Robert W. Thomas and Anne McDonald Thomas Revocable Trust, The v. Inland Pacific Colorado, LLC et al
ORDER. ORDERED that The Thomas Trust's Motion for Summary Judgment Reforming Deed of Trust and Ordering Payment of Promissory Note filed January 11, 2012 12 is GRANTED IN PART AND DENIED IN PART. FURTHER ORDERED that Plaintiff's Motion to Refer Pending Dispositive Motions to United States Magistrate Judge Kristen L. Mix for Report and Recommendation filed April 4, 2012 43 is DENIED, by Chief Judge Wiley Y. Daniel on 9/25/12.(sgrim)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Wiley Y. Daniel
Civil Action No. 11-cv-03333-WYD-KLM
THE ROBERT W. THOMAS AND ANNE MCDONALD THOMAS REVOCABLE
TRUST, Trust Domiciled in the State of Washington,
INLAND PACIFIC COLORADO, LLC, a Nevada limited liability company;
FIRST WESTERN TRUST BANK, a Colorado company,
WESTMINSTER PROMENADE DEVELOPMENT COMPANY II, LLC, a
Nevada limited liability company, and TIMOTHY and MEGAN O’BYRNE, husband and
wife and residents of Colorado, and their marital community.
THIS MATTER is before the Court on the Thomas Trust’s Motion for Summary
Judgment Reforming Deed of Trust and Ordering Payment of Promissory Note filed on
January 11, 2012. On February 9, 2012, Defendants Inland Pacific Colorado, LLC
[“IPC”] and Westminster Promenade Development Company II, LLC [“WPDC”]
collectively filed a response, and First Western Trust Bank filed a separate response.1
Replies were filed by the Trust on February 24 and February 27, 2012.
Plaintiff The Robert W. Thomas and Anne McDonald Thomas Revocable Trust shall be referred
to herein as “the Trust”. IPC and WPDC may collectively be referred to herein as “Defendants.”
Defendant First Western Trust Bank will separately be referred to as “First Western”. I note that since the
filing of the summary judgment motion, an Amended Complaint was filed adding additional defendants,
including Timothy O’Byrne [“O’Byrne”] who is referenced in this Order. The Trust advised the Court by
Statement filed April 9, 2012, that the Amended Complaint does not impact the summary judgment
The Trust moves for summary judgment ordering that 1) IPC is in default of its
obligations under a $1 million promissory note with accrued interest and attorney fees
[the “Note”]; and 2) judgment be entered against IPC in the amount of all sums due
under the Note, including the full principal sum, interest, and default interest accrued
since the date the Note was due, plus attorney fees and related collection costs. The
Trust also seeks entry of judgment against IPC, WPDC and First Western requiring
reformation ab initio of the deed of trust provided by IPC for the purpose of securing its
obligations under the Note. This motion is actually a motion for partial summary
judgment, as it does not ask for judgment on all the claims. For the reasons discussed
below, the Trust’s motion is granted in part and denied in part. I also deny for the
record Plaintiff’s Motion to Refer Pending Dispositive Motions to United States
Magistrate Judge Kristen L. Mix for Report and Recommendation filed April 4, 2012.
The Trust’s Statement of Facts2
Plaintiff is a trust domiciled in the State of Washington with Robert W. Thomas
and Anne McDonald Thomas [the “Thomases”] as the trustees. IPC and WPDC are
limited liability companies.3 WPDC is owned by IPC, its sole member. On May 16,
I have cited to the record only where the facts are disputed or when I felt it was necessary.
The Trust asserts that IPC and WPDC are controlled by O’Byrne or that he has de facto control,
stating that O’Byrne represented to the Trust that he has legal authority to act on behalf of both entities.
(Ann McDonald Thomas Decl. [“Thomas Decl.”] ¶ 3, attached to Pl.’s Mot. Summ. J.) IPC and WPDC
deny that they are controlled by O’Byrne, arguing that they follow all statutes regarding limited liability
company structure and management and that O'Byrne has no more say or control in IPC or WPDC than
any other manager. (O’Bryne Decl. ¶¶ 3-4, Ex. A to Defs.’ IPC and WPDC’s Resp. to Pl.’s Mot. Summ. J.
2008, following negotiations with O’Byrne for the sale of the Trust’s interest in property
in Westminster, Colorado [the “Property”], the Trust entered into the Agreement of
Purchase and Sale with IPC for sale of the Property to IPC or its designee for
$2,106,321. (Thomas Decl. ¶ 4 and Ex. 1, as corrected in the Notice of Filing Errata
and Correction Concerning the Thomas Trust’s Mot. for Summ. J. [“Errata”].)4
IPC agreed to pay the Trust partly in cash and partly via the Note which was
delivered on May 15, 2008. O’Byrne executed the Note on behalf of IPC as its
President/Manager. The Note stated, “The indebtedness evidenced by the Note is
secured by a Deed of Trust dated May 6, 2008. . . .” (Thomas Decl. Ex. 2, as corrected
in the Errata.)5 A Deed of Trust [“DOT”] was executed by the parties. (Id. Ex. 3.) While
the DOT states that it “is made this 6th day of May, 2008”, it was actually signed by
O’Byrne on behalf of IPC on June 5, 2008. (Id.) Indeed, while the Trust asserted in its
motion that the “closing” took place on May 15, 2008, it later admitted in its reply that
the Note and DOT were each negotiated and executed in June 2008.
In the Note, IPC agreed to pay the Trust “the principle sum of ONE MILLION
DOLLARS ($1,000,000.00); with interest thereon at six percent (6 %), simple interest,
per annum, compounded annually.” (Thomas Decl. Ex. 2.) The Note also provides that
The Property was originally acquired by Doug Wetter [“Wetter”] in 2005 for $3,740,000.
Defendants note that following Wetter's purchase of the Property, he contacted the Thomases to see if the
Trust had any interest in investing in the Property. The Thomases, through the Trust, agreed to invest in
the Property and the arrangement created a situation whereby Wetter owned 50% of the Property and the
Trust owned the remaining 50% of the Property. On June 5, 2008, Defendants purchased Wetter's 50%
interest in the Property for $1,831,930.00.
Hereafter, when I reference the exhibits to Thomas’ Declaration, I will be referring to the
corrected exhibits in the Errata.
