Bilanzich v. Lonetti

2007 UT 26
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
----oo0oo----
Michael T. Bilanzich, No. 20060017
Plaintiff and Petitioner,
v.
John Lonetti, an individual;
Eunes I. Lonetti, an individual; F I L E D
and JDL Holdings, L.C.,
Defendants and Respondents. March 20, 2007
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Fifth District, St. George
The Honorable James L. Shumate
No. 010500411
Attorneys: Richard D. Burbidge, Jefferson W. Gross, Salt Lake
City, for plaintiff
Terry L. Wade, Bryan J. Pattison, Michael F.
Leavitt, St. George, for defendants
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On Certiorari to the Utah Court of Appeals
PARRISH, Justice:
INTRODUCTION
¶1 Michael Bilanzich asks this court to overturn a court
of appeals decision denying his claim for attorney fees. We hold
that Utah Code section 78-27-56.5 grants the district court
discretion to award attorney fees and costs to a prevailing party
if the writing that forms the basis of the lawsuit provides
attorney fees for at least one party. Therefore, we reverse the
court of appeals and remand to that court with instructions to
remand the case to the district court for further proceedings.
BACKGROUND
¶2 John and Eunes Lonetti (the “Lonettis”) loaned
$1,780,600 to Reese’s Enterprises, Inc. (“REI”). The loan was

1 In addition to his claims against the Lonettis, Bilanzich
also made separate claims for relief against Jones, Waldo,
Holbrook & McDonough, the law firm that had represented him in
(continued...)
No. 20060017 2
evidenced by a promissory note and secured by a security
agreement and a trust deed in real property owned by the
corporation. The Lonettis and REI later entered into an
agreement modifying the original promissory note to account for
the outstanding principal, interest, and an additional loan of
$354,938. The modified promissory note held a balance of
$2,167,717. The Lonettis subsequently filed suit against REI to
foreclose their trust deed and collect on the note.
¶3 In an attempt to resolve REI’s legal and financial
woes, a representative of REI approached Bilanzich, proposing
that he execute a personal guaranty on the Lonetti loan and other
debts in exchange for an ownership interest in REI. Thereafter,
in order to settle the Lonetti suit, REI, the Lonettis, and
Bilanzich entered into a settlement agreement memorialized in a
document entitled “term sheet.” Among other things, the term
sheet provided that Bilanzich would place a personal guaranty of
the REI promissory note into escrow and that, upon the
satisfaction of the condition that REI obtain adequate financing,
the guaranty would be released to the Lonettis at a closing. The
term sheet specified that “[i]f financing is not obtained, the
closing will not occur, all items in escrow will be returned to
the party depositing them, and Lonetti will foreclose and realize
on security.”
¶4 In accord with the provisions of the term sheet,
Bilanzich signed a personal guaranty and placed it in escrow.
The Bilanzich guaranty included a unilateral provision that
granted to the Lonettis any “costs, expenses, and attorney’s fees
incurred in collection of the Note and realization of the
security.”
¶5 REI did not obtain adequate financing to satisfy the
conditions of the term sheet, and the corporation later filed for
bankruptcy. Despite this fact, the Bilanzich guaranty was
released from escrow to the Lonettis. The Lonettis subsequently
assigned the REI note, the deed of trust, and the Bilanzich
guaranty to their company, JDL Holdings L.C. (“JDL”).
¶6 Bilanzich filed this action in August 2000, seeking to
have the personal guaranty provided to the Lonettis declared
unenforceable due to the nonoccurrence of a condition precedent
to the guaranty.1 Bilanzich also sought a rescission of the

