Interbank Inv. v. Vail Valley Consol. Water

• Decision Date: 14 September 2000
• Docket Number: No. 99CA0477.,99CA0477.
• Citation: 12 P.3d 1224
• Parties: INTERBANK INVESTMENTS, L.L.C., a Colorado corporation, Plaintiff-Appellant and Cross-Appellee, v. VAIL VALLEY CONSOLIDATED WATER DISTRICT, a quasi-municipal corporation; and Eagle River Water and Sanitation District, a quasi-municipal corporation, Defendants-Appellees and Cross-Appellants.
• Court: Colorado Court of Appeals

12 P.3d 1224

INTERBANK INVESTMENTS, L.L.C., a Colorado corporation, Plaintiff-Appellant and Cross-Appellee, v. VAIL VALLEY CONSOLIDATED WATER DISTRICT, a quasi-municipal corporation; and Eagle River Water and Sanitation District, a quasi-municipal corporation, Defendants-Appellees and Cross-Appellants.

No. 99CA0477.

Colorado Court of Appeals, Div. II.

September 14, 2000.

Haligman, Lottner, Rubin & Fishman, P.C., Richard I. Brown, Curt Todd, Michelle Hargis Dillard, Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee.

Collins and Cockrel, P.C., Paul C. Rufien, Derek G. Passarelli, Denver, Colorado, for Defendants-Appellees and Cross-Appellants.

Opinion by Judge DAILEY.

In this contract dispute, plaintiff, Interbank Investments, LLC, appeals the trial court's dismissal of its complaint against defendants, Vail Valley Consolidated Water District and Eagle River Water and Sanitation District. According to plaintiff, the trial court erred in finding that its claims were precluded by the statute of limitations and that it had not, in any event, proven damages with respect to its breach of contract claims.

Defendants cross-appeal the trial court's determinations that plaintiff had standing to sue; that there had not been a material breach of contract precluding recovery here; and that, under the circumstances, repudiation could not be presented as an affirmative defense.

We affirm in part, reverse in part, and remand with directions.

I. Background

Plaintiff claims to be the successor in interest to a developer who in the 1970's agreed to construct two water distribution systems in Eagle County. Defendants are the successors in interest to the original water districts.

Under a 1978 agreement, the developer was to receive reimbursement for its costs of construction "promptly" after the district collected water tap fees from new developments. Under a 1979 agreement, the developer was to receive reimbursement "quarterly" from applicable tap fees. The developer, however, would be responsible for re-paying to the districts engineering and consultant fees under the 1978 Agreement and engineering, consulting, and legal fees under the 1979 Agreement. No reimbursement was due the developer until after the water districts recouped their engineering, consulting, and legal expenses.

Construction of the water systems was completed in the early 1980's and by 1984 the water districts listed the water distribution systems and facilities as assets in their financial statements. Although the districts began collecting tap fees in 1980, none of the fees has ever been paid to the developer or its successors in interest. The districts, however, had recouped their expenses by October 1990 for the 1978 Agreement and by May 1992 for the 1979 Agreement.

On November 1, 1996, plaintiff initiated this action for breach of contract and unjust enrichment against defendants. After a trial to the court, the trial court found: (1) plaintiff had failed to prove its contract damages, because it had provided no documentary evidence from which contract damages could reliably be determined; (2) the doctrine of unjust enrichment "may apply"; and (3) unjust enrichment awards of $123,816.26 and $110,635.54 "might be" appropriate in connection with the 1978 and 1979 agreements, respectively.

Ultimately, however, the trial court dismissed plaintiff's claims on statute of limitations grounds.

The trial court concluded that plaintiff's causes of action accrued on July 31, 1984, when the water districts alerted the developer via letter that they would not perform their part of the contract unless certain documentation was provided (which was not) by August 15, 1984. Applying a then applicable six-year contract limitations period, the court determined that plaintiff's causes of action became barred on August 1, 1990. See § 13-80-110(1)(a), C.R.S.1973.

Alternatively, the court ruled that, even if the plaintiff's claims did not accrue until tap fees first became available for construction cost reimbursement in October 1990 and May 1992, the claims were still precluded by the then applicable three year contract limitations period. See § 13-80-101(1)(a), C.R.S. 2000.

II. Plaintiff's Standing

Defendants contend that plaintiff has no standing to sue with respect to the 1978 and 1979 agreements, because plaintiff is not in fact a successor in interest to the developer. According to defendants, plaintiff was not properly assigned successor rights under the agreements. We disagree.

