Bodell Construction v. First Interstate Financial

2018 UT App 199THE UTAH COURT OF APPEALS
BODELL CONSTRUCTION COMPANY,
Appellee,
v.
FIRST INTERSTATE FINANCIAL LLC, FIRST INTERSTATE FINANCIAL
UTAH LLC, FIRST INTERSTATE FINANCIAL LLC, AND
PAUL THURSTON,
Appellants.
Opinion
No. 20160855-CA
Filed October 18, 2018
Third District Court, Salt Lake Department
The Honorable Mark S. Kouris
No. 120901496
Karra J. Porter, Kristen C. Kiburtz, and James C.
Lewis, Attorneys for Appellants
Jeffrey L. Silvestrini, Stephen T. Hester, and Bradley
M. Strassberg, Attorneys for Appellee
JUDGE DIANA HAGEN authored this Opinion, in which
JUDGES MICHELE M. CHRISTIANSEN FORSTER and
DAVID N. MORTENSEN concurred.
HAGEN, Judge:
¶1 A jury found that First Interstate Financial LLC, First
Interstate Financial Utah LLC, First Interstate Financial LLC, and
Paul Thurston (Thurston), 1 defrauded Bodell Construction
Company (Bodell) by misrepresenting a real estate investment.
1. Because we use “Thurston” interchangeably to refer to both
Paul Thurston individually and the appellants collectively, we
use singular, masculine pronouns for convenience.
Bodell Construction Company v. First Interstate Financial
Bodell discovered the misrepresentations after learning that
McGillis Investment Company (McGillis) had sued Thurston
over the same investment (the McGillis Litigation). The McGillis
Litigation is central to each claim of error presented on appeal.
First, Thurston challenges the admission of evidence relating to
the McGillis Litigation, claiming that any probative value was
substantially outweighed by the risk of unfair prejudice. Second,
Thurston contends that he was entitled to a directed verdict
because the undisputed facts established that the statute of
limitations on Bodell’s fraud claims began to run as a matter of
law before Bodell discovered the McGillis Litigation. Third,
Thurston challenges the jury’s punitive damages award on due
process grounds, claiming that the award was intended to
punish him for conduct that formed the basis of the McGillis
Litigation. We affirm.
BACKGROUND
¶2 In 2006, Thurston persuaded Bodell to invest $1.2 million
in the development of condominiums in San Francisco,
known as 310 Townsend (the 310 Townsend Project). Thurston
represented to Bodell that the 310 Townsend Project did
not have any current or foreseeable problems. Thurston also
told Bodell that he had personally invested over $4 million of
his own “cash equity” in the project. Bodell considered it
significant that Thurston had “skin in the game” by placing his
own money at risk and relied upon that representation in
deciding to invest.
¶3 In truth, Thurston had bought his interest in the 310
Townsend Project by borrowing over $4 million from McGillis.
To obtain the loan, Thurston misrepresented to McGillis that he
was acting on behalf of a group of developers from southern
California. McGillis believed that Thurston had vetted the
borrowers and paid him a fee for finding and underwriting the
loan.
20160855-CA 2 2018 UT App 199Bodell Construction Company v. First Interstate Financial
¶4 Before approaching Bodell, Thurston had told McGillis
that the southern California developers needed more time to
repay the loan because the project was experiencing permit
delays and cost overruns. McGillis agreed to extend the loan for
a $1.2 million payment. Thurston then asked Bodell to contribute
the $1.2 million without disclosing the current problems with the
310 Townsend Project, the existence of the McGillis loan, or the
fact that Bodell’s investment was needed to extend the McGillis
loan.
¶5 After Bodell invested, Thurston provided Bodell’s
representative with a letter explaining that the 310 Townsend
Project was experiencing delays, permit problems, and cost
overruns. When Bodell’s representative questioned why the
project was not as Thurston had represented, Thurston claimed
that he was as surprised as Bodell and “had no idea that there
were issues like this” when he encouraged Bodell to invest.
Thurston told Bodell that they had both been misled. Believing
that they were “teammates” and “on the same side,” Bodell’s
representative continued to work with Thurston for several
months in an attempt to salvage the investment. But, in 2007,
Bodell asked Thurston for its money back. Thurston apologized
for not realizing the problems with the 310 Townsend Project
and returned a $50,000 premium that Bodell had paid for the
opportunity to invest.