“[t]he entire amount, with interest, and any charges due pursuant to the [DOT], are due
in twenty-four (24) months (“Due Date”). . . .If not sooner paid, the entire principal
amount outstanding and accrued interest thereon shall be due and payable on May 14,
2010.” (Id.) “If any payment required by this Notice is not paid when due, or if any
default under the [DOT] securing this Notice occurs, the entire principal amount
outstanding and accrued interest thereon shall at once become due and payable at the
option of the Note Holder and the indebtedness shall bear interest a [sic] the rate of 12
percent per annum from the date of default.” (Id). Expenses and attorneys’ fees were
also required to be paid if applicable. (Id.)
On May 14, 2010, the Trust asserts that IPC failed to pay its Note obligations.
(Thomas Decl. ¶ 7.) Defendants deny that a default occurred, as it asserts there were
multiple oral and written agreements that altered the terms of the Note. This allegedly
included oral agreements with the Trust whereby the Trust and Defendants agreed that
no payment would be due until development of the Property or a value creation event
occurred, and is discussed in more detail in Section III.B.1, infra. As no development or
a value creation event occurred, Defendants assert that no payment was due and there
was no default under the terms of the Note. (O’Byrne Decl. ¶¶11-13, 19-22, 24, 26-28.)
The Trust denies that the asserted oral agreements were ever made, and/or asserts
that any oral agreements contradict and vary the terms of unambiguous agreements
IPC made a partial interest payment of $120,000 on or about May 19, 2010, but
this payment was less than the total interest due under the Note, excluding default
interest, which the Trust asserts had already begun to accrue before the partial interest
payment. (Thomas Decl. ¶ 7.) Defendants admit making the interest payment, but
deny that a default had occurred on the Note. Thus, they assert that default interest
had not yet begun to accrue. (O’Byrne Decl. ¶ 25.) It is undisputed that no payment
has been made since the $120,000 partial interest payment.
The Trust asserts that after defaulting on the Note, O’Byrne acknowledged his
obligation to pay the Trust in an email dated May 16, 2010. (Thomas Decl. Ex. 4.) The
email from O’Byrne to Ann McDonald Thomas stated, “Getting you paid is a top priority
for us as I understand your current financial needs. We don’t want to be an undue
cause of stress for you and we want to get you paid as quickly as possible, which we
will do.” (Id.)6 On many occasions the Trust, through counsel, has notified IPC of its
continuing default and has demanded payment. Between the spring of 2010 and early
2011, the Trust and O’Byrne (mainly through counsel) also discussed potential payment
arrangements, but no payments have been made.
The Trust asserts that as of January 11, 2012, the Note obligation is $1,000,000
in principal, $3,600 in original interest at 6%, and $209,103 in accrued default interest,
exclusive of attorney’s fees and other costs. (Thomas Decl. ¶ 9 and Ex. 5.) This is
denied by Defendants, as they deny that default has occurred and dispute the amount
of interest due under the Note as well as the calculation. (O’Byrne Decl. ¶¶ 14, 28.)
Defendants deny that O’Byrne acknowledged any obligation to pay the Trust in the email.
Rather, they assert that O’Byrne was stating the Trust would be paid as soon as the conditions precedent
required by the subsequent oral and written agreements were satisfied. (O’Byrne Decl. ¶ 26.)
Under the terms of the Agreement of Purchase and Sale between IPC and the
Trust, the Trust was obligated to transfer the Property to IPC “or Buyer’s 1031 exchange
assignee” and to cooperate in executing such additional documents (not specifically
identified) as might be necessary to facilitate a tax-free exchange, pursuant to Section
1031 of the United States Internal Revenue Code (26 U.S.C. §1031) [the “1031
Exchange”].7 IPC entered into an Assignment Agreement transferring all its “rights, but
not its obligations” in the Property to an intermediary, First American Exchange
The Trust signed the Assignment Agreement as required, as did the intermediary
and IPC, on May 29 and June 4, 2008. (Thomas Decl. Ex. 7.) The intermediary agreed
that a separate entity—WPDC—would take title to the Property. Defendants assert that
the Assignment Agreement reflects the part-oral, part-written nature of the agreement
between the parties; the Trust denies the existence of any oral agreement.8
Pursuant to its agreement to transfer the Property to Buyer’s assignee, the Trust
deeded the Property to WPDC on June 4, 2008. The Trust asserts that this was done
at the instruction or request of O’Byrne. (Thomas Decl. ¶ 8.) The total consideration
paid was $2,016,321.73, which included the “Note to Thomas Trust.”
One day after the closing papers were signed, on June 5, 2008, O’Byrne
executed the DOT on behalf of IPC, purporting to grant rights in the Property as the
While Defendants assert in their response that the Agreement of Purchase and Sale was not
between IPC and the Trust, the Agreement does not support this as it was signed by those parties.
Defendants also point out that the Assignment Agreement refers to IPC as the buyer and the
Thomas Trust, DS Wetter, LLC and RM Wetter, LLC as sellers.
Trust’s security for the Note. The Trust asserts that this execution of the DOT by IPC
was not in accordance with the parties’ agreement, which was that there would be an
effective transfer via the DOT’s execution by the owner of the Property, which had
become WPDC. (Thomas Decl. Exs. 1-3.) The DOT itself states that “Borrower
covenants that Borrower owns and has the right to grant and convey the Property, and
warrants title to same…” (Id. Ex. 3 ¶ 3.) The Trust asserts that WPDC held title to the
Property when the DOT was signed only because the Trust was obligated to, and
therefore did, transfer title to the designated entity—WPDC—as provided in the
Agreement. (Id., Ex. 1 at ¶ 5.1.1.) In executing the DOT, the Trust maintains that IPC
purported to grant rights in the Property to the Trust as security for the Note, as required
by the parties’ agreements, but WPDC had acquired title in the meantime.
In response to the facts in the previous paragraph, Defendants assert that IPC
had nothing to convey at the time the DOT was entered into as it did not own any
interest in the Property. (O’Byrne Decl. ¶ 16.) They also assert that the Trust was
aware that IPC had nothing to convey at the time the DOT was entered into, especially
given that the Thomases as trustees of the Trust are sophisticated attorneys. (Id. ¶¶ 5,
16.) The Trust denies that it knew at the time the DOT was issued that it had been
executed by an entity that did not own the property. The Trust asserts that it discovered
the error during the course of reviewing the documentation following the default, and
informed O’Byrne and his counsel of it in February 2011.
In response, on February 22, 2011, O’Byrne’s counsel wrote that “if there is an
error in the deed of trust that does not give the Trust the intended security for the
promissory note, my client will correct the error.” (Elizabeth Perka Decl. [“Perka Decl.”],
Ex. 3, attached to Pl.’s Mot.)
