Sundial v. The Villages at Wolf Hollow

2013 UT App 223_________________________________________________________
THE UTAH COURT OF APPEALS
SUNDIAL INC.,
Plaintiff and Appellant,
v.
THE VILLAGES AT WOLF HOLLOW CONDOMINIUM
HOMEOWNER’S ASSOCIATION, INC.,
Defendant and Appellee.
Memorandum Decision
No. 20121026‐CA
Filed September 12, 2013
Third District, West Jordan Department
The Honorable Mark S. Kouris
No. 080402632
James T. Dunn, Attorney for Appellant
Alan R. Stewart, Attorney for Appellee
JUDGE CAROLYN B. MCHUGH authored this Memorandum
Decision, in which JUDGES JAMES Z. DAVIS and STEPHEN L. ROTH
concurred.
McHUGH, Judge:
¶1 Sundial Inc. (Sundial) appeals from a judgment awarding it
damages for unjust enrichment on the ground that the trial court
failed to include prejudgment interest. We affirm.
¶2 The underlying claim for equitable relief relates to The
Villages at Wolf Hollow development, a sixty‐four unit
condominium project (the Project) in Salt Lake County. The
original developer of the Project was Aurora Development, LC
(Aurora). In September 2001, Aurora recorded a declaration of
condominium that included bylaws for what later became The
Sundial v. The Villages at Wolf Hollow
Villages at Wolf Hollow Condominium Homeowner’s Association,
Inc. (the HOA).
¶3 In July 2004, Sundial purchased the last thirty‐four
condominium units in the Project that remained unsold, as well as
two undeveloped building pads. At that time, Aurora was
insolvent and unable to finish construction of the Project. Sundial
wrote five checks totaling $44,500 to the HOA between December
2004 and June 2005. A portion of these payments was to cover the
monthly assessments on the Sundial units and a large additional
sum to ensure the Project’s survival. After completion of the
Project, a dispute arose between Sundial and the HOA over the
treatment of these payments.
¶4 On February 11, 2008, Sundial filed a complaint alleging that
the HOA had been unjustly enriched by the payments and
requesting damages of $44,500 plus interest. The HOA filed an
answer and counterclaim alleging that Sundial had failed to pay
certain dues, fees, and other assessments. Subsequently, Sundial
amended the amount requested in its unjust enrichment claim to
$30,064.66 plus interest in order to reflect the dues, fees, and other
assessments that were properly paid to the HOA.
¶5 After a bench trial, the trial court issued its memorandum
decision and found that Sundial “paid significantly more than the
monthly fees [it] was required to pay” because of an understanding
that “the Project was on the brink of failure.” The trial court found
that the excess funds ensured the completion of the Project, thereby
preventing liens from being recorded against the Project and
avoiding foreclosure. Consequently, the trial court awarded
Sundial $5,403 in damages on its unjust enrichment claim. In
calculating this amount, the trial court first found that Sundial’s
overpayments were made, at least in part, for its own benefit. Thus,
the trial court adopted a formula to isolate the benefit unjustly
conferred on the HOA from the benefit to Sundial itself. The
method the trial court selected was to multiply the total payment
figure of $44,500 by 47%, which represents the percentage of units
20121026‐CA 2 2013 UT App 223Sundial v. The Villages at Wolf Hollow
not owned by Sundial. From the remaining $20,915, the trial court
subtracted $15,512 in fees properly charged to Sundial, resulting in
the final damage award of $5,403.
¶6 After the trial court issued its memorandum decision,
counsel for Sundial submitted a proposed form of judgment, which
included prejudgment interest at the rate of 10%. Although the
HOA filed an objection to the proposed judgment, the trial court
entered it on July 27, 2012. However, the trial court scheduled oral
arguments on the HOA’s objection for October 30, 2012. The HOA
argued that prejudgment interest was inappropriate because a
specific award was not foreseeable or mathematically certain until
the trial court made its final ruling and determined how the unjust
benefit to the HOA would be calculated. Sundial claimed that the
court had correctly included prejudgment interest because the
unjust benefit conferred on the HOA could be calculated with
mathematical certainty based on specific amounts and dates. The
trial court found the HOA’s arguments persuasive and set aside the
original judgment in favor of an amended judgment that did not
include an award of prejudgment interest. Sundial filed a timely
notice of appeal from the amended judgment.
¶7 The only issue Sundial raises on appeal is whether the trial
court erred in failing to award prejudgment interest. “A trial
court’s decision to grant or deny prejudgment interest presents a
question of law which we review for correctness.” Cornia v. Wilcox,
898 P.2d 1379, 1387 (Utah 1995).
¶8 “[T]he legal rate of [prejudgment] interest for . . . any . . .
chose in action shall be 10% per annum.” Utah Code Ann.
