Brody v. Bock, 93SC681

• Decision Date: 05 June 1995
• Docket Number: No. 93SC681,93SC681
• Parties: Robert D. BRODY, Petitioner, v. Thomas H. BOCK, Respondent.
• Court: Colorado Supreme Court

Page 769

897 P.2d 769

Robert D. BRODY, Petitioner, v. Thomas H. BOCK, Respondent.

No. 93SC681.

Supreme Court of Colorado,

En Banc.

June 5, 1995.

Rehearing Denied June 26, 1995.

Hamil Professional Corp., J. Lawrence Hamil, Michelle W. Stern, Christina V. Miller, Denver, for petitioner.

William R. Fishman, Denver, for respondent.

Justice KIRSHBAUM delivered the Opinion of the Court.

In Bock v. Brody, 870 P.2d 530 (Colo.App.1993), the court of appeals reversed a directed verdict entered by the trial court in favor of the petitioner, Robert D. Brody, and against the respondent, Thomas H. Bock, on a common-law fraud claim asserted by Bock against Brody. The court of appeals also held that the trial court's order dismissing a claim for unjust enrichment asserted by Bock against Brody was not appealable. Having granted Brody's petition for certiorari review of these two conclusions, ¹ we affirm in part, reverse in part, and remand this case to the court of appeals with directions.

I

The trial court entered its directed verdicts in favor of Brody and against Bock on Bock's claims of common-law fraud and unjust enrichment at the conclusion of Bock's case-in-chief. In so doing, the trial court found the following facts, viewing the evidence most favorably to Bock.

Bock and Brody first met in early 1978. At that time Bock was employed by a stock brokerage firm as an underwriter and as the firm's research director. Brody was the president and sole shareholder of two companies, American Growth Sponsors, Inc. (hereafter "American Growth"), and Investment Research Corporation (hereafter "IRC"). American Growth was a securities brokerage firm that sold shares of American Growth Fund (hereafter "the Fund"), a registered mutual fund, and other investments. IRC was the investment advisor to the Fund.

Bock and Brody became friends, and in December of 1978 Bock accepted a position with American Growth as an underwriter. In the ensuing months the two became close personal friends. Bock, Brody, and their spouses frequently dined together and took several vacations together. Bock and Brody exchanged gifts, had lunch together almost every day, and regularly conversed with each other after work.

In early 1979 American Growth was engaged in best efforts underwriting, an enterprise wherein the underwriter does not purchase securities from the issuing company but offers securities to the public as an agent of the insurer. During 1979 the market for best efforts underwriting declined and the market for firm commitment underwriting substantially increased. In firm commitment underwriting the underwriter purchases securities directly from the issuer and assumes the risk of re-selling the securities, as a principal, to the public. When the market for best efforts underwriting declined sharply during 1979, Bock began to consider other employment opportunities.

In May of 1980 Bock discussed his concerns about his future in corporate finance and underwriting with Brody, and Brody initially recommended that Bock abandon his career in underwriting and focus solely on selling shares of the Fund. When Bock resisted this suggestion, Brody stated that if Bock would agree to sell shares of the Fund Brody would execute a codicil to his will bequeathing all of the stock of American Growth and of IRC to Bock, would accept only such compensation from the two companies as would be necessary to meet his living expenses, and would appoint Bock a lifetime director of the two companies.

In April or May of 1981, Brody took Bock to Brody's bank, opened a safe deposit box, and showed Bock an executed codicil to his will (hereafter "the codicil"). Bock testified that he memorized the contents of the codicil, which was captioned "Codicil to last will and testament of Robert David Brody," and stated that "[s]o long as Thomas H. Bock is an officer or director of either American Growth Fund Sponsors or Investment Research Corporation, upon my death, he shall inherit all of the outstanding common stock of both companies, free of any estate or inheritance taxes."

Bock testified that on the basis of Brody's promises he agreed to remain an employee of American Growth and IRC as a seller of funds, but that in January of 1991 Brody suggested that he and Bock should "part company." Brody asked Bock to sign an agreement which provided that Bock would waive all claims against American Growth; IRC; affiliated companies; and present and former directors, officers, agents, and employees of the companies. The agreement also included a two-year non-competition clause effective upon cessation of Bock's employment with the companies.

