Free Motion to Stay - District Court of Colorado - Colorado

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UNITED STATES DISTRICT COURT DISTRICT OF COLORADO Civil Action No. 03-cv-02504-REB-CBS PETER HORNICK, an individual, Plaintiff/Counterclaim Defendant, v. GARY BOYCE and JOANNE BOYCE, individuals, Defendants/Counterclaimants. DEFENDANTS/COUNTERCLAIMANTS' FORTHWITH RENEWED MOTION FOR STAY OF EXECUTION PENDING APPEAL PURSUANT TO FED. R. CIV. P. 62(d) AND FOR APPROVAL OF SUPERSEDEAS BOND Pursuant to Fed. R. Civ. P. 62(d), Defendants/Counterclaimants, Gary Boyce and Joanne Boyce (collectively, the "Boyces"), respectfully request the Court stay the execution and enforcement of the judgment entered herein in favor of Plaintiff, Peter Hornick ("Hornick"), pending appeal and for approval of the posting of an irrevocable letter of credit as a cash supersedeas bond. In support of this Motion, the Boyces advise the Court as follows: CERTIFICATION OF CONFERENCE In accordance with D.C.COLO.LCivR 7.1.A, the undersigned certifies that he has conferred in good faith with counsel for Hornick and advises the Court that Hornick and his counsel have not yet reviewed the Motion and, therefore, neither agree nor disagree with the relief requested herein.

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REQUEST FOR HEARING AND EXPEDITED RULING The Boyces respectfully request an expedited ruling on the instant motion as Hornick was issued, as of August 3, 2007, a Writ of Execution in a miscellaneous action (Case No. 06CV135) which he commenced in the District Court for Saguache County, Colorado (the "State Court Action") seeking to enforce the Judgment under the Colorado Uniform Enforcement of Foreign Judgments Act, C.R.S. §§ 13-53-101, et seq. Accordingly, Hornick is attempting to execute on the Judgment and the Boyces will suffer irreparable harm if he does in fact execute upon their real and personal property before this renewed motion is heard. PROCEDURAL BACKGROUND 1. On August 30, 2006, the Court entered its Findings of Fact, Conclusions

of Law, and Orders in this matter, awarding a judgment in favor of Hornick in the amount of $3.5 million together with pre- and post-judgment interest. The Clerk of the Court entered Judgment in this matter on September 6, 2006 (the "Judgment"). 2. On September 8, 2006, Hornick commenced the State Court Action

seeking to enforce the Judgment under the Colorado Uniform Enforcement of Foreign Judgments Act, C.R.S. §§ 13-53-101, et seq. 3. On September 11, 2006, Hornick recorded the Judgment with the

Saguache County Clerk and Recorder thereby perfecting a judgment lien in all real property then owned or thereafter acquired by the Boyces in Saguache County. 4. On September 18, 2006, the Boyces filed a timely Motion to Alter or

Amend Findings pursuant to Fed. R. Civ. P. 52(d) (the "Motion to Amend"). Pursuant to

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Fed. R. App. P. 4(a), the filing of the Motion to Amend automatically extended the deadline for the parties to appeal the Judgment until thirty days following the date that the Court ruled upon the motion. 5. Also on September 18, 2006, the Boyces filed a Forthwith Motion to Stay

Judgment Pending Determination of Post Trial Motions (the "Motion to Stay"). In the Motion to Stay, the Boyces argued, among other things, that the Judgment lien Hornick had perfected in their real property provided adequate security for the stay of execution they sought. 8. On December 27, 2006, the Court entered its Orders Re: Defendants'

Post-Trial Motions in which it granted in part the Motion to Amend and granted in its entirety the Motion to Stay. 9. On January 2, 2007, the Court entered its Amended Findings of Fact,

Conclusions of Law, and Orders which reduced the amount of the Judgment from $3.5 million to $1.5 Million. Taking into account pre- and post-judgment interest to date, the amount of the Judgment is approximately $2.27 million and continues to accrue interest. 10. On January 26, 2007, both Hornick and the Boyces filed notices of appeal

in this matter pursuant to Fed. R. App. P. 4(a). 11. On January 26, 2007, the Boyces also filed a Motion for Stay of Execution