¶6 Several years later, Bodell filed this action against
Thurston for an accounting and breach of the covenant of good
faith and fair dealing. As part of his initial disclosures, Thurston
produced documents that referenced the McGillis Litigation.
Bodell obtained transcripts from the McGillis Litigation and
discovered the existence of the McGillis loan, Thurston’s
representations to McGillis that the 310 Townsend Project was
experiencing delays and cost overruns before Bodell invested,
and that Thurston needed $1.2 million to extend the McGillis
loan. Upon learning these additional facts, Bodell amended its
complaint to allege fraud and fraudulent concealment.
Specifically, Bodell alleged that it had been fraudulently induced
20160855-CA 3 2018 UT App 199Bodell Construction Company v. First Interstate Financial
into investing in the 310 Townsend Project and would not have
invested if Thurston had disclosed all material aspects of the
deal.
¶7 Before trial, Thurston filed a motion in limine seeking to
exclude “any reference” to the McGillis Litigation. Bodell
opposed the motion, arguing that the McGillis Litigation was
relevant to its fraud and fraudulent concealment claims.
Specifically, in reviewing the McGillis Litigation transcripts,
Bodell had learned that Thurston knew of the problems with the
310 Townsend Project at the time he asked Bodell to invest and
that Thurston had not invested his own cash equity but instead
needed Bodell’s investment to secure an extension on the
McGillis loan. Bodell argued that this evidence was also relevant
to refute Thurston’s statute-of-limitations defense because it
would show it could not have reasonably discovered the fraud
before obtaining the McGillis Litigation transcripts.
¶8 At the pretrial motion hearing, Thurston conceded that
evidence of the McGillis Litigation, as it pertained to the 310
Townsend Project and the McGillis loan, was relevant to Bodell’s
fraud claims and statute-of-limitations argument. Accordingly,
Thurston narrowed his motion in limine and sought to exclude
only two categories of evidence relating to the McGillis
Litigation: (1) the “dozens and dozens” of other transactions at
issue in the McGillis Litigation that were unrelated to the 310
Townsend Project and (2) “information concerning the outcome
of that case, the verdict, [and] the findings of fact.” Bodell
indicated that the parties were “largely in agreement on the
scope of an order in limine if there’s going to be one” but argued
that it was unnecessary at this point. The court agreed,
indicating that it would rule on objections to the evidence at
trial.
¶9 Thurston expressed concern that, without an order in
limine, some of Bodell’s witnesses, who harbored animus
against him, might intentionally blurt out prejudicial
information. The court indicated that Thurston’s concern could
be addressed by having Bodell instruct its witnesses about
20160855-CA 4 2018 UT App 199Bodell Construction Company v. First Interstate Financial
“staying on track” and answering only the question posed.
Bodell indicated it had already talked to its witnesses and they
understood that. Based on those representations, the court
denied the motion.
¶10 Bodell’s representative was the first witness at trial. When
he was asked about the McGillis Litigation, Thurston objected,
claiming the evidence was irrelevant and prejudicial. In
response, Bodell argued that the testimony was relevant because
“[i]t goes to how he discovered the fraud.” The court overruled
Thurston’s objections and allowed the representative to testify as
to what “he learned about through the lawsuit,” but it directed
Bodell’s counsel to “be very shallow” in discussing the lawsuit
itself.
¶11 Bodell’s representative went on to testify that he learned
from the McGillis Litigation that Thurston had not invested his
own money in the 310 Townsend Project as he represented, that
the McGillis loan was the source of the funds, and that Bodell’s
investment was used to get an extension on that loan. The
representative further testified that he learned Thurston had told
McGillis that there were problems with the 310 Townsend
Project that required an extension of the loan even though
Thurston had represented to Bodell that there were no such
problems. Thurston objected to this testimony on hearsay
grounds, but the court overruled those objections.
