2016 UT App 102
THE UTAH COURT OF APPEALS
TELEGRAPH TOWER LLC AND JARED CHRISTIANSEN,
Appellants,
v.
CENTURY MORTGAGE LLC, ET AL.,1
Appellees.
Opinion
No. 20140489-CA
Filed May 12, 2016
Fifth District Court, St. George Department
The Honorable G. Michael Westfall
The Honorable James L. Shumate2
No. 100503310
Bryce D. Panzer and Brett N. Anderson, Attorneys
for Appellants
Bruce C. Jenkins and Carson B. Bagley, Attorneys for
Appellees VF Parties
Russell S. Mitchell, Attorney for Appellees Lyle
Stringham and Barbara Stringham
George A. Hunt and Timothy J. Bywater, Attorneys
for Appellee Harris Property Investments LLC
1. The parties on appeal are not limited to those listed, but also
include other parties whose names appear on the notice of
appeal or who have otherwise entered appearances in this court.
2. Judge G. Michael Westfall was assigned this case after Judge
James L. Shumate retired from the bench in March 2014. All
orders relevant to this appeal were decided by Judge Shumate.
Telegraph Tower v. Century Mortgage
JUDGE KATE A. TOOMEY authored this Opinion, in which JUDGE J.
FREDERIC VOROS JR. and SENIOR JUDGE RUSSELL W. BENCH
concurred.3
TOOMEY, Judge:
¶1 Jared Christiansen and Bradley S. Harrell, through their
company Telegraph Tower LLC (collectively, Borrowers), asked
a lending company, Century Mortgage, for a loan to complete a
construction project (the Project). Century Mortgage agreed and
sought money from various individuals and business entities
(collectively, Investors) to fund the loan. In essence, Century
Mortgage acted as a middleman between Borrowers and
Investors. It executed an agreement with Borrowers promising to
make funds available as needed for the Project. It also executed
an agreement with Investors, agreeing to service the loan,
including preparing all necessary paperwork and obtaining
information about the Project. At some point, Century Mortgage
misplaced the money4 and construction on the Project was
forced to stop for lack of funds. Borrowers sued Investors and
Century Mortgage under various legal theories. Particularly,
Borrowers claimed Investors were vicariously liable for the
tortious actions of Investors’ agent, Century Mortgage. Investors
responded that Century Mortgage was Borrowers’ agent and all
duties were fulfilled when Investors deposited their
contributions to the loan in Century Mortgage’s bank account.
3. Senior Judge Russell W. Bench sat by special assignment as
authorized by law. See generally Utah R. Jud. Admin. 11-201(6).
4. It is unclear what happened to the loan proceeds. When
Borrowers asked Century Mortgage about the money, one of
Century Mortgage’s principals, Donald Larkin, responded that
the ‚*m+oney is where it is . . . we intend to get *it+ for you.‛
Larkin later explained, ‚Let’s just say that we tried something
and it didn’t work out like we planned,‛ and there is ‚no money
in the account.‛
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Telegraph Tower v. Century Mortgage
¶2 In this appeal, we must determine whether the district
court correctly granted summary judgment on all relevant
causes of action. We affirm in part and reverse in part. Upon
review of the issues, we conclude the court improperly granted
summary judgment before deciding an agency issue and
improperly limited Borrowers’ damages. But we affirm the
court’s conclusion that Investors are not jointly and severally
liable.
BACKGROUND
I. Factual Background
¶3 Because of the complexities of this case, we first introduce
the parties involved and describe their relationships with one
another, then describe the procedural posture that gave rise to
this appeal. We recite only the facts and procedural background
relevant to this appeal.
Century Mortgage and Borrowers
¶4 In 2008, Borrowers sought to develop real property
Christiansen owned on Telegraph Street in Washington City,
Utah. With plans to construct a commercial office building on
the property, Borrowers pursued financing from Century
Mortgage for the approximately $2.8 million needed for the
Project. Century Mortgage did not immediately agree to fund
the Project but instead reached out to various individuals and
entities to solicit their investments. This effort was successful,
and Century Mortgage eventually agreed to assist Borrowers.
