Court Opinion

ID: 5137549
Source: CourtListenerOpinion
Date Created: 2021-12-21 14:40:24.83344+00
Date Added: 2024-06-11T08:24:03.106021
License: Public Domain

2013 UT App 97
_________________________________________________________

              THE UTAH COURT OF APPEALS

 DON BRADY, SINIKKA BRADY, DON BRADY INTERIOR DESIGN, AND
                  FINNISH TOUCH DAY SPA,

            Plaintiffs, Appellees, and Cross‐appellants,

                                 v.

     KANG S. PARK, BANK OF UTAH, AND PAUL M. HALLIDAY,

           Defendants, Appellants, and Cross‐appellees.

                             Opinion
                        No. 20110208‐CA
                       Filed April 18, 2013

              Third District, Salt Lake Department
               The Honorable Joseph C. Fratto Jr.
                         No. 060917206

       Robert E. Mansfield, Christine R. Poleshuk, and
   Nathan E. Wheatley, Attorneys for Appellants and Cross‐
                          appellees
Clark R. Nielsen and Kathryn J. Steffey, Attorneys for Appellees
                     and Cross‐appellants

  JUDGE J. FREDERIC VOROS JR. authored this Opinion, in which
    JUDGES GREGORY K. ORME and MICHELE M. CHRISTIANSEN
                         concurred.

VOROS, Judge:

¶1    This is a dispute over a $675,000 promissory note. The note
was amortized over thirty years, but a balloon payment was due in
about ten years. Although Appellees (the Bradys) made every
monthly payment for nearly ten years—albeit some late—
                             Brady v. Park

Appellants (Park) won a judgment against them for more than $2.4
million.

¶2     On appeal, both parties contest the trial court’s reading of
the note. For different reasons, both challenge the trial court’s
ruling with respect to compound interest. In addition, Park
challenges the trial court’s refusal to enforce the note’s 10% late fee,
while the Bradys challenge the trial court’s enforcement of the 20%
default interest rate. Finally, the Bradys challenge the trial court’s
exclusion of evidence and dismissal of their claim for breach of the
implied covenant of good faith and fair dealing. We affirm in part,
reverse in part, and remand for further proceedings.

                          BACKGROUND

¶3     This dispute arises from a seller‐financed real estate
transaction. The Bradys purchased commercial property from Park
in 1996 for $750,000. In connection with the purchase, they gave
him two promissory notes. The smaller note was for $80,625 and
the larger for $675,000. Each note was secured by two trust deeds:
one on the commercial property and one on a Summit County
investment property owned by the Bradys. Only the larger note
(the Note) is at issue here. The Note bore interest at the rate of 10%
per year on the unpaid principal. It called for monthly payments
starting in January 1997 of $5,923.61 and a balloon payment in
October 2006 consisting of “the entire principal balance together
with interest thereon.” Of relevance here, the Note specified two
consequences for a late payment—a 10% late fee and a 20% default
interest rate:

       If payment is not made within five (5) days of due
       date, a late fee of 10 per cent will be due. If payment
       is not made within 5 days of due date the entire
       balance shall bear interest at the rate of 20% until
       note is brought current.

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                           Brady v. Park

The Note was prepared by a title company. However, according to
the title company’s attorney, the 20% default interest provision was
not boilerplate but was included “at the instructions of Dr. Park.”

¶4      The Bradys made the first three payments on time but made
the April 1997 payment late. On May 2, 1997, they made a double
payment comprised of the April and May payments plus a 10% late
fee for the April payment, but paid no default interest. The Bradys
made other payments late but never missed a payment. Seeking to
refinance the Note, and believing their payments had kept the Note
current, the Bradys approached Park through a bank loan officer in
2000 to obtain a payoff amount.

¶5     According to the Bradys, Park did not respond to their
payoff request until 2002, when he provided a payoff amount
between $1.4 million and $1.5 million. That is when the Bradys first
learned that Park believed the Note had not been current since
March 1997. The Bradys disputed Park’s calculation and over the
next four years asked Park for a corrected payoff. They claim Park
did not respond until October 18, 2006—thirteen days before the
balloon payment was due—when he notified the Bradys that the
payoff amount was $2,585,398. Park calculated these amounts
assuming that the Note had not been current since the March 1997
payment and thus bore interest at 20%. Litigation ensued.

¶6      In October 2006, after receiving the second payoff amount,
the Bradys sued Park, seeking a judicial determination of the
amount due. The Bradys also alleged predatory lending and breach
of the implied covenant of good faith and fair dealing and sought
damages for Park’s alleged refusal to accept their tenders of
payment. Park counterclaimed for breach of contract, breach of the
implied covenant of good faith and fair dealing, and unjust
enrichment.

¶7    After a four‐day bench trial and two days of supplemental
hearings, the trial court ruled that the Note unambiguously
provided for compound default interest and that it had not been

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                             Brady v. Park

current since March 1997. The trial court concluded that the Note
had not been current since that date because the Bradys had failed
to pay all accrued default interest. The trial court concluded that,
under the Note, “if a payment was late, any amount then owing,
including principal and accrued interest, would bear interest at the
rate of 20% until the note returned to a current status” and that
“[t]his agreement under the [Note] has the result of compounding
interest being charged, on an annual basis, during the delinquent
period.” In effect, the trial court ruled that the amount accrued
under the 20% default interest rate was due not with the balloon
payment but with each monthly payment. However, the trial court
also ruled that the 10% late fee was “not allowed[,] because it is not
a measure of damages that can be awarded by the Court.” A final
judgment was entered in February 2011, awarding Park $2,440,845
(as of June 2010) plus $179,340.97 in attorney fees and costs.

