Valley Electrical Consolidated, Inc. v. TFG-Ohio, LP et al

Filing 56

MEMORANDUM DECISION AND ORDER granting 44 TFGs Motion for Partial Summary Judgment; denying 48 VECs Motion for Partial Summary Judgment. Signed by Judge Jill N. Parrish on 2/8/2018. (jds)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
VALLEY ELECTRICAL CONSOLIDATED,
INC.,
Plaintiff,
v.
MEMORANDUM DECISION AND
ORDER GRANTING COUNTERCLAIM
PLAINTIFF’S MOTION FOR PARTIAL
SUMMARY JUDGMENT AND DENYING
PLAINTIFF’S MOTION FOR PARTIAL
SUMMARY JUDGMENT

TFG-OHIO, L.P. and TETRA FINANCIAL
GROUP, L.C.C.,
Defendants,
TFG-OHIO, L.P.,
Defendant and
Counterclaim Plaintiff,
v.

Case No. 2:16-cv-00751
District Judge Jill N. Parrish

VALLEY ELECTRICAL CONSOLIDATED,
INC.; EVETS ELECTRIC, INC.; and J.L.
ALLEN CO., LLC,
Counterclaim
Defendants.

Before the court are TFG-Ohio, L.P.’s (“TFG”) Motion for Partial Summary Judgment
(ECF No. 44) and Valley Electrical Consolidated, Inc.’s (“VEC”) Motion for Partial Summary
Judgment (ECF No. 48). For the reasons set forth below, the court GRANTS TFG’s Motion for
Partial Summary Judgment and DENIES VEC’s Motion for Partial Summary Judgment.
I.

INTRODUCTION

This is a contract case. VEC, as the lessee, and TFG, as the lessor, entered into a Master
Lease Agreement. The Master Lease provided for a Base Term of thirty-six months. It also

provided that the lease would extend for an additional twelve months unless VEC provided
written notice of its intent to elect a different end-of-term option at least 180 days before the end
of the Base Term. VEC failed to provide such notice. Consequently, TFG contends that VEC
was required to make twelve additional monthly rent payments. VEC admits that it has not made
any of the additional rent payments. But it argues that it was not required to do so for a variety of
reasons. The court is unconvinced by VEC’s arguments and therefore holds that VEC is liable
for breach of contract because it has failed to make any of the twelve monthly rent payments.
II.

UNDISPUTED FACTS

A. THE PARTIES
VEC is a construction solutions provider for oil and gas, industrial, and power generation
markets. TFG is in the business of leasing equipment and other property to lessees in the form of
finance leases. Generally, a finance lease is a “fixed-term lease used by a business to finance
capital equipment.” Finance Lease, Black’s Law Dictionary (10th ed. 2014). “The lessor’s
service is usually limited to financing the asset, and the lessee pays maintenance costs and taxes
and has the option of purchasing the asset at lease-end for a nominal price.” Id.
B. THE LEASE
On December 8, 2011, VEC, as the lessee, and TFG, as the lessor, executed the Master
Lease Agreement. Master Lease ¶ 1, ECF No. 44-1. Pursuant to the Master Lease, TFG leased to
VEC certain equipment and other property (the “Leased Property”). Master Lease ¶ 1. The
Leased Property is described in the Amended and Restated Schedule No. 001 to the Master
Lease (the “Lease Schedule”). Lease Schedule, ECF No. 44-5. The Lease Schedule and the
Master Lease are collectively referred to as the “Lease.” The purpose of the Lease was to fund
the cost of improvements and equipment for a VEC facility located in Ohio. See Spencer Dep.
62:18-63:13.
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The Lease Schedule provides that the Base Term of the Lease is thirty-six months. Lease
Schedule ¶ 4. The Base Term began on March 6, 2012, and ended on March 31, 2015. See
Master Lease ¶ 2; Lease Schedule ¶ 4. The Master Lease provides VEC with certain options
upon the conclusion of the Base Term:
19.

[VEC’S] END OF TERM OPTIONS

Upon the completion of the Base Term of any Lease, provided at least one
hundred eighty (180) days prior written notice is received by [TFG] from [VEC]
via certified mail, [VEC] shall irrevocably elect one the of the following options:
(i) purchase all, but not less than all, of the Leased Property for a price to be
agreed upon by [TFG] and any applicable Assignee and [VEC]; (ii) extend the
Lease for twelve (12) additional months at the rate specified on the respective
Schedule, or (iii) return the Leased Property to [TFG] at [VEC’s] expense to a
destination within the continental United States specified by [TFG] and terminate
the Schedule . . . . With respect to options (i) and (iii), each party shall have the
right in its absolute and sole discretion to accept or reject any terms of purchase or
of any new Schedule, as applicable. IN THE EVENT [TFG] AND [VEC] HAVE
NOT AGREED TO EITHER OPTION (i) OR (iii) BY THE END OF THE BASE
TERM, OR IF [VEC] FAILS TO GIVE WRITTEN NOTICE OF ITS
ELECTION VIA CERTIFIED MAIL AT LEAST ONE HUNDRED EIGHTY
(180) DAYS PRIOR TO THE TERMINATION OF THE BASE TERM, THEN
OPTION (ii) SHALL AUTOMATICALLY APPLY AT THE END OF THE
BASE TERM.
Master Lease ¶ 19.
In sum, VEC, so long as it provided 180-day prior written notice, could irrevocably elect
either of the three end-of-term options: (i) purchase all the Leased Property; (ii) extend the Lease
for twelve additional months; or (iii) return the Leased Property. See Master Lease ¶ 19. If,
however, VEC failed to provide the requisite notice, then a twelve-month extension would
automatically apply at the end of the Base Term. See Master Lease ¶ 19. The twelve-month
extension would also automatically apply if the parties were unable to agree on option (i) or (iii)
by the end of the Base Term. See Master Lease ¶ 19. With respect to option (i), purchase of the

