Armand L. Smith and Virginia L. Smith V. Price Development Company Fka
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Brigham Young University Law School BYU Law Digital Commons Utah Supreme Court Briefs 2001 Armand L. Smith and Virginia L. Smith v. Price Development Company fka Fairfax Realty, Inc., and North Plains Development Company, LTD : Brief of Appellee Utah Supreme Court Follow this and additional works at: https://digitalcommons.law.byu.edu/byu_sc2 Part of the Law Commons Original Brief Submitted to the Utah Supreme Court; digitized by the Howard W. Hunter Law Library, J. Reuben Clark Law School, Brigham Young University, Provo, Utah; machine-generated OCR, may contain errors. Harold G. Christensen; Reed L. Martineau; Rex E. Madsen; Snow Christensen & Martineau; James S. Jardine; Brent D. Wride; Rick B. Hoggard; Rod N. Andreason; Ray Quinney & Nebeker; Attorneys for Defendants/ Appellants. Robert S. Campbell; Clark K. Taylor; Vancott aB gley Cornwall & McCarthy; Attorneys for Plaintiffs/Appellees. Recommended Citation Brief of Appellee, Smith v. Price Development Company, No. 20010673.00 (Utah Supreme Court, 2001). https://digitalcommons.law.byu.edu/byu_sc2/1912 This Brief of Appellee is brought to you for free and open access by BYU Law Digital Commons. It has been accepted for inclusion in Utah Supreme Court Briefs by an authorized administrator of BYU Law Digital Commons. Policies regarding these Utah briefs are available at http://digitalcommons.law.byu.edu/utah_court_briefs/policies.html. Please contact the Repository Manager at [email protected] with questions or feedback. IN THE SUPREME COURT OF STATE OF UTAH ARMAND L. SMITH, Individually and as Trustee for the Armand L. Smith, Jr. Trust and the Shannon S. Windham Trust, and Appeal No. 20010673-SC VIRGINIA L. SMITH, Plaintiffs and Appellees, v. PRICE DEVELOPMENT COMPANY, a Utah corporation f/k/a FAIRFAX Third District Court REALTY, INC., a Utah Case No. 940904312CV corporation, NORTH PLAINS LAND COMPANY, LTD., a Utah limited (Honorable Frank G. Noel partnership, and NORTH PLAINS Presiding District Court DEVELOPMENT COMPANY, LTD, a Judge) Utah limited partnership, Defendants and Appellants. BRIEF OF APPELLEES ON APPEAL FROM A FINAL JUDGMENT OF THE THIRD JUDICIAL DISTRICT COURT FOR SALT LAKE COUNTY, STATE OF UTAH HONORABLE FRANK G. NOEL, PRESIDING DISTRICT JUDGE HAROLD G. CHRISTENSEN (0638) ROBERT S. CAMPBELL (0557) REED L. MARTINEAU (2106) CLARK K. TAYLOR (53 54) REX E. MADSEN (2052) VanCott Bagley Cornwall & Snow Christensen & Martineau McCarthy 10 Exchange Place, 11th Floor 50 South Main Street, Salt Lake City, UT 84145 Suite 1600 Telephone: (801) 521-9000 Salt Lake City, UT 84145 Telephone: (801) 532-3333 JAMES S. JARDINE (1647) BRENT D. WRIDE (5163) Attorneys for Plaintiffs- RICK B. HOGGARD (5088) Appellees . ROD N. ANDREASON (8853) Ray Quinney & Nebeker FILED 36 S. State St., Ste. 1400 Salt Lake City, UT 84145 UTAH SUPREME COURT Telephone: (801) 532-1500 Attorneys for Defendants- ceo 2 7 2002 Appellants. PAT BARTHOLOMEW CLERK OF THE COURT IN THE SUPREME COURT OF STATE OF UTAH ARMAND L. SMITH, Individually and as Trustee for the Armand L. Smith, Jr. Trust and the Shannon S. Windham Trust, and Appeal No. 20010673-SC VIRGINIA