¶8     Park appeals.1 He contends that the trial court erred (1) in
calculating compound interest on an annual rather than a monthly
basis and (2) in concluding that the 10% late fee provision was an
unenforceable penalty.

¶9      As appellees and cross‐appellants, the Bradys argue that the
trial court erred (1) in ruling that the Note calls for compound
interest at all, (2) in ruling that the Note requires all accrued default
interest to be paid for the Note to be brought current, (3) in ruling
that the 20% default interest provision is enforceable, (4) in
excluding evidence of tender, and (5) in dismissing their claim for
breach of the implied covenant of good faith and fair dealing.

             ISSUES AND STANDARDS OF REVIEW

¶10 Park first contends that the trial court erred in ruling that the
Note called for interest to be compounded annually rather than

1. Park’s appeal and the Bradys’ cross‐appeal were filed on the
same day.

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                            Brady v. Park

monthly. The Bradys respond that the trial court erred in ruling
that the Note called for compound interest at all. A promissory
note “is a contract that is interpreted according to the well‐settled
rules of contract construction.” WebBank v. American Gen. Annuity
Serv. Corp., 2002 UT 88, ¶ 16, 54 P.3d 1139. We review “a district
court’s interpretation of a contract for correctness, giving no
deference to the district court. Whether a contract is ambiguous is
a question of law, which we also review for correctness.” Bodell
Constr. Co. v. Robbins, 2009 UT 52, ¶ 16, 215 P.3d 933; see also
Richardson v. Hart, 2009 UT App 387, ¶ 6, 223 P.3d 484.

¶11 Park next contends that the trial court erred in concluding
that the 10% late fee provision was an unenforceable penalty and
in placing the burden of proof on the party seeking to enforce a
liquidated damages clause. “The determination of whether a
contract is unconscionable is . . . a question of law for the court,”
which we review for correctness. Sosa v. Paulos, 924 P.2d 357, 360
(Utah 1996); Hi‐Country Estates Homeowners Ass’n v. Bagley & Co.,
2008 UT App 105, ¶ 8, 182 P.3d 417. “[W]hether the trial court
placed the burden of proof on the appropriate party [is a]
question[] of law, which we review for correctness.” Fisher v. Fisher,
2009 UT App 305, ¶ 7, 221 P.3d 845.

¶12 On cross‐appeal, the Bradys contend that the trial court
erred in interpreting and in enforcing the 20% default interest
provision. We review these claims for correctness. See Bodell, 2009
UT 52, ¶ 16.

¶13 The Bradys also contend that the trial court improperly
excluded as irrelevant certain documents offered in support of their
claim that they had tendered full payment to Park in 2000. “A trial
court has broad discretion in deciding whether evidence is
relevant, and we review a trial court’s relevance determination for
abuse of discretion.” State v. Fedorowicz, 2002 UT 67, ¶ 32, 52 P.3d
1194.

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                            Brady v. Park

¶14 Finally, the Bradys contend that the trial court erred in
dismissing their claim for breach of the implied covenant of good
faith and fair dealing. “When reviewing the denial of a motion for
involuntary dismissal, [we] defer to the trial court’s findings and
inferences under a clearly erroneous standard and review the trial
court’s conclusions of law for correctness.” Markham v. Bradley,
2007 UT App 379, ¶ 13, 173 P.3d 865.

                             ANALYSIS

        I. The Note Does Not Call for Compound Interest

¶15 Park contends that the trial court misread the Note. He
maintains that because the Note is “unambiguous and specifically
calls for interest payments on a monthly basis, the trial court erred
in its ruling that interest should be compounded annually.” As
calculated by Park’s trial expert, by the time the balloon payment
was due in October 2006, the principal on the Note, including
unpaid interest that he had converted to principal, had grown from
$675,000 to $2,590,422.04. The Bradys respond that the Note called
for simple interest only.

¶16 Compound interest is defined as “interest paid on both the
principal and the previously accumulated interest.” Black’s Law
Dictionary 887 (9th ed. 2009). “‘Compound interest means interest
on interest, in that accrued interest is added periodically to the
principal, and interest is computed upon the new principal thus
formed . . . .’” Mountain States Broadcasting Co. v. Neale, 783 P.2d
551, 554 (Utah Ct. App. 1989) (quoting 45 Am. Jur. 2d Interest and
Usury § 76 (1969)).

¶17 “Compound interest is not favored by the law.” Watkins &
Faber v. Whiteley, 592 P.2d 613, 616 (Utah 1979) (per curiam); see also
City of Hildale v. Cooke, 2001 UT 56, ¶ 36, 28 P.3d 697 (noting that a
trial court “properly follow[ed] our previous determination that the
law disfavors compound interest.”); Christensen v. Munns, 812 P.2d

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                            Brady v. Park

69, 71 (Utah Ct. App. 1991) (noting “the general disinclination of
the courts to allow compound interest . . . .” (citation and internal
quotation marks omitted)). Accordingly, compound interest will be
awarded only where “the parties expressly agreed to compound
interest.” Mountain States Broadcasting, 783 P.2d at 555.

