Free Response to Motion - District Court of Colorado - Colorado

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

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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 RESPONSE TO FORTHWITH RENEWED MOTION FOR STAY OF EXECUTION PENDING APPEAL AND FOR APPROVAL OF REAL PROPERTY AS ALTERNATIVE SECURITY IN LIEU OF SUPERSEDEAS BOND Plaintiff Peter Hornick, by and through his undersigned attorneys, files the following Response to Defendants'/Counterclaimants' Forthwith Renewed Motion for Stay of Execution Pending Appeal and for Approval of Real Property as Alternate Security in Lieu of Supersedeas Bond (Document 169):

INTRODUCTION

This matter was extensively briefed when Defendants/Counterclaimants filed their original Motion for Approval of Real Property as Alternate Security in lieu of Supersedeas Bond (Document 145). No relevant law has since changed, nor have any facts that might or might not support the motion changed. Defendants just want

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another bite at the apple. While giving them such a bite is in the discretion of the Court, this Court should not do so, for the reasons discussed below.

1. The Law of the Case Doctrine Strongly Discourages Relitigating This Issue

The Boyces characterize this Court's recitation of the reasons why their evidence was insufficient to support their request for alternate security as an invitation to try again with better evidence next time. The doctrine of the law of the case would indicate that such is an overly optimistic reading of Order denying the stay (Document 165).

The law of the case doctrine is designed to promote finality. It operates to prevent the relitigation of issues once decided in a case in subsequent proceedings in the same case. Arizona v. California, 460 U.S. 605, 618-619 (1983); United States v. Monsivais, 946 F.2d 114, 115-116 (10th Cir. 1991); Flannery v. Allstate Ins. Co., 49 F.Supp. 2d 1223, 1226 (D. Colo. 1999). The law of the case doctrine is a rule of practice in the courts, not a limit on their power, but the circumstances justifying departure from it are narrow: the law of the case must be followed "unless the evidence on a subsequent trial was substantially different, controlling authority has since made a contrary decision of the law applicable to such issues, or the decision was clearly erroneous and would work a manifest injustice." Monsivais, supra at 117 (quoting White v. Murtha, 377 F.2d 428, 432 (5th Cir.1967). In this instance, the only changed circumstance is a better marshaling of evidence available to Defendants at the time the

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prior motion was made. The law of the case does not allow for continual relitigation of that issue. Accordingly, this Court should not indulge Defendants with another chance to present evidence that could have been presented in the first Motion.

2. Departure from a full bond is not appropriate in this case

As discussed extensively in the earlier briefing, a supersedeas bond in the full amount is a normal condition of a stay. Miami International Realty Co., supra, and see Poplar Grove Planting and Refining Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. 1979) (stating that the burden is on the moving party to demonstrate objectively the reasons for departure from the full bond requirement; the judgment creditor need not initiate contrary proof). Federal Prescription Service, Inc. v. American Pharmaceutical Ass'n, 636 F.2d 755, 760-761 (D.C.Cir.1980) ("Because the stay operates for the appellant's benefit and deprives the appellee of the immediate benefits of his judgment, a full supersedeas bond should be the requirement in normal circumstances, such as where there is some reasonable likelihood of the judgment debtor's inability or unwillingness to satisfy the judgment in full upon ultimate disposition of the case and where posting adequate security is practicable."). The "full amount" includes the whole amount of the judgment remaining unsatisfied, costs on the appeal, interest, and damages for delay. Poplar Grove, 600 F.2d at 1191. Departure from a requirement of the full amount must be justified.

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Defendants cite to Athridge v. Iglesias, 464 F. Supp. 2d 19 (D.D.C. 2006) as a case similar to this one where real estate was substituted as a bond. However, there are significant differences. In Atheridge, the Defendant was actively disputing with his insurance carrier the issue of whether the insurance carrier had an obligation to help obtain a supersedeas bond, with some prospect in sight of actually being able to obtain the bond. The stay Defendants were seeking was only a thirty day stay in order to resolve that conflict. 464 F. Supp. 2d at 23. Here, on the contrary, the stay defendants are seeking is for the entire appeal period, which could easily run 18 months or longer.

Courts generally consider several factors in determining whether to waive the full supersedeas bond requirement: a. b. The complexity of the collection process; The amount of time required to obtain a judgment after it is affirmed on appeal; c. The degree of confidence the district court has in the availability of funds to pay the judgment; d. Whether the appellant's ability to pay the judgment is so plain that the cost of a bond would be a waste of money; e. Whether the appellant is in such a precarious financial situation that the requirement to post a bond would place appellant's other creditors at risk. Dillon v. City of Chicago, 866 F.2d 902, 904-905 (7th Cir. 1988)(waiving a bond requirement because the City demonstrated the existence of previously appropriated and available funds for the purpose of paying judgments without substantial delay or Page 4 of 9

