Schenk Family v. NorthShore

2016 UT App 124
THE UTAH COURT OF APPEALS
S CHENK F AMILY LIMITED PARTNERSHIP ,
Appellee,
v.
NORTH S HORE LIMITED PARTNERSHIP ,
Appellant.
Opinion
No. 20141089-CA
Filed June 3, 2016
Second District Court, Ogden Department
The Honorable Noel S. Hyde
No. 070900119
Zane S. Froerer and Paul H. Johnson, Attorneys
for Appellant
Donald L. Dalton, Attorney for Appellee
S ENIOR JUDGE R USSELL W. BENCH authored this Opinion, in which
JUDGES J. F REDERIC VOROS JR . and K ATE A. TOOMEY concurred.1
BENCH, Senior Judge:
¶1 	NorthShore Limited Partnership appeals the trial court’s
award of damages and attorney fees to Schenk Family Limited
Partnership 	(SFLP). 	We 	vacate 	the 	trial 	court’s 	award 	and
remand for further proceedings consistent with this opinion.
1. Senior Judge Russell W. Bench sat by special assignment as
authorized by law. See generally Utah R. Jud. Admin. 11-201(6).

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20141089-CA 	2 	2016 UT App 124
BACKGROUND
¶2 	In September 2002, SFLP obtained mining property on the
Great 	Salt 	Lake, 	which 	it 	leased 	to 	NorthShore. 	SFLP was
induced to enter the Lease, in part, due to a related Supply
Agreement 	between 	NorthShore’s 	sister 	company, 	Mineral
Resources International, Inc. (MRI), and Mitch Shaw and David
Schenk.2 Two separate sections of the Lease contained provisions
indicating 	that 	“[i]n 	case 	of 	default 	by 	[NorthShore], 	all
inventory and mining rights become the property of [SFLP].”3
¶3 	In 2006, Shaw and Schenk agreed to terminate the Supply
Agreement 	as 	consideration 	for 	NorthShore’s 	promise 	to
renegotiate the Lease. However, according to SFLP, NorthShore
“refused to propose in good faith any terms for renegotiation of
the Lease.”
¶4 	On February 22, 2007, SFLP, as a defendant in a case
initiated 	by 	MRI, 	filed 	a 	third-party 	complaint 	against
NorthShore, in which it alleged that “termination of the Supply
Agreement, under [the] circumstances, has resulted in breach
and/or termination of the [Lease].” SFLP subsequently amended
2. David Schenk is the son of SFLP’s general partners.
3. There was some dispute in the trial court as to the definition of
inventory and mining rights. NorthShore argued that mining
rights 	and 	inventory 	should 	be 	defined 	as 	“the 	subsurface
mining rights and the inventory of minerals contained below the
surface of the leasehold property,” which were owned by SFLP
and leased to NorthShore. The trial court determined that the
mining 	rights 	included 	a 	royalty 	agreement 	issued 	to
NorthShore by the State of Utah, which permitted NorthShore to
harvest 	mineral 	brines 	from 	the 	Great 	Salt 	Lake, 	and 	that
inventory included NorthShore’s inventory of mineral brines. In
light of our holding on appeal, we need not resolve this issue.

Schenk Family v. NorthShore
20141089-CA 	3 	2016 UT App 124
its third-party complaint to add claims for breach based on
NorthShore’s 	failing 	to 	pay 	property 	taxes, 	missing 	rent
payments, and refusing to allow SFLP to inspect the property.
As a remedy, SFLP sought “a judicial declaration that the Lease
has terminated with consequent legal effect, including [SFLP’s]
right of immediate possession and reversion of all inventory and
mining 	rights.” 	SFLP 	also 	sought 	“attorney’s 	fees, 	legal
expenses, and costs of Court.”
¶5 	On December 30, 2011, NorthShore filed a motion for
partial summary judgment on SFLP’s claim that NorthShore
breached the Lease by failing to pay taxes and by missing rent
payments and on SFLP’s requested remedy of termination of the
Lease. The trial court granted NorthShore’s motion, dismissing
the breach of contract claims challenged by the motion and
determining 	that 	SFLP could 	not 	terminate 	the 	Lease 	as a
remedy for the remaining breach of contract claims. But the
court clarified that it was denying the motion to the extent that it
sought summary judgment on SFLP’s claim that it “is entitled to
the remedy of all inventory and mining rights becoming the
property of SFLP upon a default of the Lease Agreement by
NorthShore.”
¶6 	SFLP’s 	remaining 	third-party 	claims—that 	MRI’s
termination of the Supply Agreement and NorthShore’s refusal
to 	permit 	inspections 	constituted 	material 	breaches 	of 	the
Lease—were tried as part of a larger trial involving related
parties. The only issue tried to the jury on SFLP’s claims against
NorthShore was breach. A Special Verdict Form was submitted
to the jury asking, “Do you find from a preponderance of the
evidence 	that 	NorthShore 	Limited 	Partnership 	breached 	the
Commercial Property Lease in the manner alleged by Schenk
Family Limited [P]artnership?” The jury answered “Yes” to this
question. 	The 	issue 	of 	damages 	arising 	from 	a 	breach 	by
NorthShore was not submitted to the jury.

