Ellsworth Paulsen Construction Co. v. 51-SPR-L.L.C.

2008 UT 28, 183 P.3d 248, 601 Utah Adv. Rep. 23, 2008 Utah LEXIS 58, 2008 WL 926586
CourtUtah Supreme Court
DecidedApril 8, 2008
Docket20060864, 20060882
StatusPublished
Cited by16 cases

This text of 2008 UT 28 (Ellsworth Paulsen Construction Co. v. 51-SPR-L.L.C.) is published on Counsel Stack Legal Research, covering Utah Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ellsworth Paulsen Construction Co. v. 51-SPR-L.L.C., 2008 UT 28, 183 P.3d 248, 601 Utah Adv. Rep. 23, 2008 Utah LEXIS 58, 2008 WL 926586 (Utah 2008).

Opinion

PARRISH, Justice:

INTRODUCTION

T1 51-SPR-LL.C. ("51-SPR") entered into a development agreement with Guy Hatch ("Hatch") and his company, Broad-stone Investments, L.L.C. ("Broadstone"), to develop two commercial office buildings in American Fork, Utah (the "Northshore Project"). Hatch, without disclosing the in *250 volvement of 51-SPR, entered into two construction contracts with Ellsworth Paulsen Construction Company ("EPCO") for the construction of the two Northshore buildings. Toward the end of the project, the relationship between Hatch and 51-SPR soured, resulting in Broadstone relinquishing its one-half interest in the Northshore property to 51-SPR. After learning of 51-SPR's involvement in the project, EPCO approached 51-SPR regarding unpaid construction invoices. 51-SPR, viewing itself as a mere investor, disclaimed any obligation to pay EPCO for the construction costs. EPCO then filed a mechanic's lien against the two Northshore buildings. The lien included a $78,000 claim stemming from a prior business deal between Hatch and EPCO. Additionally, EPCO brought a contractual claim against 51-SPR, claiming that 51-SPR was a partner or joint venturer with Broadstone and, therefore, was jointly liable on the construction contracts.

T2 The district court granted partial summary judgment to EPCO, holding that 51-SPR and Broadstone were joint venturers. Additionally, following a trial, the district court held that EPCO could not collect the $78,000 claim as part of its lien on the North-shore property, but that the inclusion of the claim did not constitute an abusive lien under section 38-1-25 of the Utah Code. The court of appeals reversed the district court's partial summary judgment regarding the existence of a joint venture but upheld the district court's judgment regarding the lien. Ellsworth Paulsen Constr. Co. v. 51-SPR-L.L.C,, 2006 UT App 353, 144 P.3d 261. We affirm the decision of the court of appeals.

BACKGROUND

I. FACTUAL BACKGROUND

T3 In 2000, Robert Chimento, acting on behalf of 51-SPR, entered into a development agreement (the "Agreement") with Hatch, acting on behalf of Broadstone. The Agreement contemplated the development of two commercial office buildings ("Building I" and "Building II") in American Fork, Utah. The Agreement provided, among other things, that 51-SPR would contribute $2.9 million toward the purchase and development of the Northshore property, that Broadstone would act as the project manager, and that 51-SPR and Broadstone would take title to the property as tenants in common. Broad-stone then entered into two construction contracts with EPCO for construction of the two buildings. From the time the construction contracts were entered through near completion of the project, EPCO had no knowledge of 51-SPR's involvement in the project because all of EPCO's dealings had been exclusively with Hatch.

4 4 Prior to the Northshore Project, EPCO and Hatch had collaborated on other construction projects. In the first project (the "Broadstone Project"), EPCO constructed six office buildings as part of a Hatch development project. Toward the end of the Broad-stone Project, Hatch began plans for the development of more office buildings on land owned by Lloyd Williams (the "Williams Project"). At that time, EPCO loaned $110,000 to Vintage Construction ("Vintage"), the Hatch-related company that was involved in developing the Broadstone Project and the Williams Project. A portion of the loan, $32,000, was earmarked for the Broadstone Project, and the remaining $78,000 was earmarked for the Williams Project. Although Hatch never informed EPCO exactly how the money would be used, EPCO assumed-based on Hateh's representations-that the $78,000 would either be used for engineering design work and other costs for the Williams Project or be applied to the construction of the proposed buildings on the Williams property. Hatch agreed that in return for the $78,000 loan, he would give EPCO a change order on the first building constructed on the Williams property. However, the Williams Project was never developed; instead, the office buildings that Hatch had proposed to build on the Williams property were built on the Northshore property as part of the Northshore Project. By the time Hatch and EPCO were working on the Northshore Project, Vintage had not repaid the $78,000 to EPCO. In order to pay the $78,000 loan to EPCO, Hatch provided EPCO with a change order in the amount of $78,000 on Building II of the Northshore Project so that EPCO could be repaid through the Northshore Project's construction loans.

*251 15 Toward the end of the Northshore Project, 51-SPR accused Hatch of materially breaching the Agreement by mismanaging the construction funds. 51-SPR confronted Hatch, and Hatch agreed to relinquish Broadstone's one-half interest in the North-shore Project to 51-SPR. Hatch then apparently fled to Hawaii, leaving EPCO with nowhere to send its final invoices. It was at this point that EPCO discovered 51-SPR's involvement in the project and approached 51-SPR directly for payment for the completed work. 51-SPR, viewing itself as a mere investor, disclaimed any obligation to pay EPCO for the construction costs.

II. PROCEDURAL BACKGROUND

T6 EPCO filed mechanic's liens against the two Northshore buildings and commenced an action to foreclose the liens. EPCO included in the lien amount the $78,000 change order on Building IIL that Hatch had provided to repay the loan from EPCO. EPCO also asserted breach of contract claims against 51-SPR on the theory that 51-SPR was in a partnership or joint venture relationship with Broadstone and therefore jointly liable on the construction contracts. In a separate proceeding, 51-SPR brought an action to quiet title to the two Northshore buildings. 51-SPR also brought a claim against EPCO under Utah's abusive lien statute, section 88-1-25 of the Utah Code, for including the $78,000 claim as part of its lien on the Northshore property. These proceedings were later consolidated.

17 EPCO moved for partial summary judgment on the issue of 51-SPR's lability as a partner or joint venturer of Broadstone. 51-SPR opposed the motion, arguing that summary judgment was not appropriate because there was a material issue of fact regarding one of the elements of a partnership or joint venture: whether 51-SPR and Broadstone agreed to share losses. Relying on statements contained in an affidavit of Robert Chimento, 51-SPR argued that Broadstone had agreed to bear all of the risk of loss. In his affidavit, Chimento stated that "[ulnder the Agreement, Broadstone and Hatch were solely responsible for all expenses, costs, losses, and risks associated with the Northshore project" and that "51-SPR was not liable or responsible for any losses, liabilities, or responsibilities relating to the [Northshore] Property, and under its arrangement with Broadstone, stood to lose only its investment in the Property and nothing more." The district court, however, held that Chimento's "bald assertions" did not create a genuine issue of material fact and granted EPCO partial summary judgment.

T8 Later in the proceedings, after holding a three-day bench trial, the district court ruled that EPCO could not collect the $78,000 claim as part of its lien because the $78,000 did not relate to the development of the Northshore property.

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Bluebook (online)
2008 UT 28, 183 P.3d 248, 601 Utah Adv. Rep. 23, 2008 Utah LEXIS 58, 2008 WL 926586, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ellsworth-paulsen-construction-co-v-51-spr-llc-utah-2008.