Jensen v. Cannon

473 P.3d 637

Jodi JENSEN, Appellant and Cross-appellee,

v.Gary CANNON, Appellee and Cross-appellant.

No. 20190433-CA

Court of Appeals of Utah.

Filed August 27, 2020

Opinion

POHLMAN, Judge:

¶1 Jodi Jensen and Gary Cannon divorced in March 1998. More than a decade later, Jensen filed an independent action seeking relief from the parties’ divorce decree on the basis that Cannon failed to disclose certain assets during the divorce proceedings. The district court largely resolved the dispute in Cannon's favor through summary judgment and a bench trial. In this appeal and cross-appeal, Jensen and Cannon challenge several of the district court's rulings resolving Jensen's claims and denying Cannon's motions. We affirm the challenged rulings.

BACKGROUND

¶2 Jensen and Cannon married in 1987 and divorced in 1998. Before the parties divorced, they entered into a settlement agreement resolving "any and all disputes" regarding "the distribution of real and personal property acquired by them during the course of their marriage" and dividing identified assets. (Cleaned up.) The agreement was incorporated into the divorce decree.

¶3 Some years later, Jensen began to suspect that Cannon had not disclosed all of his assets during the divorce proceedings. She accordingly filed suit against Cannon in 2009, alleging that Cannon had committed fraud in not disclosing certain assets. After several years, that case was dismissed without prejudice by stipulation. In 2016, within one year of the dismissal, Jensen re-filed her complaint, again alleging that Cannon committed fraud by not disclosing certain assets during the divorce proceedings. She subsequently amended her complaint, adding claims for breach of the covenant of good faith and fair dealing, negligent misrepresentation, unjust enrichment, accounting, and fraudulent nondisclosure.

¶4 As relevant here, Jensen alleged that at the time of their divorce, Cannon held an interest in two assets: a 3.89-acre parcel of real property Jensen has identified on appeal as the Riverton Corners property and an option (the Option Agreement) to purchase a different 3.4-acre parcel of land Jensen has identified as the Green property. Jensen claimed that Cannon did not disclose either asset during the divorce proceedings.

¶5 Cannon moved for summary judgment on all Jensen's claims. He argued that Jensen's non-fraud claims should be dismissed because they constituted an "improper[ ] attempt to modify the divorce decree" and were untimely and improper under rule 60 of the Utah Rules of Civil Procedure. He also argued that Jensen could not prove her fraud-related claims by clear and convincing evidence. And he requested attorney fees pursuant to Utah Code section 78B-5-825, contending that Jensen's claims both lacked merit and were brought in bad faith.

¶6 The district court granted the motion in part and denied it in part. The court awarded Cannon judgment on some of Jensen's fraud-based claims but concluded that Jensen could "proceed with her [fraud] and [fraudulent nondisclosure] causes of action" with respect to the Riverton Corners and Green properties. The court also dismissed Jensen's claims for breach of the covenant of good faith and fair dealing, negligent misrepresentation, accounting, and unjust enrichment. The court rendered no ruling on Cannon's request for bad faith attorney fees in its summary judgment ruling.

¶7 The case proceeded to a bench trial. At the trial's conclusion, the court determined that Jensen had not carried her burden of proving her fraud claims by clear and convincing evidence. The court stated that the central issue on the fraud claims was whether Cannon knew the Option Agreement and the Riverton Corners property were assets "that he needed to disclose during the divorce." The court found that Cannon credibly testified that he did not know he was required to disclose those assets and that he therefore did not have the intent required for fraud.

¶8 The district court also denied Cannon's request for bad faith attorney fees under Utah Code section 78B-5-825. It determined that the case was "brought in good faith" and on that basis denied the request.

¶9 Finally, the district court also denied a motion filed by Cannon for sanctions against Jensen under rule 11 of the Utah Rules of Civil Procedure.¹ During the proceedings, Jensen had filed a motion in limine requesting that the court sanction Cannon under rule 37 of the Utah Rules of Civil Procedure for spoliation of the Option Agreement. She asked the court to presume that a physical copy of the Option Agreement once existed and to impose an adverse inference in her favor that had the document been disclosed, it would have shown that Cannon "had an ownership interest in the Green Property during the marriage that was not disclosed." The court denied Jensen's motion.