§ 15‐1‐1(2) (LexisNexis 2009). Sundial does not dispute that its
unjust enrichment claim against the HOA was a “chose in action.”
See Snow, Nuffer, Engstrom & Drake v. Tanasse, 1999 UT 49, ¶ 9, 980
P.2d 208 (“A ‘chose in action’ has been defined as ‘a claim or debt
upon which a recovery may be made in a lawsuit. It is not a present
possession, but merely a right to sue; it becomes a “possessory
thing” only upon successful completion of a lawsuit.’” (quoting
20121026‐CA 3 2013 UT App 223Sundial v. The Villages at Wolf Hollow
Barron’s Law Dictionary 71 (3d ed. 1991))). However, an award of
prejudgment interest pursuant to section 15‐1‐1(2) is not automatic.
Prejudgment interest is appropriate only “when the loss ha[s] been
fixed as of a definite time and the amount of the loss can be
calculated with mathematical accuracy in accordance with
well‐established rules of damages.” Iron Head Constr., Inc. v.
Gurney, 2009 UT 25, ¶ 11, 207 P.3d 1231 (alteration in original)
(citation and internal quotation marks omitted). “[W]here damages
are incomplete or cannot be calculated with mathematical
accuracy, . . . the amount of the damages must be ascertained and
assessed by the trier of . . . fact at the trial, and in such cases
prejudgment interest is not allowed.” Cornia, 898 P.2d at 1387
(citation and internal quotation marks omitted). Accordingly,
“equitable claims typically do not support an award of
prejudgment interest because in most equitable cases the damages
are not readily calculable to a mathematical certainty.” Kimball v.
Kimball, 2009 UT App 233, ¶ 41, 217 P.3d 733. Notwithstanding that
general rule, this court has cautioned that “rel[ying] on the nature
of the claim” to determine whether prejudgment interest is allowed
is inappropriate. Shoreline Dev., Inc. v. Utah Cnty., 835 P.2d 207, 211
(Utah Ct. App. 1992).
¶9 In the present case, the amount of damages could not have
been determined with mathematical certainty prior to the trial
court’s ruling. Tellingly, Sundial calculated its unjust enrichment
damages at $30,064.66 before trial, yet the trial court awarded only
$5,403. This discrepancy occurred, in large part, because there are
no “well‐established rules” for calculating the unjust benefit that
was conferred on the HOA. See Iron Head, 2009 UT 25, ¶ 11 (citation
and internal quotation marks omitted). The trial judge was “left to
determine the amount of damages from a mere description of the”
benefits conferred on Sundial as opposed to those conferred on the
HOA. See id. ¶ 12 (citation and internal quotation marks omitted).
In making that assessment, the trial court considered the entire
factual record, including that “Sundial had a financial stake in the
[P]roject and needed to keep it viable to sell the 34 condominium
units it had purchased,” that Sundial’s sole shareholder wanted the
20121026‐CA 4 2013 UT App 223Sundial v. The Villages at Wolf Hollow
Project to survive because his son was a resident, and that
Sundial’s sole shareholder intended to market the units as
investment opportunities to his friends and former real estate
clients. The trial court then carefully considered the benefit to the
other residents of the Project and found that in the absence of
Sundial’s payments, Aurora would likely have defaulted on its
construction loan, resulting in liens against the Project, unfinished
common areas and amenities, and the devaluation of all of the
units. Based on its assessment of this evidence, the trial court
determined that some of the overpayments were mutually
beneficial and therefore the full amount of those payments could
not be included in a damage award for unjust enrichment.
¶10 As a result, the trial court fashioned a methodology to
calculate how much of the overpayments were an unjust benefit to
the HOA. The trial court was not bound to use the ratio between
condominium units owned by Sundial and those owned by other
residents to allocate the benefit conferred by the payments between
the parties. Until the trial court selected a methodology, the
amount of damages could not be ascertained with precision. As the
trial court correctly noted, “three or four different judges could
have heard this same case and maybe come up with different
numbers.” Another judge calculating damages might have
concluded that the full amount of the overpayment, none of it, or
some different percentage constituted the value of the unjust
benefit enjoyed by the HOA. Thus, the damage amount here was
determined by the broad discretion of the trier of fact. See Encon
Utah, LLC v. Fluor Ames Kraemer, LLC, 2009 UT 7, ¶ 53, 210 P.3d 263(“[L]osses that cannot be calculated with mathematical accuracy
are those in which the damage amounts are to be determined by the broad
discretion of the trier of fact . . . .” (citation and internal quotation
marks omitted)).
¶11 Accordingly, the trial court correctly denied Sundial an
award of prejudgment interest. Affirmed.
20121026‐CA 5 2013 UT App 223