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Leased Property, both parties had “absolute and sole discretion” to accept or reject any terms of
purchase. Master Lease ¶ 19.
The Master Lease defines an “Event of Default” to include, among other things, any
failure “to make any payment of rent . . . which remains unremedied for five (5) days.” Master
Lease ¶ 16(a)(1). Paragraph 17(a) of the Master Lease provides:
“Upon the occurrence of any Event of Default, [TFG] may, with or without the
giving of notice, do any one or more of the following: . . . (10) With or without
terminating the Lease, recover the Casualty Loss Value of the Leased Property as
of the rental payment date immediately preceding the date of Default.”
Master Lease ¶ 17(a).
The Casualty Loss Value of the Leased Property, as set forth in Exhibit B of the Master
Lease, is $219,582.00 for any date that was thirty-six or more months from the Commencement
Date of the Lease. Master Lease, Ex. B. Paragraph 17(c) of the Master Lease provides:
[TFG] shall be entitled to recover all costs and expenses incurred by [TFG] in
exercising any or all of the above-listed remedies, including without limitation . . .
reasonable attorney fees and court costs incurred in connection therewith or in
connection with any collection activities, negotiated settlement or otherwise
resulting or arising from [VEC’s] Default, and any indemnity, plus interest on all
of the above until paid (before and after judgment, if any) at the lesser of the rate
of twenty-four percent (24%) per annum or the highest rate permitted by law.
Master Lease ¶ 17(c).
The Master Lease also contains provisions regarding modification, waiver, integration,
and choice of law. With respect to modification, the Master Lease “may not be contradicted by
evidence of any alleged oral agreement and any change or modification must be in writing
signed by the parties hereto.” Master Lease ¶ 20(a) (emphasis removed). With respect to waiver,
“[a]ny waiver by [TFG] of any right or remedy must be in writing specifically identifying what is
being waived.” Master Lease ¶ 17(b). With respect to integration, the Lease is “the entire
agreement between the parties . . . and shall supersede all prior communications, representations,

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agreements and understandings, in any form, and there is no understanding or agreement
between the parties, oral or written, which is not set forth herein.” Master Lease ¶ 20(a). With
respect to choice of law, the Master Lease provides that it is to be “governed by and construed in
accordance with the laws of the State of Utah.” Master Lease ¶ 20(e) (emphasis removed).
C. THE SECURITY AGREEMENT
In connection with the Lease, the parties executed a Security Agreement. Security
Agreement ¶ 1, ECF No. 50-2. Pursuant to the Security Agreement, VEC granted to TFG a cash
security deposit in the amount of $137,238.00, twenty-five percent of the amount funded under
the Master Lease. See Lease Schedule ¶ 9; Security Agreement ¶ 3. Neither the Lease Schedule
nor the Security Agreement set a date on which TFG was required to return the security deposit
to VEC.
Between March 2013 and November 2014, Rick Razecca, a TFG National Account
Executive, and Brenda Spencer, VEC’s then Chief Financial Officer, communicated by email
and over the telephone regarding the release of the security deposit. See ECF No. 51-1 at 10-26.
On April 10, 2014, the parties executed a Partial Collateral Release (the “First Collateral
Release”). First Collateral Release, ECF No. 46-1 at 15-16. Pursuant to the First Collateral
Release, TFG released $45,769.30 to VEC. See First Collateral Release ¶ 1. By executing the
First Collateral Release, VEC acknowledged and ratified that “the Security Agreement and the
Lease shall remain in full force and effect without change.” First Collateral Release ¶¶ 2-3.
On November 11, 2014, the parties executed another Partial Collateral Release
Agreement (the “Second Collateral Release”). Second Collateral Release, ECF No. 46 at 20-21.
Pursuant to the Second Collateral Release, TFG released to VEC the remainder of the security
deposit, $91,469.30. See Second Collateral Release ¶ 1. With this second release, TFG released
the entire security deposit, $137,238.00, before the end of the Base Term. Spencer Decl. ¶¶ 8, 10.
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By executing the Second Collateral Release, VEC again acknowledged and ratified that “the
Security Agreement and the Lease shall remain in full force and effect without change.” Second
Collateral Release ¶¶ 2-3.
D. VEC FAILS TO PROVIDE TIMELY NOTICE
Because the Base Term of the Lease ended on March 31, 2015, VEC had to give written
notice of its end-of-term election on or before October 2, 2014 to satisfy the written-notice
requirement. See Master Lease ¶ 19. VEC did not give notice of its end-of-term election on or
before October 2, 2014. Spencer Dep. 59:9-12.
On January 8, 2015, more than three months after the written-notice deadline, Mr.
Razecca emailed Ms. Spencer. ECF No. 51-1 at 29. Mr. Razecca wrote, “I understand we have
not received your notice [to elect an end-of-term option]; [my supervisor, Greg Emery,] asked
me to send you information as to what we typically receive from clients.” ECF No. 51-1 at 29.
Mr. Razecca went on to write, “On your letter head [sic], simply state what is intended at the end
of the term, 1. Purchase, 2. Extend or 3. Return.” ECF No. 51-1 at 29. Ms. Spencer responded by
email the next day. ECF No. 51-1 at 31. She attached to the email a letter in which she wrote that
VEC “intends to exercise its option to (i) purchase all, but not less than all of the leased
[property] for a price to be agreed upon by [TFG].” ECF No. 51-1 at 32.
During the next two weeks, Ms. Spencer and Mr. Razecca exchanged a number of emails.
On January 13, Ms. Spencer asked whether TFG received a hardcopy of the letter and what the
next steps were. ECF No. 51-1 at 35. On January 14, Mr. Razecca responded that VEC received
the letter that morning. ECF No. 51-1 at 34. On January 19, Ms. Spencer asked whether there
was “[a]ny further follow up.” ECF No. 51-1 at 34. Two days later, on January 21, Mr. Razecca
wrote that Mr. Emery was out of the office and that “[Mr. Emery] would be in touch . . . if he

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needs anything else.” ECF No. 51-1 at 34. This ended the exchange between Ms. Spencer and
Mr. Razecca, and the parties did not communicate in writing for close to two months.
E. PAYOFF NEGOTIATIONS
On March 20, 2015, Mr. Emery emailed Ms. Spencer. ECF No. 51-1 at 37. Mr. Emery
wrote, “[a]s per our conversation, attached is the payoff letter and below is the breakdown.” ECF
No. 51-1 at 37. Upon receipt of the payoff, VEC’s obligations under the Lease would be deemed
satisfied and TFG would transfer its interest in the Leased Property to VEC. ECF No. 51-1 at 38.
The total payoff was comprised of: (1) a residual payoff of $219,582.00; (2) six extension
payments, totaling $92,817.18; and (3) taxes in the amount of $22,131.14. ECF No. 51-1 at 37.
Thus, the total payoff amount was $334,530.32. ECF No. 51-1 at 38.
In internal emails, Ms. Spencer and other VEC employees discussed how to respond to
the payoff letter. See ECF No. 47-6 at 2-3. In one email, Ms. Spencer wrote:
If we went by the contract[,] the extension would be 12 months[.] . . . [TFG] is
requesting a 6 month extension because we were late with the notice[.] . . . Feels
if April rent not paid[,] [TFG] will enforce the contract[.] . . . Our payoff to them
needs to have two components: Residual Value [and] Extension due to late
notice[.]
ECF No. 47-6 at 2. In a subsequent internal email, Ms. Spencer wrote, “I want to confirm that we
are not going to pay the April payment.” ECF No. 47-6 at 3.
F. VEC STOPS MAKING RENT PAYMENTS
VEC never accepted the terms of the payoff letter. See Greenwell Decl. ¶ 7. VEC has not
made any monthly rental payments—or any payments at all on the Lease—since April 1, 2015.
Greenwell Decl. ¶ 7. VEC continues to use the Leased Property, and it has made no effort to
return or stop using the Leased Property. Ferry Dep. 7:9-8:2.

