Humphrey v. O'Connor

• Decision Date: 10 October 1996
• Docket Number: No. 95CA1058,95CA1058
• Parties: Donald J. HUMPHREY, Plaintiff-Appellee and Cross-Appellant, v. Terrence J. O'CONNOR, Defendant-Appellant and Cross-Appellee. . IV
• Court: Colorado Court of Appeals

Page 1015

940 P.2d 1015

Donald J. HUMPHREY, Plaintiff-Appellee and Cross-Appellant, v. Terrence J. O'CONNOR, Defendant-Appellant and Cross-Appellee.

No. 95CA1058.

Colorado Court of Appeals,

Div. IV.

Oct. 10, 1996.

Rehearing Denied Nov. 14, 1996.

Certiorari Denied July 28, 1997.

Vanderwerf & Lipinsky, P.C., Lino S. Lipinsky de Orlov, Denver, for Plaintiff-Appellee and Cross-Appellant.

Otten, Johnson, Robinson, Neff & Ragonetti, P.C., Darrell G. Waas, David P. Hutchinson, Denver, for Defendant-Appellant and Cross-Appellee.

Opinion by Judge CASEBOLT.

In this action between former members of a joint venture, defendant, Terrence J. O'Connor, appeals the summary judgment entered in favor of plaintiff, Donald J. Humphrey, on Humphrey's claim for common law contribution concerning the settlement of a joint venture debt to the Resolution Trust Corporation (RTC). Humphrey cross-appeals asserting that the trial court erred in granting O'Connor's motion for judgment on the pleadings directed to Humphrey's additional claim for unjust enrichment. We reverse and remand with directions.

Humphrey and O'Connor were joint venturers in the Gunpark Joint Venture (Gunpark). Humphrey owned a four percent share and O'Connor the remaining ninety-six percent. The parties' joint venture agreement provided that Humphrey and O'Connor would share the net profits and losses of Gunpark in the same proportion as their ownership percentages.

Gunpark obtained loans from a savings and loan association in the original amount of $4.2 million, secured in part by property owned by the joint venture. Humphrey and O'Connor were co-makers of the promissory note. Gunpark thereafter defaulted on the loans and the RTC, as receiver for the savings and loan, commenced a foreclosure on the property. After foreclosure, a deficiency of $4.7 million remained. Humphrey and O'Connor were jointly and severally liable for the entire amount of the deficiency.

The RTC, Humphrey, O'Connor, and Gunpark then entered into a settlement agreement. Under the agreement, Humphrey pledged to make payments to the RTC totaling $150,000 in exchange for a release to him from further liability. O'Connor agreed to make payments to the RTC totaling $35,000 to secure his own release. The agreement enabled each joint venturer to satisfy his own individual liability without regard to the other's monetary performance and also provided that each party would remain liable for the entire $4.7 million deficiency until that party satisfied his own settlement obligations. Both Humphrey and O'Connor complied with their respective settlement obligations.

Thereafter, Humphrey commenced this action. As pertinent here, Humphrey only asserted claims for unjust enrichment and common law contribution to recover from O'Connor the amount by which Humphrey's settlement payment exceeded four percent of the total settlement payment of $185,000. The trial court granted Humphrey's motion for summary judgment on the contribution claim based on its finding that the settlement agreement included a provision waiving O'Connor's right to object to the claim. Correspondingly, the trial court denied O'Connor's motion for judgment on the pleadings on the contribution claim. However, it granted O'Connor's motion for judgment on the pleadings on Humphrey's claim for unjust enrichment. This appeal followed.

I.

O'Connor first contends that the trial court erred in construing a neutral reservation-of-rights clause as compelling contribution and waiving his common law defenses to Humphrey's contribution claim. We agree.

The pertinent provision of the settlement agreement provides:

Waiver of Subrogation. Until all of the Humphrey payment obligations have been satisfied and all of the O'Connor payment obligations have been satisfied, none of the Borrowers shall have any right of subrogation, indemnification, or contribution against the others for amounts paid to the RTC under this Agreement or any right to enforce the terms of this Agreement against another Borrower. Nothing herein contained shall preclude any of the Borrowers from exercising rights of subrogation, indemnification, or contribution against one or more of the other Borrowers after full satisfaction of both the Humphrey payment obligations and the O'Connor payment obligations.

