Thurston v. Block United

2021 UT App 80
THE UTAH COURT OF APPEALS
WRIGHT W. THURSTON , ET AL.,1
Appellants,
v.
BLOCK U NITED LLC, ET AL.,
Appellees.
Opinion
No. 20200258-CA
Filed July 22, 2021
Fourth District Court, Provo Department
The Honorable Christine S. Johnson
No. 190400207
B. Ray Zoll, Chad C. Shattuck, and Jared W. Moss,
Attorneys for Appellants
Evan S. Strassberg and Steven J. Joffee,
Attorneys for Appellee
JUDGE D AVID N. M ORTENSEN authored this Opinion, in which
JUDGES M ICHELE M. C HRISTIANSEN F ORSTER and R YAN M. HARRIS
concurred.
MORTENSEN, Judge:
¶1 	Within 	days 	of 	the 	filing 	of 	the 	underlying 	lawsuit,
Wright W. Thurston and Block United LLC (Block United)2
1. The parties on appeal include other parties whose names we
have not listed here but who appear on the notice of appeal or
have otherwise entered appearances in this court.
2. 	The 	named 	appellants 	and 	appellees 	in 	this 	case 	are
numerous. For ease of reference, we refer to the appellants
collectively through reference to Thurston, and we refer to the
(continued…)

Thurston v. Block United
20200258-CA 	2 	2021 UT App 80
entered into a settlement agreement resolving the lawsuit. Block
United quickly held up its end of the deal, which included
transferring money and other assets to Thurston. Thurston,
however, refused to comply with his principal obligation—
signing and filing papers to dismiss the lawsuit—apparently out
of 	belief 	that 	certain 	individuals 	made 	material
misrepresentations during settlement negotiations. Nearly six
months after the settlement agreement was reached, Thurston
filed an amended complaint with the aim of adding causes of
action 	for 	these 	alleged 	misrepresentations. 	Days 	after 	the
amended complaint was filed, Block United filed a motion to
enforce the settlement agreement.
¶2 	The 	district 	court 	granted 	Block 	United’s 	motion 	to
enforce the settlement agreement, finding that the settlement
agreement was binding and that Thurston had waived any right
to rescind the agreement regardless of any alleged fraudulent
misrepresentations. 	In 	granting 	the 	motion 	to 	enforce, 	the
district court dismissed the amended complaint in its entirety
with prejudice. Thurston appeals. We affirm.
BACKGROUND
¶3 	Thurston 	formed 	Block 	United 	in 	April 	2017. 	Block
United was a manager-managed LLC, and Thurston was one of
the company’s two managers. By July 2018, Thurston and the
other manager were deadlocked on Block United’s management
(…continued)
appellees collectively through reference to Block United. In
addition, two different lawsuits were filed below which were
eventually 	consolidated. 	In 	this 	opinion, 	we 	refer 	to 	the
underlying cases, complaints, and the like in the singular, as the
distinction 	between 	the 	two 	cases 	and 	their 	filings 	are
immaterial to the resolution of this appeal.

Thurston v. Block United
20200258-CA 	3 	2021 UT App 80
and operation, which ultimately led to Thurston withdrawing
from daily participation in the company.
¶4 	Thurston 	later 	filed 	the 	underlying 	lawsuit 	in 	early
February 2019. As a general matter, Thurston alleged that after
he 	had 	withdrawn 	from 	daily 	participation, 	Block 	United
concealed material information about its functions and costs,
misstated 	accounting 	records, 	converted 	its 	assets 	to 	other
companies, and engaged in defamatory conduct. The complaint
included claims for breach of contract, conversion, breach of
fiduciary duties, and dissolution of the LLC, among others.
¶5 	On February 20, 2019, the parties reached a settlement
agreement during formal mediation. And like any other garden-
variety settlement agreement, the crux of the agreement was that
Block United would pay Thurston specified sums of money and
other assets in exchange for Thurston agreeing to sign and file
dismissal papers and to release Block United from liability. Block
United substantially complied with its obligations under the
settlement agreement within a few weeks, including transferring
to Thurston all the money and assets specified.
¶6 	Thurston, 	however, 	continually 	declined 	to 	sign 	the
required 	dismissal 	and 	release 	papers. 	Initially, 	Thurston
appeared to premise his delay on being too busy to review the
dismissal papers or on assertions that he otherwise needed more
or updated information from Block United. But in June 2019,
Thurston 	asserted 	that 	Block 	United 	“made 	several
misrepresentations during settlement” about its liabilities, assets,
and ongoing business obligations, which purportedly “induced
[Thurston] into settlement.” And in response to Block United
threatening to file a motion to enforce the settlement agreement,
Thurston 	stated 	his 	belief 	that, 	based 	on 	these 	alleged
misrepresentations, any such motion would be “meritless and
result 	in 	costly 	litigation.” 	He 	asserted, 	instead, 	that 	their
“collective efforts [we]re better spent resolving the outstanding