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G. PROCEDURAL BACKGROUND
On December 10, 2015, VEC filed a complaint against TFG. Compl., ECF No. 1-1. The
complaint contains three causes of action. First, VEC alleges that TFG breached the Master
Lease by “failing and refusing to agree upon a price for the Leased Property and for failing to
sell the Leased Property to VEC for its fair value.” Compl. ¶ 13. Second, VEC alleges that TFG
breached the “implied covenant of good faith and fair dealing by failing and refusing to agree
upon a price for the Leased Property.” Compl. ¶ 17. Third, VEC seeks a declaration that that its
only obligation under the Master Lease “is to pay the fair value of the Leased Property and the
fair value of the Leased Property is its appraised value.” Compl. ¶ 22. VEC has moved for partial
summary judgment on its claims for breach of contract and breach of the implied covenant of
good faith and fair dealing.
In response to VEC’s complaint, TFG brought multiple causes of action against VEC and
other counterclaim defendants. Countercl. ¶¶ 49-118. TFG has moved for partial summary
judgment on its First Cause of Action, breach of contract. Countercl. ¶¶ 49-53. Under the First
Cause of Action, TFG alleges that VEC has “breached its obligations under the Lease by failing
to make all payments due under the Lease.” Countercl. ¶ 52. TFG alleges that it has suffered
damages in excess of $246,382.89 as a result of the breach. Countercl. ¶ 53.
III.

ANALYSIS

A. MOTION STANDARD
Summary judgment is appropriate when “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The
movant bears the initial burden of demonstrating the absence of a genuine dispute of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has met this burden, the
burden shifts to the nonmoving party to “set forth specific facts showing that there is a genuine issue

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for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To do so, the nonmoving party
“must do more than simply show that there is some metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
When the nonmoving party bears the burden of proof at trial on a dispositive issue, that party
must “go beyond the pleadings” and “designate specific facts” so as to “make a showing sufficient to
establish the existence of an essential element to that party’s case.” Celotex, 477 U.S. at 322. “The
plain language of Rule 56(c) mandates the entry of summary judgment . . . against a party who fails
to make a showing sufficient to establish the existence of an element essential to that party’s case,
and on which that party will bear the burden of proof at trial.” Id. As such, summary judgment is not
a “disfavored procedural shortcut” but rather “an integral part of the Federal Rules as a whole” that is
designed “to secure the just, speedy and inexpensive determination of every action.” Id.

B. TFG’S BREACH OF CONTRACT COUNTERCLAIM
The court first addresses TFG’s motion for partial summary judgment, which seeks
summary judgment on TFG’s breach-of-contract counterclaim. “The elements of a prima facie
case for breach of contract are (1) a contract, (2) performance by the party seeking recovery, (3)
breach of the contract by the other party, and (4) damages.” Bair v. Axiom Design, L.L.C., 20
P.3d 388, 392 (Utah 2001). 1
Here, it is undisputed that the parties formed a valid contract, the Lease. And it is
undisputed that the Lease provides for liquidated damages in the event of breach. VEC does,
however, contend that TFG has failed to establish the second and third elements, performance

1

Here, the Master Lease provides that “the Master Lease, the lease documents, and the legal
relationship between the parties shall in all respects be governed by and construed in accordance
with the laws of the state of Utah.” Master Lease ¶ 20(e). Consequently, Utah law governs all of
the claims at issue because “questions involving the extent of contractual obligations are
determined by the law chosen by the parties if they have made an effective choice.” Am. Nat’l
Fire Ins. Co. v. Farmers Ins. Exch., 927 P.2d 186, 188 (Utah 1996) (citation omitted).

9

and breach. Thus, the court first addresses whether TFG adequately performed under the Lease
and then turns to the question of whether VEC breached the terms of the Lease.
1. Performance
It is undisputed that TFG provided the funding required by the Lease and that VEC still
possesses the Leased Property. Despite this, VEC argues that TFG has not adequately performed
under the Lease. Specifically, VEC contends that TFG materially breached the Lease when it (1)
failed to negotiate a purchase price for the Leased Property in good faith and (2) did not return
VEC’s security deposit after VEC made twelve monthly payments.
a. Whether TFG Materially Breached the Lease by Failing to Negotiate a Purchase Price in
Good Faith
VEC argues that TFG materially breached the Lease by failing to negotiate a purchase
price for the Leased Property in good faith. Specifically, VEC contends that TFG was required to
negotiate in good faith as soon as VEC put TFG on notice that VEC intended to purchase the
Leased Property. This argument fails for three reasons.
First, setting aside VEC’s other affirmative defenses, TFG was not required to negotiate
a purchase price for the Leased Property. As discussed above, VEC could elect to purchase the
Leased Property only if it gave notice of its intent to do so 180 days before the end of the Base
Term. Because VEC never provided such notice, the Lease automatically extended for an
additional twelve months at the end of the Base Term. TFG had no obligation to negotiate a
purchase price because VEC failed to give the required notice. Thus, it was impossible for TFG
to breach the implied covenant by negotiating in bad faith because it was not obligated to
negotiate a purchase price.
Second, even if TFG were required to negotiate a purchase price, both parties had
“absolute and sole discretion to accept or reject any terms of purchase.” In essence, VEC asks the

10

court to use the implied covenant of good faith and fair dealing to impose an obligation on
TFG—to negotiate a reasonable purchase price—that is inconsistent with the plain language of
the Master Lease. But the implied covenant cannot be used to “nullify a right granted by contract
to one of the parties or to require a party vested with a contract right to exercise that right in a
manner contrary to that party’s legitimate self-interest.” Brehany v. Nordstrom, Inc., 812 P.2d
49, 55 (Utah 1991). Consequently, TFG had absolute and sole discretion to reject VEC’s terms
of purchase if doing so was consistent with TFG’s legitimate self-interest. 2 Consequently, VEC’s
argument based on the implied covenant fails because it is inconsistent with the plain language
of the Master Lease.
Third, even if TFG was required to negotiate a purchase price, there is no evidence that it
negotiated in bad faith. Based on the language of the Master Lease, VEC must show that TFG
exercised its “absolute and sole discretion” to “reject any terms of purchase” in bad faith. TFG
offered to sell the Leased Property to VEC and to relieve VEC of its obligations under the Lease

