Black Diamond v. Big Cottonwood Pine , 2020 UT App 90 ( 2020 )

2020 UT App 90THE UTAH COURT OF APPEALS
BLACK DIAMOND FINANCIAL LLC,
Appellant and Cross-appellee,
v.
BIG COTTONWOOD PINE TREE WATER COMPANY,
Appellee and Cross-appellant, and
VICKI KINCAID,
Appellee.
Opinion
No. 20190237-CA
Filed June 11, 2020
Third District Court, Salt Lake Department
The Honorable Keith A. Kelly
No. 160903434
Erik A. Olson and Kevin Paulsen, Attorneys for
Appellant and Cross-appellee
John A. Snow and Alex B. Leeman, Attorneys for
Appellee and Cross-appellant Big Cottonwood Pine
Tree Water Company
Michael F. Skolnick and Jeremy Speckhals, Attorneys
for Appellee Vicki Kincaid
JUDGE MICHELE M. CHRISTIANSEN FORSTER authored this Opinion,
in which JUDGES DAVID N. MORTENSEN and DIANA HAGEN
concurred.
CHRISTIANSEN FORSTER, Judge:
¶1 Black Diamond Financial LLC (Black Diamond) appeals
the district court’s grant of summary judgment in favor of Vicki
Kincaid, its grant of Big Cottonwood Pine Tree Water
Company’s (Big Cottonwood) motion to strike Black Diamond’s
supplemental disclosures, and its grant of summary judgment in
favor of Big Cottonwood on the issue of damages. We affirm.
Black Diamond v. Big Cottonwood
BACKGROUND
¶2 In the 1980s, the Pine Tree subdivision was built in Big
Cottonwood Canyon. Big Cottonwood is a nonprofit corporation
responsible for administering water rights to shareholders living
in Pine Tree. The water is supplied by Salt Lake City
Corporation pursuant to a Water Supply Permit and Agreement
entered in 1984.
¶3 When Big Cottonwood was established, its bylaws stated
that each lot-owner, or “member,” would be issued a share of
stock that would entitle them to connect only their own cabin to
the main water line. The member’s lot number was to “be
specified on the share certificate” and was to “be transferable
only at such time as said lot is transferred and only to the
transferee or transferees of said lot.” If a share certificate was
surrendered for transfer, Big Cottonwood was to cancel the
certificate and issue a new one, but it was not permitted to issue
a new certificate “until the former certificate for a like number of
shares shall have been surrendered and cancelled.” The bylaws
further provided that shares are “not transferrable to another
lot” and that “if [a] member, at the time of transfer of [a] lot,
does not transfer the share to the transferee of the lot, ownership
of the share shall automatically revert to” Big Cottonwood,
which would “hold the share for the benefit of the transferee or
subsequent transferee of said lot.” As a matter of practice, Big
Cottonwood “did not implement any system for checking the
title of a particular lot when it was asked to issue a new water
share stock certificate” but instead “simply assumed that the
person asking for the new water share also had an interest in the
property.”
¶4 In 2005, Steven Rollins obtained Lot 25 in Pine Tree, along
with its water share, represented by Share Certificate No. 59.
Between 2003 and 2009, Rollins and the previous owners of Lot
25 paid Big Cottonwood assessments on the water share and
used the water. At the time he purchased Lot 25, Rollins was in a
relationship with Kincaid. Rollins borrowed money from
20190237-CA 2 2020 UT App 90Black Diamond v. Big Cottonwood
Kincaid to remodel the property and promised to repay her out
of the proceeds when the property was sold. When Rollins was
unable to sell the property for a satisfactory price, he entered
into a new agreement with Kincaid in which he agreed, among
other things, to transfer his water share to her in exchange for
forgiving the loan. At the time, “both Rollins and Kincaid . . .
were unaware of the provisions of [Big Cottonwood’s] Articles
and Bylaws that prohibited Rollins from conveying to Kincaid
his share of [Big Cottonwood] stock unless he also conveyed to
her title to Lot 25.”
¶5 Rollins signed the water share for Lot 25 over to Kincaid,
and she asked Big Cottonwood to issue a new share in her name.