The agreements between the developer and the water districts expressly required the water districts' consent to any assignments. Because the water districts or defendants never consented to any assignments, defendants argue that the plaintiff is not a valid party in interest.

"Under the law of assignments ... the right to receive money due or to become due under an existing contract may be assigned even though the contract itself may not be assignable." Farmers Acceptance Corp. v. DeLozier, 178 Colo. 291, 294, 496 P.2d 1016, 1017 (1972).

Defendants argue that this rule is not applicable here because the developer had continuing obligations for any non-performance on its part. The agreements, however, provided only a one-year warranty on the water systems and the developer was under no contractual obligation to remedy problems with the systems beyond that date. Further, the developer explicitly assigned only the rights to receive payment, and not any of its obligations under the contract, to its successors in interest, including plaintiff. Hence, defendants' lack of consent to the assignment of rights to receive payment does not deprive plaintiff of standing to sue.

III. Statute of Limitations

Plaintiff asserts that the trial court erred in determining that its claims were time barred. Specifically, plaintiff contends that its claims could not have accrued until after the water districts received sufficient tap fees to recoup their expenses and that the court applied the incorrect limitations period. We agree.

A. Date Cause of Action Accrued

Plaintiff argues that the trial court erred in determining that its claim accrued on July 31, 1984 rather than in October 1990 and May 1992 when the water districts were first under an obligation to pay tap fees to the developer or its successor in interest. We agree.

"A cause of action for debt, obligation, money owed, or performance shall be considered to accrue on the date such debt, obligation, money owed, or performance becomes due." Section 13-80-108(4), C.R.S.2000. Under this statute, plaintiff's cause of action accrued as of the times in 1990 and 1992 when the tap fees first became available for reimbursement of the developer's construction costs.

Defendants, in effect, seek an exemption from the statute, claiming that plaintiff's causes of action accrued at or around July 31, 1984, when the water districts by letter purported to repudiate the agreements because of the developer's failure to provide certain documentation as required under the contracts. In their cross-appeal, defendants claim that the developer's failure to then provide this documentation constituted a material breach of the contract and that defendants had sufficient grounds for terminating the contract.

Under the contracts, the developer was to provide the water districts with: (1) bills of sale conveying the facilities and equipment constituting the water systems; (2) conveyances of easements required for the water system; (3) final as-built drawings of the water system facilities; and (4) invoices and other cost documentation verified by the water districts' engineer.

The developer responded by providing a bill of sale with respect to one of the two water systems. The remaining documentation was, however, not provided by August 15, 1984, as demanded by the water districts.

Nevertheless, the trial court found that the required easements were generally acceptable even though not every easement was twenty feet wide as required by the agreements and that the developer's building blueprints, which had been provided to the water districts, fulfilled the function of as-built drawings, except as they related to certain lines that had to be relocated after initial construction.

The trial court found that the developer had breached the contracts but not in a material way.

Whether there has been a material breach of contract turns upon the importance or seriousness of the breach and the likelihood that the injured party nonetheless received, or will receive, substantial performance under the contract. Indeed, a breach that is material "goes to the root of the matter or essence of the contract," 6 W. Jaeger, Williston on Contracts § 842 at 165 (3d ed.1962); see also Gibson v. City of Cranston, 37 F.3d 731 (1st Cir.1994),

and renders substantial performance under the contract impossible. See J. Calamari & J. Perillo, Contracts § 11-18 at 461-62 (3d ed. 1987)("Substantial performance is the antithesis of material breach. If it [is] determined that a breach is material, it follows that substantial performance has not been rendered."). See also Reynolds v. Armstead, 166 Colo. 372, 443 P.2d 990 (1968).

In deciding whether a breach is material, the extent to which an injured party would still obtain substantial benefit from the contract, and the adequacy of compensation in damages for the breach, should be considered. Kaiser v. Market Square Discount Liquors, Inc., 992 P.2d 636 (Colo.App. 1999). The importance or materiality of contract terms must be assessed in context and in light of the expectations of the parties at the time the original contract was formed. Phoenix Power Partners, L.P. v. Colorado Public Utilities Commission, 952 P.2d 359 (Colo.1998).

Finally, whether a breach of contract is material is a question of fact. Kaiser v. Market Square Discount Liquors, Inc., supra.

Hence, we may disturb the trial court's finding here only if it is...