Humphrey asserts that this clause bestowed an unconditional right to contribution upon him and functioned as O'Connor's affirmative waiver of any objection to Humphrey's contribution claim. O'Connor contends that this paragraph served only to preserve the status quo until the parties satisfied their obligations under the settlement agreement. The trial court adopted Humphrey's interpretation, concluding that "the court is not in a position to deprive [Humphrey] of his rights under an agreement made with [O'Connor]. By the terms of the [settlement] agreement, [O'Connor] has waived his objection to [Humphrey's] contribution claim."

Interpretation of a written contract is a question of law subject to de novo review. Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371 (Colo.1990). Hence, we need not defer to the trial court's interpretation. Bertrand v. Board of County Commissioners, 872 P.2d 223 (Colo.1994).

Contracts should be construed to give effect to the intent of the parties. In re Marriage of Thomason, 802 P.2d 1189 (Colo.App.1990). Contractual terms should be given their generally prevailing meaning and an integrated contract should be viewed in its entirety with the end of seeking to harmonize and give effect to all provisions. Central Bank v. Deloitte & Touche, 928 P.2d 754 (Colo.App. 1996).

The word "until" is typically used as a function word to indicate continuance up to a particular time. See Webster's Third New International Dictionary 2513 (1986). Hence, under the agreement, there would be no right of contribution as long as any of the payment obligations remained unsatisfied.

Once full satisfaction of the payment obligations occurred, the paragraph specified that "nothing ... shall preclude [the] exercis[e]" of contribution rights. This direction is, in our view, merely an enabling provision that does not grant or confer an automatic, absolute right of contribution, nor does it constitute a waiver of any defenses. "Exercise" in this context equates to "assertion," and the presence of the word connotes a choice or option, not an unconditional grant of an incontestible right.

Essentially, the disputed paragraph is a reservation of each borrower's rights, whatever they may be, against the other, to be held in abeyance pending performance of their respective settlement obligations to the RTC. Neither borrower waived his rights or defenses against the other; rather, each merely deferred his right to proceed against the other until both had performed their individual obligations to the RTC.

Our interpretation is supported by the Fifth Circuit's recent explication of a similar paragraph in an RTC settlement agreement in an opinion not yet rendered when the trial court ruled in this case. In Wilhite v. Schendle, 92 F.3d 372 (5th Cir.1996), a former bank director sought contribution against a nonpaying director for a portion of the amount paid to the RTC under a settlement agreement. The paragraph in the Wilhite case similar to the one at issue here specified that: "[N]othing in this Agreement shall be interpreted as a bar to any rights of the former officers or directors to indemnification or contribution from any other former officer or director as a consequence of their respective payments to the RTC in connection with this Agreement...."

The Wilhite court disagreed with the plaintiff's assertion that the paragraph in question created a right of contribution from the other former directors who had signed the settlement agreement. Rather, the court found that the paragraph "does not indicate that it is creating new rights within the Agreement" and concluded that "the passive language ... [of] the paragraph merely preserves rights that may exist outside the Settlement Agreement." Wilhite v. Schendle, supra 92 F.3d at 376.

Accordingly, because we conclude that the trial court's reading of the paragraph at issue was erroneous, O'Connor did not waive his right to assert common law defenses to Humphrey's contribution claim, nor did the agreement grant an unconditional right of contribution to Humphrey as a matter of contractual interpretation. Consequently, the trial court's summary judgment based upon its interpretation of the agreement cannot stand.

II.

Nonetheless, Humphrey asserts that the summary judgment was correctly entered because, based on the undisputed facts, he was entitled to common law contribution as a matter of law, since he paid more than his proportionate share of the settlement amount. In opposition, O'Connor asserts that Humphrey may not obtain contribution as a matter of law because Humphrey did not pay more than his proportionate share of the $4.7 million deficiency or pay a lesser amount and secure a release of O'Connor with that settlement payment. We agree with O'Connor.

Summary judgment is appropriate when the pleadings, affidavits, depositions, and admissions establish that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. C.R.C.P. 56(c); Cung La v. State Farm Automobile Insurance Co., 830 P.2d 1007 (Colo.1992). The burden is on the moving party to establish that no genuine issue of fact exists and any doubts in this regard must be resolved against the moving party. Aspen Wilderness Workshop, Inc. v. Colorado Water Conservation Board, 901 P.2d 1251 (Colo.1995).

Our review of a summary judgment is de novo. Aspen Wilderness Workshop, Inc. v. Colorado Water Conservation Board, supra. Similarly, the correctness of legal conclusions based on undisputed facts is a question of law subject to our independent review on appeal. Evans v. Romer, 854 P.2d 1270 (Colo.1993), ...