McCleve Properties, LLC v. D. Ray Hult Family Ltd. Partnership
307 P.3d 650
Utah Ct. App.2013Background
- Marshall leased commercial premises from Hult (9‑year lease) containing: (1) a prohibition on assignment without Hult’s prior written consent and (2) a limited option to purchase requiring written notice and closing within 120 days (with a possible 60‑day extension).
- Marshall sent a notarized letter assigning the purchase option to McCleve; McCleve sent a notarized letter exercising the option and stating it needed a March 31, 2007 closing to complete a §1031 exchange.
- Hult replied acknowledging McCleve would “exercise your Purchase Option” and indicated an anticipated March 2007 closing without objecting to the lack of prior written consent or noting the 120‑day closing requirement.
- When McCleve attempted to close in March 2007, Hult refused, claiming the 120‑day closing period had expired; McCleve sued for specific performance and damages.
- The district court granted summary judgment to McCleve, finding Hult waived strict enforcement of the assignment and timing provisions; later it ordered specific performance, held Hult in contempt, and awarded certain damages (including income tax liability).
- On appeal the court affirmed summary judgment and denied awards for loss of use and amortization, but reversed/remanded the tax‑damage award for further analysis of foreseeability of consequential damages.
Issues
| Issue | McCleve (Plaintiff) Argument | Hult (Defendant) Argument | Held |
|---|---|---|---|
| Whether Hult waived strict lease requirements (assignment consent and 120‑day closing) | Hult’s November letter accepted McCleve’s exercise and proposed March closing; waiver may be implied from conduct | Hult says it never intended to waive and avers lack of knowledge of lease timing provision, creating factual dispute | Affirmed: waiver found as a matter of law from unambiguous written acceptance and conduct; summary judgment for McCleve affirmed |
| Whether income tax liability from failed §1031 exchange is recoverable | Damages were foreseeable because McCleve told Hult it intended a §1031 exchange when exercising the option | Such tax consequences are consequential damages and were not within contemplation of the original contracting parties (Marshall/Hult) | Reversed and remanded: court must analyze foreseeability under consequential‑damages standard before awarding tax damages |
| Whether McCleve proved loss‑of‑use damages (rental cash flow) | McCleve sought lost positive cash flow for delayed acquisition | Hult argued lack of foundation for McCleve’s spreadsheet and hypothetical figures | Affirmed denial: trial court found insufficient evidentiary foundation and McCleve did not contest that basis on appeal |
| Whether McCleve may recover amortization benefit for delayed acquisition | McCleve claimed lost principal reduction between March 2007 and July 2008 | Hult argued amortization was only delayed not lost; McCleve provided no evidence of actual loss (e.g., higher rates or PV loss) | Affirmed denial: delay did not demonstrate an actual loss and McCleve offered no evidence of net harm |
Key Cases Cited
- Peterson v. Coca‑Cola USA, 48 P.3d 941 (Utah 2002) (summary judgment standard)
- IHC Health Servs., Inc. v. D & K Mgmt., Inc., 73 P.3d 320 (Utah 2003) (waiver is fact‑dependent; appellate deference explained)
- Geisdorf v. Doughty, 972 P.2d 67 (Utah 1998) (requirements for waiver; strict compliance vs. waiver)
- Mid‑America Pipeline Co. v. Four‑Four, Inc., 216 P.3d 352 (Utah 2009) (waiver in contract context: acting inconsistently with rights causes prejudice)
- ASC Utah, Inc. v. Wolf Mountain Resorts, LC, 245 P.3d 184 (Utah 2010) (sophisticated parties charged with knowledge; ignorance of contract not a defense to waiver findings)
- Ranch Homes, Inc. v. Greater Park City Corp., 592 P.2d 620 (Utah 1979) (distinction between general and consequential damages for options)
- Beck v. Farmers Ins. Exch., 701 P.2d 795 (Utah 1985) (general vs. consequential damages and foreseeability requirement)