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Elite Legacy Corp. v. Schvaneveldt

Court of Appeals of Utah

November 17, 2016

Elite Legacy Corporation, Aspenwood Real Estate Corporation, and Hilary Wing, Appellees,
Charles Schvaneveldt, Appellant.

         Second District Court, Ogden Department The Honorable Noel S. Hyde The Honorable Michael D. Lyon No. 060906802

          Karra J. Porter and Phillip E. Lowry, Attorneys for Appellant

          L. Miles LeBaron and Dallin T. Morrow, Attorneys for Appellees

          Judge J. Frederic Voros Jr. authored this Opinion, in which Judges Gregory K. Orme and Kate A. Toomey concurred.


          VOROS, Judge

         ¶1 In this opinion we address two of four appeals arising from a single lawsuit over a failed real estate deal.[1] The lawsuit involves a dispute over a real estate sales commission. On one hand are a real estate brokerage and related individuals (Plaintiffs); on the other, the property sellers.

         ¶2 In case 20140978-CA, appellant Charles Schvaneveldt, one of the sellers, challenges the denial of his motion under rule 60(b) of the Utah Rules of Civil Procedure. That motion sought to vacate the judgment below on the ground that Plaintiffs lacked standing to bring or maintain the action. In case 20130746-CA, Schvaneveldt challenges Plaintiffs' standing, the trial court's ruling that Plaintiffs earned the commission, and the trial court's denial of his summary judgment motion seeking to avoid personal liability for the commission. We affirm on all issues in both appeals.


         The Parties

         ¶3 Because of the case's complicated record and lengthy history, we begin by identifying the relevant parties and non-parties on appeal.

         ¶4 Plaintiffs are all related to a company originally known as Aspenwood Real Estate Corporation. Aspenwood was a real estate brokerage company doing business as "Re/Max Elite." Hilary "Skip" Wing and others founded Aspenwood, and Wing at times acted as its principal broker. Tim Shea worked for Aspenwood as a real estate agent. Elite Legacy Corporation has since subsumed Aspenwood. We refer to these parties collectively as Plaintiffs.

         ¶5 The defendants are all related to the property sellers. Charles "Chuck" Schvaneveldt is the sole member of Still Standing Stable LLC (Still Standing). Cathy Code is Schvaneveldt's wife. Still Standing owned the property in question and, Schvaneveldt claims, contracted with Shea in the For Sale By Owner Agreement. For ease of reference-though not precisely accurate-we refer to Code, Schvaneveldt, and Still Standing collectively as Sellers.

         History of Aspenwood and Re/Max Elite

         ¶6 In 2004, Wing and Dale Quinlan-at that time both licensed principal brokers-together with other individuals bought a real estate brokerage called Aspenwood Real Estate Corporation. To align their new brokerage with the national Re/Max real estate franchise, Quinlan submitted a "DBA application" and registered the assumed name "Re/Max Elite" with the Utah Division of Corporations and Commercial Code (the Division). Quinlan listed himself as the registered agent and checked a box indicating that he-not Aspenwood-was the "applicant/owner" of the assumed name. Quinlan, Wing, and the other owners appear to have jointly operated the Aspenwood brokerage under the name Re/Max Elite until July 2005, when Quinlan surrendered his broker license. Although Quinlan remained listed as Re/Max Elite's registered agent, he no longer played any role in the management of Aspenwood. Instead, Wing assumed management of Aspenwood. Aspenwood continued to conduct business under the assumed name Re/Max Elite.

         ¶7 In March 2006 the Division transferred the Re/Max Elite assumed name from Quinlan to Aspenwood. It did so based on a transfer letter from Quinlan. The parties disagree as to whether Quinlan's signature on the letter is authentic. Plaintiffs maintain that Quinlan made the change. They rely on the declaration of a company officer stating that "Dale Quinlan . . . was tasked by the [Aspenwood] Board of Directors to . . . (1) ensur[e] that Aspenwood, and not Dale Quinlan only, owned the dba RE/MAX Elite . . . and (2) mak[e] Shane Thorpe the registered agent." Sellers maintain that Quinlan's signature on the letter was forged. They rely on a forensic report finding that "it is highly probable" that the transfer letter was a cut-and-paste forgery. The Division later invalidated the transfer.

         The Property

         ¶8 In 1998, Still Standing purchased 170 acres of property in Weber County (the Property) from the State of Utah School and Institutional Trust Lands Administration (SITLA). Still Standing purchased the Property with notice from SITLA that "there is likely no access" and that SITLA was "not guaranteeing access to the property." Four years later, Still Standing sued three of the Property's adjoining landowners in an attempt to gain access across the landowners' parcels, which separated the Property from the nearest public road. Still Standing lost the lawsuit and was unable to secure road access to the Property.[2]

         ¶9 After the lawsuit, Still Standing purchased an unrelated five-acre strip of property located on the opposite side of the public road (the Strip). Although the Strip bordered the Property and contained an easement, that easement did not connect to any public road and thus did not provide access to the Property. During the underlying litigation, at least two title insurance companies-including one hired by Sellers-examined the Property, but no title company was willing to issue a policy insuring access.