¶12 On cross-examination, Thurston questioned the
representative about Bodell’s responses to certain
interrogatories. Specifically, he asked what information Bodell
had to support the claim that Thurston had defaulted on the
McGillis loan. The representative answered:
That he was perhaps going to default. I don’t know
exactly, but yes. I learned through that trial,
learned that—that’s where I learned about—one of
the sources of learning about the big default, I
mean the cheating McGillis out of $2 million that
20160855-CA 5 2018 UT App 199Bodell Construction Company v. First Interstate Financial
he was successful in winning, a fraud against Mr.
Thurston.
Thurston did not object or move to strike the answer as
nonresponsive but instead asked the witness to “limit [his]
answer to [the] question.”
¶13 Bodell requested a sidebar at which it suggested that
Thurston “opened the door with that question. He has asked
him about the result of the trial however you look at it.” The
court agreed, stating, “That’s precisely what you’re
doing . . . . You’re opening the door to let them bring the trial
in.” Thurston conceded, “It’s in.” Thurston explained that this
line of questioning was designed to show that there was no
support for some of the claims made in Bodell’s answers to
interrogatories. The court surmised that “this area that [Thurston
was] getting into now probably doesn’t require [further
discussion of] the [McGillis] trial” and allowed Thurston to
finish his cross-examination. The court indicated that it would
address the matter the following morning outside of the jury’s
presence.
¶14 When testimony resumed, Thurston again asked about
the basis for Bodell’s assertion that Thurston was in default on
the McGillis loan, specifically asking whether Bodell had any
documentation to that effect. Bodell’s representative answered,
“Well, I’m not aware of anything directly, just what I understood
occurred in the McGillis case where they won the fraud
judgment against [Thurston] related to this and other
investments.” Thurston did not object or move to strike this
testimony.
¶15 The following morning, Thurston argued that the
testimony regarding the outcome of the McGillis Litigation was
not only prejudicial but false. He explained that the verdict in
the McGillis Litigation was for breach of fiduciary duty, not
fraud, and that it was impossible to determine whether the jury’s
verdict even related to the 310 Townsend Project given the
20160855-CA 6 2018 UT App 199Bodell Construction Company v. First Interstate Financial
number of transactions at issue in that case. Thurston explained
that he did not move to strike the testimony because he did not
want to draw attention to it, but that he did not “know how to
unring that bell.” The court indicated that it could be remedied
with a curative instruction. Going forward, the court ruled:
I think the other trial certainly does come in, the
other trial in terms of discovering what happened
and what you discovered from the trial I think
comes in. I don’t think there’s any need to bring
the verdict in not the verdict form or anything like
that, but if in fact we have to determine when it
was that [Bodell] discovered that there were some
improprieties, at least the first time he learned that,
that’s highly relevant with regard to the statute of
limitations.
The court reiterated that it would issue a curative instruction
regarding the testimony about the McGillis Litigation verdict,
stating, “I don’t think the result has any relevance here. That
said, the proceedings certainly do have relevance because that
was when [Bodell] made the discovery” of the alleged fraud.
Accordingly, the court ruled that “the details of that trial
certainly can come in. The only thing that’s not going to come in
will be the verdict.” Bodell clarified that it could “talk about the
parties to the case, the allegations of the case, but not the results
of the case.” The court confirmed, “Yes. I think that’s fair.”
¶16 When the jury reconvened, the district court gave the
following curative instruction:
And maybe since it’s fresh on the jury’s mind,
there was a reference yesterday to the result of the
other trial we’re talking about and that reference
not only doesn’t appear accurate, but quite frankly
it wasn’t even supposed to come in this trial. So I
would ask you to disregard that. That is not what
20160855-CA 7 2018 UT App 199Bodell Construction Company v. First Interstate Financial
happened. So just so you know, if you recall the
reference yesterday, please disregard. If you don’t
recall, that’s fine.
Thurston did not object to this instruction or request further
relief.
¶17 During the remainder of trial, Bodell elicited testimony on
three occasions regarding the nature of the allegations in the
McGillis Litigation. First, Bodell asked McGillis’s managing
partner what claims had been alleged in the lawsuit:
A: There were many and I might be missing
some. One of them was elder abuse. The other was
contract fraud, fiduciary—
Q: Breach of fiduciary duty?
A: Breach of fiduciary duty, fraud, contract,
elder abuse, maybe misrepresentation. Those are
the ones that are prevalent in my mind.