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20141089-CA 	4 	2016 UT App 124
¶7 	Following the trial, SFLP filed a Motion for Reversion of
Inventory and Mining Rights and a Motion for Attorney’s Fees.
The trial court held a hearing on the motions, during which
NorthShore argued that SFLP had never provided a calculation
of damages or indicated that it expected the trial court to make a
legal ruling on damages, that any claim for damages should
have been put before the jury, and that the remedy provisions
providing for a transfer of mining and inventory rights did not
apply to the types of breach alleged by SFLP. The trial court
rejected NorthShore’s arguments and concluded that the jury’s
finding of breach was sufficient for the trial court to make a legal
determination that the breach constituted a default under the
Lease. The court further concluded that the parties bargained for
a contractual remedy in the Lease, which provided for the
transfer of mining and inventory rights in the event of default.
Accordingly, the trial court ordered “that all inventory and
mining rights of [NorthShore] on or appertaining to the property
subject to the . . . Lease . . . are the property of [SFLP].” The trial
court also found that SFLP was entitled to attorney fees under
the Lease as the prevailing party and that SFLP’s claimed fees
were 	reasonable. 	Accordingly, 	the 	trial 	court 	ordered
NorthShore to pay SFLP $28,687.50 in attorney fees. In ruling on
various subsequent motions, the trial court eventually reduced
the fee award to $23,864.40 and later augmented it by $17,381.10.
NorthShore filed a notice of appeal, challenging the trial court’s
award of the inventory and mining rights and attorney fees.
ISSUES AND STANDARDS OF REVIEW
¶8 	NorthShore 	argues 	that 	the 	trial 	court 	erred 	in
interpreting the Lease to provide for forfeiture of the inventory
and mining rights as a remedy for the breaches of contract found

Schenk Family v. NorthShore
20141089-CA 	5 	2016 UT App 124
by the jury.4 “We review the interpretation of a contract for
correctness.” Osguthorpe v. Wolf Mountain Resorts, LC, 2013 UT
12, ¶ 7, 322 P.3d 620.
¶9 	NorthShore also argues that SFLP was not entitled to
attorney fees under the Lease, because it was not the prevailing
party, and that the trial court’s award of fees was not reasonable.
“[W]hether a party is the prevailing party in an action is a
decision left to the sound discretion of the trial court, and we
review the trial court’s decision for an abuse of discretion.” Smith
v. Simas, 2014 UT App 78, ¶ 13, 324 P.3d 667 (citation and
internal quotation marks omitted). Likewise, “a trial court has
broad discretion in determining what constitutes a reasonable
fee, and we will consider that determination against an abuse-of-
discretion standard.” EDSA/Cloward, LLC v. Klibanoff, 2008 UT
App 284, ¶ 8, 192 P.3d 296 (citation and internal quotation marks
omitted).
ANALYSIS
I. Interpretation of the Lease
¶10 	NorthShore 	asserts 	that 	the 	trial 	court 	erred 	in
interpreting the Lease. The court interpreted the Lease to allow
the forfeiture of inventory and mining rights to SFLP as the
remedy for any breach of the Lease, including the termination of
4. 	Because 	we 	agree 	with 	NorthShore 	that 	the 	trial 	court
misinterpreted the remedy provisions of the Lease, we need not
examine NorthShore’s arguments that the jury’s verdict was
actually a general verdict precluding further consideration of
damages; that the trial court erred in considering SFLP’s request
for damages post-trial and in refusing to give NorthShore a
reasonable opportunity to defend against the claim; and that
enforcing the remedy provisions was unconscionable.