The Trust then stated that unless reformation occurred, it would initiate a
reformation action. On June 10, 2011, the Trust sent O’Byrne’s counsel a draft
(reformed) deed of trust. (Perka Decl. Ex. 4.) The Trust asserts that O’Byrne and his
counsel failed to respond in any meaningful way (id. Ex. 5), which Defendants deny.
Defendants contend that the reformed deed of trust suggested by the Trust was
objectionable because it purported to relate back to an effective date that conflicted with
the seniority of the First Western Deed of Trust and would render the DOT at issue
ineffective and fraudulent. Defendants suggested a short form deed of trust that would
reform the name of the grantor. (O’Byrne Decl. ¶ 17).
The Trust admits that Defendants proposed a short form of a corrective DOT. It
sought to adapt to this approach, but asserts that Defendants refused to produce a
corrective DOT in proper form—one that effected reformation ab initio in order to
accomplish the intent of the parties. The most recent version of the corrected DOT
offered by IPC’s counsel made the correction effective currently (proposing that WPDC
“hereby grants” security in the Property), not ab initio (and was not proposed until after
this action was filed). (Perka Decl. Ex. 12.)
On November 10, 2011, the Trust wrote to O’Byrne’s counsel, attaching a draft
Complaint—and advised that if it did not receive executed documents appropriately
reforming the DOT within seven days, it would file the Complaint in this Court.
Six days later, on November 16, 2001, counsel for O’Byrne sent the Trust a draft
“Correction Addendum,” stating that O’Byrne would be “available to sign a final
document on Monday of next week”. (Perka Decl. Ex. 9.) The Trust asserts that this
document departed substantially from the documentation that had been sent by the
Trust in June 2011, and (among other problems) changed the definition of “Borrower”
when the change required related to the identity of the Grantor of the DOT. (Perka
Decl. Ex. 7.)9 On November 30, 2011, the Trust sent specific changes to O’Byrne’s
draft “Correction Addendum”. (Id. Ex. 8.) It states it used the format counsel for
O’Byrne apparently preferred but corrected its deficiencies, which Defendants deny.
Defendants refused to execute the suggested addendum which would make the
reformation of the DOT effective at the time of the original transaction. as they contend
that it would affect the lien priority of First Western's trust deed—the first lien on the
Property. (O’Byrne Decl. ¶ 17.)
The Trust requested executed reformation documents within a few days.
O’Byrne’s counsel responded on December 8, 2011, that he would “target early next
week to. . . finaliz[e] the Correction Addendum.” (Perka Decl. Ex. 9.) On December 13,
2011, the Trust again wrote to O’Byrne’s counsel, stating that “[i]f we do not have a
signed reformation document by noon on Friday of this week [December 16, 2011], we
Defendants assert in response that the Trust initially stated that changing the definition of
“Borrower” was not required, then later acquiesced and stated that such a change was appropriate. The
Trust denies this, stating that in the original DOT, the term “Borrower” was used interchangeably to refer to
the Grantor and Borrower. As a result, the Trust asserts that the change in “Borrower” would have led to
absurd results. Defendants also assert that when the Trust’s counsel did not respond to their proposed
correction addendum, they executed the addendum and forwarded it to the Trust’s counsel on November
will file the action that afternoon.” (Id. Ex. 10.) The following day, counsel for O’Byrne
responded, “I respectfully disagree with your unilateral deadline of this week Friday
morning, which I find unreasonable. Please be aware that existing commitments will not
allow me to accommodate your desired schedule.” (Id. Ex. 11.)
The Trust waited until December 20, 2011, to file this action. As of that date, the
Trust asserts it had received no proposed revision to the DOT that reflected the parties’
intent, much less an executed document to that effect, nor was there any explanation
why arriving at a final document would require more than a few minutes of further effort,
if any. (Perka Decl. ¶ 14.) Again, Defendants assert that they refused to execute a
deed of trust that did not maintain First Western’s lien priority.
Despite the fact that the Trust informed O’Byrne that it would file a collection and
foreclosure action if payment was not made, there was no suggestion of a payment of
any kind as of the date this action was filed. (Perka Decl. Ex. 1; Thomas Decl. ¶ 7.)
Again, Defendants deny that a payment is currently due on the Note.
After this Complaint was filed, counsel for IPC/O’Byrne proposed yet another
version of “reformation” in which WPDC “hereby grants” (in the present) security in the
Property. The Trust asserts that this proposal did not address the Trust’s request for,
and entitlement to, reformation to conform the DOT to the parties’ original intent—i.e., a
reformation document that was effective as of the date of the original transaction in May
2008, as requested in this action and as the Trust had requested over a period of ten
months before the action was filed. (Perka Decl. Ex. 12.) Defendants deny this,
asserting that it is unclear what the "date of the original transaction" is—the DOT is
dated May 6, 2008, the date of the Note is May 15, 2008, the date of the Agreement of
Purchase and Sale was May 16, 2008, and the escrow closing date was June 4, 2008.
Further, Defendants assert that the Trust has refused to recognize that First Western’s
deed of trust is senior to the Trust’s Deed of Trust and that it was always the parties'
intent to maintain that seniority. (O’Byrne Decl. ¶ 17.)10
Defendants IPC and WPDC’s Additional Facts
Defendants state that the initial thought with respect to the Property was that
Wetter and the Trust would build a condominium project on the Property. The Trust
does not deny this, admitting that the parties discussed potential development of the
Property that the Trust and the Wetters owned as tenants in common. Economic
conditions precluded further development on the condominium project. After the
condominium project failed, Defendants assert that the Trust and Wetter were unable to
develop the Property from 2005 to 2008. (O’Byrne Decl. ¶ 9.) While the Trust denies it
was “unable” to develop the Property, it admits that no development took place.
Defendants assert that after they were introduced to the Trust, the Trust
approached Defendants and asked them to help the Trust recoup their initial investment
in the Property. Defendants state that they agreed to carry the Trust's costs until the
Property could be developed or a value creation event occurred (i.e. sale at a premium,
In reply, while the Trust admits the closing date of June 4, 2008, it denies the remainder of
Defendants’ assertions. It maintains that none of the parties’ written agreements contain any provision
regarding “maintain[ing] that security”, and that the Bank’s priority is a function of its recorded lien vs. a
DOT (whether reformed or not) that as of this date is still unrecorded. The Trust is unaware whether later
advances occurred or are contemplated that may not enjoy relation back. The Trust also asserts that it
lacks sufficient information to take a position on the Bank’s priority with respect to advances that may or
may not have been made since the Bank recorded its interest. It understands that the Bank recorded its
lien in 2008 or earlier, and the Trust has not recorded any version of the DOT.
development, package sale with another property, etc.) (O’Byrne Decl. ¶ 11), which is
denied by the Trust. In connection with that alleged agreement, Defendants assert that
they paid the Trust $1,016,321.73 in cash and executed a $1,000,000 promissory note.
