Opinion
{1 Verdi Energy Group, Inc. (Verdi) appeals from the district court's decisions to grant summary judgment in favor of Greg Nelson and Brigham Lundahl and to award Nelson and Lundah] their attorney fees. We affirm the summary judgment decision but reverse and vacate the award of attorney fees.
BACKGROUND
12 Nelson, Lundahl, and their wives owned real property containing a hydrother
13 Negotiations continued for a period of months, during which Verdi made a second similar offer, which the Sellers ignored, and Lundahl presented his own offer that would have required Verdi to put $100,000 down prior to closing as evidence of its ability to purchase the property, which Verdi refused. Finally, in May 2009, Verdi presented the Sellers with Addendum No. 6. Nelson checked the acceptance box and signed his name, but Lundah] did not respond. According to Verdi, it believed its offer had been accepted, so it then undertook a number of activities that it claims amounted to part performance under the REPC. The Sellers characterize these activities as simple due diligence contemplated by the REPC provision that allowed Verdi to cancel the contract if it was unsatisfied by the results of any inspections of the property. In June 2009, the Sellers informed Verdi that they no longer wished to sell the property.
T4 On July 22, 2009, Verdi filed a complaint against the Sellers, asserting breach of contract, breach of the covenant of good faith and fair dealing, anticipatory repudiation, and constructive trust. On August 17, 2010, the Sellers moved to dismiss Verdi's complaint on the basis that the documents exchanged between the parties showed that they had never entered into a contract. The Sellers asserted that no contract had arisen from the exchange of offers and counteroffers, as evidenced by the fact that neither the REPC nor any of the addenda had been executed by Verdi as buyer and both Lun-dahl and Nelson as sellers. The Sellers also pointed out that their wives, who were joint owners of the property, had not executed any of the documents and that as a consequence, there was no agreement for the sale of the property that satisfied the Utah Statute of Frauds. The district court denied the Sellers' motion to dismiss without explanation.
T5 Verdi then amended the complaint to add claims of fraud and negligent misrepresentation, asserting that the Sellers had represented that they had full authority to sell the property and were now claiming that they could not bind their wives. Verdi claimed that these representations were made in the original written REPC and during oral negotiations leading up to Addendum No. 6. In its prayer for relief, Verdi sought specific performance of the purchase contract, imposition of a constructive trust on the property, or damages from the Sellers' failure to perform the contract.
T6 On February 9, 2011, the Sellers again moved to dismiss. With regard to the contract, negligent misrepresentation, anticipa
T7 On October 25, 2011, the Sellers filed a second request to submit their motion for summary judgment. Verdi requested a hearing, but on November 1, 2011, the district court granted summary judgment to the Sellers without a hearing and in a summary order that stated simply, "Motion Granted."
8 The January 3 supplemental order also awarded the Sellers $18,944 in attorney fees under the bad faith statute. See Utah Code Ann. § 7T8B-5-825 (LexisNexis 2012). The award of fees was apparently based on a December 29, 2011 affidavit prepared by one of the Sellers' attorneys. That affidavit was not accompanied by a written motion requesting fees, and the affidavit itself did not describe any basis for awarding attorney fees. The affidavit described the work done in very broad terms, concluding simply with the attorney's "opinion that the [$18,944 in] attorney's fees as stated herein are fair and reasonable." The supplemental order explained that an award of bad faith attorney fees was justified because
there was clearly no contract between the parties when the action was initiated and the goal, it appears, was to stop or delay the [Sellers] from moving forward with other ventures while [Verdi] attempted to gather funds and ultimately force the [Sellers] to sell [Verdi] the property. In other*109 words, [Verdi] used the present lawsuit to encumber the property and attempt to coerce the [Sellers] into selling it the property. Thus, [Verdi] brought this action without merit and not in good faith.
