Free Reply to Response to Motion - 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. REPLY IN SUPPORT OF 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 Defendants/Counterclaimants, Gary Boyce and Joanne Boyce (collectively, the "Boyces"), by and through their undersigned counsel, submit the following Reply in Support of Defendants/Counterclaimants' Forthwith Renewed Motion for Interim 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 "Reply"). In support of this Reply, the Boyces advise the Court as follows: A. THE LAW OF THE CASE DOCTRINE DOES NOT PROHIBIT THE COURT'S RECONSIDERATION OF THE MOTION 1. While the Plaintiff correctly recites the law of the case doctrine, to the

extent the rule is even applicable, he misapplies it to the facts at issue. "As most commonly defined, the doctrine posits that when a court decides upon a rule of law, that

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decision should continue to govern the same issues in subsequent stages in the same case." Arizona v. California, 460 U.S. 605, 618 (1983). The doctrine anticipates the ordinary course of litigation and merely "directs a court's discretion," but does not limit its power. Id. The doctrine does not prohibit a district court from reconsidering its own decision "if the law has since changed, new evidence becomes available, to correct an error, or if a `manifest injustice would otherwise ensue.'" Johnson v. County of Nassau, 480 F.Supp.2d 581, 608 (E.D.N.Y. 2007)(emphasis added); Intergraph Corp. v. Intel Corp., 253 F.3d 695, 698 (Fed.Cir. (Ala.) 2001); Banks v. United States, ----Fed.Cl. -----, 2007 WL 1300768 (Fed.Cl. 2007). 2. Clearly, therefore, the Court is not prohibited from reconsidering its prior

decision in this matter if "new evidence becomes available." In that regard, and in furtherance of the Motion (Documents 169, 171 and 172), the Boyces engaged the services of Keserich & Company Appraisals Inc., to prepare appraisals of the property subject to the Plaintiff's judgment lien. Specifically, the Nye Ranch, the Barsch and Miller Ranch, the Poncha Pass Ranch, the Sierra West Ranch, the Hutchinson Homestead and the Glenn Lot (collectively, the "Boyce Properties"). The Boyces have received, and submitted to the Court, certified appraisals for the following properties: Ranch: Nye Ranch: Barsch and Miller Ranch Poncha Pass Ranch Sierra West Ranch Hutchinson Homestead Glenn Lot Total: 2 Appraised Value: $1,560,000.00 $2,080,000.00 $ 560,000.00 $1,400,000.00 $ 344,000.00 $ 158,000.00 $6,102,000.00

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3.

While the Boyces would not, even with the utmost respect, attempt to tell

the Court what it intended by its April 11, 2007, Order ("April 11 Order")(Document 164), it is clear that the competency of the evidence previously submitted by the Boyces, related to the value of the Boyce Properties, was a material issue in the Court's consideration. In the April 11 Order, the Court stated that appraisals from a certified real estate appraiser would be necessary, at a minimum, to demonstrate that the Plaintiff's judgment lien in the Boyce Properties provides adequate protection. Therefore, the submission of such certified appraisals is material new evidence that warrants the Court exercising its discretion in reconsidering the Motion. B. REPLY IN SUPPORT OF 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 4. In his Response to Defendants/Counterclaimants Forthwith Renewed

Motion for Interim 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 "Response"), Plaintiff advances five grounds in opposition to the Motion. None of these arguments provides a factual or legal justification for the Court to deny the Motion. 5. First, Plaintiff argues that the circumstances of this case do not warrant a Plaintiff has, once again, They have not

waiver of the requirement for a supersedeas bond.

mischaracterized the nature of the relief sought by the Boyces.

requested that the Court waive the requirement of a bond, or that it accept a partial bond. Thus, the standard articulated in Dillon v. City of Chicago, 866 F.2d 902, 904-07 (7th Cir. 1988) is inapposite. 3

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6.

Rather, the Boyces have requested that they be allowed to substitute the

Boyce Properties as alternative security for a stay. Under these circumstances, the Boyces need to only objectively demonstrate a present financial ability to facilely respond to the judgment and present the Court a financially secure plan for maintaining that same degree of solvency during the period of the appeal. Poplar Grove Planting and Refining Co., Inc. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1190-91 (5th Cir. 1979). 7. As described in the Motion, the Boyces have made a good faith attempt to

obtain a cash bond, but because they are land rich and cash poor, they are unable to do so. Collectively, the Boyce Properties have a conservative unencumbered value of at least twice the present value of the Judgment. The Plaintiff does not challenge that his existing judgment lien already provides him a priority lien status in all of the Boyce Properties, subject, however, to the lien interest of the First Southwest Bank in the Barsch and Miller Ranch and the Sierra West Ranch (which will be discussed in further detail below). As such, the Boyces have met their burden under Poplar Grove and the Court should approve their plan of alternative security in lieu of a formal cash supersedeas bond. 8. Second, Plaintiff challenges the Boyces inability to obtain a cash bond. As

detailed in the Motion, the Boyces are unable to obtain a cash bond using real property for collateral. (see, Exhibit N to Motion, Letter from Nancy Beasley to Scott A. Hyman, Esq., dated January 26, 2007). Through his Affidavit (see, Exhibit D to Motion), Gary Boyce also testified regarding his unsuccessful efforts to obtain a cash bond from