Defendants covered all of the Trust's carrying costs related to the purchase, totaling
nearly $200,000. They did not cover the carrying costs for Wetter.11 Following these
negotiations, Defendants contend that the parties entered into an oral agreement
(O’Byrne Decl. ¶ 13), which the Trust denies.
According to Defendants, the parties' oral agreement contained the following
rights and obligations: a) the two-year payment provision in the Note was a soft
payment date and would not become due until the property was actually developed or a
value creation event occurred; b) the Note's payment term would be extended until
development on the Property was complete or a value creation event occurred; c) the
Trust would refrain from recording the DOT; d) Defendants were responsible for
developing the Property and would pay back the Trust upon development (which would
include a premium if the development was successful) or a value creation event
occurred; and e) IPC agreed to pay a premium (i.e. carry the Trust's closing costs) for
the Property in exchange for this oral agreement/arrangement. (O’Byrne Decl. ¶ 19.)
The Trust denies this, asserting that there was no such oral agreement and that the
claim contradicts the unambiguous material terms of the written agreements.
In response to this , the Trust admits only that, pursuant to the terms of the Agreement
Regarding Purchase and Sale, Defendants agreed to pay the Trust $2,106,321 for sale of the Trust’s
interest in the Property, which included $1,016,321.71 in cash and a $1,000,000 Promissory Note.
(Thomas Decl. Ex. 1.)
As to the Note, O’Byrne believes that the Note was subject to 6% simple interest,
and states that is what Defendants intended. (O’Byrne Decl. ¶ 14.) The Trust denies
that O’Byrne actually “believes” that the Note did not call for compound interest,
asserting that this “belief” is contradicted by the plain terms of the Note which states
interest was to be “compounded annually.” (Thomas Decl. Ex. 2.)
After the execution of the Note and DOT, Defendants contend that the parties
ratified and performed the prior oral agreement regarding the Note and Deed of Trust.
As alleged evidence of the parties' oral agreement, the DOT has never been recorded
and the Trust refrained from filing a lawsuit on the Note or DOT until December 2011.
The Trust denies that these facts are evidence of the parties’ oral agreement. It also
states that after Defendants defaulted on the Note in 2008, it acquired information
suggesting that the Bank’s lien exceeded the value of the Property. The Trust realized
that the DOT had not been executed by the owner of the Property, and was concerned
that a slander of title claim might be made if the DOT were recorded before it was
reformed. The Trust took steps to accomplish reformation and finally filed an action
after ten months of unfulfilled assurances that reformation would be accomplished
The Trust and Defendants entered into two written agreements in 2010.
Defendants assert that these two agreements evidence the oral agreement, which the
Trust denies. The first agreement dated October 4, 2010, was entitled “Agreement
Regarding Disposition of Property” [the “Forbearance Agreement”]. (Def.’s Resp., Ex.
D.) The second was a Performance Guarantee Agreement signed by O’Byrne on
October 4, 2010 (Id., Ex. F.), which was contemplated in the Forbearance Agreement.
It related only to IPC’s performance of an obligation to give the Trust notice of any
The Forbearance Agreement recognized that the DOT was not yet recorded, and
indicated that O’Byrne advised the Trust that “negotiations are in process for a potential
sale of a portion of the Property” and that “he wishes to avoid the recording of the DOT
during those negotiations.” (Defs.’ Resp., Ex. D.) It also provided in pertinent part:
1. [IPC] and WPDC agree that no sale, disposition, encumbrance or
transfer . . . of the Property will occur without [IPC] and WPDC’s providing
at least seven (7) business days’ notice to the Thomas Trust . . . in order
to permit the . . .Trust to take action to protect its interest in the Property. . . .
2. As detailed in a separate “Performance Guarantee Agreement” . . . O’Byrne
personally guarantees the performance by [IPC] and WPDC of the promise set
forth in the preceding paragraph . . . .
3. The . . . Trust agrees that, while the current transaction is pending, but only as
long as the. . .Trust determines in its sole discretion that the potential transaction
has a realistic prospect of closing on terms that produce a substantial payment
against the note obligation, the . . .Trust will refrain from recording the DOT. . . .
4. This forbearance will also depend on the. . .Trust’s receiving regular updates
regarding developments in the negotiations for the sale of the Property, . . . .
5. It is further agreed that this Agreement and . . . forbearance as called for
herein are subject to a full reservation of all rights of the. . .Trust under the Note
and DOT and otherwise, including all remedies for any past or future breach of
any obligations under the Note and DOT.
(Id.) Defendants assert that they materially performed all their obligations under the
Forbearance Agreement. (O’Byrne Decl. ¶¶ 20, 21, 22.) The Trust asserts that the two
agreements speak for themselves and do not contain any provision affecting the Trust’s
right to collect the Note except to expressly preserve it.
Defendants maintain that the Forbearance Agreement was suggested by the
Trust. It points out that the Trust’s counsel wrote a letter on September 13, 2010,
stating “[i]n order for the Trust to refrain from filing a lawsuit and recording its Deed of
Trust, the Thomas Trust requires a personal, written guarantee from Mr. O'Byrne ... “
(Defs.’ Resp., Ex. E.) The Trust denies that the Agreement was suggested by its
counsel, pointing out that the Forbearance Agreement provides, “Timothy O’Byrne . . .
wishes to avoid the recording of the DOT during those negotiations.” (Id., Ex. D.)
Finally, Defendants assert that the economy has precluded them from developing
the Property or a value creation event from occurring. Thus, when the original term of
the Note became due on or about May 15, 2010, they attempted to negotiate an
extension of the payment term. According to Defendants, the Trust refused to negotiate
an extension of the payment term in derogation of the parties' agreement. (O’Byrne
Decl. ¶¶ 23, 24.) The Trust admits that it declined to extend the May 14, 2010 due date
for the Note, and denies Defendants’ remaining assertions in this paragraph, including
the existence of an oral agreement.
First Western’s Additional Facts
When the Note was delivered by IPC to the Trust on May 15, 1008, it was
apparently unsecured.12 On June 4, 2008, WPDC executed a promissory note in favor
of First Western in the original principal amount of $2,885,000.00 (the “First Western
Note”, as amended). (Decl. of Susan Rice [“Rice Decl.”] ¶ 2, attached to First Western’s
While the Trust does not deny this, it asserts that the IPC Note was intended to be secured by
the later executed DOT in favor of the Trust which is why the Trust now seeks reformation of the DOT.