         The FSBO and the REPC

         ¶10 In January 2006 Cathy Code advertised the Property for sale by owner in a local newspaper. Tim Shea, a real estate agent employed by Aspenwood, expressed interest on behalf of a buyer. After visiting the Property with Schvaneveldt and Code, Shea sent Sellers a For Sale by Owner Commission Agreement and Agency Disclosure Agreement (the FSBO) and, on behalf of potential buyers (Buyers), sent Sellers the first Real Estate Purchase Contract (the First REPC).

         ¶11 Both contracts were drafted using standard printed forms. Sellers submitted a counteroffer to the First REPC. Sellers signed the FSBO and sent it back to Shea. The two-page FSBO listed "Re/Max Elite (Layton Branch)" as the "company"; "Tim Shea" as the authorized agent for the company; and "Chuck and Cathy Code" as "the seller." Shea signed the FSBO above the "company" line, and Code signed the FSBO above the "Sellers' Signature" line. Among other provisions, the FSBO contained a brokerage-fee clause, a seller-disclosures clause, an attorney-fee clause, and an integration clause.

         ¶12 This litigation centers on the FSBO's brokerage-fee clause. That clause sets forth the terms of the real estate commission agreement:

2. BROKERAGE FEE. The Seller agrees to pay the Company, irrespective of agency relationship(s), as compensation for services, a Brokerage Fee in the amount of $ or 3% of the acquisition price of the Property, if the Seller accepts an offer from Emmett Warren and or Assigns (the "Buyer"), or anyone acting on the Buyer's behalf, to purchase or exchange the Property. The Seller agrees that the Brokerage Fee shall be due and payable, from the proceeds of the Seller, on the date of recording of closing documents for the purchase or exchange of the Property by the Buyer or anyone acting on the Buyer's behalf. If the sale or exchange is prevented by default of the Seller, the Brokerage Fee shall immediately be due and payable to the Company.

         After Sellers' counteroffer to the First REPC lapsed, Shea forwarded to Sellers a second offer in the form of another Real Estate Purchase Contract-the REPC relevant to this appeal (the REPC). Schvaneveldt accepted the second offer by signing and returning the REPC to Shea. Schvaneveldt checked the "ACCEPTANCE OF OFFER TO PURCHASE" box, signed his name above the "Sellers' Signature" line, and printed his name above the "Sellers' Name (PLEASE PRINT)" line.[3] The REPC required Buyers to deposit $25, 000 in earnest money. It required Sellers to "convey good and marketable title to Buyer[s] at Closing by general warranty deed." And it imposed a 15-day seller-disclosure deadline, a 60-day due-diligence deadline, and a 90-day settlement deadline ahead of closing.

         ¶13 Initially, Buyers and Sellers each fulfilled their REPC obligations. Buyers deposited $25, 000 earnest money with Aspenwood, and Sellers made the required disclosures. In the disclosures, Sellers admitted that the Property did not have access from a public road, but stated that there was "direct access to the Property through . . . [a] Private Easement." As the closing date approached, Buyers became increasingly concerned about the lack of insurable access to the Property. But they did not object to the seller disclosures during the 60-day due-diligence window.

         ¶14 Before closing, Sellers' attorney called Buyers' attorney to inform him that Sellers would be conveying the Property by special warranty deed rather than by general warranty deed; Sellers' escrow and closing instructions also specified that the conveyance would be by special warranty deed. Buyers' attorney responded that a special warranty deed "might be okay if I can get a title policy that's going to guarantee [Buyers] access." But by the time of closing, no title insurance company- including one hired by Sellers-was willing to offer a policy insuring access to the Property. Buyers did not appear at closing.

         Pretrial Proceedings

         ¶15 After the deal fell through, Re/Max Elite brought an interpleader action to determine who was entitled to the earnest money it was holding. Re/Max Elite then filed a cross-complaint seeking a sales commission from Still Standing-and later, Schvaneveldt and Code-under the FSBO's brokerage-fee provision. Sellers counterclaimed. Sellers argued-in eight pretrial motions-that no named plaintiff had standing to sue. Sellers filed six motions under the Assumed Name Statute and two motions under the Real Estate Licensing and Practices Act. In each motion, Sellers' central argument asserted that only Re/Max Elite's principal broker, Wing-and not its agent, Shea- could sue to recover the commission under Utah law. In support, Sellers submitted a summary judgment motion asserting that Wing was Re/Max Elite's principal broker.

         ¶16 In response, Aspenwood, Elite Legacy, and Wing joined Re/Max Elite in the action as additional plaintiffs to the lawsuit to cure any alleged standing deficiency. After Plaintiffs added Wing, Sellers abandoned their standing arguments until after trial.