Thurston v. Block United
20200258-CA 	4 	2021 UT App 80
issues.”3 Thurston thus asked Block United to engage in a
second 	round 	of 	mediation 	to 	deal 	with 	the 	“outstanding
issues,” to which Block United agreed. This second round of
mediation was scheduled for August 22, 2019.
¶7 	But 	on 	August 	19, 	2019, 	Thurston 	instead 	filed 	an
amended complaint4 and canceled the mediation. The aim of this
amended complaint was to include new claims seeking redress
for the fraudulent misrepresentations allegedly made during the
mediation. As to these additional claims, the amended complaint
reads:
107. 	Further, 	[Block 	United] 	made 	material
misrepresentations regarding the accounting, taxes,
liabilities, use of [Block United] proceeds to invest
in other companies or for [Block United’s] personal
benefit, filing of unlawful lien by [a third party]
against 	[Block 	United]-owned 	real 	estate, 	and
[Block United’s] intent to no longer operate any
blockchain mining facility in the mediation held
with [Thurston].
108. 	[Thurston] 	relied 	on 	[Block 	United’s]
misrepresentations in entering into a conditional
settlement 	agreement 	in 	mediation, 	and 	[Block
United] knew [its] representations were false and
have not corrected such misrepresentations.
3. Those “outstanding issues” ran the gamut: from asking Block
United to provide corrected tax returns, to asking the “Block
United team” to “admit in writing” that they lied to customers
and “misuse[d]” their funds.
4. The amended complaint was timely. Block United stipulated
to several extensions of the deadline to amend pleadings, which
Thurston stated were necessary to “allow” him to “hopefully
finalize settlement.”

Thurston v. Block United
20200258-CA 	5 	2021 UT App 80
109. 	[Thurston] request[s] the Court to declare
the 	conditional 	settlement 	agreement 	void 	or
voidable, and to award damages against [Block
United], plus attorneys’ fees and costs.
¶8 	On August 30, 2019, Block United filed a motion to
enforce the settlement agreement. In its motion, Block United
simply asserted that the settlement agreement was binding and
that 	it 	had 	tendered 	and 	Thurston 	had 	“accepted 	all 	the
consideration 	and 	performance” 	due 	under 	the 	settlement
agreement, but that Thurston nevertheless refused to live up to
his side of the agreement and sign the dismissal papers. Block
United thus requested that the court enforce the settlement
agreement.
¶9 	Thurston 	responded 	by 	arguing 	that 	the 	settlement
agreement should be rescinded on the ground that Block United
“fraudulently procured” the agreement based on various “false
representations and omissions during mediation.” (Cleaned up.)
Thurston then went on to detail numerous instances of these
alleged 	fraudulent 	misrepresentations. 	As 	one 	example,
Thurston alleged that Block United understated its liabilities
because, during the mediation, Block United stated that it had
not paid Rocky Mountain Power for only two months leading up
to the February 2019 mediation, but Thurston “later learned”
that Block United “failed to pay Rocky Mountain Power since
August 	2018 	and 	had 	an 	unpaid 	balance 	of 	more 	than
$1,190,189.37 as of the date of mediation.”
¶10 	In 	reply, 	Block 	United 	argued 	that 	the 	settlement
agreement should be enforced irrespective of any of Thurston’s
arguments to the contrary because Thurston had waived the
right to rescind the agreement by retaining the money and assets
he had received under the agreement. In addition, Block United
went on to explain that “even if the [c]ourt were to consider the
merits” 	of 	Thurston’s 	arguments, 	they 	should 	be 	rejected
because the “allegations of fraud [were] baseless and, in many
cases, demonstrably false.” Among other things, Block United