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several sources. Without painstakingly indicating each step he went through to attempt to obtain such a bond, and without detailing standard lending principals, Mr. Boyce indicated that he was unable to obtain a cash bond due to the nature of his business (which does not provide adequate cash flow to service the additional amount of debt that would be required to obtain a cash bond), and the Boyces current debt structure (which includes Plaintiff's judgment liens). The limited ability of the Boyces' existing cash flow to service the additional debt requirements of a cash bond would certainly put their other creditors at great risk if the relief request hereby is not granted (see, Affidavit of Gary Boyce, Exhibit D to Motion). The Tenth Circuit Court of Appeals has previously held that affidavit testimony is sufficient to meet the burden of proof on this issue, Miami Intern. Realty Co. v. Paynter, 807 F.2d 871, 874 (10th Cir. 1986), and accordingly, the Boyces have met their burden of proof with respect to their inability to obtain a cash bond. Further, the issue is not what an insurance company may or may not require, but that the Boyces objectively demonstrate a present financial ability to facilely respond to the judgment and present the Court a financially secure plan for maintaining that same degree of solvency during the period of the appeal. Poplar Grove, 600 F.2d at 1190-91. 9. Third, the Plaintiff argues in the Response at pg. 6, that the Villa Grove

Ranch is inadequate security for his Judgment due to the fact that it is encumbered by a deed of trust and is the subject of litigation pending in Saguache County District Court captioned, Villa Grove Ranch Co., LLC v. Peter Hornick, et al., Case No. 05CV53 ("Case No. 05CV53"). The Boyces do not understand Plaintiffs' concern. The Plaintiff acknowledges that there is $1.125 million (an amount that exceeds the current principal

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balance of the referenced deed of trust), on deposit in the Court Registry in Case No. 05CV53. As a party to that case nothing can happen to those funds without his involvement. If he succeeds in that lawsuit, he will be awarded the Villa Grove Ranch, the money paid into the court registry will be used to discharge the First Southwest Bank deed of trust and he will owe the Boyces the sum of $1.25 million. If he loses the case, he will receive the funds held in the court registry and retain his judgment lien in the ranch. Neither event can happen, however, until after the appeal in this case has been resolved because Case No. 05CV53 has been stayed pending resolution of this appeal.1 It is, therefore, factually incorrect and misleading for Plaintiff to represent to the Court that the final disposition of Case No. 05CV53 could somehow deprive him of his interest in the Villa Grove Ranch and, that the value of that property as security for the Judgment is "entirely illusory." 10. Fourth, while the Plaintiff does not challenge the credibility of the

appraisals submitted by the Boyces and, thus, does not challenge the values established therein, he does attempt to argue that the values should be reduced significantly due to holding, marketing and selling costs for the subject properties. The Plaintiff ignores the fact that Mr. Keserich's opinion is that it is reasonable to expect that the Boyce Properties could be sold within a year of listing and that he based his values accordingly. This addresses the second concern of the Court set forth in the April 11 Oder, regarding the length of marketing times involved in selling the real estate for full

Plaintiff also implies that title to that case is somehow clouded by a lis pendens. What he fails to inform the Court is that he is the person who filed the lis pendens. 6

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value. Mr. Keserich further opines that resale's and, his market analysis, support the conclusion that the value of the properties will continue to appreciate at a minimum rate of six percent (6%) per year. The Plaintiff does not challenge either of these

conclusions. Therefore, as the Boyces continue to pay down the underlying debt to the First Southwest Bank on the Barsch and Miller Ranch and the Sierra West Ranch, and the value of all the Boyce Properties continues to increase at the minimum rate of six percent (6%) per year, the secured position of the Plaintiff in the Boyce Properties will do nothing but improve. It is inconsistent, therefore, for the Plaintiff on the one hand to challenge the Boyces' requested relief due to the length of time that it may take to market the properties and then turn around and request that the properties be conveyed to him and held in escrow. Response, at 7. Under either event, the marketing time would be the same. Further, this proposal ignores the extremely detrimental economic effect such an arrangement would have on the Boyces solvency, their ranching operation, and their other creditors; and, therefore, must be rejected. 11. As supported by Keserich & Company's certified appraisals, the Boyce

Properties are worth in excess of $6,100,000.00. Even after accounting for encumbrances2, the present net values of the Boyce Properties are in excess of $4,670,000.00 - over twice the current value of the Judgment ­ a value that is increasing at a rate of six percent (6%) per year while the Boyces continue to reduce

