Tooele Associates Limited Partnership v. Tooele City , 284 P.3d 709 ( 2012 )

IN THE UTAH COURT OF APPEALS
‐‐‐‐ooOoo‐‐‐‐
Tooele Associates Limited Partnership, ) OPINION
)
Plaintiff, Appellant, and Cross‐ ) Case No. 20100504‐CA
appellee, )
)
v. ) FILED
) (August 2, 2012)
Tooele City, )
) 2012 UT App 214Defendant, Appellee, and Cross‐ )
appellant. )
‐‐‐‐‐
Third District, Salt Lake Department, 060919737
The Honorable Randall N. Skanchy
Attorneys: Bruce R. Baird, Paxton R. Guymon, and Lauren Parry Johnson,
Salt Lake City, for Appellant and Cross‐appellee
George M. Haley and Christopher R. Hogle, Salt Lake City, for
Appellee and Cross‐appellant
‐‐‐‐‐
Before Judges Voros, Orme, and Thorne.
VOROS, Associate Presiding Judge:
¶1 Tooele Associates Limited Partnership sued Tooele City over the development of
a planned residential community. The City counterclaimed. Following a three‐week
trial, the jury returned a special verdict finding that the City had caused Tooele
Associates $22.5 million in damages, and Tooele Associates had caused the City $1.82
million in damages. The City moved for entry of judgment awarding damages in its
favor and no damages for Tooele Associates; Tooele Associates opposed the motion and
moved for entry of judgment in its favor. The trial court ruled that the jury’s special
verdict was irreconcilably inconsistent, struck the verdict, and declared a mistrial.
Tooele Associates petitioned for interlocutory appeal and the City cross‐petitioned. We
granted those petitions with respect to the issues discussed below. We now reverse the
trial court’s post‐trial ruling and remand.
BACKGROUND
¶2 Tooele Associates entered into a series of agreements with the City involving the
development of a planned residential community known as Overlake. Among other
things, the agreements required Tooele Associates to build certain public improvements
and required the City to provide culinary water for the development. However, as the
trial court stated, this “development of massive proportions” led to “disputes of a
similar scale.” Although the present dispute encompasses a range of alleged acts and
omissions on both sides, we recount only the portion of the dispute relevant to the
resolution of this appeal.
¶3 Central to this dispute are two sets of documents: a Development Agreement,
which set forth the basic rights and obligations of the parties relating to the
development, and several Bond Agreements, which obligated Tooele Associates to
complete and to provide security for the completion of certain public improvements.1
Tooele Associates sued the City, alleging breach of the Development Agreement and
1
The Bond Agreements were not themselves security for other obligations.
Rather, the Bond Agreements were agreements between Tooele Associates and the City
in which Tooele Associates agreed, in the words of Jury Instruction 46, to “ensure the
completion of all public improvements required to be installed in the subdivision and
provide a Bond to secure the obligations contained in the Bond Agreement.”
20100504‐CA 2
breach of the covenant of good faith and fair dealing. The City counterclaimed, alleging
breach of the Development Agreement and Bond Agreements.2
¶4 Many of Tooele Associates’ specific allegations of breach focus on public
improvements it was required to build under the Development Agreement and Bond
Agreements. Tooele Associates claimed that the City breached the Development
Agreement and the covenant of good faith and fair dealing in several ways. These
included misapplying the City’s public improvement ordinances in relation to
Overlake, requiring the public improvements to meet standards not clearly set forth in
any agreement and not required of other similarly situated developers, creating
arbitrary and incomplete punch lists of items that needed to be fixed for the public
improvements to be considered complete, slowing or refusing to make final inspections
of the public improvements, refusing to recognize prior admissions that certain public
improvements were complete, and ultimately refusing to accept certain public
improvements as complete. Tooele Associates also claimed that the City’s refusal to
extend the Development Agreement after the initial ten‐year period constituted breach.
Tooele Associates claimed that these and other alleged breaches prevented it from
completing the development and realizing the financial benefit of the culinary water to
be provided by the City.
¶5 The City denied the allegations of breach and argued, among other things, that
Tooele Associates failed to complete the public improvements and that this failure
constituted a material breach that excused the City from providing any benefits under
the agreement. The City also claimed damages for incomplete public improvements. In
response, Tooele Associates alleged that the City waived any claim or defense based on
incomplete public improvements.