Thurston v. Block United
20200258-CA 	6 	2021 UT App 80
asserted that Thurston “allege[d] that the [settlement agreement]
should be invalidated because [Block United] allegedly did not
disclose certain liabilities to [him] before the mediation when, in
fact, the very documents [Thurston] use[d] to support [his]
assertions were produced to [him] before the mediation.” Block
United then proceeded to refute each allegation, and in many
instances showed that the relevant documents were in fact
provided to Thurston in advance of the mediation. As just one
example, Block United demonstrated that a Rocky Mountain
Power invoice reflecting “the exact amount that [Thurston] now
contend[s] [Block United] concealed” was in fact provided in
advance of the mediation.
¶11 	Subsequently, 	the 	court 	held 	oral 	arguments 	on 	the
motion. There, the court asked Thurston why, if his intention
was to rescind the settlement agreement, he had “kept all the
money . . . paid as part of” that same agreement. Thurston
answered 	that, 	“unless 	the 	court 	order[ed] 	otherwise,” 	his
intention 	was 	to 	keep 	the 	proceeds 	he 	received 	under 	the
settlement agreement because it “was never [Block United’s] in
the first place” and was instead “always [his].” The court then
discussed the holdings of several cases that, it explained, reflect
the notion that “an aggrieved party can’t have his cake and eat it
too. He has to decide if he wants to set aside the contract as void
and then return the benefits or if he wants to accept those
benefits and 	sue.” 	And 	because 	Thurston 	had 	retained 	the
proceeds received under the settlement agreement, the court
determined 	that 	he 	had 	waived 	the 	right 	to 	rescind 	the
agreement. In response to this ruling, Thurston remarked,
Point of record, Your Honor? . . . To be clear, Your
Honor, there is [an] amended complaint[] . . .
which, I think goes exactly with the case law that
the Court just cited with respect to keeping the
proceeds and going after damages. Our amended
complaint[] cite[s] exactly that allegation. . . . [We]
have kept the proceeds and are seeking damages.
And [we are] enforcing that right to sue here.

Thurston v. Block United
20200258-CA 	7 	2021 UT App 80
That’s the only reason we ask the Court to void is
when they brought the motion to enforce. We have
to 	oppose 	it. 	But 	we 	have 	never 	waived 	our
complaints. So I just want to, I don’t know if that’ll
persuade Your Honor?
¶12 	The court responded that it “appreciate[d] the . . . point,”
but did not “find it terribly persuasive” because there was not “a
basis for fraud in the first place given that the documents that
were submitted in the reply brief indicate[d] . . . that all of that
information was put forward as part of the mediation.” The
court specifically referenced the Rocky Mountain Power invoice
and remarked, “I could go through the rest of the allegations
here, but the exhibits in the reply brief are really the same. . . .
There’s amounts given that are claimed to be examples of fraud
and 	yet 	the 	amounts 	correspond 	to 	documents 	that 	were
submitted to [Thurston] as part of the mediation.” Therefore, in
granting 	the 	motion 	to 	enforce, 	the 	court 	dismissed 	with
prejudice 	“all 	claims” 	asserted 	in 	the 	amended 	complaint.
Thurston appeals.
ISSUE AND STANDARD OF REVIEW
¶13 	Thurston 	contends 	that 	the 	district 	court 	erred 	by
enforcing 	the 	settlement 	agreement. 	We 	review 	the 	district
court’s enforcement of the settlement agreement for abuse of
discretion. McKelvey v. Hamilton, 2009 UT App 126, ¶ 17, 211
P.3d 390.5
5. Thurston also argues that the district court erred “by failing to
hold 	an 	evidentiary 	hearing.” 	But 	he 	never 	requested 	an
evidentiary hearing below, instead only “request[ing] a hearing
for oral argument on th[e] motion.” (Emphasis added.) Thurston
thus failed to preserve the issue and has “not argued that the
plain error doctrine or any other exception to the preservation
(continued…)