Bodell also asked McGillis’s bookkeeper whether she knew what
claims were at issue in the McGillis Litigation:
A: Claims of fraud, and elder abuse and breach
of fiduciary duty. Those were a few of them. I think
there were maybe some more, but those were the
main ones.
...
Q: But with respect to the other transaction that
counsel asked you about that were part of that
lawsuit, were there similar problems with alleged
fraud?
A: Yes.
20160855-CA 8 2018 UT App 199Bodell Construction Company v. First Interstate Financial
Finally, in response to Bodell’s questions on cross-examination,
Thurston acknowledged that he had been “sued for fraud by Mr.
McGillis.” In all three instances, Thurston raised no
contemporaneous objection.
¶18 At the close of Bodell’s case-in-chief, Thurston moved for
a directed verdict on the ground that the three-year statute of
limitations barred Bodell’s claims. The court denied the motion.
The question was submitted to the jury.
¶19 By special verdict, the jury found that the statute of
limitations did not bar Bodell’s claims. It also found that
Thurston had committed fraud against Bodell, had fraudulently
concealed important facts from Bodell, and had made negligent
representations to Bodell. Finally, the jury found, by clear and
convincing evidence, that Bodell should be awarded punitive
damages. The jury awarded Bodell $356,141 in compensatory
damages and $7.5 million in punitive damages.
¶20 Thurston filed a motion for judgment notwithstanding the
verdict, a new trial, and remittitur. Relevant here, Thurston
sought a new trial based on prejudicial evidence admitted
regarding the McGillis Litigation; judgment notwithstanding the
verdict based on his statute-of-limitations defense; and judgment
as a matter of law, a new trial, or remittitur on the punitive
damages. The district court denied the motion except as to the
remittitur of punitive damages. The district court found the
punitive damages excessive, and Bodell accepted a remittitur of
punitive damages to $356,141, an amount equal to actual
damages. Thurston appeals.
ISSUES AND STANDARDS OF REVIEW
¶21 Thurston first asks this court to determine whether he
was deprived of a fair trial when the district court admitted
evidence concerning allegations made against him in the
McGillis Litigation. “We review a [district] court’s decision to
admit or exclude evidence under Rule 403 of the Utah Rules of
20160855-CA 9 2018 UT App 199Bodell Construction Company v. First Interstate Financial
Evidence under an abuse of discretion standard, and will not
overturn a lower court’s determination of admissibility unless it
is beyond the limits of reasonability.” Gregory & Swapp, PLLC v.
Kranendonk, 2018 UT 36, ¶ 20, 424 P.3d 897 (quotation
simplified).
¶22 We next consider whether Thurston was entitled to
judgment as a matter of law based on the statute of limitations.
“When reviewing any challenge to a trial court’s denial of a
motion for directed verdict, we review the evidence and all
reasonable inferences that may fairly be drawn therefrom in the
light most favorable to the party moved against, and will sustain
the denial if reasonable minds could disagree with the ground
asserted for directing a verdict.” Barrientos ex rel. Nelson v. Jones,
2012 UT 33, ¶ 9, 282 P.3d 50 (quotation simplified). If the denial
of a directed verdict relies upon any underlying legal
conclusions, those conclusions are reviewed for correctness. See
Liley v. Cedar Springs Ranch Inc., 2017 UT App 166, ¶ 12, 405 P.3d
817.
¶23 Finally, we are asked to determine whether the district
court erred in failing to grant a new trial with regard to punitive
damages. Failure to grant a new trial is reviewed for an abuse of
discretion. See Barrientos, 2012 UT 33, ¶ 7 (noting that “because
the grant of a new trial is ordinarily left to the sound discretion
of the trial court,” we review the district court’s decision to deny
a new trial “under an abuse of discretion standard” (quotation
simplified)).
ANALYSIS
I. Evidence Regarding the McGillis Litigation
¶24 Thurston contends that he is entitled to a new trial
because the court admitted prejudicial testimony regarding the
McGillis Litigation. Specifically, Thurston challenges the
admission of testimony concerning (1) the outcome of the
McGillis Litigation and (2) the allegations of elder abuse, fraud,
20160855-CA 10 2018 UT App 199Bodell Construction Company v. First Interstate Financial
and other claims in the McGillis Litigation. Although Thurston
raised these arguments below in a rule 59 motion for a new trial,
he has not appealed the district court’s denial of that motion.
