SHREE GANESH, LLC v. WESTON LOGAN, INC. AND MATTHEW M. WESTON
No. 20190475
SUPREME COURT OF THE STATE OF UTAH
June 17, 2021
2021 UT 21
Heard March 10, 2021
On Direct Appeal
First District, Logan
The Honorable Kevin K. Allen
No. 170100051
Attorneys:
Troy L. Booher, J. Frederic Voros, Jr., Alexandra Mareschal, Robert G. Crockett, Sarah C. Vaughn, Salt Lake City, for appellant
Brandon J. Baxter, Shawn P. Bailey, Matthew D. Lorz, Logan, for appellees
CHIEF JUSTICE DURRANT authored the opinion of the Court, in which ASSOCIATE CHIEF JUSTICE LEE, JUSTICE HIMONAS, JUSTICE PEARCE, and JUSTICE PETERSEN joined.
Introduction
¶1 In this dispute arising out of the sale of hotel property (the Property), Shree Ganesh,
Background1
¶2 In January of 2016, Shree Ganesh, LLC entered into a contract (the Purchase Agreement) with Weston Logan Inc. to purchase Weston Logan‘s Best Western Inn (the Property) in Logan, Utah. The Purchase Agreement described the Property to be sold as “certain real property . . . located in the City of Logan . . . and more particularly described as . . . [t]he 89 Unit Best Western Plus Weston Inn located at 250 N. Main St.”
¶3 Specifically included in the purchase price were all of Weston Logan‘s “leases, contracts, signage, billboards, аll transferable licenses or permits and all hotel inventory (consisting of linens, paper goods, cleaning and operating supplies)” that were “used in the operation of the Property.” Additionally, as part of the Purchase Agreement, Weston Logan agreed to “execute any documents required to transfer to [Shree Ganesh] the telephone numbers presently in use by the Hotel, the Best Western Plus Franchise, along with any other business-related services.”
¶4 The purchase agreement also contained a provision — Section 8.1 — governing Weston Logan‘s required disclosures. Under Section 8.1, which is titled “Books and Records,” Weston Logan was required to disclose, in relevant part, “[a]ll rental agreements, leases, service contracts, insurance policies, latest tax bill(s) and other written agreements, written code violations or other notices which affect the property” and “[t]he operating statements and Federal Tax Returns of the Property.”
¶5 Additionally, Section 12 of the Purchase Agreement required Weston Logan to obtain Shree Ganesh‘s consent before entering into new service or tenant contraсts, making “any material changes to the Property, do[ing] any act, or enter[ing] into any agreements of any kind that materially changes the value of the Property.”2
¶6 At some point after the purchase agreement was signed, Dharmesh Ahir, Shree Ganesh‘s owner, sent an email to Wesley Christensen, Weston Logan‘s real estate agent, requesting a price reduction on the sale of the Property based on the fact that three new hotels would soon enter the Logan hotel market. Mr. Christensen responded by attaching a document entitled “STR Supply Pipeline for Utah” and stating, presumably in reference to the attachеd document, that there was not a “single property, not even in the preplanning stage, ever mentioned in Logan.” Mr. Christensen then stated that the requested price reduction was “ridiculous” based on Mr. Ahir‘s “supply claim.”
¶7 But during the time in which Weston Logan was in the process of selling the Property to Shree Ganesh, it was also developing another hotel in the Logan hotel market with MMR Investments, LLC. Matthew Weston, a shareholder in both MMR and Weston Logan, represented both companies in this development and also represented Weston Logan in the sale of the Property to Shree Ganesh.
¶8 As part of this development effort — in the same month the parties entered into the Purchase Agreement — Weston Logan purchased
¶9 After the sale of the Property closed, MMR and Weston Logan merged, and Shree Ganesh learned about Weston Logan‘s plans to build a competing hotel across the street. Because, according to Shree Ganesh, the construction of a competing hotel аcross the street significantly reduced the market value of the Property, Shree Ganesh sued Weston Logan for its failure to disclose its plans to develop the competing hotel.
¶10 In response, Weston Logan filed a motion for summary judgment. In its motion, Weston Logan argued that it never discussed partnering with MMR on the site across the street until after Shree Ganesh and Weston Logan closed on the Property. Weston Logan further argued that even if it had, it was not required to disclose its plans to develop the competing hotel under the terms of the Purchase Agreement оr under the common law. The district court agreed and granted summary judgment in favor of Weston Logan on all Shree Ganesh‘s claims. Shree Ganesh appealed. We have jurisdiction under
Standard of Review
¶11 Shree Ganesh argues that the district court erred in granting Weston Logan‘s motions for summary judgment on Shree Ganesh‘s contract and tort claims. “We review a grant of summary judgment for correctness.”3 “We give no deference to the district court‘s legal conclusions and consider whether the court correctly decided ‘that no genuine issue of material fact existed.‘”4 And we “review the facts in а light most favorable to the party against whom summary judgment was granted.”5
Analysis
¶12 While selling hotel property to Shree Ganesh, Weston Logan failed to disclose any involvement it had in building a competing hotel across the street. Based on this failure, Shree Ganesh brought a number of contract and tort claims against Weston Logan. But, on summary judgment, the district court dismissed all its claims. We reverse.