Thurston v. Block United
20200258-CA 	8 	2021 UT App 80
ANALYSIS
¶14 	Thurston challenges the district court’s order on two
related grounds. First, he argues that the district court erred in
concluding that he waived his right to rescind the settlement
agreement 	by 	keeping 	the 	proceeds 	received 	thereunder.
Second, he argues that, even if the district court did not err in
concluding that he waived the right to rescind the settlement
agreement, it still erred by dismissing the new claims pleaded in
the amended complaint because these claims can “exist even
with the settlement agreement in place.”
¶15 	“It is quite well established that a settlement agreement
may be summarily enforced by motion in the court of the
original action.” Tracy-Collins Bank & Trust Co. v. Travelstead, 592
P.2d 605, 607 (Utah 1979). However, the “power to enter a
judgment enforcing a settlement agreement” is contingent on the
agreement 	constituting 	“an 	enforceable 	contract.” 	Badger 	v.
MacGillivray, 2016 UT App 109, ¶ 2, 374 P.3d 1053 (cleaned up).
So, “basic contract principles affect the determination of when a
settlement agreement should be so enforced.” ACC Cap. Corp. v.
Ace West Foam Inc., 2018 UT App 36, ¶ 12, 420 P.3d 44 (cleaned
up).
¶16 	And under Utah contract law, a party who has been
induced to enter a contract by fraudulent misrepresentations has
two options: (1) it may elect to rescind the contract or (2) it may
affirm the contract. See Dugan v. Jones, 615 P.2d 1239, 1247 (Utah
1980), superseded on other grounds by rule as recognized in Arnold v.
Curtis, 846 P.2d 1307 (Utah 1993); see also Brown v. Richards, 840
P.2d 143, 150 (Utah Ct. App. 1992) (noting the availability of
these same two options). In either instance, the defrauded party
may recover damages associated with the fraud. See Ong Int’l
(…continued)
rule applies.” In re Koller, 2018 UT App 27, ¶ 14, 424 P.3d 926. As
a result, we do not further address this issue.

Thurston v. Block United
20200258-CA 	9 	2021 UT App 80
(U.S.A.) Inc. v. 11th Avenue Corp., 850 P.2d 447, 457 (Utah 1993)
(explaining 	that 	“monetary 	and 	punitive 	damages” 	are
compensable rescissionary damages); Conder v. A.L. Williams
& Assocs., 739 P.2d 634, 639 (Utah Ct. App. 1987) (explaining that
a party who affirms the contract may sue for damages thereon).
¶17 	However, a party waives the option of rescission if it fails
to 	“move 	promptly 	and 	with 	all 	reasonable 	diligence 	to
disaffirm the contract upon discovery of the fraud.” See Taylor v.
Moore, 51 P.2d 222, 226 (Utah 1935); see also Continental Ins. Co. v.
Kingston, 2005 UT App 233, ¶¶ 9, 11, 114 P.3d 1158 (noting that
the defrauded party waives the right to rescind if “from action or
inaction” its “course of conduct demonstrates that it intended to
relinquish that right” (cleaned up)); Ockey v. Lehmer, 2008 UT 37,
¶ 	31, 	189 	P.3d 	51 	(“Ockey’s 	failure 	to 	object 	to 	the 	1994
conveyance 	constitutes 	ratification—either 	consciously 	or
through willful ignorance—of the actions taken on his behalf.”).
The 	rationale 	is 	grounded 	in 	the 	notion 	that 	“[t]he 	party
deceived is not allowed to go on deriving all possible benefit
from the transaction, and then claim to be relieved from his own
obligations by seeking its rescission.” Taylor, 51 P.2d at 227
(cleaned up); see also Ockey, 2008 UT 37, ¶ 32 (“It is well
established in our case law that an individual cannot go along
with a contract for the purpose of enjoying benefits . . . only to
later claim a right to rescind . . . .” (cleaned up)).
¶18 	Here, the district court concluded that Thurston waived
the 	option 	to 	rescind 	the 	settlement 	agreement 	because 	he
retained the proceeds received under that agreement. And to
this very point, we have repeatedly explained that a party who
fails to promptly return proceeds received under a contract
waives the right to rescind that contract. See Perry v. Woodall, 438
P.2d 813, 815 (Utah 1968) (“If he continues to treat the property
as his own the right of rescission is gone, and the party will be
held bound by the contract.”); Taylor, 51 P.2d at 227 (“If the party
defrauded continues to receive benefits under the contract after
he has become aware of the fraud . . . he will be deemed to have
affirmed the contract and waived his right to rescind.” (cleaned