Instead, he asks us to directly review the district court’s legal
errors at trial. However, he has failed to identify any legal error
committed by the district court, much less show that any alleged
error was preserved for appellate review.
¶25 With respect to the testimony regarding the outcome of
the McGillis Litigation, Thurston has not identified any adverse
ruling by the district court for our review on appeal. Before trial,
the district court declined to enter a categorical order in limine,
but it agreed with Thurston that the results of the McGillis
Litigation were inadmissible and cautioned Bodell to instruct its
witnesses accordingly. When Bodell’s representative
unexpectedly testified that McGillis had prevailed against
Thurston on its fraud claim, Thurston made no objection or other
motion on which the court could rule. Thurston’s counsel later
explained that his failure to object was a tactical decision to
avoid drawing undue attention to the testimony. On appeal, he
does not claim that the court plainly erred in declining to
intervene sua sponte.
¶26 When the matter was later discussed outside the jury’s
presence, Thurston did not move the court to strike the
testimony, issue a curative instruction, grant a mistrial, or
provide any other relief. The court confirmed that the McGillis
Litigation verdict was inadmissible and decided, sua sponte, to
issue a curative instruction. That instruction not only informed
the jury that the testimony regarding the McGillis verdict was
inadmissible and should be disregarded but also stated that the
testimony “doesn’t appear to be accurate” and “is not what
happened.” Thurston did not object to this curative instruction
as insufficient or request any other relief. Thurston does not
allege that the district court plainly erred in failing to do more.
¶27 Rather than take issue with the district court’s rulings,
Thurston suggests that the “error” arose when Bodell’s
representative violated the district court’s directive not to
20160855-CA 11 2018 UT App 199Bodell Construction Company v. First Interstate Financial
discuss the outcome of the McGillis Litigation. 2 He asks us to
review the prejudicial effect of that violation without regard to
the district court’s rulings. 3 “Appellate courts review the
decisions of lower courts. We do not review the actions of
counsel—at least not directly.” State v. Hummel, 2017 UT 19,
¶ 107, 393 P.3d 314. Nor do we “review the trial record in a
search for an idealized paradigm of justice.” State v. Thornton,
2017 UT 9, ¶ 49, 391 P.3d 1016 (explaining that “American courts
have long followed the ‘writ of error’ approach to appellate
2. On appeal, Thurston also alleges that Bodell “doubled down”
by referring to this stricken testimony when counsel argued in
closing that Thurston “defrauded Mr. McGillis and lied to him
about being the borrower on the 310 Townsend loan” and when
he urged the jury not to let Thurston “do to you what he did to
Mr. McGillis to the tune of $2.4 million.” Bodell maintains that
this argument was based on Thurston’s own admissions during
the trial in this case. We need not decide whether this was
proper argument, because Thurston made no contemporaneous
objection and has not argued on appeal that the court plainly
erred by not intervening sua sponte.
3. Thurston asserts that Wilson v. IHC Hospitals, Inc., 2012 UT 43,
289 P.3d 369, supports such an approach. We disagree. In Wilson,
the Utah Supreme Court held that counsel’s repeated violation
of an order in limine categorically excluding evidence of
collateral source benefits was sufficiently prejudicial to warrant a
new trial. Id. ¶ 29. But, unlike in this case, the issue in Wilson was
properly preserved. As the court noted, “[o]n the fourth day of
trial, when IHC asked Mr. Wilson about the amount of
out-of-pocket expenses his family had incurred in purchasing
Jared’s wheelchair, the Wilsons objected, arguing ‘this [is] a
direct violation of the Court’s order.’” Id. ¶ 29 n.6. The court held
that “[t]his objection was both timely and sufficient to preserve
the collateral source issue for appeal.” Id. In contrast, Thurston
failed to make a timely objection to the testimony in such a way
that the court could rule on it.