         ¶17 Both parties filed a flurry of additional pretrial motions. In February 2010 Schvaneveldt moved for summary judgment, seeking a ruling that he could not be personally liable for the sales commission. Schvaneveldt asserted that he was involved in the sale only as a representative for Still Standing. He was not personally liable, he argued, because the blank line on the REPC reserved for the property name was filled in with the words "Land LLC Still Standing Stables." Plaintiffs opposed the motion and argued that Schvaneveldt was personally liable because he signed the REPC and because the FSBO listed him (along with Code) as a seller. The court denied Schvaneveldt's motion because the FSBO listed Schvaneveldt-not Still Standing-as the seller.

         ¶18 In March 2010, Plaintiffs moved for partial summary judgment, seeking a ruling that Plaintiffs had earned a commission under the FSBO as a matter of law. Plaintiffs argued that Sellers became obligated to pay a commission the moment Sellers accepted an offer-the words used by the FSBO. And Sellers accepted an offer, Plaintiffs argued, as soon as they signed the REPC with Buyers. Sellers responded that Plaintiffs had not brought a "ready, willing, and able" buyer, that the sale was to be a cash transaction, and that Shea had altered the REPC after signing to conceal the deal's cash transaction status. The trial court granted the motion, ruling that Plaintiffs had earned a commission because Sellers had accepted an offer from Buyers. The court explained that any alleged changes to the REPC were a red herring.

         ¶19 In February 2011 Plaintiffs again moved for summary judgment on the commission claim and on all of Sellers' counterclaims. In March 2011 Still Standing filed a cross-motion for summary judgment, alleging that a breach of Plaintiffs' fiduciary duties had caused the sale to fail. The trial court heard oral arguments on the motions. The court first ruled that the sale failed due to Sellers' failure to guarantee Buyers' access to the Property by providing a general warranty deed or other assurance of access:

[I]t is undisputed that the lack of a guaranteed access was the sole reason . . . that the transaction failed. . . . [I]t strains credulity to think that somebody would fork over four million [dollars] without a general warranty deed or at least some kind of a guarantee under a special warranty deed that there would be an access.

         In light of this ruling, the trial court dismissed Still Standing's fiduciary-duty claims against Plaintiffs on the ground that Sellers' refusal to convey by general warranty deed-prompted by concerns about access and not any breach of fiduciary duty- caused the deal to fail.

         ¶20 After the trial court dismissed the fiduciary-duty claims and ruled that Plaintiffs had earned the commission, the only question left for trial was which party was responsible to pay that commission.


         ¶21 In a pretrial hearing with both sides present, the trial court suggested that Still Standing could not be liable for the commission and thus should be dismissed to avoid confusing the jury. Plaintiffs agreed to release Still Standing so long as liability would be determined between Schvaneveldt and Code at trial. The trial court proposed a jury instruction stating that Still Standing was not liable and that the jury must look only to Schvaneveldt and Code for liability. Schvaneveldt and Code did not object to this instruction. Before agreeing to Still Standing's dismissal, Plaintiffs reiterated that they would accept the instruction only if Schvaneveldt and Code would agree not to argue that Still Standing was the liable party. Again, Schvaneveldt and Code did not object.

         ¶22 Trial proceeded and Schvaneveldt and Code did not mention Still Standing, with one exception: Schvaneveldt argued that he had signed "Member" next to his name on the REPC, indicating that he signed in a representative capacity for Still Standing. When Plaintiffs objected, the court suggested bringing Still Standing back into the case. Schvaneveldt's counsel proposed instructing the jury to disregard the testimony.[4]Plaintiffs agreed to Schvaneveldt's solution, and the court instructed the jury accordingly. At the close of evidence, Schvaneveldt and Code both moved for a directed verdict; the court granted Code's motion but denied Schvaneveldt's. This ruling left Schvaneveldt as the only remaining potentially liable party. The jury entered a verdict against Schvaneveldt, awarding damages of $30, 000.

         ¶23 Plaintiffs moved for a new trial, arguing that the damage award was inadequate because it did not amount to the 3% commission the court had previously ruled Plaintiffs had earned. Rather than granting a new trial, the court increased the judgment to $130, 875-3% of the REPC sales price. The court also awarded Plaintiffs attorney fees and interest. The court entered a total judgment in the amount of $362, 485.96 against Schvaneveldt. Schvaneveldt also moved for a new trial on multiple grounds, including that "[Schvaneveldt] should have been allowed to raise the misconduct of Re/Max and Tim Shea, " that "Tim Shea's lawyer violated [Schvaneveldt's] attorney-client privilege, " and "cumulative errors." The trial court denied the motion on all grounds.

         Post-trial Litigation Concerning Plaintiff's Standing

         ¶24 In the months following trial, Schvaneveldt filed several rule 60(b) motions.[5] Each relied on evidence that, Schvaneveldt argued, showed that the assumed name Re/Max Elite was registered to Dale Quinlan, making him the only person with standing to sue for the FSBO commission. That evidence includes the following:

• documents from the Division showing that Quinlan had registered the assumed name "Re/Max Elite" with himself as ...

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