¶5 By early 2010, Century Mortgage had disbursed roughly
$490,000 in funds it had collected for the Project on behalf of
Borrowers to prevent the property from being subject to
foreclosure, including approximately $475,000 for a ‚Land
Payoff‛ to Village Bank; roughly $10,000 for property taxes; and
$4,555 for closing costs.
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Telegraph Tower v. Century Mortgage
¶6 In April 2010, Borrowers executed and recorded a trust
deed and note in favor of Investors. A couple weeks later,
Century Mortgage and Borrowers executed a loan agreement
(the Construction Loan Agreement), which promised Borrowers
approximately $2.8 million for the Project. Instead of paying
Borrowers the loan in one lump sum, the agreement set forth
conditions and requirements for Borrowers to receive it in
portions as needed. Further, the agreement described Century
Mortgage as Investors’ agent in servicing the loan and executing
the agreement. Specifically, the Construction Loan Agreement
stated it was made ‚by and between the undersigned Telegraph
Towers LLC., Jared Christiansen and Bradley Harrell
individually (borrower) and Century Mortgage, as agent for
*Investors+.‛ It identified the names of each individual investor
and the percentage of interest to which each investor was
entitled. Further, the agreement provided that
[u]pon the recordation of the Trust Deed, the net
proceeds of the loan will be available to be
disbursed by [Century Mortgage5] to the
undersigned Borrower or others as hereinafter
provided which shall be conclusively deemed full
consideration for the Note and that such
consideration has fully passed and been paid to the
Borrower.
¶7 In June and July 2010, according to Christiansen,
‚Century Mortgage fully funded several draws totaling
approximately $256,389.72‛ to pay for pre-construction costs.
But by August, after major construction had begun, Century
Mortgage stopped responding to Borrowers’ requests for funds.
5. We note that, in the first sentence of the Construction Loan
Agreement, Investors are referred to as ‚investors.‛ But
thereafter Investors are referred to as ‚lenders.‛ Moreover, the
term ‚lenders‛ is often used interchangeably when referring
either to Investors or to Century Mortgage.
20140489-CA 4 2016 UT App 102
Telegraph Tower v. Century Mortgage
Through their attorney, Borrowers sent Century Mortgage a
written request for a meeting. According to Christiansen, in that
meeting Century Mortgage informed them that ‚there [was not]
actually any money at all. All the money that [they] collected
ha[d] been spent.‛ At this point, Borrowers alleged, Century
Mortgage had ‚failed to fund at least $1,138,703.31 in loan
proceeds that should have been available for construction of the
Project.‛ As a result, Borrowers were unable to pay
subcontractors and suppliers, and then at least thirteen
mechanic’s liens were recorded against the property.
Century Mortgage and Investors
¶8 According to its brochure materials, once Century
Mortgage received a loan request, it would reach out to
prospective investors who had expressed interest in similar
investment opportunities and allow them to choose whether to
participate in a particular venture either by funding the entire
loan or by sharing the investment with other parties. Here,
Century Mortgage identified various individuals and entities to
contribute funds to the Project, some of whom had previously
used Century Mortgage’s services to invest in other projects.
Others agreed to invest through Century Mortgage for the first
time.
¶9 In April 2010, most of Investors executed an agreement
(the Investors Agreement) by which they promised to fund the
loan requested by Borrowers. The Investors Agreement specified
the amount each investor agreed to contribute. It expressly
stated,
Century Mortgage agrees to act as agent for the
above investors in gathering pertinent information
about the property and principals involved and
making such information available to the investors,
along with a recommendation. Century Mortgage
is not a guarantor of the note and the signers
herein agree that neither it nor its principals acting
20140489-CA 5 2016 UT App 102
Telegraph Tower v. Century Mortgage
on its behalf are liable in any way for the success or
failure of this venture except as to
misrepresentation or omission of material facts of
which they are aware. The investment decision is
solely that of the investor.
It also set forth Century Mortgage’s responsibilities:
Century Mortgage agrees to prepare, or have
prepared documents necessary to complete this
transaction in a businesslike manner. This will
include a Trust Deed, Trust Deed Note, closing
statements, and Title Insurance. The deeds and
notes will bear the investors names and the
borrowers obligation will be solely to the investors
so named. However, Century Mortgage will
service the loan for the length of its regular term,
gathering the money to be invested and
distributing it to the Title Co. for the lot (or land),
holding the balance on a construction loan and
distributing it to the contractor periodically as
needed, upon completion of each part of the home
or project, collecting monthly interest payments,
assessing necessary late fees, calculating principal
and interest, and forwarding the amount due each
investor promptly.