After Kincaid paid a processing fee, Big Cottonwood canceled
Rollins’s Share Certificate No. 59 and issued Share Certificate
No. 63 to Kincaid.
¶6 In 2011, Rollins’s lender foreclosed on Lot 25. The lender
began marketing the property but was soon informed that the
water share had previously been transferred to Kincaid and that
Lot 25 therefore had no water service. In 2013, Black Diamond
expressed interest in purchasing Lot 25. The real estate agent
“informed Black Diamond that the property did not come with
water, but Black Diamond pursued the matter anyway, hoping
to get the property for a much lower price.” Black Diamond
believed that it could obtain water from another source but also
had a “‘common sense’ understanding . . . that water shares in
the Pine Tree Subdivision ‘had to stay’ with the land” so that if it
“became the owner of the lot it would have some right to the
water.”
¶7 After failing to obtain water through other means, Black
Diamond sued Big Cottonwood and Kincaid, (1) seeking a
declaratory judgment that Rollins’s transfer of the water share to
Kincaid was void, that the share automatically reverted back to
Big Cottonwood upon the attempted transfer, and that Big
Cottonwood must issue the share to Black Diamond; (2)
asserting that Big Cottonwood breached its articles and bylaws
20190237-CA 3 2020 UT App 90Black Diamond v. Big Cottonwood
and its duty of good faith by issuing Share Certificate No. 63 to
Kincaid and that Black Diamond, as a third-party beneficiary of
the contract, suffered losses as a result; and (3) asserting that
Kincaid intentionally interfered with Black Diamond’s potential
economic relationships by refusing to transfer her water share to
Black Diamond.
¶8 Black Diamond provided initial disclosures in which it
stated that it had not yet calculated its damages. The disclosures
asserted that one of Black Diamond’s intended witnesses, its
principal Brandon Wixom, would testify regarding damages.
When deposed, Wixom was asked how he had been damaged.
He responded, “I cannot occupy and use the property. I cannot
rent the property. Several ways we have been damaged . . . . I
cannot market the property to sell. . . . Quiet enjoyment, use all
the privileges that a landowner should have, I am unable to
have.” When asked more specifically how he would calculate
damages, he responded that “it could be done very easily” based
on “lack of rent for . . . X amount per month, over the time that
it’s been unable to be rented.”
¶9 Kincaid moved for summary judgment on the ground
that she was a protected purchaser under Utah Code section
70A-8-303. Black Diamond and Big Cottonwood filed cross
motions for partial summary judgment on Black Diamond’s
breach of contract claim. The district court granted summary
judgment in favor of Kincaid on Black Diamond’s claims against
her because it agreed with Kincaid that she was a protected
purchaser. On the other hand, the district court granted
summary judgment in favor of Black Diamond on the breach of
contract issue, concluding that Black Diamond was a third-party
beneficiary under the bylaws, that Big Cottonwood had
breached the bylaws, and that Big Cottonwood was therefore
liable for any damages caused by the breach. The court
determined that specific performance was not available because
Kincaid was a protected purchaser but left open the question of
what damages Black Diamond sustained as a result of the breach
of contract.
20190237-CA 4 2020 UT App 90Black Diamond v. Big Cottonwood
¶10 Following the court’s ruling on summary judgment and
after the close of fact discovery, Black Diamond served
supplemental disclosures on Big Cottonwood, which included a
new theory and computation of damages based on the
devaluation of Lot 25 caused by the property’s lack of access to
water. Big Cottonwood moved to strike the supplemental
disclosures as untimely, asserting that the only method of
calculating damages that Black Diamond had ever provided was
Wixom’s deposition statement that he would calculate damages
based on “lack of rent for . . . X amount per month, over the time
that it’s been unable to be rented.” The district court granted Big
Cottonwood’s motion to strike and limited Black Diamond’s
argument and presentation of evidence of damages to “lost
rental value of the subject property.” 1
¶11 After completing expert discovery, Big Cottonwood
moved for summary judgment on the issue of damages,
asserting that Black Diamond had “suffered no recoverable
damages.” The district court granted Big Cottonwood’s motion,
concluding that Black Diamond sustained “no actual harm . . .
