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 COMBINED RESPONSE TO MOTION FOR INTERIM STAY OF EXECUTION AND TO 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 Combined Response to Defendants' Motion for Interim Stay of Execution and Defendants' Motion for Stay of Execution Pending Appeal and for Approval of Real Property as Alternative Security in Lieu of Supersedeas Bond. Plaintiff only opposes an interim stay to the extent of requiring Defendant to Answer Judgment Debtor Interrogatories previously propounded. While Plaintiff has no objection to a stay of execution upon the posting of a sufficient supersedeas bond, Plaintiff does object to the sufficiency of the security proposed by Defendants.

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A. THE MOTION FOR INTERIM STAY 1. Plaintiff does not object to an interim stay of execution pending resolution of Defendants' Motion to substitute real estate for a supersedeas bond EXCEPT TO THE EXTENT Defendants seek to continue to avoid answering the Fed. R. Civ. P. 69 Interrogatories served upon them in this Case on October 3, 2006 For reasons discussed below, the answers to those Interrogatories are necessary to evaluate the issues raised in the Boyce's Motion for Approval of Real Property as Alternative Collateral.

B. THE MOTION FOR STAY PENDING APPEAL

2.

Defendants have proposed that this Court issue a stay of execution of the Judgment entered January 2, 2007, pursuant to Fed. R. Civ. P. 62(d) pending their appeal of that judgment. Defendants propose to post no bond for such a stay, rather asserting that the judgment lien recorded by Plaintiff is sufficient security to ensure Plaintiff from loss resulting from delay.

3.

The general requirement for a stay pursuant to Fed. R. Civ. P. is that the stay be conditioned upon a full supersedeas bond in the amount of the judgment. Miami International Realty Co. v. Paynter, 807 F.2d 871, 873 (10th Cir. 1986) ("the purpose of a supersedeas bond is to secure an appellee from loss resulting from

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the stay of execution and. . . a full supersedeas bond should be the requirement in normal circumstances"). Certainly, district courts have discretion in setting supersedeas bonds for stays pursuant to Rule 62(d). However, only in unusual circumstances is it appropriate not to require a full bond. Such circumstances may include a defendant's showing of lack of sufficient assets to obtain a bond in the full amount, or other impracticality in obtaining such a bond. 807 F. 2d at 873, 874.

C. DEFENDANTS' ASSERTED INABILITY TO OBTAIN A BOND IS INCOMPLETE, IF NOT DISINGENUOUS

4.

Defendants have asserted that they have attempted to obtain a bond from a bonding company, and that all bonding companies require full cash collateral for obtaining such a bond. For purposes of argument, Plaintiff assumes that statement to be true. However, Defendants have not shown an inability to acquire the requisite cash as security.

5.

Defendants' Motion recites "The Boyces contacted First Southwest Bank and attempted to obtain the collateral required by the insurance companies, but, due to the nature of their business operation and current liabilities, including the Hornick Judgement, judgment liens, and lis pendens, they were unable to do so."

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Motion at 10-11. The Motion cites Gary Boyce's Affidavit at paragraph 13 as factual support for that statement. The Affidavit, however, says nothing of the sort. It merely recites that Gary Boyce tried through several sources to obtain a cash bond, but was unable to do so.

6.

In fact, if the value of Boyce's unencumbered real property is as Boyce states, then the Boyces should be able to obtain sufficient cash from a mortgage on their property to be able to provide sufficient cash to either obtain the necessary bond from a bonding company or post the cash itself as bond.

7.

Similarly, Gary Boyce's affidavit states, at paragraph 12, that he and his wife, Joanne Boyce, have "no material liquid assets" other than the real estate identified earlier in the affidavit. Accepting, for the sake of argument, that half a million dollars worth of antiques and furniture is not a material asset, as asserted by Boyce in that paragraph, the statement says nothing of what other assets such as stocks, bonds, notes, and other choses in action may be available to generate the cash necessary to post the bond. It is for this very reason that Defendants must answer the Rule 69 Interrogatories, as discussed above, before they can credibly assert an inability to obtain a bond that would take them out of the normal circumstances.

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8.

There is no indication that this case is not within the realm of the normal, where a bond in the full amount would be a 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.").

9.

Defendants cite to Athridge v. Iglesias, ­ F. Supp. 2d ­ , 2006 WL 3627317, (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. The Court did not want to allow the intransigence of the insurance company to operate to the disadvantage of the Defendant. That fact in and of itself provides

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the unusual circumstance taking this matter out of the realm of the usual.

10.

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 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 Eisenhauer letter, Exhibit C, in order to obtain value out of the real estate Boyce proposes as sufficient

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security, the property may need to be on the market for five years, and involve commissions and other expenses. 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.

As further discussed below, the failure to require a full bond as a condition of a stay pursuant to Rule 62(b) will adversely affect Mr. Hornick.

D. DEFENDANT'S PROPOSED SECURITY IS INADEQUATE 11. Defendants' proposed security of merely leaving in place Plaintiff's judgment lien is inadequate for several reasons: a. The main asset Defendants have identified that is subject to the judgment

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lien is 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. 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, 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. b. Defendants have not even identified other assets other than to describe the total number of acres in property denoted the Sierra West Parcel, the Hutchinson Homestead, and the Glenn Lot. Exhibit C, the "Broker's Opinion" from Rose Realty is so vague as to be completely unusable for use in establishing the value of the properties. The location of the properties is not identified, nor is any methodology used by Ms. Eisenhauer to reach her conclusions. Although the letter recites that "these properties could potentially sell quickly," it goes on to state that "you could realistically anticipate them taking up to five years to sell."

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c.

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 $1.2 million. See Vaca's Colo. R. Civ. P. 26(a)(1) Disclosures in that case, attached as Exhibit 1. That case has pending motions for partial and complete summary judgment, and is scheduled for a three day trial commencing December 6, 2006. Any delay in securing and executing upon assets of Gary Boyce could thus result in significant prejudice to Peter Hornick.

d.

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 contained in Exhibit C 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.

12.

In order for real property to provide adequate substitute for a cash bond, the

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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.

CONCLUSION For the reasons stated above, Plaintiff requests that this Court grant Defendants' Motion for an interim stay on the condition that they answer the Rule 69 Interrogatories propounded to them earlier, and that this Court Deny Defendants' Motion for substitution of real estate for the cash bond normally required for a supersedeas bond, or, at the very least, allow expeditious briefing of that matter after Defendants' have fully answered the judgment debtor interrogatories

Respectfully Submitted this 9th day of February, 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

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CERTIFICATE OF SERVICE I hereby certify that on the 9th day of February, 2007, I electronically filed the foregoing Plaintiff Hornick's COMBINED RESPONSE TO MOTION FOR INTERIM STAY OF EXECUTION AND TO 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]

s/ Erich Schwiesow

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