WILLIAM H. STEELE, Chief District Judge.
As set forth in more detail in other Court orders, the plaintiffs are four limited liability companies ("Utah," "Range," "Water" and "Patmos"), and one corporation ("Florencia"), all formed by non-party Charles Breland to facilitate his business of buying, developing and reselling real estate. The defendants are a mother and son ("Linda" and "William") who performed services for Breland and certain of his entities regarding various properties. The plaintiffs seek a declaration that they owe nothing to the defendants arising out of their rendition of such services. (Doc. 1 at 7; Doc. 88-1 at 2).
The defendants counterclaimed against all five plaintiffs, as well as against another LLC formed by Breland ("Osprey"), on theories of breach of contract and promissory estoppel.
The defendants' claims regarding the Utah property were tried to the Court, with the Court considering evidence presented to the jury as well as additional evidence presented only to the Court. After the parties rested, the plaintiffs
As noted, the defendants bring two claims regarding the Utah property: breach of contract and promissory estoppel. The Court addresses the defendants' claims in sequence, followed by the plaintiffs' prayer for declaratory relief.
The defendants assert that Breland, on behalf of himself and the LLC plaintiffs, agreed to compensate them with a 25% mineral interest in the Utah property. The single measure of relief demanded by the defendants is specific performance, that is, transfer to them of a 25% mineral interest.
The parties agree that Utah law supplies the elements of the defendants' claim for breach of contract. (Doc. 88-1 at 8). They further agree that the elements of such a claim are: (1) a contract; (2) performance by the party seeking recovery; (3) breach by the other party; and (4) damages. (Id.).
The Court finds that the defendants and Breland originally agreed that they would be compensated for their work in connection with the Utah property by payment of 10% of the resale price of the property. The Court also finds that the defendants and Breland, on behalf of himself and the LLC plaintiffs, later agreed to compensate the defendants instead with a 25% mineral interest in the Utah property. The defendants testified that these agreements were entered orally, while Breland denied any such agreement. The Court finds the defendants more credible than Breland for several reasons, including without limitation the following circumstances.
First, Breland admits that he (through one of his entities) had an oral agreement with the defendants regarding their compensation with respect to the Mexico property, (Doc. 112 at 2), so an oral agreement with respect to the Utah property is consistent with the parties' previous dealings. Second, the 10%-of-resale-price measure of the original agreement regarding the Utah property is the same as with the Mexico property, and there was plentiful evidence that Breland and the defendants discussed and even laughed about the defendants' consistent 10% arrangement. Third, there was substantial evidence of Breland's tendency to abruptly alter business proposals to suit his purposes, with which practice his switch to a 25% mineral interest is consistent. Fourth, while the defendants' receipt of other forms of compensation for their efforts might suggest that such compensation was to the exclusion of a 25% mineral interest, the plaintiffs admit that the defendants have received from them no compensation of any sort in connection with the Utah property. (Doc. 88-1 at 8). Fifth, while Breland denied the specific compensation arrangement to which the defendants testified, he identified no different agreement governing the parties' relations; it is not plausible that the defendants purposely labored for free, so Breland's silence leaves the defendants' asserted compensation agreement as the only one supported by any evidence. Sixth, after observing the parties throughout the trial, the Court finds that Breland — in both his testimony and his demeanor — was less than ingenuous.
The Court finds that the agreement to compensate the defendants with a 25% mineral interest was entered on July 20, 21 or 22, 2005. William testified that Breland entered the agreement on behalf of himself and his LLCs, the first of which were formed on July 20, two days before closing.
The Court finds that Breland entered the agreement to compensate the defendants with a 25% mineral interest on behalf of himself and on behalf of the LLC plaintiffs. It is uncontroverted that Breland is and always has been the sole member of these entities, and their close connection to both Breland and the Utah property satisfies the Court that Breland entered the agreement for them as well as for himself.
As addressed in Part I.B, the Court finds that the defendants fully performed their obligations under the July 2005 agreement. As discussed above, the LLC plaintiffs have breached the agreement because no mineral interest has been transferred to the defendants. And the defendants have been damaged by the failure to receive the agreed (or any) compensation for their efforts.
For the reasons set forth above, the Court finds that the defendants have established all elements of their claim for breach of contract against the LLC plaintiffs.