1 (...continued)
the settlement deal; D. Williams Ronnow, the individual lawyer
that had released the guaranty from escrow; Cambridge Capital
Group, Inc., a financial institution that had loaned money to
REI; and REI itself. During the suit’s complicated history,
additional claims and defendants were added until there were
twelve named defendants. We address only that portion of the
procedural history relevant to the present appeal.
2 The district court did not specify which rationale it used
to reject Bilanzich’s motion. The court of appeals, however,
interpreted the district court’s ruling as being based upon the
unenforceability of the guaranty rather than the existence of the
settlement agreement. Bilanzich v. Lonetti, 2005 UT App 522U,
para. 1. Because “we review the decision of the court of
appeals, not the trial court,” Li v. Enterprise Rent-A-Car Co. of
Utah, 2006 UT 80, ¶ 8, 150 P.3d 471, and because neither party
asserts that the court of appeals erroneously focused on the
enforceability of the guaranty, we confine our analysis to that
issue.
3 No. 20060017
guaranty and a claim of unjust enrichment against the Lonettis
and JDL. JDL then brought suit against Bilanzich, seeking to
recover on the guaranty. The JDL action was consolidated with
the Bilanzich case. In August 2003, Bilanzich filed a motion for
partial summary judgment against the Lonettis and JDL, which the
district court granted, holding that the failure of a condition
precedent set forth in the term sheet rendered the guaranty
unenforceable. Thereafter, Bilanzich agreed with the Lonettis
and JDL to dismiss his other claims in exchange for an agreement
not to appeal the judgment.
¶7 Bilanzich then filed a motion seeking his attorney fees
pursuant to Utah Code section 78-27-56.5 and the terms of the
guaranty. Bilanzich argued that this statute entitled him to
attorney fees because the guaranty allowed at least one party to
recover fees and because the litigation was based on that
document. The Lonettis and JDL opposed the motion for fees,
principally arguing that Bilanzich could not rely on a provision
for attorney fees found in a document that was ruled to be
unenforceable. The Lonettis and JDL also asserted that the
settlement agreement barred such a motion and that the fees
claimed by Bilanzich were unreasonable in light of the multiple
defendants and claims involved.
¶8 The district court denied Bilanzich’s motion for fees.2
Bilanzich appealed. The court of appeals affirmed the district
court on the basis of the common law rule that a party may not

3 Because the suit below involved the Lonettis as
individuals as well as their company JDL, our use of the term
“Lonettis” throughout the remainder of this opinion refers to
both John and Eunes Lonetti and JDL.
No. 20060017 4
“‘avoid [a] contract and, at the same time, claim the benefit of
the provision for attorney fees.’” Bilanzich v. Lonetti, 2005 UT
App 522U, paras. 4, 7 (quoting BLT Inv. Co. v. Snow, 586 P.2d
456, 458 (Utah 1978)). In so holding, the court of appeals
reasoned that the common law rule established in BLT Investment
survived the enactment of Utah Code section 78-27-56.5. Id.
para. 6.
¶9 Bilanzich subsequently petitioned for certiorari, which
we granted for the following issue: “Whether Utah Code Ann.
§ 78-27-56.5 allows an award of attorney fees pursuant to a
contract, where a party successfully claims the same contract is
unenforceable due to failure of a condition precedent.”
STANDARD OF REVIEW
¶10 The question presented to us requires an interpretation
of Utah Code section 78-27-56.5. Statutory interpretation is a
matter of law that we review for correctness. MacFarlane v.
State Tax Comm’n, 2006 UT 25, ¶ 9, 134 P.3d 1116. Consequently,
we cede no deference to the court of appeals.
ANALYSIS
¶11 Generally, attorney fees are awarded only when
authorized by contract or by statute. Fericks v. Lucy Ann Soffe
Trust, 2004 UT 85, ¶ 23, 100 P.3d 1200. But see Stewart v. Pub.
Serv. Comm’n, 885 P.2d 759, 782-83 (Utah 1994) (awarding fees
under this court’s equitable powers in an original proceeding
challenging a telephone rate increase where the petitioner acted
“as a private attorney general”). Bilanzich has no contractual
right to attorney fees because the fees provision within the
guaranty was unilateral, providing for an award of attorney fees
and costs only to the Lonettis3 in the event of a lawsuit.
Moreover, even if the contractual language had allowed Bilanzich
to recover fees and costs, under the common law, the invalidation
of the guaranty due to the failure of the condition precedent
necessarily invalidated the attorney fees clause contained

