Court Opinion

ID: 9617829
Source: CourtListenerOpinion
Date Created: 2023-08-22 05:02:01.475075+00
Date Added: 2024-06-11T18:03:20.823062
License: Public Domain

BENCH, Judge,
concurring and dissenting:
I concur in the majority’s determination that the State is entitled to additional royalties from Consol. I dissent, however, from the majority’s conclusion that section 15-1-1 does not apply in this case and in its decision to allow the Board unilaterally to modify the interest rate on amounts owed under its existing contracts.
Statutory Prejudgment Interest
The trial court was clearly correct in awarding prejudgment interest pursuant to section 15-1-1. This statute has consistently been interpreted to specify the prejudgment interest rate where it is not specified in the *529contract. See, e.g., Lone Mountain Prod. Co. v. Natural Gas Pipeline Co., 984 F.2d 1551, 1561 (10th Cir.1992); Nielsen v. O’Reilly, 848 P.2d 664, 669-70 (Utah 1992) (section 15-1-1 establishes legal rate of prejudgment interest in breach of contract claim); SCM Land Co. v. Watkins & Faber, 732 P.2d 105, 108-09 (Utah 1986) (section 15-1-1 governs interest rate on prejudgment interest rate where no rate is specified by contract); Lignell v. Berg, 593 P.2d 800, 809 n. 14 (Utah 1979) (same); Mont Trucking, Inc. v. Entrada Indus., 802 P.2d 779, 782 (Utah Ct.App.1990) (Utah law provides that section 15-1-1 governs interest in all contracts when parties have not specified rate); Breuer-Harrison, Inc. v. Combe, 799 P.2d 716, 731-32 (Utah Ct.App.1990) (section 15-1-1 governs prejudgment interest where contract does not specify interest rate); Ringwood v. Foreign Auto Works, Inc., 786 P.2d 1350, 1358 (Utah Ct.App.1990) (same); Price-Orem v. Rollins, Broim & Gunnell, 784 P.2d 475, 482 (Utah Ct.App.1989) (same); Mason v. Western Mortgage Loan Corp., 754 P.2d 984, 987 n. 2 (Utah Ct.App.1988) (same); Davies v. Olson, 746 P.2d 264, 270 (Utah Ct.App.1987) (same).1
The Utah Court of Appeals recently addressed the very issue here presented in Trail Mountain Coal Co. v. Division of State Lands & Forestry, 884 P.2d 1265 (1994). In fact, Trail Mountain is a companion case to the present case.2 On the basis of the same relevant facts, the court of appeals determined, in accordance with existing authority, that section 15-1-1 controls prejudgment interest when the contract is silent. The court of appeals stated in pertinent part:
The trial court ruled that the State Land Board had no authority to unilaterally change the applicable rate of interest and to impose penalties not mentioned in the lease. We agree. As previously noted, Utah law establishes the rate of prejudgment interest “[ejxcept when parties to a lawful contract agree on a specified rate.” Utah Code Ann. § 15-1-1 (1992). Trail Mountain and the Division did not agree on a specified rate of prejudgment interest, nor to the imposition of penalties for the late payment of royalties.
Trail Mountain, 884 P.2d at 1273. Therefore, not only is section 15-1-1 applicable to prejudgment interest generally, but there is a specific case in this jurisdiction holding that section 15-1-1 is applicable to the precise lease being interpreted in this case.
By transferring the Trail Mountain appeal to the court of appeals, this court authorized the court of appeals to address and answer the question, which it has now done in accordance with existing authority. See Conder v. A.L. Williams & Assoc., 739 P.2d *530634, 636 (Utah Ct.App.1987) (when case is transferred from supreme court, court of appeals stands in supreme “court’s shoes for all purposes pertinent to the case”). In any event, Trail Mountain was decided in a published opinion by an appellate court of this jurisdiction, and it is now part of our common law. Until altered by this court or by the legislature, it is the law that must be followed in this jurisdiction by judges, practitioners, and the public.
Of course, this court has the power to alter the common law by overruling Trail Mountain and the cases cited therein. However, the overruling of existing case law should not be done lightly. State v. Menzies, 235 Utah Adv.Rep. 23, 1994 WL 110861 (Mar. 29, 1994). To overrule the rule of law established in earlier cases, this court should explain how it came to be “clearly convinced [1] that the rule was originally erroneous or is no longer sound because of changing conditions and [2] that more good than harm will come by departing from precedent.” Id. (quoting John Hanna, The Role of Precedent in Judicial Decision, 2 Vill.L.Rev. 367, 367 (1957)). Mere disagreement with the common law “certainly does not satisfy Menzies ’ careful requirements for overruling prior case law.” White v. Deseelhorst, 879 P.2d 1371, 1377 (Utah 1994) (Zimmerman, C.J., concurring). This court must therefore either follow existing precedent or, in a very disciplined way, overrule existing precedent so as to alter the common law. At the very minimum, Trail Mountain must be treated as persuasive authority. The failure to address existing precedent will “produce unacceptable indeterminacy in the law and ... undermine confidence in its institutions.” State v. Thurman, 846 P.2d 1256 (Utah 1993).
The majority does not give even lip service to Trail Mountain and the cases cited therein. Instead, the majority strains to avoid the operation of section 15-1-1 by engaging in a rather tortured analysis of the State’s responsibilities under the Utah Enabling Act. The majority correctly indicates that the State has the responsibility to manage trust lands “for the sole benefit of the common schools and to receive ‘full value’ from any disposition of its school trust lands.” The cases cited by the majority, however, support only the notion that the State must get “full value” at the time it enters into a contract for the disposition of school trust lands. For example, in Alamo Land & Cattle Co. v. Arizona, 424 U.S. 295, 96 S.Ct. 910, 47 L.Ed.2d 1 (1976), the Supreme Court stated, “Full appraised value is to be determined and measured at the times of the disposition of the respective interests, and if the State receives those values at those respective times, the demands of the Enabling Act are met.” Id. at 307, 96 S.Ct. at 918. A contract for less than fair value is to be considered simply “null and void.” Id. at 304-05, 96 S.Ct. at 917.