The plaintiffs argue that the Utah statute of frauds bars the defendants' contract claim. They originally invoked four different statutes, (Doc. 64 at 19-20), but they have now confined their argument to Utah Code § 25-5-3. (Doc. 108 at 18).
The defendants invoke the "partial performance" exception to Utah's statute of frauds. "Nothing in this chapter shall be construed to abridge the powers of courts to compel the specific performance of agreements in case of part performance thereof." Utah Code § 25-5-8. The plaintiffs agree that "the doctrine of part performance allows a court to enforce an oral agreement, if it has been partially performed." (Doc. 108 at 16).
"It is clear ... that a verbal agreement to transfer an interest in land can be taken out of the statute of frauds, and that one can be estopped from challenging the oral agreement if three requirements are met: A court must find (1) that there was such an agreement, (2) that there had been part or full performance, and (3) that there was reliance thereon." Orton v. Carter, 970 P.2d 1254, 1259 (Utah 1998). The parties agree that these are the elements of the part performance exception.
Demonstrating these elements is not easy. As to the first element, "the terms of the oral contract must be clear and definite and established by clear and definite testimony." Bradshaw v. McBride, 649 P.2d 74, 79 (Utah 1982); accord Spears v. Warr, 44 P.3d 742, 751 (Utah 2002), disavowed in part on other grounds, Tangren Family Trust v. Tangren, 182 P.3d 326, 331 n.20 (Utah 2008).
As noted above, the Court has found that an oral agreement to transfer to the defendants a 25% mineral interest in the Utah property existed. The defendants argue that the consideration for this promise consisted of their efforts in acquiring the Utah property as well as their post-acquisition efforts in exploring the mineral interests thereunder. They point to evidence that they engaged in such exploration activity as demonstrating that they performed and that they did so in reliance on the agreement.
As found in Part I.A, the agreement to compensate the defendants with a 25% mineral interest was reached just before closing. The defendants presented no evidence that they performed acquisition services after the agreement was reached, and the Court finds that they did not do so. Thus, the part performance exception to the statute of frauds can be in play only if the consideration for the agreement to transfer the mineral interest included post-acquisition services in exploring the property's minerals.
According to the defendants, William testified that the agreement required them, as part of the consideration for receiving a 25% mineral interest, to participate with Breland in developing the Utah property's mineral resources. (Doc. 109 at 2-3, 5-6, 7). The Court cannot agree. What William actually said was that "we were to have 25 percent of the minerals and mineral interest, the revenue interest in the property as part of putting the deal together." (Doc. 111-1 at 71 (emphasis added)). Putting the deal together is pre-acquisition activity, not post-acquisition exploration.
William also testified that, before presenting the Utah property to Breland, he had been working with Southern Companies ("Southern") "to put together an offer to come in and buy the property." (Doc. 111-1 at 29-30). He testified that his "agreement for compensation" with Southern was "[a] 25 percent interest in the minerals moving forward," plus a ten percent fee based on the purchase price. (Id. at 30). The Court finds that William reached an agreement with Southern to receive a 25% mineral interest exclusively for his acquisition efforts. Because William testified that the defendants' deal with Breland was "basically the same deal that I had made with Southern Companies," (id. at 31), it is clear that the defendants' deal with Breland was to receive a mineral interest based solely on the defendants' acquisition efforts.
The defendants, (Doc. 109 at 3, 5), stress that Larry Trice, a representative of Breland, wrote a letter in 2007 describing William as one "with whom we participate in our Utah gas and oil exploration." (Defendants' Exhibit 8 at 1). This statement, however, sheds no light on the terms of the agreement to transfer a 25% mineral interest; William would have had incentive to "participate" in mineral exploration even if he had already fully performed his obligations under the agreement, since he would be exploring a mineral interest he was already owed.
As noted, to successfully invoke the part performance exception, the defendants are required to establish, by clear and definite testimony, that the terms of the oral contract clearly and definitely required them to perform post-acquisition work as consideration for receiving a 25% mineral interest. They have come nowhere close to meeting this demanding standard.
Because the defendants cannot establish the first element of the part performance exception, the Court need not consider whether they could satisfy the second and third elements.
The Court finds that the defendants have established every element of their claim for breach of contract. The Court finds that the plaintiffs have established every element of their affirmative defense of the statute of frauds. The Court finds that the defendants have not established every element of any exception to the statute of frauds. The defendants have not prevailed on their breach of contract claim and are not entitled to any relief under that claim. The plaintiffs' motion for partial findings is
The promissory estoppel claim is presented as an "alternative" to the contract claim. (Doc. 109 at 2 n.2). The defendants assert that Breland promised on behalf of himself and the plaintiff LLCs to transfer to the defendants a 25% mineral interest in the Utah property.