4 Although we did not grant certiorari on this issue,
Bilanzich also argues that the rule in BLT Investment is
inapplicable because the district court merely excused an
obligation contained in the guaranty, but did not void it
entirely. See Quealy v. Anderson, 714 P.2d 667, 673 (Utah 1986)
(Hall, C.J., dissenting) (“A condition precedent may qualify the
existence of an entire contract or only the performance of a
contractual duty.”). Consequently, he argues that the attorney
fees provision retains its force under the common law of
contract.
In the present case, however, the failure of the condition
precedent invalidated the entire guaranty and not just the
performance of a particular contractual duty. The condition that
REI obtain adequate financing was precedent to the delivery of
the guaranty document itself. Therefore, the failure of the
condition rendered the entire document unenforceable.
5 No. 20060017
therein.4 BLT Inv. Co. v. Snow, 586 P.2d 456, 458 (Utah 1978);
Quealy v. Anderson, 714 P.2d 667, 668-69 (Utah 1986).
¶12 Because Bilanzich cannot establish a contractual claim
to attorney fees, we next consider whether Utah Code section
78-27-56.5 grants authority to the district court to award
attorney fees and costs to Bilanzich. Under the statute,
[a] court may award costs and attorney’s fees
to either party that prevails in a civil
action based upon any promissory note,
written contract, or other writing executed
after April 28, 1986, when the provisions of
the promissory note, written contract, or
other writing allow at least one party to
recover attorney’s fees.
Utah Code Ann. § 78-27-56.5 (2002).
¶13 “When interpreting statutes, our primary goal is to
evince the true intent and purpose of the Legislature.” State v.
Martinez, 2002 UT 80, ¶ 8, 52 P.3d 1276 (internal quotation marks
omitted). The first step of statutory interpretation is to
evaluate the “best evidence” of legislative intent, namely, “the
plain language of the statute itself.” Id. (internal quotation
marks omitted). “When examining the statutory language we assume
the legislature used each term advisedly and in accordance with
its ordinary meaning.” Id. (internal quotation marks omitted).
¶14 The plain language of Utah Code section 78-27-56.5
provides that a court may award costs and attorney fees to a

5 Despite the fact that the Lonettis requested an award of
attorney fees from the district court, they claim in their
briefing that the terms of the guaranty did not grant them
attorney fees and that therefore Utah Code section 78-27-56.5
does not apply. They point to the language of the guaranty that
provides for “attorney fees incurred in collection of the Note
and realization of the security” and argue that because they were
merely attempting to enforce the guaranty, not to collect on the
underlying note, they had no contractual right to fees. This
attempt to draw such a fine distinction fails because it ignores
the fact that a personal guaranty does not exist in a vacuum.
The guaranty extends liability under the note, and an action to
enforce the guaranty is necessarily an attempt to collect on the
obligation under the note.
No. 20060017 6
prevailing party in a civil action if two main conditions are
met. First, the civil action must be “based upon any promissory
note, written contract, or other writing.” And second, “the
provisions of the promissory note, written contract, or other
writing” must “allow at least one party to recover attorney’s
fees.”
¶15 The first condition of the statute is met because the
Lonettis’ claim against Bilanzich was based entirely upon the
personal guaranty. Utah Code section 78-27-56.5 defines those
documents that may form the basis of a lawsuit under this section
very broadly. Any “promissory note, written contract, or other
writing” falls within the ambit of the statute so long as the
litigation is “based upon” that document. This first condition
requires only that a party to the litigation assert the writing’s
enforceability as basis for recovery; the statute’s plain
language does not require that the writing actually be
enforceable. Therefore, the litigation below meets the first
criterion of the statute because it was based upon the Lonettis’
assertion that the guaranty provided them with a legal right to
recovery.
¶16 The second condition of the statute is also met because
the guaranty provides for an award of attorney fees and costs to
the Lonettis.5 Although the guaranty itself was rendered
unenforceable by the failure of a condition precedent, the
language of the statute focuses on the provisions of the writing
rather than its legal effect. Under the statute, it is
immaterial that events outside of the writing rendered the
guaranty ineffectual because the provisions of the guaranty
“allow[ed] at least one party to recover attorney’s fees.” Thus,
under the clear terms of Utah Code section 78-27-56.5, a court
may award attorney fees and costs to Bilanzich as the prevailing

