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Ron Case Roofing & Asphalt v. Blomquist

Citations: 773 P.2d 1382; 108 Utah Adv. Rep. 7; 1989 Utah LEXIS 47; 1989 WL 49364Docket: 19748

Court: Utah Supreme Court; May 11, 1989; Utah; State Supreme Court

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The Supreme Court of Utah upheld a summary judgment requiring Vesper Financial Corporation and its shareholders, Gerald V. Blomquist and Bradley K. Panos, to pay $17,500 plus interest to Ron Case Roofing and Asphalt Paving, Inc. The trial court determined that Ron Case was a third-party beneficiary of a settlement agreement between Vesper and Brooks Construction, which included obligations that benefited him. The Vesper group contended that material facts remained regarding Ron Case’s right to recovery and whether they had valid defenses against his claim. Ron Case argued that the trial court erred in not awarding him attorney fees. The court affirmed the trial court's decision, emphasizing the background of disputes between Brooks Construction and Ron Case related to the Burton Plaza project, as well as the subsequent restructuring of corporate ownership between Vesper and Brooks Construction aimed at resolving these disputes. Ron Case initiated the lawsuit after failing to collect the stipulated judgment from Brooks Construction.

Ron Case asserted that the Vesper group was liable for obligations to him related to the Brooks' debts from the Burton Plaza project, as outlined in a settlement agreement dated January 24, 1983. After Ron Case filed for summary judgment, the trial court ruled in his favor, determining that no genuine issues of material fact existed and holding the Vesper group accountable. The court indicated that while the Vesper group might have a claim against Brooks for breach of the agreement, this claim could not serve as a defense against Ron Case's lawsuit. Ron Case's request for attorney fees was denied.

In reviewing the summary judgment, the court emphasized that such judgments are granted only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. The court also stressed that facts must be viewed favorably to the losing party and that legal determinations are reviewed without deference to the trial court's interpretations. 

The Vesper group contested the summary judgment by arguing that the settlement did not entitle Ron Case to recover the unpaid judgment from Brooks, claiming they did not intend to assume Brooks' liabilities. However, the court noted that contract interpretation begins with the document's explicit terms. The Vesper group's reliance on extrinsic evidence to demonstrate their intentions was rejected, as the court found the settlement agreement comprehensive and unambiguous, supported by an integration clause that confirmed the agreement encapsulated the parties' entire understanding. Consequently, the trial court's exclusion of extrinsic evidence was upheld, and the Vesper group's claim regarding the nature of their obligations was found unpersuasive.

Panos, Blomquist, and Vesper are jointly and severally liable for all current and future debts related to labor, materials, and other items for the Vesper Projects, as stated in Paragraph 4 of the settlement agreement. Additionally, Paragraph 2 requires them to indemnify Brooks, Smith, and Brooks Construction against any claims arising from the Vesper Projects or the operations of Vesper, Panos, and Blomquist. The court found the language of these paragraphs clear and unambiguous, ruling that extrinsic evidence presented by the Vesper group was inadmissible due to ambiguity. The court also determined that Ron Case's ability to pursue the Vesper group for recovering Brooks Construction's unpaid judgment hinges on whether he qualifies as a third-party beneficiary under the principles outlined in Section 302 of the Restatement (Second) of Contracts. This section states that a party is an intended beneficiary if the contract's performance is meant to benefit them directly, and the intent must be evident from the contract's terms and context. Only intended beneficiaries can enforce rights under a contract, while incidental beneficiaries cannot. The analysis of Paragraphs 2 and 4 will clarify Ron Case's status as a potential intended beneficiary.

The parties intended for the Vesper group to be responsible for all obligations owed by Brooks to those providing labor and materials for Vesper projects, including Ron Case. This establishes Ron Case as a third-party beneficiary under the settlement agreement, supported by legal precedents indicating that assuming a debtor's obligations confers enforceable rights to the debtor's creditors. The court noted that it need not explore Ron Case's claim regarding indemnification rights in paragraph 2 of the settlement agreement, as sufficient grounds were found in paragraph 4. However, most jurisdictions maintain that typical indemnity clauses do not imply an intent to benefit nonparties. Since paragraph 2 contained only standard indemnity language, it did not create enforceable rights for Ron Case. His ability to sue the Vesper group is solely based on paragraph 4.

The Vesper group argues they have a valid defense against Ron Case's claim, asserting that the settlement agreement aimed to ensure Brooks Construction’s proper performance on the Vesper projects, which did not occur. They claim this failure means the contract is void due to lack of consideration. Alternatively, they contend that Brooks Construction's failure constitutes a breach of the settlement agreement, which could be used as a defense against Ron Case’s claim or as a counterclaim. The court recognizes that a valid defense against the contract can be asserted against a third-party beneficiary.

The defense of failure of consideration is noted, but the Vesper group lacks such a defense in this case. A breach by Brooks Construction of its obligations in the settlement agreement does not constitute a failure of consideration unless the promise's performance was the contract's primary purpose. The settlement agreement's broad purpose was to resolve claims between Vesper and Brooks Construction and to restructure the corporations, thus a breach of paragraph 13 does not void the Vesper group's obligation to pay Ron Case. 

Furthermore, the Vesper group's argument that Brooks Construction’s breach could be used as a setoff against Ron Case's claim is incorrect. While a promisor can claim the voidness of a contract against a third-party beneficiary, they cannot claim a mere breach as a defense. Therefore, the Vesper group cannot use claims against Brooks Construction to defend against Ron Case's claim for Brooks' indebtedness.

Regarding Ron Case's request for attorney fees based on the settlement agreement, the court does not address it because Ron Case failed to cross-appeal the trial court's denial of this request. Consequently, the trial court's decision is affirmed in all respects.