¶18 Park’s interpretation is based on the text of the Note. He
asserts that the Note unambiguously calls for compound interest
in the following clause: “principal and interest payable as follows:
$5,923.61 due [o]n the 1st day of January 1997, and $5,923.61 on the
1st day of each and every month thereafter until October 31, 2006,
at which time the entire principal balance together with interest
thereon is paid in full.” We do not agree that in this passage “the
parties expressly agreed to compound interest.” See Mountain States
Broadcasting, 783 P.2d at 555.

¶19 To begin with, the Note does not employ the term compound
interest, a settled term of art. Furthermore, it does not describe
compound interest. It does not refer to the payment of interest “on
both the principal and the previously accumulated interest,” Black’s
Law Dictionary 887 (9th ed. 2009); it does not provide “that accrued
interest is added periodically to the principal” and that “interest is
computed upon the new principal thus formed,” Mountain States
Broadcasting, 783 P.2d at 554; and it does not indicate that “unpaid
interest is itself subject to an interest charge.” See McConnell v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 578 P.2d 1375, 1379–80
(Cal. 1978) (holding that a provision stating that a “monthly debit
balance . . . shall be charged, in accordance with your usual custom
with interest” did not “clearly express an understanding that
interest would be compounded.”). In short, the Note does not
expressly call for compound interest.

¶20 Park seeks contextual support for his interpretation in the
20% default interest rate provision. That provision states that if a
payment is over five days late, “the entire balance shall bear
interest at the rate of 20% until [the] note is brought current.”
Park’s argument is that, by implication, “the entire balance” that

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                            Brady v. Park

bears interest at 20% must include an interest component;
otherwise the Note would have used the term “the balance” or “the
principal balance” or “the entire principal balance.” The Bradys
counter that “[w]hile the phrase ‘entire balance’ could mean both
principal and unpaid accrued interest, the phrase could also
reasonably refer simply to the entire principal balance.” They
observe that the Note’s acceleration clause refers to “the entire
principal balance and accrued interest,” implying that interest
accrues without being added to principal. We agree with the
Bradys on this point. Had the default interest provision stated that
“the entire principal balance and accrued interest shall bear interest
at the rate of 20%” we might well agree that it called for compound
interest, at least following default. Because it did not, but left the
meaning of “entire balance” to inference and implication, the Note
falls short of an express agreement for compound interest.2

¶21 The Note thus bears simple interest only. This holding
moots the question of whether the compounding period is annual
or monthly.

     II. Park’s Challenge to the Trial Court’s Late Fee Ruling
                        Requires Remand

¶22 The trial court refused to enforce the Note’s 10% late fee
provision on the ground that it constitutes a penalty. The trial court
ruled that the 10% late fee “is not a liquidated damage provision”
but an unenforceable “penalty.” It reasoned that “[t]here is no
evidence that the late fee is either a liquidated or actual amount of
damage incurred by defendants as a result of plaintiffs’ failure to
timely make payments, and consequently is disallowed.” Park
challenges this ruling on appeal.

2. This conclusion is reinforced by another argument advanced by
the Bradys. They argue that the Note omits a term essential to
determining compound interest, namely, the compounding period.
See Nielsen v. Gold’s Gym, 2003 UT 37, ¶¶ 7, 11, 12, 78 P.3d 600. Park
does not respond to this argument on appeal.

20110208‐CA                       8                 2013 UT App 97
                             Brady v. Park

¶23 Park contends that the trial court erred in two ways: (1) by
placing the burden on Park to prove that the provision was
enforceable rather than on the Bradys to prove that it was
unenforceable, and (2) by concluding that the provision was an
unenforceable penalty rather than an enforceable liquidated
damages clause. The Bradys respond that the late fee provision was
a penalty because it was designed to “act as a spur to performance”
rather than to provide a fair estimate of the damages to be suffered
as a result of breach. They further argue that, even if the late fee
provision was a liquidated damages provision and not a penalty,
it was “unenforceable because the amounts due under the
provision are grossly disproportionate to the actual damages
incurred by Park and would allow Park a double recovery.”

¶24 After this case was tried and briefed on appeal, our supreme
court recontoured the law of liquidated damages in Utah. See
Commercial Real Estate Inv., LC v. Comcast of Utah II, Inc., 2012 UT 49,
285 P.3d 1193. In so doing, it abrogated a number of Utah judicial
opinions, including several that the parties brief extensively on
appeal. More fundamentally, Commercial Real Estate abandons the
distinction on which the trial court’s ruling rests.

