NetDictation, LLC v. Rice

2019 UT App 198THE UTAH COURT OF APPEALS
NETDICTATION LLC AND ANITA KARAN,
Appellants,
v.
ANGELA RICE AND NRT COMMERCIAL UTAH LLC,
Appellees.
Amended Opinion*
No. 20180334-CA
Filed December 5, 2019
Third District Court, Salt Lake Department
The Honorable Todd M. Shaughnessy
No. 120905273
Donald L. Dalton, Attorney for Appellants
Stephen W. Whiting and David N. Jardine, Attorneys
for Appellee Angela Rice
Joseph M. Stultz and Daniel C. Dansie, Attorneys for
Appellee NRT Commercial Utah LLC
JUDGE GREGORY K. ORME authored this Opinion, in which
JUDGES JILL M. POHLMAN and DIANA HAGEN concurred.
ORME, Judge:
¶1 This appeal arises from a poorly constructed provision
of a promissory note that was attached to a larger,
integrated contract. The first issue is a question of contract
interpretation. The district court ruled in plaintiff Angela Rice’s
favor, granting her partial summary judgment and reserving
* This amended opinion replaces the opinion issued November
29, 2019, NetDictation, LLC v. Rice, 2019 UT App 192. Footnote 8
has been revised to correct a misstatement.
NetDictation, LLC v. Rice
for a bench trial the determination of what constituted “a
reasonable time under the circumstances” for payment.
Defendant NetDictation, LLC appeals the court’s grant of
partial summary judgment, which we affirm. The second
issue arises out of NetDictation’s cross­complaint against Rice’s
business broker, defendant NRT Commercial Utah, LLC,
which does business as Coldwell Banker Commercial LLC
(Coldwell Banker). NetDictation alleged that Coldwell Banker
breached the limited duty it owed to NetDictation by
imperfectly conveying NetDictation’s concerns about the
provision of the promissory note at issue to NetDictation’s
attorneys, who drafted it. The district court granted Coldwell
Banker’s motion for summary judgment, which ruling we
likewise affirm.
BACKGROUND 1
¶2 On December 30, 2011, NetDictation and Anita Karan
(collectively, NetDictation) entered into an Asset Purchase and
Sale Agreement (the APSA) to purchase a medical transcription
business, Accu­Write, Inc., from Rice. 2 Coldwell Banker brokered
the transaction, representing Rice.
1. “In reviewing a district court’s grant of summary judgment,
we view the facts and all reasonable inferences drawn therefrom
in the light most favorable to the nonmoving party and recite the
facts accordingly.” Ockey v. Club Jam, 2014 UT App 126, ¶ 2 n.2,
328 P.3d 880 (quotation simplified).
2. Anita Karan was not a party to the APSA but guaranteed
NetDictation’s obligations and signed the contract on
NetDictation’s behalf.
20180334-CA 2 2019 UT App 198NetDictation, LLC v. Rice
Rice’s Claim Against NetDictation
¶3 Section 1.3 of the APSA listed the purchase price as
$98,000, of which NetDictation was to pay $5,000 as a deposit,
$20,000 as a down payment, and the remaining $73,000 at
closing. NetDictation was to deliver the $73,000 to Rice in the
form of “two executed promissory notes,” one in the amount of
$25,000 (the $25,000 Note) and the other in the amount of $48,000
(the $48,000 Note). Both notes were attached as exhibits to the
APSA. The APSA also contained an integration clause, which
provided that the APSA (with its attached schedules and
exhibits) “sets forth the entire understanding of the parties” and
“supersedes all prior oral or written agreements, instruments
and understandings.”
¶4 The $25,000 Note stated that it was to be paid in “[a]
balloon payment . . . due and payable to [Rice] on or before April
1, 2012.” The $48,000 Note, on the other hand, contained a more
complex repayment structure. NetDictation was to make
payment on the note in monthly installments over a 24-month
period, the amount of which varied depending on Accu-Write’s
post-sale income. The $48,000 Note provided the following
method of calculating the monthly payment, hereinafter referred
to as the Payment Provision:
FOR VALUE RECEIVED, NetDictation, LLC . . . ,
hereby irrevocably promises and agrees to pay to
the order of [Rice] . . . the principal sum of Forty
Eight Thousand Dollars ($48,000.00) . . . all in
accordance with the terms and conditions set forth
below.
1. Monthly payments, in the amount of
Thirty­Five Percent (35%) of the monthly income of
[Accu­Write], . . . based on the following formula:
20180334-CA 3 2019 UT App 198NetDictation, LLC v. Rice
1.1. Fifty Thousand Dollars ($50,000.00) down
payment divided by Twenty Four (24) months
equals Two Thousand Eighty Three Dollars and
Thirty Three Cents ($2,083.33) down payment
adjustment. The average monthly income is Eleven
Thousand Six Hundred Sixty Six Dollars
($11,666.00) multiplied by Thirty Five Percent
(35%) equals Four Thousand Eighty Three Dollars
and Thirty One Cents ($4,083.31) minus Two
Thousand Eight[y] Three Dollars and Thirty Three
Cents ($2,083.33) down payment adjustment comes
to One Thousand Nine Hundred Ninety Nine
Dollars and Ninety Eight Cents ($1,999.98) per
month for Twenty Four (24) Months. This payment
will be adjusted accordingly if the monthly income
of [Accu-Write] increases or decreases.
