Colorado Nat. Bank of Denver v. Friedman, 91SC706

• Decision Date: 08 February 1993
• Docket Number: No. 91SC706,91SC706
• Parties: COLORADO NATIONAL BANK OF DENVER, Individually, and as Personal Representative of the Estate of William Henry Conter, a/k/a William H. Conter, a/k/a William Conter, Deceased, Petitioner/Cross-Respondent, v. Don FRIEDMAN, Individually, and as General Partner of Wikiup Mobile Home Club, a Colorado limited partnership, Respondent/Cross-Petitioner.
• Court: Colorado Supreme Court

Page 159

846 P.2d 159

COLORADO NATIONAL BANK OF DENVER, Individually, and as

Personal Representative of the Estate of William Henry

Conter, a/k/a William H. Conter, a/k/a William Conter, Deceased, Petitioner/Cross-Respondent, v. Don FRIEDMAN, Individually, and as General Partner of Wikiup

Mobile Home Club, a Colorado limited partnership,

Respondent/Cross-Petitioner.

No. 91SC706.

Supreme Court of Colorado,

En Banc.

Feb. 8, 1993.

Rehearing Denied March 15, 1993.

Davis, Graham & Stubbs, John M. Roche, Richard P. Holme, Denver, for petitioner/cross-respondent Colorado Nat. Bank of Denver, in its Individual Capacity.

John S. Pfeiffer, Denver, for petitioner/cross-respondent Colorado Nat. Bank of Denver, as Personal Representative.

Krendl Horowitz & Krendl, P.C., Jay S. Horowitz, Kim E. Ikeler, Denver, for respondent/cross-petitioner.

Justice VOLLACK delivered the Opinion of the Court.

Petitioner Colorado National Bank (the Bank) and cross-petitioner Don Friedman (Friedman) petition from the court of appeals opinion in Friedman v. Colorado National Bank of Denver, 825 P.2d 1033 (Colo.App.1991). The court of appeals found, among other things, that the Bank breached a contract with Friedman in bad faith, but that Friedman was not permitted to recover damages for lost profits as a result of the breach. The court of appeals also determined that the successor judge appropriately performed post-trial duties. The court of appeals concluded that the district court erred by dismissing Friedman's claim for tortious interference with contract. We affirm the court of appeals opinion in part, reverse in part, and remand for further proceedings consistent with this opinion.

I.

On December 2, 1964, William Conter (Conter) and Don Friedman (Friedman) executed an agreement wherein they formed a limited partnership. On February 14, 1978, Friedman and Conter amended their limited partnership agreement. The amended agreement (the 1978 Agreement) stated that it replaced the original partnership agreement in its entirety. The 1978 Agreement provided that the purposes of the partnership were to develop, construct, and operate a mobile home resort, and that the name of the resort continued to be the "Wikiup Mobile Home Club" (the mobile home club).

The 1978 Agreement stated that Friedman was the sole general partner, while both Friedman and Conter were limited partners. The profits and losses of the partnership were allocated as follows:

Friedman -- as General Partner: 05%

Friedman -- as Limited Partner: 45%

Conter -- as Limited Partner: 50%

The 1978 Agreement stated that the general partner shall be "the sole and exclusive manager" of the mobile home club, and "shall be responsible for all management policy, and general management supervision without fee except as otherwise agreed on by the parties."

The 1978 Agreement expressly stated that the partnership would not terminate upon the death of a limited partner. Rather, the limited partner's personal representative, heirs, or devisees shall succeed to the deceased limited partner's interest. The 1978 Agreement provided that it would be binding upon the limited partner's personal representatives.

The 1978 Agreement expressly included the following provisions: ¹

XIII. OPTION TO PURCHASE

A. Notwithstanding anything else in Article XI or elsewhere in this Agreement, the following events shall give the General Partner an option to purchase the interest of a Limited Partner:

1. In the event of the death of a Limited Partner, the General Partner shall have the right to purchase the entire interest of such Limited Partner;

....

B. Whenever the General Partner has an option to purchase the interest of a Limited Partner, the price to be paid and the terms of the option shall be as follows:

1. In the event of the death of a Limited Partner, the price to be paid shall be equal to the value of the decedent's partnership interest as of his date of death as submitted for federal estate tax purposes. Payment shall be made in four equal semiannual installments, including interest, beginning four months after election to purchase, and any balance shall bear interest at 7% per annum.... Election to purchase the decedent's interest by a surviving General Partner shall be made within 60 days after the delivery to the surviving Partner of an appraisal, accompanied by a letter stating that the appraisal will be (or has been) used in the decedent's federal estate tax return.... The purchase price shall not be adjusted if the value of the partnership interest is redetermined upon audit of the return. If no federal tax return is filed, the Personal Representative of the decedent and the surviving General Partner shall agree as to the value as of the date of death.... The surviving General Partner shall have 60 days after the delivery to him of such an appraisal to elect to purchase the decedent's interest.... If election is made, then the purchasing Partner shall become the sole owner of the partnership interest and the deceased Partner's estate shall have no further interest in the business....