In the present case, there has been no allegation that Consol leased the trust property for less than full value. In fact, the lease actually included an escalator provision to insure that the State received full value for the duration of the lease. The requirement that the State receive full value at the time of the disposition of the State’s interest is a far cry from authorizing the State unilaterally to modify material terms of its existing contracts. In none of the cases cited by the majority was the state allowed to enforce a contract and, at the same time, to vary its terms.
In support of its conclusion that the Board can unilaterally modify an existing contract, the majority notes that the lease between Consol and the State is subject to the laws of Utah in existence when the lease was signed. The majority essentially points at Consol, claiming that it should have known it was taking a lease subject to the requirement that the State receive full value for any disposition of its trust lands. The majority ignores, however, the fact that section 15-1-1 was also in effect when the lease was signed. Consistent with the majority’s own analysis, the lease between Consol and the State is governed by section 15-1-1. See Lone Mountain, 984 F.2d at 1561; Nielsen, 848 P.2d at 669-70; SCM Land, 732 P.2d at 108-09; Lignell, 593 P.2d at 809 n. 14; Trail Mountain, 884 P.2d at 1273; Mont Trucking, 802 P.2d at 782; Brewer-Harrison, 799 P.2d at 731-32; Ringwood, 786 P.2d at 1358; *531Price-Orem, 784 P.2d at 482; Mason, 754 P.2d at 987 n. 2; Davies, 746 P.2d at 270.
The lease agreement was signed in 1968. Section 15-1-1, in force in 1968, provided that the statutory prejudgment interest rate in contracts was 6%. Thus, under the rules of contract formation, a prejudgment interest rate of 6% was integrated into the contract between the State and Consol. See SCM Land, 732 P.2d at 108-09 (rate of interest is governed by statutory rate in effect when contract was entered into); accord Lone Mountain, 984 F.2d at 1561. The State has no authority to modify, unilaterally and at-will, the statutory interest rate in effect when the parties entered into the contract.3
The Agency Rule
The majority concedes that section 15-1-1 would apply if the Board lacked authority to modify the statutory rate of interest. The majority then erroneously concludes that the Board had such authority.
Administrative agencies possess only such rule-making authority as the legislature has expressly delegated to them. See Crowther v. Nationwide Mut. Ins. Co., 762 P.2d 1119, 1122 (Utah Ct.App.1988). “ ‘It is well [settled] that the legislature may not delegate authority’ to a Board ‘to adopt rules or regulations which abridge, enlarge, extend or modify the statute creating the right or imposing the duty.’ ” IML Freight, Inc. v. Ottosen, 538 P.2d 296, 297 (Utah 1975) (quoting McCulloch v. Ashby, 73 N.M. 267, 387 P.2d 588 (1963)). Crowther held as follows:
Administrative regulations “may not conflict with the design of an Act, and when they do the court has a duty to invalidate them_ Furthermore, when an administrative official misconstrues a statute and issues a regulation beyond the scope of a statute, it is in excess of administrative authority granted.” Travelers Indem. Co. v. Barnes, [191 Colo. 278] 552 P.2d 300, 303 (Colo.1976). It is the prerogative and responsibility of the legislature to set policy and that responsibility may not be constitutionally delegated to an agency under its rule-making authority.
Crowther, 762 P.2d at 1122; see also McKnight v. State Land Bd., 14 Utah 2d 238, 244, 381 P.2d 726, 730 (1963) (“[R]ules and regulations of an administrative agency must conform to rather than be contrary and inconsistent with statutory law.”).
The majority holds that Utah Code Ann. § 65-1-23 (1987) grants the State authority to change the statutory rate of interest and thereby to unilaterally manipulate the terms of its existing contracts. Section 65-1-23, at all times relevant to this appeal, provided as follows:
Except'as otherwise provided by law, the State Land Board shall by rules and regulations prescribe the form of the application, the form of the lease, the annual rental, the amount of royalty and the basis upon which the royalty shall be computed, and such other details as it may deem necessary in the interest of the State.
Id. (emphasis in majority opinion), repealed by Trust Land Management Act ch. 121, § 18, 1988 Utah Laws 548, 566. Under the majority’s analysis, the emphasized language in this section provides the State with carte blanche authority to modify existing legal contracts to the State’s advantage. This very argument was addressed in Trail Mountain, where the court of appeals expressly held:
Nor does the statutory grant of rule-making authority to the State Land Board, found in Utah Code Ann. § 65-1-23 (1986), allow the Board to change the material terms of the lease by subsequent rule. While section 65-1-23 authorizes the Board, “[e]xcept as otherwise provided by law,” to establish rules and regulations prescribing the form of application, the form of lease, the amount of royalties and *532so forth, it says nothing about permitting the Board to retroactively alter existing leases. Nor does the “other details” language contemplate something as significant as a deviation from the generally prevailing statutory interest scheme. As already noted, Utah Code Ann. § 15-1-1 (1992) establishes the statutory rate for prejudgment interest in cases where the parties have not contractually agreed upon a rate.