¶5 The $48,000 Note further provided that in the event of
NetDictation’s default, Rice “may at [her] sole option consider
the entire unpaid principal balance and accrued but unpaid
interest . . . at once . . . due and payable without notice,” and that
“all amounts owing and past due hereunder, including without
limitation principal (whether by acceleration or in due course),
interest, late fees and other charges, shall, if permitted by
applicable law, bear interest at the rate of twelve percent (12%)
per annum both before and after judgment.”
¶6 Following closing, Accu-Write did not maintain its past
profitability. For that reason, up until the initiation of the current
lawsuit, no payments came due on the $48,000 Note pursuant to
the Payment Provision. Nevertheless, NetDictation made
payments totaling $3,376.25 on the $48,000 Note in January,
February, and March of 2012.
¶7 By April 2012, the parties’ relationship had deteriorated
due to Accu-Write’s poor performance, and NetDictation ceased
making payments on either note in June. Rice subsequently filed
20180334-CA 4 2019 UT App 198NetDictation, LLC v. Rice
suit in August, alleging that NetDictation still owed $4,000 on
the $25,000 Note that had come due in April and that
NetDictation had failed to pay the monthly installments on the
$48,000 Note in April, May, June, and July. 3
¶8 Rice and NetDictation filed cross-motions for summary
judgment. The primary issue was whether NetDictation’s duty
to pay the $48,000 obligation was contingent on Accu-Write’s
profitability. 4 Rice argued that because the APSA provided for a
fixed purchase price of $98,000, the $48,000 Note also
represented a fixed amount, of which only the installment
payment amounts were variable based on profitability, not the
ultimate liability on the note. And to the extent the full amount
was not satisfied by the end of the note’s 24­month term, Rice
argued, quoting Watson v. Hatch, 728 P.2d 989 (Utah 1986), that
“the law implies that [the time of performance] is to be done
within a reasonable time under the circumstances.” See id. at 990.
NetDictation, on the other hand, contended that $50,000 of the
$98,000 purchase price was fixed—consisting of the $5,000
deposit, the $20,000 down payment, and the $25,000 Note—but
that the balance reflected in the $48,000 Note, was “explicitly
variable” under the terms of the Payment Provision.
¶9 The district court granted Rice’s motion for summary
judgment “in part.” The court stated that the APSA,
3. Rice eventually conceded that payments on the $48,000 Note
had not yet come due based on Accu-Write’s failure to maintain
its past profitability but argued that the note nonetheless came
due in June 2012, on the theory of anticipatory repudiation.
4. The 24-month payment period contemplated by the Payment
Provision had ended by the time the parties filed their summary
judgment motions. Payment had never come due under the
provision’s formula.
20180334-CA 5 2019 UT App 198NetDictation, LLC v. Rice
“particularly Paragraph 1.3. and sub-paragraphs thereunder in
conjunction with the Promissory Notes . . . reflected an absolute
and fixed purchase amount.” Although noting that “the
payment terms of the $48,000 Promissory Note are undoubtedly
problematic,” and “it is difficult . . . to understand why they
were drafted the way they were,” the court nevertheless
concluded that the note “reflected $48,000 defined as a principal
sum,” and “indicate[d] it was for a fixed amount” when read in
conjunction with its other provisions—for example, those
providing that the note “is transferable and allows prepayment.”
But because “[t]he $48,000 Promissory Note does not contain a
payment schedule or balloon provision” in the event “the gross
monthly income of [Accu-Write was] not sufficient to warrant a
monthly payment during the 24 month period,” the court
concluded that “no payments would have been due until a
reasonable time after the end of that period.” The court
accordingly granted Rice partial summary judgment, reserving
for trial the determination of what constituted “a reasonable
time under the circumstances” for the balance of the $48,000
Note to become due.
¶10 Following a bench trial, the district court awarded Rice
the principal sum due on the $48,000 Note, interest on that
amount, a $2,400 late fee, interest on the late fee, and $1,433.65 in
costs, 5 totaling $76,224.49. 6
5. Although the district court awarded costs to Rice, it denied her
motion for attorney fees.
6. The district court did not award Rice any amount on the
$25,000 Note. The court credited the $3,376.25 in premature
payments on the $48,000 Note toward the $4,000 that remained
owing on the $25,000 Note, and NetDictation tendered $854.54
(representing the remaining $623.75 plus interest) to Rice
(continued…)
20180334-CA 6 2019 UT App 198NetDictation, LLC v. Rice
NetDictation’s Cross-claim Against Coldwell Banker
¶11 Approximately one month after the district court partially
granted Rice’s motion for summary judgment, NetDictation filed
a cross­complaint against Coldwell Banker, 7 alleging that
Coldwell Banker had “breached its duty of due, professional
care to” NetDictation. Specifically, Rice and NetDictation had
agreed to “arrange to have an Attorney prepare closing
documents to consummate the transaction.” To that end,
Coldwell Banker arranged for a law firm (Law Firm) 8 to
(…continued)
sometime during the course of litigation. Because the record
includes transcripts only of limited portions of the bench trial, it
is unclear what the court determined to be a reasonable time for
the $48,000 Note to come due, but that specific issue is not before
us.
