356 P.3d 188
Utah Ct. App.2015Background
- Baughs owned 20 acres in Weber County, Utah and were advised by a wetlands consultant that fill dirt violated wetlands rules.
- They added fill and leveled the property after that advice, without obtaining a wetlands permit or installation of a silt fence.
- Army Corps of Engineers inspected in 2005 and ordered removal of fill and silt fence; Baughs did not comply.
- In 2009, Favero purchased the property under a REPC requiring disclosures of known environmental or code problems and delivery in generally accepted agricultural condition; an abrogation clause preserved certain terms, others merged at closing.
- Favero discovered wetlands violations after closing and sued for breach of contract, warranty against encumbrances, and good-faith-and-fair-dealing; negligence and fraudulent misrepresentation claims were dismissed.
- Trial court found Breach of contract, breach of warranty against encumbrances, and breach of the implied covenant of good faith and fair dealing, and awarded damages and attorney fees to Favero.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Escrow Instructions vs REPC warranties | Favero's acceptance preserved REPC warranties. | Escrow Instructions and as-is language negate warranties. | Escrow preserved the REPC warranties; not an exclusive as-is acceptance. |
| Duty to disclose wetlands under REPC | Baughs breached by not disclosing wetlands or violations. | Favero waived disclosure objection by not objecting in writing. | Favero did not waive; breach found. |
| Covenant against encumbrances | Wetlands violations do not constitute encumbrance. | Such violations should be encumbrances only if discoverable or known. | Wetlands violation constitutes encumbrance; breach found. |
| Good faith and fair dealing | Non-disclosure could not injure Favero if no objection was made. | No breach if not injurious or waived. | Failure to disclose breached implied covenant. |
| Attorney fees on appeal | Contract allows prevailing party to recover fees, including on appeal. | Fees only at trial unless contract covers appeal. | Favero entitled to fees reasonably incurred on appeal. |
Key Cases Cited
- Holmes Dev., LLC v. Cook, 2002 UT 38 (Utah) (encumbrance analysis, burden or limitation on title)
- Brewer v. Peatross, 595 P.2d 866 (Utah) (encumbrance depends on discoverable or known burdens)
- Frimberger v. Anzellotti, 594 A.2d 1029 (Conn. App. Ct. 1991) (latent regulatory violations not encumbrances absent action)
- Flemetis v. McArthur, 226 P.2d 124 (Utah) (public statutes restricting use do not automatically breach warranty)
- Mortenson v. Financial Growth, Inc., 456 P.2d 181 (Utah) (warranty interpretation and encumbrance principles)
- Mason v. Loveless, 24 P.3d 997 (Utah App. 2001) (merger doctrine—deed controls after delivery)
- Iota, LLC v. Davco Mgmt. Co., 2012 UT App 218 (Utah) (clearly erroneous standard for factual disputes)
- Covey v. Covey, 80 P.3d 553 (Utah App. 2003) (contractual fee-shifting includes appellate fees)
- Meadow Valley Contractors, Inc. v. Utah Dep’t of Transp., 266 P.3d 671 (Utah) (contract interpretation de novo review)