because the lack of water for Lot 25 was factored into the
purchase price.” Further, the district court concluded that Black
Diamond, having purchased Lot 25 knowing that it did not have
access to water, should have known “that Lot 25 was not
rentable without water” and could not have expected to “be able
to rent the property and generate rental income.” Because Black
Diamond could not establish that it had suffered damage, the
district court granted Big Cottonwood’s motion for summary
judgment and “awarded nominal damages in the amount of
1. We question whether the vague lost rent calculation provided
by Wixom in his deposition was sufficient to fulfill the disclosure
requirements of rule 26 of the Utah Rules of Civil Procedure.
However, since Big Cottonwood conceded that the court could
consider the lost rental value, we assume for purposes of our
decision that the disclosure was sufficient.
20190237-CA 5 2020 UT App 90Black Diamond v. Big Cottonwood
$1.00” based on Big Cottonwood’s “breach of its bylaws.” Black
Diamond now appeals.
ISSUES AND STANDARDS OF REVIEW
¶12 Black Diamond first argues that the district court erred in
granting summary judgment in favor of Kincaid on the issue of
whether she was a protected purchaser under the Utah Uniform
Commercial Code. “Because a district court’s ruling on summary
judgment is a question of law, we review it for correctness.”
Rupp v. Moffo, 2015 UT 71, ¶ 5, 358 P.3d 1060.
¶13 Next, Black Diamond asserts that the district court erred
in striking the supplemental disclosures it filed to supplement its
computation of damages against Big Cottonwood. “While
interpretations of the Utah Rules of Civil Procedure are
questions of law reviewed for correctness, we recognize that trial
courts have a great deal of deference in matters of discovery.”
Arreguin-Leon v. Hadco Constr. LLC, 2018 UT App 225, ¶ 15, 438
P.3d 25 (quotation simplified), cert. granted, 455 P.3d 1055 (Utah
2019). “We therefore review discovery orders for abuse of
discretion and will not find abuse of discretion absent an
erroneous conclusion of law or where there is no evidentiary
basis for the trial court’s ruling.” Id. (quotation simplified).
¶14 Finally, Black Diamond argues that the district court erred
in determining as a matter of law that it had failed to establish
any recoverable damages and was entitled only to nominal
damages. Again, we review the district court’s summary
judgment ruling for correctness. Rupp, 2015 UT 71, ¶ 5. 2
2. Big Cottonwood raised additional issues on cross-appeal.
However, Big Cottonwood asks us to address these issues only if
we “determine[] to reverse the judgment entered by the district
court.” Because we affirm the district court’s ruling on appeal,
(continued…)
20190237-CA 6 2020 UT App 90Black Diamond v. Big Cottonwood
ANALYSIS
I. Kincaid Was a Protected Purchaser
¶15 Black Diamond first argues that the district court erred in
concluding that Kincaid was a protected purchaser under Utah
Code section 70A-8-303. A protected purchaser acquires “the
rights of a purchaser” as well as “the purchaser’s interest in the
. . . share of stock in a water company free of any adverse claim.”
Utah Code Ann. § 70A-8-303(2) (LexisNexis 2019). 3
“Protected purchaser” means a purchaser of a
certificated or uncertificated security, or of an
interest in the security, who:
(a) gives value;
(b) does not have notice of an adverse claim to the
security;
(c) obtains control of the security; and
(d) for a share of stock issued by a land company
or a water company:
(…continued)
we find it unnecessary to address the issues raised by Big
Cottonwood on cross-appeal.
3. Kincaid points out that this version of the statute was not
enacted until 2016 and asserts that the district court should have
used the less stringent version of the statute in effect in 2010 to
determine whether she was a protected purchaser. However,
this issue was not raised below, and we find it unnecessary to
consider it on appeal, because we agree with the district court
that Kincaid was a protected purchaser even under the current
version of the statute.