7. Rice had named Coldwell Banker as a defendant. Her claims
against Coldwell Banker were conditioned on her interpretation
of the $48,000 Note being rejected by the court, whereupon she
intended to hold Coldwell Banker responsible for any loss.
Following the court’s summary judgment ruling in her favor,
Rice and Coldwell Banker stipulated to a dismissal of her claims
against it.
8. NetDictation also asserted claims against Law Firm in its
cross­complaint. Following a bench trial, the district court
entered a judgment dismissing NetDictation’s claims against
Law Firm, which decision NetDictation likewise appealed. But
NetDictation and Law Firm settled soon after NetDictation filed
its notice of appeal, and this court accordingly granted their
stipulated motion to dismiss NetDictation’s appeal from the
judgment in favor of Law Firm.
20180334-CA 7 2019 UT App 198NetDictation, LLC v. Rice
represent NetDictation in the transaction and to draft the APSA
and promissory notes in accordance with the “Offer for Purchase
and Sale of Assets” agreement (the Offer to Purchase), which
both parties had signed and which had the Payment Provision
attached as an addendum. Although Coldwell Banker retained
Law Firm to represent NetDictation in the transaction, Law Firm
never directly communicated with NetDictation. Instead,
Coldwell Banker apparently took it upon itself to act as an
intermediary for all communication between Law Firm and
NetDictation.
¶12 Law Firm drafted the closing documents and sent them to
Coldwell Banker, who forwarded them to NetDictation for
review. In response, referring to the Payment Provision of the
$48,000 Note, NetDictation emailed Coldwell Banker raising the
following concern:
The document makes no mention of the way the
“earn out” will be paid. As it stands now it seems
to indicate that I owe the entire money on the day
of closing. To be honest . . . , I feel like I want to use
my own attorney to draft this since I just
completed a deal this summer. Thoughts?
¶13 Instead of forwarding the email verbatim to Law Firm,
Coldwell Banker informed Law Firm of NetDictation’s concerns
in a separate email, on which it copied NetDictation, stating,
“With reference to [the $48,000] Note will you include the
guidelines for payment I sent to you in the [Offer to Purchase] as
an exhibit? It outlines how payments will be calculated and
paid.” Law Firm replied, but only to Coldwell Banker: “I believe
I typed the provision almost verbatim into [the $48,000 Note].”
Coldwell Banker then communicated to NetDictation that the
Payment Provision, as it appeared in the addendum to the Offer
to Purchase, had been incorporated into the $48,000 Note.
Nonetheless, NetDictation notified Coldwell Banker a few days
20180334-CA 8 2019 UT App 198NetDictation, LLC v. Rice
later that it had forwarded the closing documents to another
attorney for review. Although NetDictation later raised other
concerns about the APSA draft, it did not raise before closing
any further issues concerning the Payment Provision as it
appeared in the $48,000 Note.
¶14 Soon after filing its answer to NetDictation’s
cross­complaint, Coldwell Banker moved the court for summary
judgment. It argued that because it acted exclusively as Rice’s
agent, it did not owe a fiduciary duty to NetDictation, much less
the “duty to second guess the legal work product of [Law Firm]
who had the exclusive duty to produce the closing documents
that reflected the true terms of the subject transaction.” Instead,
quoting Hermansen v. Tasulis, 2002 UT 52, 48 P.3d 235, Coldwell
Banker stated that its “only dut[y] to NetDictation w[as] to be
‘honest, ethical and competent,’” see id. ¶ 22, which it fulfilled
“by providing the Offer [to Purchase] containing all terms of the
subject transaction to [Law Firm] for use in drafting the
[APSA].” Although NetDictation conceded that Coldwell Banker
did not owe it a fiduciary duty, it argued “that Coldwell Banker
failed to communicate to [Law Firm] exactly and precisely what
deal was reached between the parties and/or NetDictation’s
concerns with the documents prepared.”