2

VEC also contends that it had a right to purchase the Leased Property for ten percent of the
amount financed under the Lease. Like VEC’s other arguments, this one too is contradicted by
the plain language of the Master Lease and the record. VEC contends that, during negotiations,
Mr. Razecca led Ms. Spencer to believe that the Leased Property could be purchased for ten
percent of the amount financed under the Lease. But VEC does not have any evidence of this
“agreement.” VEC relies on Ms. Spencer’s declaration, which provides, “it was my
understanding that, at the end of the lease, the residual value of the property would be calculated
at an amount not to exceed 10% of the total amount financed.” Spencer Decl. ¶ 18 (emphasis
added). But there is nothing in Ms. Spencer declaration indicating that VEC and TFG agreed that
VEC could purchase the Leased Property for ten percent of the amount financed. Moreover, even
if there were such an agreement, the Master Lease contains a merger clause, which provides that
the Lease is “the entire agreement between the parties . . . and shall supersede all prior
communications, representations, agreements and understandings, in any form, and there is no
understanding or agreement between the parties, oral or written, which is not set forth herein.”
Master Lease ¶ 20(a). Thus, VEC cannot rely on any alleged oral agreement reached prior to the
execution of the Master Lease. Finally, the Master Lease speaks directly to the issue of purchase
price, providing that the price is “to be agreed upon” by the parties. Master Lease ¶ 19. If VEC
wanted the right to purchase the Leased Property for ten percent of the amount financed, it
should have included that term in the Master Lease.

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for $334,530.32. After receiving this offer, Ms. Spencer wrote in an email, “I believe the
negotiating starts now.” ECF No. 47-5 at 2. Yet there is no evidence that Ms. Spencer (or anyone
else at VEC) ever responded to TFG’s offer. Instead, it appears that VEC decided to litigate
rather than negotiate.
For the reasons set forth above, the court concludes that VEC has failed to show that TFG
materially breached the implied covenant by failing to negotiate a purchase price in good faith.
TFG was not required to negotiate a purchase price, and even if it were, it had absolute and sole
discretion as to the purchase price it was willing to accept. Moreover, VEC has no evidence that
TFG exercised this discretion in bad faith. Accordingly, the court concludes that VEC’s
performance was not excused based on TFG’s alleged failure to negotiate a purchase price in
good faith.
b. Whether TFG Materially Breached the Lease by Failing to Release VEC’s Security
Deposit
VEC contends that TFG materially breached the Lease by failing to release VEC’s
security deposit after VEC made twelve monthly rent payments. 3 In support of this, VEC argues
that, during the negotiation of the Master Lease, Mr. Razecca represented both orally and in
writing that TFG would return VEC’s security deposit in full after VEC made twelve monthly
lease payments. Spencer Decl. ¶ 5.
A material breach includes “a failure of performance which ‘defeats the very object of the
contract’ or ‘[is] of such prime importance that the contract would not have been made if default
in that particular had been contemplated.’” Polyglycoat Corp. v. Holcomb, 591 P.2d 449, 451
(Utah 1979). “The law is well settled that a material breach by one party to a contract excuses

3

At oral argument, counsel for VEC suggested that VEC was abandoning this argument.
Nevertheless, the court addresses its merits.

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further performance by the nonbreaching party.” Holbrook v. Master Protection Corp., 883 P.2d
295, 301 (Utah Ct. App. 1994) (quoted in Eggett v. Wasatch Energy Corp., 94 P.3d 193, 199
(Utah 2004)).
The right to terminate for material breach can be waived if the party having the right
elects not to and continues to receive the benefits of performance from the breaching party. 23
Williston on Contracts 63:9 (4th ed.); see also In re Estate of Flake, 71 P.3d 589, 599 (Utah
2003) (quoting Soter’s, Inc. v. Desert Fed. Sav. & Loan Ass’n, 857 P.2d 935, 937 (Utah 1993))
(“A waiver is the intentional relinquishment of a known right. To constitute a waiver, there must
be an existing right, benefit, or advantage, a knowledge of its existence, and an intention to
relinquish it. [The relinquishment] must be distinctly made, although it may be express or
implied.”).
Here, VEC’s security-deposit argument fails for three reasons. First, TFG was not
contractually obligated to return the security deposit after VEC made twelve monthly payments.
The parties’ final agreement does not provide for an early release of the security deposit. The
Lease Schedule provides:
Security Deposit: As additional security for the financing provided under this . . .
Lease Schedule, [VEC] shall provide (or [TFG] shall hold back from any funding)
a Security Deposit in the amount of $137,238.60, to be collected (or held back by
[TFG] from any funding) prior to or in connection with any lease financing
provided hereunder, and to be held in an instrument acceptable to [VEC].
Lease Schedule ¶ 9. If VEC wanted the security deposit released before the end of the Lease, it
should have negotiated for that term in the Lease Schedule. 4 It did not. There is nothing in the

4

VEC points to an email exchange between Mr. Razecca and Ms. Spencer to support its claim
that TFG was required to release the security deposit after VEC made twelve monthly rent
payments. See ECF No. 46-1 at 4-9. In the emails, Mr. Razecca represents that the security
deposit would be returned after twelve monthly payments. See ECF No. 46-1 at 4-9. But this
exchange occurred before the parties executed the Lease. And the Lease, which does not provide
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Lease Schedule, or the Master Lease, that provides for the release of the security deposit before
the end of the Lease. Accordingly, the court concludes that TFG did not breach the Lease when it
failed to return the security deposit after VEC made twelve monthly rent payments.
Second, even assuming that TFG breached, VEC has failed to show that the breach was
material because it has not identified any damages flowing from the alleged breach. VEC
contends that TFG breached by failing to return the security deposit in a timely manner. But
VEC does not identify any damages flowing from the alleged breach. TFG released the security
deposit in 2014, before the end of the Base Term. There is no evidence whatsoever that the
alleged breach “defeat[ed] the very object” of the Lease: VEC possessed the Leased Property for
the entirety of the Base Term and it received the security deposit before the Base Term ended.
Thus, even assuming that TFG breached, VEC has failed to show that the alleged breach was
material because no reasonable fact finder, based on the record, could conclude that the breach
“defeat[ed] the very object” of the Lease.
Third, even assuming that TFG materially breached, VEC cannot use this as a excuse for
non-performance because, by continuing performance, it waived its right to terminate the Lease.
TFG, according to VEC, materially breached the Lease in April 2013 by failing to return VEC’s
security deposit after VEC made twelve monthly rent payments. But instead of terminating the
Lease then, VEC continued to perform for an additional twenty-four months. VEC accepted the
benefits of the Lease, and it did not assert the alleged breach as grounds for recession until after
this action commenced—years after the alleged breach. In fact, after TFG allegedly materially
breached, VEC executed the First Collateral Release and the Second Collateral Release. In both
for an early release of the security deposit, is “the entire agreement between the parties . . . and
shall supersede all prior communications, representations, agreements and understandings, in any
form, and there is no understanding or agreement between the parties, oral or written, which is
not set forth herein.” Master Lease ¶ 20(a).