6 The Lonettis argue that Utah Code section 78-27-56.5
should not be interpreted to controvert the common law rule
established in BLT Investment absent a clearer legislative
mandate to do so. However, “[w]e have long held that where a
conflict arises between the common law and a statute or
constitutional law, the common law must yield.” Gottling v. P.R.
Inc., 2002 UT 95, ¶ 7, 61 P.3d 989 (internal quotation marks and
citation omitted). Additionally, the legislature has clearly
stated that Utah statutes that contradict the common law are not
to be interpreted narrowly:
The rule of common law that statutes in
derogation thereof are to be strictly
construed has no application to the statutes
of this state. The statutes establish the
laws of this state respecting the subjects to
which they relate, and their provisions and
all proceedings under them are to be
liberally construed with a view to effect the
objects of the statutes and to promote
justice.
Utah Code Ann. § 68-3-2 (2004). Thus, where the plain language
of a statute works a result contrary to the common law, the
legislature need not further clarify its intent for this court to
give effect to the statute’s plain meaning.
7 No. 20060017
party because the litigation was based on a writing that granted
attorney fees to at least one of the parties in the litigation.6
¶17 We note, however, that the language of the statute is
not mandatory but allows courts to exercise discretion in
awarding attorney fees and costs. Under the plain language of
Utah Code section 78-27-56.5, “[a] court may award costs and
attorney’s fees” (emphasis added), but is not required to do so.
In interpreting the Utah Arbitration Act, which contains a
similarly worded attorney fees provision, see Utah Code Ann.
§ 78-31a-126(3) (2002), we have held that the use of the word
“may” indicates that the court has discretion in awarding fees,
Paul deGroot Bldg. Servs., L.L.C. v. Gallacher, 2005 UT 20, ¶ 22,
112 P.3d 490; Buzas Baseball, Inc. v. Salt Lake Trappers, Inc.,
925 P.2d 941, 952-53 (Utah 1996). Because Utah Code section
78-27-56.5 provides no guidance as to when fees should be
awarded, district courts should look to the policies underlying
the statute in exercising this discretion. Paul deGroot Bldg.
Servs., 2005 UT 20, ¶¶ 22-23; Buzas Baseball, 925 P.2d at 953.
We pause to analyze these policies.
¶18 Utah Code section 78-27-56.5 was designed to “creat[e]
a level playing field” for parties to a contractual dispute.

7 The purpose behind Utah Code section 78-27-56.5 is
somewhat unique in comparison to other statutes that allow courts
to award attorney fees. For example, Utah Code section 78-27-56
allows district courts to award attorney fees in order to
discourage frivolous and bad faith litigation. Utah Code Ann.
§ 78-27-56 (2002) (awarding attorney fees to a prevailing party
if the losing party asserted claims or defenses that were
“without merit and not brought or asserted in good faith”).
Under this statute, courts should exercise their judgment in
awarding attorney fees in light of the merits of the case and the
intent of the party in bringing or defending the action. Still
Standing Stable, L.L.C. v. Allen, 2005 UT 46, ¶¶ 7, 12, 122 P.3d
556.
Unlike statutes such as Utah Code section 78-27-56, which
require courts to analyze the merits of the litigation and the
intent of the losing party to further the legislative purpose of
reducing frivolous and bad faith litigation, Utah Code section
78-27-56.5 does not require such an inquiry. Rather than
alleviating the burdens associated with meritless and bad faith
litigation, section 78-27-56.5 seeks to remedy the exposure to
uneven litigation risks created by contractual provisions. Even
good faith actions and defenses to actions implicate this policy.
No. 20060017 8
Anglin v. Contracting Fabrication Machining, Inc., 2001 UT App
341, ¶ 11, 37 P.3d 267. The statute levels the playing field by
allowing both parties to recover fees where only one party may
assert such a right under contract, remedying the unequal
allocation of litigation risks built into many contracts of
adhesion. In addition, this statute rectifies the inequitable
common law result where a party that seeks to enforce a contract
containing an attorney fees clause has a significant bargaining
advantage over a party that seeks to invalidate the contract.
The former could demand attorney fees if successful, while the
latter could not. Quealy, 714 P.2d at 672 (Zimmerman, J.,
concurring).
¶19 Consequently, in order to further the statute’s
purpose, the exposure to the risk of a contractual obligation to
pay attorney fees must give rise to a corresponding risk of a
statutory obligation to pay fees. In exercising their
discretion, therefore, district courts should award fees
liberally under Utah Code section 78-27-56.5 where pursuing or
defending an action results in an unequal exposure to the risk of
contractual liability for attorney fees.7
¶20 We stress that in furthering the policies behind Utah
Code section 78-27-56.5, however, courts may also inform their
decisions with other equitable principles. For example, in the

