Lawry v. Palm

• Decision Date: 24 July 2008
• Docket Number: No. 07CA0334.,07CA0334.
• Citation: 192 P.3d 550
• Parties: Robyn J. LAWRY and Frying Pan Anglers, Inc., Plaintiffs-Appellees and Cross-Appellants, v. Roy C. PALM, Defendant-Appellant and Cross-Appellee.
• Court: Colorado Court of Appeals

192 P.3d 550

Robyn J. LAWRY and Frying Pan Anglers, Inc., Plaintiffs-Appellees and Cross-Appellants, v. Roy C. PALM, Defendant-Appellant and Cross-Appellee.

No. 07CA0334.

Colorado Court of Appeals, Div. V.

July 24, 2008.

Leavenworth & Karp, P.C., James F. Fosnaught, Glenwood Springs, Colorado, for Plaintiffs-Appellees and Cross-Appellants.

Austin, Pierce & Smith, P.C., Thomas Fenton Smith, Daniel J. Sullivan, Aspen, Colorado, for Defendant-Appellant and Cross-Appellee.

Opinion by Judge GRAHAM.

Defendant, Roy C. Palm, appeals the judgment entered after a trial to the court in favor of plaintiffs, Robyn J. Lawry and Frying Pan Anglers, Inc. (FPA), for breach of contract and conversion. Plaintiffs cross-appeal portions of the trial court's judgment finding that no confidential relationship existed between the parties, awarding damages to defendant on his counterclaim, declining to award pretrial interest on FPA's conversion claim, declining to award attorney fees as consequential damages, and declining to award attorney fees to FPA as the prevailing party. Plaintiffs also cross-appeal the trial court's order denying Lawry's request for costs pursuant to section 13-17-202, C.R.S. 2007. We affirm.

FPA is a fly fishing retailer and licensed outfitter located in Basalt, Colorado. FPA provides fly fishing guide services on the Frying Pan River and float and guiding services on the Roaring Fork and Colorado Rivers. Defendant was the sole owner of the capital stock of FPA and operated the business for approximately twenty years. He also individually held United States Forest Service Permit SOP89, an outfitting license that was necessary for commercial guiding on the Frying Pan River.

On December 23, 2003, defendant and Lawry entered into an agreement whereby defendant would sell to Lawry all his capital stock in FPA for the sum of $150,000, to be paid over an eighteen-month period. In addition, the agreement contained an employment agreement whereby defendant would continue working as a consultant to FPA for ten years in exchange for an annual salary of $36,000. The employment portion of the agreement required defendant to hold "the Outfitting Licenses absolutely [for] the benefit of" FPA, because the "continued holding and availability of these licenses is integral to the ongoing viability of" FPA. This provision was included in the agreement in response to defendant's representations to Lawry that the permits and licenses could only be held in defendant's name and could not be transferred to FPA.

On April 1, 2004, defendant transferred and conveyed all FPA shares of stock to Lawry. As of November 22, 2004, Lawry had paid defendant $76,671.23 and $73,328.77 remained due on the purchase price.

On November 23, 2004, the parties' deteriorating relationship took a turn for the worse. Defendant submitted an order for trout flies to Mowbray, Lawry's husband and FPA's vice president. Mowbray responded in an e-mail to defendant, stating that the fly order appeared to be excessive. Defendant e-mailed a reply: "You are on your own." Without receiving a response from Mowbray or Lawry, defendant sent another e-mail later that day, providing in part:

I have been ordering flies from various manufacturers for twenty years and I know I have a better understanding of flies than you. Look at the facts — Flies have been our largest sales for years.

I am not stupid! The reputation of . . . [FPA] has been going down since you took over. I worked twenty years to make the shop what it was and you have been running it into the ground. This is not just me talking but customers who Art [a]nd I have known for years. You lost Scott Rods, are losing Sims and Action Optics. You have been selling off the inventory that came with the shop (that I paid for) in order to keep the doors open. The shop had the best year ever and should be paying for itself. So much for "nothing is going to change[.]" Don't cut off your nose to spite your face. The reason for the increase in sales was not of your doing, but location, location, location! I was more than willing to be part of the team but there is not a team. It's all you and when you don't listen to experience and people who are trying to help, then I don't know what to do. I would like my name, web fishing reports, and any reference to or about me removed from . . . [FPA]. I want real property as equity as insurance per our agreement. (not encumbered). The shop has been working on my credit long enough. Use your own credit. I don't think you want me calling the INS.