The Sierra West Ranch is encumbered by a secured lien in favor of the First Southwest Bank, with a current principal balance due of $332,746.60; and, the principal balance of the obligation secured by First Southwest Bank's lien on the Barsch and Miller Ranch is presently $1,095,444.03 ­ this amount, however, should not technically be deducted as the Plaintiff is fully protected ­ see, paragraph 9 above.
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the underlying debt. Accordingly, assuming sale costs, and potential depreciation (even though historic market conditions show continuing appreciation), of a combined 10% ($467,000.00), the resulting $4,203,000.00 of value (as of the date of the Motion ­ with a value of $4,722,490.00 on 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 heard), would still more than cover the $2,446,043.06 Judgment (the value of the Judgment, together with interest, on January 26, 2009). Accordingly, the Plaintiff's

unsubstantiated challenge of the significant value in the Boyce Properties securing his Judgment lien is clearly disingenuous. 12. Finally, the Plaintiff argues that because Mr. Boyce is a defendant in a

separate lawsuit that he could somehow be prejudiced by any delay in executing upon the Boyces' assets. In making this argument, the Plaintiff ignores the priority status of his perfected judgment liens in the Boyces Properties. This lien gives Plaintiff priority over any one that may obtain a judgment against the Boyces in the future. Mooring v. Brown, 763 F.2d 386, 387 (10th Cir. 1985); Hicks v. Londre, 125 P.3d 452, 456 (Colo. 2005); Sky Harbor, Inc. v. Jenner, 435 P.2d 894, 896-97 (Colo. 1968). As the Plaintiff, asserts, trial in the captioned matter Vaca Partners, L.P. v. Gary Boyce, et al., Case No. 2005-cv-45, District Court, Saguache County, Colorado, is currently scheduled to commence September 24, 2007. Therefore, any claims in that action have not been reduced to a judgment and Plaintiff's prior judgment liens would have priority in the event they are. The Plaintiff knows, through his post-judgment discovery, that the only significant assets of the Boyces available to satisfy the Judgment are the Boyce

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Properties. Accordingly, due to the priority status of his perfected Judgment liens in the Boyces Properties, and the corresponding significant equity securing his Judgment, the Plaintiff, cannot, in good faith, argue that he will be prejudiced by any delay in executing upon the assets of the Boyces. 13. Plaintiff attempts once again to unsuccessfully distinguish the holding in

Athridge v. Iglesias, 464 F. Supp.2d 19 (D.D.C. 2006), however, his efforts are disingenuous. The facts in Athridge are directly on point and the District Court for the District of Columbia correctly approved a plan of alternative security under circumstances very similar to the instant case. In Athridge the defendant offered to pledge property worth only 130% of the judgment. Here, the Boyces propose to pledge property worth at least twice the Judgment if not significantly more. Plaintiff alleges that the defendant in Athridge was only seeking a thirty day stay while he resolved a conflict with his insurance carrier (Response, at pg. 4); however, this is a gross misrepresentation of that case. The court in Athridge clearly states that "[I]n a

continued effort to expedite litigation in this case, this Court will exercise its discretion and accept the real estate holdings as security pending appeal." Athridge, at 24-25 (emphasis added). Further, the order entered in Athridge is attached to the case and in no way limits the stay to a thirty day period. Athridge, at 25. Under the circumstances, therefore, the Plaintiff is completely protected from any loss resulting from a stay of execution pending appeal, and the fundamental purpose of a supersedeas bond is satisfied.

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CONCLUSION 14. As stated in the Motion, the amount and nature of the supersedeas bond

falls within the discretion of the Court. Olcott v. Delaware Flood Co., 76 F.3d 1538, 1559-60 (10th Cir. 1996). The Boyces have made the necessary showing for the Court to exercise that discretion and grant the Motion. The Boyces own real property with a conservative value (net of First Southwest Bank's deed of trust on the Barsch and Miller Ranch and the Sierra West Ranch) of $4,670,000.00. 15. The Boyces could liquidate the Boyce Properties in due course and satisfy

the Judgment. As such, they have a present financial ability to facilely respond to the Judgment. And, pledging the Boyce Properties as security is a financially secure plan for maintaining their present level of solvency. The assets are worth at least twice the amount of the Judgment. Even if, contrary to historic market conditions, the Boyce Properties were to somehow depreciate during the pendancy of the appeal there would still be more than enough value in the Boyce Properties to satisfy the Judgment. Moreover, as a judgment lien creditor who has recorded his lien, the Plaintiff possesses rights that are identical to a bona fide purchaser for value. In sum, unless or until the Judgment is satisfied or overturned, the Plaintiff's interest in the Boyce Properties are primary and superior to all third-parties and there is absolutely no question that the Boyce Properties will be available to satisfy the Judgment if it is ultimately upheld on appeal. 16. Accordingly, for the reasons set forth herein and in the Motion, the Boyces

respectfully request that the Court grant them leave to pledge the Boyce Properties as

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security in lieu of a supersedeas bond and stay execution of the Judgment pending appeal. Respectfully submitted this 12th day of June, 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 12th day of June, 2007, the foregoing REPLY IN SUPPORT OF 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 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 s / Joanne Torre Hyman Joanne Torre Hyman Paralegal

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