Fisher v. Davidhizar

491 P.3d 110

Darwin C. FISHER, Cheryl Fisher, David Fisher, and Office Management Consultants LC, Appellants,

v.Lavern DAVIDHIZAR, Appellee.

No. 20190769-CA

Court of Appeals of Utah.

Filed April 1, 2021

Emily Adams, Freyja Johnson, Salt Lake City, and Cherise Bacalski, Attorneys for Appellants

Duane L. Ostler, Attorney for Appellee

Judge Diana Hagen authored this Opinion, in which Judges Michele M. Christiansen Forster and David N. Mortensen concurred.

Opinion

HAGEN, Judge:

¶1 This is the third appeal arising from a 2001 business dispute. In an attempt to resolve that dispute, David Fisher (David) and Lavern Davidhizar (Lavern) entered into a settlement agreement.¹ When Lavern later disavowed the agreement, David sued him for breach of contract. In response, Lavern alleged, both as an affirmative defense to the contract claim and as a counterclaim for damages against David, that David had fraudulently induced him to enter the settlement agreement. The district court initially granted summary judgment in favor of David on his breach of contract claim, awarded damages, and dismissed Lavern's counterclaims. Lavern appealed, and in Fisher v. Davidhizar (Fisher I ), 2011 UT App 270, 263 P.3d 440, this court reversed and remanded for trial on Lavern's fraudulent inducement claim.

¶2 In the meantime, David had declared bankruptcy and his parents, Darwin and Cheryl Fisher (the Fishers), had purchased his claims from the bankruptcy estate. At trial, a jury found that David had fraudulently induced Lavern to enter the settlement agreement, and it awarded damages to Lavern. Reasoning that by purchasing David's claims the Fishers had also assumed liability for the counterclaim, the district court entered judgment against the Fishers for the damages awarded on Lavern's counterclaim, together with attorney fees. David was not named as a judgment debtor. This time the Fishers appealed, and in Fisher v. Davidhizar (Fisher II ), 2018 UT App 153, 436 P.3d 123, this court reversed, holding that the Fishers did not assume liability for Lavern's counterclaim. We vacated the fraud damages award against the Fishers and remanded to the district court to determine whether Lavern was still entitled to an attorney fees award against the Fishers as the prevailing party. David was not a party to Fisher II .

¶3 On remand, the district court ruled that Lavern was still the prevailing party as to the Fishers. The court entered an amended judgment that not only assessed attorney fees against the Fishers but also added David as a judgment debtor on the counterclaim. The Fishers and David now appeal the amended judgment. We conclude that the authority cited by the district court did not allow it to add David to the judgment on remand. However, the district court correctly ruled that Lavern was the prevailing party as to the Fishers. Accordingly, we reverse in part and affirm in part.

BACKGROUND

¶4 David and his business partner owned and operated Office Management Consultants LC (OMC), which leased tables to medical providers for use in treating disc decompression. In 2001, Lavern contributed $100,000 to help OMC finance two tables, but a dispute arose over whether Lavern had a partnership interest in the tables. Through David, OMC and Lavern entered into a settlement agreement to resolve the dispute. The settlement agreement "transferred ownership of OMC, the tables, and some of OMC's assets to [Lavern] in return for [Lavern] assuming OMC's debt and certain other financial obligations." Fisher I , 2011 UT App 270, ¶ 2, 263 P.3d 440.

¶5 Shortly thereafter, Lavern terminated the settlement agreement, and David sued him for breach of contract. Lavern did not dispute that he had breached the settlement agreement but asserted as an affirmative defense that his breach was justified by David's fraudulent behavior. Specifically, he claimed that David had induced him to enter into the settlement agreement by making misrepresentations about the amount of income generated by the tables under contract and the status of those client accounts. In addition to raising fraudulent inducement as an affirmative defense, Lavern brought counterclaims against David, seeking damages for fraud, fraudulent inducement, and negligent misrepresentation (collectively, Lavern's fraud claims).

¶6 David filed a motion for summary judgment on his breach of contract claim, which the district court granted, reserving the issue of damages for a bench trial. The court also dismissed Lavern's fraud claims for failure to plead them with particularity. At the bench trial, the court awarded over $800,000 in damages to David on his breach of contract claim. Lavern appealed. We reversed the district court's dismissal of Lavern's fraud claims and vacated its judgment and damages award. See id. ¶ 12.

