Ludlow v. Gibbons

• Decision Date: 10 November 2011
• Docket Number: No. 10CA1719.,10CA1719.
• Citation: 310 P.3d 130
• Parties: Gregory T. LUDLOW, S. Reid Ludlow, and Jean E. Cowles, Plaintiffs–Appellants and Cross–Appellees, v. Lynda S. GIBBONS; Brent Wilson; and Gibbons–White, Inc., a Colorado corporation, Defendants–Appellees and Cross–Appellants.
• Court: Colorado Court of Appeals

310 P.3d 130

Gregory T. LUDLOW, S. Reid Ludlow, and Jean E. Cowles, Plaintiffs–Appellants and Cross–Appellees,

v.Lynda S. GIBBONS; Brent Wilson; and Gibbons–White, Inc., a Colorado corporation, Defendants–Appellees and Cross–Appellants.

No. 10CA1719.

Colorado Court of Appeals,

Div. III.

Nov. 10, 2011.

Cooper & Clough, P.C., Paul D. Cooper, Jeremy L. Swift, Denver, Colorado; Hensley & Kennedy, P.C., John F. Hensley, Boulder, Colorado, for Plaintiffs–Appellants and Cross–Appellees.

Balaban, Levinson & Costigan, P.C., Kenneth L. Levinson, Cherami Ball Costigan, Bernadette J. Wasilik, Denver, Colorado, for Defendants–Appellees and Cross–Appellants.

Opinion by Judge J. JONES.

Plaintiffs, Gregory T. Ludlow, S. Reid Ludlow, and Jean E. Cowles (together, the sellers), appeal the district court's order granting summary judgment in favor of defendants, Lynda S. Gibbons, Brent Wilson, and Gibbons–White, Inc. (together, the brokers). The sellers also appeal the court's award of attorney fees and costs to the brokers. In the event that we reverse any part of the court's summary judgment order, the brokers conditionally cross-appeal the district court's order striking their nonparty fault designations.

We vacate the summary judgment on the sellers' negligence claims, affirm the summary judgment on the sellers' breach of fiduciary duty claim, vacate the award of attorney fees and costs, and affirm the order striking the brokers' nonparty fault designations.

I. Background

In March 2000, the sellers entered into an exclusive listing agreement with Gibbons–White, Inc., for the sale of approximately 131 acres of vacant land in Boulder County. Over the next seven years, the sellers received offers from at least three different buyers to purchase portions of their land. None of these offers resulted in a completed sale. The last was an offer, contained in a proposed contract to buy and sell real estate, by Bush Development, Inc. in November 2006. On February 6, 2007, Bush backed out of the sale because the company for which it had intended to develop the property had decided not to enter the Longmont area market.

Immediately thereafter, a Bush representative told Richard Groves, the president and chief executive officer of Actis, LLC, a real estate investment business, about the property and the unsuccessful Bush deal. On February 21, 2007, Actis conveyed an offer to the sellers to purchase 49.2 acres of the land (which apparently included the land Bush had offered to buy) for $6,439,910. The offer was signed by Mr. Groves. As pertinent to this appeal, it contained the following provision:

Reimbursement Agreement:

On or before sixty (60) days following the Mutual Execution of this Contract, Seller shall provide Buyer with a proposed cost-sharing and reimbursement agreement (“Reimbursement Agreement”) relating to shared utilities, road and infrastructure for the Property. This Contract shall terminate unless a mutually acceptable Reimbursement Agreement is placed into escrow with the Title Company on or before the Resolution Deadline. If the Parties are unable to successfully agree to acceptable terms and execute the Reimbursement Agreement on or before the Resolution Deadline, Buyer's Earnest Money shall be refunded to Buyer in full, pursuant to the provisions of Section 2(b) of this Contract Addendum, without penalty. Buyer's proportionate share of any said shared utilities, road and infrastructure costs for the Property shall be deducted from the Purchase Price referenced in the Contract at Closing.

(Emphasis added.) The italicized portion of this provision had not appeared in any of the previous offers for the sellers' property. According to Mr. Groves' deposition testimony, he requested that the brokers include this language in the offer because he wanted to purchase the land with certain infrastructure already in place and wanted a credit against the purchase price at closing if the sellers had not installed the infrastructure by that time.

The sellers did not agree to the Actis offer. Instead, they submitted a fully executed counteroffer which reduced the size of the property to be sold to 44.3 acres at a price of $5,790,822.60. It also included an option for Actis to purchase the remaining 4.98 acres at a higher price per square foot. Importantly, the counteroffer did not eliminate the infrastructure credit provision. Mr. Groves agreed to the counteroffer on Actis's behalf without further negotiation.