14

documents, VEC acknowledged and ratified that the Security Agreement and the Lease “shall
remain in full force and effect without change.” Consequently, the court concludes that, even if
TFG materially breached, VEC waived its right to terminate the Lease because it later
acknowledged and ratified that the Security Agreement and the Lease remained in full force and
effect, and it continued to perform for an additional twenty-four months. See Longenecker v.
Brommer, 368 P.2d 900, 903 (Wash. 1962) (right to terminate was waived by party that
“continued to accept the benefit of [other party’s] performance and did not assert the breach as a
grounds for rescission of the contract until this action was instituted.”). 5
In sum, VEC has failed to show that TFG materially breached the Lease by failing to
return the security deposit after VEC made twelve monthly payments. Even if it could, VEC
waived its right to terminate the Lease because it continued to perform under the Lease for two
years after the alleged breach. Consequently, the court concludes that VEC’s performance was
not excused by TFG’s alleged failure to return the security deposit after twelve monthly
payments.
c. TFG Adequately Performed Under the Lease
For the reasons set forth above, the court concludes that TFG adequately performed under
the Lease. TFG provided the funding required under the Lease and VEC still possesses the
Leased Property. Moreover, VEC has failed to show that TFG materially breached the Lease by
failing to negotiate a purchase price in good faith or by not returning the security deposit after
VEC made twelve monthly payments.

5

VEC’s new-found defense is also inconsistent with its complaint. In its complaint, VEC asks
for “a declaration that its only obligation under the Master Lease Agreement is to pay the fair
value of the Leased Property.” Compl. ¶ 22. Nowhere in the complaint, not even in the
alternative, does VEC ask the court to declare that its performance was excused based on TFG’s
failure to return the security deposit.

15

2. Breach
TFG contends that VEC breached the Lease because it failed to make any of the twelve
additional monthly rent payments. VEC admits that it has not made those payments. But it
contends that it was not required to do so because TFG waived its right to extend the Lease for
twelve additional months. VEC also argues that it was not required to make any of the additional
rent payments because it elected to purchase the Leased Property, as opposed to extend the
Lease.
a. Whether TFG Waived Its Right to Enforce the Twelve-Month Extension
VEC contends that it was not required to make additional rent payments because TFG
impliedly waived its right to enforce the twelve-month extension. In support of this, VEC points
to an email from Mr. Razecca to Ms. Spencer. In the email, Mr. Razecca wrote, “I understand we
have not received your notice [to elect an end-of-term option]; Greg [Emery] asked me to send
you information as to what we typically receive from clients.” Mr. Razecca also wrote, “On your
letter head [sic], simply state what is intended at the end of the term, 1. Purchase, 2. Extend or 3.
Return.” For further support, VEC points to Ms. Spencer’s declaration, which provides, “Rick
Razecca represented to me that, although the notice was late, he did not believe this would be an
issue.” Spencer Decl. ¶ 13.
“The exercise of an option requires the affirmative performance of an option according to
its specific terms.” Geisdorf v. Doughty, 972 P.2d 67, 70 (Utah 1998). But “it is generally held
that a lessor may waive strict compliance with option provisions.” Id. at 71. “Waiver requires
three elements: (1) an existing right, benefit, or advantage; (2) knowledge of its existence; and
(3) an intention to relinquish the right.” Soter’s, 857 P.2d at 940. “[A]ny waiver must be
distinctly made, although it may be express or implied.” Geisdorf, 972 P.2d at 72 (quoting
Soter’s, 857 P.2d at 940).
16

Because a party must strictly comply with an option provision, “it logically follows that
that a stricter standard is necessary for the waiver of option requirements than that which is
required for waiver of bilateral contract provisions.” Id. Accordingly, trial courts must be
“especially careful in their examination of the evidence in questions of waiver and option
performance.” Id. Moreover, “courts should be cautious in finding implied waiver on the part of
an optionor unless the totality of the circumstances demonstrates an unambiguous intent to waive
the strict compliance required to exercise an option.” Id. (footnote omitted).
Here, VEC has failed to show that a reasonable fact finder could conclude that TFG
unambiguously indicated that it intended to waive strict compliance with the written-notice
provision (and thus its right to enforce the twelve-month extension). Mr. Razecca informed Ms.
Spencer that TFG had not received VEC’s end-of-term election, and he provided an example of
what VEC could send to provide notice. At best, the email suggests that TFG considered whether
to waive strict compliance with the written-notice requirement. Perhaps TFG would have waived
the requirement if VEC elected to return the Leased Property, as opposed to purchase it. Or
perhaps VEC may have indicated that it intended to elect the twelve-month extension. In any
event, the email does not evidence an unambiguous intent to waive the written-notice
requirement (and thus the twelve-month extension).
VEC’s reliance on Ms. Spencer’s declaration further undermines its argument. VEC cites
Ms. Spencer’s declaration for the proposition that “Razecca represented to Spencer that late
notice would not be an issue.” ECF No. 46 at 17 (emphasis added). But this is not what the
declaration says. It provides, “Rick Razecca represented to me that, although the notice was late,
he did not believe this would be an issue.” Spencer Decl. ¶ 13 (emphasis added). There is an
important difference between Mr. Razecca saying that “late notice would not be an issue” and