Resp.) The First Western Note is secured by a Deed of Trust dated June 4, 2008,
executed by WPDC (“First Western DOT”), and recorded in the real estate records of
Jefferson County, Colorado, on June 6, 2008 at Reception No. 2008055880,
encumbering the Property. (Rice Decl. ¶ 3.)13 First Western has never agreed that the
IPC Deed of Trust, or any other lien, would have a superior lien position against the
Property relative to the First Western Deed of Trust. (Id. ¶ 4.) First Western was
named in this lawsuit only because of its secured interest in the Property.
On June 5, 2008 (one day after the closing of the First Western loan), IPC
executed the Deed of Trust purporting to encumber the Property as security for the IPC
Note even though the Property was actually owned by WPDC. The Trust admits that it
did not record the IPC Deed of Trust in the real estate records.
Standard of Review
Summary judgment may be granted where “the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and the ... moving party is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c). “A fact is ‘material’ if, under the
governing law, it could have an effect on the outcome of the lawsuit.” E.E.O.C. v.
Horizon/ CMS Healthcare Corp., 220 F.3d 1184, 1190 (10th Cir. 2000). “A dispute over
A true and accurate copy of the Note, including the amendments thereto, is attached to the
Declaration of Susan Rice as Exhibit A. A true and accurate copy of the First Western DOT is attached to
the Declaration as Exhibit B.
a material fact is ‘genuine’ if a rational jury could find in favor of the nonmoving party on
the evidence presented.” Id.
The burden of showing that no genuine issue of material fact exists is borne by
the moving party. Horizon/ CMS Healthcare Corp., 220 F.3d at 1190. “‘Only disputes
over facts that might affect the outcome of the suit under the governing law will properly
preclude the entry of summary judgment.’” Atl. Richfield Co. v. Farm Credit Bank of
Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000) (quotation omitted). When applying the
summary judgment standard, the court must “‘view the evidence and draw all
reasonable inferences therefrom in the light most favorable to the party opposing
summary judgment.’” Id. (quotation omitted). All doubts must be resolved in favor of
the existence of triable issues of fact. Boren v. Southwestern Bell Tel. Co., 933 F.2d
891, 892 (10th Cir. 1991).
Whether Summary Judgment is Appropriate
Before addressing the merits of the motion, I note that IPC and WPDC asserted
in their response that the Court should delay ruling on this motion due to the pendency
of motions to dismiss that argued the Court lacks jurisdiction over the case pursuant to
28 U.S.C. § 1332. I reject this argument. While Defendants’ motion to dismiss filed in
February 2012 did raise a jurisdictional issue, the issue was later rendered moot, and
ultimately denied as moot by the Court, due to the filing of the Amended Complaint.
(Order of June 14, 2012, ECF No. 63.) There is thus no reason to delay a ruling on the
summary judgment motion. Accordingly, I turn to its merits.
Whether The Note Should Be Enforced
The Trust seeks summary judgment in its favor on the IPC Note, asserting that
IPC is in default of its obligations under the Note and owes $1,212,703 as of January 6,
2012, plus additional default interest until paid and attorney fees and costs. Defendants
assert that the motion should be denied on this issue.
I note that Article 3 of Colorado’s Uniform Commercial Code (the “Code”)
governs negotiable instruments. See Colo. Rev. Stat. § 4-3-102. A “negotiable
instrument” is defined generally as “an unconditional promise or order to pay a fixed
amount of money, with or without interest or other charges described in the promise or
order” which “[i]s payable on demand or at definite time.” Id. § 4-3-104(a)(2). Such
instrument is a “note”, id., and the Code requires the issuer (the maker) of a note to pay
it according to the terms when issued to a person entitled to enforce it. Id. § 4-3-412.
The holder of the note is entitled to enforce it. Id. § 4-3-301. Where the promisor
defaults on a note, the holder may bring an action to obtain a judgment against the
defaulting party. See Mortg. Inv. Corp. v. Battle Mountain Corp., 70 P.3d 1176, 1184-85
In this case, Defendants argue that summary judgment should be denied on the
Note because the parties entered into oral agreements that modified the Note's terms,
and that they are not in default under the Note based on the terms of those oral
agreements. They argue that summary judgment must be denied because the
existence of the oral agreement and its terms must be determined by the jury.
More specifically, Defendants contend that the terms of the oral agreement
specifically provided that the two-year payment term would not become due until the
Property was actually developed or a value creation event occurred, that the payment
term would be extended until development was complete or such an event occurred,
and that they were not required to repay the Trust until development or a value creation
event occurred, citing to O’Byrne’s Declaration. Defendants assert that these
representations were made prior to execution of the Note. Since no development or
value creation had occurred at the Property as of May 14, 2010, Defendants contend
that no default occurred.
I reject this argument as a basis to deny summary judgment. First, I agree with
the Trust that this alleged oral agreement entered into prior to the Note contradicts the
Note and Agreement of Purchase and Sale which provide that payments on the Note
“shall be deferred for a period of two years (24 months) from the date of Closing, when
the entire balance of principal and interest shall be due and owing.” (Thomas Decl. Exs.
1 and 2.) The Note provides that it is due May 14, 2010. Further, the Agreement of
Purchase and Sale which requires that the Buyer deliver the Note to the Sellers before
closing states, “This agreement constitutes the entire agreement between Sellers and
Buyer with respect to the purchase and sale of the Property and supersedes all prior
agreements, understandings, offers, and negotiations, oral or written, with respect to the
Property.” (Id. Ex. 1 ¶ 6.1.)
I also note that shortly after the Note balance was due, on May 18, 2012,
O’Byrne wrote to Anne McDonald Thomas stating, “Anne - we will be wiring all
accumulated interest tomorrow and at least $25k per month plus interest, or accelerated
from other sources, until paid in full.” I agree with the Trust that this assurance is
inconsistent with Defendants’ contention that the Note was not due on May 14, 2010 (or
even now) per the parties’ oral agreement. Instead, on May 18, 2010, O’Byrne was
promising to pay all interest plus $25,000 per month in principal. If O’Byrne had
believed that the Note was not yet due, this promise to begin paying $300,000 a year in
principal is nonsensical. Instead, it appears that O’Byrne made that promise in hopes of
getting an extension of the loan. O’Byrne also made a partial interest payment on May
19, 2012, which again appears inconsistent with Defendants’ contention that no default
had occurred on the Note.
