Pero v. Knowlden

2014 UT App 220
_________________________________________________________

THE UTAH COURT OF APPEALS

PAMELA BRIDGE PERO,
Plaintiff and Appellant,
v.
JODY KNOWLDEN AND DENISE KNOWLDEN,
Defendants and Appellees.

Opinion
No. 20130386-CA
Filed September 18, 2014

Seventh District Court, Price Department
The Honorable Douglas B. Thomas
No. 090700542

D. David Lambert, Leslie W. Slaugh, and Alyssa L.
Lambert, Attorneys for Appellant

Don M. Torgerson and Mandie J. Torgerson,
Attorneys for Appellees

JUDGE JOHN A. PEARCE authored this Opinion, in which
JUDGE STEPHEN L. ROTH and SENIOR JUDGE RUSSELL W. BENCH
concurred.1

PEARCE, Judge:

¶1 Pamela Bridge Pero filed a complaint in 2009 against her
son, Jody Knowlden,2 seeking the reconveyance of real property.
Pero had conveyed the property to Knowlden in 1998 with the

1. The Honorable Russell W. Bench, Senior Judge, sat by special
assignment as authorized by law. See generally Utah Code Jud.
Admin. R. 11-201(6).

2. Pero also sued Jody Knowlden’s wife, Denise Knowlden, but she
appears to have been only a nominal defendant. We treat the
matter as one between Pero and her son.
Pero v. Knowlden

understanding that Knowlden would obtain a mortgage to allow
him to retire personal debt and then reconvey the property to Pero
once he had paid off the mortgage. After a two-day trial, the
district court found Pero’s claims were time barred. Pero appeals.
We largely affirm the district court’s decision, but we vacate it in
part and remand for the entry of further findings of fact and
conclusions of law.

BACKGROUND

¶2 Pero owned a house and property located in Scofield, Utah.
She raised her family in the house until 1985. After that, Pero
rented the Scofield property to third parties and allowed her family
to use it as a vacation property.

¶3 In 1991, Knowlden suffered a gunshot wound that caused
him to accrue substantial medical bills. After approximately six
years of making little progress in paying them down, Knowlden
approached Pero and proposed that she permit him to use the
Scofield property as collateral for a loan to pay off his bills. Pero,
Knowlden, and other members of Pero’s family discussed
Knowlden’s proposal for about a year. In April 1998, Pero agreed
to transfer title in the Scofield property to Knowlden.

¶4 Although Pero and Knowlden never memorialized their
agreement in writing, the district court found that the initial
transfer of the deed was “expressly conditioned upon the promise
that the deed would be reconveyed upon Knowlden’s payment of
the loan.” The district court also found the oral agreement had
three additional terms: (i) Knowlden could only obtain a single
loan; (ii) he was to pay taxes on the property; and (iii) the loan was
not to exceed $20,000. The district court also found that Pero
believed the loan would be paid off within three to five years.

¶5 On July 3, 1998, Pero quitclaimed the Scofield property to
Jody and Denise Knowlden as joint tenants. The deed was recorded
on July 6, 1998. On the same date, Knowlden recorded a deed of
trust against the Scofield property in the amount of $48,000. Pero

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Pero v. Knowlden

was not aware of the initial loan amount until this action
commenced. On February 28, 2000, Knowlden recorded a second
deed of trust against the Scofield property in the amount of
$71,500. Pero learned of the second loan in 2000 and was “furious.”
Knowlden paid the first loan off with the second loan, but the
Scofield property remained encumbered by the second loan in an
amount greater than the $20,000 to which the parties had agreed.

¶6 Pero and the rest of the family continued to use the Scofield
property for recreation and gatherings between 1998 and 2004.
During that time, Pero had keys to the property. Pero, her husband,
and other family members provided materials and labor to
improve the Scofield property during that time.

¶7 In early 2004, Knowlden changed the locks on the house and
placed a note on the door warning against trespassing on the land.
Pero wrote Knowlden a letter on May 23, 2004, expressing anger
and dismay that she and her other children had been locked out.
Knowlden did not respond. Pero penned another letter dated
February 25, 2005, stating that she “fe[lt] very strongly” that
Knowlden needed to transfer the property back to her. Again,
Knowlden did not respond. Pero wrote a final letter on July 27,
2005, asking Knowlden to quitclaim the property back to her as
soon as possible; again, Knowlden did not respond to this request.
Pero also asked Knowlden on multiple occasions—apparently
beginning in 2000—about his intent to reconvey, but Knowlden
always evaded the question. Indeed, Knowlden never expressly
confirmed or denied that he would reconvey the property until the
commencement of this litigation, when he expressly indicated that
he did not intend to return ownership to Pero.

