and the REPC, more generally) in bringing those claims.
¶45 Furthermore, by arguing that the economic loss rule
barred Thorp’s tort claims, Charlwood necessarily sought to
enforce specific terms of the REPC. First, the very nature of
Charlwood’s argument involved establishing that a valid
contract existed and that through application of the economic
loss rule, the terms of that contract should be enforced to bar
Thorp’s non-contractual claims. Second, the economic loss rule
required Charlwood to establish that the terms of the REPC
overlapped with the alleged common law duties of disclosure
that Thorp was alleging were violated. And in holding that the
economic loss rule applies in this case, the district court
concluded that “the alleged misrepresentations” on which
Thorp’s tort claims were based “are all governed by the REPC.”
Accordingly, we do not agree with Thorp’s assertion that
Charlwood did not seek to enforce the REPC.
¶46 This court addressed a similar situation in Chase v. Scott,
2001 UT App 404, 38 P.3d 1001. In that case, the plaintiff
unsuccessfully sought to rescind a real estate purchase contract
20190981-CA 22 2021 UT App 118Thorp v. Charlwood
and claimed negligent misrepresentation in the transaction; he
did not bring an action for breach of contract. Id. ¶¶ 4–5. The
district court awarded attorney fees to the defendant under an
attorney fee provision in the contract that was identical to the
one at issue here. Id. ¶ 5. On appeal, this court concluded that
the “ensuing defense” against the plaintiff’s action to rescind the
contract “was litigation to enforce the Contract” because the
defendant was required “to defend the legality and seek
enforcement of the agreement,” which “qualified as instituting
legal action relating to the enforcement of the parties’ rights
under the agreement.” Id. ¶¶ 15–17 (quotation simplified). Here,
although Thorp did not seek to rescind the REPC, he attempted
to circumvent the REPC by bringing tort claims. This necessarily
required Charlwood to seek enforcement of the REPC by
demonstrating that its terms governed the dispute between the
parties.
¶47 For the foregoing reasons, we conclude that the court did
not err in awarding attorney fees to Charlwood.10
10. Thorp also argues that the district court abused its discretion
in awarding Charlwood 50% of the attorney fees incurred in
bringing the motion to dismiss and 100% of the attorney fees
incurred in bringing the rule 73 motion. But because Thorp has
not included a transcript of the hearing addressing the issue of
attorney fees in the record, it is unclear whether he objected to
the court’s calculation as arbitrary, and he has therefore not
shown that he preserved a challenge to the court’s calculation of
attorney fees. See State v. Johnson, 2017 UT 76, ¶ 15, 416 P.3d 443(stating that to preserve an issue, “the issue must be specifically
raised by the party asserting error, in a timely manner, and must
be supported by evidence and relevant legal authority”)
(quotation simplified). See also Utah R. App. P. 24(a)(5)(B)
(continued…)
20190981-CA 23 2021 UT App 118Thorp v. Charlwood
IV. Fees on Appeal
¶48 Charlwood seeks an award of attorney fees incurred on
appeal. “When a party who received attorney fees below
prevails on appeal, the party is also entitled to fees reasonably
incurred on appeal.” Telegraph Tower LLC v. Century Mortgage
LLC, 2016 UT App 102, ¶ 52, 376 P.3d 333 (quotation simplified).
Accordingly, Charlwood is entitled to an award for attorney fees
reasonably incurred on appeal, and we remand to the district
court to calculate the amount of an appropriate award.
CONCLUSION
¶49 The district court did not err in dismissing Thorp’s
complaint on the ground that the economic loss rule barred his
claims. We also affirm the court’s award of attorney fees to
Charlwood and remand to the district court to calculate an
appropriate award for Charlwood’s attorney fees reasonably
incurred on appeal.
¶50 Affirmed.
(…continued)
(providing that the principal brief must include “citation to the
record showing that the issue was preserved for review”).
20190981-CA 24 2021 UT App 118