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Hardy v. Montgomery

Court of Appeals of Utah

June 28, 2018

Richard Hardy, Appellant,
v.
Jeremy Montgomery and Julie Montgomery, Appellees.

          Seventh District Court, Price Department The Honorable George M. Harmond No. 140700039

          Tyler A. Woodworth, Attorney for Appellant

          Shane Clifford, Attorney for Appellees

          Judge Michele M. Christiansen authored this Opinion, in which Judges Gregory K. Orme and Ryan M. Harris concurred.

          CHRISTIANSEN, JUDGE.

         ¶1 Richard Hardy appeals from the trial court's order awarding judgment in favor of Jeremy Montgomery and Julie Montgomery (collectively, the Montgomerys). We affirm in part, vacate in part, and remand for further proceedings.

         BACKGROUND

         ¶2 Hardy owned a home in Helper, Utah. In late 2012 or early 2013, Hardy listed the home for sale with Bridge Realty. Before the home sold, Hardy met the Montgomerys, who were interested in buying the home. Hardy wanted to sell his home to the Montgomerys, but he did not want to pay a real estate commission to Bridge Realty. To avoid paying the commission, the parties agreed that the Montgomerys would lease the home from Hardy with an option to purchase the home after Hardy's listing agreement with Bridge Realty expired. Hardy retained an attorney, who drafted a lease agreement (the Lease Agreement). Attached to the Lease Agreement was a real estate purchase contract (the REPC) and a seller financing addendum. The Lease Agreement provided that the Montgomerys would pay $700 in rent plus $100 in "additional rent" to reimburse Hardy for property taxes and insurance. The Lease Agreement contained a "Non-Waiver" provision, which stated in part, "No failure of Landlord to enforce any term hereof shall be deemed a waiver, nor shall any acceptance of a partial payment of rent be deemed a waiver of Landlord's right to the full amount thereof." Most relevant here, the Lease Agreement contained an "Option to Purchase" provision, which stated:

Provided Tenant is not in default hereunder, Tenant shall have the right to purchase ("Option") the Premises for the Purchase Price of $126, 775.00, ("Purchase Price") at any time after September 15, 2013 and before the end of the Term of the Lease. As consideration for the Option, Tenant shall pay Landlord, a non-refundable option payment of $7, 000.00 ("Option Payment"), payable on or before the beginning of the Term, which shall be applied to the Purchase Price and shall be counted toward the Earnest Money Deposit. In the event the Tenant exercises the Option to purchase the Premises, Tenant shall execute a Promissory Note for the balance remaining on the Purchase Price, after the Option Payment has been applied, and the parties shall close the transaction, as outlined in [the REPC], attached hereto as Exhibit "A", together with its applicable amendments, and addenda.

         The REPC stated that the $7, 000 was an earnest money deposit and that Hardy, as the seller, would provide financing for the remaining balance of the purchase price.

         ¶3 The parties signed the Lease Agreement on April 17, 2013. The parties did not sign the REPC at that time. Hardy declined to sign the REPC because he allegedly had an "uneasy feeling" about selling the home to the Montgomerys. Nevertheless, the Montgomerys delivered a $7, 000 check to Hardy as consideration for the option to purchase the home. Pursuant to the terms of the REPC, Hardy was required to "deposit the Earnest Money into [a] Brokerage Real Estate Trust Account" within four days of receipt. Instead, Hardy deposited the $7, 000 into his personal checking account.

         ¶4 The Montgomerys paid $700 per month in rent from May 2013 to October 2013; the Montgomerys never paid the $100 in additional rent for property taxes and insurance. Hardy never mentioned the Montgomerys' failure to pay the $100 in additional rent nor advised them that this amounted to a default of the Lease Agreement.

         ¶5 In July 2013, Hardy and Jeremy Montgomery spoke on the phone, and Hardy indicated that he no longer wished to sell the house to the Montgomerys. Thereafter, in September 2013, Hardy's attorney sent a letter to the Montgomerys. The letter stated, in relevant part, that the Montgomerys still had "the ability to exercise [the] option to purchase the residence," but that Hardy was "not interested in financing the purchase of the property" based on the Montgomerys' late rent payments in May, June, and July 2013. The letter claimed that Hardy had no obligation to finance the purchase of the property because the REPC was "never executed or signed" and because the Lease Agreement provided that "the entire agreement is contained in the lease agreement and any additional agreement must be signed by all of the parties." The letter also alerted the Montgomerys that they were in default based on their late rent payments and stated that it gave Hardy "the option to terminate the entire agreement at his discretion if [the Montgomerys] fail[ed] to remedy the breach of contract by paying all associated late fees and damages within 7 days of this notice." The letter did not mention the fact that the Montgomerys had not been paying the full amount-$800-in rent and additional rent. The Montgomerys stopped paying rent in October 2013 but stayed in the home until the second week of February 2014.