Accordingly, we conclude that neither the lease language contemplating changes in operating rules nor the grant of authority found in section 65-1-23 provide[s] a basis for altering the monetary terms of the lease, either in terms of deviating from the statutory rate of prejudgment interest or in assessing late fees. Therefore, we deny the Division’s cross-appeal seeking a higher interest rate and late fees and affirm the trial court’s decision in that respect.
Trail Mountain, 884 P.2d at 1273.
Certainly section 65-1-23 authorizes the Board to negotiate a prejudgment interest rate higher than that provided by statute. If interest is not specified in the lease, however, this statute cannot reasonably be interpreted to allow the Board to change the statutory rate of interest. The plain language of the statute does not permit the agency, at any time, to promulgate rules that are inconsistent with provisions “otherwise provided by law.” Id. An administrative rule out of harmony or in conflict with the express provisions of a statute “would in effect amend that statute.” Olson Constr. Co. v. State Tax Comm’n, 12 Utah 2d 42, 45, 361 P.2d 1112, 1113 (1961). Therefore, even if section 65—1—23 could be construed to allow the agency to provide for prejudgment interest when not provided by contract, the agency rule cannot “trump” section 15-1-1. See Crowther, 762 P.2d at 1122.4
Section 15-1-1 would control, in any event, because it is the most specific statute. See State v. Burnham, 87 Utah 445, 449, 49 P.2d 963, 965 (1935) (“It is a general rule of statutory construction that where two statutes treat the same subject-matter, the one general and the other [specific] in its provisions, the [specific] provision controls.”); accord Cannon v. Gardner, 611 P.2d 1207, 1209 (Utah 1980); Floyd v. Western Surgical Assoc., 773 P.2d 401 (Utah Ct.App.1989). The statutes relied upon by the majority do not even mention interest rates.
Impairment of Contract
Consol correctly argues that if the Board can modify its existing contracts, then the statutes and rules relied upon run headlong into constitutional prohibitions. The Federal Constitution provides for the protection of consensual contractual rights by stating that no State shall pass any “law impairing the obligations of contracts.” U.S. Const, art. I, § 10. Utah’s Constitution similarly states that no “law impairing the obligations of contracts shall be passed.” Utah Const, art. I, § 18.
It is a fundamental principle of constitutional law that a state may not pass a law altering the nature and legal effect of an existing contract to the prejudice of either party to the contract. See Pulos v. James, 261 Ind. 279, 302 N.E.2d 768, 775 (1973). It is likewise a fundamental principle of constitutional law that the state may not pass a law altering a contractual remedy when the remedy is material to the contract. Kirkman v. Bird, 22 Utah 100, 111-12, 61 P. 338, 339-0 (1900) (“The remedy subsisting in a state when and where a contract is made and is to be performed is a part of its obligation, and any subsequent law of the state which so affects that remedy as substantially to impair and lessen the value of the contract is forbidden by the constitution, and is therefore void.”).
“Any law which changes the intention and legal effect of the original parties, giving to *533one a greater or the other a less interest or benefit of the contract, impairs its obligations.” 16A Am.Jur.2d Constitutional Law § 695 (1979) (citing Kentucky Util. Co. v. Carlisle Ice Co., 279 Ky. 585, 131 S.W.2d 499 (1939)). “Law” for purposes of impairment has been defined to mean “[a]ny enactment, from whatever source it originates, to which a state gives the force of law.” Id. § 699. This includes “acts of the legislature, municipal ordinances passed pursuant to legislative authority, rules and orders by an instrumentality of the state exercising delegated authority, and state constitutions and constitutional amendments.” Id. § 701. Absent a compelling state interest, the state may not pass a law impairing its own contracts with private parties. Id. § 694.5
In the present case, the parties did not specify a prejudgment interest rate. Because the parties were silent on the issue of prejudgment interest, as indicated by existing authority, including Trail Mountain, section 15-1-1 was incorporated by operation of law into the contract.6 This provision in the contract was material in that it set the penalty Consol was to be charged if it became delinquent in its royalty payments. At the interest rate specified by section 15-1-1, Consol would owe the State $460,725.38 in unpaid prejudgment interest, but according to the majority, under the Board’s later-promulgated rule governing prejudgment interest, Consol would owe $1,473,856.09 in prejudgment interest. The majority has allowed the State, through the Division of State Lands, to impair a material remedy and obligation in its own contract with Con-sol to its own benefit of over one million dollars. Such an impairment of contract is prohibited by the Federal and State Constitutions.7
Conclusion
In accordance with existing authority, including Trail Mountain, I would hold that section 15-1-1 governs the prejudgment interest rate in the contract between the State and Consol. The State may not unilaterally modify the terms of its own contract to its own benefit. The majority’s holding impairs the contract between the State and Consol in violation of both the Federal and State Constitutions.
HALL, Justice, did not participate herein; BENCH, Court of Appeals Judge, sat.
STEWART, Associate Chief Justice, does not participate herein.