20160855-CA 12 2018 UT App 199Bodell Construction Company v. First Interstate Financial
review”). Our role as an appellate court is to review “specific
rulings made by the trial court.” Wing v. Still Standing Stable LLC,
2016 UT App 229, ¶ 17, 387 P.3d 605 (quotation simplified). In
other words, “[w]e ask only whether the trial court committed a
reversible error in resolving a question presented for its
determination.” Thornton, 2017 UT 9, ¶ 49.
¶28 Here, Thurston has not challenged any specific district
court ruling nor has he invoked an exception to the preservation
requirement by arguing that the district court plainly erred in
failing to take further action sua sponte. Instead, by asking us to
directly review the prejudicial effect of the testimony without
regard to the district court’s rulings, Thurston attempts “an
end-run around the law of preservation (and the doctrine of
plain error review).” Hummel, 2017 UT 19, ¶ 112.
¶29 Thurston takes a similar approach in challenging
testimony identifying the specific claims at issue in the McGillis
Litigation. Although Thurston originally moved for an order in
limine excluding “any reference” to the McGillis Litigation, he
later conceded that evidence of the McGillis Litigation was
relevant and admissible so long as it concerned the 310
Townsend Project. By the time of trial, Thurston had abandoned
his motion in limine except with respect to evidence regarding
the McGillis Litigation verdict and information about unrelated
investments at issue in that case. 4
¶30 The court’s midtrial ruling was consistent with Thurston’s
modified position. While the court excluded evidence regarding
the verdict, it ruled that the allegations in the McGillis Litigation
were admissible to prove what Thurston knew and represented
to others at the time he induced Bodell’s investment and when
4. Thurston does not argue that the claims of fraud, elder abuse,
and misrepresentation in the McGillis Litigation were unrelated
to the 310 Townsend Project.
20160855-CA 13 2018 UT App 199Bodell Construction Company v. First Interstate Financial
Bodell learned of those facts. Thurston voiced no objection and
sought no clarification of the court’s ruling.
¶31 Nor did he object when Bodell asked witnesses to name
the specific legal claims at issue in the McGillis Litigation. Three
witnesses each testified that the lawsuit involved fraud claims,
and two of those witnesses mentioned additional claims of elder
abuse and breach of fiduciary duty. The district court had no
opportunity to rule on the relevance of this specific testimony
because Thurston made no contemporaneous objection.
¶32 “When an issue is not preserved in the trial court, but a
party seeks to raise it on appeal, the party must establish the
applicability of [the preservation] exceptions to persuade an
appellate court to reach that issue.” State v. Johnson, 2017 UT 76,
¶ 19, 416 P.3d 443. Here, Thurston has not argued, let alone
established, a valid exception to the preservation requirement
that would justify reaching this unpreserved issue.
II. Statute of Limitations
¶33 Thurston challenges the district court order denying his
motion for a directed verdict. He argues that he was entitled to
judgment on Bodell’s fraud and fraudulent concealment claims
because the undisputed facts established that the statute of
limitations barred those claims. Specifically, Thurston contends
that the three-year limitation period for fraud claims began to
run in 2007 when Bodell, having determined that the 310
Townsend Project was not proceeding as represented,
demanded a return of its investment. Thurston argues that
Bodell admittedly had knowledge of facts that could form the
basis of a cause of action, triggering the statute of limitations as a
matter of law. Because this action was not brought within three
years of that date, Thurston contends that he was entitled to a
directed verdict.
¶34 The relevant statute of limitations for fraud claims
provides that the “cause of action does not accrue until the
discovery by the aggrieved party of the facts constituting the
20160855-CA 14 2018 UT App 199Bodell Construction Company v. First Interstate Financial
fraud or mistake.” Utah Code Ann. § 78B-2-305(3) (LexisNexis
2012). This statutory discovery rule tolls the running of the
three-year limitations period until the date a plaintiff either
discovers or should have discovered the fraud claim. See Russell
Packard Dev., Inc. v. Carson, 2005 UT 14, ¶ 23, 108 P.3d 741. “[T]he
determination of when the aggrieved party reasonably should
have known of the facts forming the basis of the party’s fraud
claim is a question of fact.” Shiozawa v. Duke, 2015 UT App 40,
¶ 14, 344 P.3d 1174. “Indeed, at what point a party should have
reasonably discovered its claim is a fact-intensive inquiry that
precludes judgment as a matter of law in all but the clearest of
cases.” Id. (quotation simplified).