¶6 Following a three‐week trial in June 2009, the jury returned a special verdict
addressing thirty‐three questions submitted by the court. In sum, on Tooele Associates’
claims, the jury found that the City had materially breached the Development
Agreement and the covenant of good faith and fair dealing in eight specific ways. On
the City’s affirmative defense of excuse, the jury found that Tooele Associates had
materially breached the Development Agreement in two ways, but that the City had
2
A number of other claims were resolved through pretrial motions, bifurcated
from the June 2009 jury trial, or reserved for resolution by the trial court.
20100504‐CA 3
waived its claim of material breach. On the City’s counterclaims, the jury found that
Tooele Associates’ failure to complete public improvements was a breach—without
specification of materiality—of both the Development Agreement and the Bond
Agreements, and that these breaches were not waived. The jury found Tooele
Associates’ damages to be $22.5 million and the City’s damages to be $1.82 million.
¶7 After the jury returned the special verdict, the City moved for entry of judgment
in its favor. Based on the jury’s finding that Tooele Associates breached the Bond
Agreements by not completing the public improvements, the City argued that Tooele
Associates could not recover any damages because the Bond Agreements allowed the
City to withhold approval for future development phases in the event of incomplete
public improvements (the Bond Agreement defense). Tooele Associates opposed the
City’s motion and moved for entry of judgment in its favor.
¶8 Faced with competing claims that the jury verdict favored each party, the trial
court carefully examined the special verdict for inconsistencies and requested
supplemental briefing on the issue. Each party argued below, and argues now on
appeal, that the verdict is consistent in its favor. The trial court ruled the verdict
irreconcilably inconsistent.
ISSUE AND STANDARD OF REVIEW
¶9 Tooele Associates and the City each claim that the trial court erred by finding the
jury verdict irreconcilably inconsistent. We review for correctness a trial court’s
determination of whether a special verdict is inconsistent. See Neff v. Neff, 2011 UT 6,
¶¶ 76, 86, 247 P.3d 380 (apparently applying a correctness standard of review);
Dishinger v. Potter, 2001 UT App 209, ¶¶ 28–30, 47 P.3d 76 (same); see also Norris v. Sysco
Corp., 191 F.3d 1043, 1047 (9th Cir. 1999) (“We review a district court’s determination
regarding a claim that the jury’s verdict is internally inconsistent de novo.”).
ANALYSIS
¶10 Our duty is to reconcile special verdicts if possible. “‘Where the possibility of
inconsistency in jury interrogatories or special verdicts exists, [we] will not presume
20100504‐CA 4
inconsistency; rather, [we] will seek to reconcile the answers if possible.’” Neff, 2011 UT
6, ¶ 76 (alterations in original) (quoting Bennion v. LeGrand Johnson Constr. Co., 701 P.2d
1078, 1083 (Utah 1985)). “‘When reviewing claims that a jury verdict is inconsistent, we
must accept any reasonable view of the case that makes the jury’s answers consistent.’”
Id. ¶ 49 n.20 (quoting Heno v. Sprint/United Mgmt. Co., 208 F.3d 847, 852 (10th Cir. 2000)).
“Accordingly, a jury’s verdict will be sustained, even in the face of possible
inconsistency, if the judgment can ‘be read harmoniously.’” Id. ¶ 76 (quoting Bennion,
701 P.2d at 1083). Therefore, “the question for this court is whether it is reasonable to
construe the jury’s verdict with regard to these claims in a manner that gives effect to all
of the jury’s responses on the special verdict form.” Id. Otherwise stated, “[g]iven the
choice of two competing reasonable alternatives, we are bound to adopt the
construction of the verdict that does not nullify the jury’s answers.” Id. ¶ 85.
¶11 When reconciling apparent inconsistencies on a special verdict form, “the
answers to the questions are to be construed in the context of the surrounding
circumstances of the case and in connection with the pleadings, instructions, and issues
submitted.” Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure: Civil
§ 2510 (3d ed. 2011); see also Neff, 2011 UT 6, ¶ 85 (noting the importance of the jury
instructions in the court’s attempt to reconcile responses on a special verdict form).
