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Fisher v. Davidhizar

Court of Appeals of Utah

August 16, 2018

Darwin C. Fisher, Cheryl Fisher, and Office Management Consultants LC, Appellants,
v.
Lavern Davidhizar, Appellee.

          Fifth District Court, St. George Department The Honorable Wallace A. Lee No. 020500856

          Emily Adams, Attorney for Appellants

          Bryan J. Pattison and Timothy O. Hemming, Attorneys for Appellee

          JUDGE DIANA HAGEN authored this Opinion, in which JUDGES KATE A. TOOMEY and DAVID N. MORTENSEN concurred.

          HAGEN, JUDGE.

         ¶1 This appeal arises from a lawsuit between David Fisher (David)[1] and Dr. Lavern Davidhizar (Davidhizar), in which David sued Davidhizar for breach of a settlement agreement, and Davidhizar counterclaimed for fraudulent inducement. After summary judgment in favor of David on the breach of contract claim, but before trial on the remaining issues, David declared bankruptcy. David's parents, Darwin and Cheryl Fisher (collectively, the Fishers), and David's bankruptcy estate (the bankruptcy estate) entered into a Purchase Agreement, assigning to the Fishers all proceeds from the pending lawsuit. Ultimately, a jury found that David had fraudulently induced the settlement agreement and awarded damages and attorney fees to Davidhizar. On appeal, the Fishers challenge the district court's determination that they are liable for this award by virtue of the Purchase Agreement. Because we conclude that, in entering into the Purchase Agreement, the Fishers did not assume liability for Davidhizar's counterclaim, we reverse and remand to the district court for further proceedings consistent with this opinion.

         BACKGROUND

         ¶2 David and his business partner owned and operated Office Management Consultants, LC (OMC), a billing company that leased disc decompression tables to medical providers. Davidhizar agreed to loan $101, 000 to OMC to purchase two such tables, but when OMC failed to make loan payments, a dispute arose over ownership of the tables. OMC and Davidhizar entered into a settlement agreement to resolve the dispute. Soon thereafter, Davidhizar repudiated the settlement agreement, stating that he "wasn't going to follow through with the agreement, because it had been misrepresented."

         ¶3 David and OMC sued Davidhizar, alleging breach of the settlement agreement. Davidhizar's answer raised a counterclaim for fraudulent inducement. David and OMC filed a motion for summary judgment on the breach of contract claim, which the district court granted, reserving the issue of damages for trial. Before a trial could be held on the amount of David's damages as well as the merits of Davidhizar's fraudulent inducement counterclaim, [2] David filed for bankruptcy.

         ¶4 The Fishers and the bankruptcy estate both asserted an interest in the pending lawsuit and eventually entered into a Purchase Agreement to resolve the dispute. The Purchase Agreement recited the Fishers' contention that, prior to filing for bankruptcy, David had "assigned all proceeds from the Davidhizar Action to [them]." It also recited the trustee's contrary position that the bankruptcy estate's property included "any assignment to the Fishers by [David] of any proceeds from the Davidhizar Action[]." The express purpose of the Purchase Agreement was "to settle any dispute with respect to the ownership of the causes of action asserted in the Davidhizar Action." As part of the Purchase Agreement, the Fishers "agree[d] to accept[] any and all interest of the Bankruptcy Estate in and to the Davidhizar Action and to the causes of action and claims asserted by [David] therein."[3] The Fishers then moved to substitute themselves as plaintiffs and to remove David as plaintiff in the lawsuit against Davidhizar. The court granted the motion.

         ¶5 Because the Fishers never moved to substitute themselves as counter-defendants, David remained the sole named counter-defendant in the lawsuit. Davidhizar later moved the district court to order the Fishers to assume liability for the fraudulent inducement counterclaim should he be awarded any damages or attorney fees. The district court granted the motion, reasoning that the Purchase Agreement "conveyed David's entire legal share in the present case," which "included not only David's rights and benefits associated with this matter, but also his liabilities and risks."

         ¶6 The case proceeded to trial on three issues: (1) David's damages on his breach of contract claim; (2) Davidhizar's fraudulent inducement counterclaim; and (3) Davidhizar's damages, if any. After hearing all of the evidence, the jury found that David had fraudulently induced Davidhizar to enter the settlement agreement, and it awarded him $78, 600 in damages. Given that the settlement agreement was fraudulently induced, the jury determined that Davidhizar was not liable for any damages arising from David's breach of contract claim.

         ¶7 After the jury issued its verdict, the district court awarded $110, 993 in attorney fees to Davidhizar. The court based its award on the settlement agreement's attorney fee provision and Utah Code section ...


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