19 In its written objection, Verdi challenged the merits of the bad faith determination and the lack of factual findings to support it. Verdi also objected on the basis that the court had never made a ruling on bad faith attorney fees in prior proceedings and there had been no hearing on the issue. The district court issued its supplemental order without a hearing and without addressing these objections. Verdi then filed several postjudgment motions, including a motion for relief from judgment, an objection to the sufficiency of the affidavit supporting the request for attorney fees, and a motion for the court to enter more detailed findings on its denial of the motion for relief from judgment. The district court apparently heard from the parties on these issues at a hearing in September 2012. Following that hearing, the court entered an order, prepared by Verdi's counsel, in which it noted that its January 3 award of attorney fees had been "premature" but that it was now awarding the Sellers "their attorney fees in the amount requested in their Affidavit of Attorney Fees." The order provides neither a basis for the award nor any further findings to support it,. The transcript from the September 2012 hearing is not part of the record on appeal.
ISSUES AND STANDARDS OF REVIEW
T10 Verdi asserts that the district court erred in four ways. The first three challenges relate to the grant of summary judgment. First, Verdi claims that the district court erred in granting summary judgment on its breach of contract and breach of the covenant of good faith and fair dealing claims because the court "failed to properly apply the doctrine of partial performance as an exception to the statute of frauds." Second, Verdi asserts that the court erred in dismissing its constructive trust claim because the court failed to recognize that execution of the contract transferred equitable title to Verdi. Third, Verdi contends that the court erred in granting summary judgment on the fraud and negligent misrepresentation claims because there were issues of material fact regarding whether Verdi could reasonably have relied on the Sellers' representations that they had full authority to sell the property.
{11 In an appeal from the grant of summary judgment, "[a)n appellate court reviews a trial court's legal conclusions and ultimate grant or denial of summary judgment for correctness, and views the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." Orvis v. Johnson,
12 Finally, Verdi challenges the district court's award of bad faith attorney fees. Verdi contends that the court's determinations that the case was meritless and not brought in good faith were not sufficiently supported by the record to justify an award of bad faith attorney fees and that, in any event, the Sellers' affidavit was inadequate under rule 78 of the Utah Rules of Civil Procedure to support a fee award.
113 "We review a trial court's grant of attorney fees under [the bad faith statute] as a mixed question of law and fact." Gallegos v. Lloyd,
ANALYSIS
I. The Summary Judgment Claims
"1 14 It is the burden of the "proponent of the contract ... [to] show{[ ] that an offer and acceptance" occurred. Cea,
115 Thus, when an offeree responds to an offer with a "proposal of different terms from those of the offer," the offer-ee has made "a counteroffer, and no contract arises unless the original offeror accepts [the counteroffer] unconditionally." Id. (citation and internal quotation marks omitted); 1 Corbin on Contracts § 3.28 (1998) ("Any expression of assent that changes the terms of the offer in any material respect may be operative as a counter-offer."). Onee a counteroffer is made, "[the offeree's power to accept the original offer is thereby terminated." Cea,
116 The facts relating to the various transactions between Verdi and the Sellers are undisputed. Thus, the question before us is whether those facts demonstrate that a contract for the sale of the property was actually formed. Verdi asserts that a contract arose out of its February 2009 presentation of the REPC, the Sellers' counteroffer, Verdi's Addendum No. 3 response, and Nelson's acceptance of Addendum No. 6 in May 2009. We conclude that the district court correctly determined that the parties' negotiations did not result in a contract.
17 On February 11, 2009, Verdi offered to purchase the property, including the well and certain water rights, for $400,000, with a closing date in July 2009. The offer was accompanied by $8,000 in earnest money. Verdi made the offer in the form of a REPC. Paragraph 23 of the REPC provided that " '[aleceptance' occurs when Seller or Buyer, responding to an offer or counteroffer of the other (a) signs the offer or counteroffer where noted to indicate acceptance; and (b) communicates to the other party or to the other party's agent that the offer or counteroffer has been signed as required."
{ 18 The Sellers responded to Verdi's offer by making handwritten interlineations on the face of the REPC itself that, among other things, increased the purchase price to $500,000 and moved the closing date forward from July to June 2009. The Sellers then checked the "counteroffer" box on the last page of the printed form (leaving blank the "acceptance" box just above it), initialed and signed it, and returned it to Verdi. The counteroffer box advised Verdi that the counteroffer "present[ed] for Buyer's Acceptance the terms of Buyer's offer subject to the exceptions or modifications as specified" in the handwritten interlineations.