Furthermore, we presume that the jury followed the jury instructions. See Moore v.
Burton Lumber & Hardware Co., 631 P.2d 865, 869 (Utah 1981); State v. Nelson, 2011 UT
App 107, ¶ 4, 253 P.3d 1094 (“In the absence of the appearance of something persuasive
to the contrary, we assume that the jurors were conscientious in performing . . . their
duty, and that they followed the instructions of the court.” (citation and internal
quotation marks omitted)), cert. denied, 255 P.3d 684 (Utah 2011). Finally, if special
verdicts may be reconciled, the trial court should apply the law and render a verdict
consistent with the jury’s findings. See Utah R. Civ. P. 58A(a) (“If there is a special
verdict or a general verdict accompanied by answers to interrogatories returned by a
jury, the court shall direct the appropriate judgment, which the clerk shall promptly sign
and file.” (emphasis added)); Dishinger, 2001 UT App 209, ¶ 17 (“‘[I]n [the] case of a
special verdict, the jury only finds the facts, and the court applies the law thereto and
renders the verdict.’” (second alteration in original) (citation omitted)).
20100504‐CA 5
¶12 In the present case, the trial court identified two apparent inconsistencies in the
special verdict. However, we hold that the special verdict is reconcilable. The key to
reconciling the special verdict lies in the distinction between material and nonmaterial
breach.
¶13 A party must show material breach to prevail on certain affirmative defenses,
such as excuse. See McArthur v. State Farm Mut. Auto. Ins. Co., 2012 UT 22, ¶ 28 & n.7,
274 P.3d 981 (“It is well‐settled law that one party’s breach excuses further performance
by the non‐breaching party if the breach is material.” (citation and internal quotation
marks omitted)). However, a party need not show that a breach is material to recover
damages. See, e.g., Coalville City v. Lundgren, 930 P.2d 1206, 1209–10 (Utah Ct. App.
1997) (rejecting a claim for rescission because plaintiff’s breach was nonmaterial and
damages were sufficient to compensate for the breach). When viewed in light of the
jury instructions, the special verdict questions, and the structure of the special verdict
form, the jury’s answers can be read harmoniously.
I. First Apparent Inconsistency: Tooele Associates’ Breach
¶14 At first glance, the special verdict form seems to present two conflicting findings
regarding breach by Tooele Associates: both that Tooele Associates breached the
Development Agreement by failing to complete public improvements, and that it did
not. However, when the distinction between material and nonmaterial breach is
considered, the special verdict form may be reconciled.
¶15 The apparent conflict arises from the jury’s responses to Questions 2 and 7.
Question 2 presented the City’s affirmative defense of excuse by asking whether Tooele
Associates materially breached the Development Agreement and then asking about
various ways in which Tooele Associates may have done so:
2. Has Tooele City proven by a preponderance of the
evidence that Tooele Associates materially breached the
Development Agreement?
The jury answered yes. One of the subparts of Question 2 then asked the jury to specify
whether the breach involved the failure to complete public improvements:
20100504‐CA 6
[2(a)]. By failing to complete public
improvements in Overlake pursuant to
Sections VII.2 and VIII.2 of the Development
Agreement?
The jury answered no. In other words, the jury found that Tooele Associates materially
breached the Development Agreement, but not by failing to complete public
improvements.3
¶16 Question 7 presented the City’s counterclaim, asking whether Tooele Associates
breached the Development Agreement by failing to complete public improvements.
The question referred to two of the same sections of the Development Agreement listed
in Question 2(a):
7. Has Tooele City proven that Tooele Associates breached
Sections III.G, VII.2, VIII.2, and XVII of the Development
Agreement by failing to complete public improvements in
Overlake?
The jury answered yes. In other words, Tooele Associates breached sections VII.2 and
VIII.2 by failing to complete public improvements.4
¶17 The difference in wording between Questions 2 and 7 is significant. Question 2
asks about material breach while Question 7 does not use “material” as a qualifier. The
significance of this wording is evident when viewed in light of the structure of the
special verdict form submitted to the jury. The form is divided into two sections.