9 No. 20060017
spirit of leveling the playing field, courts should avoid using
this statute to expose one party to a disproportionate risk of
paying attorney fees that would result in a windfall to the other
party. District courts should also apply common sense principles
in determining the prevailing party, if any. See A.K. & R.
Whipple Plumbing & Heating v. Guy, 2004 UT 47, ¶ 11, 94 P.3d 270;
J. Pochynok Co. v. Smedsrud, 2005 UT 39, ¶¶ 9, 12, 116 P.3d 353.
¶21 Section 78-27-56.5’s use of the word “may” also
indicates that courts have broad discretion in applying equitable
principles in fixing the amount of any award of fees under the
statute. Although the statute does not specifically require that
the award of attorney fees and costs be reasonable, the district
court may exercise its discretion to impose such a requirement.
See R.T. Nielson Co. v. Cook, 2002 UT 11, ¶ 20, 40 P.3d 1119
(“The trial court has broad discretion in determining what
constitutes a reasonable fee . . . .” (internal quotation marks
and citation omitted)). Additionally, in cases where multiple
defendants are involved, such as this one, the district court may
limit the award of attorney fees to the losing party’s equitable
share of the total amount. We also note that should Bilanzich
ultimately prevail in recovering fees, the district court may
properly consider a request to award his attorney fees and costs
associated with his appeals. See First Sw. Fin. Servs. v.
Sessions, 875 P.2d 553, 556 (Utah 1994) (instructing the district
court to award reasonable attorney fees and costs incident to an
appeal pursuant to the attorney fee provision contained in Utah
Code section 57-1-32).
¶22 Finally, Bilanzich argues that this court should reject
the Lonettis’ remaining claim that the settlement agreement
barred Bilanzich from seeking fees. We decline to do so. It is
not the role of this court to resolve fact-sensitive claims that
are not encompassed within the question on which we granted
certiorari and have not been properly addressed in the courts
below. On remand, therefore, the district court should address
all remaining issues that were properly presented to it but not
resolved.
CONCLUSION
¶23 We hold that even though the guaranty is unenforceable,
Utah Code section 78-27-56.5 does allow Bilanzich to seek
attorney fees and costs. The statute grants the district court
discretion in awarding fees. Such discretion should be exercised
in accord with the legislative purpose behind the statute, as
well as other equitable principles. We therefore reverse the
court of appeals and remand this matter to that court with

No. 20060017 10
instructions to remand the case to the district court for further
proceedings consistent with this opinion.
---
¶24 Chief Justice Durham and Justice Durrant concur in
Justice Parrish’s opinion.
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WILKINS, Associate Chief Justice, dissenting:
¶25 The legal import of the district court’s determination
that the guaranty is a nullity is to prevent either party from
collecting attorney fees from the other based upon the guaranty.
I therefore agree with the result reached by the court of appeals
and would affirm.
¶26 Mr. Bilanzich brought suit seeking a declaration from
the district court that he had no liability under the guaranty.
It is the guaranty alone that determines his fate. He alleged,
and the district court found, that the guaranty had been placed
in escrow and was not to be delivered to the Lonettis until and
unless preconditions were met. He also alleged, and the district
court found, that the relevant precondition was not met, but that
the guaranty was mistakenly sent to the Lonettis anyway.
¶27 Mr. Bilanzich prevailed on his motion for summary
judgment before the district court because the guaranty never
took effect. To be of any legal consequence, the guaranty had to
have been “delivered” to the Lonettis in the legal sense.
Delivery of a document held in escrow upon conditions is not
legally delivered unless done with the authorization of the
guarantor. Mr. Bilanzich, as the guarantor on the document, had
restricted the authority of the escrow agent to deliver the
document on his behalf. The agent had no authority to deliver
the document as was done. The district court said as much. The
acquisition of the necessary loan was not a condition precedent
to the legal effectiveness of the guaranty, it was an unmet
condition precedent to the authority of the escrow agent to
deliver the guaranty to the Lonettis. The guaranty, had it been
properly delivered, contained no limitations relating to the loan
acquisition. On its face it is unconditional. The limitation
appears only in the escrow arrangement between the parties (the
“term sheet” upon which both rely), and addresses not the
obligation accruing to Bilanzich upon delivery of the guaranty,
but rather, the circumstances under which the unconditional
guaranty was to be delivered.

