INTRODUCTION
¶ 1 We granted certiorari to review a court' of appeals decision affirming the trial court’s denial of petitioner Tracy Cannon’s motion for attorney fees made under Utah Code Ann. § 78-27-56 (1996).
Wardley Better Homes & Garden v. Cannon,
FACTUAL SETTING
¶ 2 Arles Hansen, an agent of respondent real estate brokerage Wardley Better Homes and Gardens, fraudulently changed the duration of four real estate listing agreements between Wardley and property sellers Leland and Sheri Mascaro. The agreements gave Wardley the exclusive right to list the Mascaros’ property for sale and required the Mascaros to pay the brokerage a seven percent commission if it found a buyer who would purchase the property for the Mascaros’ asking price.
*1013 ¶ 3 Hansen and the Mascaros signed the agreements November 14,1993, with the mutual understanding that they would expire the next day, November 15, 1993. They filled out the dates in the first agreement to reflect this understanding; they left the spaces for an expiration date in the other three agreements blank. After obtaining the Mascaros’ signatures on each of the listing agreements, Hansen altered the expiration date of the first agreement from November 15, 1993, to November 15, 1994, and wrote the same fraudulent date in the blank spaces of the other three listing agreements.
¶ 4 Subsequently, in 1994, the Mascaros entered into a year-long listing agreement with the real estate brokerage Cannon Associates, Inc., through Tracy Cannon, its principal broker. Ultimately, the Mascaros sold their property to Tracy Cannon, individually, and she received a commission of $115,338.16 for her work as an agent on the sale.
¶ 5 Upon learning that the Mascaros had sold their property, Wardley filed this action against them, alleging that the Mascaros had breached their contract by not paying Ward-ley a commission when presented with a qualified buyer. The Mascaros counterclaimed, alleging negligence, fraud, and breach of contract. Eventually, Wardley amended its complaint to include causes of action against Tracy Cannon and Cannon Associates, Inc. (“Cannon”) for unlawful interference with contract in violation of Utah Code Ann. §§ 61-2-11(15), (18), and 61-2-17(4) (1993 & Supp.1996), interference with a prospective economic relationship, and conversion.
¶ 6 Deposition testimony indicated that Wardley’s decision to bring suit against the Mascaros and Cannon was made jointly by Hansen, Hansen’s wife, who was also a Wardley agent, and Dougan Jones and Ken Tramp, brokers and co-managers of the Wardley office out of which the Hansens operated. Under an agreement with Ward-ley, the Hansens, who still worked for Ward-ley at that time, were obligated to pay eighty percent of the litigation costs, and Wardley was obligated to pay the other twenty percent. After a bench trial, the court ruled against Wardley on all claims, holding that Wardley had failed to establish any cause of action against Cannon. The court found further that Hansen had fraudulently induced the Mascaros to sign the listing agreements by assuring them that the agreements would be limited to one day.
¶ 7 Following the trial, Cannon and the Mascaros moved for an award of attorney fees pursuant to section 78-27-56 of the Utah Code, which provides:
(1) In civil actions, the court shall award reasonable attorney’s 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, except under Subsection (2).
(2) The court, in its discretion, may award no fees or limited fees against a party under Subsection (1), but only if the court:
(a) finds the party has filed an affidavit of impecuniosity in the action before the court; or
(b) the court enters in the record the reason for not awarding fees under the provisions of Subsection (1).
Utah Code Ann. § 78-27-56 (1996).
¶ 8 The trial court denied Cannon’s motion. It reasoned that because Wardley “represented that it did not have knowledge of Hansen’s fraudulent acts” and because Wardley did not pursue “its claims to hinder, delay, defraud, or otherwise take unconscionable advantage of Cannon,” the case was not brought in bad faith and was not without merit. Cannon appealed, and we transferred the case to the court of appeals.
¶ 9 Before the court of appeals, Cannon relied on
Hodges v. Gibson Products Co.,
*1014
¶ 10 The court of appeals rejected Cannon’s argument and affirmed the trial court’s denial of attorney fees.
Wardley Better Homes & Garden v. Cannon,
¶ 11 The court of appeals also rejected Cannon’s argument on the merits, holding that Hansen’s knowledge could not be imputed to Wardley for the purpose of determining entitlement to attorney fees.