T 19 On February 20, 2009, nine days after the date of the counteroffer, Verdi presented the Sellers with Addendum No. 83, which reiterated the counteroffer's purchase price and closing date but added additional terms. In particular, the counteroffer more specifically identified the subject property by including its full legal description and the recording information for the warranty deed that conveyed the property to the Nelsons and the Lundahls; it granted Verdi "full and complete access to the identified property for all testing and evaluation purposes"; and finally, it mandated that "due diligence and test data remain{ ] confidential and the property of the buyer." These modifications were apparently of sufficient importance to Verdi that Addendum No. 3 required the Sellers-by 5:00 p.m. the next day-"to accept the terms of this ADDENDUM in accordance with the provisions of Section 23 of the REPC," which required the Sellers to "sign [Addendum No. 3] where noted to indicate acceptance" and "communicate[] to [Buyer] ... that the ... counteroffer has been signed as required." This requirement, when considered in conjunction with the additional protections proposed by Verdi, makes Addendum No. 3 a counteroffer, rather than an acceptance of the Sellers' counteroffer, as Verdi now claims. See id. ("[Nlo contract arises unless the original offeror accepts [the counteroffer] unconditionally." (citation and internal quotation marks omitted). Addendum No. 8 also provided, "Unless so accepted, the offer as set forth in this ADDENDUM shall lapse." When the Sellers did not respond to Addendum No. 3, Verdi's counteroffer expired according to its own terms. See Restatement (Second) of Contracts § 86 (1981) (explaining that "[an offeree's power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer"). In addition, the Sellers' failure to respond amounted to a rejection of the counteroffer. See Cea,
120 Three months after the Sellers failed to respond to Addendum No. 3, Verdi again offered to purchase the property under the same terms proposed in Addendum No. 3 but with a closing date and due diligence deadline in December 2009. A few days later, on May 26, 2009, Lundahl counterof-fered, setting a closing and due diligence deadline in September 2009 and requiring Verdi to pay $100,000 of the $500,000 purchase price within a month of accepting the offer. That same day, Verdi responded by presenting the Sellers with Addendum No. 6. Addendum No. 6 offered to purchase the property for $500,000 and to close in September 2009 but required the return of the $8,000 earnest money. Nelson checked the acceptance box and signed his name to Addendum No. 6. Lundahl never signed. Lundahl's failure to respond by the acceptance deadline constituted a rejection: "[x] Seller [] Buyer shall have until 5:00 [] am [x] om Mountain Time on May 28, 2009, to accept the terms of this ADDENDUM in accordance with the provisions of Section 23 of the REPC. Unless so accepted, the offer as set forth in this ADDENDUM shall lapse." See id. Lundahl's failure to execute Addendum No. 6 renders it unenforceable.
A. Contract Claims
121 Verdi first asserts that summary judgment on his breach of contract and breach of the covenant of good faith and fair dealing claims was improper because the contract was enforceable under the part performance doctrine. Verdi's part performance argument arises from one of the grounds asserted by the Sellers as the basis for summary judgment: violation of the statute of frauds. Both in their motion for summary judgment and on appeal, the Sellers contended that even if there was an agreement to sell the property to Verdi, that agreement necessarily fails because the Sellers' wives had not signed the REPC or the various addenda. According to the Utah Statute of Frauds, "[elvery contract ... for the sale, of any lands, or any interest in lands, shall be void unless the contract ... is in writing subscribed by the party by whom the ... sale is to be made, or by his lawful agent thereunto authorized in writing." Utah Code Ann. § 25-5-8. There is no husband-wife exception to the rule that each owner must consent to the sale via signature on the contract or written authorization to another to bind a co-owner to the sale. Williams,
122 Verdi asserts that the part performance doctrine saves the contract from the statute of frauds problem created by the wives' failure to sign the contract. The part performance doctrine is an equitable remedy fashioned "to prevent an overly rigid adherence to the statute [of frauds] from becoming the means of perpetuating a fraud." Jenkins v. Percival,
123 Verdi's part performance argument fails. Verdi's claim that there was an agreement that was made unenforceable by the statute of frauds due to the wives' failure to sign rests on its contention that the REPC, together with Addendum No. 3 and Addendum No. 6, represented an offer-and-acceptance chain that established an agreement by the Sellers to sell the property to Verdi. Yet we have rejected Verdi's foundational contention that the Sellers agreed to sell the property, because Verdi and the Sellers-their wives aside-never reached the meeting of the minds necessary to form a contract for the sale and purchase of the property in the first place. See supra 120 & n. 7. The doctrine of part performance permits a court to enforce a contract that is otherwise unenforceable because of the failure to comply with the statute of frauds; it does not create a contract that was never in existence. Martin,
{24 We therefore affirm the district court's grant of summary judgment on Verdi's breach of contract claims. See Utah R. Civ. P. 56(c) (explaining that summary judgment is appropriate when there are no disputed facts and "the moving party is entitled to a judgment as a matter of law").