1 The same may be said for the dispute regarding the nature
and impact of the settlement between the parties prior to the
effort by Bilanzich to recover attorney fees and costs. That is,
even if the settlement between the parties did not prevent the
claim for fees and costs, the absence of benefit under the
guaranty and the statute accomplishes the same end.
11 No. 20060017
¶28 The facts in this case are more akin to a failure to
agree than a failure of bargained consideration expressed as a
condition precedent. It is as if the Lonettis found the guaranty
in the parking lot, and knowing the loan had not been acquired as
agreed, elected to keep the guaranty and treat it as binding on
Bilanzich anyway.
¶29 Both parties, at one time or another in these
proceedings, have claimed that the guaranty authorizes the
recovery of attorney fees by the Lonettis incurred in collecting
on the promissory note and deed of trust. By extension,
Mr. Bilanzich also claims that the guaranty itself provides for
attorney fees to the Lonettis. I do not agree. But even if it
did, it is of no consequence in this case.1
¶30 Having never been lawfully delivered, as is required
for a guaranty to be binding, any claimed benefit from the
attorney fees language in the guaranty never, as a matter of law,
accrued to the benefit of the Lonettis. The statutory basis upon
which Bilanzich relies for equitable award of his attorney fees
is thereby defeated as well, inasmuch as the guaranty must grant
fees to the Lonettis (if successful) in order for the statute to
extend the same to Bilanzich.
¶31 Utah Code section 78-27-56.5, as ably described in the
lead opinion, requires both “a civil action based upon” a
“promissory note, written contract, or other writing” and that
the document “allow at least one party to recover attorney’s
fees.” Given the dignity accorded promissory notes and written
contracts in the law, one might safely presume that not just any
old “writing” qualifies as an “other writing” worthy of the
statutory intervention. A writing of legal dignity in the nature
of promissory notes and written contracts must certainly have
been contemplated. The guaranty signed by Mr. Bilanzich in this
case is clearly of sufficient consequence to qualify.
¶32 However, for any “writing,” including a promissory note
or a written contract, to be of any legal consequence, it must be
given to the party claiming the benefit. Just as a guaranty
intended for one but mistakenly given to another cannot be
enforced by the recipient, a guaranty intended to be given only

No. 20060017 12
after the occurrence of an event that is given prematurely cannot
be enforced by anyone. To be legally effective delivery, the
delivery must have been intended by the executing party.
Authorizing another to deliver the document is sufficient.
However, when no such authorization has been given, a delivery
has not been effected. Factual circumstances may ameliorate this
result, as in, for example, when the recipient of the guaranty is
not aware of any defect in the delivery or authority and acts in
reliance thereon. Such is not the case here.
¶33 Just as a stolen promissory note cannot be enforced by
the thief, neither can a guaranty be enforced by one aware of
legally deficient delivery.
¶34 Had the Lonettis been unaware of the limitations on the
escrow agent’s authority to deliver the guaranty, or had they
been unaware of the condition regarding the loan set forth in the
“term sheet,” or had they been unaware the loan had not been
arranged at the time of closing as contemplated by the parties,
the result might well be different. If those were unresolved
issues of fact, a remand to resolve them would be in order.
However, there appears to be no dispute regarding these critical
facts.
¶35 Equity cannot revive that which has never lived. The
obligations of the guaranty executed by Mr. Bilanzich never
commenced legal life. As the district court correctly put it,
the guaranty is (and always was) a “nullity.” Neither party is
entitled to any benefit, or burden, from its stillborn terms.
The legislature did not address the question, and the existing
rule of law, as expressed in BLT Investment Co. v. Snow, 586 P.2d
456, 458 (Utah 1978), has not changed: One who successfully
establishes that no agreement exists between the parties cannot
then claim a purported benefit from it. Just as the attorney
fees provisions work both ways, so does the effect of
nullification.
¶36 At least, that is my opinion. Consequently, I would
affirm the court of appeals.
---
¶37 Justice Nehring concurs in Associate Chief Justice
Wilkins’ dissenting opinion.