¶15 The district court granted Coldwell Banker’s motion for
summary judgment. The court concluded that “[a]s a broker
representing [Rice] in the transaction, Coldwell Banker (a
non­attorney) had no duty to explain to [Law Firm] the meaning
of the terms in the written agreement, or the broker’s subjective
understanding of the deal reached between NetDictation and
Rice” when it delivered to Law Firm the negotiated and signed
Offer to Purchase containing the Payment Provision and
integration clause. The court also ruled that Coldwell Banker did
not breach any duty to be honest, ethical, and competent in its
dealings with NetDictation when it summarized NetDictation’s
concern about the Payment Provision instead of forwarding the
20180334-CA 9 2019 UT App 198NetDictation, LLC v. Rice
email verbatim to Law Firm. The court stated that “the most that
can be said of Coldwell Banker’s summary of NetDictation’s
e­mail is that it imperfectly communicated NetDictation’s
concern; but this miscommunication, even if it rises to the level
of a miscommunication, is not so dishonest and deliberately
misleading that it can be said to violate the limited duty a broker
owes to [a] party it does not represent.” Furthermore, “because
NetDictation was copied on the email to [Law Firm], it had an
opportunity to correct any misstatement or otherwise object to
Coldwell Banker’s rephrasing of its question.”
¶16 The court accordingly dismissed NetDictation’s
cross­claim against Coldwell Banker. NetDictation subsequently
filed a motion for reconsideration, which the district court
denied. This appeal followed.
ISSUES AND STANDARDS OF REVIEW
¶17 NetDictation raises two issues on appeal. It first argues
that the district court erred in granting summary judgment to
Rice because the APSA did not unambiguously support Rice’s
interpretation of the Payment Provision. It next contends that the
district court erroneously granted summary judgment to
Coldwell Banker because conflicting evidence warranted a trial.
“We review a district court’s decision granting summary
judgment for correctness, viewing the facts and all reasonable
inferences drawn therefrom in the light most favorable to the
nonmoving party.” Mind & Motion Utah Invs., LLC v. Celtic Bank
Corp., 2016 UT 6, ¶ 15, 367 P.3d 994 (quotation simplified).
“Summary judgment is appropriate when there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Id. (quotation simplified). As to
the first issue, “[t]he interpretation of a contract is a legal
question, which we . . . review for correctness.” Id. And as to the
second issue, because NetDictation does not assert that the
20180334-CA 10 2019 UT App 198NetDictation, LLC v. Rice
existence of undisputed material facts precluded summary
judgment, “our review is limited to determining whether the
district court correctly applied the summary judgment standard
in light of the undisputed material facts.” Essential Botanical
Farms, LC v. Kay, 2011 UT 71, ¶ 12, 270 P.3d 430 (quotation
simplified).
ANALYSIS
I. Interpretation of the APSA
¶18 “A motion for summary judgment may not be granted
if . . . an ambiguity exists in the contract and there is a factual
issue as to what the parties intended.” Peterson v. Sunrider Corp.,
2002 UT 43, ¶ 14, 48 P.3d 918 (quotation simplified). But “[i]f the
language of the contract is unambiguous, the intention of the
parties may be determined as a matter of law based on the
language of the agreement.” Id. ¶ 18.
¶19 A contract is not ambiguous “simply because one party
seeks to endow [terms] with a different interpretation according
to his or her own interests.” Mind & Motion Utah Invs., LLC v.
Celtic Bank Corp., 2016 UT 6, ¶ 24, 367 P.3d 994 (quotation
simplified). Rather, “a contractual term or provision is
ambiguous if it is capable of more than one reasonable
interpretation because of uncertain meanings of terms, missing
terms, or other facial deficiencies.” Glenn v. Reese, 2009 UT 80,
¶ 10, 225 P.3d 185 (quotation simplified). Additionally, because
“it is axiomatic that a contract should be interpreted so as to
harmonize all of its provisions and all of its terms,” courts must
first attempt to do so when determining whether a contract is
facially ambiguous. Gillmor v. Macey, 2005 UT App 351, ¶ 19, 121
P.3d 57 (quotation simplified). This involves “examin[ing] the
entire contract and all of its parts in relation to each other and
20180334-CA 11 2019 UT App 198NetDictation, LLC v. Rice
giv[ing] a reasonable construction of the contract as a whole to
determine the parties’ intent.” Id. (quotation simplified).
¶20 NetDictation contends that because section 1.3 of the
APSA “apparently” provided a fixed and unconditional
purchase price, it could not be harmonized with the “earn-out” 9
language of the $48,000 Note. The district court therefore “had to
imply an obligation for payment” of the $48,000 Note in the
event the principal remained unpaid at the end of the 24­month
period. But this, by the very nature of the missing term, “meant
that the agreement was ambiguous.” “Otherwise,” NetDictation
argues, “there would have been no need for the trial court to
imply a term for payment of the $48,000 obligation that did not
exist,” and summary judgment was therefore improper. We
disagree.
¶21 Although NetDictation correctly cites DCH Holdings, LLC
v. Nielsen, 2009 UT App 269, 220 P.3d 178, for the proposition
that “[a]mbiguity may be found when a contract is missing an
essential term,” id. ¶ 10, we disagree with its contention that the
district court “impl[ied] an obligation for payment” of the
$48,000 Note beyond the 24-month period. Having reviewed the
APSA and the $48,000 Note in their entirety, we conclude that
the district court did not imply an obligation for payment
because the plain language of the documents unambiguously
reflects a fixed, unconditional purchase price of $98,000, which
necessarily includes payment in full of the $48,000 Note. In other
9. NetDictation characterizes the Payment Provision as an
earn­out, which “is a contractual provision stating that the seller
of a business is to obtain additional compensation in the future if
the business achieves certain financial goals, which are usually
stated as a percentage of gross sales or earnings.” Sandra Lim,
Earnout, Investopedia, https://www.investopedia.com/terms/e/
earnout.asp [https://perma.cc/YQV7-LNNC].