¶35 This is not one of those rare cases in which the defendant
was entitled to judgment as a matter of law. Bodell presented
sufficient evidence to support a finding that it did not reasonably
discover its fraud claims until after it learned of the McGillis
Litigation from Thurston’s initial disclosures. Bodell’s
representative testified that he first discovered the facts
underlying the fraud claims by reviewing the transcripts of the
McGillis Litigation. Specifically, he learned that Thurston had
not invested his own cash equity in the 310 Townsend Project
but instead had funded his investment by borrowing money
from McGillis, that Thurston knew that the 310 Townsend
Project was experiencing cost overruns and delays in obtaining
permits and had cited those problems as justification for an
extension on the McGillis loan, and that Thurston needed $1.2
million to secure the extension when he approached Bodell
about investing. Based on this evidence, the jury could have
reasonably concluded that until Bodell learned of these facts
from the McGillis Litigation, Bodell could not have reasonably
discovered that Thurston had concealed and misrepresented
these facts to induce the investment.
¶36 Thurston maintains that Bodell’s admission that, “by
2007, [it] had determined that the project was not as represented
to [it] by Thurston” placed it on notice that it had some type
of claim for misrepresentation. Thurston argues that, “[w]hile
20160855-CA 15 2018 UT App 199Bodell Construction Company v. First Interstate Financial
Bodell might not have known all of the alleged
misrepresentations, or whether they were intentional or not,
it knew that it had a potential claim—hence the demand
for return of funds.” But Bodell’s discovery that the 310
Townsend Project was not as represented did not necessarily
put it on notice that it had a claim against Thurston. Bodell’s
representative testified that Thurston denied prior knowledge
of the problems and claimed that he had also been misled. In
fact, Bodell’s representative testified that he continued to work
with Thurston because Thurston led him to believe that
they were “on the same side” and had both been similarly
wronged. Based on this evidence, the jury could have reasonably
concluded that Bodell had no basis to question Thurston’s
representation or to suspect him of any wrongdoing until
Bodell learned from the McGillis Litigation transcripts that
Thurston had cited the permit problems and cash overruns as
justification to extend the McGillis loan before approaching
Bodell to invest.
¶37 The facts of this case were susceptible to different
interpretations that precluded judgment as a matter of law
on whether the discovery rule tolled the statute of limitations
for fraud. The district court properly submitted to the jury
the factual question of when Bodell should have reasonably
discovered the basis for its claims. Accordingly, we affirm
the denial of Thurston’s motion for a directed verdict. 5
III. Punitive Damages
¶38 Thurston contends that the punitive damages award
violates due process because the award was designed to punish
Thurston for his actions toward McGillis, a nonparty, rather than
for his actions toward Bodell. Thurston argues that there was a
5. To the extent Thurston also challenges the district court’s
denial of its motion for judgment notwithstanding the verdict,
we affirm that ruling for the same reasons.
20160855-CA 16 2018 UT App 199Bodell Construction Company v. First Interstate Financial
“steady drumbeat throughout trial regarding Thurston lying to
Mr. McGillis, abusing Mr. McGillis, [and] getting rich off of Mr.
McGillis,” which “could not have been ignored by the jury.”
Thurston contends that because the district court did not protect
him against the risk that the jury would punish him for the
alleged injury inflicted upon McGillis, “the award of punitive
damages cannot stand and a new trial must be granted.”
¶39 Under Utah law, a jury may award punitive damages if it
awards compensatory damages and finds “by clear and
convincing evidence that the acts or omissions of the tortfeasor
are the result of willful and malicious or intentionally fraudulent
conduct, or conduct that manifests a knowing and reckless
indifference toward, and a disregard of, the rights of others.”
Utah Code Ann. § 78B-8-201(1)(a) (LexisNexis 2012) (emphasis
added). In finding by clear and convincing evidence that
Thurston committed fraud on Bodell, the jury necessarily made a
finding of intentionally fraudulent conduct sufficient to support
an award of punitive damages. But, to satisfy due process, such
an award must relate to the harm Bodell suffered and cannot be
used to punish Thurston for harm caused to others.