¶13 Under
¶14 The court dismissed Shree Ganesh‘s contract claims because the court interpreted the Purchase Agreement to not create a contractual duty to disclose the information at issue. Similarly, the court dismissed Shree Ganesh‘s tort claims because, based on the court‘s view of the relevant facts in this case, Weston Logan did not breach a common law duty when it failed to disclose the informаtion at issue. We reverse the district court on both counts.
¶15 First, we reverse the district court‘s dismissal of Shree Ganesh‘s contract claims because the Purchase Agreement is ambiguous as to whether Weston Logan owed Shree
¶16 Second, we reverse the district court‘s dismissal of Shree Ganesh‘s tort claims because there remain genuine disputes of material fact as to whether Weston Logan breached а common-law duty owed to Shree Ganesh when Weston Logan failed to disclose the information at issue.
I. We Reverse the District Court‘s Dismissal of Shree Ganesh‘s Breach-of-Contract Claims Because the Purchase Agreement is Ambiguous
¶17 Shree Ganesh argues that Weston Logan breached two provisions of the Purchase Agreement by failing to disclose its plans to build a competing hotel across the street from the Property. The first provision it points to is Section 8.1. Section 8.1, entitled “Books and Records,” requires Weston Logan, in relevant part, to disclose “[a]ll rental аgreements, leases, service contracts, insurance policies, latest tax bill(s) and other written agreements, written code violations or other notices which affect the Property.”8 Shree Ganesh argues that the language “other written agreements . . . which affect the Property” obligated Weston Logan to disclose any written agreements related to the development of the hotel property across the street because those written agreements affected the market value of the Property.
¶18 In contrast, the district court found that this provision required disclosure only of “agreements that involved, concerned, or bound th[e] real property” being sold. Under this interpretation, the Purchase Agreement did not require disclosure of documents having an “indirect impact on hotel market conditions or the future profitability of the Best Western hotel business.”
¶19 This interpretation is based primarily on the court‘s understanding of how the Purchase Agreement defined the “Property” being sold. According to the court, “the term ‘the Property,‘” as it is used in the Purchase Agreement, “refers solely to the real property that was sold” and not to the hotel as a business. Although the court‘s interpretation of the term “Property” may ultimately be thе one the parties intended, we disagree that the term‘s meaning is unambiguous.
¶20 “When we interpret a contract we first look at the plain language [of the contract] to determine the parties’ meaning and intent.”9 If the language of the “contract is unambiguous, the parties’ intentions are determined from the plain meaning of the contractual language, and the contract may be interpreted as a matter of law.”10 But if “a contractual term or provision is ambiguous as to what the parties intended,” such that genuine issues of material fact remain, the moving party is not entitled to judgment as a matter of law.11 Summary judgment is therefore precluded and “the question becomes a question of fact to be determined by the fact-finder.”12 A “contractual term or provision is ambiguous if ‘it is capable of more than one reasonable interpretation because of uncertain meanings of terms, missing terms, or other facial deficiencies.‘”13 In this case, the term “Property” could reasonably be interpreted in the narrow manner proposed by the district court or in the broader manner proposed by Shree Ganesh.
¶21 As the district court pointed out, the Purсhase Agreement defines the property as “that certain real property . . . located in the
¶22 But although the court is correсt that the Purchase Agreement refers to the Property as “certain real property,” the court overlooks the significance that the Purchase Agreement more “particularly describe[s]” the Property as the “89 Unit Best Western Plus Weston Inn.” This suggests the parties were not concerned with the transfer of real property alone, but with the transfer of real property that would continue to be used for the operation of a Best Western hotel business.
¶23 Other provisions of the Purchase Agreement support this conclusion. For example, in describing what is being purchased, it specifically includes any “leases, contracts, signage, billboards, all transferable licenses or permits and all hotel inventory (consisting of linens, paper goods, cleaning and operating supplies) now in, owned and used in the operation of the Property.”14 By categorizing this list of hotel-related items as items “owned and used in the operation of the Property,” the Purchase Agreement equates the “Property” with a hotel business. This again suggests that the parties’ ultimate aim was not merely to transfer real property, but to transfer property with which Shree Ganesh could operatе a successful hotel business.
¶24 Similarly, in Section 8.1(b), the Purchase Agreement requires Weston Logan to disclose the “operating statements and Federal Tax Returns of the Property.” In addition to once again equating the term “Property” with a functioning hotel business, this provision expressly requires Weston Logan to disclose the important financial documents related to the operation of that business.