Schenk Family v. NorthShore
20141089-CA 	6 	2016 UT App 124
the 	Supply 	Agreement 	and 	NorthShore’s 	refusal 	to 	permit
inspections. The forfeiture remedy5 appears in two paragraphs
of the Lease—one dealing with NorthShore’s obligation to pay
rent and the other dealing with NorthShore’s obligation to pay
taxes and maintain insurance coverage:
If any payment becomes more than ten days past-
due, such unpaid amounts shall bear interest from
the due date to the date of payment at the rate of
five percent (5%) of the outstanding balance per
month. If any payment becomes more than thirty
days 	late, 	Lessor 	may 	issue 	written 	Notice 	of
Default 	to 	Lessee 	via 	certified 	mail 	and 	shall
provide 30 days with which to cure. In case of
default 	by 	Lessee, 	all Inventory 	and 	mining rights
become the property of Lessor.
. . . .
If property taxes become delinquent, or Lessee fails
to keep in force the required Insurance, Lessor may
issue 	written 	Notice 	of 	Default 	to 	Lessee 	via
certified mail and shall provide 30 days with which
5. There was some discussion in the trial court as to whether the
remedy 	provision 	in 	this 	case 	was 	a 	forfeiture 	clause, 	a
liquidated 	damages 	clause, 	or 	some 	combination 	of 	both.
However, on appeal, the parties appear to agree that the remedy
provision is a type of forfeiture clause. Even though the remedy
provision did not provide for the forfeiture of the entire Lease,
we agree that it is a forfeiture provision because it is “[a]
contractual provision stating that, under certain circumstances,
one party must forfeit something to the other.” Forfeiture Clause,
Black’s Law Dictionary (9th ed. 2009).

Schenk Family v. NorthShore
20141089-CA 	7 	2016 UT App 124
to cure. In case of default by Lessee all Inventory and
mining rights become the property of Lessor.
(Emphasis added.)
¶11 	NorthShore urges us to construe the remedy provisions as
applying only to defaults under those paragraphs—i.e., failure to
pay rent and failure to pay taxes or keep insurance in force.
SFLP, on the other hand, defends the trial court’s determination
that because there is “no language in the . . . Lease that would
expressly limit this remedy only to a breach of the terms of the
two specific paragraphs,” the forfeiture remedy applied to all
defaults6 under the Lease.
¶12 	“When interpreting a contract, we look to the writing
itself to ascertain the parties’ intentions, and we consider each
contract provision . . . in relation to all of the others, with a view
toward giving effect to all and ignoring none.” Green River Canal
Co. v. Thayn, 2003 UT 50, ¶ 17, 84 P.3d 1134 (omission in original)
(citation and internal quotation marks omitted). “[F]orfeitures
are not favored in the law,” and “forfeiture provisions will be
strictly construed against the one who seeks to enforce them.”
Richardson v. Hart, 2009 UT App 387, ¶ 15, 223 P.3d 484 (citation
and internal quotation marks omitted). Having reviewed the
language of the Lease, we agree with NorthShore that the
6. For purposes of our analysis, we accept the trial court’s
determination that the breaches found by the jury could be
classified as defaults. Compare Default, Black’s Law Dictionary
(9th ed. 2009) (defining “default” as a failure “to perform a
contractual obligation”), with id. Breach of Contract (defining
“breach of contract” as a “[v]iolation of a contractual obligation
by failing to perform one’s own promise, by repudiating it, or by
interfering with another party’s performance”).

Schenk Family v. NorthShore
20141089-CA 	8 	2016 UT App 124
remedy provisions apply only to defaults based on nonpayment
of rent, nonpayment of taxes, and failure to maintain insurance.
¶13 	The 	structure 	of 	the remedy 	provisions 	indicates the
parties’ intent for them to apply only to specific, identified
defaults—nonpayment of rent or taxes and failure to maintain
insurance. Had the parties intended for the forfeiture remedy to
apply to all types of default under the Lease, we would expect to
see a single remedy provision pertaining to the entire Lease. By
listing the remedy in specific paragraphs identifying particular
types of default along with the method for providing notice of
default and an opportunity to cure,7 the parties indicated their
intent for the remedy to apply specifically to the types of default
outlined in those paragraphs. The fact that the parties included
the default remedy in two separate provisions also supports this
conclusion; had they intended for the remedy to apply to all
types of default, there would have been no need to repeat the
remedy in the paragraph relating to taxes and insurance.
¶14 	Further, given our jurisprudence disfavoring forfeiture
provisions, 	the 	parties’ 	failure 	to 	explicitly 	indicate 	their
intention for the forfeiture remedy to apply to all defaults under
the Lease precludes us from interpreting the Lease as providing
a contractual remedy for the breaches found by the jury in this
case. Thus, SFLP’s only remaining remedy for a breach based on
the termination of the Supply Agreement or the failure to permit
7. The fact that the Lease does not outline any procedure for
providing notice and an opportunity to cure with respect to
other types of default further supports a narrow interpretation of
the 	remedy 	provisions, 	since 	a 	party 	seeking 	to 	enforce 	a
forfeiture provision must give the other party “notice of default
and a reasonable period of time in which to cure the default
before exercising a forfeiture provision.” See Johnston v. Austin,
748 P.2d 1084, 1086–87 (Utah 1988).