¶8 Pero filed a complaint with the district court on May 11,
2009, alleging constructive trust and unjust enrichment causes of
action. She later amended her complaint to add claims of breach of
agreement and rescission. All of Pero’s causes of action sought to
compel Knowlden to reconvey the Scofield property to her. After
a two-day trial in February 2013, the district court concluded that
Knowlden breached the agreement in July 1998 when he secured
the first, $48,000 loan and that Pero had actual knowledge of this

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breach in 2000. Additionally, the court found that although
Knowlden had not yet breached the agreement to reconvey the
property, Pero had knowledge in 2004 of all facts necessary to put
her on notice to inquire whether Knowlden intended to reconvey.
The district court applied a four-year statute of limitations to each
of Pero’s claims and concluded that each of them was time barred.
Pero appeals from the district court’s order denying her claims.

ISSUES AND STANDARDS OF REVIEW

¶9 Pero contends that the district court erred in concluding that
statutes of limitations barred her claims. “The applicability of a
statute of limitations and the applicability of the discovery rule are
questions of law, which we review for correctness.” Russell Packard
Dev., Inc. v. Carson, 2005 UT 14, ¶ 18, 108 P.3d 741 (citation and
internal quotation marks omitted). “[A]pplication of the discovery
rule also involves a subsidiary factual determination—the point at
which a person reasonably should know that he or she has suffered
a legal injury.” Jensen v. Young, 2010 UT 67, ¶ 10, 245 P.3d 731
(citation and internal quotation marks omitted). “We review this
subsidiary factual determination under a clearly erroneous
standard.” Bowen v. Bowen, 2011 UT App 352, ¶ 4, 264 P.3d 233.

ANALYSIS

I. Breach of Agreement and Rescission

¶10 The district court concluded that Knowlden breached the
terms of the parties’ agreement in July 1998 when he took out a
loan for $48,000, and again in February 2000 when he secured a
second loan for $71,500. The court concluded that, as of 2000, Pero
had constructive notice of the July 1998 breach and actual notice of
the February 2000 breach. To the extent that Pero’s claims for
breach of agreement and rescission were predicated on either of
these two events, those claims—filed in May 2009—were barred by
the four-year statute of limitations. See Utah Code Ann. § 78B-2-
307(1)(a) (LexisNexis 2008) (“An action may be brought within four

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years: (1) after the last charge is made or the last payment is
received: (a) upon a contract, obligation, or liability not founded
upon an instrument in writing . . . .”); McKean v. McBride, 884 P.2d
1314, 1317 (Utah Ct. App. 1994) (applying the four-year statute of
limitations to a claim seeking rescission of an oral contract).

¶11 However, the district court also concluded that “Knowlden
ha[d] not yet breached the agreement to reconvey the Scofield
property because the loan has not been paid off and still encumbers
the home in the approximate amount of $60,000.” This ruling
suggests that Knowlden’s contractual obligation to reconvey the
Scofield property pursuant to the agreement survived his initial
breaches. But the court also found that, due to the events of 2004,
“Pero had knowledge of all facts necessary to put her on notice to
inquire as to whether Knowlden did not intend to return the
Scofield property to her (a clear indication of repudiation of the
agreement).” The court concluded that Pero “knew nothing in May
2009 that she did not know in 2004” and that her claims for breach
of agreement and rescission were also barred because she filed her
complaint more than four years after Knowlden’s 2004 actions gave
her constructive notice that he had repudiated his future obligation
to reconvey.3

¶12 Under Utah law, “an action may be maintained for breach
of contract based upon anticipatory repudiation by one of the
parties to the contract.” Breuer-Harrison, Inc. v. Combe, 799 P.2d 716,
723 (Utah Ct. App. 1990); see Hurwitz v. David K. Richards & Co., 436
P.2d 794, 796 (Utah 1968). However, the non-repudiating party
need not sue immediately when an anticipatory breach occurs.
Rather, the non-repudiating party may continue to “[t]reat the
contract as still binding and wait until the time arrive[s] for its

3. Although Pero asserts in her brief that “[Knowlden] never
breached or repudiated his obligation to repay the loan and return
title to Pero until after the suit was filed,” she does not directly
challenge the factual underpinnings of the district court’s
conclusion that Knowlden’s actions in 2004 put Pero on notice that
he had repudiated the agreement.

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performance and at such time bring an action on the contract.”
Hurwitz, 436 P.2d at 796.

¶13 If Knowlden’s contractual obligation to reconvey the
Scofield property still existed in 2004, the acts the district court
found to have constituted repudiation would not necessarily have
started the limitations period, because Pero had the option to
“continue to treat the contract as operable and encourage
performance without waiving any rights under the contract.” Kasco
Servs. Corp. v. Benson, 831 P.2d 86, 89 (Utah 1992). Under such an
analysis, Pero’s claim for reconveyance would not be barred by the
statute of limitations, because the time for reconveyance has not yet
arrived.

