Must Utah courts consider extrinsic evidence when determining contract ambiguity? UDOT v. Boggess-Draper Company Explained

In UDOT v. Boggess-Draper Company, the Utah Court of Appeals clarified when district courts must consider extrinsic evidence in contract interpretation disputes, particularly regarding latent ambiguities in condemnation proceedings.

Background and Facts

Boggess-Draper owned property in South Jordan that UDOT condemned in phases. In 2005, the parties entered a final judgment resolving the first condemnation, wherein Boggess-Draper conveyed “any and all rights appurtenant” to its remaining property “by reason of the location thereof with reference to said highway.” In 2010, UDOT filed a second condemnation action against different portions of Boggess-Draper’s property. When Boggess-Draper’s expert identified severance damages from loss of access and exposure, UDOT moved in limine to exclude this evidence, arguing it had already acquired all appurtenant rights in the 2005 judgment.

Key Legal Issues

The primary issue was whether the district court properly refused to consider extrinsic evidence when determining if the 2005 final judgment contained ambiguous language regarding which appurtenant rights had been conveyed. Boggess-Draper argued that at the time of the 2005 judgment, the western portion of 11400 South Street was a city-owned road, not a state highway, creating uncertainty about the parties’ intent regarding which property rights were actually conveyed.

Court’s Analysis and Holding

The Court of Appeals held that the district court erred by declining to consider extrinsic evidence. The court explained Utah’s three-part framework for contractual ambiguity analysis: (1) if no ambiguity exists, courts enforce contracts according to their terms without considering extrinsic evidence; (2) if a facial ambiguity exists, courts consider extrinsic evidence to resolve it; and (3) if a party contends an apparently unambiguous contract contains a latent ambiguity, courts must consider extrinsic evidence to determine whether such ambiguity exists. The court found that the change in highway ownership after the 2005 judgment constituted an “objectively verifiable” collateral matter that could create a latent ambiguity about the parties’ original intent.

Practice Implications

This decision emphasizes that Utah courts must consider relevant extrinsic evidence when determining whether latent ambiguities exist, even in contracts that appear facially clear. For condemnation practitioners, this ruling highlights the importance of presenting objectively verifiable evidence of collateral circumstances that may illuminate the parties’ actual intent at the time of contracting. The decision also demonstrates that changes in property ownership, highway classifications, or other external factors occurring after contract formation can be relevant to interpreting the original agreement’s scope and meaning.