Schenk Family v. NorthShore
20141089-CA 	9 	2016 UT App 124
inspections would have been actual monetary damages. But
SFLP made no attempt to prove its damages at trial and instead
relied exclusively on the forfeiture remedy provided in the
Lease. Because the forfeiture remedy does not apply to the
breaches committed by NorthShore, the trial court erred in
awarding SFLP the inventory and mining rights.
II. Attorney Fees
¶15 	NorthShore next challenges the trial court’s award of
attorney fees to SFLP. The Lease provides that “[i]n the event of
a dispute, the non-prevailing party shall pay the prevailing
party’s attorneys fees.” NorthShore maintains that because SFLP
failed to present evidence of damages at trial and its breach of
contract claims did not entitle it to an award of the inventory
and mining rights under the Lease, it could not be considered
the prevailing party. Cf. Smith v. Simas, 2014 UT App 78, ¶¶ 29–
31, 324 P.3d 667 (upholding a trial court’s determination that
there was no prevailing party where one party prevailed on the
issue of breach but the other party prevailed on materiality and
damages). It further challenges the reasonableness of the trial
court’s award.
¶16 	“Whether or not a party is the prevailing party is a
question for the trial court, depending in large measure on the
context of each case.” Id. ¶ 29 (citation and internal quotation
marks omitted). Factors relevant to this determination may
include, 	but 	are 	not 	limited 	to, 	(1) 	contractual
language, (2) the number of claims, counterclaims,
cross-claims, etc., brought by the parties, (3) the
importance of the claims relative to each other and
their 	significance 	in 	the 	context 	of 	the 	lawsuit
considered as a whole, and (4) the dollar amounts
attached to and awarded in connection with the
various claims.

Schenk Family v. NorthShore
20141089-CA 	10 	2016 UT App 124
R.T. Nielson Co. v. Cook, 2002 UT 11, ¶ 25, 40 P.3d 1119. This
standard permits a “case-by-case evaluation by the trial court,
and flexibility to handle circumstances where both, or neither,
parties 	may 	be 	considered 	to 	have 	prevailed.” 	Id. 	The
reasonableness of attorney fees may be based on a variety of
factors, including
the difficulty of the litigation, the efficiency of the
attorneys in presenting the case, the reasonableness
of the number of hours spent on the case, the fee
customarily 	charged 	in 	the 	locality 	for 	similar
services, the amount involved in the case and the
result attained, and the expertise and experience of
the attorneys involved.
Dixie State Bank v. Bracken, 764 P.2d 985, 989 (Utah 1988) (citation
and internal quotation marks omitted).
¶17 	Had the trial court determined, as we do on appeal, that
the Lease did not permit SFLP to recover the inventory and
mining rights as a remedy for the breaches found by the jury, see
supra ¶ 14, the trial court’s determination regarding who was the
prevailing party and the extent to which SFLP’s claimed fees
were reasonable would likely have been affected. We therefore
vacate the trial court’s award of attorney fees. But because “the
trial court is in a better position than we are as an appellate court
to decide which party is the prevailing party,” R.T. Nielson, 2001
UT 11, ¶ 25, and “to assess the reasonableness of the fees
requested under a contract,” Foote v. Clark, 962 P.2d 52, 56 (Utah
1998), we remand this case for the trial court to revisit its
determination that SFLP was the prevailing party, in light of our
holding in this case, and to adjust and re-enter the attorney fee
award as appropriate.

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20141089-CA 	11 	2016 UT App 124
CONCLUSION
¶18 	We determine that the remedy provision in the Lease
providing for a transfer of inventory and mining rights applied
only to defaults based on nonpayment of rent or taxes or failure
to 	maintain 	insurance. 	The 	trial 	court 	therefore 	erred 	in
determining that SFLP was entitled to that remedy for breaches
arising from the termination of the Supply Agreement and
NorthShore’s refusal to permit inspections. We therefore vacate
the trial court’s award of the inventory and mining rights and its
award of attorney fees and remand for further proceedings
consistent with this opinion.