Pending Appeal Pursuant to Fed. R. Civ. P. 62(d) and for Approval Of Real Property As Alternative Security in Lieu Of Supersedeas Bond (the "Alternative Security Motion") in which the Boyces requested that the Court approve the real property subject to

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Hornick's perfected judgment lien as adequate security in lieu of a traditional appeal bond. 12. On April 11, 2007, the Court entered its Order Concerning Stay of

Execution Pending Appeal (the "April 11th Order") in which it denied the Alternative Security Motion. 13. On May 2, 2007, Hornick submitted Writs of Execution to the District

Court. Writs were issued on June 14, 2007. 14. On May 8, 2007, the Boyces filed Defendants/Counterclaimants' Forthwith

Renewed Motion for Stay of Execution Pending Appeal Pursuant to Fed. R. Civ. P. 62(d) and for Approval of Real Property as Alternative Security In Lieu of Supersedeas Bond (the "Renewed Motion for Stay"). 15. On June 20, 2007, the District Court entered its Order Concerning

Renewed Motion to Stay Execution Pending Appeal, in which it denied the Boyces' request for a stay and alternative security (the "June 20th Order"). INTRODUCTION In its June 20th Order, the Court denied the Renewed Motion for Stay because it found that the Boyces had presented insufficient evidence of the value of the real estate subject to the Judgment liens and, therefore had failed to meet their burden to show that their plan of alternative security provided adequate security to Hornick. LEGAL STANDARD An appellant may obtain a stay of execution of a monetary judgment pending appeal by posting a supersedeas bond. Fed. R. Civ. P. 62(d) (West 2007). The motion

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may be filed either before or after a notice of appeal has been filed. Id. The purpose of a supersedeas bond is to secure an appellee from loss resulting from the stay of execution and the possibility of the judgment debtor's intervening insolvency. Olcott v. Delaware Flood Co., 76 F.3d 1538, 1559 (10th Cir. 1996); Miami Int'l Realty Co. v. Paynter, 807 F.2d 871, 873 (10th Cir. 1986); see also, Poplar Grove Planting & Refining Co., Inc. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1190-91 (5th Cir. 1979)("The purpose of a supersedeas bond is to preserve the status quo while protecting the nonappealing party's rights pending appeal"). A stay of execution under Rule 62(d) becomes effective when the supersedeas bond is approved by the court. Fed. R. Civ. P. 62(d) (West 2007). The amount and nature of the supersedeas bond falls within the discretion of the Court. Olcott, 76 F.3d at 1559-60; Miami Int'l Realty, 807 F.2d at 873. See also, Acevedo-Garcia v. VeraMonroig, 296 F.3d 13, 17 (1st Cir. 2002). A supersedeas bond can "take the form of a surety bond, a letter of credit, or cash posted with the Clerk of the Court." Secure Engineering Services, Ltd. v. International Technology Corp., 727 F. Supp. 261, 263 (E.D. Va. 1989). See also, Trans World Airlines, Inc. v. Hughes, 515 F.2d 173, 177 (2d Cir. 1975); Ligurotis v. Whyte, 951 F.2d 818, 821 (7th Cir. 1992); State Industries, Inc. v. Mor-Flo Industries, Inc., 124 F.R.D. 613 (E.D. Tenn. 1988); Gaus v. Conair Corp., 2003WL542652 (S.D.N.Y. 2003). ARGUMENT The Boyces are cattle ranchers. They have virtually no liquid assets. Rather, their wealth is primarily tied up in land and livestock. The Boyces do, however, own four