¶25 Commercial Real Estate surveys “several competing
approaches to evaluating the enforceability of liquidated damages
clauses.” Id. ¶ 20. These include disfavoring penalties, the shock‐
the‐conscience test, the Restatement of Contracts test, and
deference to contracting parties. Id. ¶¶ 22–32. The supreme court
found each of the approaches problematic. See id. ¶¶ 33–37.
Accordingly, it held that “liquidated damages clauses should be
reviewed in the same manner as other contractual provisions.” Id.
¶ 38. They “are not subject to any form of heightened judicial
scrutiny,” and “courts should begin with the longstanding
presumption that liquidated damages clauses are enforceable.” Id.
¶ 40. Courts should thus “invalidate liquidated damages clauses
only with great reluctance and when the facts clearly demonstrate
that it would be unconscionable to decree enforcement of the terms

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                           Brady v. Park

of the contract.” Id. ¶ 38 (citation and internal quotation marks
omitted). The court noted that unconscionability involves a two‐
pronged analysis addressing substantive unconscionability and
procedural unconscionability. Id. ¶ 42. Finally, the court reiterated
a point at issue here, that the burden of persuasion lies with the
party challenging the enforceability of the clause. Id. ¶ 41.

¶26 The foregoing discussion shows that the approach employed
by the trial court in the present case is no longer good law in Utah.
The trial court here followed the penalty approach, which focuses
on whether a liquidated damage clause is in fact a penalty.
Although the trial court found the clause to be a penalty, it did not
do so in the context of the two‐pronged test for unconscionability.
And the trial court made this finding only after erroneously
concluding that the Note called for compound interest.3

¶27 In short, both the legal and factual bases relied on by the
trial court when it ruled on this issue were inaccurate. Accordingly,
we vacate the trial court’s ruling on the enforceability of the 10%
late fee provision and remand for a determination of (1) whether
the challenged provision is unconscionable under Commercial Real
Estate as applied to installment payments, (2) if not, which
installment payments generated a late fee, (3) whether the late fee
provision applies to the balloon payment, and (4) if so, whether
that application of the late fee is unconscionable.4 Finally, on

3. It might appear that a 10% late fee is far from unconscionable
under any standard. Park claims a late fee of only $592 per late
payment. But he also claims that more than sixty payments were
late, resulting in over $35,500 in late fees on the monthly payments.
He also argues that the balloon payment was late, resulting in
another $174,371 in late fees. So in the end, according to Park, a
$675,000 note generated some $210,000 in late fees.

4. Whether a late fee provision applies to a balloon payment is
                                                   (continued...)

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                            Brady v. Park

remand, the Bradys, as the parties challenging the provision, bear
the burden of demonstrating that the provision is unconscionable.

 III. The Note Does Not Require Payment of Default Interest to
                       Bring It Current

¶28 The Bradys contend that the trial court erred in ruling that
“all accrued default interest was required to be paid before the
Note could be brought back to ‘current’ status.”5 The first payment
that the Bradys made late was the April 1997 payment. The parties
agree that, as a result, the Note was in default for some period of
time.

¶29 The Bradys argue that when they paid the combined April
and May payment in May 1997, together with the 10% late fee, the
Note was “brought current,” thus stopping the clock on the accrual
of default interest.

4. (...continued)
governed by the terms of the note. See Poseidon Dev., Inc. v.
Woodland Lane Estates, LLC, 62 Cal. Rptr. 3d 59, 63–66 (2007). The
secondary question is whether it is enforceable. See, e.g., In re
Market Center East Retail Prop., Inc., 433 B.R. 335, 364 (Bankr. D.N.M.
2010) (“A late fee of 5% of a missed monthly payment may be
reasonable, but as applied to the balloon it serves as a windfall for
the creditor.”); Sterling v. Goodman, 719 P.2d 1262, 1263 (Nev. 1986)
(“Attaching a late payment to a balloon payment is an
unreasonable result when it does not appear to have been intended
under the contract.”).

5. This issue is raised on appeal by the Bradys, who cross‐appealed
the ruling of the trial court. Although they discuss it in connection
with their response to Park’s first issue on appeal, Park does not
contest that it is properly before us, and we agree that it is.

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                           Brady v. Park

¶30 Park responds that the Bradys’ combined April and May
1997 payment did not bring the Note current, because it did not
include thirty‐nine days of default interest at the rate of 20%—a
whopping $14,420.52, according to Park’s accounting expert.6 By
the same calculation, the Bradys’ June 1997 payment of $5,923.61,
though timely made, should have included a default interest
payment of $12,388.65; the Bradys’ July 1997 payment, though also
timely made, should have included a default interest payment of
$10,231.81, and so on throughout the nearly ten‐year life of the
loan. The Bradys never made these large payments of default
interest nor were they given advance notice of Park’s belief that
they were required to do so. Consequently, in Park’s view, the
Note was never “brought current.”

¶31 The trial court ruled that because the Bradys’ combined May
1997 payment did not include default interest, the Note was not
brought current and was never brought current by the Bradys
thereafter. The question, then, is whether the Note required the
Bradys to pay all accrued default interest to bring the Note current.

¶32 The Bradys assert that the Note is ambiguous on this point.
“A contractual term or provision is ambiguous if it is capable of
more than one reasonable interpretation because of uncertain
meaning of terms, missing terms, or other facial deficiencies.”
Daines v. Vincent, 2008 UT 51, ¶ 25, 190 P.3d 1269 (citation and
internal quotation marks omitted). “[C]ontractual ambiguity can
occur in two different contexts: (1) facial ambiguity with regard to
the language of the contract and (2) ambiguity with regard to the
intent of the contracting parties.” Id. To determine if a contract is
facially ambiguous, “a judge [must] first review relevant and

6. Park’s expert appears to have read the 20% default interest rate
provision not to raise the Note’s interest rate from 10% to 20%
during the period of default, but to require payment of 20% interest
on the entire principal balance—compounded monthly—in
addition to the ordinary 10% interest accrued on the Note.