B. Constructive Trust Claim
125 Verdi next asserts that the district court should not have granted summary judgment on the claim that the Sellers held the property in a constructive trust for Verdi's benefit. Verdi's argument is that "[uJpon the execution of the Real Estate Purchase Contract, which occurred upon the execution of Addendum No. 6, equitable title transferred to Verdi," pending execution of a deed of conveyance at the closing when it would have received legal title as well. In support of its position, Verdi cites C & J Industries v. Bailey,
C. Fraud and Negligent Misrepresentation Claims
126 Finally, Verdi argues that summary judgment was inappropriate on its fraud and negligent misrepresentation claims because there is a genuine dispute of material fact about whether Nelson and Lundahl represented to Verdi that they had full authority to convey title to the property, including any interest that their wives might hold. See generally Smith v. Frandsen,
[ 27 Verdi claims that Nelson and Lundahl each represented that he had full authority to convey all the rights in the undivided portion of the land in which he had an interest, including the rights of any co-owner of that portion. In other words, Nelson represented that he had authority to sell a 20% joint interest in the property and Lundahl represented that he had authority to sell an 80% joint interest, regardless of whether ownership of that interest was also shared with another, le., their respective wives. But Verdi's purchase of the property did not fail because of any misrepresentation by the Sellers that they had authority to bind their wives to the contract. Rather, the purchase fell through because no valid contract to sell the land to Verdi was ever formed. Had Lundah] executed Addendum No. 6 and then the purchase failed to occur because the wives refused to sign the contract, the scope of the Sellers' representations about their authority to bind their wives would be material to the dispute. But under the present facts, where no one representing Lundahl's 80% undivided interest in the property signed the final segment of the REPC-Ad-dendum No. 3-Addendum No. 6 sequence that could have created a contract, any representation (or misrepresentation) about the Sellers' authority to bind their wives is immaterial. - Accordingly, the district court properly granted summary judgment in favor of the Sellers on the fraud and negligent misrepresentation claims.
128 We now turn to Verdi's claim that the district court erred in awarding bad faith attorney fees to the Sellers. The bad faith statute allows a trial court to "award reasonable attorney fees to a prevailing party if the court determines that the action or defense to the action was without merit and not brought or asserted in good faith." Utah Code Ann. § 78B-5-825(1) (LexisNexis 2012). In order for a court to award fees under the statute, it must separately address the requirements of bad faith and lack of merit. Still Standing Stable, LLC v. Allen,
29 The district court provided the following explanation for the award of bad faith attorney fees:
[There was clearly no contract between the parties when the action was initiated and the goal, it appears, was to stop or delay the [Sellers] from moving forward with other ventures while [Verdi] attempted to gather funds and ultimately force the [Sellers] to sell [Verdi] the property. In other words, [Verdi] used the present lawsuit to encumber the property and attempt to coerce the [Sellers] into selling it the property. Thus, [Verdi] brought this action without merit and not in good faith.
While the court seems to conclude that Verdi's claims were brought for the purpose of delay so that it could force the Sellers to sell the property to Verdi and, implicitly, without a belief in their actual merits, there does not appear to be any evidence in the record to support these findings.