. Chief Justice Zimmerman’s individualized dicta attacking this well-established line of cases is unfounded. Justice Zimmerman suggests that because the contracts were for the sale of goods (mineral rights), they are not a "loan or forbearance." Justice Zimmerman misapprehends the purpose of section 15-1-1 and prejudgment interest. Prejudgment interest is designed to compensate the nonbreaching party that finds itself, by virtue of the breach, in the position of loaning money or forbearing what is owed by the breaching party. See 22 Am.Jur.2d Damages § 82 (1988); see also L & A Drywall, Inc. v. Whitmore Constr. Co., 608 P.2d 626, 630 (Utah 1980) (prejudgment interest represents interest on amount awarded as damages due to party's failure or delay in paying amount under contract); Fitzgerald v. Critchfield, 744 P.2d 301, 304 (Utah Ct.App.1987) (prejudgment interest is that interest owed on overdue debt from date debt became overdue until entry of judgment). Therefore, because of the underpayment of royalties by Con-sol, the State found itself in the position of loaning or forbearing money it was owed.

. Several mining companies, including Consol and Trail Mountain, entered into leases with the Division of State Lands using the same lease form. Following an audit, the Division of State Lands notified these companies that they had underpaid their royalties. The mining companies brought separate declaratory judgment actions, seeking determinations of their rights and obligations under the lease agreement. In all cases, the trial court granted relief in favor of the mining companies. The State appealed the rulings. This court consolidated the cases and reversed and remanded for the trial court to take evidence on the interpretation of the lease agreement, among other things. See Plateau Mining Co. v. Division of State Lands & Forestry, 802 P.2d 720 (Utah 1990). Following a trial on remand, the trial court ruled in favor of the State. Consol and Trail Mountain filed separate appeals. This court transferred Trail Mountain’s appeal to the court of appeals pursuant to rule 42 of the Utah Rules of Appellate Procedure but retained Consol’s appeal.