A few months later, the parties entered into a second contract for the sale of the acreage covered by the option. This contract, which also contained an infrastructure credit provision, brought the total stated purchase price for both parcels to $6,550,073.40.

In negotiating the two contracts and subsequent amendments thereto, the sellers were represented by Cameron Grant and the law firm of Grant, Grant & Goiran, LLP (together, the lawyers). The sellers and Actis were also assisted by Brent Wilson, a real estate broker employed by the listing brokerage firm of Gibbons–White. Though Mr. Grant and Mr. Wilson were involved in the Actis transaction from the start, neither of them informed the sellers that their contracts with Actis contained the infrastructure credit provisions. Therefore, according to the sellers, when they reviewed the draft settlement statement one week before closing, they were surprised to learn that Actis would receive a $1,615,909.95 credit against the purchase price at closing for “infrastructure costs.” Despite the credit, the sellers, having been advised that they were legally obligated at that point to go through with the transaction, closed as scheduled.

Thereafter, the sellers brought this action, asserting four claims for relief: (1) professional negligence by the lawyers; (2) professional negligence by the brokers; (3) negligent supervision by Lynda Gibbons, the employing broker of Gibbons–White; and (4) breach of fiduciary duty by the brokers. The sellers alleged that the lawyers' and the brokers' failure to timely advise them of the infrastructure credit provisions in the contracts constituted professional negligence. According to the sellers, this negligence caused them to have to sell their land to Actis for $1.6 million less than what it was worth and what they had thought they would receive under the contracts. The sellers also alleged that Ms. Gibbons' failure to review the contracts and to call attention to the infrastructure credit provisions constituted negligent supervision on her part. With respect to the claim of breach of fiduciary duty, the sellers alleged that the brokers were in a fiduciary relationship with them for the purposes of this real estate transaction, and breached their fiduciary duties by failing to tell them that (1) they were no longer acting as their agents, but as transaction brokers, and (2) they had a business relationship with Actis.

The brokers designated Mr. Groves and Actis as nonparties at fault pursuant to section 13–21–111.5, C.R.S.2011. The sellers moved to strike these designations. The district court granted the sellers' motion, concluding that neither Mr. Groves nor Actis owed a duty of care to the sellers as a matter of law.

After substantial discovery, the lawyers and the brokers moved for summary judgment. The lawyers argued that the sellers could not establish the causation element of their professional negligence claim against them. However, the sellers and the lawyers reached a settlement agreement before the court could rule on the lawyers' motion.

The brokers likewise argued that the sellers could not prove causation for the professional negligence and negligent supervision claims alleged against them. They also argued that any damages alleged by the sellers were speculative as a matter of law, they had served as transaction brokers in the Actis transaction, and, accordingly, they had owed no fiduciary duties to the sellers as a matter of law.

The district court granted the brokers' motion for summary judgment as to all claims. As relevant here, the district court ruled that (1) the sellers had failed to establish a genuine issue of material fact as to causation because they had not presented evidence that they “would have” sold the property to a specifically identifiable person or entity for $6.6 million but for the brokers' negligence, and (2) the brokers had not owed fiduciary duties to the sellers because they had acted as transaction brokers rather than the sellers' agents.

The brokers subsequently requested attorney fees and costs pursuant to their original listing agreement with the sellers. Finding that the brokers were the prevailing parties in the litigation, the court awarded them attorney fees and costs.

II. The Sellers' Appeal

A. Standard of Review

We review an order granting summary judgment de novo, applying the same principles that guided the district court's determination. Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282, 290 (Colo.App.2009). Thus, we will affirm such an order only when the pleadings and supporting documents clearly demonstrate that no issues of material fact exist and that the moving party is entitled to judgment as a matter of law. C.R.C.P. 56(c); Lombard v. Colo. Outdoor Educ. Ctr., Inc., 187 P.3d 565, 570 (Colo.2008). In considering whether the moving party has ultimately established its entitlement to summary judgment, we must grant the nonmoving party all favorable inferences that reasonably may be drawn from uncontested facts and resolve any doubt as to whether a triable issue of material fact exists against the moving party. Lombard, 187 P.3d at 570.

B. Negligence Claims

As with any negligence claim, to recover on a claim of professional negligence, a plaintiff must prove that the professional owed a duty of care to the plaintiff, the professional breached that duty of care, and the professional's breach of the duty proximately caused the plaintiff injury. E.g., Stone v....