¶14 The district court’s order does not clearly address the
options available to Pero after Knowlden’s anticipatory
repudiation. For example, the order does not confront whether
Knowlden will be obligated to convey the property at some future
date or whether Pero will be somehow time barred from seeking
return of the property when Knowlden’s time to perform arises. To
the contrary, the order contains the seemingly irreconcilable
conclusions that (1) the time for performance is not yet due and (2)
the statute of limitations bars the claim to enforce performance. We
vacate the district court’s dismissal of Pero’s breach of agreement
claim and remand for the entry of additional findings of fact and
conclusions of law to resolve this ambiguity. This will permit the
district court to clarify what continuing obligations, if any,
Knowlden has under the agreement and whether Pero has lost the
ability to compel performance of those duties or seek damages if
Knowlden breaches when performance is due.

II. Constructive Trust and Unjust Enrichment

¶15 Pero also challenges the district court’s determination that
the statute of limitations began running on Pero’s constructive trust
and unjust enrichment claims no later than 2004, when Knowlden
locked Pero out of the Scofield property, posted a no-trespassing
notice, and failed to respond to Pero’s letter complaining about the
lockout. Pero argues that there was “no clear repudiation of the

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obligation to reconvey the property prior to filing of the
complaint.” She further argues that because there was no clear
repudiation, Knowlden “did not meet his burden to prove a statute
of limitations defense and Pero’s claims to regain title are not time
barred by the statute of limitations.”

¶16 A constructive trust claim is subject to a four-year statute of
limitations. See Estate of Davis v. Davis, 2011 UT App 343, ¶ 8, 265
P.3d 813. The four-year statute of limitations applies because there
is not a specific limit otherwise provided by law. See Utah Code
Ann. § 78B-2-307(3) (LexisNexis 2008); American Tierra Corp. v. City
of W. Jordan, 840 P.2d 757, 760 (Utah 1992). The district court also
properly employed that same four-year statute of limitations in
evaluating the timeliness of Pero’s unjust enrichment claim. See
Russell/Packard Dev., Inc. v. Carson, 2003 UT App 316, ¶ 11, 78 P.3d
616, aff’d, 2005 UT 14, 108 P.3d 741. This statute of limitations is
subject to a discovery rule that provides that the time for filing an
action is tolled until a plaintiff “knows or should know of the
alleged breach or repudiation.” Snow v. Rudd, 2000 UT 20, ¶ 11, 998
P.2d 262.

¶17 However, even after giving Pero the benefit of the discovery
rule, the district court found that she knew or should have known
of the basis for her equitable claims more than four years prior to
the filing of her complaint. The district court concluded,

Pero knew nothing regarding the breach in May 2009
(at the time she filed the suit) that she did not already
know in 2000. She was aware of the breach, a loan
which was over three and a half times the agreed
upon amount, in 2000 and was furious about it.
Regarding the repudiation, Pero knew nothing in
May 2009 that she did not know in 2004. This
unfortunately is a clear case of a plaintiff simply
sitting on her rights.

As with the district court’s breach of agreement ruling, it is difficult
to discern whether the court based its statute of limitations analysis
of Pero’s equitable claims on Knowlden’s initial 1998 and 2000

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breaches of the agreement, his 2004 repudiation of the agreement,
or both. However, Pero has failed to persuade us that either of the
district court’s possible theories is incorrect as applied to Pero’s
constructive trust and unjust enrichment claims.

¶18 To the extent that the district court determined that the
statute of limitations began running upon Knowlden’s initial
breaches, the court relied on the facts that “(i) [Pero] had
constructive knowledge of a material breach in July 1998, (ii) she
had actual knowledge of a material breach of the agreement as of
the year 2000 and was ‘furious’; and (iii) she did not file suit until
May 2009.” The district court concluded that “Pero’s knowledge of
the breach of the agreement was clear and absolute in 2000, and
much more than a hint of breach or repudiation.” Thus, to the
extent Pero’s equitable claims accrued in 1998 or 2000, those claims
are barred by the statute of limitations.

¶19 Similarly, the district court found that Pero had notice of
Knowlden’s repudiation of the agreement prior to May 2005. The
court stated,

[P]rior to May 2005 Pero had knowledge of all facts
necessary to put her on notice to inquire as to
whether Knowlden did not intend to return the
Scofield property to her (a clear indication of the
repudiation of the agreement) based on the
following: (i) the lockout in 2004, (ii) the May 2004
letter and the February 2005 letters requesting
reconveyance which were unanswered, and (iii)
Knowlden’s complete silence and unwillingness to
discuss the Scofield property since 2000 despite
repeated attempts and requests by Pero to do so in
writing and in person.