¶7 Before the district court set the matter for trial on remand, David filed for bankruptcy. The Fishers purchased "David's interest in any proceeds from the lawsuit" from the bankruptcy estate. The Fishers were then substituted as plaintiffs in this case, leaving David as the only named counter-defendant. Lavern filed a motion to clarify the Fishers’ liability; the district court ruled that the Fishers’ "agreement conveyed David's entire legal share in the present case," which included David's "liabilities and risks."

¶8 The case proceeded to trial on Lavern's fraud claims. The jury was instructed that the court had already determined Lavern had breached the settlement agreement and the amount of damages incurred. The court asked the jury to determine whether Lavern had been induced to enter into the settlement agreement by fraud, fraudulent inducement, or negligent misrepresentation. The jury found by clear and convincing evidence that David "committed fraud on Lavern," that Lavern was entitled to economic damages in the amount of $78,600, and that "Lavern should be excused from any contract damages on the basis of [f]raudulent [i]nducement" as well as "negligent misrepresentation."

¶9 Following the jury verdict, the court entered a judgment, which stated in relevant part:

1. The [settlement agreement] is rescinded/void.

2. [Lavern] is excused from any damages on Plaintiff's contract claims, and therefore Plaintiff's claims against [Lavern] are dismissed with prejudice as a matter of law.

3. Judgment is entered in favor of Lavern Davidhizar jointly and severally against [the Fishers], and [OMC] in the amount of $78,600 on [Lavern's] counterclaim for fraud, together with reasonable attorney fees [and costs].

4. This Judgment represents the final judgment in this case.

¶10 The Fishers appealed, contending that the district court erred in holding them liable on Lavern's counterclaim. David was not a party to Fisher II , and Lavern did not cross-appeal. We reversed, concluding that the Fishers did not assume liability for the counterclaim when they purchased David's claims from the bankruptcy estate. See Fisher II , 2018 UT App 153, ¶ 18, 436 P.3d 123. We then remanded to the district court "for the limited purpose of determining if either party is entitled to attorney fees as the prevailing party." Id. ¶ 22.

¶11 On remand from Fisher II , the district court found Lavern was the prevailing party as to the Fishers. The court found that "on the breach of contract claim and damages, there was a draw." But the court declined to "isolate only [Lavern and the Fishers] to determine the prevailing party" and instead proceeded to "consider the case in its entirety," including Lavern's counterclaim against David. After considering the net judgment rule, various "common sense factors," and which party obtained a "comparative victory," the district court ruled that Lavern was the prevailing party and awarded attorney fees against the Fishers.

¶12 The district court entered an amended judgment, which reflected the attorney fee award.² But the amended judgment also added David as a judgment debtor on the fraud counterclaim, even though no motion had been filed seeking such relief. The amended judgment stated that it was entered (1) pursuant to rule 54(e) of the Utah Rules of Civil Procedure ; (2) as a result of the decision in Fisher II , which "modified ... the prior judgment, to remove liability of [the Fishers] for the ... counterclaim"; and (3) to "correct[ ] a clerical error," presumably under rule 60(a) of the Utah Rules of Civil Procedure, whereby David was "inadvertently" not named in the original judgment.

¶13 David moved to set aside the judgment against him, arguing that the court had impermissibly entered the amended judgment before the seven-day objection period had passed and that neither rule 54(e) nor rule 60(a) gave the court authority to amend the judgment to add him as a judgment debtor. The court denied that motion, referencing rule 61 of the Utah Rules of Civil Procedure and concluding that any error was harmless.

ISSUES AND STANDARDS OF REVIEW

¶14 David and the Fishers appeal, challenging the district court's denial of David's motion to set aside the amended judgment, the court's ruling that Lavern was the prevailing party as to the Fishers, and the sufficiency of the evidence supporting the damages awarded on Lavern's counterclaim.

¶15 We first address whether the authority invoked by the district court on remand allowed it to add David as a judgment debtor. "We review the district court's determination on jurisdictional issues for correctness, giving no deference to the district court's decision." Mardanlou v. Ghaffarian , 2015 UT App 128, ¶ 15, 351 P.3d 114.

¶16 Next, we address the district court's ruling that Lavern was the prevailing party as to the Fishers. We review a district court's determination of which party prevailed "under an abuse of discretion standard." See Olsen v. Lund , 2010 UT App 353, ¶ 5, 246 P.3d 521 (cleaned up).

¶17 Because we vacate the judgment against David and do not consider the counterclaim as part of the prevailing party analysis, we need not reach the sufficiency...