L. SMITH, Plaintiffs and Appellees, v. PRICE DEVELOPMENT COMPANY, a Utah corporation f/k/a FAIRFAX Third District Court REALTY, INC., a Utah Case No. 940904312CV corporation, NORTH PLAINS LAND COMPANY, LTD., a Utah limited (Honorable Frank G. Noel partnership, and NORTH PLAINS Presiding District Court DEVELOPMENT COMPANY, LTD, a Judge) Utah limited partnership, Defendants and Appellants. BRIEF OF APPELLEES ON APPEAL FROM A FINAL JUDGMENT OF THE THIRD JUDICIAL DISTRICT COURT FOR SALT LAKE COUNTY, STATE OF UTAH HONORABLE FRANK G. NOEL, PRESIDING DISTRICT JUDGE HAROLD G. CHRISTENSEN (0638) ROBERT S. CAMPBELL (0557) REED L. MARTINEAU (2106) CLARK K. TAYLOR (5354) REX E. MADSEN (2 052) VanCott Bagley Cornwall & Snow Christensen & Martineau McCarthy 10 Exchange Place, 11th Floor 50 South Main Street, Salt Lake City, UT 84145 Suite 1600 Telephone: (801) 521-9000 Salt Lake City, UT 84145 Telephone: (801) 532-3333 JAMES S. JARDINE (1647) BRENT D. WRIDE (5163) Attorneys for Plaintiffs- RICK B. HOGGARD (5088) Appellees . ROD N. ANDREASON (8853) Ray Quinney & Nebeker 36 S. State St., Ste. 1400 Salt Lake City, UT 84145 Telephone: (801) 532-1500 Attorneys for Defendants- Appellants. CERTIFICATE OF SERVICE I hereby certify that I am a member of and/or employed by the law firm of Van Cott Bagley Cornwall & McCarthy, Suite 1600 Key Bank Tower Suite, 50 South Main Street, Salt Lake City, Utah, 84144-0340, and that in said capacity and pursuant to Rule 21, Utah Rules of Appellate Procedure, a true and correct copy of the foregoing BRIEF OF APPELLEES was delivered to the following thisc^r day of September, 2002 by: x ] Hand Delivery ] Facsimile No. ] Depositing the same in the U.S. Mail, postage prepaid ] Federal Express ] Certified Mail, Receipt No. , return receipt requested Reed L. Martineau, Esq. Rex E. Madsen, Esq. Snow, Christensen & Martineau 10 Exchange Place, Eleventh Floor Salt Lake City, Utah 84111 James S. Jardine, Esq. Brent D. Wride, Esq. Ray Quinney & Nebeker 79 S. Main Street, Suite 600 Salt Lake City, UT84111 Attorneys for Defendarrt^aagLAppellants INDEX Page No. NATURE OF THE CASE 1 RESULT SOUGHT BY APPELLEES IN THIS APPEAL 2 STATEMENT OF FACTS 2 1. The Parties and the Partnerships 2 2. Price's Unfounded Claim That It Was Entitled, as General Partner, to Convey the Partnership Property to the JP Realty REIT 3 3. The Mall was Never Insolvent or Headed Toward Foreclosure 5 4. The 1989 "Capital Call" 6 5. Financing of the North Plains Mall 6 6. Price's Real Reason for the REIT and Conveyance to It of the North Plains Mall 7 7. Strength of the Commercial Mall Market in 1993-94 8 8. Price Violated the Partnership Agreements By Commingling Monies 8 9. Price Violated the Partnership Agreements By Paying Itself Inflated Management Fees 9 10. Price Breached the Partnership Agreements By Manipulating the Partnership Tax Returns to Favor John Price and Prejudice the Smiths 9 11. Price's Decision and Creation of the JP Realty REIT in July- September 1993 10 i Page No. 12. Price Gave Smiths "Three Options" 10 13. Price Did Not Make a Fair Market Value or Other Independent Evaluation of the Mall 12 14. Further Inquiry By Smiths As to the Three Options 12 15. Price's Implementation of the REIT 14 16. Price "Cooked the Partnership Books" of