Free Brief - 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 Civil Action No. 03-CV-02504-REB-CBS PETER HORNICK, an individual, Plaintiff, vs. GARY BOYCE, and JOANNE BOYCE, individuals Defendants/Counterclaimants

DEFENDANTS' BENCH BRIEF REGARDING BOYCES' DECEMBER 18TH OFFER TO RECEIVE PERFORMANCE AND EXCLUSION OF SETTLEMENT DISCUSSIONS

Defendants, Gary and Joanne Boyce (collectively, the "Boyces") submit this Bench Brief addressing certain legal and evidentiary issues arising from the parties' settlement discussions following the failed Closing on December 10, 2001. In sum, the Boyces did not forfeit the right to act on the Plaintiff's repudiation of the Option Agreement conducting settlement discussions and by inviting performance on December 18, 2001. In any event, all such settlement discussions occurring after December 10, 2001 are inadmissable under Fed. R. Evid. 408 if offered to prove the liability (or innocence) of either party.

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I. Relevant Facts1: 1. This case arises from an option agreement (the "Option Agreement") for

Plaintiff Peter Hornick to purchase the Boyces' membership interest in Villa Grove Ranch Co., LLC ("Villa Grove") for the sum of $500,000. Ex. 5, Option Agreement.2 The Option Agreement required the parties to close the transaction by December 10, 2001 (i.e., 60 days after Hornick exercised the Option). Ex. 5 § 4. 2. As the Court is aware, on December 10, 2001, the designated date of

Closing, attorney Robert Bruce rejected the Boyces' proposed form of transfer for their membership interest (the "Boyces' Assignment") and proposed his own unexecuted form (the "Brupbacher Assignment"). Ex. 17, Fax from R. Bruce to J. Lubitz, dated December 10, 2001. In rejecting the Boyces' Assignment, Mr. Bruce represented that he acted on behalf of Ross Brupbacher, to whom Hornick had assigned his rights and duties under the Option Agreement.3 Test. of R. Brupbacher. The evidence, however, shows that Brupbacher had insufficient funds on deposit with Mr. Bruce on December 10, 2001, with which to pay the $500,000 purchase price under the Option Agreement. Ex. 13 and Test. of R. Bruce.

These facts are detailed further in Defendants' Proposed Findings of Fact, Conclusions of Law and Order, filed on August 1, 2006, but are truncated here to clarify the issues addressed in this brief. All exhibit citations in this bench brief refer to the exhibits included in Defendants' Proposed Findings of Fact, Conclusions of Law and Order. According to Hornick, Brupbacher subsequently assigned these right back to Hornick, thus providing Hornick with the requisite standing to bring this suit. 2
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3.

During this trial, the Boyces have presented evidence showing that the

Boyces' Assignment was a commercially reasonable transfer of their membership interest and that Brupbacher repudiated the Option Agreement when Mr. Bruce's unjustifiably rejected the Boyces' Assignment. Brupbacher also repudiated the Option Agreement because he had insufficient funds available at Closing. See Defendants' Proposed Findings of Fact at ¶¶ 24-39. 4. Following the December 10th failed Closing, the parties engaged in

settlement discussions (via their respective attorneys) to resolve their dispute over the failed closing. Test. of G. Boyce.4 5. As part of these settlement discussions, on December 11, 2001, one day

after performance was due under the Option Agreement, Mr. Bruce notified the Boyces that he now had funds available in his trust account to pay the $500,000 purchase price. Ex. 16, Letter from R. Bruce to G. Boyce, dated December 11, 2001. This purported tender of performance, however, was conditioned upon the Boyces signing and delivering the Brupbacher Assignment. Ex. 16. The Boyces did not accept Brupbacher's untimely tender of performance. Test. of G. Boyce. 6. On December 18, 2001, the Boyces faxed an executed assignment to Bruce

in the hopes of settling the matter. Ex. 26. Fax from J. Lubitz to R. Bruce, dated December 18, 2001. Despite these efforts, the parties were unable to resolve their dispute.

Brupbacher did not personally participate in any of settlement discussions. Test. of R. Brupbacher. 3

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II.

ARGUMENT A. The Boyces Did Not Forfeit the Right to Treat Brupbacher's Repudiation as a Breach

Brupbacher repudiated the Option Agreement when Mr. Bruce rejected the Boyces' Assignment on December 10, 2001. Once Brupbacher repudiated the Option Agreement, none of the subsequent settlement negotiations between the parties "revived" it. Specifically, the Boyces' December 18th transmission of the Boyces' Assignment did not somehow "forfeit" the Boyces' right to act on Brupbacher's breach of the Option Agreement. Colorado follows well-established contract law on this matter. Highlands Ranch Univ. Park, LLC v. Uno of Highlands Ranch, Inc., 129 P.3d 1020, 1024 (Colo. App. 2005). Accord AG Props. of Kingston, LLC v. Besicorp Empire Dev. Co., LLC, 788 N.Y.S.2d 694, 696 (N.Y. App. Div. 2005); Builders Concrete Co. of Morton v. Fred Faubel & Sons, Inc., 373 N.E.2d 863, 868 (Ill. App. 1978). "A continued willingness of the injured party to receive performance after a repudiation is an indication that, if the repudiator will withdraw its renunciation, but not otherwise, the contract may proceed." Highlands Ranch, 129 P.3d at 1024 (citing BuViBar Petroleum Corp. v. Krow, 40 F.2d 488, 492 (10th Cir.1930)). The refusal of the renouncing party to retract the repudiation amounts to a continuation of the renunciation, and the non-breaching party may still elect to treat such repudiation as a breach. Highlands Ranch, 129 P.3d at 1024. (citing BuViBar Petroleum Corp., 40 F.2d at 492; 3 Williston on Contracts § 334). Highlands Ranch is particularly on point to the instant case, as it concerned a 4