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                             Brady v. Park

credible extrinsic evidence offered to demonstrate that there is in
fact an ambiguity.” Id. ¶ 31. If a contract is facially ambiguous,
extrinsic evidence of the parties’ intent is examined. Id. ¶ 25.
However, “a finding of ambiguity [is justified] only if the
competing interpretations are ‘reasonably supported by the
language of the contract.’” Id. (quoting Ward v. Intermountain
Farmers Ass’n, 907 P.2d 264, 268 (Utah 1995)). “If the extrinsic
evidence is not conclusive, then the last resort in contract
interpretation is to construe the provision against the drafter.” Fire
Ins. Exch. v. Oltmanns, 2012 UT App 230, ¶ 7, 285 P.3d 802; accord
Sears v. Riemersma, 655 P.2d 1105, 1107 (Utah 1985) (“The
well‐established rule in Utah is that any uncertainty with respect
to construction of a contract should be resolved against the party
who had drawn the agreement.”); see also Zions First Nat’l Bank v.
Rocky Mountain Irrigation, Inc., 795 P.2d 658, 664 (Utah 1990)
(applying “construction against the framer” rule to promissory
notes).

¶33 We begin with the text of the Note. See Bodell Constr. Co. v.
Robbins, 2009 UT 52, ¶ 19, 215 P.3d 933. Here, the relevant passage
consists of the two sentences governing the late fee and default
interest:

       If payment is not made within five (5) days of due
       date, a late fee of 10 per cent will be due. If payment
       is not made within 5 days of due date the entire
       balance shall bear interest at the rate of 20% until
       note is brought current.

Park reads the second quoted sentence to mean that the Note is
brought current when all accrued interest is paid. The Bradys read
the same sentence to mean that the Note is brought current when
all past due interest is paid. They further contend that, in contrast to
the 10% late fee mentioned in the first quoted sentence, the second
quoted sentence “provided only that default interest shall accrue
but did not provide that it shall be due at any time prior to the

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                           Brady v. Park

Note’s maturity date.” In the Bradys’ view, the Note was a trap for
the unwary, causing them to unwittingly amass interest that, by
Park’s calculation, would itself yield interest at the rate of 20%
compounded monthly for the life of the Note. Park responds that
“[w]here the Note has incurred fees and extra interest as a result of
default, it is illogical to argue that those excess amounts need not
be paid in order to bring the Note current (back to its original
state).”

¶34 Turning to extrinsic evidence, Park cites the testimony of his
trial expert that an obligation is brought current only “when all
interest, either accrued or due, late fees, and any other costs are
paid.” By this reading, because the Bradys never paid any default
interest, the Note was never brought current. The Bradys counter
with other testimony given by Park’s expert. He later testified that,
although the Bradys’ initial payment on the Note, made in January
1997, “did not cover the interest owed,” the Note was nevertheless
not in default, because the payment was timely. In other words,
although the payment did not cover all accrued interest, it brought
the Note current because it did cover all currently due interest.
Neither party cites any case law, statute, dictionary, or
authoritative text for their interpretation of the term brought
current.7

7. In contrast to his trial argument, Park’s appeal does not rely on
Utah Code section 57‐1‐31(1), which provides a method for curing
a default under a trust deed. See Utah Code Ann. § 57‐1‐31(1)
(LexisNexis 2010) (stating that a borrower may cure its default
under a trust deed note by paying “the entire amount then due
under the terms of the trust deed (including costs and expenses
actually incurred in enforcing the terms of the obligation, or trust
deed, and the trustee’s and attorney’s fees actually incurred) other
than that portion of the principal as would not then be due had no
default occurred, and thereby cure the existing default.”).

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                            Brady v. Park

¶35 While we do not regard Park’s interpretation and the
Bradys’ interpretation as equally plausible, we nevertheless agree
with the Bradys that the text of the Note forecloses neither.
Furthermore, extrinsic evidence introduced at trial does not dispel
the ambiguity. Accordingly, as a “last resort,” we construe the
provision against the drafter of the provision. Fire Ins. Exch., 2012
UT App 230, ¶ 7. It is undisputed that the default interest provision
was included “at the instructions of Dr. Park.” We therefore adopt
the Bradys’ interpretation of the term brought current.

¶36 As a result, default interest, whenever it accrued, was due
with the balloon payment and not before. Consequently, payment
of the accrued default interest was not required to bring the Note
current. We thus hold that the Note was “brought current” with the
Bradys’ May 1997 payment. Other late payments should be treated
the same way: the 20% default interest rate runs from the
expiration of the five‐day grace period until the payment was
made, together with the 10% late fee (if the trial court determines
on remand that the 10% late fee is enforceable).