the "REIT Value" Accounting of March 8.1994 16 17. Price Finally Discloses the Contribution Agreements 18 18. Price's Assertion That It Failed to Disclose Upon Advice of Counsel 18 19. The Trial — Testimony of John Price 19 20. The Trial on Liability and Compensatory and Punitive Damages 20 21. The District Court's Crookston I Special Findings 22 SUMMARY OF THE ARGUMENT 23 ARGUMENT 26 I. PRICE DEVELOPMENT HAS CONSPICUOUSLY FAILED TO MARSHAL THE FACTS OF THIS CASE, AS REQUIRED BY THIS COURT, AND ERGO ITS APPEAL MUST FAIL 26 II. PRICE DEVELOPMENT HAS NOT APPEALED THE JURY VERDICT, AFFIRMED BY JUDGE NOEL, THAT PRICE BREACHED ITS FIDUCIARY DUTIES TO THE SMITHS, CONVERTED SMITHS' INTEREST IN PARTNERSHIP ASSETS, AND BREACHED ITS PARTNERSHIP AGREEMENTS, AND ACCORDINGLY, THOSE QUESTIONS ARE NOT BEFORE THE COURT IN THIS APPEAL. ... 28 ii Page No. PRICE HAS MADE NO CONSTITUTIONAL CHALLENGE TO THE EXCESSIVENESS OF THE PUNITIVE DAMAGE AWARD AND ACCORDINGLY, THIS COURT WILL REVIEW THE PUNITIVE DAMAGE VERDICT AND JUDGMENT UNDER AN ABUSE OF DISCRETION STANDARD 29 1. Price Has Not Raised or Made a Constitutional Challenge 29 THE DISTRICT COURT DID NOT COMMIT ANY ERROR UNDER THE EGREGIOUS FACTS OF THIS CASE IN SUBMITTING THE ISSUE OF PUNITIVE DAMAGES TO THE JURY 30 1. The Issue on Appeal of Whether the Trial Court Should Have Submitted to the Jury the Question of Punitive Damages is Reviewed Under an Abuse of Discretion Standard 31 2. In the Review of the Sufficiency of Evidence, Price Ignores a Pivotal Factor - It Was a Fiduciary 32 3. Regardless of the Standard of Review, the Evidence of Price's Breach of Trust and Confidence Was Overwhelming 33 AS TO PRICE'S CLAIM OF EXCESSIVENESS OF PUNITIVE DAMAGES AWARDED, THE TRIAL COURT ARTICULATED GROUNDS UNDER CROOKSTON I IN CONCLUDING THAT THE PUNITIVE DAMAGES AWARD WAS REASONABLE AND BORE A RATIONAL RELATIONSHIP TO PRICE'S MISCONDUCT 33 1. The Standard of Review of the Trial Court's Articulated Grounds is an Abuse of Discretion 33 2. Under Any Standard of Review, the Punitive Damage Award in this Case Was Not Excessive, and the Trial Court Did Not Abuse Its Discretion 34 iii Page No. Relative Wealth of Price Development 34 i. Nature of Price's Misconduct 35 ii. Facts and Circumstances Surrounding Price's Misconduct 41 iv. The Effect of Price's Misconduct on Smiths and Others 42 v. Probability of Future Recurrences 43 vi. Relationship of the Parties 44 vii. Ratio of Punitive to Compensatory Damages 44 PRICE DEVELOPMENT'S NEW "CAUSATION" ISSUE FAILS BECAUSE (1) THE ISSUE WAS NOT PRESERVED, (2) THE INJURY TO SMITHS WAS PLAINLY ESTABLISHED, (3) PRICE CONFUSES INJURY WITH DAMAGES AND (4) CITED CASE AUTHORITY IS INAPPOSITE 46 1. Causation Issue Was Not Preserved Below 46 2. In Any Event Smiths Established Causation and Damages At Trial 46 3. Price Confuses Injury With The Quantum of Damages 48 4. Price Cites To Inapposite Case Law 49 THE TRIAL COURT DID NOT ERR IN CONCLUDING THAT COMPENSABLE DAMAGES FOR PRICE'S BREACH OF FIDUCIARY DUTY INCLUDED THE TIME VALUE OF MONEY 49 iv Page No. 1. In a Breach of Fiduciary Case, Courts Have Clearly Recognized that an Award of the Time Value of Money to the Plaintiff is Necessary to Prevent the Fiduciary From Profiting From Its Own Wrongdoing 49 2.