Red Bridge Capital LLC v. Dos Lagos LLC

2016 UT App 162THE UTAH COURT OF APPEALS
RED BRIDGE CAPITAL LLC,
Appellee,
v.
DOS LAGOS LLC, MELLON VALLEY LLC,
ROLAND N. WALKER, AND SALLY WALKER,
Appellants.
Opinion
No. 20141123-CA
Filed July 29, 2016
Third District Court, Salt Lake Department
The Honorable John Paul Kennedy
No. 120902931
Evan A. Schmutz and Andrew V. Wright, Attorneys
for Appellants
David E. Leta, Amber M. Mettler, and Andrew V.
Hardenbrook, Attorneys for Appellee
SENIOR JUDGE PAMELA T. GREENWOOD authored this Opinion, in
which JUDGES GREGORY K. ORME and MICHELE M. CHRISTIANSEN
concurred. 1
GREENWOOD, Senior Judge:
¶1 Dos Lagos LLC, Mellon Valley LLC, Roland N. Walker,
and Sally Walker (collectively, Defendants) appeal the district
court’s denial of their motion for satisfaction of judgment and
grant of attorney fees to Red Bridge Capital LLC. We reverse and
remand.
1. Senior Judge Pamela T. Greenwood sat by special assignment
as authorized by law. See generally Utah R. Jud. Admin. 11-
201(6).
Red Bridge Capital v. Dos Lagos
BACKGROUND
¶2 Red Bridge foreclosed on two parcels of property
belonging to Mellon (the Foreclosed Parcels) and then sought a
deficiency judgment against Defendants. The Foreclosed Parcels
were encumbered by a communications easement. Mellon owns
two additional parcels (the Strip Parcels) that lie between the
two Foreclosed Parcels, and a road lies between the two Strip
Parcels. Thus, the most convenient access between the
Foreclosed Parcels and the road is over the Strip Parcels.
¶3 To resolve Red Bridge’s deficiency claims, the parties
entered into a Settlement Agreement in which Defendants
agreed to (1) pay $150,000 to Red Bridge, (2) consent to entry of a
deficiency judgment in the amount of $2,000,000, (3) terminate
the communications easement as to the Foreclosed Parcels, (4)
grant Red Bridge an access and utility easement across the Strip
Parcels with two points of entry for each of the Foreclosed
Parcels to be selected by Red Bridge, (5) “cause all liens and
encumbrances to be removed from the Strip Parcels,” and (6)
negotiate in good faith for “a mutually acceptable development
agreement” or, if a mutually acceptable agreement could not be
reached, transfer title to the Strip Parcels to Red Bridge, “free
and clear of any and all liens and encumbrances.” Red Bridge
agreed that if “each” of these actions were completed within 180
days, it would file a satisfaction of the $2,000,000 deficiency
judgment. If “any” of the actions did not occur within the
allotted time, Red Bridge was entitled to collect the judgment.
¶4 In the course of fulfilling their obligations under the
Settlement Agreement, Defendants discovered that the legal
descriptions of the Strip Parcels in an exhibit to the Settlement
Agreement incorrectly included a tenth-acre triangle of land (the
Elim Parcel) that actually belonged to Elim Valley Planning &
Development LLC, which was not a party to the Settlement
Agreement. Defendants arranged to have Elim execute an access
20141123-CA 2 2016 UT App 162Red Bridge Capital v. Dos Lagos
and utility easement with respect to its property, but Defendants
were unable to discharge a $39,000 judgment lien on the Elim
Parcel.
¶5 Red Bridge asserted that the Settlement Agreement
obligated Defendants to remove the judgment lien from the Elim
Parcel and that they failed to comply with their obligations
under the Settlement Agreement in two additional respects.
First, although Defendants terminated the communications
easement as to the Foreclosed Parcels, they were unable to
remove it from the Strip Parcels. Second, Defendants never
proposed an appropriate development agreement, the parties
did not reach an agreement, and Defendants did not transfer the
Strip Parcels to Red Bridge after failing to reach an agreement. It
is undisputed that Defendants complied with all other
obligations necessary for release of the $2,000,000 judgment.