Bock refused to sign the proposed agreement until he received a copy of the codicil and a written document setting forth the oral agreement regarding the codicil to Brody's will. When Brody refused to provide Bock with a copy of the codicil, Bock initiated this civil action against Brody, American Growth, and IRC. The complaint asserted claims for breach of contract to make a will, breach of contract, breach of a duty of good faith and fair dealing, breach of fiduciary duty, fraud in the inducement of a contract, unjust enrichment, and common-law fraud.

Prior to trial Brody, American Growth, and IRC filed motions to dismiss the claim for breach of contract to make a will on the ground that such claim failed to satisfy the requirements of section 15-11-701, 6B C.R.S. (1987) (hereafter "the succession statute"), and to dismiss the claim for breach of duty of good faith and fair dealing pursuant to C.R.C.P. 12(b)(5) for failure to state a claim upon which relief could be granted. The trial court granted the motions, and Bock did not appeal the dismissal of these two claims.

Bock subsequently filed a motion pursuant to C.R.C.P. 41(a)(2) to withdraw his claims against American Growth and IRC on the ground that the companies were "no longer necessary parties to this case." The trial court granted the motion. The issues of liability and damages were bifurcated, and the issues regarding liability were tried to a jury in May 1992. ²

At trial Brody testified as an adverse witness during Bock's case-in-chief. Brody denied entering into any oral agreement to bequeath the stock in the two companies to Bock or guaranteeing Bock a lifetime directorship on the board of American Growth or IRC, and testified that in May of 1980 he had no intention of devising his stock in those companies to Bock. Brody further testified that he did execute a codicil to his will in June 1981 (hereafter "the 1981 codicil"), which codicil contained the following provisions:

SPECIFIC REQUEST [sic] OF STOCK

So long as and if Thomas H. Bock of the County of Arapahoe, State of Colorado, is an officer, director, or employee of either American Growth Fund Sponsors, Inc. or Investment Research Corporation, or both, on the date of my death, I hereby give to the said Thomas H. Bock all of the stock of American Growth Fund Sponsors, Inc. and Investment Research Corporation registered in my name or in which I have a beneficial interest on the date of my death.

Brody also testified that in 1988 he changed his will to provide for a specific bequest of $500,000 to Bock and that after the initiation of this lawsuit he executed a new will omitting Bock's name.

At the conclusion of Bock's case-in-chief Brody orally requested the trial court to enter a directed verdict in favor of Brody and against Bock on Bock's claims for common-law fraud, fraudulent inducement to enter into a contract, breach of fiduciary duty, breach of contract, and unjust enrichment. The trial court granted the motion and held that the terms of the 1981 codicil differed from the terms of the alleged oral agreement and therefore did not meet the requirements of the succession statute; that Bock's fraudulent inducement and common-law fraud claims "fell within the ambit of the contract" and should be deemed contract claims; and that no fiduciary relationship existed because there was no evidence of a legal relationship between the parties. The trial court also dismissed Bock's unjust enrichment claim against Brody on the ground that any enrichment had been conferred on American Growth and IRC rather than on Brody. The trial court's order reflected that the unjust enrichment claim was dismissed "without prejudice."

On appeal the court of appeals affirmed the trial court's judgment insofar as it dismissed Bock's claims for breach of fiduciary duty and fraudulent inducement. Bock v. Brody, 870 P.2d 530, 533-34 (Colo.App.1993). However, the court of appeals reversed the trial court's judgment insofar as it dismissed Bock's common-law fraud claim. Id. at 534. The court of appeals held that "to the extent that one performs an agreement in reliance upon the fraudulent promise of another to make provision for the actor in a will, [the succession statute] does not foreclose a court from imposing a remedy for commission of the fraud." Id. In a special concurrence Judge Rothenberg emphasized that Bock was entitled to recover only those damages that directly resulted from his reliance on the alleged fraud. Id. at 535 (Rothenberg, J., specially concurring). Although both parties appealed the trial court's judgment with respect to the unjust enrichment claim, the court of appeals dismissed the appeal with respect to that issue, holding that American Growth and IRC were indispensable parties pursuant to C.R.C.P. 19 and that the dismissal without prejudice was not a final, appealable order. Bock, 870 P.2d at 533.

II

Brody argues that the succession statute bars all claims based upon alleged promises to make a will which do not comply with that statute, that Bock's common-law fraud claim is dependent upon terms of an oral agreement which do not satisfy the requirements of the succession statute, and that Bock's fraud claim is therefore barred by that statute. Brody contends alternatively that Bock's common-law fraud claim was...