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parcels of real property, the "Villa Grove Ranch," the "Sierra West Parcel", the "Glenn Lot" and the "Hutchinson Homestead" (collectively, the "Boyce Property"). By recording his Judgment with the Saguache County Clerk and Recorder Hornick perfected a judgment lien in the Boyce Property, which, to date, has made it impossible for the Boyces to use the Boyce Property (their only material otherwise unencumbered asset) as security for a formal cash bond. On condition that the Judgment lien is released, the Boyces have been able to secure a commitment for an irrevocable letter of credit in the amount of $2,500,000.00. See Exhibit A, Loan Commitment of the American National Bank, dated August 14, 2007. This is 167% of the value of the Judgment, and provides more than adequate cash security to cover the Judgment, which together with interest through January 26, 2009 (two years from the date of the parties filing their respective Notices of Appeal ­ the anticipated length of time for the appeals to be heard1), would be in the amount of $2,446,043.06. The Loan Commitment specifically states: At the request of Mr. Gary Boyce, American National Bank ("ANB") is prepared to issue an irrevocable secured letter of credit naming Peter Hornick as beneficiary, in an aggregate amount of up to Two Million Five Hundred Thousand Dollars and No/100 ($2,500,000.00), upon fulfillment of the following conditions: (a) approval of the United States District Court for the District of Colorado, (b) the receipt by ANB from Mr. Boyce of a fee in the amount of $43,750 for the issuance of the Letter of Credit, and (c) the deposit with ANB of $2,500,000.00 as cash collateral, free of claims of any third parties. Mr. Boyce has advised ANB that this amount will be available upon the release of all existing judgment liens held by Mr. Hornick in properties owned by Gary Boyce and Joanne Boyce. Mr. It should be noted, however, that the briefing schedules for the appeals are almost complete and no party has requested oral argument. Therefore, it is reasonable to expect that a decision with respect to the appeals will be rendered well in advance of January 26, 2009.
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Boyce has advised ANB of the source of the funds for the cash collateral, and ANB has received assurances it believes to be reliable that the required cash collateral will be made available. After issuance of the irrevocable secured letter of credit, the funds will be paid by ANB to the order of Mr. Hornick within three business days of presentment of draft(s) drawn on ANB and accompanied by the following documents: (1) a certified copy of the mandate by the Tenth Circuit Court of Appeals affirming the judgment entered against Gary Boyce and Joanne Boyce in the case of Peter Hornick v. Gary Boyce and Joanne Boyce, Civil Action No. 03-cv-02504-REB-CBS, which judgment was entered by the United States District Court for the District of Colorado; and (2) a statement showing the breakdown of the draft amount between judgment amount, interest charges, attorneys' fees (if any), court costs (if any), and any other fees (which amounts ANB will have no responsibility for verifying). ANB's obligation to honor drafts shall not exceed the $2,500,000.00 face amount of the letter of credit. ANB will attempt, but shall have no obligation, to accommodate any additional language as may be prescribed by the United States District Court for the District of Colorado in its approval of the irrevocable secured letter of credit as a supersedeas bond. See, Exhibit A. Hornick has previously argued that due to the uncertain value of the Boyce Property, and the expense and time delays related to liquidating those properties, his Judgment lien in those properties provides inadequate security pending appeal. Accordingly, he insisted that the only adequate security would be a cash bond. The Boyces are, therefore, prepared to comply with Hornick's request by posting an irrevocable letter of credit made payable to Hornick on the terms and conditions as set forth in the Loan Commitment, and further prescribed by the Court. This is equivalent to a cash bond. Secure Engineering Services, 727 F. Supp. at 263; see also, In re Southmark Corporation, 138 B.R. 820 (Bankr. N.D. Tex. 1992), which states: The supersedeas bond . . . resembles the secured letter of credit. With a secured letter of credit, the grantor has a liability to the beneficiary of the 7

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letter of credit. With a secured supersedeas bond, the grantor has a liability to the beneficiary of the bond. With a secured letter of credit, the grantor transfers its property including the security interest to the bank. With a secured supersedeas bond, the grantor transfers its property including the security interest to the issuing entity. With a secured letter of credit, the issuing bank pays the beneficiary on the letter of credit upon proper demand from the beneficiary. With a secured supersedeas bond, the issuing entity pays the beneficiary on the bond upon proper demand by the beneficiary. With a secured letter of credit, after payment to the beneficiary, the issuing bank looks to the pledged collateral of the grantor to be made whole. With a secured supersedeas bond, after payment to the beneficiary, the issuing entity looks to the pledged collateral of the grantor to be made whole. With a secured letter of credit, the issuing bank has an obligation to pay the beneficiary independent of the underlying obligation between the grantor and the beneficiary. With a secured supersedeas bond, the issuing entity has an obligation to pay the beneficiary independent of the underlying obligation between the grantor and the beneficiary. With a secured letter of credit, the issuing bank's independent obligation to the beneficiary protects the beneficiary as a creditor of the grantor. With a secured supersedeas bond, the issuing entity's independent obligation to the beneficiary protects the beneficiary as a creditor of the grantor. Id. at 828. Accordingly, Hornick, as the beneficiary under the letter of credit, is a fully secured and protected creditor of the Boyces. As stated, in responding to the previous motions filed by the Boyces, Hornick has asserted, and the Court accepted, that his Judgment liens do not provide adequate security for a stay of enforcement of his Judgment pending appeal. Those liens,