The parties agree that Alabama law supplies the elements of the defendants' claim for promissory estoppel. (Doc. 88-1 at 9). They further agree that the elements of such a claim are: (1) a promise which; (2) the promisor should have reasonably expected to induce action or forbearance of a definite and substantial character; (3) the promise did in fact induce such action or forbearance by the promisee; and (4) injustice can be avoided only by enforcing the promise. (Id.).
For reasons expressed in Part I.A, the Court finds that Breland promised the defendants, on behalf of himself and the plaintiff LLCs, to transfer to the defendants a 25% mineral interest in the Utah property based on their services in acquiring the property. The Court further finds that Breland at the same time promised, on behalf of himself and the plaintiff LLCs, to participate with the defendants in oil and gas exploration on the Utah property.
The Court finds that Breland's promise induced the defendants to take actions of a definite and substantial character. Without pretense of being exhaustive, those efforts included securing a petroleum engineer, identifying additional mineral leases, negotiating mineral leases, crafting a drilling deal, working on multiple wells, exploring financing needed to retain state leases, and testifying as an entity representative. For years, William traveled to Utah 20-30 times a year, staying as long as six weeks at a time, and he paid all his own expenses for almost all these trips.
Finally, the Court concludes that injustice can be avoided only by enforcing the promise to transfer a 25% mineral interest. The plaintiffs admit the defendants "have not received any compensation from Breland or his entities in connection with the Utah property." (Doc. 88-1 at 8). This is an extraordinary injustice. Breland extracted from the defendants all their services in acquiring the Utah property (beginning with their bringing the property to his attention in the first place), in exchange for a promise to pay them 10% of the resale price. Shortly before closing, he swapped the cash compensation for a 25% mineral interest. Failing to enforce this promise would condone Breland's complete stiffing of the defendants for services that he himself valued in seven figures.
The plaintiffs offer no relevant response. Rather than addressing promissory estoppel with respect to the 2005 promise to transfer a 25% mineral interest, they focus exclusively on attempting to show that promissory estoppel does not apply to a separate (and redundant) promise by Breland, made in 2010, to use the assets of all his entities to satisfy all obligations to the defendants. (Doc. 108 at 13-16). The plaintiffs' confusion is not easy to understand, given that the joint pretrial document expressly and in detail ties the promissory estoppel claim to Breland's 2005 promise to transfer a mineral interest. (Doc. 88-1 at 8-9). Even after the defendants explicitly set forth their theory in their post-trial brief, (Doc. 109 at 2-5), the plaintiffs in their subsequent post-trial brief completely ignored it and instead repeated — essentially verbatim — their earlier, misdirected argument regarding the 2010 agreement. (Doc. 112 at 14-17). They have thereby forfeited whatever argument (if any) they might have raised in opposition to the defendants' theory.
With exceptions not relevant here, "an individual is required to be licensed as a principal broker ... if the individual performs, offers to perform, or attempts to perform one act for valuable consideration of ... buying ... real estate for another person" or of "offering for another person to buy ... real estate." Utah Code § 61-2f-201(2). "Unless a person is licensed under this chapter, it is unlawful for the person to ... act in the capacity of a principal broker ...." Id. § 61-2f-201(1). "An individual required to be licensed under this chapter who violates this chapter ... is, upon conviction of a first violation, guilty of a class A misdemeanor." Id. § 61-2f-405(1)(a). "A person may not bring or maintain an action in any court of this state for the recovery of a commission, fee, or compensation for any act done or service rendered if the act or service is prohibited under this chapter." Id. § 61-2f-409(1)(a). The plaintiffs assert that Alabama law precludes the defendants from recovering under a theory of promissory estoppel because they lacked a Utah broker's license. (Doc. 108 at 21-22; Doc. 112 at 14).
The burden is on the plaintiffs to establish all elements of this affirmative defense.
Even had the plaintiffs demonstrated that the defendants were required to hold a license but did not possess one, they have not demonstrated that such a failure precludes the defendants' claim. In identifying the consequences of such a failure, the plaintiffs eschew Utah law. Instead, they rely exclusively on Alabama law, arguing that it prohibits the defendants' claim because their pursuit of a 25% mineral interest is based on an "illegal contract," enforcement of which is barred by public policy. (Doc. 108 at 21-22).