Defendants also argue, however, that the parties ratified and performed their
prior oral agreement following execution of the Note, and that the parties' conduct is
inconsistent with the notion that the written documents are the entire agreement
between the parties. In that regard, it is argued that Defendants agreed to pay a
premium price for the Property over that paid to Wetter to cover the Thomases’ carrying
costs and to “make them whole” on the transaction. Defendants also point to the fact
that while the Note was delivered on May 15, 2008, the DOT was not executed until
June 5, 2008 and was not ever recorded. Further, they point to the fact that while the
alleged breach of the Note took place in May 2010, this lawsuit was not filed until
December 2011. Defendants argue that these facts show the parties agreed that the
maturity date on the Note would be extended until development or a value creation
event could occur. I reject this argument, as none of the facts referenced by
Defendants in any way support the existence of, or ratification of, an alleged oral
argument regarding the Note.
I also find that the existence of any oral agreement is barred. As a preliminary
matter, “under law of merger, prior agreements, covenants, and conversations are
merged into the final, formal, written contracts executed by the parties.” Batterman v.
Wells Fargo Ag Credit Corp., 802 P.2d 1112, 1115 (Colo. App. 1990). Further, “[a]bsent
allegations of fraud, accident, or mistake in the formation of a contract, parole evidence
is inadmissible to vary, contradict, change, or modify an unambiguous integrated
contract.” Tripp v. Cotter Corp., 701 P.2d 124, 126 (Colo. App. 1985). Here, the Note is
clear and unambiguous regarding the obligation to pay. Since the evidence proffered
by Defendants directly contradicts and varies the term of the agreement, it is barred
from consideration. See Batterman, 802 P.2d at 1116.
It is also argued by Defendants that summary judgment must be denied on the
Note because its terms were modified by a subsequent accord and satisfaction,
referencing the Forbearance Agreement entered into between the parties on or about
October 4, 2010. It is true that parties to a contract may agree to modify the contract
through an “accord.” Bakehouse & Associates, Inc. v. Wilkins, 689 P.2d 1166, 1168
(Colo. App. 1984). Such “[a]n agreement to modify an existing contract, i.e., an
executory accord, does not extinguish the original obligation, but suspends performance
of that obligation until the accord is breached or satisfied.” Id. If the accord is then
satisfied, the original obligation is discharged under the doctrine of accord and
satisfaction. Id. “In determining whether a debt has been discharged by an accord and
satisfaction, it first must be determined whether there was sufficient evidence to show
an intent to accept the accord agreement.” Rasheed v. Mubarak, 695 P.2d 754, 757
(Colo. App. 1984).
I find that Defendants have not presented sufficient evidence of an accord
agreement to delay payment of the Note. While Defendants assert that the
Forbearance Agreement modified the Note by providing that the Trust agreed not to
pursue the alleged default under the Note as long as Defendants provided regular
updates regarding the pending sale of the Property, that is not supported by the
Agreement. The Agreement does not contain any reference to the Trust agreeing to
delay payment of the Note. (Defs.’ Resp., Ex. D.) Instead, the Trust agreed only to
refrain from recording the DOC “while the current transaction is pending” and subject to
the Trust’s discretion. Id. Indeed, the Forbearance Agreement actually reinforced the
Trust’s right to collect the overdue Note, as it stated that “this Agreement and the . . .
Trust's forbearance as called for herein are subject to a full reservation of all rights of
the. . .Trust under the Note and DOT and otherwise, including all remedies for any past
or future breach of any obligations under the Note and DOT. (Id.)14 Accordingly, I reject
the argument that the Note was modified by an accord and satisfaction.
Defendants also point to the fact that the Trust’s counsel wrote in an email dated September
13, 2010, that the Trust was trying “to determine whether this potential sale [of the Property[ provides a
basis for delaying an action to enforce the note obligation” as well as the recording of the DOT, and that it
needed “a personal, written guarantee” from O’Byrne “[i]n order for the [Trust] to refrain from filing a
lawsuit and recording its Deed of Trust.” (Defs.’ Resp., Ex. E.) However, this was written before
execution of the Forbearance Agreement, and the Agreement itself did not state that the Trust would delay
an action to enforce the note obligation or refrain from filing a lawsuit. (Id. Ex. D.)
Defendants also have asserted in a counterclaim that the Trust fraudulently
induced them into entering into the Note, which they argue is a factual determination
precluding entry of summary judgment at this time. Defendants allege in that regard
that they have raised a genuine issue of material fact as to whether the Trust
represented to IPC that the maturity date on the Note would be extended until
development occurred or a value creation event took place at the Property prior to
execution of the Note. They further assert that O'Byrne's Declaration establishes that
this oral representation was made to him prior to execution of the Note. (O’Byrne Decl.
¶¶ 11, 12, 13.)15 Defendants conclude that if they are able to prove this claim, then the
Note could be rescinded and no default would have occurred. Thus, they contend that
the Court should deny Plaintiff s Motion on this basis.
Turning to my analysis, the elements of a fraud in the inducement claim are:
(1) A false representation of a material existing fact, or a
representation as to a material existing fact made with a
reckless disregard of its truth or falsity; or a concealment of a
material existing fact, that in equity and good conscience
should be disclosed; (2) knowledge on the part of the one
making the representation that it is false; or utter indifference
to its truth or falsity; or knowledge that he is concealing a
material fact that in equity and good conscience he should
disclose; (3) ignorance on the part of the one to whom
representations are made or from whom such fact is
concealed, of the falsity of the representation or of the
existence of the fact concealed; (4) the representation or
O'Byrne's affidavit also makes clear, according to Defendants, that IPC would not have entered
into the Note unless the Trust promised to extend the payment/maturity date until development could be
completed or a value creation event occurred on the Property. (Id. ¶ 12). O'Byrne also states that IPC
relied on these representations to obtain IPC's initial loan with First Western, in assisting the Trust in
getting out of their loan with Guaranty Bank, in attempting to develop and/or find a buyer for the Property,
in attempting to negotiate the terms of a current refinancing with First Western, and in its own affirmative
representations to individuals/entities that were interested in purchasing or developing the Property. (Id.)
concealment is made or practiced with the intention that it shall
be acted upon; and (5) action on the representation or
concealment resulting in damage.
Trimble v. City & County of Denver, 697 P.2d 716, 724 (Colo.1985). If such a claim is
successful, the defendant has a right to rescind the contract. See Crawford Rehab.
Servs., Inc. v. Weissman, 938 P.2d 540, 547 n. 11 (Colo. 1997).