Thurston v. Block United
20200258-CA 	10 	2021 UT App 80
up)); cf. Kingston, 2005 UT App 233, ¶ 16 (“[W]hen an insurer
accepts premiums after discovering facts that would justify
rescission of the policy, numerous courts have precluded the
insurer from later denying coverage.”).
¶19 	Thurston 	tacitly 	acknowledges 	the 	district 	court’s
rationale and supporting authority, asserting that “[m]aintaining
possession of the property may constitute a waiver of the right to
rescind the contract.” (Emphasis added.) Nevertheless, he argues
that the district court “overlooked” other evidence in the record
tending to show his “intent” to pursue rescission. Specifically,
Thurston refers to the various post-settlement correspondence to
Block 	United 	in 	which 	he 	referenced 	fraudulent
misrepresentations, 	along 	with 	his 	eventual 	filing 	of 	the
amended complaint and its request for rescission, and asserts
that these facts demonstrated his intent to rescind the agreement.
¶20 	We are not persuaded by Thurston’s attempt to simply
gloss over our case law and the district court’s resultant ruling
that, because he retained the proceeds under the settlement
agreement, he waived his right to rescind it. Both below and on
appeal, 	there 	was 	no 	dispute 	that 	Thurston 	retained 	the
settlement proceeds, and our case law is clear that this supports
a determination of waiver. Moreover, the same evidence to
which Thurston otherwise refers further supports the district
court’s 	determination. 	For 	example, 	even 	in 	his 	June
communications, 	Thurston 	was 	still 	representing 	that 	his
intention was to “finalize settlement.” See supra note 4; see also
Frailey v. McGarry, 211 P.2d 840, 845 (Utah 1949) (“[T]he party is
entitled to a reasonable time in which to decide upon the course
he will take. But this does not mean that he will be indulged in a
vacillating or hesitating course of conduct . . . .”). Likewise,
waiting nearly six months to file an amended complaint further
supported the district court’s ruling. See Frailey, 211 P.2d at 845
(“For almost a year plaintiff [vacillated] between reliance on the
contract, obtaining a modified contract, abandonment of the
contract and finally rescission.”). We therefore conclude that the

Thurston v. Block United
20200258-CA 	11 	2021 UT App 80
court did not abuse its discretion in determining that Thurston
had waived his right to rescind the settlement agreement.
¶21 	And this leads us to Thurston’s other argument, which
relates to a defrauded party’s option to affirm the contract. He
maintains that, even if the district court did not err by enforcing
the settlement agreement, it nevertheless erred by dismissing the
case outright. Specifically, he asserts that the fraud claims added
in the amended complaint “evidenced” his “intent” to affirm the
settlement agreement and sue for damages thereon, and thus
these claims should not have been dismissed.
¶22 	We 	disagree. 	While 	a 	claim 	pleaded 	to 	affirm 	the
settlement 	agreement 	and 	recover 	damages 	thereon 	would
presumptively survive the enforcement of the agreement, the
fraud claims pleaded in the amended complaint do not take this
form. See Utah R. Civ. P. 8(a) (directing that “[a]n original claim .
. . must contain a short and plain . . . demand for judgment for
specified 	relief,” 	including 	any 	relief 	requested 	“in 	the
alternative”).6 In the amended complaint, Thurston specifically
asked only for the court to “declare the conditional settlement
agreement void or voidable, and to award damages” on that
basis. As pleaded, “even under Utah’s liberal notice pleading
requirements,” this fails to provide fair notice that Thurston was
alternatively 	requesting 	that 	the 	settlement 	agreement 	be
affirmed, or fair notice of any theory of damages that might
result from affirming the settlement agreement. See Asael Farr
& Sons Co. v. Truck Ins. Exch., 2008 UT App 315, ¶ 17, 193 P.3d
6. We “may choose to affirm the judgment of the district court on
any legal ground or theory apparent on the record.” Pentalon
Constr., Inc. v. Rymark Props., LLC, 2015 UT App 29, ¶ 25, 344
P.3d 180. And given that Thurston’s argument quite literally
relies on the allegations as pleaded in the amended complaint,
and 	Block 	United 	has 	argued 	the 	pleading 	deficiencies 	on
appeal, the ground for our ruling is indeed apparent in the
record.

Thurston v. Block United
20200258-CA 	12 	2021 UT App 80
650 (cleaned up). So, no claims pleaded should have survived
the enforcement of the settlement agreement and, therefore, the
district court did not err by dismissing the case outright in its
order granting the motion to enforce.7
CONCLUSION
¶23 	We 	affirm 	the 	district 	court’s 	enforcement 	of 	the
settlement agreement and dismissal of the amended complaint
in its entirety. We remand for the limited purpose of calculating
Block United’s reasonable attorney fees incurred on appeal.
7. Block United also requests costs and attorney fees incurred on
appeal. The settlement agreement provides, “The parties agree
that in any dispute arising out of or relating in any respect to the
final settlement agreement, the prevailing party shall be entitled
to 	attorney’s fees.” 	Because 	Block 	United 	has 	prevailed 	on
appeal, 	we 	grant 	the 	request 	for 	reasonable 	attorney 	fees
incurred on appeal.