Free Trial Brief - District Court of Colorado - Colorado

Case 1:03-cv-02504-REB-CBS

Document 99

Filed 08/03/2006

Page 1 of 8

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Case No. 03-CV-02504-REB-CBS PETER HORNICK, Plaintiff v. GARY BOYCE AND JOANNE BOYCE, Defendants

PLAINTIFF HORNICK'S TRIAL BRIEF

Plaintiff Peter Hornick, by and through his undersigned counsel, presents the following Trial Brief in order to set out the law governing certain issues which may arise at trial, including evidentiary issues and elements of claims:

1. The Potential Opinion Testimony of Robert Bruce At the Trial Preparation Conference Held on July 28, 2006, Defendants raised the potential issue of excluding any opinion testimony by Robert Bruce relating to the reasonableness of the closing documents proposed by the Parties, because Mr. Bruce has not been endorsed as an expert. Robert Bruce was the attorney representing Ross Brupbacher and Peter Hornick at the closing. He was the advisor responsible for giving them advice concerning the documents used at closing. He used his legal expertise in so giving advice, contemporaneously with the actions taking place. As such, his 1

Case 1:03-cv-02504-REB-CBS

Document 99

Filed 08/03/2006

Page 2 of 8

opinion on the issue of whether or not documents proposed were reasonable is opinion testimony given pursuant to F.R.E. 701. It is based upon his perception, is helpful to a clear understanding of his testimony and determination of a fact in issue, and is not based on technical or other specialized knowledge. Indeed, a "legal" opinion as such would not be admissible under Rule 701, as opinions of law are not helpful to the Court, which is charged with making its own legal conclusions. See United States v. Parris, 243 F.3d 286, 288-289 (6th Cir. 2001). But testimony that an action was or was not reasonable, informed by the particular experience of the perceiver of the action, is lay opinion testimony. Tampa Bay Shipbuilding & Repair Co. v. Cedar Shipping Co., 320 F.3d 1213, 1223 (11th Cir. 2003); United States v. Ayala-Pizarro, 407 F.3d 25, 27-28 (1st Cir. 2005).

2. The Applicability of the Doctrine of Judicial Admissions to a Determination of the Closing Date Defendants raise the issue of failure to close on a closing date of December 10, 2001, for the first time in this litigation in their Proposed Findings of Fact, Conclusions of Law, and Order for Judgment. Both parties have always acted on the understanding and agreement that the closing date set by the Option was December 11. The Complaint states in Paragraph 11 that the closing date was set, pursuant to the terms of the Option, for December 11, 2001. Defendants denied paragraph 11, but, as their subsequent pleadings show, not out of disagreement with the date of December 11, but

2

Case 1:03-cv-02504-REB-CBS

Document 99

Filed 08/03/2006

Page 3 of 8

rather out of disagreement with further averments that Boyce failed to close. Defendants' Motion for Leave to Amend Answer and to Assert Counterclaim recites, on page 2, "On October 10, 2001, Hornick exercised the Option and a Closing date of December 11, 2001 ("Closing Date") was triggered pursuant to the terms of the Option." Defendants' First Amended Answer and Counterclaim avers, in paragraph 9 of the Counterclaim, that "On October 10, 2001, Hornick exercised the Option and a Closing date of December 11, 2001 ("Closing Date") was triggered pursuant to the terms of the Option." In his Answer to Defendants' First Amended Answer and Counterclaim, Hornick admits the allegations contained in paragraph 9. An allegation admitted by a party is deemed established for purposes of the case. F.R.C.P. 8(d); Hicks v. United States, 486 F.2d 325, 328 n. 3 (10th Cir. 1973) (A judicial admission "occurs where a proposition of fact is alleged by one party and conceded to be true by the adverse party."). Accordingly, the fact that the closing date was set as December 11, 2001, pursuant to the terms of the Option, is established.

3. Mutual Mistake, Ambiguity, and Waiver Even were the doctrine of judicial admissions not applicable to establish December 11, 2001, as the closing date under the Option, the fact that the parties treated it as such, and that no party raised the issue of the proper day until five and one-half years later, seven days prior to trial, demonstrates that the parties acceptance of December 11, 2001 as the closing date was a mutual mistake of fact,

3

Case 1:03-cv-02504-REB-CBS

Document 99

Filed 08/03/2006

Page 4 of 8

and that any breach for failure to close by December 10, rather than December 11, was waived.

A. Mutual Mistake A mutual mistake of fact occurs where both parties "labor under the same erroneous conception in respect to the terms and conditions of the instrument." Maryland Casualty Co. v. Buckeye Gas Products Co., Inc., 797 P.2d 11 (Colo. 1990). In Maryland Casualty, an insurance agreement was drafted with a date indicated retroactive coverage. It was clear that the date was entered as a scrivener's error, and the contract was reformed not to provide retroactive coverage. In this case, both parties understood that the Option called for a closing on December 11, 2001. Both parties treated December 11, 2001, as the closing date. The contract should be reformed to accord with the expectations of the parties, and their understanding that their closing on December 11, 2001 was in accordance with the terms of their contract.