¶10 A few prospective investors did not execute the Investors
Agreement, or any other agreement, but nevertheless promised
to invest in the Project. One investor entered into a series of
separate contracts with Century Mortgage agreeing to invest a
total of $600,000 for the Project.
¶11 Although Investors dispute whether they are bound by
the Construction Loan Agreement, they generally agree they are
subject to the trust deed and note. Further, all Investors who
executed the Investors Agreement concede they are bound by it.
20140489-CA 6 2016 UT App 102
Telegraph Tower v. Century Mortgage
Finally, all Investors gave their respective contributions to
Century Mortgage to fund the loan.
II. Procedural Background
¶12 In September 2010, Borrowers filed suit against Investors.6
Borrowers claimed Investors breached the Construction Loan
Agreement and the integrated trust deed and note. They also
brought claims regarding the implied covenant of good faith and
fair dealing and unjust enrichment. Specifically, they claimed,
‚Investors expressly authorized Century Mortgage to act as the
Investors’ agent and to enter the *Construction+ Loan Agreement
with *Borrowers+, and to service the loan on the Investors’
behalf.‛ Accordingly, Borrowers claimed, ‚Century Mortgage,
on its own behalf and on behalf of all the Investors, entered into
the [Construction] Loan Agreement and expressly agreed,
among other things, that the net proceeds of the loan
contemplated therein would be available for disbursement and
application to the Project as appropriate requests were made.‛
As such, Borrowers assert, ‚*Investors+ breached and are in
default of the [Construction] Loan Agreement and any other
agreements ancillary thereto.‛7
6. In their complaint, Borrowers also brought claims against
Century Mortgage and its principals individually, but those
claims are not part of this appeal.
7. At the district court, three groups of investors answered
Borrowers’ complaint. The first group, the ‚VF Parties,‛ was the
largest and included more than eighteen investors represented
by the same legal counsel. The second group was a married
couple, Lyle and Barbara Stringham, referred to as the
‚Stringhams.‛ Finally, the ‚HPI‛ group consisted of Harris
Property Investments LLC and its principal, Paul Harris. To
avoid further complicating the issues, we continue to refer to the
(continued<)
20140489-CA 7 2016 UT App 102
Telegraph Tower v. Century Mortgage
¶13 After discovery closed, between October 2012 and
February 2013, the parties made various motions and counter-
motions for summary judgment. To support their various
motions, the parties raised four main issues: (1) whether Century
Mortgage acted as Investors’ agent or fiduciary, or as Borrowers’
agent or fiduciary, or both; (2) whether Borrowers could
demonstrate that Investors did not pay their respective shares,
considering that Century Mortgage commingled the funds; (3)
whether Investors were jointly and severally liable; and (4)
whether Investors were unjustly enriched.
¶14 First, the parties raised several theories regarding Century
Mortgage’s agency. On one hand, Investors argued they had no
duty under the Construction Loan Agreement because Century
Mortgage did not have authority to sign the agreement on
Investors’ behalf. Rather, Century Mortgage acted as Borrowers’
agent and fiduciary because Century Mortgage held Borrowers’
loan funds, disbursed interest payments, and paid Village Bank
to prevent it from foreclosing on the property. Investors
alternatively argued that, even if Century Mortgage was their
agent, Borrowers’ claim still failed as a matter of law for at least
two reasons: Century Mortgage’s authority was limited to
gathering information and preparing loan documents and, as
Borrowers’ fiduciary, it acted as a dual agent similar to an
escrow agent. Accordingly, Investors argued that, under
common law principles not yet adopted in Utah, Borrowers bore
the risk of loss because Borrowers entered into a fiduciary
relationship with Century Mortgage first. Further, Investors
argued that any obligation Investors had to pay Borrowers was
fulfilled under Utah Code section 22-1-2 when Investors gave
Century Mortgage their funds because Century Mortgage was ‚a
fiduciary.‛
(