Lawry assumed that defendant had resigned from FPA, and the next day, plaintiffs' attorney sent defendant a letter explaining that Lawry "accepted" defendant's "desires" that were "expressed" in his e-mails, that she was negotiating with the bank to obtain a loan to pay the balance owed to him, and that she was ready "to work with" his attorney "to settle all matters of disassociation." Defendant did not respond to the letter.

On December 3, defendant sent Lawry the following e-mail:

I would appreciate it if you would drop my 2003 and 2004 credit card invoices off at my mailbox or the shop. I would also like to have my 2003 income tax information. [Anything] that is yours and pertains to . . . [FPA] will be delivered to you at the shop. Year being 2004. Give me a list.

That same day, plaintiffs' attorney sent a letter to defendant requesting FPA's 2003 tax return so that Lawry could secure a loan to pay the balance owed to defendant. The letter also discussed "winding up" FPA's affairs and "orderly disassociation." Defendant did not respond to the letter.

On December 9, the parties' attorneys met and discussed "winding up" FPA's affairs. Defendant's attorney did not indicate that defendant wanted to continue working for FPA.

Rather, on that same day, defendant removed from FPA's fly shop Permit SOP89, which had been amended to include a second permit, the "Grizzly Permit," which authorized guide trips on the Colorado River and had been purchased by FPA in 2004. Defendant notified the Colorado Department of Wildlife that FPA could no longer operate under "his" permits. He also informed FPA's guides that he was no longer an FPA outfitter, that they could not take float trips under his permits, and that they could not go on United States Forest Service property because FPA no longer had the use of "his" permits.

From the time defendant removed the permits until May 2005, FPA had no permits and, therefore, FPA guides could not take customers on guided fishing trips. As a result, many of the guides resigned and FPA was unable to replace them.

Plaintiffs then filed this complaint against defendant, alleging that defendant (1) breached the agreement by resigning from FPA, withdrawing the permits from FPA, and failing to perform certain duties under the agreement; and (2) converted a truck, a computer, and the Grizzly Permit, which were all owned by FPA. Plaintiffs also asserted claims for interference with business relationships, defamation, breach of fiduciary duty, fraud, and civil theft.

Defendant answered and filed counterclaims for breaches of contract, alleging that plaintiffs wrongfully terminated his employment, that Lawry failed to pay him the entire $150,000 purchase price for FPA, and that plaintiffs had interfered with his ability to perform his duties under the agreement.

After a bench trial, the court found in favor of plaintiffs on their breach of contract and conversion claims and against them on all remaining claims. On the breach of contract claim, the trial court awarded damages for the time Lawry "spent dealing with the consequences of [defendant's] breaches" in the amount of $2,625, lost license fees in the amount of $90, and FPA's actual and future lost profits in the amount of $63,549, plus interest in the amount of $9,089. In addition, the trial court imposed a constructive trust on Permit SOP89 and ordered defendant to convey that permit to FPA within three days and to execute a form "naming FPA as the new holder applicant." The trial court awarded plaintiffs $11,400 for the conversion of the truck and $500 for the conversion of the computer, plus pretrial interest. The court ordered that the Grizzly Permit "shall be transferred to Plaintiff by execution by [defendant] of Form FS-2700-sa Holder Initiated Revocation of Existing Authorization."

The trial court ruled in favor of defendant on his counterclaim for breach of contract and awarded him the balance due on the purchase price, $73,328.77, plus pretrial interest, pursuant to "Section 5 of the Agreement." The court denied defendant's remaining counterclaims.

The trial court declined to award any party attorney fees as the prevailing party and denied plaintiffs' request for Lawry's costs pursuant to section 13-17-202.

This appeal followed.

I. Standard of Review

This is an appeal from a judgment entered after a trial to the court. We, therefore, review the court's judgment here as a mixed question of fact and law.

We defer to the court's credibility determinations and will disturb its findings of fact only if they are clearly erroneous and not supported by the record. M.D.C./Wood, Inc. v. Mortimer, 866 P.2d 1380, 1383 (Colo. 1994); Page v. Clark, 197 Colo. 306, 313, 592 P.2d 792, 796 (1979). When the evidence is conflicting, a reviewing court may not substitute its conclusions for those of the trial court merely because there may be credible evidence supporting a different result. In re Estate of Breeden v. Gelfond, 87 P.3d 167, 172 (Colo.App.2003).

We review de novo the court's application of the governing legal standards. Ocmulgee Props. Inc. v. Jeffery, 53 P.3d 665, 667 (Colo.App.2001).

II. Breach of Contract

We reject defendant's various contentions that the trial court erred in finding that he breached the agreement and in awarding damages for that breach.

A. Repudiation by Resignation

Defendant first contends that the trial court...