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ground lease under which the tenant was to construct a building and then lease the premises for twenty years. Highlands Ranch, 129 P.3d at 1022. About six months after signing the lease, the tenant informed the landlord that it would not perform. Id. at 1023. Five months after this repudiation, the landlord nevertheless tendered the pad site and demanded performance from the tenant, and the tenant continued to refuse to perform. Id. In a suit by the landlord based upon this breach, the tenant argued that the tender of the pad site indicated that the lease was still in force. Id. The court rejected this

argument, however, noting that landlord's willingness to allow the tenant to perform did not obviate landlord's right to act on the breach if the tenant continued to refuse performance. Id. at 1024. Here, on December 18th, the Boyces indicated their willingness to allow Brupbacher to perform notwithstanding his repudiation by transmitting the Boyces' Assignment to Mr. Bruce. While this gave Brupbacher the ability to withdraw his repudiation and perform, it did not eliminate the Boyces' prerogative to act on the breach when Brupbacher persisted in his refusal. Accordingly, the Boyces' right to rescind the Option Agreement based upon that breach remains intact. B. Offers of Settlement Made by the Parties After the December 10, 2001 Closing Date Are Inadmissible

Even if the Court were to attach legal significance to the December 18th transmission, Fed. R. Evid. 408 is an exclusionary rule providing that "[e]vidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim 5

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which was disputed as to either validity or amount is not admissible to prove liability for or invalidity of the claim or its amount." Rule 408 reflects a well-recognized public policy in favor of non-litigious solutions to disputes. SW Nurseries, LLC v. Florists Mut. Ins., 266 F. Supp. 2d 1253, 1257 (D. Colo. 2003). Colorado recognizes only few exceptions to this general rule: evidence of settlement offers may be admissible to challenge a claim of undue delay, to prove the defendant's knowledge and intent, or for purposes of impeachment or rebuttal. Fed. R. Evid. 408. Accord SW Nurseries,266 F. Supp. 2d at 1257 (D. Colo. 2003). Here, the discussions between the parties following the failed December 10th Closing were clearly settlement negotiations. On December 11, 2001, for example, Mr. Bruce indicated that Brupbacher was ready to make the $500,000 payment if the Boyces' would sign the Brupbacher Assignment - an obvious offer to compromise on what they perceived as a breach by the Boyces. In the same vein, the Boyces transmitted an executed assignment on December 18, 2001, as an attempt to compromise by offering to close the deal well past the date mandated by the Option Agreement. These events

occurred at a time when the parties were disputing each other's performance under the Option Agreement, and at a time when litigation was threatened. Any attempt by Hornick to now characterize these exchanges as anything but settlement discussions - perhaps as some preternaturally long closing odyssey - is incredulous at best. One need only look at the conditional nature of the discussions to see that both parties thought the other in breach and, by extension, that neither party felt any

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obligation to perform after December 10, 2001. For example, Brupbacker offered to pay the $500,000 and to tacitly overlook the Boyces' tender of the Boyces' Assignment, if the Boyces would sign the Brupbacher Assignment. The Boyces similarly offered to

compromise but only if Brupbacher paid the $500,000 and signed the Boyces' Assignment on December 18, 2001. The tentative, conditional language between the parties is the hallmark of settlement discussions and not the effect of two parties who believe themselves already obligated to perform and are just working out the details. What is more, both parties promised to compromise their legal positions on a perceived breach in order to remedy the dispute arising from the failed December 10, 2001, closing. This very situation underscores the policy reasons behind Rule 408. Fed. R. Evid. 408 advisory committee notes (Rule 408 "promot[es] the public policy favoring the compromise and settlement of disputes). If evidence of settlement discussions, such as those occurring in this case after December 10, 2001, were admissible to show the validity or invalidity of a claim, it would create a serious impediment to informal settlement discussions by encouraging disputing parties to entrench in their respective legal positions instead of working out their differences. For all these reasons, the Court should exclude evidence regarding the parties' discussions and offers of compromise following the December 10, 2001, closing date if offered to prove the liability of either party for the claims at issue in this case. III. CONCLUSION The Boyces' December 18th transmission of an executed assignment merely

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provided Brupbacher an opportunity to perform under the Option Agreement and did not eliminate the Boyces' ability to sue based on the repudiation when Brupbacher continued his refusal. Further, all settlement discussions between the parties occurring after the December 10, 2001, Closing date are inadmissible to prove the liability of either party for the claims asserted in this case.

Date: August 7, 2006.

Respectfully submitted, HALE FRIESEN LLP (Original signature on file) /s/ Allan L. Hale Allan L. Hale, Reg. No. #14885 Hale Friesen, LLP 1430 Wynkoop Street, Suite 300 Denver, Colorado 80202 Telephone: (720) 904-6000 Counsel for Defendants and Counterclaimants Gary Boyce and Joanne Boyce

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CERTIFICATE OF SERVICE I certify that on the 7th day of August, 2006, the foregoing DEFENDANTS' BOYCES' DECEMBER 18TH OFFER TO RECEIVE PERFORMANCE AND EXCLUSION OF SETTLEMENT DISCUSSIONS was served on all parties and other interested persons by HAND DELIVERY: Erich Schwiesow, Esq. Helen Sigmond, Esq. 311 San Juan Avenue P.O. Box 1270 Alamosa, CO 81101-7195

/s/ Chris Hyland

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