20180334-CA 12 2019 UT App 198NetDictation, LLC v. Rice
words, the court did not imply a payment obligation where none
otherwise existed. Rather, it implied a due date for a payment
obligation where none had otherwise been provided.
¶22 NetDictation argues that the Payment Provision of the
$48,000 Note conditions payment of the $48,000 obligation on
Accu-Write’s performance within the 24-month period. But the
significance NetDictation accords the Payment Provision directly
conflicts with provisions of the APSA and $48,000 Note. Section
1.3 of the APSA indicates that the parties intended the $98,000
purchase price, which necessarily includes the $48,000 Note, to
be fixed and unconditional. Section 1.3 of the APSA states, “In
consideration for the transfer of [Accu-Write], at the Closing,
[NetDictation] shall deliver to [Rice] the purchase price of
$98,000.00,” of which NetDictation was to deliver $73,000 at
closing in the form of “two executed promissory notes.” Section
1.3 is entirely silent as to the purchase price itself being variable,
as NetDictation’s interpretation of the Payment Provision would
have it be.
¶23 Even more telling are certain provisions within the
$48,000 Note. The note states, “NetDictation . . . hereby
irrevocably promises and agrees to pay to the order of [Rice] . . .
the principal sum of Forty Eight Thousand Dollars ($48,000.00)
(the Principal Sum), together with interest thereon (if any) and
other fees in connection therewith.” The note then states that it is
to be repaid “all in accordance with the terms and conditions set
forth below.” In addition to the Payment Provision, the $48,000
Note includes an acceleration clause that provides that in the
event of NetDictation’s default, “the Holder may at its sole
option consider the entire unpaid principal balance and accrued
but unpaid interest hereunder at once . . . due and payable
without notice.”
¶24 The purchase price stated in section 1.3 of the APSA and
the $48,000 Note’s reference to the $48,000 obligation as “the
20180334-CA 13 2019 UT App 198NetDictation, LLC v. Rice
Principal Sum,” along with the note’s acceleration clause, cannot
be harmonized with NetDictation’s position on the Payment
Provision. In addition to that position contradicting the $98,000
purchase price provided in section 1.3, the $48,000 Note refers to
the obligation as a “principal sum,” which NetDictation
“irrevocably promise[d] and agree[d] to pay.” Such language,
especially in the absence of any express indication of the $48,000
Note’s variable nature anywhere else in the contract, strongly
suggests the sums represented fixed, unconditional amounts.
Moreover, acceleration of the $48,000 Note upon NetDictation’s
default would be impossible if the obligation were anything but
a set, unconditional amount. NetDictation has not provided a
satisfactory explanation as to how the $48,000 “principal sum”
could be accelerated if the effect of the Payment Provision was to
condition not just the timing of payment but the ultimate
liability for the note on Accu­Write’s future profitability. 10 And
10. NetDictation’s explanation is limited to a single sentence.
After quoting the acceleration clause, NetDictation argues that
“there could have been payments due during the 24-month term
of the note, which would have constituted the ‘unpaid principal
balance.’” In other words, NetDictation argues that the provision
could provide for a scheme which, upon NetDictation’s default,
would limit Rice’s, or any subsequent holder’s, demand for
payment to only the past-due balance. In effect, NetDictation
contends that the provision is not an acceleration clause.
We disagree with NetDictation’s interpretation. An
acceleration clause is “[a] loan-agreement provision that requires
the debtor to pay off the balance sooner than the due date if some
specified event occurs, such as failure to pay an installment.”
Acceleration Clause, Black’s Law Dictionary 14 (10th ed. 2014)
(emphasis added). See also Acceleration, Black’s Law Dictionary
14 (10th ed. 2014) (defining “acceleration” as “[t]he act or process
of quickening or shortening the duration of something, such as
(continued…)
20180334-CA 14 2019 UT App 198NetDictation, LLC v. Rice
we cannot readily conceive of a way in which to harmonize the
note’s acceleration clause with NetDictation’s interpretation of
the Payment Provision. See Munford v. Lee Servicing Co., 2000 UT
App 108, ¶ 18, 999 P.2d 23 (“Provisions which are apparently
conflicting are to be reconciled and harmonized, if possible, by
reasonable interpretation so that the entire agreement can be
given effect.”) (quotation simplified).
¶25 But the Payment Provision can be harmonized with the
APSA and the other provisions of the $48,000 Note, thereby
avoiding a conclusion of ambiguity. See Gillmor v. Macey, 2005
UT App 351, ¶ 19, 121 P.3d 57 (“Harmonizing conflicting or
apparently ambiguous contract language before concluding that
provisions are actually ambiguous is an important step in the
hierarchy of rules for contract interpretation.”). Specifically,
interpreting the $48,000 obligation to be for a fixed,
unconditional sum with variable monthly payments based on
Accu-Write’s income during the 24­month period avoids the
problems that arise under NetDictation’s interpretation of the
Payment Provision.