In 1981, Conter established a revocable trust, into which he deposited his interest in the limited partnership. Conter named the Bank trustee, and the Bank subsequently began administering the trust.

In 1985, Friedman contacted the Bank, and proposed establishing a management company for the mobile home club. Friedman indicated that quick action was required in order to prevent high vacancy rates in the succeeding year. The Bank neither accepted nor rejected Friedman's proposal. The Bank, however, contacted an attorney, and sought an interpretation of the 1978 Agreement in the event of Conter's death. ² On January 11, 1986, Conter died.

On March 10, 1986, Friedman filed a claim asserting his rights to purchase Conter's interest in the mobile home club, pursuant to the 1978 Agreement. ³ In March of 1986, the Bank employed Wilson Wampler (Wampler) of Value Consultants, Inc., to appraise the value of Conter's interest in the mobile home club at the time of his death. The Bank also contacted J.S. Harper & Company, and discussed the possibility of obtaining a second appraisal. On April 25, 1986, the Bank filed a notice of disallowance. In that notice, the Bank identified itself as the personal representative of Conter's estate. On June 13, 1986, Wampler provided the Bank with an estimate, setting the value of the mobile home club at $5,635,000. On June 20, Friedman sought both a declaration that he held an option to purchase the estate's interest in the mobile home club, and a decree of specific performance requiring the Bank, as personal representative of Conter's estate, to execute section XIII of the 1978 Agreement.

On August 1, the Bank filed an answer and counterclaim. The Bank contended that Friedman's claims should be barred by the doctrine of unclean hands. The Bank counterclaimed that Friedman improperly charged the partnership for management fees, and thus breached the 1978 Agreement. The Bank requested the probate court to issue an order dissolving the partnership and awarding the estate damages. On November 20, the Bank filed an amended answer and counterclaim wherein the Bank asserted that neither Conter nor his personal representative had agreed to pay for management supervision.

On April 7, 1987, approximately ten months after the Bank received Wampler's appraisal, Harper delivered an appraisal to the Bank, estimating that the mobile club was worth $6,337,000 at the time of Conter's death.

On April 10, 1987, more than one year after Conter's death, the Bank agreed to honor Friedman's right to purchase Conter's interest. Relying on Harper's 1987 appraisal, the Bank informed Friedman that the value of Conter's interest in the mobile home club, for federal estate tax purposes, was set at $2,900,000. The Bank provided Friedman with copies of both Harper's 1987 appraisal and Wampler's 1986 appraisal.

Friedman subsequently informed the Bank that he wished to exercise his option to purchase Conter's interest for $2,900,000. Friedman, however, reserved any claims he might have against the Bank regarding the amount of and method used to determine the value of the interest. Friedman additionally tendered the Bank a promissory note in the requested amount. The Bank, however, refused to execute the sale of Conter's interest on the ground that Friedman refused to waive his claims against the Bank.

On January 26, 1988, Friedman filed an amended petition for allowance of claim, and a demand for a jury trial. Friedman stated four causes of action against the Bank: (1) As the personal representative of Conter's estate, the Bank breached the 1978 Agreement; (2) the Bank should be enjoined to permit Friedman to purchase Conter's interest at a price of $1,900,000; (3) the Bank, in its individual capacity, tortiously interfered with the contract between Friedman and Conter's estate; and (4) the Bank and the estate breached an implied covenant of good faith and fair dealing under the 1978 Agreement. Friedman sought punitive damages in excess of $1,000,000 based on the Bank's breach of contract and tortious conduct.

In the amended petition, Friedman stated that the 1978 amendments to the Agreement were designed to both reflect recognition of and reward Friedman's considerable efforts expended on management of the mobile home club. Friedman also noted that he regularly distributed financial statements and Conter's share of profits to the Bank from 1981 until Conter's death in 1986. During this five-year interval, the Bank never expressed dissatisfaction with Friedman's management of the mobile home club. Friedman alleged that the improper conduct of both the Bank and the estate prevented him from selling the mobile home club.

On February 22, 1988, the Bank in turn filed an answer to Friedman's amended petition for allowance of a claim. The Bank claimed that it provided Friedman appraisals in full...