Section I addresses Tooele Associates’ claims and the City’s affirmative defenses, and
Section II addresses the City’s counterclaims and Tooele Associates’ affirmative
3
The material breaches that the jury did find involved Tooele Associates’ failure
to pay the full amount owed for water used to irrigate a golf course and failure to
comply with all the City’s applicable ordinances, resolutions, policies, and procedures,
including the requirements for subdivision plat and site plan approval.
4
The jury also found in Question 6 that Tooele Associates breached the Bond
Agreements by failing to complete public improvements.
20100504‐CA 7
defenses. Question 2 appears in Section I, presenting the City’s affirmative defense of
excuse; Question 7 appears in Section II, presenting the City’s counterclaim for
damages. As noted above, the materiality of a breach is central to the affirmative
defense of excuse, but not to a claim for damages based on incomplete performance.
See McArthur, 2012 UT 22, ¶ 28 & n.7; Lundgren, 930 P.2d at 1209–10.
¶18 The jury was specifically instructed on the principle of material breach. Jury
Instruction 30 stated that the jury “must decide whether there was a material breach of
the Development Agreement.” It explained that a breach is material “if a party fails to
perform an obligation that was important to fulfilling the purpose of the contract,” and
that a breach is not material “if the party’s failure was minor and could be fixed without
difficulty.” Jury Instruction 63 specifically applied the principle of material breach to
the City’s affirmative defense of excuse, reiterating the definitions of material and
nonmaterial breach in the context of Tooele Associates’ failure to complete the public
improvements. It stated that the affirmative defense of excuse would not be available to
the City if Tooele Associates’ breach was nonmaterial, but that the “City may still be
entitled to compensation for the breach.” (Emphasis added.) Furthermore, Jury Instruction
27 presented Tooele Associates’ contention that it did not materially breach either the
Development Agreement or the Bond Agreements. In view of these instructions, we
assume that the jury was attuned to the distinction between material and nonmaterial
breach when it responded to Questions 2 and 7. We read their responses accordingly.
¶19 Read thus, the jury’s answers to Questions 2 and 7 are consistent. The jury found
that Tooele Associates materially breached the Development Agreement in a number of
ways, but not by failing to complete public improvements. It further found that Tooele
Associates breached the Development Agreement by failing to complete public
improvements, but did not find that the breach was material—that is, “important to
fulfilling the purpose of the contract.” The jury’s answers to these questions thus may
reasonably be read in harmony.
II. Second Apparent Inconsistency: The City’s Waiver
¶20 Next, the special verdict form seems to present two conflicting findings on
waiver: both that the City waived its claims and defenses under the Development
Agreement and Bond Agreements, and that it did not. However, when the pivotal
20100504‐CA 8
distinction between material and nonmaterial breach is again considered, the special
verdict form is consistent on the question of waiver as well.
¶21 The apparent conflict arises from the jury’s responses to Questions 3 and 8.
Question 3 asked whether the City waived its claims and defenses of material breach
under the Development Agreement “and/or” Bond Agreements:
3. Has Tooele Associates proven that Tooele City waived its
claims and its defenses, as stated in Question 2, that Tooele
Associates materially breached the Development Agreement
and/or Bond Agreements?
The jury answered yes. In other words, notwithstanding the material breaches
identified in Question 2, the City waived its claims and defenses based on Tooele
Associates’ material breach of the Development Agreement, the Bond Agreements, or
both.
¶22 Question 8 asked, more pointedly, whether the City waived its public‐
improvements‐based counterclaims under the Development Agreement and the Bond
Agreements:
8. Has Tooele Associates proven that Tooele City waived its
rights to claim that Tooele Associates did not complete
public improvements in Overlake required by the
Development Agreement and the Bond Agreements?
The jury answered no. In other words, while the City waived other claims, it did not
waive its claim that Tooele Associates breached the Development Agreement and the
Bond Agreements by failing to complete public improvements.
¶23 As with Questions 2 and 7, the difference in wording between Questions 3 and 8
is telling. Question 3 asks about material breach, while Question 8 does not; rather,
Question 8 asks whether the City “waived its rights to claim that Tooele Associates did
not complete public improvements.” Again, this difference in wording is relevant in
light of the structure of the special verdict form. Section I addresses Tooele Associates’
claims and the City’s affirmative defenses. Question 2, discussed above, asks whether
20100504‐CA 9
Tooele Associates materially breached the Development Agreement (yes). Question 3
asks whether the City waived its affirmative defenses based on material breach (yes).