¶25 As these examples from other provisions in the Purchase Agreement demonstrate, the subject of the Purchase Agreement was not solely real estate. Rather it includеd other things necessary or helpful to Shree Ganesh‘s continued operation of a Best Western hotel franchise on the Property. With this in mind, we conclude that it is reasonable to interpret the language “other written agreements . . . which affect the Property” contained in Section 8.1 to require disclosure of written agreements that would affect the continued operation of the hotel business. Accordingly, the district court erred in concluding that the meaning of this provision was unambiguous.
¶26 Shree Ganesh also argues that Weston Logan violated Section 12 of the Purchase Agreement. Section 12 states that after Shree Ganesh had removed certain contingencies (thereby nullifying the disclosure requirements in Section 8.1), Weston Logan would be prohibited from “enter[ing] into any new service or tenant contracts that cannot be canceled with 30 days notice and without penalty” and from “mak[ing] any material changes to the Property, do[ing] any act, or enter[ing] into any agreements of any kind that materially changes the value of the Property or the rights of [Shree Ganesh] as they relate to the Property,” unless Weston Logan first obtаins Shree Ganesh‘s written consent.15
¶27 As it did with Shree Ganesh‘s claim under Section 8.1, the district court dismissed this claim based on its interpretation of the term “the Property,” concluding that Weston Logan‘s “obligation ‘to not make any material changes to the Property’ simply mean[t] that it could not make material changes to the real property.” And it concluded that the “prohibition against ‘any act, or . . . agreements of any kind that materially changes the value of the Property or the rights relate[d] to the Property‘” meant that Weston Logan “could not, without [Shree Ganesh‘s] written cоnsent, engage in any actions or enter into any agreements that materially changed the value of the Best
¶28 For the same reason we rejected the district court‘s conclusion under Section 8.1, we reject it here. The parties clearly intended to transfer what was necessary to continue the operation of the Property as a hotel business. And based on this understanding, we conclude it is reasonable to interpret Section 12 as prohibiting Weston Logan from engаging in acts that would harm Shree Ganesh‘s operation of that business. In fact, Section 12 provides additional support for this interpretation by expressly prohibiting actions that would materially change ”the value of the Property.”16 Accordingly, the court erred in treating this provision as unambiguous.
¶29 Because the district court erred in concluding that Sections 8.1 and 12 are susceptible to only one reasonable interpretation, we reverse the district court‘s dismissal of Shree Ganesh‘s contract claims against Weston Logan.17
II. We Reverse the District Court‘s Dismissal of Shree Ganesh‘s Tort Claims Because Therе Remain Unresolved Issues of Material Fact
¶30 Shree Ganesh also argues that Weston Logan and Mr. Weston committed the tort of fraudulent nondisclosure by failing to disclose information about their plans to build a competing hotel across the street. To prevail on a claim for fraudulent nondisclosure, a plaintiff must prove three elements: “(1) the defendant had a legal duty to communicate information, (2) the defendant knew of the information . . . and (3) the nondisclosed information was material.”18 The district court dismissed Shree Ganesh‘s nondisclosure claim because it concluded that Weston Logan did not breach a legal duty to communicate the information at issue. But, because we conclude that two genuine disputes of fact related to this claim exist, we reverse this determination.
¶31 First, there is a genuine dispute as to whether Weston Logan breached a common-law duty to disclose information about a competing hotel across the street. As the district court noted, we recognized a duty to disclose “material elements” of a property in Ong International (U.S.A.), Inc. v. 11th Avenue Corp.19 In that case we stated that “a seller [of real property] has a duty to represent fairly and accurately the material elements of property sold when such elements are not easily ascertainable by the buyer and materially affect the value of the property.”20
Because any determination on Shree Ganesh‘s implied-covenant claim would be premature in light of our determination regarding Shree Ganesh‘s сontract claims, we do not reach the merits of this argument. But, because the district court on remand may want to revisit its implied-covenant decision in connection with Shree Ganesh‘s contract claims, we also remand for a reconsideration of this issue.
¶32 In Yazd v. Woodside Homes Corp., we explained that to “be material, the information must be ‘important.‘”21 And we explained that “[i]mportance, in turn, can be gauged by the degree to which the information could be expected to influence the judgment of a person buying property or assenting to a particular purchase pricе.”22 In this case, Shree Ganesh provided testimony that information about a competing hotel across the street would have been an important factor in its decision to purchase the Property. So to the extent the district court was suggesting the undisclosed information in this case was indisputably immaterial, we disagree.