B. Ambiguity Whether or not a contract term is ambiguous is generally a matter of law for the trial court to determine. Resolution of the ambiguity is a question of fact. Metropolitan Paving Company v. City of Aurora, Colorado, 449 F.2d 177, 181 (10th Cir. 1971). In this instance, the parties treatment of what otherwise would appear to be a closing date of December 10, 2001, as a closing date of December 11, 2001, could be related

4

Case 1:03-cv-02504-REB-CBS

Document 99

Filed 08/03/2006

Page 5 of 8

to a latent ambiguity in the option contract concerning definition of the term "Date of Notice." The Option calls for a closing date to be set for the first business day following the 60th calendar day following "the date of the notice of Option exercise." Nowhere is the date of notice of Option exercise defined, nor does the Option contain a term indicating that notice is deemed to be received upon receipt or upon a certain number of days following deposit in the mails, as is common. Accordingly, the date from which the 60 days begins counting is ambiguous. Certainly, the actions of the parties in treating December 11, 2001 as the closing date would clarify any ambiguity.

C. Waiver Any claim Defendants may have that failure to close on December 10, 2001, was a breach of the contract on the part of Brupbacher is waived, because that ground was not asserted while others were at the time Defendants refused to comply with the contract. Metropolitan Paving Company, supra, 449 F. 2d at 182. In Metropolitan Paving Company, a contractor made a claim for additional compensation for work allegedly necessitated by changed circumstances. The owner denied the claim on the basis that although the excavation may have been difficult, it should have been anticipated, under the circumstances. At trial, the owner asserted the defense that the contractor had not given prompt written notice of the changed circumstances, as required by the contract. The trial court upheld the defense, but the Court of Appeals reversed that holding, noting that, especially in Colorado, where a party has refused to comply with a contract on one ground, other possible grounds for refusal are thereby waived. Id. at 182. Thus here, where Defendants refused to close on the 5

Case 1:03-cv-02504-REB-CBS

Document 99

Filed 08/03/2006

Page 6 of 8

grounds that reasonable closing documents that they prepared were unjustly refused, and that closing did not occur by December 11, 2001, but never refused to comply because the closing did not occur by December 10, that ground for refusal, even if justifiable in the first instance, has been waived.

4. Time is not of the Essence for the Closing of an Option Contract In general, time is not of the essence of a contract unless there is a specific provision to that effect, or the circumstances clearly indicate that such was the intention of the parties. Foster v. Coffey, 204 P.900, 901 (Colo. 1922). While it is true that in option contracts, time has been held to be of the essence, even though not expressly stated, that rule relates to the exercise of the option itself, not to a subsequently set closing. See Rubber, Inc. v. Jenkins, 570 P.2d 1317, 1318 (Colo. App. 1977). That is so because the time in which an option shall remain open is the very substance of the contract. Once the option has been exercised, the contract is essentially no different from any other contract to purchase real property. In such a case, time is not of the essence unless expressly made so, or unless the surrounding circumstances make it so. Commonwealth Petroleum Company, Inc. v. Billings, 759 P.2d 736, 738 (Colo. App. 1987). In this case, the Option contains no "time is of the essence" clause. Thus, while the time for exercise of the option was of the essence under the rationale set forth in Rubber, the time for closing was not. The actions of the parties further made clear that time was not of the essence, at least until the end of 2001. During the

6

Case 1:03-cv-02504-REB-CBS

Document 99

Filed 08/03/2006

Page 7 of 8

course of negotiations concerning the form and content of the closing documents, which negotiations covered many days after the original closing date of December 11, 2001, Ross Brupbacher had informed Boyce that he would not close unless the transaction were completed by the end of the year. Thus the only manner in which time became of the essence in the closing of the Option was in closing it prior to December 31, 2001.

5. Good Faith and Fair Dealing In Colorado, every contract is subject to an implied duty of good faith and fair dealing. The duty of good faith emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party. It does not obligate a party to accept a material change in the terms of the contract, or to assume obligations that vary or contradict the contract's express provisions. It does not inject substantive terms into the parties' contract. Wells Fargo Realty Advisors Funding, Inc. v. Uioli, Inc., 872 P.2nd 1359, 1363 (Colo. App. 1994). The option agreement signed between Hornick and Boyce requires Hornick to deliver $500,000.00 in immediately available funds at closing. It requires Boyce to execute and deliver "(i) an assignment of the Interest, (ii) Boyce's resignation as manager, and (iii) such other instruments as Hornick or his attorney may reasonably request to. . . effectuate the purposes of this Agreement." The Option Agreement gives Hornick, not Boyce, the right to request additional reasonable instruments for consummation of the transaction. Nothing about the Option allows Boyce any discretion in determining what he will provide. The duty of 7

Case 1:03-cv-02504-REB-CBS

Document 99

Filed 08/03/2006

Page 8 of 8

good faith does not work to inject a new term into the Option allowing Boyce to determine what he will reasonably require. It is a one-way street. Anything Boyce attempts to include in the closing beyond a simple assignment of Boyce's interest is an attempt to inject a new term into the contract.

This Trial Brief is not intended to be an exhaustive treatment of the legal issues that may come up at trial in this matter. Nonetheless, it is hoped that some of the anticipated legal issues have been brought to the Court's attention.

Respectfully submitted this 3rd day of August, 2006.

s/ Erich Schwiesow Erich Schwiesow Lester, Sigmond, Rooney & Schwiesow P.O. Box 1270 Alamosa, Colorado 81101 Telephone: (719) 589-6626 FAX (719) 589-5555 Email: [email protected] Attorney for Plaintiff, Peter Hornick CERTIFICATE OF SERVICE I hereby certify that on the 3rd day of August, 2006, I electronically filed the foregoing Plaintiff Hornick's Trial Brief with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: [email protected] [email protected] [email protected] [email protected]

s/ Erich Schwiesow 8