20190237-CA 7 2020 UT App 90Black Diamond v. Big Cottonwood
(i) pays, or whose predecessors in interest
paid, an assessment levied against the
share of stock for at least four of the
immediate past seven years by the land
company or the water company; or
(ii) has used, or whose predecessors in
interest have used, either directly or
indirectly, the water available under the
share of stock issued by a water
company for at least four of the
immediate past seven years.
Id. § 70A-8-303(1).
¶16 Black Diamond concedes that Kincaid met the first three
elements of the protected purchaser definition but asserts that
she neither paid assessments nor used the water for seven years
prior to learning of Black Diamond’s adverse claim. The district
court rejected this argument because Rollins and the couple from
whom he purchased Lot 25 paid assessments and used the water
for seven years prior to Kincaid obtaining the water share.
¶17 Black Diamond asserts that previous owners of Lot 25
cannot be considered Kincaid’s predecessors in interest because
they held different numbered share stock certificates from
Kincaid as a result of Big Cottonwood’s practice of revoking old
water share certificates and reissuing new certificates to the new
owner each time the property was transferred. Because Kincaid’s
Share Certificate No. 63 was a new certificate, Black Diamond
asserts that she had no predecessor in interest.
¶18 But the share stock certificate is not the property itself;
rather, it documents an individual’s property interest in the
share, just as deeds and title certificates document interests in
real or personal property. See Stock Certificate, Black’s Law
Dictionary (11th ed. 2019) (defining “stock certificate” as an
“instrument evidencing ownership of shares of stock” (emphasis
20190237-CA 8 2020 UT App 90Black Diamond v. Big Cottonwood
added)); see also Eisner v. Macomber, 252 U.S. 189, 208–10 (1920)
(explaining that a stock certificate is “but the evidence” of the
stockholder’s interest and that therefore new stock certificates
issued in proportion to the stockholder’s previous holdings did
not represent a gain to the stockholder); Linder v. Utah S. Oil Co.,
269 P.2d 847, 852 (Utah 1954) (explaining that issuing new stock
certificates “does not modify the property rights”). Such
documents are nearly always issued anew upon transfer of
property because they must identify the owner of the property
interest by name. See Issuance by Corporation of New Stock
Certificates Without Requiring Surrender of Old, 61 A.L.R. 436(1929) (explaining that “[o]ne of the usual requirements in the
reissue of corporate stock is the surrender of the old certificate”
and that a new certificate “affirms that a designated person is
entitled to a certain number of shares of stock,” thereby attesting
that the person “is an owner and has capacity to transfer the
shares”). The fact that Big Cottonwood issued a new share
certificate to evidence Kincaid’s interest in Lot 25’s water share
has no more significance to the chain of title than the issuance of
a new deed to someone who purchases a home. A property
owner’s predecessors in interest are those who had a prior
interest in the property at issue, not the certificate evidencing the
property ownership.
¶19 In this case, there is no question that Share Certificate No.
63 evidenced water rights in Lot 25. Although the certificate did
not explicitly refer to Lot 25, Big Cottonwood’s bylaws provided
for one water share per lot. Shares could not be transferred to
other lots, and new share certificates could not be issued until an
old one was surrendered or canceled. Share Certificate No. 63
was issued to Kincaid upon the cancellation of Rollins’s Share
Certificate No. 59, which stated that it was attached to Lot 25.
Thus, it is clear that the water share held by Kincaid was the
same water share held by the previous owners of Lot 25. Given
these circumstances, we agree with the district court that Rollins
and the prior owners were predecessors in interest to Kincaid’s
water share regardless of the fact that they held separate share
certificates. Because it is undisputed that Kincaid’s predecessors
20190237-CA 9 2020 UT App 90Black Diamond v. Big Cottonwood
both paid assessments and used the water from 2003 through
2009, the fourth element of the protected purchaser statute is
fulfilled. The district court therefore correctly granted summary
judgment in favor of Kincaid on the protected purchaser issue.
II. The District Court Did Not Exceed Its Discretion in Striking
Black Diamond’s Supplemental Disclosures
¶20 Black Diamond next challenges the district court’s grant
of Big Cottonwood’s motion to strike its supplemental
disclosures. “Rule 26 of the Utah Rules of Civil Procedure
requires litigants to make initial disclosures of certain fact
witnesses, documents, and other information.” Sleepy Holdings
LLC v. Mountain West Title, 2016 UT App 62, ¶ 12, 370 P.3d 963.