Notwithstanding this finding, Pero argues on appeal that the
district court “found that Pero did not have a ‘clear indication’ that
Knowlden had breached or repudiated his obligation to reconvey
title until she commenced action and the Knowldens filed their
answer.”

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Pero v. Knowlden

¶20 Contrary to Pero’s argument, the district court did not find
that “there was no clear repudiation of the constructive trust until
Knowlden filed his answer to Pero’s Complaint.” The finding that
Pero interprets as one of “no clear repudiation” actually recites that
“Knowlden’s first express repudiation of reconveyance of the
Scofield property was not given until commencement of this
action.” (Emphasis added.) Despite the absence of an express
repudiation, however, the district court also found that Knowlden’s
actions in 2004 gave Pero “a clear indication of the repudiation of
the agreement.”

¶21 Utah law does not require that a repudiation—even between
close family members—be express. To the contrary, the discovery
rule applied to constructive trusts may be satisfied by either actual
or constructive notice. Snow v. Rudd, 2000 UT 20, ¶ 11, 998 P.2d 262
(“[A] trustee cannot take advantage of a statute of limitations
defense until something has occurred to give the beneficiary a clear
indication that a breach or repudiation has occurred, or,
alternatively, the circumstances must be such that [the beneficiary]
must be charged with knowledge of such a repudiation or breach.”
(second alteration in original) (citation and internal quotation
marks omitted)); Estate of Davis v. Davis, 2011 UT App 343, ¶ 10, 265
P.3d 813 (“‘[I]t is appropriate to protect the interests of a
beneficiary by applying the discovery rule to toll the statute of
limitations until the beneficiary knows or should know of the alleged
breach or repudiation.’” (emphasis added) (quoting Snow, 2000 UT
20, ¶ 11)).

¶22 Pero has not persuaded us that the district court committed
any error by finding that she had constructive notice of Knowlden’s
repudiation. In her reply brief, Pero attempts to distinguish this
case from Snow v. Rudd, 2000 UT 20, 998 P.2d 262, by arguing that
the plaintiff in Snow failed to inquire about the status of the trust,
while Pero “inquired and inquired and inquired” but “[h]er
inquiries were met with silence and evasion.” We fail to see how
Knowlden’s “silence and evasion” is less indicative of repudiation
than the circumstances presented in Snow. Cf. Smargon v. Grand
Lodge Partners, LLC, 2012 UT App 305, ¶¶ 18–20, 288 P.3d 1063
(discussing contractual repudiation resulting from the failure to

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Pero v. Knowlden

give adequate assurances that performance will occur). Pero also
attempts to distinguish this case from Snow by arguing that “there
was no written instrument to uncover or obtain that would have
allowed Pero to determine that the trust with her son had been
breached or repudiated” and that “in Snow, the property had been
conveyed away and there was no cure possible.” However, neither
argument provides Pero an escape from Snow’s holding that the
statute of limitations on a constructive trust claim begins to run on
the date “the beneficiary knows or should know of the alleged
breach or repudiation.” Snow, 2000 UT 20, ¶ 11. We therefore affirm
the district court’s conclusion that Pero had notice of Knowlden’s
repudiation more than four years prior to the filing of her
complaint.

¶23 We have affirmed the district court’s findings that Pero had
notice of Knowlden’s breaches of the parties’ agreement as of 2000
and notice of his subsequent repudiation as of 2004. We thus
conclude that the district court properly dismissed Pero’s equitable
claims for the present reconveyance of the property regardless of
whether the court relied on Knowlden’s initial breaches or his
subsequent repudiation of the parties’ agreement as the date upon
which the statute of limitations began to run.4

4. This result may appear to be incongruous with the result we
reach on Pero’s breach of agreement claim. However, Pero has
provided us with no case law applying the remedies available for
anticipatory breach of a contract to a constructive trust claim.
Indeed, it does not appear that those contract principles have been
applied in constructive trust cases. Compare Snow v. Rudd, 2000 UT
20, ¶ 11, 998 P.2d 262 (“[A] statute of limitations period will not
begin to run until the beneficiary knows or through reasonable
investigation could have learned of a breach or repudiation.”), with
Breuer-Harrison, Inc. v. Combe, 799 P.2d 716, 725 (Utah Ct. App.
1990) (“[A]n innocent party, confronted with an anticipatory
repudiation, may continue to treat the contract as operable and
urge performance by the repudiating party without waiving any
right to sue for that repudiation.” (citation and internal quotation
marks omitted)).

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Pero v. Knowlden

CONCLUSION

¶24 We affirm the district court’s determination that Pero’s
claims for constructive trust, unjust enrichment, and rescission are
barred by the applicable statutes of limitations. However, we
vacate the district court’s dismissal of Pero’s breach of agreement
claim and remand for further findings and conclusions regarding
Knowlden’s continuing obligation to reconvey the Scofield
property as discussed herein.

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