Material breach is thus relevant in this context. See supra ¶¶ 17–18.
¶24 Question 8 appears in Section II, which addresses the City’s counterclaims and
Tooele Associates’ affirmative defenses. Questions 6 and 7 address the City’s
counterclaims of incomplete performance. Question 8 then asks whether the City
waived its counterclaims (no). Material breach is not mentioned. Having been
instructed on the principle of materiality and its relation to the parties’ affirmative
defenses and counterclaims, the jury presumably answered the special verdict questions
with these distinctions in mind. See supra ¶ 18.
¶25 Thus, Question 3 addresses the City’s waiver of affirmative defenses based on
material breach, while Question 8 addresses the City’s waiver of counterclaims to
recover damages for incomplete public improvements. Accordingly, the jury found
that the City waived its affirmative defenses based on material breach of both the
Development Agreement and the Bond Agreements, but not its counterclaim that
Tooele Associates failed to complete public improvements. In other words, with respect
to Tooele Associates’ failure to complete public improvements, the City is entitled to
claim breach, but not material breach; the City can recover damages for Tooele
Associates’ incomplete performance, but its own performance is not excused. Thus the
jury’s responses on the issue of waiver may reasonably be reconciled as well.5
5
We are not persuaded that the finding of waiver in Question 3 must be limited
to the Development Agreement. In its reading of Question 3, the City emphasizes the
use of “and/or” and the phrase “as stated in Question 2.” Question 2 lists specific
allegations of breach of the Development Agreement, citing provisions of the agreement
for each allegation, and does not mention the Bond Agreements.
“Given the choice of two competing reasonable alternatives, we are bound to
adopt the construction of the verdict that does not nullify the jury’s answers.” Neff v.
Neff, 2011 UT 6, ¶ 85, 247 P.3d 380. We agree with Tooele Associates that the phrase “as
stated in Question 2” may reasonably be read as a descriptive reference to the specific
factual allegations in Question 2 rather than a restrictive reference to specific
Development Agreement provisions. For example, one factual allegation listed in
Question 2—“fail[ure] to complete public improvements”—was grounded in an
(continued...)
20100504‐CA 10
III. The City’s Bond Agreement Defense
¶26 The City argues that judgment should be entered in its favor because its Bond
Agreement defense based on nonmaterial breach survives, and that defense as a matter
of law forecloses all of Tooele Associates’ claims. The City contends that before trial the
court ruled that, so long as the City could show that Tooele Associates’ performance
deviated in any degree from the requirements of the Bond Agreements, the City could
withhold approval of all future phases of development and Tooele Associates could
5
(...continued)
obligation common to both the Development Agreement and the Bond Agreements.
And Jury Instruction 27 presented the City’s claim that failure to complete public
improvements was a violation of both agreements. Thus, read in context, Question 3
asked the jury to decide the issue of waiver under not only the Development
Agreement, but also the Bond Agreements.
The jury understood this. The special verdict form effectively instructed the jury
after it addressed waiver in Question 3 that the survival of an affirmative defense
obviated the need to assess damages. Yet the jury assessed damages before moving on
to the City’s counterclaims, thus indicating that the City’s affirmative defenses based on
material breach were waived, including those based on the Bond Agreements.
That said, we join those courts that “rue the use of the phrase ‘and/or’ by lawyers
and judges.” Lazcar Intern., Inc. v. Caraballo, 957 So. 2d 1191, 1193 (Fla. Dist. Ct. App.
