Opinion ID: 1111799
Heading Depth: 1
Heading Rank: 1

Heading: The Rogers' Claim

Text: Plaintiffs William and Patricia Rogers were shown two lots in the subdivision during January of 1979 by a real estate agent hired by Douglas Monson. The Rogers explained to the agent that they owned a contracting business and planned to build two homes that would later be sold at a profit. Plaintiffs were assured by the agent that the improvements would be installed by fall of 1979. In April 1979, plaintiffs purchased the lots, using a construction loan that came due in ten months. Plaintiffs planned to build the homes and sell them during the 1979-80 ski season. By the summer of 1979, it became apparent that the improvements would not be done by autumn; plaintiffs prepared the homes to withstand winter. As the January 1980 due date for the loan approached without completion of the improvements, plaintiffs barraged Westcor with calls and told Blaine Bitner (who was at this time making a desultory effort at installing the improvements in his role as an employee of Bitner Excavating) about the lack of improvements. Plaintiffs were assured the improvements would be made by November 1980 as provided by the escrow agreement with Summit County. Plaintiffs obtained a three-month extension of their loans in 1980. When the new due date arrived, plaintiffs were unable to pay anything but the interest and were required by the lender to convert the construction loan to a thirty-year installment loan with payments of over $2,000 per month. Plaintiffs borrowed the funds to make these payments. Under increasing pressure from the lender and hoping, on the basis of Westcor's assurances, that the improvements would soon be completed, plaintiffs listed the homes with a real estate broker. Plaintiffs received offers on both homes for around $130,000 each, subject to the completion of the improvements. Plaintiffs independently arranged for the installation of gas and electricity, but the homes were still uninhabitable in November of 1980 because the roads were not paved and the water system was incomplete. Plaintiffs fell into arrears on the payments on their installment loan and were threatened with foreclosure. To preserve their credit rating, plaintiffs began negotiating with the potential buyers who had signed offers. Plaintiffs reached an agreement with the buyers under which plaintiffs drastically reduced the prices of the homes, and the buyers assumed the loans as of January 1, 1980, also assuming the risk that the improvements would not be completed. In January 1980, plaintiffs obtained an appraisal that put the value of the homes at $136,000 and $138,000, assuming installment of the improvements. The homes were sold for $105,419.95 and $106,689.00. The trial court found Bitner Company liable to the Rogers for the difference between the appraised value of the homes and the prices for which the homes were eventually sold. Bitner Company assigns error on several grounds: it alleges that there was no substantial evidence upon which the trial judge could find Bitner and Westcor joint venturers; it insists that plaintiffs were not third-party beneficiaries of the agreement between Westcor and Bitner Company, or the agreement between Bitner Company and Summit County; and it challenges the method used by the trial court to calculate the plaintiffs' damages. Bitner Company also attacks a joint venture by estoppel theory that was not relied upon by the trial court and is therefore wholly irrelevant. Bitner Company claims the trial court erred in finding that it and Westcor were joint venturers and it is therefore not liable to the Rogers. According to Bitner Company, it was only a seller of land and bears no responsibility for the failure of Westcor, the buyer, to make improvements. Bitner Company asks us to review the evidence and conclude that as a matter of law, Bitner Company and Westcor were not joint venturers. Whether a joint venture exists is, however, a question of fact. In Strand v. Cranney, 607 P.2d 295, 296 (Utah 1980), we stated: Whether a joint venture exists is ordinarily a question of fact. On review of factual determinations, this Court will sustain a decision that is based on findings supported by substantial evidence, Gibbons & Reed Co. v. Guthrie, 123 Utah 172, 256 P.2d 706 (1953). The evidence is to be viewed in the light most favorable to the prevailing party. Toomer's Estate v. Union Pacific Railroad Co., 121 Utah 37, 239 P.2d 163 (1951). A joint venture does not always arise pursuant to formal agreement; rather, it is a relationship voluntarily entered by the parties and may be proven by the actions taken by the parties. The characterizations given by the parties are certainly not determinative of the issue. Betenson v. Call Auto & Equipment Sales, 645 P.2d 684, 686 (Utah 1982); Lignell v. Berg, 593 P.2d 800, 804 (Utah 1979). The requirements for the relationship are not exactly defined, but certain elements are essential: the parties must combine their property, money, effects, skill, labor and knowledge. As a general rule, there must be a community of interest in the performance of the common purpose, a joint proprietary interest in the subject matter, a mutual right to control, a right to share in the profits, and unless there is an agreement to the contrary, a duty to share in any losses which may be sustained. Basset v. Baker, 530 P.2d 1, 2 (Utah 1974). We have reviewed the evidence presented at trial and hold that the trial court's determination that Bitner Company and Westcor were joint venturers is amply supported by the record. The agreement entered into by Bitner Company and Westcor has terms not usually characteristic of a mere sale of land: the selling price was calculated on anticipated profits from the sale of developed lots rather than the value of the raw land; Bitner Company's principals were entitled to a commission on each lot they sold; Bitner Company was entitled to one-half of any savings if the improvements were constructed for less than the cost anticipated in the escrow agreement filed with Summit County; Bitner Company was entitled to 50 percent of the payments received for lots after closing costs and commissions were paid; and no interest or minimum payments were required of Westcor. Also, testimony at trial indicated that the land sale contract was used by Bitner Company's accountants for tax avoidance purposes. Moreover, Bitner Company had a degree of participation in the venture that is inconsistent with its assertion that it only participated as a seller. Nine days after it sold the subdivision, Bitner Company signed an escrow agreement with Summit County guaranteeing the completion of the improvements. Bitner Company's principals had their phone numbers on promotional billboards and earned substantial amounts of money as commissions on lots they sold. Blaine Bitner, under the auspices of Bitner Excavating, made some efforts at installing the improvements, which were executed in accordance with a plan prepared by Bitner Company prior to any involvement with Westcor. Finally, we note that, until this appeal, Westcor and Bitner Company aligned themselves in all litigation concerning the development and never claimed against each other. Because we agree with the trial court that Westcor and Bitner Company were joint venturers, we need not consider whether plaintiffs are third-party beneficiaries of either the escrow agreement with Summit County or the 1980 trust agreement between Bitner Company and Westcor. Bitner Company also assigns as error the method of damage calculation employed by the trial court. According to Bitner Company, the trial court should have based the damage calculation on the difference between the price set in the earnest money agreements and that ultimately received. The record indicates that the earnest money agreements were entered into after Bitner Company's failure to complete the improvements had already placed plaintiffs under substantial economic duress. The earnest money agreements represent an attempt to mitigate the damage caused by Bitner Company's breach. We agree with the trial court that Bitner Company should not benefit from its breach by having the plaintiffs' damages based on a forced sale undertaken to mitigate harm already suffered by plaintiffs. We also reject Bitner Company's attack on the appraisals considered by the trial court. Plaintiffs presented an appraiser with extensive appraisal experience in Summit County and professional certification from the Society of Real Estate Appraisers. The trial judge was within his discretion in accepting plaintiffs' expert's opinion of the value of the property. Utah R. Evid. 104(a); Utah R. Evid. 702; see State v. Clayton, 646 P.2d 723, 726 (Utah 1982) (trial judge has discretion to determine whether an expert is qualified; Clayton was decided before the adoption of Utah Rule of Evidence 702 but is in harmony with the principles underlying the new rules). We also note that Bitner Company failed to make an objection at trial and is barred from raising the issue first on appeal. Utah R. Evid. 103(a).