¶6 On May 27, 2014, Defendants filed a motion in the district
court seeking a determination that they were entitled to a
satisfaction of judgment. They asserted that, to the extent the
Settlement Agreement could be read to obligate them to remove
the judgment lien from the Elim Parcel, the Settlement
Agreement should be reformed due either to mutual mistake or
to unilateral mistake. In the alternative, they asserted that the
Elim Parcel was not material to the Settlement Agreement and
that they had therefore substantially complied with the
Settlement Agreement by removing the title defects on the
remaining portions of the Strip Parcels, which would provide
Defendants with the required access points to the Foreclosed
Parcels. They further argued that Red Bridge waived any
obligation they had to remove the communications easement
from the Strip Parcels when Red Bridge excluded that easement
from a memo purporting to contain a list of “directives for
[Defendants] to resolve the title issue in compliance with the
parties[’] Settlement Agreement.” Finally, Defendants argued
that they fulfilled their obligations with respect to negotiating a
20141123-CA 3 2016 UT App 162Red Bridge Capital v. Dos Lagos
development agreement because they negotiated in good faith
but were prevented from reaching an agreement because Red
Bridge refused to accept any solution short of Mellon deeding
the Strip Parcels to Red Bridge.
¶7 The district court scheduled an evidentiary hearing on
Defendants’ motion for July 3, 2014. The parties submitted a
statement of stipulated undisputed facts, along with exhibits the
parties agreed should be admitted. The stipulated facts were
intended to be “[i]n addition to the statements and facts
contained in the exhibits which [were] offered and admitted into
evidence at the hearing . . . and in addition to any testimony of
witnesses that [was] admitted into evidence at the [h]earing.”
¶8 Although Defendants appeared at the hearing ready to
present evidence, the court indicated that it saw Defendants’
motion and Red Bridge’s response “basically as cross motions
for summary judgment on the issues.” The court gave the parties
the opportunity to make opening statements and asked a
number of questions but then refused to take any additional
evidence. The court determined that the parol evidence rule
precluded it from considering extrinsic evidence relating to
Defendants’ mistake arguments and denied the motion for
satisfaction of judgment because the motion was not “well taken
on many fronts but [was] clearly not sufficient . . . either
substantively and maybe procedurally.” The court did not
further explain its decision.
¶9 The court subsequently issued a written order denying
the motion. The order indicated that the court had “made its
Findings of Fact and Conclusions of Law upon the record” at the
July 3 hearing. Later, in response to a motion by Red Bridge, the
district court awarded Red Bridge its attorney fees and costs.
Defendants appeal.
20141123-CA 4 2016 UT App 162Red Bridge Capital v. Dos Lagos
ISSUES AND STANDARDS OF REVIEW
¶10 Defendants contend that the district court erred in
excluding extrinsic evidence regarding mistake and in
summarily denying their motion for satisfaction without taking
evidence or articulating grounds for the denial. 2 A district
court’s refusal to consider extrinsic evidence “presents a
question of law that we review for correctness.” Equine Assisted
Growth & Learning Ass’n v. Carolina Cas. Ins. Co., 2009 UT App
200, ¶ 5, 216 P.3d 971, aff’d, 2011 UT 49, 266 P.3d 733; see also
Bennett v. Huish, 2007 UT App 19, ¶ 8, 155 P.3d 917. Essentially,
the district court appears to have treated Defendants’ motion for
satisfaction and Red Bridge’s response as cross-motions for
summary judgment and ruled as a matter of law. “Summary
2. On appeal, Red Bridge raises an alternative justification for the
district court’s decision—namely, that Defendants could not rely
on their compliance with the Settlement Agreement to
demonstrate that they had satisfied the judgment. Red Bridge
asserts that the only way Defendants could establish that they
satisfied the judgment was to show that they had paid Red
Bridge $2,000,000. To have the judgment lien released on other
grounds, Red Bridge suggests, Defendants were required to file
a motion to enforce the Settlement Agreement, by which they
could obtain an order requiring Red Bridge to release the
judgment lien.
We are not convinced that proof of payment is the only
possible way to demonstrate satisfaction of a judgment. The
Utah Rules of Civil Procedure require only “satisfactory proof”
that a judgment has been satisfied. Utah R. Civ. P. 58B(b). Where
the judgment debtor can demonstrate that, as here, the parties
had agreed to satisfaction by means other than simple payment,
evidence that the judgment debtor met its obligations under the
parties’ agreement may provide satisfactory proof that the
judgment has been satisfied.