I find that Defendants’ fraud in the inducement counterclaim does not require
denial of summary judgment on the Note. First, while the parol evidence rule does not
generally apply to claims of fraud or fraud in the inducement, courts have held the rule
does apply to such a claim “if the evidence in question is offered to show a promise
which contradicts an integrated written agreement.” Watkins & Son Pet Supplies v.
Iams Co., 254 F.3d 607, 613 (6th Cir. 2001); see also Wall v. CSX Transp., Inc., 471
F.3d 410, 420 (2d Cir. 2006); Brinderson-Newburg Joint Venture v. Pacific Erectors,
Inc., 971 F.2d 272, 281 (9th Cir. 1992). .
Indeed, this principle was recognized by the Colorado Court of Appeals in
Stevens v. Vail Assocs., Inc., 472 P.2d 729 (Colo. App. 1970). It stated, “‘[t]he rule is
generally recognized that where the execution of a written contract has been induced by
a contemporaneous parole ... promise not relating directly to the subject matter of the
contract and such promise is not inconsistent with the provisions of the written contract,
it will not be considered as merged therein and evidence of such parole ... promise is
admissible.” Id. (quotation omitted). The reason for this rule is that fraud in the
inducement applies in the case of “a fraudulent misstatement of fact that induces a party
to enter a contract, not a fraudulent promise of future performance that is within the
scope of the subject matter of the written contract but was not included in it.” Iams Co.,
254 F.3d at 613 (emphasis in original).
In the case at hand, the alleged promise by the Trust that Defendants are alleged
to have relied on expressly contradicts the express terms of the Note. While
Defendants allege that the Trust represented to IPC that the maturity date on the Note
would be extended until development occurred or a value creation event took place at
the Property prior to execution of the Note, the Note specifically states to the contrary.
It states in that regard that “[t]he entire amount, with interest, and any charges due
pursuant to the [DOT], are due in twenty-four (24) months (“Due Date”). . . .If not sooner
paid, the entire principal amount outstanding and accrued interest thereon shall be due
and payable on May 14, 2010.” (Id.) Thus, under the above authority, the evidence the
Defendants rely on to support their fraud in the inducement claim is not admissible
under the parole evidence rule.
Second, even if the evidence were admissible, Defendants have not established
a viable claim for fraud in the inducement. A fraud in the inducement claim “cannot be
predicated upon the mere nonperformance of a promise or contractual obligation or
upon the failure to fulfill an agreement to do something at a future time”. H & H Distrib.,
Inc. v. BBC Int’l, Inc., 812 P.2d 659, 662 (Colo. App. 1990) At most, in this case
Defendants assert that the Trust made a mere promise that was not performed.
Defendants have not proffered any evidence to show that at the time the Note was
executed, the Trust knew its alleged representation was false. Defendants have also
not presented any evidence that at the time the Note was executed, the Trust did not
intend to fulfill that promise. See id. Finally, given the fact that Defendants signed the
Note which was expressly contrary to the alleged promise in that it contained a maturity
date of 2010, Defendants cannot show they justifiably relied on any such promise by the
Trust or that its reliance was reasonable. See White Holding Co., LLC v. Martin
Marietta Materials, Inc., 423 F. App’x 943, 945 (11th Cir. 2011) (“Despite its efforts,
White Construction eventually agreed to the option to purchase clause while aware the
terms of the MSA directly contradicted the alleged oral promises. Thus, we are unable
to conclude White Construction justifiably relied on any alleged promise . . . .”); Coutts
Bank (Switzerland) Ltd. v. Anatian, 691 N.Y.S.2d 409, 410 (N.Y. App. Div. 1999)
(alleged oral representations by bank that were significantly contradicted by the
subsequent letters “rendered any reliance by defendants on the alleged oral
representations . . . unreasonable as a matter of law, and such alleged oral
representations cannot support the asserted defense of fraud in the inducement. . .).
Finally, Defendants argue that, regardless of any default, summary judgment on
the Note is not appropriate because there are disputed issues of material fact as to the
amount due with regard to the calculation of interest. While the Trust argues that the
Note provides that interest at 6% is compounded annually, Defendants argues that this
is unclear. The Note states that it is subject to both simple interest and interest
compounded annually, and Defendants argue that the two concepts are mutually
exclusive. Accordingly, Defendants contend that the amount of interest due cannot be
determined on the face of the instrument. Defendants also reference O’Byrne’s belief
that the Note was subject to simple interest.
Again, I reject Defendants’ argument. Contract interpretation is a question of law
for the court. B & B Livery, Inc. v. Riehl, 960 P.2d 134, 136 (Colo. 1998). Under
Colorado law, written contracts that are complete and free from ambiguity shall be held
to express the intention of the parties, and should be enforced according to their plain
language. May v. United States, 756 P.2d 362, 369 (Colo. 1988). The fact that the
parties have different opinions about the interpretation of the contract does not itself
create an ambiguity. Id.
In the case at hand, Colorado law is clear regarding the definition of interest that
is to be compounded annually. See Francis ex rel. Goodridge v. Dahl, 107 P.3d 1171,
1175 (Colo. App. 2005). “Compound interest is defined as ‘interest paid on both the
principal and the previously accumulated interest.’” Id. (quoting Black’s Law Dictionary
830 (8th rev. ed. 2004)). “Annual” or “annually” means ‘occurring, appearing, made,
done, or acted upon every year.” Id. (quoting Websters Third New Int’l Dictionary 88
(1986)). The fact that the Note references simple and compound interest does not
make the Note ambiguous. See Francis, 107 P.3d at 1175 (“we conclude the total
prejudgment interest in this case is arrived at by first calculating simple interest on the
amount of the judgment from the date plaintiff's action accrued (here, the date of the
accident) until the day before the action was filed. That simple interest amount should
then be added to the amount of the judgment and used as the initial base amount to
calculate compound interest annually from the date the suit was filed until the date
judgment is entered”). Since I find that the Note is not ambiguous on this issue, any
belief by O’Byrne about the meaning of the Note regarding interest is inadmissible.
Based upon the foregoing, the Trust’s summary judgment is granted as to Claim
One of the Amended Complaint, asserting that IPC is in default of its obligations under
the Note. Accordingly, summary judgment is granted in the Trust’s favor and against
IPC in the amount of all sums due under the Note, including the full principal sum,
interest, and default interest accrued since the date the Note was due, plus attorney
fees and related collection costs.