    IV. The Bradys’ Challenge to the Default Interest Rate Is
                         Unpreserved

¶37 On cross‐appeal, the Bradys contend that the 20% default
interest rate is unenforceable because it is “grossly excessive,
unconscionable, and would allow a double recovery.” Park
responds that, because the Bradys “never argued that the Note’s
default interest rate constitutes an unenforceable penalty, that it is
unconscionable, or that it provides a double recovery” at trial, they
did not preserve this claim. We agree with Park.

¶38 To be preserved for appeal, an issue “must be presented to
the trial court in such a way that the trial court has an opportunity
to rule on that issue.” 438 Main St. v. Easy Heat, Inc., 2004 UT 72,
¶ 51, 99 P.3d 801 (brackets, citation, and internal quotation marks
omitted). The preservation requirement is based on the premise

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                             Brady v. Park

that, “in the interest of orderly procedure, the trial court ought to
be given an opportunity to address a claimed error and, if
appropriate, correct it.” State v. Holgate, 2000 UT 74, ¶ 11, 10 P.3d
346 (citation and internal quotation marks omitted). Merely
mentioning an issue does not preserve it; the issue must be
specifically raised, with relevant legal authority, in a manner that
alerts the court to the need to correct the error. See State v. Cruz,
2005 UT 45, ¶ 33, 122 P.3d 543.

¶39 Here, the Bradys cite various points in the record where they
asserted that the Note’s terms were “unconscionable,” “unfair,”
“excessive,” and “unreasonable and unjustified.” However,
nowhere did the Bradys alert the court to the claim that the 20%
default interest rate in particular was unenforceable as a penalty or
otherwise unconscionable. This explains why the trial court ruled
that the 10% late fee was an unenforceable penalty but made no
ruling one way or the other concerning the 20% default interest
rate.

¶40 Anticipating this vulnerability, the Bradys contend that, in
any event, the trial court’s failure to rule on the enforceability of the
default interest provision constituted plain error. To prove plain
error, an appellant must show that “(i) [a]n error exists; (ii) the
error should have been obvious to the trial court; and (iii) the error
is harmful.” State v. Dunn, 850 P.2d 1201, 1208 (Utah 1993).

¶41 We do not agree that any error here was obvious. The
Bradys challenge a provision in the Note calling for default interest
of 20%. But we have previously held that a 30% default interest rate
was not unconscionable. See The Cantamar, LLC, v. Champagne, 2006
UT App 321, ¶¶ 34–37, 142 P.3d 140. Although the Bradys ably
argue the points on which the present case is distinguishable from
Cantamar, we cannot agree, in light of Cantamar, that “the trial court
erred by failing to sua sponte” invalidate the default interest rate
as unenforceable. See State v. Alfatlawi, 2006 UT App 511, ¶ 31, 153
P.3d 804.

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                            Brady v. Park

¶42 Because this claim was not preserved at trial and any error
was not obvious, the claim is denied.

 V. The Bradys’ Purported Evidence of Tender Was Reasonably
                          Excluded

¶43 On cross‐appeal the Bradys further contend that the trial
court abused its discretion in excluding on relevance grounds a fax
from Bank One to Park, dated June 20, 2000 (the Bank One Fax),
and “other similar documents.” In the Bank One Fax, a bank officer
asked Park to calculate a payoff amount that would enable the
bank to pursue a refinance of the Note. These documents, the
Bradys insist, “would have established that the Bradys tendered
payment as of June 20, 2000,” thus halting the accrual of all interest
and penalties as of that date.

¶44 Evidence is relevant if it has any tendency to make a fact of
consequence to determining the action more or less probable than
it would be without the evidence. Utah R. Evid. 401. “A trial court
has broad discretion in deciding whether evidence is relevant, and
we review a trial court’s relevance determination for abuse of
discretion.” State v. Fedorowicz, 2002 UT 67, ¶ 32, 52 P.3d 1194.

¶45 The Bradys contend that the Bank One Fax “clearly
establishes” that the Bradys tendered payment of the Note by June
20, 2000. A review of the doctrine of tender is thus in order. “An
offer in writing to pay a particular sum of money . . . is, if not
accepted, equivalent to the actual production and tender of the
money . . . .” Utah Code Ann. § 78B‐5‐802(1) (LexisNexis 2012). “In
order to be valid, tender of payment on a contract must be (1)
timely, (2) made to the person entitled to payment,
(3) unconditional, (4) an offer to pay the amount of money due, and
(5) coupled with an actual production of the money or its
equivalent.” PDQ Lube Ctr., Inc. v. Huber, 949 P.2d 792, 800 (Utah
Ct. App. 1997) (citations and internal quotation marks omitted).
The proponent of a tender thus bears the burden of showing that

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                              Brady v. Park

the excluded documents constituted “a bona fide, unconditional,
offer of payment of the amount of money due coupled with an
actual production of the money or its equivalent.” See Jenkins v.
Equipment Ctr., Inc., 869 P.2d 1000, 1003 (Utah Ct. App. 1994); see
also Hyams v. Bamberger, 36 P. 202, 204 (Utah 1894) (“[T]ender of the
debt . . . will . . . protect the [obligor] from cost, and stop interest.”).