The Court detects multiple deficiencies in the plaintiffs' cursory treatment of the issue. First, the plaintiffs have not explained — despite the defendants' objection, (Doc. 109 at 8) — why Alabama law would supply the rule of decision.
Beverly v. Chandler, 564 So.2d 922, 924 (Ala. 1990) (internal quotes omitted); accord J.C. Bradford & Co., L.L.C. v. Vick, 837 So.2d 271, 175 (Ala. 2002). Because the Court finds the defendants were not required to have a broker's license, the Court need not consider further the difficulties with the plaintiffs' legal argument.
As noted in Part I.B, the defendants' contract claim is barred by the statute of frauds. The plaintiffs have explicitly limited their invocation of this defense to the contract claim. (Doc. 108 at 16; Doc. 112 at 17). Because the plaintiffs have preserved no argument that the promissory estoppel claim is barred by the statute of frauds, the Court does not consider or address this forfeited defense.
The plaintiffs argue that the defendants' claims are barred by res judicata. (Doc. 108 at 5-13). The argument is presented as an almost verbatim repetition of the plaintiffs' trial brief. (Doc. 92 at 10-18). The Court, addressing that trial brief, has previously ruled that "the plaintiffs' res judicata defense is legally insupportable." (Doc. 103 at 4). That ruling remains unchanged.
The joint pretrial document preserved an affirmative defense of laches. (Doc. 88-1 at 9-10). The plaintiffs, however, did not mention — much less address — such a defense in either their Rule 50 motion or their post-trial brief. They have thereby forfeited any argument they might (or might not) have regarding the timeliness of the defendants' claim. Cf. Sapuppo v. Allstate Floridian Insurance Co., 739 F.3d 678, 681 (11
The plaintiffs propose that any recovery on the defendants' promissory estoppel claim should be limited to a 3% mineral interest rather than the 25% demanded. (Doc. 112 at 3-4 n.3). The basic idea seems to be that, because the jury awarded the defendants $250,000 on their promissory estoppel claim regarding the Mexico property (or about 12% of the $1.9 million they were seeking), the plaintiffs' recovery regarding the Utah property should likewise be limited to about 12% of what they seek, which would be roughly a 3% mineral interest. As discussed in note 5, supra, only such facts as are necessarily established by the jury's general verdict regarding the Mexico property can be binding on the Court as to the Utah property. The plaintiffs identify nothing necessarily established by the jury's verdict — on the contrary, they concede the "uncertain nature of the binding effect of the jury's finding in favor of the Donados on their promissory estoppel claim on the Mexico side." (Doc. 112 at 3 n.3). Because the Mexico claim involved a promise, made in 2004, to pay money for work regarding the Mexico property, while the Utah claim involves a different promise, made at a different time, to provide different compensation for different work, and with different acts of reliance supporting the two claims, it is impossible to conclude that the jury made any finding regarding the quantum of recovery that could be binding on the Utah claim. To the extent the plaintiffs suggest the Court follow the jury though not bound to do so, the Court declines.
The Court finds that the defendants have established every element of their claim for promissory estoppel. The Court finds that the plaintiffs have not established every element of their affirmative defense regarding a broker's license. The Court rejects the plaintiffs' affirmative defense of res judicata on grounds previously stated. The plaintiffs have not presented or preserved any other defense to the promissory estoppel claim. The defendants have prevailed on their promissory estoppel claim and are entitled to a judgment awarding them a 25% mineral interest in the Utah property. The plaintiffs' motion for partial findings is
The plaintiffs seek a declaration "that there are no commissions, fees or expenses owed by" them to the defendants. (Doc. 1 at 7). Given the jury's verdict as to the Mexico claims and the Court's ruling as to the Utah claims, the plaintiffs are not entitled to the relief they seek.
The parties are
DONE and ORDERED.
Breland also suggests that injustice is lacking because Zajac and/or Levada paid William $450,000 after Levada's 2011 bid to purchase the Utah property fell through. By the plaintiffs' own admission, the payment was made for services rendered in connection with that transaction, (Doc. 108 at 14), not for the defendants' work for Breland in acquiring the property years earlier. It is therefore irrelevant to the injustice inquiry.
