Loveland Essential Grp., LLC v. Grommon Farms, Inc.

Decision Date02 February 2012
Docket NumberNo. 11CA0722.,11CA0722.
Citation318 P.3d 6
PartiesLOVELAND ESSENTIAL GROUP, LLC, a Minnesota limited liability company, Plaintiff–Appellant, v. GROMMON FARMS, INC., a Colorado corporation; Gary Grommon; and Connie Grommon, Defendants–Appellees.
CourtColorado Court of Appeals

OPINION TEXT STARTS HERE

Cline Williams Wright Johnson & Oldfather, L.L.P., Tracy A. Oldemeyer, Fort Collins, Colorado, for PlaintiffAppellant.

Erik G. Fischer, P.C., Erik G. Fischer, Fort Collins, Colorado, for DefendantsAppellees.

Opinion by Judge J. JONES.

¶ 1 This appeal concerns the second lawsuit between plaintiff, Loveland Essential Group, LLC (Buyer), and defendants, Grommon Farms, Inc., Gary Grommon, and Connie Grommon (collectively, Seller), arising from Buyer's purchase of commercial real property and assets from Seller. Buyer asserts that its claims in this case arose after it filed the first lawsuit but before there was a final judgment in the first lawsuit.

¶ 2 The district court granted summary judgment in Seller's favor, concluding, as relevant here, that because Buyer had not sought to amend its complaint in the first lawsuit to assert the new claims, the doctrine of claim preclusion barred this subsequent lawsuit on the new claims. We conclude, however, that claim preclusion does not bar Buyer's action on the new claims if they arose after the first lawsuit was filed. Because there is a genuine issue of material fact as to when the new claims arose, we reverse the summary judgment and remand for further proceedings.

I. Background

¶ 3 Buyer entered into a real estate purchase agreement (RPA) and an asset purchase agreement (APA) with Seller to purchase certain commercial real property and business assets. The RPA required that there not be any encumbrances on the real property, other than those identified therein. The APA similarly required that there not be any encumbrances on the assets conveyed, other than those identified therein.

¶ 4 At the closing, Seller executed a Warranty Deed conveying the real property to Buyer and warranting that the property was free and clear of all encumbrances, except those identified in an attachment.

¶ 5 After closing, Buyer filed a complaint in Case No. 07CV 170 that, as amended, alleged in part that Seller had breached the RPA, the APA, and the Warranty Deed by conveying the real property and assets subject to a lease on part of the real property.

¶ 6 On August 8, 2008, about a year and a half after the original filing, and three months before trial thereon, Buyer learned that an Adjacent Property Reimbursement Agreement between the City of Loveland and the developer of the area in which the real property is located had been filed with the Larimer County Clerk and Recorder on August 1, 2008. The Reimbursement Agreement purports to obligate parties subject thereto to pay a portion of city street improvementand construction costs when applying for a permit to develop or redevelop property within the covered area. The City apparently seeks reimbursement of $794,871.69 from Buyer under the Reimbursement Agreement. 1

¶ 7 Buyer moved to vacate the trial setting (then six weeks away) and to conduct additional discovery, arguing that such discovery was necessary “before it may move to amend the Complaint to add a claim that the Reimbursement Agreement is an additional ground for breach of the [RPA], the [APA], and/or the Warranty Deed.” According to Buyer, such an amendment would “minimize the burden and expense on the parties and the Court and is in the best interests of justice so that all of Plaintiff's claims may be heard in one action.” In the alternative, Buyer requested that, if the court denied the motion, it expressly rule that Buyer could pursue claims based on the Reimbursement Agreement in a separate lawsuit to “address potential claim preclusion ... defenses....”

¶ 8 The court granted Buyer's motion to vacate the trial date and permit additional discovery. It reset the trial for about two and a half months after the vacated date.

¶ 9 Buyer conducted additional discovery related to the Reimbursement Agreement. However, it did not move to amend its complaint in Case No. 07CV 170 to add claims based thereon. Rather, a week before trial on the claims in Case No. 07CV 170, it filed its complaint in this case, Case No. 09CV34, alleging that Seller had breached the RPA and the Warranty Deed by conveying the property subject to the Reimbursement Agreement. Thereafter, it conducted further discovery related to the claims in Case No. 09CV34.

¶ 10 After a bench trial on the claims in Case No. 07CV 170, the district court concluded that Seller had breached the RPA, APA, and the Warranty Deed by conveying the real property subject to the lease. On appeal, a division of this court affirmed the judgment in part, reversed it in part, and remanded the case for further proceedings. Essentially, the division upheld the judgment to the extent it was based on breaches of the RPA and Warranty Deed, but remanded for further findings on Buyer's damages. Loveland Essential Grp., LLC v. Grommon Farms, Inc., 251 P.3d 1109 (Colo.App.2010).