130 Our supreme court has noted that the bad faith statute "is narrowly drawn. It was not meant to be applied to all prevailing parties in all civil suits." Cady v. Johnson,
131 We cannot ascertain the basis for the district court's finding that Verdi was acting in bad faith. See Jeschke v. Willis,
182 Here, as far as we have been able to determine from the record, the Sellers had mentioned bad faith on only one occasion prior to the award of bad faith fees, when they raised the concern that Verdi's complaint "was filed in bad faith" at the original hearing on the motion for summary judgment in June 2011. Specifically, the Sellers asserted that by filing a cause of action based on a contract that clearly does not exist and failing to prosecute it for two years, Verdi was employing "an intimidation tactic" intended to get the Sellers "to cave" into selling the property to Verdi. That allegation was stated in the course of argument, and the Sellers offered no specific evidence in support. Verdi did not have an opportunity
133 To demonstrate that an action is "without merit," the party seeking an award of attorney fees must do more than assert that the case was unsuccessful. Jeschke,
T 34 In this ease, the district court concluded that Verdi's claims lacked merit based on the fact that "there was clearly no contract between the parties when the action was initiated." We agree that Verdi's claims lacked merit in the conventional sense, ie., they were unsuccessful because they depended on the existence of a contract that was never formed. We disagree, however, that the claims were so obviously unsupported by the principles of contract law or the facts of the case as to be patently groundless. The factual context of this case involved a complicated series of negotiations, offers, and counteroffers that Verdi asserts ultimately resulted in an enforceable contract. And although it became apparent by the time discovery closed and the court was presented with the second motion for summary judgment that the REPC-Addendum No. 3-Addendum No. 6 sequence did not create a contract, both the underlying facts and the law on contract formation permit a colorable argument that a contract arose.
135 For these reasons, we conclude that Verdi's claims were not "without merit" as the term is used in the bad faith statute. Accordingly, the grant of bad faith attorney fees must be reversed. See id. 118 (noting that an action must both lack merit and be asserted in bad faith to warrant an award of attorney fees under the bad faith statute). See generally Cady v. Johnson,
CONCLUSION
186 Summary judgment for the Sellers was appropriate on all of Verdi's claims because the parties never formed a contract. We reverse and vacate the award of attorney fees under the bad faith statute, however, because Verdi's claims were not without merit as required for such an award. We deny the Sellers' request for attorney fees on appeal because they neither received attorney fees in the district court nor prevailed on appeal.
Notes
. We recite "the facts and all reasonable inferences drawn therefrom in the light most favor
. The statutory provisions cited in this opinion have not been amended since the time of the underlying proceedings. We therefore cite the current version of the Utah Code.
. The summary order and a subsequent supplemental order both refer to the motion granted on November 1 as a motion to dismiss, but the court actually considered the motion as one for summary judgment. - Accordingly, we will treat it as a summary judgment ruling on appeal.
. Verdi does not make any arguments directly challenging the district court's grant of summary judgment on the anticipatory repudiation claim.
. Our resolution of Verdi's challenge to the district court's determinations supporting the award of bad faith attorney fees eliminates the need to reach Verdi's claim that the attorney fees affidavit failed to comply with rule 73 of the Utah Rules of Civil Procedure.
. - The counteroffer notice actually says "specified in the attached ADDENDUM NO. 2." The parties agree that Addendum No. 2 was never a part of the Sellers' counteroffer and that all of the terms of the counteroffer were handwritten onto the REPC itself.
. Verdi has not made a claim that Nelson's signature bound Lundahl or that Nelson had au thority to authorize the sale on behalf of Lun-dahl. Verdi also does not claim that the REPC is separately enforceable against Nelson's interest in the property.
. For example, because we have resolved Verdi's part performance claim on the basis that there was no underlying contract implicating the statute of frauds, we need not address the question of whether Verdi's subsequent activities met the standard for part performance in reliance on the contract or were simply due diligence efforts contemplated by the REPC provision permitting
. At the original summary judgment hearing, there was no motion for bad faith attorney fees pending before the district court, and the court did not award any attorney fees, although it agreed that the lawsuit had been pending for too long. The court explained that "there are too many questions that remain unanswered" about the merits of the claim and the justification for the delays. The court granted Verdi's request for a continuance and reserved a ruling on the motion for summary judgment. The court nevertheless told counsel that "[i)f it's appropriate for the Court to impose sanctions, [it] can at the appropriate time."
. - The fact that the same district court originally granted Verdi's request for a prejudgment writ of attachment, which requires a showing that there is a "substantial likelihood ... [of] prevail{ing] on the merits of the underlying claim{s]," see Utah R. Civ. P. 64A(c)(3), is further indication that Verdi's claims had some colorable basis in law and fact.