Telegraph Tower LLC v. Century Mortgage LLC
2016 UT App 102
Utah Ct. App.2016Background
- Borrowers (Telegraph Tower LLC; Christiansen and Harrell) contracted a $2.821M construction loan in 2010; Century Mortgage organized investors to fund the loan and acted as intermediary.
- Century Mortgage prepared and executed a Construction Loan Agreement (identifying multiple investors with percentage interests) and an Investors Agreement (describing Century as agent to gather information, prepare documents, and service the loan).
- Investors delivered their contributions to Century Mortgage, which commingled funds; Century later stopped disbursing funds and some proceeds were lost, halting construction and generating mechanic’s liens.
- Borrowers sued Investors and Century Mortgage for breach of the Construction Loan Agreement, breach of implied covenant, unjust enrichment, and sought joint and several liability among investors.
- The district court granted summary judgment for Investors, concluding investors had provided the funds to Century (satisfying obligations), investors were not jointly and severally liable, and limited investor liability to each investor’s promised contribution; Borrowers appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Century Mortgage acted as agent for Investors (so Investors are bound by Construction Loan Agreement) | Century: contract language and conduct show Century was Investors’ agent and signed/entered the Construction Loan Agreement on their behalf | Investors: Century was Borrowers’ agent or limited escrow/arranger; depositing funds with Century satisfied obligations | Agency is a factual question; district court failed to decide it; summary judgment vacated and remanded on agency issue |
| Whether Investors are jointly and severally liable for the $2.821M loan | Century/Borrowers: investors collectively promised one loan and thus are jointly liable for total performance | Investors: each promised a separate %/dollar amount (several liability); transaction is syndicated/several | Court affirmed: investors are not joint and several; obligations are several based on allocation percentages in the Construction Loan Agreement |
| Whether summary judgment was proper where funds were commingled and specific investor-fund linkage disputed | Borrowers: commingling and agency disputes create genuine issues of material fact precluding summary judgment | Investors: proof shows each investor provided its agreed share to Century, satisfying duties | Summary judgment was improper insofar as it rested on unresolved agency and factual inferences; remanded for further proceedings on those factual disputes |
| Whether damages are limited to each investor’s contractual contribution | Borrowers: court erred limiting damages; consequential damages may exceed contracted contributions and must be assessed by the three-prong test (existence, certainty, contemplation) | Investors: liability should be capped at each investor’s contractual contribution | Court erred to limit damages at summary judgment; limitation reversed and remanded for damages analysis consistent with contract-damages principles |
Key Cases Cited
- Orvis v. Johnson, 177 P.3d 600 (Utah 2008) (standard of review for summary judgment and viewing facts for the nonmoving party)
- Uintah Basin Med. Ctr. v. Hardy, 179 P.3d 786 (Utah 2008) (summary judgment inappropriate where competing inferences exist)
- USA Power, LLC v. PacifiCorp, 235 P.3d 749 (Utah 2010) (inferences from undisputed facts can create genuine issues of material fact)
- Zions First Nat’l Bank v. National Am. Title Ins. Co., 749 P.2d 651 (Utah 1988) (appellate deference to trial court views but obligation to analyze legal conclusions de novo)
- WebBank v. American Gen. Annuity Serv. Corp., 54 P.3d 1139 (Utah 2002) (contract ambiguity is a question of law; intent becomes factual when ambiguity exists)
- Billings v. Union Bankers Ins. Co., 918 P.2d 461 (Utah 1996) (consequential damages may reach beyond contract terms when foreseeable)
- Beck v. Farmers Ins. Exch., 701 P.2d 795 (Utah 1985) (recognition that consequential damages may be recoverable)
- Macris v. Sevea Int’l, Inc., 307 P.3d 625 (Utah Ct. App. 2013) (prevailing party below may recover attorney fees on appeal)