(…continued)
payments”). That is exactly what this clause requires. Further,
section 7 of the $48,000 Note explicitly states that the parties
intended the obligation to be subject to acceleration. It provides,
with our emphasis, that in the event of NetDictation’s default,
“all amounts owing and past due hereunder, including without
limitation principal (whether by acceleration or in due course),
interest, late fees and other charges, shall . . . bear interest at the
rate of twelve percent (12%) per annum both before and after
judgment.” In light of section 7 expressly contemplating possible
acceleration of the $48,000 Note, we reject NetDictation’s
suggestion that the relevant provision is not an acceleration
clause.
20180334-CA 15 2019 UT App 198NetDictation, LLC v. Rice
¶26 NetDictation contends that such an interpretation
nonetheless compels the conclusion of ambiguity because the
court still had “to imply a term for payment of the $48,000
obligation that did not exist” if the obligation remained unpaid
at the end of the 24­month term. See id. ¶ 18 (declining “to accept
an interpretation of [an agreement] that creates new ambiguities
and requires the crafting of new provisions”). But courts may, in
“limited situations,” read essential missing terms into a contract
when those terms “are necessarily involved in the contractual
relationship such that it may be said that the parties must have
intended them and failed to express them only because of sheer
inadvertence or because they are too obvious to have needed
expression.” New York Ave. LLC v. Harrison, 2016 UT App 240,
¶ 31, 391 P.3d 268 (quotation simplified). And implying a
reasonable time for performance when no time for performance
is expressly stated is a familiar example of this precept.
¶27 “An implied reasonable time limit is as much a part of the
agreement as those terms that are expressed,” and it has long
been recognized “that if a contract fails to specify a time of
performance the law implies that it shall be done within a
reasonable time under the circumstances.” Coulter & Smith, Ltd.
v. Russell, 966 P.2d 852, 858 (Utah 1998). For that reason, the
failure of the parties to include a provision in the $48,000 Note
addressing the time frame within which NetDictation was to
satisfy the obligation that remained at the conclusion of the
24­month period was not an essential term missing from the note
and therefore did not create an ambiguity. 11
11. To be sure, “when a contract specifically states the time for its
performance, it is plain error to allow it to be performed within a
reasonable time.” New York Ave. LLC v. Harrison, 2016 UT App
240, ¶ 32, 391 P.3d 268 (quotation simplified). But this is not the
situation before us. Although the $48,000 Note contemplated a
(continued…)
20180334-CA 16 2019 UT App 198NetDictation, LLC v. Rice
¶28 Accordingly, we affirm the district court’s grant of partial
summary judgment to Rice. 12
II. Duty to Be Honest, Ethical, and Competent
¶29 Although “not occupying a fiduciary relationship with
prospective purchasers, a real estate agent[13] hired by the vendor
(…continued)
24-month term for installment payments, for the reasons
explained in ¶¶ 20–27 of this opinion, that provision was limited
to prescribing the time within which the payments could be
varied depending on Accu-Write’s monthly income. The
24­month term did not represent the time within which the
$48,000 obligation was to be satisfied, if at all, although it
certainly would have been possible for the sum to be fully paid
within that time had Accu-Write’s profitability warranted it.
12. Rice seeks attorney fees incurred on appeal. “A party entitled
by contract or statute to attorney fees below and that prevails on
appeal is entitled to fees reasonably incurred on appeal.” Cougar
Canyon Loan, LLC v. Cypress Fund, LLC, 2019 UT App 47, ¶ 19,
440 P.3d 884 (quotation simplified). Although Rice prevails on
appeal, we deny her request on the ground that the district court
declined to award her attorney fees below.
13. In Reperex, Inc. v. Coldwell Banker Commercial, 2018 UT 51, 428
P.3d 1082, our Supreme Court recently expressed doubt as to
whether business brokers, as was Coldwell Banker’s role in this
transaction, share the same duty as real estate brokers because
“[t]he two roles obviously differ in some respects.” Id. ¶ 37. But
apart from concluding that “a business broker should be held at
least to [the] standard” of not “misrepresent[ing] material
information to a buyer,” the Court “le[ft] for another day the
(continued…)
20180334-CA 17 2019 UT App 198NetDictation, LLC v. Rice
is expected to be honest, ethical, and competent and is
answerable at law for his or her statutory duty to the public.”
Hermansen v. Tasulis, 2002 UT 52, ¶ 22, 48 P.3d 235 (quotation
simplified). NetDictation contends that the district court erred in
granting Coldwell Banker summary judgment because “there
was sufficient evidence of Coldwell Banker’s ‘dishonesty’ and
‘incompetence’ to send the cross claim to trial.” We address each
theory in turn.
