Chard v. Chard

456 P.3d 776

Stephanie D. CHARD and Training Table Restaurants Inc., Appellants and Cross-appellees,

v.Kent J. CHARD, Peter M. Ennenga, Don Sorensen, Training Table Land and Holding LC, and TT Three LC, Appellees and Cross-appellants

Thomas E. Lowe, Lowe Hutchinson & Cottingham PC, Appellees.

No. 20180585-CA

Court of Appeals of Utah.

Filed December 19, 2019

Andrew G. Deiss and John Robinson Jr., Salt Lake City, Attorneys for Appellants and Cross-appellees

Byron G. Martin and Steven M. Edmonds, Salt Lake City, Attorneys for Appellees and Cross-appellants Thomas E. Lowe and Lowe Hutchinson & Cottingham PC

Thomas R. Barton, Alex B. Leeman, and Mark O. VanWagoner, Salt Lake City, Attorneys for Appellees and Cross-appellants Kent J. Chard, Peter M. Ennenga, Don Sorensen, Training Table Land and Holding LC, and TT Three LC

Judge Ryan M. Harris authored this Opinion, in which Judges Jill M. Pohlman and Diana Hagen concurred.

Opinion

HARRIS, Judge:

¶1 Since December 2016, Utahns have no longer been able to order a hearty plate of chili cheese fries from a restaurant table telephone. This unfortunate circumstance resulted from the sudden closure of the Training Table restaurants, which had been open for business along the Wasatch Front since the late 1970s. The closure, in turn, was the result of a bitter intra-family dispute between a father and a daughter, both of whom owned a 50% interest in the restaurants. The dispute between them eventually reached the courts, when Stephanie D. Chard sued her father Kent J. Chard and various related individuals and entities. Kent¹ responded by filing a counterclaim, as well as causing two of his companies—which owned the land underneath the restaurants—to file a separate complaint seeking to evict the restaurants for non-payment of rent.

¶2 The landlord entities prevailed in the eviction proceedings, resulting in the closure of the restaurants. Later, the district court, on summary judgment, dismissed all of Stephanie’s claims against Kent and the other defendants, as well as all the counterclaims filed by Kent and the landlord entities. Both sides now appeal, and seek reinstatement of some of their dismissed claims. For the reasons set forth below, we affirm the dismissal of many of the claims, but reverse the district court’s dismissal of a few claims, at least one on each side, and remand for further proceedings.

BACKGROUND²

¶3 Kent, along with three other partners, founded the Training Table restaurant chain in 1977, and operated the restaurants through Training Table Restaurants Inc. (TTR). While TTR, at various times, had as many as ten restaurants, it did not own the real estate that any of the restaurants occupied. The underlying properties were owned by two limited liability companies—TT Three LC (TT3) and Training Table Land and Holding Company LC (TTL & H) (collectively, Landlords)—formed by Kent and in which Kent owned a significant interest.³ Over the years, and certainly during all relevant times, Landlords realized most of their income from the rents that TTR paid them, and Kent drew the bulk of his personal income from distributions from Landlords.

¶4 Because the restaurants were the family business, Stephanie had grown up around them, even working part-time for the business when she was a teenager, and had grown quite familiar with the restaurants, their locations, and their operation. In November 2012, Stephanie was a recent college graduate looking to formally enter the family business, and she used part of an inheritance to purchase a 50% interest in TTR from a third party for $100,000. The purchase price was derived from a professional appraisal of the business, which pegged the value of the entire business at $200,000. Upon completion of the purchase, Stephanie became a director of TTR and an equal partner with Kent in the restaurants (but acquired no interest in the properties or Landlords).

¶5 At that point in time, Kent was TTR’s president, and TTR’s board of directors consisted of Stephanie, Kent, Peter M. Ennenga, and Don Sorensen. Both Ennenga and Sorensen were longtime friends of and advisers to the Chard family, with Ennenga acting as a legal and business advisor, and Sorensen serving as the family accountant. Ennenga had been a licensed attorney until he was disbarred in 2001; after that, he continued to advise the Chard family, often through his new position as a paralegal for the law firm Lowe Hutchinson & Cottingham PC (LHC). For many years, LHC had served as TTR’s legal counsel, performing extensive work on Kent’s and TTR’s behalf. The parties agree that LHC and Ennenga represented Kent during the 2012 purchase transaction, but the parties disagree as to whether Ennenga also represented Stephanie for the purposes of that transaction.