. Under the majority's analysis of this case, the State can be entitled only to what the majority defines as "full value.” The majority defines “full value” as the rate the State would have earned had the money owed by Consol been invested in a manner similar to other state trust funds. The State is not, as a matter of law, entitled to the arbitrary interest set by the Board at rates as high as 22 to 24%. Under the majority's own analysis, this case must be remanded for a determination of "full value” in the context of the interest earned by other state trust funds during the period in question.

. The majority also relies on Utah Code Ann. § 65A-1-2 (1993), a provision first passed by the legislature long after the lease was signed and the rule was promulgated. The majority argues that this statute clarifies that the "Board had expansive authority and power to 'adopt rules’ and policies consistent with the proper administration of state school trust lands.” However, like section 65-1-23, section 65A-1-2 does not authorize the Board to change the statutory rate of interest.

. Assuming, but not conceding, that the state can constitutionally impair obligations like the one in the instant case, such ruling can be given only prospective application. See, e.g., 16AAm.Jur.2d Constitutional Law § 689 (1979) (statute tending to impair contractual obligations, if assumed to be valid, may not be given retroactive effect so as to impair contracts already in existence without violating Constitution).

. The majority attempts to avoid the operation of section 15-1-1 by claiming that there is a distinction in this case between "interest provided for by contract and interest provided as damages." The majority argues that the State is entitled to expectancy damages — the amount that the State "would have made in interest on the unpaid royalties if Consol had paid the royalties in a timely manner.” Whatever the majority may choose to call the type of damages applicable in this case, the only damages recoverable “for a breach of the obligation to pay money is the amount due, with interest thereon at the legal rate. The interest is technically damages awarded for the delay in payment.” 22 Am.Jur.2d Damages § 82 (1988). This type of damage has consistently been defined by our courts as prejudgment interest. See, e.g., L & A Drywall, Inc. v. Whitmore Constr. Co., 608 P.2d 626, 630 (Utah 1980); Fitzgerald v. Critchfield, 744 P.2d 301, 304 (Utah Ct.App.1987).

.When, in 1981, section 15-1-1 was amended to increase the prejudgment interest from 6 to 10%, the legislature expressly provided that the amendment does not affect contracts entered into before 1981. Utah Code Ann. § 15-1-1(3). The legislature apparently recognized that it could not constitutionally modify contracts then in existence.