Id.
at ¶¶ 8-11,
STANDARD OF REVIEW
¶ 12 “We review the court of appeals’ decision for correctness, and give its conclusions of law no deference.”
Newspaper Agency Corp. v. Auditing Div.,
ANALYSIS
¶ 13 Cannon asserts that the court of appeals erred by holding (1) that Cannon’s failure to marshal the evidence was fatal to her appeal; (2) that Hansen’s knowledge may not be imputed to Wardley; and (3) that, in any event, Cannon was not entitled to attorney fees under section 78-27-56 of the Utah Code. We address each issue in turn.
I. FAILURE TO MARSHAL THE EVIDENCE
¶ 14 Cannon argues that the court of appeals erred by holding that Cannon’s failure to marshal the evidence was fatal to her appeal. To mount a successful challenge to a trial court’s findings of fact, an appellant must marshal the evidence supporting the trial court’s findings.
See, e.g., Cornish Town v. Roller, 758
P.2d 919, 922 (Utah 1988). Challenges to a trial court’s legal determinations, however, do not require an appellant to marshal the evidence. Here, Cannon does not attack the trial court’s factual findings. Instead, she contends that the trial court erred as a matter of law by refusing to impute knowledge of Hansen’s conduct to Wardley. Cannon is correct that whether an agent’s knowledge should be imputed to his principal raises a legal question.
See Hodges,
II. IMPUTATION OF HANSEN’S KNOWLEDGE TO WARDLEY
¶ 15 Cannon next contends that the court of appeals erred by refusing to impute Hansen’s knowledge of his own fraudulent conduct to Wardley.
A. Imputation of Knowledge Generally
¶ 16 Under longstanding Utah law, “the knowledge of [an] agent concerning the business which he is transacting for his principal is to be imputed to his principal.”
First Nat’l Bank v. Foote,
¶ 17 By misinterpreting our holding in
Hodges v. Gibson Products Co.,
¶ 18 The court of appeals interpreted our decision in
Hodges
to mean that the “knowledge of an employee can be imputed to his employer when an employee tortiously brings a legal action (which is at least partially motivated to carry out the employer’s purposes) if it is within the scope of the employee’s authority to bring the action,”
Wardley,
¶ 19 This reasoning is flawed. First, the court of appeals’ interpretation of
Hodges
blurs the distinction between vicarious liability and imputation of knowledge. Whether a principal is vicariously liable for an agent’s acts and whether a principal is imputed with his agent’s knowledge are separate legal questions.
See Allen v. Prudential Prop. & Cas. Ins. Co.,
*1016
¶20 Second, the court of appeals’ reasoning is faulty because
Hodges
does not stand for .the proposition that an agent’s knowledge may be imputed to a principal only when the ageht commits the act for which the principal’s responsibility is sought. In
Hodges,
we stated that the “personal knowledge material to the liability that a servant has when acting in a matter as to which the master has empowered the servant to act is also imputed to the master.”
B. Imputation of Subjective Belief or Intent
¶ 21 While the law does not place a limit on the type of knowledge that may be imputed from an agent to a principal, there is a limitation on the purpose for which imputed knowledge may be used. Generally, because imputed knowledge is constructive, it canjnot be used when determining an individual’s subjective mental state.
See In re Worthen,
¶ 22 This limitation does not apply, however, in cases where the principal is a corporation. Knowledge can always be imputed to a corporation' — even when used to determine a subjective mental state — because a corporation has no belief or intent independent of that of its officers and agents.
See
9A
Fletcher Cyclopedia of Private Corporations
§ 4589 (perm.ed., rev.vol.2000) (stating that “corporations, being artificial legal entities, can have only that knowledge which is imputed to them under principles of agency law”). In other words, a corporation’s knowledge is entirely “imputed to it from the knowledge possessed by its officers and agents.”
Lowe v. April Indus., Inc.,
¶ 23 Under section 78-27-56, a finding of bad faith is dependent upon a party’s subjective belief or intent.
Valcarce v. Fitzgerald,
¶ 24 Wardley is a corporation and, consequently, the knowledge of its agents and officers, obtained while acting ■within the scope of their duty, may be imputed to it for the purpose of determining attorney fees under section 78-27-56.