2007); see also Putnam v. Industrial Comm’n, 80 Utah 187, 14 P.2d 973, 982–84 (1932)
(condemning the use of “that barbarism ‘and/or’” and setting aside a decision that was
rendered “too uncertain to [be] give[n] effect” by use of the term (citation and internal
quotation marks omitted)); Heath v. Westark Poultry Processing Corp., 531 S.W.2d 953, 955
(Ark. 1976) (“The phrase ‘and/or’ has brought more confusion than clarity to the task of
construction of statutes, contracts and pleadings.”); Holmes v. Gross, 93 N.W.2d 714, 722
(Iowa 1958) (holding inadvisable the use of “that mongrel expression” in jury
instructions, noting that it is “an equivocal connective, being neither positively
conjunctive nor positively disjunctive” (citation and internal quotation marks omitted));
State v. Smith, 184 P.2d 301, 303 (N.M. 1947) (labeling “the highly objectionable phrase
‘and/or’” a “linguistic abomination,” “which has no place in pleadings, findings of fact,
conclusions of law, judgments or decrees, and least of all in instructions to a jury.”).
20100504‐CA 11
recover nothing.6 The City explains that because Tooele Associates’ damages theory
focuses on the City’s obligation to provide culinary water for the Overlake
development, “all of [Tooele Associates’] alleged damages depended upon the ability to
develop additional lots in future phases.” Because the City is authorized to withhold
phase approval, the City reasons, Tooele Associates’ theory of damages fails. We do not
agree.
¶27 As we interpret the City’s argument, the City claims it is excused from
performing its obligations by Tooele Associates’ nonmaterial breach of the Bond
Agreements.7 Under the Development Agreement, the City is obligated “to provide the
culinary water required to meet the needs of the Overlake Development Plan at build‐
out.” An implicit condition precedent to this obligation is Tooele Associates’
completion of the development project. Yet each phase of development requires
approval by the City. Under the Bond Agreements, the City’s approval is conditioned
on Tooele Associates’ completion of the public improvements: “In the event of a Failure
to Perform by [Tooele Associates], no further permits or business licenses shall be
issued . . . .” The Bond Agreements define “Failure to Perform” as “the non‐
performance in a timely manner . . . of any obligation, in whole or in part.” The City
thus argues, in essence, that its obligation to provide culinary water for the Overlake
development is excused by Tooele Associates’ noncompletion, in any degree, of the
public improvements. Furthermore, the City claims that its Bond Agreement defense is
beyond challenge because it is law of the case under a pretrial ruling on summary
judgment. Now that the jury has found at least a nonmaterial breach, according to the
City all that remains is for the trial court to enter judgment of no liability in favor of the
City.
6
Tooele Associates does not contest that its performance did in fact deviate from
the requirements of the Bond Agreements. The City’s argument would thus render the
effort to reconcile the apparent inconsistencies in the special verdict form—and a large
share of the three‐week trial—irrelevant.
7
Although the jury did not decide whether Tooele Associates’ failure to complete
public improvements constituted a material breach of the Bond Agreements, we refer to
the failure as a nonmaterial breach for the sake of this discussion because we have
already concluded that the jury found the City waived defenses based on material
breach. See supra ¶ 25 & n.5.
20100504‐CA 12
¶28 First, we do not agree that the trial court’s earlier summary judgment ruling
established the City’s Bond Agreement defense as law of the case—at least not as the
City has argued that principle after trial and on appeal. The trial court did rule that
“the Bond Agreements do, indeed, vest authority in the City to deny further phases
based upon incomplete public improvements.” But the court’s ruling speaks only to the
City’s general Bond Agreement authority to deny approval of future phases. Although
the City argued on summary judgment that this authority extended to nonmaterial
breaches, the court did not decide the issue. The court stated in its denial of partial
summary judgment that a genuine issue of material fact existed as to whether the City
had “waived its rights to deny further phases.” In fact, the pretrial order expressly
identified what the City now describes as law of the case as merely the City’s contested
position: “The City disputes the notion that substantial performance, rather than
complete performance, is sufficient to avoid the consequences of [Tooele Associates’]
‘Failure to Perform’ under the Bond Agreements . . . .” Thus, far from being resolved
pretrial, the scope of the City’s authority under the Bond Agreements was designated as
a contested issue for trial.8
¶29 The City never clearly presented this defense to the jury. Jury Instruction 57 did
list as one of the City’s defenses that “Tooele Associates’ claim fails due to the non‐
occurrence of a condition to Tooele City’s performance: Tooele Associates’ own
performance of the Development Agreement.” And Jury Instructions 33 and 63 discuss
when the defense of excuse is available. Yet the City never requested a jury instruction
that a nonmaterial breach by Tooele Associates barred any award of damages against the
City. But even if it had, as we read the jury verdict, the City’s defense cannot succeed.