Among the required disclosures are “a computation of any
damages claimed and a copy of all discoverable documents or
evidentiary material on which such computation is based.” Utah
R. Civ. P. 26(a)(1)(C). In other words, both “the fact of damages
and the method for calculating the amount of damages must be
apparent in the initial disclosures.” Sleepy Holdings, 2016 UT App
62, ¶ 14 (quotation simplified). “When a party fails to make
timely disclosure, the district court is required to impose
discovery sanctions on that party unless the failure to disclose is
harmless or the party shows good cause for the failure to
disclose.” Bodell Constr. Co. v. Robbins, 2009 UT 52, ¶ 35, 215 P.3d
933 (quotation simplified).
¶21 In Sleepy Holdings, this court considered a similar case in
which the district court had granted a defendant’s motion to
strike the plaintiff’s late-filed supplemental disclosures and
precluded it from presenting evidence of damages based on
those disclosures. 2016 UT App 62, ¶¶ 5–6. The plaintiff asserted
that it had timely disclosed its damages theories and calculation
because it stated in its complaint that it had entered into a
contract “for the sale of twenty (20) lots for the purchase price of
$2,000,000.” Id. ¶ 15 (quotation simplified). This court rejected
the plaintiff’s assertion because the complaint did “not identify
the failed sale as damages or offer a computation or method of
20190237-CA 10 2020 UT App 90Black Diamond v. Big Cottonwood
calculating the damages as required by law,” id. ¶ 17, explaining
that “the contract price represents only one element of the
damage calculation” for determining “loss of bargain damages,”
id. ¶ 16 (quotation simplified). This court further upheld the
district court’s determination that the disclosure after fact
discovery had closed “would prejudice the defendant, who
could no longer conduct discovery to rebut those damage
theories.” Id. ¶ 26.
¶22 Like the Sleepy Holdings plaintiff, Black Diamond contends
that the damages asserted in the supplemental disclosures had
been disclosed before the fact discovery deadline: “Big
Cottonwood was made aware of these calculations and damages
theories from the outset of the case and through the course of
fact discovery . . . .” But Black Diamond’s supplemental
disclosures asserted two alternative methods of valuation,
neither of which was disclosed prior to the supplemental
disclosures: (1) an expert calculation of devaluation based on
“the value of the property with and without the water share that
Big Cottonwood should have issued to plaintiff” and (2) the
value of the water share. There is nothing in the complaint,
initial disclosures, or Wixom’s deposition that would have
properly alerted Black Diamond to either of these valuation
methods.
¶23 With respect to the first method, Black Diamond points to
(1) statements by Wixom in his deposition that he could not
occupy or use the property, that he could not “market the
property to sell,” and that he had been damaged in “several
ways” and (2) statements in Black Diamond’s complaint that it
had “been unable to access water on Lot 25, rendering worthless
Lot 25, including the home constructed thereon”; that “Big
Cottonwood’s actions are precluding Black Diamond from
using, enjoying, renting, or selling Lot 25”; and that “Black
Diamond’s losses also include the funds spent to purchase the
property and the value of the property had water been available
on the property.” But the district court correctly concluded that
none of those statements offered adequate notice to Big
20190237-CA 11 2020 UT App 90Black Diamond v. Big Cottonwood
Cottonwood of Black Diamond’s claimed damages and method
of computing them. The only statement that comes close is the
last statement that Black Diamond’s losses include the money it
spent on the property and the value of the property with water
rights. But like the parties agreeing to a purchase price of $2
million in Sleepy Holdings, the money spent on the property and
the property’s value with water do not represent every “element
of the damage calculation.” See id. ¶ 16. Black Diamond’s
supplemental disclosures stated that an expert would calculate
devaluation using “the value of the property with and without
the water share that Big Cottonwood should have issued to
plaintiff.” (Emphasis added.) But the complaint says nothing
about devaluation or how the value of the property without the
water share comes into play.