C. Employee v. Independent Contractor
¶ 25 Wardley, nevertheless, contends that Hansen’s knowledge cannot be imputed to it because Hansen was an independent contractor and not an employee. This argument fails because we have clearly held that “[t]he relationship between a real estate broker and its agents is that of employer and employee.”
White v. Fox,
D. Scope of Authority
¶ 26 Wardley also argues that Hansen acted outside the scope of his authority by fraudulently inducing the Mascaros to sign the listing agreements. Contrary to the court of appeals’ assertion that Hansen “did not, under any agency theory, have authority to fraudulently change the dates on those agreements,” Wardley,
¶ 27 In order to determine whether an employee acts within the scope of his authority, we evaluate three factors:
First, an employee’s conduct must be of the general kind the employee is employed to perform....
Second, the employee’s conduct must occur within the hours of the employee’s work and the ordinary spatial boundaries of the employment....
Third, the employee’s conduct must be motivated, at least in part, by the purpose of serving the employer’s interest.
Birkner,
E. Meritless Claim Pursued in Bad Faith
¶28 Finally, Cannon argues that once Hansen’s knowledge has been imputed to Wardley, Wardley should be liable for attorney fees under section 78-27-56. Under this section, Wardley’s “action or defense to the action” must be “without merit and not brought or asserted in good faith” before Cannon can recover attorney fees. Utah Code Ann. § 78-27-56(1) (1996).
¶ 29 The court of appeals held that even if Hansen’s knowledge was imputed to Wardley, Cannon could still not recover because there was no showing of bad faith. We disagree. A party acts in bad faith when he brings an action and either (1) lacks an honest belief in the propriety of the activities in question, (2) intends to take unconscionable advantage of others, or (3) intends to or has knowledge of the fact that his actions will hinder, delay, or defraud others.
Cady v. Johnson,
¶ 30 A claim is without merit if it is “frivolous,” is “of little weight or importance having no basis in law or fact,” or “clearly [lacks a] legal basis for recovery.” Id. at 151. Wardley’s claim was without merit because it “clearly had no legal basis for recovery.” Id. Its action was based on fraudulently-altered listing agreements. The fact that the case went' to trial does not change the fact that Wardley’s case lacked any merit.
¶ 31 Consequently, Wardley both acted in bad faith and pursued a meritless claim in prosecuting this action against Cannon and thus may be subject to attorney fees under section 78-27-56. Contrary to the conclusion of the trial court, there is no inequity in this outcome. Where a party has acted on a meritless claim and in bad faith, in most cases it would be inequitable not to award attorney fees. This is especially true in the case before us where Hansen, who was forbidden by law from bringing his own action to recover on the listing agreements, see Utah Code Ann. § 61-2-18(1) (1993), was an active participant in Wardley’s decision to file this action against Cannon.
III. FINDINGS UNDER SUBSECTION 78-27-56(2)
¶ 32 Wardley asserts that even if the trial court erred in its determination that Wardley did not act in bad faith and that Wardley did not bring a meritless claim under section 78-27-56(1), section 78-27-56(2) allows the trial court to refuse to award attorney fees if it makes its reasons known on the record. Section 78-27-56(2)(b) provides: “The court, in its discretion, may award no fees or limited fees against a party under Subsection (1), but only if ... the *1019 court enters in the record the reason for not awarding fees under the provisions of Subsection 1.” However, the trial court’s discretion under section 78-27-56(2) cannot be used to support an erroneous ruling under section 78-27-56(1). An award of no or limited fees under section 78-27-56(2) is predicated on proper findings. In this case, the trial court erred by finding that Wardley’s action did not lack merit and was not brought in bad faith under section 78-27-56(1). This finding, and the trial court’s errant finding regarding the lack of equity in awarding attorney fees, cannot be used as reasons for denying attorney fees under section 78-27-56(2). Nevertheless, we are constrained to allow the trial court the opportunity to exercise its discretion under section 78-27-56(2) in light of our holding.
CONCLUSION
¶ 33 The court of appeals erred in affirming the trial court’s refusal to impute Hansen’s knowledge to Wardley and the trial court’s determination that Wardley did not act in bad faith in bringing this meritless action against Cannon. We reverse the judgment of the court of appeals and remand the case to that court with directions that the case be remanded to the trial court to award reasonable attorney fees to Cannon unless, relying on a legally sufficient reason, it declines to do so under section 78-27-56(2).
