Opinion
Case No. 20020630-CA.
Filed November 21, 2003. (Not For Official Publication)
Appeal from the Third District, Salt Lake Department, The Honorable Sandra Peuler.
Robert E. Mansfield and Stephen Christiansen, Salt Lake City, for Appellants.
Brian R. Barnhill, Draper, and Robert A. Eder Jr., Salt Lake City, for Appellee.
Before Judges Jackson, Bench, and Davis.
MEMORANDUM DECISION
W. Mack Watkins and Christopher Watkins (the Watkinses) challenge the trial court's award of damages to Fortress Financial (Fortress) based on the court's finding that the Watkinses had breached an oral contract. The Watkinses argue that the court should have confined its ruling to an award of damages arising from their admitted breach of the written contracts that existed between the Watkinses and Fortress. We agree.
ANALYSIS
"A trial court's findings should fit `within the framework of the petition as originally drawn, or as amended' and should be supported by the evidence presented." Lee v. Sanders, 2002 UT App 281, ¶ 7, 55 P.3d 1127 (citation omitted). "A trial court may not base its decision on an issue that was tried inadvertently." Archuleta v. Hughes, 969 P.2d 409, 413 (Utah 1998) (quotations and citations omitted). Here, the issue of whether Fortress was entitled to damages arising out of a breach of a separate oral contract was not included in Fortress's initial complaint. Instead, paragraph 6 of Fortress's complaint expressly alleged that the Watkinses had violated the terms of the written contracts, thereby stating that "[a]t the time the agreements were signed, the Defendants knew . . . that their advisory clients would not use Southwest Securities." (Emphasis added.) In response to this complaint, the Watkinses filed a letter with the court admitting liability "solely on the clam [sic] of breach of contract outlined in paragraph 6 of Plaintiff's Complaint." At no point in the litigation did Fortress move to amend its complaint to allege breach of an oral contract. Thus, underLee, the trial court was required to confine its ruling to the claims raised in the petition. Because the trial court's damages award was expressly predicated on the alleged breach of a separate oral contract, we hold that the damages award was invalid.
Though the Watkinses' brief clearly argued that the existence of the oral contract was not properly before the trial court, Fortress failed to directly address this issue in its responsive brief. Fortress's brief simply argued that the evidence supported the trial court's eventual conclusions and did not respond to the Watkinses' threshold assertions that the trial court had inappropriately ruled on issues that were not before it. At oral argument, Fortress argued for the first time that the oral contract was appropriately before the trial court under the doctrine of implied consent. Cf. Lee v. Sanders, 2002 UT App 281, ¶ 7, 55 P.3d 1127 (holding that "a trial court may infer an amendment to the pleadings if the issue is tried by the Parties' express or implied consent"). Because the implied consent argument was not raised or discussed in Fortress's brief, however, we decline to address its merits here. See Valcarce v. Fitzgerald, 961 P.2d 305, 313 (Utah 1998) ("It is well established that an appellate court will decline to consider an argument that a party has failed to adequately brief.").
"Because we remand this case for the trial court to [amend] its findings . . . we need not reach the other issues. . . . However, in the interest of judicial economy, `a brief discussion of these issues is appropriate as guidance for the trial court on remand.'" Armed Forces Ins. Exch. v. Harrison, 2003 UT 14, ¶ 38, 70 P.3d 35 (citation omitted).
We think that the trial court's ruling that the "managed accounts were not included in the written contracts entered into between Plaintiff and Defendants" was incorrect. The written contracts specifically mention advisory accounts in sections 8, 9, 26, and 28. Among the contractual duties created that expressly govern the advisory accounts is the Watkinses' duty under section 28 to encourage their advisory clients to use Southwest Securities to clear their advisory account trades. Indeed, it is the admitted breach of this particular duty that has given rise to the present suit. We thus think it clear that the written contracts did govern the managed accounts and that the written contracts should form the basis for any award of damages that is appropriate under Fortress's complaint.
The trial court correctly noted that the parties and the written contracts used the terms "advisory account" and "managed account" interchangeably.
Under the terms of section 21 of the Watkinses' written contracts, the Watkinses were entitled to receive varying percentages of the commissions that were earned on the trades brokered by Fortress. Fortress argues, however, that this contractual compensation schedule is inapplicable to commissions earned from trades involving the advisory accounts. Though there is no language in the written contracts themselves that would provide for such a stark revision of the contractual terms, Fortress nevertheless contends that this agreement should be enforced as an oral modification of the contract. It is a cardinal principle of contract law, however, that "[w]hen the language of the contract is unambiguous, then the parties' intentions must be determined solely from the language of the contract." Kraatz v. Heritage Imps., 2003 UT App 201, ¶ 21, 71 P.3d 188 (quotations and citations omitted). We have carefully reviewed the terms of the written contracts dealing with compensation and payment and have found nothing ambiguous about the compensation schedules. Though the contracts signed by Mack Watkins and Christopher Watkins entitle them to differing percentages of the commissions, both contracts unambiguously state that the Watkinses are entitled to certain percentages of the commissions earned on the trades that were processed by Fortress. Neither contract has any language limiting this compensation to trades involving non-managed, "regular" accounts. Further, both contracts include language at the end expressly stating that there were to be no additional terms. Thus, given the repeated references incorporating the advisory accounts into the scope of the written contracts, we think it clear that any award of damages to Fortress arising from a breach of the written contracts must be offset by the compensation due the Watkinses under section 21 of the written contracts.
Fortress further claims that Utah Administrative Code Rule 164-6 bars the Watkinses from receiving commissions on trades that involved funds for which they had already received a management fee in their separate role as financial advisors. In making this argument, however, Fortress has not argued that section 21 of the written contracts should be declared void as against public policy, but has instead simply offered rule 164-6 as circumstantial evidence indicating that the parties could not have intended for the Watkinses to have received commissions on the advisory account trades. Absent some ambiguity in the text of the written contracts, however, we do not think that rule 164-6 or the accounting practices that have been derived therefrom can properly be considered as evidence of the parties' contractual intent. Given our conclusion that the compensation schedule set forth in the written contracts between Fortress and the Watkinses unambiguously applies to the managed accounts, we accordingly decline to address the merits of this argument.
Finally, the parties have disputed whether the Watkinses were required to pay the clearing fees charged by Southwest Securities in connection with the brokered trades. Though section 21 of the contracts clearly calls for the Watkinses to pay the clearing fees, it is the Watkinses who now allege that the parties' course of dealing was such so as to modify the contracts and thereby require Fortress to share this cost. Given the unambiguous terms of section 21A of the written contracts, however, we think it clear that the responsibility for the clearing fees should be borne by the Watkinses. Thus, any damage award entered by the trial court in this case should reflect the Watkinses' contractual obligation to pay the clearing fees.
CONCLUSION
Accordingly, we conclude that the trial court's reliance on an oral contract in its damage award was improper. The trial court should have limited its ruling to a determination of damages arising from the admitted breach of the written contracts. Further, we believe that the written contracts clearly encompassed the parties' agreements with respect to the managed accounts, and that the Watkinses were entitled to have their contractual liabilities modified by both the compensation that was due them under section 21 of the contracts and by their own contractual duty to pay the clearing fees charged by Southwest Securities. We thus reverse the decision of the trial court and remand for further proceedings consistent with this decision.
WE CONCUR: Russell W. Bench, Judge, and James Z. Davis, Judge.