Whether Reformation is Appropriate
The Trust asserts in its motion that the Court should reform the DOT to conform
to the actual agreement of the parties, which required that the DOT be executed by the
owner of the Property, WPDC. It argues that reformation is appropriate in order to
accomplish the parties’ intent that the DOT secure the obligations of IPC under the
Note. It also argues that reformation should relate back to the time the instrument was
originally executed in May 2008. Defendants assert that summary judgment should be
denied on this claim. I grant in part and deny in part the Trust’s motion as to the
Defendants first argue that the Court should deny the Motion because the DOT is
a spurious document that is patently invalid pursuant to Colo. Rev. Stat. § 38-35-201(3).
That statute defines a spurious document to include: “any document that is forged or
groundless, contains a material misstatement or false claim, or is otherwise patently
invalid.” Id. As applied to interests in real property, the Colorado courts have held that
a deed is a spurious document as defined in the statute if an instrument purporting to
affect an interest in property is conveyed by a party with no record interest in the
property. GMAC Mortg. Corp. v. PWI Group, 155 P.3d 556, 558 (Colo. App.
2006). That is because under Colorado law, only the record owner of real property may
convey or encumber the same. Id.
Here, while I agree with Defendants that the DOT may be a spurious document
under the above authority, this does not mean that reformation is inappropriate if the
parties, including WPDC as owner of the Property, clearly and unequivocally intended
that the DOT be issued to the Trust. Under Colorado law, “[r]eformation is an
appropriate remedy when the evidence clearly and unequivocally shows that an
instrument does not express the true intent or agreement of the parties.” Boyles Bros.
Drilling Co. v. Orion Indus., Ltd., 761 P.2d 278, 281 (Colo. 1988); see also Alexander
Dawson, Inc. v. Sage Creek Canyon Co., 546 P.2d 969, 971 (Colo. App. 1976) (deed of
trust reformed because the executing party erroneously included one parcel in the
description while omitting another). If the parties have “made a mutual mistake or [if]
there has been a mistake by one of the parties and fraud or inequitable conduct on the
part of the other,” then reformation is appropriate. Boyles, 761 P.2d at 281.
Reformation is an equitable remedy—it “should be available when fairness
demands such relief.” 66 Am. Jur. 2d. Reformation of Instruments § 11 (2011); accord
Tayyara v. Stetson, 492 P.2d 73, 74 (Colo. App. 1971). The burden of proof is on the
party seeking reformation and the proof must be “clear, unequivocal and indubitable.”
Segelke v. Kilmer, 360 P.2d 423, 426 (Colo. 1961). “The general rule is that, except as
to innocent parties who acquire rights without notice, reformation of an instrument
relates back to and takes effect from the time of original execution of the instrument.”
Diocese of Bismarck Trust v. Ramada, Inc., 553 N.W.2d 760, 770 (N.D. 1996); accord
Board of Comm’rs of Pitkin County v. Timroth, 87 P.3d 102, 109 (2004).
Thus, I turn to whether reformation is appropriate as a matter of law under the
above legal framework. The Trust argues that it is clear—in fact, essentially
admitted—that the DOT was executed by IPC, the maker of the Note, rather than
WPDC, to which the Property had been transferred shortly before the DOT was
executed, and that such execution was contrary to the parties’ agreement and clear
intent. It also argues that the fact assurances were made that this error would be
corrected removes any possible doubt regarding the parties’ actual agreement and
I agree with the Trust that the evidence shows that the parties clearly and
unequivocally intended that the DOT be executed by the owner of the Property, WPDC,
in order to accomplish the parties’ intent that it secure the obligations of IPC under the
Note. While Defendants deny the Trust’s assertion that the execution of the DOT by
IPC was not in accordance with the parties’ agreement that there be an effective
transfer of property via the DOT’s execution, they have presented no evidence that
supports this. Instead, the Trust has presented evidence that supports its argument.
For example, O’Byrne’s counsel stated on February 22, 2011, that “if there is an error in
the deed of trust that does not give the Trust the intended security for the promissory
note, my client will correct the error.” (Perka Decl. Ex. 3.) No one has disputed the fact
that the Property was the “intended security.” Further, counsel for Defendants proposed
a Correction Addendum to the DOT which would clarify that “the lien of the Deed of
Trust is a valid trust deed lien against the Property”, correct the Borrower under the
Deed of Trust “to be WPDC”, and which stated that it “cures the mistaken execution of
the Deed of Trust by IPC, as Borrower, for the reason that at the time of such execution
of the Deed of Trust WPDC, not IPC, was the record owner of fee simple title to the
Property.” (Perka Decl. Ex. 7.) The Correction Addendum also expressly stated that
WPDC ratified the DOT. (Id.) Accordingly, I grant summary judgment as to this portion
of the reformation claim, which is the Third Cause of Action in the Amended Complaint.
The Trust also argues, however, that reformation should relate back to the time
the instrument was originally executed in May 2008,and asks that the Court exercise its
equitable powers by entering an order on summary judgment requiring Defendants to
reform the DOT so that it is in substantially the same form of the proposed reformation
documents sent to O’Byrne’s counsel on June 10, 2011, making the DOT effective as of
May 6, 2008. I deny the motion on this issue. I find that there are genuine issues of
material fact as to the parties’ intention regarding what date the DOT would be effective.
While Plaintiff requests the Court reform the DOT to be effective as of May 6, 2008,
Defendants have presented evidence through O’Byrne’s Declaration that their intent
was not to grant the Trust an interest in the Property as of that date. Further, the DOT
was not actually executed until June 5, 2008, and the Trust has presented no authority
that the Court has the power to reform a DOT prior to the point when it was even
executed, particularly when the parties’ intent about this is disputed. Finally,
reformation of the DOT to be effective as of May 6, 2008, may well impact First
Western’s lien priority.
Based upon the foregoing, it is
ORDERED that The Thomas Trust’s Motion for Summary Judgment Reforming
Deed of Trust and Ordering Payment of Promissory Note filed January 11, 2012 (ECF
No. 12) is GRANTED IN PART AND DENIED IN PART. Specifically, it is granted as to
the First Cause of Action in the Amended Complaint alleging that Defendant IPC is in
default under the Note. It is granted in part and denied in part as to the Third Cause of
Action, the reformation claim. It is
FURTHER ORDERED that Plaintiff’s Motion to Refer Pending Dispositive
Motions to United States Magistrate Judge Kristen L. Mix for Report and
Recommendation filed April 4, 2012 (ECF No. 43) is DENIED.
Dated: September 25, 2012
BY THE COURT:
s/ Wiley Y. Daniel
Wiley Y. Daniel
Chief United States District Judge