         ¶6 Hardy sued the Montgomerys in May 2014, alleging breach of contract, unjust enrichment, conversion, and breach of the implied covenant of good faith and fair dealing. More specifically, Hardy claimed that the Montgomerys (1) violated the terms of the Lease Agreement and that the REPC and Seller Financing Addendum "should be ignored"; (2) owed rent in the total amount of $800 per month, not $700 per month; (3) owed late fees and liquidated damages; (4) owed Hardy damages for the sale opportunities Hardy had to forgo from May 2013 through March 2014 because of the Montgomerys' occupancy and claimed rights; and (5) owed Hardy damages for missing personal property.

         ¶7 The Montgomerys filed an answer and counterclaim, alleging that (1) the REPC was incorporated into, and was a part of, the Lease Agreement; (2) Hardy anticipatorily repudiated the option provision in the Lease Agreement; (3) Hardy was unjustly enriched based on his anticipatory repudiation, and the $7, 000 Hardy received should be offset against anything the Montgomerys owed Hardy; (4) Hardy provided no evidence of any lost sales opportunities for the home; and (5) Hardy provided no evidence regarding alleged damages to his personal property.

         ¶8 The trial court held a bench trial on October 2, 2015. In its written findings of fact and conclusions of law, the trial court determined that the Lease Agreement "clearly integrates the REPC and seller financing addendum into the Lease and the REPC is dated the same date as the Lease." Regarding waiver, the court determined that "Hardy never told the Montgomerys that the rental payment was in the wrong amount" and that the September 2013 letter from Hardy's attorney did not demand the additional $100 per month "even though the letter details other amounts owing and references several provisions of the Lease." Thus, the court determined, "Hardy intentionally waived the right to collect the additional $100.00 each month in rent." The court further determined that the Montgomerys' June and October rent payments had been late. Applying the Lease Agreement's late-fee and liquidated-damages provision, the court determined that the Montgomerys owed $140 in late fees and $2, 420 in liquidated damages. The court rejected Hardy's claim that he had lost potential sales of the home, finding that Hardy was "merely speculating that he may have been able to sell the house." The court also rejected Hardy's claims that "the Montgomerys kept or lost certain items of personal property [Hardy] left in the house."

         ¶9 The court further determined that Hardy had anticipatorily repudiated the option agreement and that the Montgomerys had the right to cure their default and exercise the option. More specifically, the court determined that Hardy's refusal to sign the REPC, while "not amounting to an anticipatory repudiation at that point, . . . clearly indicated Hardy was having second thoughts about financing the property." The court observed that in his July 2013 phone call with Jeremy Montgomery, Hardy had "confirmed he would not sell the property to [the] Montgomerys." The court also observed that in his September 2013 letter, wherein Hardy purported to give the Montgomerys a seven-day period to cure their default, Hardy confirmed he would not finance the sale of the property. The court concluded that Hardy's decision not to sign the REPC, his July 2013 phone call, and his September 2013 letter "all amount[ed] to an anticipatory repudiation." Based on Hardy's anticipatory breach, the court determined that Hardy would be unjustly enriched if he were allowed to keep the full $7, 000. After calculating Hardy's damages and offsetting them from the $7, 000, the trial court entered judgment against Hardy for $1, 990. Hardy appeals.

         ISSUES AND STANDARDS OF REVIEW

         ¶10 Hardy raises several arguments on appeal. First, he contends that he "could not anticipatorily repudiate the option agreement on which the Montgomerys had already defaulted." The trial court's "[f]indings of fact, whether based on oral or other evidence, must not be set aside unless clearly erroneous, and the reviewing court must give due regard to the trial court's opportunity to judge the credibility of the witnesses." Utah R. Civ. P. 52(a)(4). We review the trial court's conclusions of law for correctness. Drazich v. Lasson, 964 P.2d 324, 326 (Utah Ct. App. 1998).

         ¶11 Second, Hardy contends that "[t]he REPC is immaterial because the Montgomerys never performed the necessary consideration to exercise the option." In a related argument, he contends that "[t]he parties did not intend for the terms of the REPC to apply." Again, we will not set aside the trial court's findings of fact unless they are clearly erroneous, and we "give due regard to the trial court's opportunity to judge the credibility of the witnesses." Utah R. Civ. P. 52(a)(4).

         ¶12 Third, Hardy contends that he "did not waive his right to collect additional rents." Whether a contractual right has been waived presents a mixed question of law and fact. See ASC Utah, Inc. v. Wolf Mountain Resorts, LC, 2010 UT 65, ¶ 11, 245 P.3d 184. "[W]hether the trial court employed the proper standard of waiver presents a legal question which is reviewed for correctness, but the actions or events allegedly supporting waiver are factual in nature and should be reviewed as factual determinations, to which we give a [trial] court deference." Pledger v. Gillespie, 1999 UT 54, ¶ 16, 982 P.2d 572.

         ¶13 Fourth, Hardy contends that the trial court incorrectly calculated late fees and liquidated damages. "[T]he adequacy of a damage award is a factual question and we will not reverse the trial court's findings unless they are clearly erroneous." Tech Center 2000, LLC v. Zrii, LLC, 2015 UT App 281, ¶ 5, 363 P.3d 566 (alteration in ...


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