A. Dishonesty
¶30 NetDictation’s contention of dishonesty is almost wholly
focused on Coldwell Banker’s “recharacteriz[ation]” of
NetDictation’s email. 14 Following its review of a draft of the
(…continued)
question of the full extent of the standard of care owed by a
business broker.” Id. ¶ 38.
Although our Supreme Court issued Reperex approximately
one month before NetDictation filed the initial brief in this
appeal, neither party argues that Coldwell Banker’s duty was
anything other than to be honest, ethical, and competent in its
dealings with NetDictation. Because neither party contends that
the duty owed by business brokers differs in any way from that
owed by real estate brokers, we apply that standard to this case
without addressing the extent to which the two duties might
actually differ, if at all.
14. NetDictation, referencing the deposition testimony of one of
Coldwell Banker’s agents, suggests that Coldwell Banker’s
alleged dishonesty was motivated by “an interest to protect its
commission, and a desire to avoid contact with attorneys who
could ‘blow up the deal.’” The district court expressly rejected
NetDictation’s allegation, finding that it did not accurately
reflect the agent’s deposition testimony. Although the agent
(continued…)
20180334-CA 18 2019 UT App 198NetDictation, LLC v. Rice
APSA and attached promissory notes prepared by Law Firm,
NetDictation emailed Coldwell Banker requesting that the
Payment Provision, which had been included in the Offer to
Purchase as an attachment, be included in the $48,000 Note:
The document makes no mention of the way the
“earn out” will be paid. As it stands now it seems
to indicate that I owe the entire money on the day
of closing.
Coldwell Banker replied that it would instruct Law Firm to
include a provision reflecting the guidelines set forth in the
attachment to the Offer to Purchase. Coldwell Banker also
emailed Law Firm, copying NetDictation on the communication,
requesting that Law Firm include the Payment Provision in the
$48,000 Note:
With reference to [the $48,000] Note will you
include the guidelines for payment I sent to you in
the [Offer to Purchase] as an exhibit? It outlines
how payments will be calculated and paid.
Law Firm replied that it had included “the provision almost
verbatim into [the $48,000 Note].”
¶31 NetDictation argues that “by re-framing [its] question,
Coldwell Banker kept [Law Firm] from looking at whether the
(…continued)
acknowledged that “he is always concerned about the attorneys
‘blowing up a deal,’” hence his usual practice of being “copied
on emails of this nature,” the agent “denied that he had any
motivation to ‘filter communications’ to protect his
commission.” NetDictation does not argue that the existence of
disputed material facts precluded the court’s summary
judgment order.
20180334-CA 19 2019 UT App 198NetDictation, LLC v. Rice
[Payment Provision] language of the [$48,000] Note harmonized
with Section 1.3 of the APSA.” NetDictation contends that by
doing so, Coldwell Banker “secret[ed] known material defects.”
See Hermansen, 2002 UT 52, ¶ 23 (“[W]hen real estate
professionals undertake to secret known material defects, they
breach their duty to be honest, ethical, and competent and are
liable for their actions.”). Even assuming that the legal
implications of the Payment Provisions amount to a “material
defect,” it is unclear how NetDictation’s email would have
prompted Law Firm to ensure that the Payment Provision did
not contradict section 1.3 any more than did Coldwell Banker’s
email. NetDictation’s concern, as expressed in the email, appears
to have been limited to ensuring that it remained clear that
payment of the $48,000 obligation was not immediately due
upon closing and made no mention of the obligation itself being
contingent on Accu-Write’s post-sale earnings. 15
¶32 And Coldwell Banker did no more than instruct Law Firm
to incorporate the exhibit attached to the Offer to Purchase into
the $48,000 Note. Karan’s signature on the Offer to Purchase
evidences NetDictation’s prior approval of the exhibit that
would later become the Payment Provision. Coldwell Banker’s
email did not direct Law Firm to alter the pre­approved
provision in any way. To the contrary, Law Firm included “the
provision almost verbatim into [the $48,000 Note].”
¶33 Furthermore, even after Law Firm had included the
Payment Provision in the body of the $48,000 Note, NetDictation
engaged other attorneys to review the contract and did not
raise any further concerns regarding the Payment Provision.
15. For this same reason, we reject NetDictation’s contention that
Coldwell Banker handled the transaction incompetently when it
summarized NetDictation’s email rather than forwarding it
verbatim to Law Firm.
20180334-CA 20 2019 UT App 198NetDictation, LLC v. Rice
If the Payment Provision’s failure to reflect NetDictation’s
alleged intent to condition payment of the $48,000 Note on Accu-
Write’s performance escaped the review of licensed attorneys,
Coldwell Banker’s agent, a non-attorney, certainly cannot be
expected to have understood the deficiency—a prerequisite of
concealing it.
¶34 NetDictation’s assertion that Coldwell Banker “secret[ed]
known material defects” is further undermined by Coldwell
Banker’s copying of NetDictation on its email to Law Firm,
thereby giving NetDictation an opportunity to clarify if Coldwell
Banker had imperfectly relayed NetDictation’s concerns.