¶ 11 While the appeal of Case No. 07CV 170 was pending, Seller moved for summary judgment on Buyer's claims in this case, arguing that those claims were barred by the doctrine of claim preclusion because Buyer had not litigated them in the trial of Case No. 07CV 170. The district court agreed that the claims would be barred once the judgment in Case No. 07CV 170 had become final. Specifically, it found that because the claims in this case arose from the same agreements, Warranty Deed, and sale as those at issue in Case No. 07CV 170, Buyer was required to have asserted the claims pertaining to the Reimbursement Agreement in Case No. 07CV 170. But, because the judgment in Case No. 07CV 170 had not yet become final, the court held the motion for summary judgment in abeyance pending a final judgment. After the judgment in Case No. 07CV 170 became final, the court granted Seller's motion for summary judgment.

II. Discussion

¶ 12 On appeal, Buyer contends that the district court erred by granting summary judgment based on claim preclusion because (1) the judgment in Case No. 07CV 170 was not final when the second case was filed; (2) Seller waived the affirmative defense of claim preclusion; (3) Buyer did not discover the alleged breaches of the RPA and Warranty Deed based on the Reimbursement Agreement until after it had filed the complaint in Case No. 07CV 170, and consequently there was no identity of subject matter; (4) for the same reason there was no identity of claims for relief; and (5) the court could not hold the summary judgment motion in abeyance pending a final judgment in Case No. 07CA 170. We agree with Buyer's fourth contention, and consequently we need not address the others.

A. Standard of Review

¶ 13 We review a grant of summary judgment on the basis of claim preclusion de novo. Wall v. City of Aurora, 172 P.3d 934, 937 (Colo.App.2007); Camus v. State Farm Mut. Auto. Ins. Co., 151 P.3d 678, 680 (Colo.App.2006). Summary judgment is appropriate only where the pleadings and supporting documents demonstrate that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Rocky Mountain Festivals, Inc. v. Parsons Corp., 242 P.3d 1067, 1074 (Colo.2010); Grandote Golf & Country Club, LLC v. Town of La Veta, 252 P.3d 1196, 1199 (Colo.App.2011).

B. Analysis

¶ 14 Claim preclusion (formerly known as res judicata 2) bars “relitigation of matters that have already been decided [in a prior proceeding] as well as matters that could have been raised in a prior proceeding but were not.” Argus Real Estate, 109 P.3d at 608;accord Timm v. Prudential Ins. Co. of Am., 259 P.3d 521, 527 (Colo.App.2011). A claim in a second judicial proceeding is precluded by a previous judgment where there is (1) finality of the first judgment, (2) identity of subject matter, (3) identity of claims for relief, and (4) identity of or privity between the parties to the two actions. Burlington Ditch Reservoir & Land Co. v. Metro Wastewater Reclamation Dist., 256 P.3d 645, 668 (Colo.2011). We consider only the third factor here.

1. Identity of Claims for Relief

¶ 15 In determining whether there is identity of claims for relief, the focus of the inquiry is ‘the injury for which relief is demanded, ... not ... the legal theory on which the person asserting the claim relies.’ Jackson v. Am. Family Mut. Ins. Co., 258 P.3d 328, 331 (Colo.App.2011) (ultimately quoting Farmers High Line Canal & Reservoir Co. v. City of Golden, 975 P.2d 189, 199 (Colo.1999)); accord Argus Real Estate, 109 P.3d at 609. Claim preclusion bars litigation of claims that previously were or might have been decided only “if the claims are tied by the same injury.” Argus Real Estate, 109 P.3d at 609. Claims are tied by the same injury where they concern ‘all or any part of the transaction, or series of connected transactions, out of which the [original] action arose.’ Id. (quoting Restatement (Second) of Judgments § 24(1) (1982)). In determining what factual grouping constitutes a transaction, the court considers ‘whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations.’ Salazar v. State Farm Mut. Auto. Ins. Co., 148 P.3d 278, 281 (Colo.App.2006) (ultimately quoting Restatement (Second) of Judgments § 24(2)); accord Camus, 151 P.3d at 680.

¶ 16 Generally, a contract is considered to denote a single transaction for the purpose of claim preclusion, and therefore claims for different breaches of a contract ordinarily must be brought in the same action. See Petromanagement Corp. v. Acme–Thomas Joint Venture, 835 F.2d 1329, 1335–36 (10th Cir.1988) (but noting that this is the case “so long as the breaches antedated the original action”); LaPoint v. AmerisourceBergen...

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