Contrada, Inc. v. Parsley et al
Filing
95
ORDER. ORDERED that Plaintiff's Motion for Summary Judgment 54 is DENIED. ORDERED that Plaintiffs Motion to Strike Defendant Robin L. Parsley's Damages 85 is DENIED. ORDERED that Plaintiffs Motion to Strike Jennifer Quintinsky as a Wi tness 86 is DENIED WITHOUT PREJUDICE. ORDERED that discovery period shall be re-opened for the limited purpose of allowing Plaintiff the opportunity to depose Ms. Jennifer Quintinsky, if it so chooses by Chief Judge Wiley Y. Daniel on 02/22/12.(jjhsl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Wiley Y. Daniel
Civil Action No. 10-cv-00646-WYD-CBS
CONTRADA, INC., a Colorado corporation,
Plaintiff,
v.
ROBIN L. PARSLEY; and
N SKY LIVING, INC., a Texas corporation,
Defendants.
ORDER
I.
INTRODUCTION
THIS MATTER is before the Court on Plaintiff’s Motion for Summary Judgment,
filed April 18, 2011 [ECF No. 54]. Plaintiff seeks summary judgment on its claim for
breach of contract based on Defendant Parsley’s alleged breach of a personal guaranty
of a promissory note and loan agreement. I also address Plaintiff’s Motion to Strike
Defendant Robin L. Parsley’s Damages, filed September 7, 2011 [ECF No. 85]; and
Plaintiff’s Motion to Strike Jennifer Quintinsky as a Witness, filed September 7, 2011
[ECF No. 86].
II.
BACKGROUND
Voluminous facts have been asserted in connection with the summary judgment
motion and briefing. I will summarize those facts which I deem pertinent to my ruling. I
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have, however, construed all of the facts in the light most favorable to Defendant
Parsley as I must for purposes of this summary judgment motion. See Carolina Cas.
Ins. Co. v. Yeates, 533 F.3d 1202, 1204 (10th Cir. 2008).
In March of 2006, Endeavor Highrise, L.P. (“Endeavor”), and Plaintiff Contrada,
Inc. (“Contrada”) entered into a Loan Agreement for the principal amount of $2 million.
The purpose of the loan was to provide financing for construction of a high rise
residential condominium tower. It is undisputed that the Loan Agreement was executed
by Defendant Robin L. Parsley (“Parsley) on behalf of Endeavor, and by Contrada’s
President, Tom Wengh. In connection with the Loan Agreement, Endeavor executed a
Promissory Note and Parsley executed a Personal Guaranty (“Guaranty”). The
Guaranty references the Loan Agreement and the Promissory Note, and contains the
following guaranty:
For value received, and in consideration of and as an
inducement for the financial accommodations (the term
financial accommodations is used in its most comprehensive
sense to include any transaction or arrangement resulting in
a debtor-creditor transaction) heretofore or at any time
hereafter extended by [Contrada] to or for the account of
[Endeavor], Guarantor hereby unconditionally guarantees
the prompt payment of the Obligations to the extent of the
Guaranteed Amount, upon demand, when due, by reason of
acceleration or otherwise, including interest on the principal
amount thereof at such basic and default rates, as
applicable, as are provided for in any applicable promissory
note.
The Guaranty further provides that the “guaranteed amount” is “[o]ne half of the full
value of all Obligations.”
According to Contrada, between 2006 and 2008, it loaned additional monies to
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Endeavor, resulting in a Note Modification Agreement and a Second Promissory Note,
dated December 14, 2007. The Second Promissory Note provided for a line of credit
loan in the amount of $8 million, reflecting the original $2 million loan and additional loan
advances of up to $6 million.
Parsley admits executing the Second Promissory Note on behalf of Endeavor,
and he admits that amounts loaned pursuant to the Second Promissory Note have not
been repaid. He asserts, however, that summary judgment is not appropriate because
there are genuine issues of material fact concerning the source of the funds paid to
Endeavor, and because the Guaranty is unenforceable based on fraud and/or breach of
fiduciary duty.
II.
ANALYSIS
A.
Plaintiff’s Motion for Summary Judgment
1.
Standard of Review
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, the court may
grant summary judgment 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); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250
(1986); Equal Employment Opportunity Comm. v. Horizon/CMS Healthcare Corp., 220
F.3d 1184, 1190 (10th Cir. 2000). “When applying this standard, the court must ‘view
the evidence and draw all reasonable inferences therefrom in the light most favorable to
the party opposing summary judgment.’” Atlantic Richfield Co. v. Farm Credit Bank of
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Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000) (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).
2.
Whether Contrada Is Entitled to Summary Judgment on Its Breach
of Contract Claim
A party attempting to recover on a breach of contract claim must prove the
following elements: (1) the existence of a contract; (2) performance by the plaintiff or
some justification for nonperformance; (3) failure to perform the contract by the
defendant; and (4) resulting damages to the plaintiff. Western Distributing Co. v.