¶10 In response, Cannon filed a motion requesting that Jensen be sanctioned under rule 11 for filing the spoliation motion, claiming that at the time Jensen filed the motion she did not have, and was not likely to attain, evidentiary support for her contentions. See Utah R. Civ. P. 11(b)(3), (c) (providing that, by presenting a motion to the court, the attorney certifies that, having conducted a reasonable inquiry, "the allegations and other factual contentions have evidentiary support or ... are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery," and that an "appropriate sanction" may be imposed for a violation of subsection (b)). Following trial, the court determined that while there "may not be direct evidentiary support for" the contention that the Option Agreement had been in writing and that Cannon had spoliated the document, "there [were] inferences" supporting the contention, and on that basis denied Cannon's motion.

¶11 Jensen now appeals the district court's conclusion that she failed to prove her fraudulent nondisclosure claim with respect to the Option Agreement and the Riverton Corners property. She also appeals the court's dismissal of her non-fraud claims on summary judgment. Cannon cross-appeals, challenging the court's denial of his request for bad faith attorney fees and for rule 11 sanctions based on Jensen's spoliation motion. Cannon also requests attorney fees on appeal under rule 33 of the Utah Rules of Appellate Procedure.

ISSUES AND STANDARDS OF REVIEW

¶12 Jensen first challenges the district court's determination that she did not prove her fraudulent nondisclosure claim regarding the Riverton Corners property and the Option Agreement, arguing that the court misconstrued the elements of the claim. We review a district court's legal conclusions for correctness. See Reynolds v. MacFarlane , 2014 UT App 57, ¶ 11, 322 P.3d 755 ; see also Nielsen v. Spencer , 2008 UT App 375, ¶ 10, 196 P.3d 616 (stating that we review issues concerning the elements of a tort claim for correctness).

¶13 Jensen next challenges the district court's dismissal of her non-fraud claims on summary judgment. She argues that the district court erroneously dismissed those claims due to its misinterpretation of rule 60(d) of the Utah Rules of Civil Procedure. Summary judgment should be granted "if the moving party shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Utah R. Civ. P. 56(a). We review a district court's grant of "summary judgment for correctness, viewing the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." Penunuri v. Sundance Partners, Ltd. , 2017 UT 54, ¶ 14, 423 P.3d 1150 (cleaned up). And we review a district court's "interpretation of a rule of civil procedure for correctness." Lodge at Westgate Park City Resort & Spa Condo. Ass'n Inc. v. Westgate Resorts Ltd. , 2019 UT App 36, ¶ 18, 440 P.3d 793 (cleaned up).

¶14 On cross-appeal, Cannon challenges the district court's denial of his request for attorney fees under Utah Code section 78B-5-825. Under that section, a court in a civil action "shall award reasonable attorney fees to a prevailing party if the court determines that the action or defense to the action was without merit and not brought or asserted in good faith." Utah Code Ann. § 78B-5-825(1) (LexisNexis 2018). As relevant here, whether Jensen acted in good faith is a "question of fact," and we review the district court's determination on that point for clear error. See Bresee v. Barton , 2016 UT App 220, ¶ 15, 387 P.3d 536 (cleaned up); see also Rocky Ford Irrigation Co. v. Kents Lake Reservoir Co. , 2020 UT 47, ¶ 77 (affording a "substantial measure of discretion" to a district court's bad faith finding).

¶15 Finally, Cannon challenges the district court's denial of his motion for sanctions against Jensen under rule 11 of the Utah Rules of Civil Procedure. We review factual findings related to the rule 11 determination for clear error and the court's legal conclusions for correctness. See Gillmor v. Family Link, LLC , 2012 UT 38, ¶ 9, 284 P.3d 622 ; Westmont Mirador LLC v. Shurtliff , 2014 UT App 184, ¶ 8, 333 P.3d 369.

ANALYSIS

I. Jensen's Appeal

A. Fraudulent Nondisclosure

¶16 Jensen challenges the district court's determination that she did not prove all the elements of her fraudulent nondisclosure claim by clear and convincing evidence. "To prevail on a claim for fraudulent nondisclosure, a plaintiff must prove by clear and convincing evidence that (1) the defendant had a legal duty to communicate information, (2) the defendant knew of the information he failed to disclose, and (3) the nondisclosed information was material ." Anderson v. Kriser , 2011 UT 66, ¶ 22, 266 P.3d 819 (cleaned up); accord Hess v. Canberra Dev. Co. , 2011 UT 22, ¶ 29, 254 P.3d 161 ; Mitchell v. Christensen , 2001 UT 80, ¶ 9, 31 P.3d 572.

¶17 In evaluating Jensen's fraudulent nondisclosure claim, the district court determined that the "core issue" regarding the Option Agreement and the...