¶40 In Philip Morris USA v. Williams, 549 U.S. 346 (2007), the
United States Supreme Court held that allowing punitive
damage awards to punish a defendant for injury inflicted on a
nonparty would violate procedural due process. Id. at 356–57.
The Court clarified that the jury is allowed to consider harm to
others in determining the reprehensibility of the defendant’s
conduct, but “a jury may not go further than this and use a
punitive damages verdict to punish a defendant directly on
account of harms it is alleged to have visited on nonparties.” Id.
at 355. Where the risk of jury confusion is significant, “a court,
upon request, must protect against that risk.” Id. at 357. While
the Supreme Court allowed the states “some flexibility to
determine what kind of procedures they will implement, federal
constitutional law obligates them to provide some form of
protection in appropriate cases.” Id.20160855-CA 17 2018 UT App 199Bodell Construction Company v. First Interstate Financial
¶41 In response to Philip Morris, the Utah Supreme Court
modified its long-standing rules on punitive damages. See
Westgate Resorts, Ltd. v. Consumer Prot. Group, LLC, 2012 UT 55,
¶¶ 13–14, 285 P.3d 1219. Previously, in Crookston v. Fire Insurance
Exchange, 817 P.2d 789 (Utah 1991), the court had articulated
factors to be considered in assessing punitive damages. Id. at
808. Relevant here, the fourth Crookston factor was “the effect [of
the alleged misconduct] on the lives of the plaintiff and others.”
Westgate Resorts, 2012 UT 55, ¶ 13 (quotation simplified). The
Westgate court held that this factor “must be modified to be
constitutionally accurate,” by clarifying that harm to others
“may only be used to assess reprehensibility,” not “to directly
punish a defendant for harm caused to nonparties.” Id. ¶¶ 14, 23.
To implement that decision, our supreme court directed that
“[j]ury instructions should now include an explanation that
‘harm to others’ may be considered for reprehensibility only,
and not for punishment.” Id. ¶ 23.
¶42 In accordance with Philip Morris and Westgate Resorts, the
jury instructions in this case protected against the risk that the
jury would improperly award punitive damages to punish
Thurston for harm allegedly caused to McGillis. Thurston
proposed the punitive damages instructions that were given to
the jury. Those instructions specifically advised the jury that the
amount of punitive damages “must bear some relationship to
Plaintiff’s harm.” The exclusive list of factors that the jury was
allowed to consider in determining the amount of punitive
damages omitted any reference to “harm to others.” Instead, the
fourth Crookston factor was limited to “the effects of the
Defendant’s conduct on the Plaintiff.” By entirely eliminating
“harm to others” as a permissible consideration, the instructions
protected against any confusion regarding the permissible use of
that factor.
¶43 Thurston does not address how the jury instructions were
inadequate to “protect against the risk that the jury might
improperly consider harm to McGillis in deciding to award
punitive damages.” The court did not explicitly instruct the jury
20160855-CA 18 2018 UT App 199Bodell Construction Company v. First Interstate Financial
that it could not punish Thurston for harm he caused to others.
But, unlike the defendant in Philip Morris, Thurston did not
request such an instruction. 549 U.S. at 356; see also Westgate
Resorts, 2012 UT 55, ¶ 22 (holding that “an objection lodged with
a trial court based on a plaintiff’s suggestion that the jury
calculate punitive damages by assessing the damage caused to
nonparties suffices to serve as a ‘request’ under Philip Morris”).
In the absence of such a request, there was no need for the court
to go beyond the law as correctly stated in the jury instructions
Thurston proposed.
¶44 There was no significant risk that the jury based the
punitive damages award on the harm Thurston allegedly caused
McGillis. Because Thurston failed to establish a procedural due
process claim, the court acted within its discretion in denying his
motion for a new trial.
CONCLUSION
¶45 Thurston has failed to establish any error in the district
court’s evidentiary rulings or in its denial of his motion for a
directed verdict. He has also failed to show a significant risk that
the jury improperly based its punitive damages award on harm
Thurston allegedly caused against a nonparty. Accordingly, we
affirm the judgment.
20160855-CA 19 2018 UT App 199