20141123-CA 5 2016 UT App 162Red Bridge Capital v. Dos Lagos
judgment is proper solely in cases in which no genuine issues of
material fact exist and the movant merits judgment as a matter
of law.” Spencer v. Pleasant View City, 2003 UT App 379, ¶ 8, 80
P.3d 546 (citation and internal quotation marks omitted). While
this is not precisely a summary judgment case, the issue
presented on appeal is similar—whether the district court erred
in summarily disposing of Defendants’ motion. In reviewing this
issue, “we review the factual submissions to the trial court in a
light most favorable to finding a material issue of fact,” and
ultimately grant no deference to the district court’s legal
determination that a summary ruling was appropriate. Cf.
Nyman v. McDonald, 966 P.2d 1210, 1213 (Utah Ct. App. 1998)
(citation and internal quotation marks omitted).
¶11 Defendants also challenge the district court’s award of
attorney fees to Red Bridge. “Whether attorney fees are
recoverable in an action is a question of law, which we review
for correctness.” Valcarce v. Fitzgerald, 961 P.2d 305, 315 (Utah
1998) (plurality opinion).
ANALYSIS
¶12 We first observe that the district court did not adequately
explain its ruling. “In all actions tried upon the facts without a
jury . . . , the court must find the facts specially and state
separately its conclusions of law. The findings and conclusions
must be made part of the record and may be stated in writing or
orally following the close of the evidence.” Utah R. Civ. P.
52(a)(1). In the case of a motion for summary judgment, findings
of fact are not required, but the court should “state on the record
the reasons for granting or denying the motion,” id. R. 56(a),
including “a brief written statement of the ground for [the
court’s] decision” “when the motion is based on more than one
ground,” id. R. 52(a)(6). Although the court suggested that it
believed it was essentially considering cross-motions for
summary judgment, no such motions were before the court.
20141123-CA 6 2016 UT App 162Red Bridge Capital v. Dos Lagos
And the court’s assertion in its order that it had “made its
Findings of Fact and Conclusions of Law upon the record” at the
July 3 hearing suggests that the court implicitly treated the
motion as something other than one for summary judgment and
that the resultant order was not a summary judgment ruling.
(Emphasis added.) In any event, no clearly articulated findings
or conclusions were made at the hearing. The court simply
rejected Defendants’ theory that they could submit extrinsic
evidence in support of their mistake arguments and denied their
motion for satisfaction of judgment because it was “not sufficient
. . . substantively and maybe procedurally.”
¶13 Without further explanation, the basis of the district
court’s ruling is unclear. The court never explicitly rejected
Defendants’ mistake arguments; it ruled only that their extrinsic
evidence was inadmissible. Even if we were to agree with the
district court regarding the admissibility of the extrinsic
evidence—which we do not, see infra ¶ 16—it would not
necessarily follow that the lack of such evidence would defeat
Defendants’ mistake arguments. Indeed, such a conclusion
would make any mistake argument a nullity because parties
would be precluded from establishing mistake without extrinsic
evidence while simultaneously being precluded from presenting
extrinsic evidence. The evidence Defendants relied on in this
case is illustrative. Although Defendants sought to introduce
extrinsic evidence of the parties’ discussions regarding the
Settlement Agreement, their mistake argument also relied on the
language of the Settlement Agreement itself, which identifies the
Strip Parcels as parcels “owned by Mellon” and does not include
Elim as a party. But the district court never directly addressed
Defendants’ mistake arguments beyond ruling that the extrinsic
evidence was inadmissible.
¶14 The court also failed to address Defendants’ substantial
compliance, waiver, and good-faith negotiation arguments. This
suggests that the court’s ruling was based on its rejection of
20141123-CA 7 2016 UT App 162Red Bridge Capital v. Dos Lagos
Defendants’ mistake arguments, but as its ruling on even that
issue is unclear, we are ultimately unable to discern the basis for
the ruling. See Neerings v. Utah State Bar, 817 P.2d 320, 323 (Utah
1991) (indicating that a district court’s failure “to inform the
litigants of the legal basis for its decision” deprives appellate
courts of “a ready basis for review on appeal”). In any event, we
are convinced that the district court’s summary denial of
Defendants’ motion, without an evidentiary hearing, was
erroneous because Defendants should not have been precluded
from presenting extrinsic evidence relating to mistake.