¶33 We also disagree with the district court‘s assertion that the undisclosed information could not constitute an “element” of the Property. Under our case law, the type of information at issue in this case may constitute an element of real property triggering a tort duty to disclose. For example, in Elder v. Clawson we recognized that the failure to disclose information that the Agricultural Department had quarantined farm property because of the existence of a noxious weed could form the basis of a fraudulent nondisclosure claim.23 In that case, the buyer knew of the existence of the weed at the time of the purchase, but the seller did not inform the buyer that the property was quarantined.24 Based on these facts, we concluded that the seller had committed fraud. So in that case the material element was not the physical defect on the land — the noxious weed. Rather, the material defect was the information affecting the viability of the “economic operation” of the farm — the quarantine imposed by the Agricultural Department.25
¶34 Similarly, in Ong, we cited Moschelle v. Hulse, a Montana case in which the Montana Supreme Court determined that the withholding of information related to a commercial property‘s “probable business earnings” was deemed to be fraudulent.26 In a parenthetical description of the Moschelle decision, we described the
case as standing for the proposition that “creating [a] false impression as to [a] matter of vital importance tо [the] purchaser amounted to fraud.”27 In so doing, we equated the phrase “material element” with the phrase “matter of vital importance” and we suggested that matters of vital importance could encompass information about a commercial property‘s “probable business earnings.”
¶35 As our discussion of these cases illustrates, our definition of a “material element” of property is not limited to physical defects or conditions on the land. Rather, it encompasses any matter or information that would have been an important factor in а buyer‘s decision to purchase the real estate. Under this definition, information that could substantially decrease the Property‘s market value or future economic potential could be deemed (based on the specific facts in the case) a material element. Accordingly, there exists a genuine dispute of material fact as to whether Weston Logan breached its duty to disclose “material elements” of the Property when it withheld information about its plans to build a competing hotel across the street.
¶36 Second, there also exists a gеnuine dispute of material fact as to whether Weston Logan breached its duty to clarify potentially misleading statements made by its real estate agent. A month or so before the original closing date, Dharmesh Ahir, Shree Ganesh‘s owner, sent an email to Wesley Christensen, Weston Logan‘s real estate agent, requesting a price reduction based on the
¶37 In addressing this claim, the district court noted, correctly, that where a person makes an affirmative statement, that рerson has a common-law duty to disclose all material facts necessary to prevent that statement from being misleading.28 Notwithstanding this common-law duty, the district court dismissed Shree Ganesh‘s claim because, in the court‘s view, Mr. Christensen‘s statement was not a misleading statement necessitating the disclosure of additional, clarifying information.
¶38 According to the court, the statement was “an accurate representation of an attached STR report, which did not reference any hotels in the pre-planning stage.” Although Shree Ganesh concedes that Mr. Christensen‘s cоmments about the report were accurate, Shree Ganesh argues “it is clear that the intention of the email — particularly the ‘ridiculous’ comment — was to assure Shree Ganesh that there were, in fact, no hotels being planned in the near future, not just that none appeared in the STR report.” We conclude that this creates a genuine dispute as to a material fact.
¶39 Mr. Christensen made the statement at issue in response to Mr. Ahir‘s email inquiring about competing hotel developments in the area. In that email, Mr. Ahir did not ask Mr. Christensen about what was shown in the STR repоrt. Instead, Mr. Ahir‘s focus was on whether other hotels were in fact being developed in the area. With this context in mind, it is reasonable to conclude that Mr. Christensen‘s partial statement, which did not directly respond to Mr. Ahir‘s core concern, was misleading absent the disclosure of other, clarifying information. Accordingly, we conclude there exists a genuine dispute as to whether Weston Logan breached its duty to clarify a potentially misleading and material statement made by its agent concerning the Property.
¶40 Because genuine disputes exist as to whether Weston Logаn breached its duties to disclose “material elements” about the Property and to correct misleading affirmative statements, we reverse the district court‘s grant of summary judgment on Shree Ganesh‘s tort claims.29
Conclusion
¶41 Because we conclude that the Purchase Agreement between the parties is ambiguous as to Weston Logan‘s disclosure obligations and because there remains a genuine dispute as to material facts relevant to Shree Ganesh‘s tort claims, we reverse the district court‘s dismissal of Shree Ganesh‘s contract and tort claims against Weston Logan.
add conspiracy claims against several new defendants. Because the district court may want to revisit this decision on remand in connection with its determinations as to Shree Ganesh‘s other claims, we also remand for a reconsideration of the denial of the motion to amend. But in so doing, we make no decision regarding the merits of the district court‘s decision on this issue. Rather our decision is motivated only by the fact that — in light of our other determinations — a decision on the issue at this time would be premature.
Notes
Additionally, Shree Ganesh asks us to reverse the dismissal of its claim under the implied covenant of good faith and fair dealing. According to Shree Ganesh, even if the Purchase Agreement did not require disclosure, the covenant of good faith and fair dealing did. (Continued)