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other difficulty). In this case, there has been no assertion that posting a bond in the full amount would impinge upon any of these factors in a negative way. The five factors, in fact, argue for requiring a cash bond: a. Complexity of collection: As evidenced by the Keserich Appraisals, in order to obtain value out of the real estate Boyce proposes as sufficient security, the property would need to be on the market for at least a year, and involve commissions and other expenses. The Boyces earlier affidavit concerning value, from Woodora Eisenaur, indicated the property may need to be on the market for five years. It is for that very reason, presumably, that bonding companies refuse to become involved in the complicated collection process and require full cash security. b. Amount of time for collection: See above. Delaying the time to begin collection by the time required for the appeal to run its course would result in substantial delay to an already slow process. c. Availability of funds: Boyces have argued that they are cash poor. Funds are therefore not readily available. d. e. Ability to pay: see c. Placing other creditors at risk: The amount of equity in real property cited by the Boyces would indicate that other creditors would not be placed at risk by requiring Boyces to post a full cash supersedeas bond.

Defendants' proposed security of merely leaving in place Plaintiff's judgment lien is inadequate for several reasons: Page 5 of 9

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1. The two main asset Defendants have identified that are subject to the judgment lien are the Villa Grove Ranch, which Defendants acknowledge is encumbered by a deed of trust in favor of First Southwest Bank in an amount exceeding one million dollars, and the Sierra West parcel, which is similarly subject to a lien amounting to almost a third of its value. Although it is true that there is $1.125 million on deposit in the Court Registry pursuant to Saguache County District Court Case No. 05CV53, concerning the Villa Grove Ranch, those funds are subject to disposition only pursuant to Court Order, and there is no guarantee that they would become available to Plaintiffs even if the case were dismissed. As evidenced by the notice of lis pendens filed in that case, title to the property is the subject of ongoing litigation. It is quite possible that Defendants could be found to have no interest in the property at all, thus making any value of the property as security for the judgment entirely illusory. Furthermore, The Boyce's Motion does not state what the cost of servicing the loans on the property is, nor account for the costs of holding, marketing and selling the property, other than assuming a combined sales and depreciation deduction of 10%, with no support for that number. Thus, even if the Boyces appraisal figures are accurate, they must be reduced by significant, and unspecified, amounts, leaving security potentially not much, if at all, in excess of the judgment.

2. Gary Boyce is a defendant in Saguache County District Court Case No. 05CV45, where Plaintiff Vaca Partners, L.P. is seeking damages in excess of Page 6 of 9

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$1.2 million. That case is currently scheduled for a one week trial beginning September 24, 2007. Any delay in securing and executing upon assets of Gary Boyce could thus result in significant prejudice to Peter Hornick, in the event real property assets are insufficient to satisfy the judgment.

3. The fact that insurance companies will not provide a supersedeas bond in the absence of full cash security points up the inadequacy of allowing a non-liquid asset such as real estate to substitute for the usual cash bond requirement. Because of the delays and uncertainty involved in converting real estate to a liquid asset, insurance companies consider the real estate inadequate. Private litigants have the same concerns. If Ms. Eisenhauer's estimate of 5 years to sell property is accurate, then clearly the value placed on the property is too high for purposes of satisfying the intention behind Rule 62 that the judgment creditor be secure in his judgment. The relevant issue is not what the property might bring after five years of marketing, but what it would bring in the fire-sale context of foreclosure of a judgment lien.

In order for real property to provide adequate substitute for a cash bond, the property in an amount demonstrated to be of sufficient value should be conveyed to Defendant and held in escrow as security, such that if Defendant is unsuccessful on appeal, Plaintiff could immediately take title to the property, just as would be possible with a cash bond.

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3. The Boyces can obtain a cash bond Contrary to Defendants' assertion, this Court did not "[find]. . . that the Boyces had demonstrated an inability to obtain a cash bond." (Motion,Page 4). This Court rather stated "Gary Boyce says he has attempted to obtain a cash bond, but has been unable to do so. Motion for stay of execution, Exhibit A (Boyce Affidavit). A letter from Aarena Bonding Services, Inc., filed as Exhibit E to the Boyces' motion, also indicates that the Boyces have not been able to obtain a cash bond." April 11, 2007 Order (Document 165) at Page 3. This is a far cry from a finding of inability to obtain a cash bond. CONCLUSION

For the reasons stated above, Plaintiff requests that this Court Deny Defendants' Motion for substitution of real estate for the cash bond in the full amount normally required for a supersedeas bond.

Respectfully Submitted this 29th day of May, 2007.

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 Page 8 of 9

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CERTIFICATE OF SERVICE I hereby certify that on the 29th day of May, 2007, I electronically filed the foregoing Plaintiff Hornick's RESPONSE TO FORTHWITH RENEWED MOTION FOR STAY OF EXECUTION PENDING APPEAL AND FOR APPROVAL OF REAL PROPERTY AS ALTERNATIVE SECURITY IN LIEU OF SUPERSEDEAS BOND 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]

s/ Erich Schwiesow

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