Diodosio, 841 P.2d 1053, 1058 (Colo. 1992). A guaranty is a specialized type of
contract and, as distinguished from an ordinary contract, its terms are to be “strictly
construed” and “are not to be extended by implication beyond the express terms of the
instrument or the plain intent of the parties.” A.R.A. Mfg. Co. v. Cohen, 654 P.2d 857,
859 (Colo. 1982). Here, Parsley contends that genuine issues of material fact as to the
first element, the existence of a contract, preclude summary judgment. Specifically,
Parsley asserts that because the Guaranty extends only to loans from Contrada, and
because Contrada provided little or no money to Endeavor, the Guaranty is
unenforceable due to a failure of consideration.
Under Colorado law, an enforceable contract requires mutual assent to an
exchange, between competent parties, with regard to a certain subject matter, for legal
consideration. Denver Truck Exchange v. Perryman, 134 Colo. 586, 307 P.2d 805, 810
(1957); see also, Sumerel v. Goodyear Tire & Rubber Co., 232 P.3d 128, 133 (Colo.
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App. 2009) (a contract is formed when one party makes an offer and the other accepts
it, and the agreement is supported by consideration). “Consideration” is defined as
“[s]omething . . . bargained for and received by a promisor from a promisee; that which
motivates a person to do something, esp. to engage in a legal act.” Intern’l Paper Co. v.
Cohen, 126 P.3d 222, 224 (Colo. App. 2005) (quoting Black’s Law Dictionary 324 (8th
ed. 2004)).
While Parsley does not dispute that he executed the Guaranty, which
unambiguously promises payment of any monies loaned by Contrada to Endeavor
pursuant to the Loan Agreement and first and second Promissory Notes, he contends
that because the funds transferred to Endeavor did not come from Contrada, there is no
consideration. In support of this assertion Parsley notes that “the only record of
transfers of funds to Endeavor pursuant to the [Loan Agreement] . . . shows that
Contrada did not transfer a singe cent to Endeavor before September 2007.” The
“record of transfers of funds” to which Parsley refers (“Exhibit B”) is a spreadsheet that
appears to show various transfers to Endeavor made pursuant to the Loan Agreement
from March, 2006 through July 22, 2008. The notations on the spreadsheet preceding
the individual transfers show entries for “Marzano/Wengh,” “Marzano,” “T Wengh” and
“Contrada.” Thomas Wengh is Contrada’s President and Carlo Marzano is an agent of
Contrada and one of its shareholders. Parsley maintains that transfers coming from
“Marzano/Wengh,” “Marzano,” and “T Wengh,” are not transfers from Contrada.
According to Exhibit B, the total amount of funds transferred to Endeavor, from any
source, is $6,134,800.00.
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Contrada does not deny that Exhibit B is an accurate record of the funds
transferred to Endeavor pursuant to the Loan Agreement. It asserts only that “the fact
that funds were sent to Endeavor by Contrada shareholders does not change the fact
that a loan was made by Contrada . . ..” I note that in its initial motion Contrada sought
judgment of approximately $8 million, plus penalties and attorneys’ fees; the full amount
contemplated in the Second Promissory Note. Contrada later filed an amendment to
the motion seeking one-half the full amount, plus interest and penalties. On December
16, 2011, Contrada filed a second amendment to its motion stating that during discovery
in an Adversary Proceeding in connection with Endeavor’s bankruptcy case in the
Southern District of Texas, it discovered that the amount Contrada loaned to Endeavor
was actually $6,134.800.00; the exact amount of total funds set forth in Exhibit B.
Construing Exhibit B in the light most favorable to Parsley, only a portion of the
$6 million transferred to Endeavor was transferred pursuant to the Loan Agreement.
Therefore, while Exhibit B is some evidence that Contrada transferred significantly less
money to Endeavor that what it seeks to recover in this action, Exhibit B does not
demonstrate a complete failure of consideration.
In a related argument, Parsley asserts that he is not liable on the Guaranty
because the funds transferred to Endeavor pursuant to the Loan Agreement were
actually individual equity contributions by Thomas Wengh, Carlo Marzano and
Marzano’s family. Here Parsley relies on Mr. Marzano’s testimony during Endeavor’s
bankruptcy case that he and his family had invested in excess of $10 million in
Endeavor. Construed in the light most favorable to Parsley, this testimony is relevant to
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determining whether funds transferred to Endeavor by Marzano and his family were
“financial accommodations,” extended by Contrada under the Guaranty, but it does not
render the Guaranty unenforceable.
In conclusion, while I find that there are no disputed issues of material fact
regarding Parsley’s breach of the Guaranty, summary judgment is not appropriate
because there are material facts in dispute concerning the amount of funds transferred
to Endeavor pursuant to the Loan Agreement and, therefore, the amount of Parsley’s
liability under the Guaranty.
3.
Whether Parsley Has Demonstrated Issues of Material Fact With
Respect to His Defenses
I now turn to Parsley’s assertion that the Guaranty is unenforceable because it
was procured by fraud or breach of a fiduciary duty to Parsley, and because Contrada
“impaired its recourse” against Endeavor.