The jury found that, due to the City’s waiver, the City’s performance was not excused
even by Tooele Associates’ material breach of the Bond Agreements; this finding
logically forecloses the City’s argument that Tooele Associates’ nonmaterial breach
would excuse the City’s performance.
8
Even if the City’s defense were law of the case, that status would not
automatically place the issue beyond challenge. See Mid‐America Pipeline Co. v.
Four‐Four, Inc., 2009 UT 43, ¶¶ 11–14, 216 P.3d 352 (“Law of the case does not prohibit a
district court judge from revisiting a previously decided issue during the course of a
case . . . . Rather, the doctrine allows a court to decline to revisit issues within the same
case once the court has ruled on them.” (citation and internal quotation marks
omitted)).
20100504‐CA 13
¶30 Furthermore, the City’s Bond Agreement defense fails as a matter of law in light
of the special verdict finding that the City breached the Development Agreement’s
covenant of good faith and fair dealing. “An implied covenant of good faith and fair
dealing inheres in every contract.” Eggett v. Wasatch Energy Corp., 2004 UT 28, ¶ 14, 94
P.3d 193. The covenant “infer[s] as a term of every contract a duty to perform in the
good faith manner that the parties surely would have agreed to if they had foreseen and
addressed the circumstance giving rise to their dispute.” Young Living Essential Oils, LC
v. Marin, 2011 UT 64, ¶ 8, 266 P.3d 814. Although the scope of the covenant is limited, it
encompasses “an implied duty that contracting parties refrain from actions that will
intentionally destroy or injure the other party’s right to receive the fruits of the
contract.” Id. ¶¶ 9, 16 (citations and internal quotation marks omitted). Thus, the
covenant “‘prevent[s] either party from impeding the other’s performance of his
obligations [under the contract].’” Markham v. Bradley, 2007 UT App 379, ¶ 18, 173 P.3d
865 (second alteration in original) (quoting Zion’s Props., Inc. v. Holt, 538 P.2d 1319, 1321
(Utah 1975)); see also Restatement (Second) of Contracts § 205 cmt. d (1981) (noting that
bad faith may be established by “interference with or failure to cooperate in the other
party’s performance”).
¶31 When one party wrongfully hinders or prevents the occurrence of a condition
precedent to its performance—such as the performance of the other party—it may not
rely on the nonoccurrence of that condition to avoid performing. See Baxter v. Saunders
Outdoor Adver., Inc., 2007 UT App 340, ¶¶ 14–15, 171 P.3d 469 (“[N]o one can avail
himself of the non‐performance of a condition precedent, who has himself occasioned
its non‐performance.” (citations and internal quotation marks omitted)); see also Cannon
v. Stevens Sch. of Bus., Inc., 560 P.2d 1383, 1385 (Utah 1977) (“[I]t is a principle of
fundamental justice that if a promisor is himself the cause of the failure of performance
of a condition upon which his own liability depends, he cannot take advantage of that
failure.” (citation and internal quotation marks omitted)). Thus, “‘[o]ne party to a
contract cannot by willful act or omission make it impossible or difficult for the other to
perform and then invoke the other’s non‐performance as a defense.’” Baxter, 2007 UT
App 340, ¶ 15 (quoting Ferris v. Jennings, 595 P.2d 857, 859 (Utah 1979)); see also
Markham, 2007 UT App 379, ¶ 18.
20100504‐CA 14
¶32 The jury was expressly instructed on this principle in Jury Instruction 33:
Tooele City cannot by a willful act or omission make it
difficult or impossible for Tooele Associates to perform
under the terms of the Development Agreement or the Bond
Agreements and then be excused from performing their
obligation because the other party did not perform.
....
