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Russell/Packard Development9/18/2003
(For Official Publication)
Russell/Packard Development, Inc., and Lawrence Russell (collectively, Russell) appeal from the district court's order granting motions to dismiss in favor of Joel Carson, William Bustos, and John Thomas. We reverse and remand.
BACKGROUND
In 1996, Lawrence Russell was the principal shareholder and chief executive officer of Russell/Packard Development, Inc., a California corporation engaged in real estate development in California. When Mr. Russell became interested in developing residential real estate in Utah, he teamed with John Thomas (Thomas), a Utah real estate agent and a managing member of Premier Homes, L.C., to organize a Utah limited liability company called PRP Development, L.C. (PRP). Thomas was the manager of PRP and hence a fiduciary of Russell and PRP. PRP began pursuing real estate development activities in Utah.
In 1996, Saratoga Springs Development, L.C. (Saratoga), a company owned by Lynn Wardley, was developing and marketing land for residential construction. Saratoga owned seventy-two undeveloped twin-home lots (the lots) in the city of Saratoga Springs, Utah. Saratoga retained the brokerage services of Wardley Better Homes and Gardens Brokerage Co. (Wardley) to market and sell the lots. Dan Cary (Cary), a Wardley agent, was the listing agent for the lots. Joel Carson (Carson) and William Bustos (Bustos) were also real estate agents with Wardley. Unbeknownst to Russell, Carson had a business relationship with Bustos and Bustos had previously engaged in real estate dealings with Thomas. Also unbeknownst to Russell, Thomas owed Bustos money from previous business dealings. Thomas retained Carson on behalf of PRP and Russell to locate and review real estate proposals for purchase and development by PRP. As such, Carson became a fiduciary of PRP.
In the summer of 1996, Carson, Thomas, and Bustos learned of the availability of the Saratoga lots. At the urging of Carson and Bustos, Thomas approached Cary about purchasing the lots from Saratoga through PRP.
However, in the fall of 1996, Carson, Thomas, and Bustos, through an entity known as CMT, Inc. (CMT), made a separate offer to purchase the lots from Saratoga for $25,000 per lot. Carson told Cary that CMT was affiliated with or owned by Russell and PRP. Throughout the negotiations, Carson and Thomas, through their actions and representations to Saratoga, created the appearance that PRP was actively pursuing the purchase of the lots. Consequently, Wardley and Saratoga believed they were negotiating the purchase of the lots with PRP directly. To further disguise CMT's illegitimacy, Carson, Thomas, and Bustos misappropriated Russell's proprietary plans to develop the lots and presented them to Saratoga as their own. As a result of the same conduct, Russell erroneously believed CMT was owned by, affiliated with, or part of Saratoga.
In fact, during the negotiations and execution of the PRP contract, CMT was merely a fictitious name used by Carson, Thomas, and Bustos, having no legal status in Utah or elsewhere. On November 4, 1996, CMT and Saratoga executed a real estate contract listing Cary as the agent for Saratoga and Carson as the agent for CMT. The CMT contract was signed by Saratoga's authorized agent and by "Charles Perez" on behalf of CMT. Saratoga and CMT closed on the CMT contract the same day they executed it, with Saratoga still erroneously believing it was contracting with PRP through PRP's affiliate, CMT. The title company CMT used to close the transaction received an earnest money wire in the amount of $10,000 from an entity known as Poe Investments, L.C. (Poe), whose members were Carson and Busto
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