¶6 On November 16, 2012, shortly after Stephanie acquired her interest in the restaurants, TTR’s board of directors held a meeting to discuss certain changes to the restaurant leases that Landlords had proposed, including an increase in the monthly rents that TTR would owe to Landlords. Across TTR’s five then-operating locations, the proposal would increase TTR’s monthly rent from $29,000 per month to $30,500 per month. All four members of TTR’s board participated in the meeting, including Stephanie and Kent. The decision to raise the rent was based on a recent appraisal of Landlords’ properties, and motivated by Landlords’ desire to keep the rent consistent with nearby locations. Stephanie, as a member of the board, had access to this appraisal, and would have been aware of the underlying reasons for the proposed rent increase. During the meeting, TTR’s board unanimously approved the proposed changes, which were memorialized in a series of written addenda (the Addenda) to the leases, and were made effective as of November 1, 2012.

¶7 Thereafter, TTR paid the increased monthly rent to Landlords, without complaint, for about three years. During this time, Kent continued to serve as TTR’s president, and both Kent and Stephanie continued to serve as members of its board of directors. In 2014, however, at Stephanie’s request, she was elevated to TTR’s chief operating officer, and assumed a greater role in the company’s day-to-day operations. A few months later, in January 2015, Kent stepped down as TTR’s president, and Stephanie took his place, thereby assuming complete control of TTR’s operations.

¶8 Soon after taking operational control of TTR, Stephanie began consulting with a different law firm (New Firm) regarding her family’s overall estate plan. Initially, New Firm represented the Chard family collectively, and also provided corporate advice to TTR through Stephanie. In December 2015, New Firm sent a letter to Kent recommending a business succession plan (the Succession Plan). Under the terms of the proposed Succession Plan, Stephanie would purchase the remaining interests in TTR and Landlords on an installment basis, thus allowing Kent an income and eventually giving Stephanie complete ownership and control of not only TTR, but of Landlords as well. New Firm proposed enacting the Succession Plan effective January 1, 2016.

¶9 After conferring with Ennenga and Sorensen, Kent determined that the Succession Plan was not in his best interest, and therefore rejected it. In response, Stephanie began exploring with New Firm how to put "pressure" on Kent to accept her proposal, telling New Firm to "get aggressive" and "unleash the beast." Stephanie and her lawyers eventually sent a letter to LHC, with a copy to Kent, stating that New Firm (rather than LHC) was now counsel to TTR, and requesting that Ennenga and Sorensen step down from TTR’s board of directors. In the letter, New Firm contended that Ennenga and Sorensen had conflicts of interest due to their ownership interests in TT3 and that Ennenga had been engaging in the unauthorized practice of law.

¶10 Stephanie knew that her strategy might not be well received, because Ennenga and Sorensen had been Kent’s friends and advisors for several decades. And, as it happened, Kent did not respond well to Stephanie’s demand: shortly after learning of it, Kent attempted suicide and was hospitalized for about two weeks. While Kent was recovering, Stephanie visited Kent in the hospital and brought documents for Kent to sign to effectuate the removal of Ennenga and Sorensen from the board of TTR. Kent refused to sign the documents.

¶11 In addition to sending a demand letter, Stephanie also directed TTR to begin withholding rent payments to Landlords, asserting generally that the rent amounts that had been approved in November 2012 were unfairly high. Specifically, she claimed that she had purchased her interest in TTR without meaningful legal representation, and that the Addenda had not been drafted and reviewed by an attorney prior to execution. Stephanie again floated the Succession Plan as a potential solution to these problems, and indicated that TTR would continue to withhold rent payments until the issues identified in the Succession Plan were resolved.

¶12 Kent was not opposed, in principle, to selling the business entities to Stephanie, but was of the view that the price Stephanie was offering was too low. After negotiations with Stephanie broke down, Landlords (at Kent’s direction) began shopping the properties to third parties. A few weeks later, after locating a third-party buyer, Kent informed Stephanie that Landlords had decided to accept a competing offer to purchase Landlords’ properties for a higher price than Stephanie had offered. Stephanie’s response was to file a lawsuit.

¶13 Stephanie’s lawsuit, as eventually amended, included claims against not only Kent, but also against Landlords, Ennenga, Sorensen, and LHC, and included claims personal to Stephanie, as well as derivative claims she purported to assert on behalf of TTR. The causes of action included breach of fiduciary duty, quiet title, failure to hold court-ordered shareholders meetings, unjust enrichment, judicial...