Utah Court of Appeals
Can Utah courts award both breach of contract damages and rescission remedies? H&P Investments v. iLux Capital Explained
Summary
H&P Investments contracted to purchase 20,000 Facebook shares at $41.34 per share but received only 17,557 shares. The district court found a breach of contract and awarded damages for the missing 2,443 shares based on stock value when H&P learned of breach, plus management fee refund and capital account distribution.
Analysis
In H&P Investments v. iLux Capital, the Utah Court of Appeals addressed critical questions about damage calculation for stock nondelivery and the election of remedies doctrine in contract disputes.
Background and Facts
H&P Investments contracted to purchase 20,000 Facebook shares at $41.34 per share through investment companies iLux Capital and Fortius Financial. H&P tendered $868,140 total, including a 5% management fee. The investment companies believed H&P was investing in a fund for a pro-rata share, while H&P believed it was purchasing shares directly. H&P ultimately received only 17,557 shares when the investment companies paid $47.02 per share for Facebook stock, leaving 2,443 shares undelivered.
Key Legal Issues
The court addressed when H&P learned of the breach for damage calculation purposes, whether the New York rule applied to breach of contract claims, and whether awarding both expectation damages and management fee refunds violated the election of remedies doctrine.
Court’s Analysis and Holding
The court reversed, finding the district court clearly erred in determining H&P learned of the breach on February 7, 2014. H&P’s principal testified he “conclude[d]” by November 5, 2013 that “we got what we got, and they were not going to deliver the balance.” The court also held that the New York rule applies only to conversion cases, not breach of contract claims, citing Lake v. Pinder. Most significantly, the court found the district court violated the election of remedies doctrine by awarding both expectation damages for breach and a management fee refund, which constituted rescission damages.
Practice Implications
This decision reinforces that Utah applies Utah Code section 70A-2-713 by analogy to stock nondelivery, measuring damages by the stock’s value when the buyer learned of breach. Practitioners must carefully document the subjective date of breach knowledge and avoid seeking inconsistent remedies that violate election of remedies principles.
Case Details
Case Name
H&P Investments v. iLux Capital
Citation
2021 UT App 113
Court
Utah Court of Appeals
Case Number
No. 20190548-CA
Date Decided
October 28, 2021
Outcome
Reversed and Remanded
Holding
The district court erred in finding that the plaintiff did not learn of the breach until February 7, 2014, when the plaintiff’s own testimony established knowledge of breach by November 5, 2013, and the court improperly awarded inconsistent remedies violating the election of remedies doctrine.
Standard of Review
Factual findings reviewed for clear error unless against clear weight of evidence; legal questions reviewed for correctness; plain error for unpreserved issues requiring showing of obvious harmful error
Practice Tip
When representing clients seeking damages for stock nondelivery, carefully document the precise date the client subjectively learned of the breach, as this determines the valuation date for damages under Utah Code section 70A-2-713.
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