518 P.3d 175
Utah Ct. App.2022Background
- Neighbors Denise and Brook Larson and Corey and Nicola Stauffer settled an ejection suit by written Stipulation and Settlement Agreement: mutual release, Stauffer survey reliance, Denise to remodel/remove a shed “within six months,” and mutual restraints against harassment/disparagement.
- The Stauffer fence was to be moved to allow Denise access; Denise agreed to pay half the survey cost and the parties dismissed the prior suit. Brook was not a signatory to the Settlement.
- Denise removed the shed six months and four days after signing (forgoing a remodel); the Stauffers alleged structural poles still encroached and sued for nonperformance. The Larsons sued the Stauffers for breach of the harassment provision and for torts (intentional/ negligent infliction of emotional distress, private nuisance, trespass).
- The district court granted summary judgment for the Stauffers: it held Denise could not prove performance (she missed the six‑month deadline) and thus could not enforce the harassment provision, and it held the economic loss rule barred Brook’s tort claims. The court denied the Stauffers’ request for attorney fees under the Settlement.
- On appeal, the Court of Appeals reversed: it held substantial performance/material breach were fact issues for a jury (four‑day delay not categorically fatal) and that Brook’s claims were not barred by the economic loss rule because he was not a party to the Settlement; it also held the fee clause entitles the prevailing party to fees regardless of who filed suit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Denise could maintain breach of contract (enforce harassment provision) after missing the six‑month shed removal deadline | Denise: substantial performance exists; four‑day delay is a de minimis/technical defect and performance is a fact question | Stauffer: failure to remove within six months is nonperformance as a matter of law and defeats the performance element | Reversed — substantial performance and materiality are fact questions; summary judgment improper |
| Whether the first‑breach rule bars Denise’s claim (alternative ground) | Denise: whether any breach was material is a fact question; first breach not established as a matter of law | Stauffer: Denise’s prior breach excuses their obligations under harassment provision | Rejected — materiality is a fact question; first‑breach rule not resolved as matter of law |
| Whether Brook’s tort claims are barred by the economic loss rule | Larsons: Brook was not a party to the Settlement, so economic loss rule does not apply to bar his tort claims | Stauffer: tort claims arise from the same contract subject matter and thus are barred | Reversed — economic loss rule requires a contractual relationship between claimant and defendant; Brook was not party so rule does not bar his tort claims |
| Whether the Settlement’s fee clause permits prevailing defendant to recover fees | Stauffer: fee clause awards attorney fees to the prevailing party in any action to enforce the Settlement, regardless of who initiated suit | Larson (as court interpreted): clause applies only to the party seeking enforcement (i.e., the initiator) | Court of Appeals: fee clause awards fees to the prevailing party regardless of who initiated; fee award mandatory to prevailing party absent extraordinary circumstances |
Key Cases Cited
- Reliance Ins. Co. v. UDOT, 858 P.2d 1363 (Utah 1993) (definition of substantial performance and when deviations are "technical or unimportant")
- Bailey-Allen Co. v. Kurzet, 876 P.2d 421 (Utah Ct. App. 1994) (plaintiff need only substantially comply to satisfy performance element)
- Heslop v. Bear River Mut. Ins. Co., 390 P.3d 314 (Utah 2017) (summary judgment improper where reasonable differences of opinion on factual issue exist)
- Cross v. Olsen, 303 P.3d 1030 (Utah Ct. App. 2013) (discussing first‑breach rule and materiality inquiry)
- HealthBanc Int’l, LLC v. Synergy Worldwide, Inc., 435 P.3d 193 (Utah 2018) (economic loss rule requires contractual relationship between parties to bar tort claims)
- Reighard v. Yates, 285 P.3d 1168 (Utah 2012) (independent tort duty principle as measure of economic loss rule)
- Mind & Motion Utah Invs., LLC v. Celtic Bank Corp., 367 P.3d 994 (Utah 2016) ("shall" in contract interpreted as mandatory; contractual fee clauses generally enforceable)