Holladay v. Storey
2013 UT App 158
Utah Ct. App.2013Background
- In 2000 David Storey, Richard Holladay, and Jack Woodcock formed Castlerock Inn, LLC; Storey was the manager and each of the three held one-third interests. The Amended Operating Agreement (AOA) (2003) preserved Storey as manager.
- Appellees (Holladay and Woodcock) assumed management duties in mid‑2003; litigation between the parties began in 2003 with cross‑claims including claims for removal/expulsion, breach of fiduciary duty, conversion, unjust enrichment, accounting, and requests for dissolution or buyout under the Utah LLC Act.
- The trial court granted Storey partial summary judgment on his contractual right to be manager but later (after injunction and bench trial) found extensive mismanagement, misconduct, dishonesty, and breach of fiduciary duty by Storey.
- The court removed Storey as manager, expelled him as a member, and fixed the effective expulsion and valuation date at December 31, 2005 (backdated), based on parties’ conduct and equities; it valued Storey’s interest as of that date rather than at trial.
- The trial court denied punitive damages (reasoning retroactive valuation already compensated appellees) and denied appellees’ attorney fees for their fiduciary‑duty claim; both parties appealed the rulings.
Issues
| Issue | Plaintiff's Argument (Storey) | Defendant's Argument (Holladay/Woodcock) | Held |
|---|---|---|---|
| 1. May a court backdate a member’s expulsion? | Trial court erred; expulsion date must be date of judicial determination under the Act. | Court may set an earlier effective expulsion date tied to misconduct; Millsap permits judicially‑determined retroactive effect. | Affirmed: court may backdate expulsion; December 31, 2005 supported by findings. |
| 2. May a court retroactively fix valuation date for expelled member’s interest? | Valuation must be as of judicial determination (or dissolution); assignee status continues until then. | Court may set valuation date earlier where equities warrant to prevent windfall to expelled member. | Affirmed: court may set retroactive valuation date; December 31, 2005 appropriate. |
| 3. Did the court improperly enforce the mediation/stipulation and misinterpret the AOA? | Enforcement and some calculations produced manifest injustice and created nonexistent contractual provisions. | Mediation agreement was binding; AOA and Act permit court’s approach to expulsion/valuation. | Affirmed enforcement and valuation calculations; preserved‑issue and preservation failures limited review. |
| 4. Were punitive damages and fiduciary‑duty attorney fees available? | N/A (Storey opposed) | Appellees seek punitive damages and attorney fees for breach of fiduciary duty. | Reversed denial of punitive damages and reversed denial of attorney fees; remanded to determine entitlement and amounts. |
Key Cases Cited
- CCD, LC v. Millsap, 116 P.3d 366 (Utah 2005) (permits judicial expulsion and supports retroactive effect tied to wrongful conduct)
- Norman v. Arnold, 57 P.3d 997 (Utah 2002) (breach of fiduciary duty is an independent tort and can support punitive damages)
- d’Elia v. Rice Dev., Inc., 147 P.3d 515 (Utah Ct. App. 2006) (appellate court accepts unchallenged trial‑court factual findings as true)