The jury found that the City did make it difficult for Tooele Associates to complete the
public improvements. The City did so, in the words of the special verdicts, “[b]y
slowing or refusing to give final inspections of the public improvements,” “[b]y
misinterpreting and misapplying its own public improvement ordinances in relation to
the Overlake Project Area’s subdivisions,” and “[b]y refusing to recognize and accept its
own admissions that public improvements within the Overlake Project Area’s
subdivisions were complete.” Thus, the jury found that the City was at least partially
responsible for Tooele Associates’ failure to complete the public improvements. These
jury findings establish that the City breached the Development Agreement and its
covenant of good faith and fair dealing, again in the words of the special verdicts, by
“refusing to approve, and threatening refusal of, applications for the creation of new
subdivisions within the Overlake Project Area.” In other words, the jury found that, in
spite of the Bond Agreement authority, the City’s hindrance of Tooele Associates and
refusal to approve further phases constituted breach of the covenant of good faith and
fair dealing, permitting Tooele Associates to assert its claim for damages.9
¶33 The special verdict form makes clear that the City did impede Tooele Associates’
performance and therefore it may not claim that its own performance is excused due to
Tooele Associates’ failure to completely perform. Thus, the City may not rely on the
Bond Agreement authority to withhold phase approval to escape its obligation to
provide culinary water for the Overlake development. The special verdict form also
establishes that because Tooele Associates bore partial responsibility for its failure to
9
In light of the several specific findings of hindrance, we reject the City’s
argument that it did not interfere with Tooele Associates’ completion of the public
improvements.
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perform, it is not excused from its obligation to perform. Thus, Tooele Associates may
not escape its obligation to complete the public improvements. In other words, the jury
found that, notwithstanding the City’s authority under the Bond Agreements, both
parties are responsible for the incomplete public improvements, neither party may avail
itself of the defense of excuse, and both parties are liable for the damages they caused.10
CONCLUSION
¶34 We conclude that the findings on the special verdict form may reasonably be
read as consistent.11 The City materially breached the Development Agreement,
including its covenant of good faith and fair dealing, in part by hindering Tooele
Associates’ completion of the public improvements and withholding approval of
additional phases. Tooele Associates also materially breached the Development
Agreement. However, Tooele Associates’ failure to complete public improvements,
though a breach of the Development Agreement, was not material. Failure to complete
the public improvements also constituted a breach of the Bond Agreements, although
the jury did not determine whether that breach was material. Regardless, the City
waived its affirmative defense of excuse under both the Development Agreement and
the Bond Agreements. However, the City did not waive its counterclaim for damages
based on the incomplete public improvements under either agreement.
10
The City briefly argues that we should affirm on alternative grounds because, it
alleges, the damages were excessive and other special verdict findings were
unsupported by evidence or contrary to law. The trial court did not address these
arguments in the order from which the parties take their interlocutory appeal. “While
we possess the authority to affirm on alternative grounds, ‘we are not obligated to
exercise this authority,’” Olsen v. Chase, 2011 UT App 181, ¶ 19, 270 P.3d 538 (quoting
O’Connor v. Burningham, 2007 UT 58, ¶ 23, 165 P.3d 1214), cert. denied, 262 P.3d 1187(Utah 2011), and we decline to do so here.
11
Despite the lack of clarity in the special verdict form that has occasioned this
appeal, the jury’s work in this case was exemplary. The jury completed a legally
complex special verdict form with a nuanced understanding of the legal principles
spelled out in the court’s instructions.
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¶35 In light of the jury’s findings of waiver and hindrance, the City’s Bond
Agreement defense fails. Because the City breached the covenant of good faith and fair
dealing by hindering Tooele Associates’ completion of the public improvements, the
City may not rely on Tooele Associates’ failure to complete the public improvements to
excuse the City’s obligation to provide culinary water. Because Tooele Associates was
also responsible for its failure to complete the public improvements, Tooele Associates
may not rely on the City’s hindrance to excuse its obligation to complete the public
improvements. In short, when the law is appropriately applied to the reconciled special
verdict, Tooele Associates recovers for the City’s breach of the Development
Agreement, and the City recovers for Tooele Associates’ breach of both agreements.
¶36 We reverse the trial court’s post‐trial ruling and remand for entry of judgment in
accordance with the jury’s verdict and for any further proceedings as appropriate.
____________________________________
J. Frederic Voros Jr.,
Associate Presiding Judge
‐‐‐‐‐
¶37 WE CONCUR:
____________________________________
Gregory K. Orme, Judge
____________________________________
William A. Thorne Jr., Judge
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