Although NetDictation contends that it “did not recognize the
recipients of the email as the attorneys engaged by Coldwell
Banker,” the focus in determining whether Coldwell Banker was
honest in its dealings with NetDictation is on Coldwell Banker’s
subjective beliefs. Cf. Hermansen, 2002 UT 52, ¶ 22 (stating that a
purchaser can recover from a real estate agent only when “the
agent had both the duty to disclose and knowledge of the defects”)
(emphasis added) (quotation otherwise simplified). NetDictation
has not provided any evidence that the agent had reason to
know that NetDictation would not recognize the purpose of the
email based on its content and to whom it was addressed. 16
16. NetDictation asserts that an agent of Coldwell Banker
“admitted at trial that he knew NetDictation” mistakenly
believed that Law Firm represented Coldwell Banker and not
NetDictation. NetDictation does not cite the record in support of
this assertion, and our review of the record has not revealed
such an admission. Instead, following this assertion,
NetDictation immediately pivots to the agent’s testimony that he
“believe[d]” he notified NetDictation that he had engaged Law
Firm to represent NetDictation, referring to the response as
“some vague effort to claim” that he had done so.
(continued…)
20180334-CA 21 2019 UT App 198NetDictation, LLC v. Rice
¶35 For these reasons, although Coldwell Banker’s role as an
intermediary between NetDictation and Law Firm appears
ill­advised, under the facts of this case Coldwell Banker did not
breach its limited duty to be honest in its dealings with
NetDictation, a non-client.
B. Incompetence
¶36 In arguing that Coldwell Banker “incompetently handled
the transaction for both parties,” NetDictation contends that
Coldwell Banker violated a provision of the Utah Administrative
Code, which provides:
An individual licensee may not . . . propose,
prepare, or cause to be prepared a document,
agreement, settlement statement, or other device
that the licensee knows or should know does not
reflect the true terms of the transaction.
Utah Admin. Code R162-2f-401b(4)(a) (2011). Even assuming
chapter 2f, entitled “Real Estate Licensing and Practice Rules,”
(…continued)
In the absence of such an admission in the record, we need
not address whether NetDictation is entitled to rely on the
agent’s subsequent trial testimony when challenging the district
court’s grant of summary judgment to Coldwell Banker, which
resulted in the dismissal of NetDictation’s claims against it. Cf.
Normandeau v. Hanson Equip., Inc., 2009 UT 44, ¶ 15, 215 P.3d 152(“[W]hen new material facts emerge at trial that change the
nature of the [denial of summary judgment], parties then have
an obligation to reraise the issue at trial in order to preserve it for
appeal.”).
20180334-CA 22 2019 UT App 198NetDictation, LLC v. Rice
governs business brokers, 17 see supra note 13, NetDictation’s
argument is unavailing.
¶37 NetDictation asserts that “[t]here is sufficient evidence
that [Coldwell Banker’s agent] may have known the APSA did
not reflect the true terms of the transaction,” but it does not
discuss any such evidence. Although NetDictation, the
non­moving party, is entitled to have “the facts and all
reasonable inferences drawn therefrom” viewed “in the light
most favorable” to its position, Ockey v. Club Jam, 2014 UT App
126, ¶ 9, 328 P.3d 880 (quotation simplified), it is unreasonable to
infer that Coldwell Banker’s agent, a non­attorney, knew that the
Payment Provision did not comport with the interpretation
NetDictation allegedly intended—especially when such
deficiency escaped the detection of licensed attorneys and when
the provision reflected almost verbatim the addendum
NetDictation had reviewed, approved, and necessarily professed
to understand by signing the Offer to Purchase. Coldwell Banker
therefore did not violate rule R162­2f­401b(4)(a) of the Utah
Administrative Code, if it even applies, and cannot be deemed to
have been incompetent on that ground.
17. The sale of Accu-Write did not involve real estate but was
limited to the transfer of “100% of the outstanding stock, all
goodwill, trademarks and intellectual [property], trade names,
telephone numbers, customer lists, transferable permits and
licenses, signs, and other intangible assets” to NetDictation. Had
the sale involved the transfer of any real property, it would
strengthen NetDictation’s position that the above-quoted
administrative rule applied to Coldwell Banker. See Reperex Inc.
v. Child, Van Wagoner & Bradshaw, 2017 UT App 25, ¶ 40, 392 P.3d
905 (“[A]t least where . . . the business being sold includes real
property, the standard of care for business brokers is not lower
than the standard of care for real estate brokers.”).
20180334-CA 23 2019 UT App 198NetDictation, LLC v. Rice
CONCLUSION
¶38 Having reviewed the APSA and the $48,000 Note in their
entirety, although noting that the contract is hardly a model of
precision in legal drafting, we conclude that the district court did
not err in granting partial summary judgment in Rice’s favor.
We also affirm the court’s subsequent grant of summary
judgment to the business broker, Coldwell Banker, on the
grounds that it was neither dishonest nor incompetent in its
dealings with NetDictation, a non-client.
20180334-CA 24 2019 UT App 198