¶15 “A mutual mistake of fact can provide the basis for
equitable rescission or reformation of a contract even when the
contract appears on its face to be a complete and binding
integrated agreement.” Burningham v. Westgate Resorts, Ltd., 2013
UT App 244, ¶ 12, 317 P.3d 445 (citation and internal quotation
marks omitted). Likewise, unilateral mistake “provides a basis
for reformation or rescission” where one party makes a mistake
either as the result of the other party’s fraud or with the
knowledge of the other party who then attempts to take
advantage of the mistake. See Guardian State Bank v. Stangl, 778
P.2d 1, 5–7 (Utah 1989). Mistake is “not necessarily provable by
reference to the contract itself.” Tangren Family Trust v. Tangren,
2008 UT 20, ¶ 15, 182 P.3d 326. Thus, “extrinsic evidence is
appropriately considered, even in the face of a clear integration
clause, where the contract is . . . voidable for . . . mistake.” Id.¶16 Here, Defendants argued that the inclusion of the Elim
Parcel in the description of the Strip Parcels was either a mutual
mistake or a unilateral mistake of which Red Bridge was aware
and tried to take advantage. Defendants identify a number of
facts that they assert support their theories of mutual and
unilateral mistake: that the language of the Settlement
Agreement identifies the Strip Parcels as parcels “owned by
Mellon”; that Elim was not a party to the Settlement Agreement;
and that the parties’ discussions regarding the Settlement
20141123-CA 8 2016 UT App 162Red Bridge Capital v. Dos Lagos
Agreement focused on property Mellon owned. Because
extrinsic evidence is admissible to prove mistake, Defendants
should have been permitted to present their extrinsic evidence.
And because the district court’s denial of Defendants’ motion for
satisfaction appears to have rested solely on its determination
that extrinsic evidence was inadmissible, we reverse the district
court’s ruling and remand for further proceedings.
¶17 Defendants also raised arguments regarding substantial
compliance, waiver, and good-faith negotiation of the
development agreement. But we are unable to review the district
court’s rulings on these issues because we cannot tell from the
court’s order why it refused to take evidence on these issues,
why it rejected Defendants’ arguments on these issues, or even
whether it rejected the arguments at all. It is possible that the
district court found it unnecessary to address these arguments
because it considered Defendants’ failure to satisfy the lien on
the Elim Parcel to alone defeat their motion for satisfaction.
(Although, if this were the case, the district court still should
have addressed Defendants’ alternative substantial compliance
argument.) On remand, the district court should either address
these arguments or articulate a basis for declining to address
them.
¶18 In light of our holding, we also reverse the district court’s
award of attorney fees to Red Bridge. The award of attorney fees
was based on two provisions: one in the Settlement Agreement,
providing that “if any legal action is taken to enforce any term or
provision of this Agreement, the Parties agree that the prevailing
party in such action shall be entitled to payment of its attorneys’
fees, expenses and costs incurred to enforce the terms of this
Agreement”; and another provision in the deficiency judgment,
stating, “This judgment may be augmented by the reasonable
costs, expenses and attorneys’ fees, incurred by Red Bridge in
collecting or enforcing this Judgment . . . .” Because we have
reversed the district court’s order, Red Bridge cannot be deemed
20141123-CA 9 2016 UT App 162Red Bridge Capital v. Dos Lagos
to have “prevailed” and is not entitled to attorney fees at this
time. 3
CONCLUSION
¶19 We hold that Defendants should have been permitted to
present extrinsic evidence in support of their mistake arguments.
Accordingly, we reverse the district court’s ruling, including its
award of attorney fees, and we remand the case for further
proceedings consistent with this opinion.
3. Because of the manner in which we resolve this appeal, we
need not consider Defendants’ arguments that their motion for
satisfaction did not constitute an action to “enforce” the
Settlement Agreement and that the award of fees was excessive.
20141123-CA 10 2016 UT App 162