17

him saying “he did not believe [late notice] would be an issue.” The former indicates an
unambiguous intent to waive the written-notice deadline—the latter does not. Thus, VEC, in
misrepresenting its former CFO’s declaration, highlights the fact that there was ambiguity as to
whether late notice was an issue.
Whatever Mr. Razecca initially believed, by March 2015, TFG made clear to VEC that
late notice was an issue. TFG proposed terms on which VEC could buy out the Lease. The terms
included six extension payments, totaling $92,817.18. Notably, VEC did not protest that TFG
had waived its right to enforce the twelve-month extension. Instead, Ms. Spencer and other VEC
employees brainstormed alternative payoff amounts. Ms. Spencer even wrote, “Our payoff to
them needs to have two components: Residual Value [and] Extension due to late notice.”
(emphasis added). VEC’s reaction to the payoff letter shows that VEC did not believe that TFG
had waived the written-notice requirement. In fact, Ms. Spencer appears to concede that TFG
had the right to enforce the twelve-month extension.
Finally, the waiver argument is undermined by the plain language of the Master Lease.
The Master Lease provides that “[a]ny waiver by [TFG] of any right or remedy must be in
writing specifically identifying what is being waived.” Master Lease ¶ 17(b) (emphasis added).
Although a no-waiver clause is not dispositive on the issue of whether a party waived a right, it
does constitute evidence that a party does not intend to waive its right to strict performance.
Living Scripture, Inc. v. Kudlik, 890 P.2d 7, 10 (Utah 1995) (cited in ASC Utah, Inc. v. Wolf
Mountain Resorts, L.C., 245 P.3d 184, 195-96 (Utah 2010)). Here, the no-waiver clause supports
the conclusion that no reasonable fact finder could conclude that TFG intended to waive its right
to enforce the twelve-month extension because the alleged waiver—Mr. Razecca’s email—did
not “specifically identify[] what [was] being waived.”

18

In sum, the court concludes that VEC has failed to show that a reasonable fact finder
could conclude that TFG waived its right to strict performance of the written-notice requirement
(and thus its right to enforce the twelve-month extension). At best, the evidence shows that TFG
considered waiving the written-notice requirement. Consequently, the court concludes that
VEC’s obligation to make additional rent payments was not excused based on TFG’s alleged
waiver.
b. Whether VEC Breached the Terms of the Lease
VEC contends that TFG has failed to show that VEC breached the terms Lease. VEC
argues that it was not obligated to pay rent for twelve additional months because it provided
written notice of its intent to purchase the Leased Property. According to VEC, TFG could not
extend the Lease for twelve months because VEC provided notice of its intent to purchase the
Leased Property before the end of the Base Term. But this argument is inconsistent with the plain
language of the Master Lease.
“If the language within the four corners of the contract is unambiguous, the parties’
intentions are determined from the plain meaning of the contractual language, and the contract
may be interpreted as a matter of law.” WebBank v. Am. Gen. Annuity Serv. Corp., 54 P.3d 1139,
1145 (Utah 2002) (quoting Cent. Fla. Invs., Inc. v. Parkwest Assocs., 40 P.3d 599, 605 (Utah
2002)). Only when the language within the four corners of the contract is ambiguous can a court
consider extrinsic evidence to determine the intent of the parties. Id. A contract term or provision
is ambiguous if it is “capable of more than one reasonable interpretation because of ‘uncertain
meanings of terms, missing terms, or other facial deficiencies.’” Id. (quoting SME Indus., Inc. v.
Thompson, Ventulett, Stainback & Assocs., Inc., 28 P.3d 669, 675 (Utah 2001)).
Here, setting aside VEC’s affirmative defenses, TFG had every right to enforce the
twelve-month extension at the end of the Base Term. The Master Lease provides, “Upon the
19

completion of the Base Term of any Lease, provided at least one hundred eighty (180) days
prior written notice is received by [TFG] from [VEC] via certified mail, [VEC] shall irrevocably
elect one of the following options . . . .” Master Lease ¶ 19 (emphasis added). Thus, VEC’s right
to elect an end-of-term option was conditioned on it giving notice of its election 180 days before
the end of the Base Term. Nothing in the Master Lease allows VEC to elect an end-of-term
option after the written-notice deadline. Therefore, any election after the written-notice deadline
was ineffective.
The Master Lease unambiguously provides for what happens if VEC fails to elect an endof-term option: “If [VEC] fails to give written notice of its election via certified mail at least one
hundred eighty (180) days prior to the termination of the Base Term, then [a twelve-month
extension] . . . automatically app[lies] at the end of the Base Term.” Master Lease ¶ 19 (emphasis
removed). 6 In short, the plain language of the Master Lease provides for an automatic twelvemonth extension if VEC fails to give the required notice. 7

6

VEC contends that the Master Lease is ambiguous because of “contradictory terms” concerning
VEC’s end-of-term responsibilities. The court disagrees. The Master Lease provides that the
twelve-month extension would automatically apply if: (1) the parties did not agree to either
option (i) or (iii) before the end of the Base Term; or (2) VEC failed to give written notice of its
election via certified mail at least 180 days before the termination of the Base Term. Master
Lease ¶ 19. VEC could have given the requisite notice, but the parties still could have failed to
agree to option (i) or (iii) before the end of the Base Term. In that event, the twelve-month
extension would still apply. To avoid the twelve-month extension, VEC needed to (1) provide
notice of its intent to purchase the Leased Property at least 180 days prior to the termination of
the Base Term and (2) reach an agreement with TFG concerning the purchase price. The Master
Lease also gives TFG “absolute and sole discretion to accept or reject any terms of purchase.”
Master Lease ¶ 19. Thus, the Master Lease was drafted in a way that TFG could have rejected
any offer made by VEC, thereby locking VEC into a twelve-month extension. See Master Lease
¶ 19. In essence, TFG had “absolute and sole discretion” to extend the Lease for an additional
twelve months. VEC simply has a case of lessee’s remorse—its understanding of how the Lease
operated was, and is, wholly inconsistent with the actual terms of the Lease.
7

Ms. Spencer testified that this was consistent with her understanding of the Master Lease. She
was asked, “So did you understand at the time that this lease was entered into that if an election
was not made by certified mail at least 180 days before the end of the base term, that it would
20