First, I note that even assuming that Parsley can prove all of the elements of his
breach of fiduciary duty counterclaim, the legal and factual basis of which is in dispute,
this would not render the Guaranty unenforceable. Similarly, while there are factual
disputes surrounding whether Contrada or its agents “put Endeavor into bankruptcy,”
Parsley has not demonstrated that “impaired recourse” is a defense to an otherwise
enforceable contract under Colorado law.1
However, if Parsley can prove his affirmative defense of fraud, he will not be
1
In support of this argument Parsley cites the Restatement (Third) of Suretyship
& Guaranty, and Rabinowitz v. Cadle Co. II., Inc., 993 S.W.2d 796 (1999), a nonbinding district court case that based its holding on an interpretation of various
provisions in the Texas Business and Commerce Code.
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legally responsible to Contrada for any damages incurred in connection with its breach
of contract claim. In order to establish this affirmative defense, Parsley must show that
(1) Contrada made a false representation of a past or present fact; (2) that the fact was
material; (3) that Parsley entered into the Guaranty relying on the assumption that the
falsely stated fact was true; (4) that the reliance was justified; and (5) that the reliance
caused damages. See Colo. Jury Instr., Civil 30:21; see also Kopeikin v. Merchants
Mortg. and Trust Corp., 679 P.2d 599 (Colo. 1984) (reciting elements of fraudulent
concealment).
Parsley testified in his deposition that he executed the Guaranty after Marzano, a
shareholder and agent of Contrada, told him that the Guaranty would not be enforced.
In addition, there is evidence in the record that at the time the Loan Agreement and
Promissory Note were prepared, a second personal guaranty was prepared for Mr.
Marzano, but was never executed. Contrada disputes these allegations and contends
that this evidence is inadmissible “parole evidence.” However, the parole evidence rule
does not apply to allegations of fraud. See Boyer v. Karakehian, 915 P.2d 1295, 1299
(Colo. 1996) (in the absence of allegations of fraud, accident, or mistake in the
formation of the contract, parol evidence may not be admitted to add to, subtract from,
vary, contradict, change, or modify an unambiguous integrated contract). Accordingly, I
find that there are genuine issues of material fact regarding Parsley’s affirmative
defense of fraud in the inducement.
B.
Plaintiff’s Motion to Strike Defendant Parsley’s Damages
I now turn to Contrada’s motion to strike Parsley’s damages in which it contends
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that Parsley has failed to provide a computation of damages as required by Fed. R. Civ.
P. 26(a)(1). Parsley seeks damages stemming from counterclaims against Contrada in
the amount of $13,074,630.14 for alleged liability on a promissory note, $1,100,000.00
in “capital contributions to partnership” and $2 million in lost profits and special
damages. Contrada contends that Parsley is not entitled to these damages because he
did not make any capital contributions to the Endeavor partnership, he is not a partner,
and because he never paid any portion of the promissory notes. Contrada requests
that, as a sanction for Parsley’s failure to properly disclose and supplement his
damages, he should be barred from offering any evidence of his counterclaim damages
at trial. I reject this request. I agree with Parsley that Contrada’s assertions go to the
legal sufficiency of his counterclaims, rather than the adequacy of his damage
disclosures. I find that Contrada’s motion is a belated attempt to dismiss Parsley’s
counterclaims. I also note that Parsley’s initial disclosures were submitted October 20,
2010. Contrada had an opportunity to seek further clarification as to Parsley’s damage
request through interrogatories or during Parsley’s deposition, but failed to do so.
Therefore, the motion will be denied.
C.
Plaintiff’s Motion to Strike Jennifer Quintisky
Finally, I address Contrada’s Motion to Strike Jennifer Quintinsky as a witness for
Parsley. Contrada notes that Ms. Quintinsky was not listed on Parsley’s initial
disclosures, but was listed on the Final Pretrial Order as a non-expert witness who may
testify at trial. In response, Parsley states that he told Contrada about Ms. Quintinsky in
January, 2011, and further states that he has no objection to opening discovery for the
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purpose of deposing Ms. Quintinsky. Therefore, I find that the motion should be denied
without prejudice, and that the discovery period should be re-opened so that Contrada
can depose Ms. Quintinsky, if it so chooses.
III.
CONCLUSION
Based upon the foregoing, it is
ORDERED that Plaintiff’s Motion for Summary Judgment, filed April 18, 2011
[ECF No. 54] is DENIED. It is
FURTHER ORDERED that Plaintiff’s Motion to Strike Defendant Robin L.
Parsley’s Damages, filed September 7, 2011 [ECF No. 85] is DENIED. It is
FURTHER ORDERED that Plaintiff’s Motion to Strike Jennifer Quintinsky as a
Witness, filed September 7, 2011 [ECF No. 86] is DENIED WITHOUT PREJUDICE. It
is
FURTHER ORDERED that discovery period shall be re-opened for the limited
purpose of allowing Plaintiff the opportunity to depose Ms. Jennifer Quintinsky, if it so
chooses.
Dated: February 22, 2012
BY THE COURT:
s/ Wiley Y. Daniel
Wiley Y. Daniel
U. S. District Judge
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