however, stand in the way of the Boyces providing the secured collateral that Hornick has insisted on ­ a cash supersedeas bond. Accordingly, Hornick should be required to release his Judgment liens so as to facilitate the Boyces prompt posting of a secured letter of credit as security for a stay of enforcement of the Judgment pending appeal. Further, to not require a release of the Judgment liens would provide Hornick far more

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collateral than he is entitled to, and would unduly prejudice the legitimate business activities of the Boyces, as well as their other creditors. See Sheldon v. Munford, Inc., 128 F.R.D. 663, 666 (N.D. Ind. 1989)(Requiring release of judicial liens upon posting of a bond). By replacing Hornick's Judgment liens with a secured letter of credit, his secured position will be significantly improved. Specifically, he will be replacing the relatively non-liquid Judgment liens with a letter of credit that would be payable immediately upon satisfaction of its terms. This brings tremendous liquidity and certainty to Hornick's secured position. CONCLUSION The Boyces have not asked this Court to waive the supersedeas bond requirement, nor have they requested that the Court to approve security that is less than the full amount of their potential obligation. To the contrary, they have offered collateral that greatly exceeds the value of the Judgment, and, therefore, the relief respectfully requested herein should be granted. WHEREFORE, the Boyces respectfully request that this Court enter an Order (proposed Order submitted herewith): 1. Approving the terms and conditions of a secured letter of credit as security

for a stay execution of the Judgment pending appeal; and permitting the Boyces leave to post said secured letter of credit as a supersedeas bond and stay execution of the Judgment pending appeal.

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2.

Requiring Hornick to deposit with the Clerk of the Court, within five (5)

business days of entry of its Order, a release of his Judgment liens in the form attached hereto as Exhibit B. Said release shall be held by the Court until the Boyces post the secured letter of credit with the Court at which time the release shall be released to the Boyces for filing with the Clerk and Recorder of Saguache County, Colorado. 3. Entering a stay of enforcement of the Judgment for fifteen (15) business

days to allow the Boyces to post a secured letter of credit as a supersedeas bond staying execution of the Judgment pending appeal. 4. If the Boyces do not post said secured letter of credit within the stated

fifteen (15) business day period, the release of Judgment liens deposited with the Court by Hornick shall be returned to Hornick. 5. For such other relief that the Court deems just and proper.

Respectfully submitted this 14th day of August, 2007. Original Signature on File s/ John G. Lubitz John G. Lubitz, Esq. Scott A. Hyman, Esq. OSTER & MARTIN, LLC 370 17th Street, Suite 4400 Denver, Colorado 80202 Tel: 303.382.1200 Fax: 303.382.1202 Email: [email protected] [email protected] Counsel for Defendants/Counterclaimants Gary Boyce and Joanne Boyce

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CERTIFICATE OF SERVICE I certify that on this 14th day of August, 2007, the foregoing DEFENDANTS/COUNTERCLAIMANTS' FORTHWITH RENEWED MOTION FOR STAY OF EXECUTION PENDING APPEAL PURSUANT TO FED. R. CIV. P. 62(d) AND FOR APPROVAL of SUPERSEDEAS BOND was served on all parties and other interested persons electronically via CM/ECF System, addressed to the following: Erich Schwiesow, Esq. Helen Sigmond, Esq. Lester, Sigmond, Rooney & Schwiesow 311 San Juan Avenue, P.O. Box 1270 Alamosa, Colorado 81101 And by depositing a copy of same in the United States Mail, postage prepaid, addressed to the following: Delphine L. Farr, Esq. Lawlis & Bruce, LLC 1875 Lawrence Street, Suite 750 Denver, Colorado 80202 And by overnighting a copy of same by Federal Express, addressed to the following: Sheriff Mike Norris Saguache County Sheriff's Office 530 5th Street Saguache, Colorado 81149 Original Signature on File s / Joanne Torre Hyman Joanne Torre Hyman Paralegal

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