¶24 With respect to the second valuation method, Black
Diamond refers to a statement in its complaint that Kincaid had
insisted that it purchase her water share for $300,000. Further,
Black Diamond cites evidence throughout the record in which
Kincaid asserts that the water share is worth $300,000. But Black
Diamond’s bare statement in its complaint about Kincaid’s offer
to sell the water share for a certain price was unconnected to any
assertion of damages and cannot be construed as a computation.
Likewise, Black Diamond cannot rely on Kincaid’s statements
about the value of the water—statements made by an opposing
party—to excuse its obligation to disclose its damages and the
method of computing them.
¶25 Black Diamond next asserts that even if it did not timely
disclose its damages theories and method of calculating its
damages, it should be permitted to proceed because Big
Cottonwood was not prejudiced by the late disclosure. Black
Diamond argues that even if its disclosures did not comply with
rule 26, the vague statements by Wixom regarding his inability
to use, enjoy, occupy, and sell the property or to access water
should have put Big Cottonwood on notice that Black Diamond
intended to pursue damages related to the value of the water
and the devaluation of the property. Black Diamond suggests
20190237-CA 12 2020 UT App 90Black Diamond v. Big Cottonwood
that Big Cottonwood could have asked Wixom further questions
about those alleged damages at the deposition and conducted
discovery relating to possible computations that might relate to
those damages. But “any ability on the part of [Big Cottonwood]
to guess at potential damages does not free [Black Diamond]
from its obligation to disclose a computation of damages.” See
Keystone Ins. Agency v. Inside Ins., 2019 UT 20, ¶ 20, 445 P.3d 434;
see also RJW Media Inc. v. Heath, 2017 UT App 34, ¶¶ 29–30, 392
P.3d 956 (“An insufficient disclosure by one party does not shift
the burden and risk to resolve the insufficient disclosure to the
other party . . . .”); cf. Arreguin-Leon v. Hadco Constr. LLC, 2018
UT App 225, ¶ 19, 438 P.3d 25 (rejecting the argument that an
opportunity for a deposing party “to ask anything it wants to
during [a] deposition” removes limitations on the scope of the
testimony at trial), cert. granted, 455 P.3d 1055 (Utah 2019).
Indeed, “[d]isclosure of specific facts and opinions is required so
that parties can make better informed choices about the
discovery they want to undertake or, just as important, what
discovery they want to forgo.” RJW Media, 2017 UT App 34, ¶ 25.
Big Cottonwood could not be expected to devote time and
resources to discovery regarding undisclosed damages theories
and computations based on conjecture that Black Diamond
might like to pursue them down the road.
¶26 Black Diamond also asserts that Big Cottonwood did not
need additional fact discovery to defend against its damages
claims and that Big Cottonwood could still gather evidence
through expert discovery, as that deadline had not yet passed.
But Big Cottonwood points to several pieces of fact discovery it
would have pursued had it known that Black Diamond intended
to seek damages based on the value of the water right or the
difference in the value of the property with and without the
water right:
[Big Cottonwood] would have conducted
discovery on the availability of water in the area
through [Big Cottonwood] and other sources, the
ability of Black Diamond to connect to other water
20190237-CA 13 2020 UT App 90Black Diamond v. Big Cottonwood
sources, efforts (or the lack thereof) by Black
Diamond to obtain water from alternative sources,
and the cost of connecting to water from other
sources. [Big Cottonwood] would have also
explored the existence and value of other
properties in the area with and without water
shares, the existence of any open market for water
shares, and the history of transactions in the area
involving water shares.
The district court therefore did not exceed its discretion in
concluding that the need for additional fact discovery relating to
the undisclosed damages theories would be harmful to Big
Cottonwood if the late disclosure were allowed.
III. The District Court Did Not Err in Granting Big Cottonwood’s
Motion for Summary Judgment with Respect to Damages
¶27 Finally, Black Diamond asserts that the district court erred
in granting Big Cottonwood’s motion for summary judgment
with respect to damages based on its determination that the
damages claimed by Black Diamond were not foreseeable as a
matter of law.