Because VEC failed to give the required notice, 8 TFG was entitled to enforce the twelvemonth extension. VEC admits that it has not made any of the additional rent payments, which
resulted in an Event of Default. See Master Lease ¶ 16(a)(1). Accordingly, the court concludes
that VEC breached the Lease by failing to make any of the additional rent payments.
3. Damages
Under its breach-of-contract claim, TFG seeks damages in the amount of $219,582.00
plus pre-judgment and post-judgment interest as specified in the Master Lease. 9 VEC has
challenged neither this amount nor the provision of the Master Lease that provide for it. The
Master Lease provides that TFG may, upon the occurrence of any Event of Default, “[w]ith or
without terminating the Lease, recover the Casualty Loss Value of the Leased Property.” Master
Lease ¶ 17(a). The Master Lease defines an “Event of Default” to include, among other things,
any failure “to make any payment of rent . . . which remains unremedied for five (5) days.”
Master Lease ¶ 16(a)(1).
Here, an Event of Default occurred on April 6, 2015, when VEC’s failure to make a
monthly rental payment went unremedied for five days. Based on this, the Casualty Loss Value
of the Leased Property is $219,582.00. See Master Lease, Ex. B. TFG is entitled to pre-judgment
interest on this amount at a rate of twenty-four percent per annum. See Master Lease ¶ 17(c). 10

automatically extend for another 12 months?” Spencer Dep. 45:1-5. She answered, “I’m sure if
that’s what I read, that’s what I understood.” Spencer Dep. 45:8-9.
8

Ms. Spencer testified that she “knew [the notice] was late.” Spencer Dep. 52:10-12.

9

At oral argument, counsel for TFG represented that TFG was seeking this amount, plus
attorneys’ fees and costs. Counsel also represented that, upon receipt of this amount, TFG would
relinquish to VEC all rights to the Leased Property, thereby resolving the entire dispute between
the parties.
10

Paragraph 17(c) provides for post-judgment interest “at the lesser of the rate of twenty-four
percent (24%) per annum or the highest rate permitted by law.” Utah Code Ann. § 15-1-1
provides that “parties to a lawful contract may agree upon any rate of interest for the loan or
21

Consequently, TFG is entitled to damages in the amount of $369,249.09. 11 TFG is also entitled
to reasonable attorneys’ fees and costs incurred in connection with this action. See Master Lease
¶ 17(c). TFG must seek any attorneys’ fees and costs within fourteen days of the date of this
order. See DUCivR 54-2.
4. TFG Is Entitled to Summary Judgment on its Breach of Contract Counterclaim
For the reasons set forth above, the court concludes that there is no genuine dispute of
material fact and that TFG is entitled to judgment as a matter of law on its breach of contract
counterclaim. TFG has shown that VEC breached the Lease by failing to make rent payments,
and VEC’s affirmative defenses do not apply. Accordingly, the court holds that that VEC is
liable for breach of contract because it failed to make any of the twelve monthly rent payments.
Judgment will be entered in favor of TFG and against VEC in the amount of $369,249.09.
C. VEC’S MOTION FOR PARTIAL SUMMARY JUDGMENT
VEC has filed a motion for partial summary judgment on its claims for breach of contract
and breach of the implied covenant. But VEC’s motion actually appears to be an improper
attempt to re-brief affirmative defenses, such as material breach, that were briefed in connection
forbearance of any money, goods, or chose in action that is the subject of their contract.”
Consequently, TFG is entitled to the twenty-four percent per annum interest rate provided in the
Master Lease. The Master Lease does not specify whether the interest is simple or compound.
Under Utah law, compound interest is awarded only when “the parties expressly agreed to
compound interest.” Mountain States Broad. Co. v. Neale, 783 P.2d 551, 555 (Utah Ct. App.
1989); see also Watkins & Faber v. Whiteley, 592 P.2d 613, 616 (Utah 1979) (“Compound
interest is not favored by the law.”). Consequently, the court concludes that the Master Lease
provides for simple interest.
11

Based on a twenty-four percent per annum interest rate, interest accrued on the $219,582.00 at
a rate of $52,699.68 per year ($219,582.00 * .24 = $52,699.68). 2.84 years have passed between
the Event of Default and the date of this order (and the separate judgment issued concurrently
herewith). Consequently, interest accrued in the amount of $149,667.09 before the date of
judgment ($52,699.68 * 2.84 years = $149,667.09). Post-judgment interest will accrue at the rate
specified by federal law. Youngs v. Am. Nutrition, Inc., 537 F.3d 1135, 1146 (10th Cir. 2008)
(“The pre-judgment interest rate is set by state law, while the post-judgment rate is set by federal
law.”); see also 28 U.S.C. § 1961(a).

22

with TFG’s motion for partial summary judgment. Indeed, VEC’s claims on which it has
supposedly moved for summary judgment do not actually seek the relief that VEC seems to
request in its motion: a finding that it was not required to perform its obligations under the
Master Lease because TFG materially breached. As such, VEC’s motion actually appears to be
an attempt to move for summary judgment on TFG’s breach-of-contract counterclaim based on
various affirmative defenses. 12 Regardless of the appropriate characterization, the court
addresses the merits of the motion.
VEC’s motion raises four issues. First, VEC contends that TFG materially breached the
Lease by failing to release VEC’s security deposit in a timely manner. Second, VEC contends
that TFG materially breached the Lease by failing to sell the Leased Property to VEC at the end
of the Base Term for a price not to exceed ten percent of the amount financed under the Lease.
Third, VEC contends that TFG breached the implied covenant by affirmatively misrepresenting
that it would only charge up to ten percent of the amount financed for the Leased Property.
Fourth, VEC contends that TFG breached the implied covenant by misrepresenting that it would
“work with” VEC on a purchase price for the Leased Property.

12

This confusion is due mainly to the fact that VEC brought claims for breach of contract and
breach of the implied covenant. Compl. ¶¶ 13-19. VEC did not, however, seek any relief based
on a theory that TFG’s alleged breaches were material, allowing VEC to terminate the Lease. See
Compl. 13-22. Instead, VEC sought, among other things, “[a] Declaratory Judgment finding and
judging that the only obligation of Plaintiff under the Master Lease Agreement is to pay the fair
value of the Leased Property” and “[d]amages for breach of contract in an amount in excess of
$25,000.” Compl. at 4. As such, VEC’s claim that it is moving for summary judgment on its
claims of breach of contract and breach of the implied covenant is inconsistent with VEC’s
complaint. In short, VEC appears to have conflated the affirmative defense of material breach
with its claims for breach of contract and breach of the implied covenant.