¶46 Here, the Bank One Fax reads more like an inquiry than an
unconditional offer:

       Yesterday, I sent you a payoff figure for amounts
       owing you that I had calculated based on the
       information that had been provided to me by the
       Bradys. You had indicated that this was not a correct
       payoff balance. I have been in contact with
       Associated Title Company here in Salt Lake to
       schedule a closing for this transaction. I would
       appreciate it if you could provide me with pay off
       figures for the two notes the Bradys currently have
       with you, as I would like to schedule a closing some
       time this week.

        ....

       Additionally, there is a “Notice of Interest”
       appearing on the Brady property, filed by “M.
       Morrison”, which I understand is your spouse. Will
       she be available to sign a release of her interest at the
       time of closing? Please advise.

The Bank One Fax falls well short of “a bona fide, unconditional,
offer of payment of the amount of money due coupled with an
actual production of the money or its equivalent.” See Jenkins, 869
P.2d at 1003. On the contrary, it suggests not that the Bradys had
offered to pay the amount of money due, but that they were still
attempting to ascertain what amount was due. Accordingly, we are

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                            Brady v. Park

not persuaded that the Bank One Fax necessarily makes the
existence of a tender more probable than it would be without the
evidence. We thus conclude that the trial court did not abuse its
discretion in excluding the Bank One Fax.8

VI. The Bradys Have Not Demonstrated Error in the Dismissal of
 Their Claim for Breach of the Implied Covenant of Good Faith
                       and Fair Dealing

¶47 Finally, the Bradys contend that the trial court erred by
granting in part Park’s mid‐trial motion to dismiss the Bradys’
claim for breach of the implied covenant of good faith and fair
dealing.

¶48 In a bench trial, after the plaintiff has completed the
presentation of his evidence, the defendant “may move for a
dismissal on the ground that upon the facts and the law the
plaintiff has shown no right to relief.” Utah R. Civ. P. 41(b). “In
reviewing a trial court’s dismissal under rule 41(b), this court
defers to the trial court’s findings of fact ‘and will not overturn its
findings if they are adequately supported by the evidence.’” Bair v.
Axiom Design, LLC, 2001 UT 20, ¶ 13, 20 P.3d 388 (quoting Wessel v.
Erickson Landscaping Co., 711 P.2d 250, 252 (Utah 1985)). “However,
the determination of whether a party has made out a prima facie
case is a question of law which we review for correctness, affording
no deference to the trial court’s judgment.” Id. (citing Wessel, 711
P.2d at 253). “A prima facie case has been made when evidence has

8. Because the Bradys do not separately argue the admissibility of
the “other similar documents,” we do not separately address them.
See State v. Carter, 776 P.2d 886, 888 (Utah 1989) (“[T]his [c]ourt
need not analyze and address in writing each and every argument,
issue, or claim raised and properly before us on appeal. Rather, it
is a maxim of appellate review that the nature and extent of an
opinion rendered by an appellate court is largely discretionary with
that court.”).

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                            Brady v. Park

been received at trial that, in the absence of contrary evidence,
would entitle the party having the burden of proof to judgment as
a matter of law.” Id. ¶ 14 (citing State v. Wood, 268 P.2d 998, 1001
(Utah 1954)).

¶49 “An implied covenant of good faith and fair dealing inheres
in every contract.” Eggett v. Wasatch Energy Corp., 2004 UT 28, ¶ 14,
94 P.3d 193. The covenant implies “as a term of every contract a
duty to perform in the good faith manner that the parties surely
would have agreed to if they had foreseen and addressed the
circumstance giving rise to their dispute.” Young Living Essential
Oils, LC v. Marin, 2011 UT 64, ¶ 8, 266 P.3d 814. Although the scope
of the covenant is limited, it encompasses “an implied duty that
contracting parties refrain from actions that will intentionally
destroy or injure the other party’s right to receive the fruits of the
contract.” Id. ¶¶ 9, 16 (citations and internal quotation marks
omitted). Thus, the covenant “‘prevent[s] either party from
impeding the other’s performance of his obligations [under the
contract].’” Markham v. Bradley, 2007 UT App 379, ¶ 18, 173 P.3d
865 (second alteration in original) (quoting Zion’s Props., Inc. v.
Holt, 538 P.2d 1319, 1321 (Utah 1975)).

¶50 Here, the Bradys contend that the trial court improperly
dismissed claims of breach alleging that Park “engaged in conduct
which rendered it difficult or impossible for the Bradys to continue
performance and then took advantage of the non‐performance he
has caused.” The Bradys cite the fact that they “presented evidence
to show that, in June 2000, they requested the pay‐off amount on
the Note to refinance the debt through Bank One,” but that Park
“refused to provide his own pay‐off amount as requested.” As a
result, they contend, they were unable to refinance the Note and
fulfill their obligations under the Note.

¶51 However, at trial, the Bradys did not rely on evidence of
Park’s inaction in June 2000. After Park moved to dismiss, the trial
court asked the Bradys, “In terms of the breach of the implied

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                            Brady v. Park

covenant of good faith and fair dealing, what is the evidence that’s
in front of me to consider?” In response, the Bradys cataloged the
evidence that they were relying on to defeat Park’s motion: the
language of the Note that Park later claimed called for compound
interest; the fact that “right from the get‐go, this note was set up
and established to fail”; the fact that Park later “insisted that
compound interest be paid”; the fact that in “2005, when the
Bradys requested, multiple times, that they get some kind of a pay
off, he didn’t respond”; and the fact that, in “2006, he finally
responded 12 days before the property was to go into default
because of payment of the note, then made a demand for two and
a half million dollars, knowing that the Bradys couldn’t pay.”
(Emphases added.)

