415 P.3d 1174
Utah Ct. App.2018Background
- Christensen, Broadweave’s CEO, proposed and formed MCG to acquire a building and lease it back to Broadweave; the Board approved disclosures describing a 1.2 DSCR but Christensen later obtained financing requiring a 1.3 DSCR and executed a lease at 1.3.
- Broadweave later merged into Veracity, which assumed Broadweave’s assets and liabilities, including the lease.
- MCG sued Veracity in 2013 for breach of the lease, unlawful detainer, and waste. Veracity counterclaimed and filed a third-party complaint against Christensen, alleging Christensen breached fiduciary duties to Broadweave by negotiating a higher rent than the Board had approved, rendering the lease voidable.
- At summary judgment the district court found Veracity lacked standing to assert breach-of-fiduciary-duty claims owed to Broadweave (because the fiduciary duty ran to Broadweave, not Veracity) and granted judgment to MCG; the court awarded damages and fees.
- On appeal the Utah Court of Appeals reversed: it held the issue was one of assignability (not standing), and because Veracity pleaded—and MCG admitted—that Veracity was the successor to Broadweave’s claims and interests, Veracity could assert Broadweave’s fiduciary-duty claim; the grant of summary judgment was vacated and remanded.
Issues
| Issue | Plaintiff's Argument (MCG) | Defendant's Argument (Veracity) | Held |
|---|---|---|---|
| Whether Veracity may assert Broadweave’s breach-of-fiduciary-duty claim to challenge lease validity | Veracity lacks standing/authority to assert fiduciary claims owed to Broadweave; no explicit assignment document exists | Veracity is successor to Broadweave’s claims and interests and may assert Broadweave’s fiduciary claims to render the lease voidable | Reversed: this is a matter of assignability; parties admitted Veracity is successor to Broadweave’s claims, so Veracity may assert the claim |
Key Cases Cited
- Orvis v. Johnson, 177 P.3d 600 (Utah 2008) (standard of review for summary judgment).
- Victor Plastering, Inc. v. Swanson Bldg. Materials, Inc., 200 P.3d 657 (Utah Ct. App. 2008) (defendant generally has standing to defend suit against it).
- Garland v. Fleischmann, 831 P.2d 107 (Utah 1992) (judicial admissions in pleadings relieve party of proving admitted facts).
- Roberts v. Roberts, 335 P.3d 378 (Utah Ct. App. 2014) (effect of admissions: withdrawals from issue absent amendment).