23

1. Whether TFG Materially Breached the Lease by Failing to Release VEC’s Security
Deposit in a Timely Manner
As discussed above, VEC has failed to show that TFG materially breached the Lease by
failing to release VEC’s security deposit after VEC made twelve monthly payments. See supra
Part III.B.3. First, under the terms of the Lease, TFG was not obligated to release the security
deposit after VEC made twelve monthly payments. Second, even if TFG breached, VEC has
failed to show that the breach was material because it has failed to identify any damages flowing
from the alleged breach. Third, even if TFG materially breached, VEC waived its right to
terminate the Lease because it later acknowledged and ratified that the Security Agreement and
the Lease remained in full force and effect, and it continued to perform under the Lease for
another twenty-four months. Accordingly, VEC has failed to show that TFG materially breached
the Lease by failing to return VEC’s security deposit after VEC made twelve monthly payments.
2. Whether TFG Materially Breached the Lease by Failing to Sell the Leased Property
to VEC for Ten Percent of the Amount Financed
As discussed above, VEC has failed to show that TFG materially breached the Lease by
failing to sell the Leased Property to VEC for ten percent of the amount financed under the
Lease. See supra Part III.B.2. First, TFG was not required to negotiate a purchase price because
VEC failed to provide requisite notice of its intent to purchase the Leased Property. Second, even
if TFG were required to negotiate a purchase price, the Lease did not provide for an agreed-upon
purchase price and TFG (and VEC) had absolute and sole discretion to reject any proposed terms
of purchase. Third, even if TFG were required to negotiate a purchase price, VEC has failed to
show that TFG negotiated in bad faith. Accordingly, VEC has failed to show that TFG materially
breached the Lease by failing to sell the Leased Property to VEC for ten percent of the amount
financed under the Lease.

24

3. Whether TFG Breached the Implied Covenant of Good Faith and Fair Dealing by
Misrepresenting that It Would Sell the Leased Property for Ten Percent of the
Amount Financed Under the Lease
VEC contends that TFG breached the implied covenant of good faith and fair dealing by
misrepresenting that it would sell the Leased Property for ten percent of the amount financed
under the Lease. But, as noted above, the implied covenant cannot be used to “nullify a right
granted by contract to one of the parties or to require a party vested with a contract right to
exercise that right in a manner contrary to that party’s legitimate self-interest.” Brehany, 812
P.2d at 55. And the Master Lease provides that the price for the Leased Property is “to be agreed
upon” and gives both parties “absolute and sole discretion to accept or reject any terms of
purchase.” Master Lease ¶ 19.
VEC does not actually point to any alleged misrepresentations made by TFG regarding
the purchase price. The only evidence that VEC has concerning any such “representation” is Ms.
Spencer’s declaration in which she states, “Based on my communications with Rick Razecca, it
was my understanding that, at the expiration of the lease term, VEC would be entitled to buy
back the Leased Property for a residual value calculated at an amount not to exceed 10% of the
total amount financed.” Spencer Decl. ¶ 4 (emphasis added). VEC has no evidence that Mr.
Razecca represented that VEC could purchase the Leased Property for ten percent of the amount
financed; it only has evidence that its former CFO believed that VEC would be able to purchase
the Leased Property for ten percent of the amount financed. 13
13

VEC’s argument regrading a ten-percent purchase price is further undermined by its
inconsistent position on what the purchase price would be. VEC has suggested at least three
different purchase prices for the Leased Property. First, in its complaint, VEC contends that it
had the right to buy the Leased Property for its “fair value.” Second, VEC attempted to amend its
complaint to provide that TFG represented that VEC could purchase the Leased Property “for the
sum of $1.00, or some other nominal amount.” ECF No. 35 at 9; see also Ferry Dep. 14:2-4
(“[W]e would satisfy the terms of the lease and it would be a $1 buyback is how I remembered
the presentation to me.”). Third, VEC continues to contend that it could purchase the Leased
25

VEC also has failed to show that any of the alleged misrepresentations occurred when
VEC was bound by the implied covenant. Specifically, VEC appears to base its claim on
statements made before the parties executed the Master Lease. Indeed, Ms. Spencer declares that
“VEC agreed to this financing based upon its ability to purchase the Leased Property at the end
of the term for an amount not to exceed 10% of the amount financed.” Spencer Decl. ¶ 4
(emphasis added). But it is well settled that “allegations of bad faith must relate exclusively to
the failure to perform the obligations of the contract, not to misrepresentations occurring during
the negotiations preceding the contract.” Potlatch Corp. v. Beloit Corp., 979 P.2d 114, 117
(Idaho 1999). Accordingly, VEC’s breach of the implied covenant claim fails to the extent that it
is based on negotiations or misrepresentations made prior to the execution of the Master Lease.
4. Whether TFG Breached the Implied Covenant by Representing That It Would
“Work With” VEC on a Purchase Price
VEC contends that TFG breached the implied covenant by representing that it would
“work with” VEC on a purchase price. But VEC has provided no evidence that TFG represented
that it would “work with” VEC on a purchase price. In fact, VEC doesn’t even address this
argument in its briefing, instead focusing on the argument that TFG was required to sell the
Leased Property for ten percent of the amount financed. Because VEC has no evidence that TFG
represented that it would “work with” VEC on a purchase price, this claim fails as a matter of
law.
5. VEC’s Declaratory Judgment Cause of Action
VEC has not moved for summary judgment on its Third Cause of Action, which seeks a
declaration that VEC’s “only obligation under the Master Lease Agreement is to pay the fair
Property for ten percent of the amount financed under the Lease. VEC’s inconsistent positions as
to the purchase price further undermine its argument that there was some sort of agreement
reached between Mr. Razecca and Ms. Spencer regarding the purchase price.

26

value of the Leased Property and the fair value of the Leased Property is its appraised value.”
But the court has determined that VEC breached the Lease by failing to make any of the twelve
additional monthly rent payments. Consequently, an Event of Default has occurred and TFG is
entitled to recover from VEC the Casualty Loss Value of the Leased Property, plus attorneys’
fees and costs. Because VEC is required to pay to TFG the Casualty Loss Value, the court cannot
declare that VEC’s only obligation under the Master Lease Agreement is to pay the fair value of
the Leased Property. Accordingly, the court concludes that VEC’s Third Cause of Action fails as
a matter of law.
IV.

CONCLUSION AND ORDER

For the reasons set forth above, the court GRANTS TFG’s Motion for Partial Summary
Judgment (ECF No. 44) and DENIES VEC’s Motion for Partial Summary Judgment (ECF No.
48). The court holds that VEC is liable for breach of contract based on its failure to make any of
the twelve additional monthly rent payments. Judgment shall be entered against VEC and in
favor of TFG in the amount of $369,249.09. TFG must seek any attorneys’ fees and costs within
fourteen days of the date of this order. See DUCivR 54-2. The court further holds that VEC’s
claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and
declaratory judgment fail as a matter of law.

Signed February 8, 2018
BY THE COURT

______________________________
Jill N. Parrish
United States District Court Judge

27