¶52 As noted above, to be preserved for appeal, a claim “must
be presented to the trial court in such a way that the trial court has
an opportunity to rule on that issue.” 438 Main St. v. Easy Heat, Inc.,
2004 UT 72, ¶ 51, 99 P.3d 801 (brackets, citation, and internal
quotation marks omitted). Here, when asked by the trial court what
evidence supported their cause of action for breach of the implied
covenant of good faith and fair dealing, the Bradys cited Park’s
actions in 2005 and 2006, not his inaction in 2000 that they point to
on appeal. We conclude that by not putting the trial court on notice
of the evidence they now claim it should have considered at trial,
the Bradys failed to preserve the claim for appeal.

¶53 The Bradys also argue that their cause of action for breach
of the implied covenant of good faith and fair dealing was
supported by evidence “that each untimely pay‐off figure provided
by Park was substantially higher than the amount ultimately
determined to be due.” “By overstating the amount due,” the
Bradys maintain, Park “rendered it impossible for the Bradys to
fulfill their obligations under the Note.”

¶54 In rejecting this argument, the trial court made reference to
the fact that the Bradys had not proven that Park acted in bad faith.

20110208‐CA                       21                 2013 UT App 97
                             Brady v. Park

It ruled that Park’s “handling of the protracted discussions
concerning the amount which was due under the notes would be
a breach of the implied covenant if the evidence was convincing
that such was done in bad faith or for the purpose of obtaining
some unfair advantage or amount to be paid.” The court then
explained that it was distinguishing “between ‘negotiations’ for the
purpose of compromising the amount due and taking a position on
the issue which is unreasonable and unjustified.” It then concluded
that it could not “find to a preponderance from the testimony or
the documentary evidence . . . that the implied covenant has been
breached. Consequently, there is no cause of action.”

¶55 The Bradys contend on appeal that “the trial court’s
conclusion that a finding of a breach of the covenant of good faith
and fair dealing requires a finding [of] bad faith or an intent to
obtain an unfair advantage is contrary to Utah law.” They rely on
Canyon Country Store v. Bracey, 781 P.2d 414 (Utah 1989) where the
supreme court stated that “[n]otwithstanding the name given the
covenant, breach of the covenant of good faith and fair dealing is
an objective question. As is true of virtually all other contractual
breaches, the intention of the breaching party is immaterial.” Id. at
421 n.6.

¶56 We are not persuaded that the trial court’s ruling offends
this principle. While the trial court’s use of the term bad faith in this
context may have been imprecise—though understandable
considering that the covenant’s name includes the words good
faith—the trial court clarified its meaning by stating that it was
unable to find by a preponderance of the evidence that Park’s
position with respect to the payoff amounts was “unreasonable and
unjustified.” “Generally, whether a party to a contract has acted
reasonably ‘is an objective question to be determined without
considering the [party’s] subjective state of mind.’” Markham v.
Bradley, 2007 UT App 379, ¶ 18, 173 P.3d 865 (quoting Billings v.
Union Bankers Ins. Co., 918 P.2d 461, 465 n. 2 (Utah 1996)
(considering whether an insurer acted in bad faith)). Accordingly,

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                            Brady v. Park

we believe that, read in context, the trial court’s ruling judged
Park’s actions against an objective standard of reasonableness.

¶57 In sum, the Bradys have not established on appeal that the
court erred either in its factual findings or legal rulings in granting
in part Park’s motion to dismiss the Bradys’ claim for breach of the
implied covenant of good faith and fair dealing.

                          CONCLUSION

¶58 We reverse the trial court’s ruling on the issue of compound
interest and hold that because the Note did not expressly provide
for compound interest, it bore simple interest only. We also vacate
the trial court’s ruling that the 10% late fee provision was
unenforceable, because that ruling was premised on now
superseded law. Furthermore, because the 20% default interest
provision is ambiguous even in light of extrinsic evidence, it must
be construed against the drafter, Park. Consequently, default
interest accrued between the expiration of each installment’s five‐
day grace period and the date that installment was paid, but fell
due with the balloon payment; thus, payment of default interest
was not required to bring the Note current before the date of the
balloon payment. The amount due on the Note must therefore be
recalculated. We remand for a determination on the enforceability
of the 10% late fee provision and for a recalculation of the amount
due under the 20% default interest provision.

¶59 The Bradys’ challenge to the validity of the 20% default
interest provision is unpreserved and therefore not properly before
us. Finally, the Bradys have not demonstrated that the trial court
abused its discretion in excluding the Bank One Fax or erred in
dismissing their claim for breach of the implied covenant of good
faith and fair dealing. We affirm the trial court on these issues.

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                          Brady v. Park

¶60 In sum, we affirm in part, reverse in part, and remand for
the trial court to recalculate the amount owing on the Note
consistent with this opinion and its ruling on the late fee issue.

20110208‐CA                    24                2013 UT App 97