¶28 The district court concluded “that there has been no
actual harm sustained by Black Diamond because the lack of
water for Lot 25 was factored into the purchase price and may
have even been used by Black Diamond as a bargaining chip in
negotiating the purchase price.” “Black Diamond purchased Lot
25 without water, and Black Diamond knew it did not acquire
the water share for Lot 25 at the time of the purchase.” The court
also determined that “[b]ecause Black Diamond purchased Lot
25 without any water share, it was not foreseeable that the
purchase by itself would result in rental income from the
property unless and until Black Diamond went and found a way
to bring culinary water needed for that property.”
20190237-CA 14 2020 UT App 90Black Diamond v. Big Cottonwood
¶29 We agree with the district court that Black Diamond has
not demonstrated that it suffered any damages as a result of Big
Cottonwood’s breach. Although it may have been foreseeable
that an unsuspecting transferee would suffer damage as a result
of Big Cottonwood’s erroneous transfer of the water right to
Kincaid, it was not foreseeable that a transferee who purchased
the property with full knowledge of the defect, at a price that
took the lack of water rights into account, would suffer damages.
And indeed, as the court observed, Black Diamond did not
suffer any actual damages as a result of the breach. Essentially,
Black Diamond is asking us to classify the windfall it hoped to
receive by purchasing the property without a water share and
then pursuing a lawsuit to recover the water rights as
consequential damages. And like the district court, we are not
inclined to do so.
¶30 Many courts have rejected similar damages claims where
the plaintiff took title to property with full knowledge of a
defect. See, e.g., Riffle v. United Gen. Title Ins., 984 S.W.2d 47, 49–
50 (Ark. Ct. App. 1998) (holding that a plaintiff could not recover
on a title insurance policy when it had purchased the property
with actual notice that the property lacked an easement); Arden
Hills N. Homes Ass’n v. Pemtom, Inc., 475 N.W.2d 495, 501 (Minn.
Ct. App. 1991) (upholding a trial court’s determination that
subsequent purchasers with notice of a construction defect were
not entitled to a share of the recovery against the developer),
aff’d, 505 N.W.2d 50 (Minn. 1993); Jablonsky v. Klemm, 377 N.W.2d
560, 569–70 (N.D. 1985) (explaining that buyers in a condo
association who purchased with knowledge that a retaining wall
had failed “consented to the wrongful action by the outsider”
and barred themselves from recovery (quotation simplified));
Meadowbrook Condo. Ass’n v. South Burlington Realty Corp., 565
A.2d 238, 241 (Vt. 1989) (holding that individuals who purchased
condo units after defects in roads and carports became apparent
were not entitled to recover). Such courts reason that “[i]n the
absence of evidence to the contrary, the price the subsequent
purchasers paid presumably reflected the existence of the patent
defect.” Arden Hills, 475 N.W.2d at 501; see also Riffle, 984 S.W.2d
20190237-CA 15 2020 UT App 90Black Diamond v. Big Cottonwood
at 50 (“[T]he purchase amount tends to reflect due regard for the
problem of access. Appellants received what they bargained for
and cannot now claim that they have suffered damages.”).
¶31 In this case, it is clear that Black Diamond purchased Lot
25 knowing full well that it did not come with any water share.
In fact, Wixom represented at the time, “We understand the risk,
we are willing, ready, and able to close on this property right
away.” Black Diamond knew or should have known that its
ability to use the property would be limited by the lack of water
and that it would likely be unable to sell or rent the property
unless it obtained water from some other source. The fact that
Black Diamond hoped to obtain the water rights for Lot 25
through litigation and then failed to do so does not give rise to a
claim of damages. Thus, the district court did not err in granting
only nominal damages to Black Diamond.
CONCLUSION
¶32 The district court did not err in granting summary
judgment in favor of Kincaid because she was a protected
purchaser at the time she acquired the water share. Further the
district court did not exceed its discretion in striking Black
Diamond’s supplemental disclosures as untimely. Finally, the
district court did not err in granting summary judgment in favor
of Big Cottonwood on the issue of damages and awarding only
nominal damages to Black Diamond. Accordingly, we affirm.
20190237-CA 16 2020 UT App 90