Newflower Market, Inc. v. Cook

• Decision Date: 29 April 2010
• Docket Number: No. 09CA0956.,09CA0956.
• Citation: 229 P.3d 1058
• Parties: NEWFLOWER MARKET, INC., Plaintiff-Appellee, v. Elizabeth C. COOK, Defendant-Appellant.
• Court: Colorado Court of Appeals

229 P.3d 1058

NEWFLOWER MARKET, INC., Plaintiff-Appellee, v. Elizabeth C. COOK, Defendant-Appellant.

No. 09CA0956.

Colorado Court of Appeals, Div. I.

April 29, 2010.

Robinson Waters & O'Dorisio, Stephen L. Waters, Kimberly A. Bruetsch, Denver, Colorado, for Plaintiff-Appellee.

Stevens, Littman, Biddison, Tharp & Weinberg, LLC, Craig A. Weinberg, Boulder, Colorado, for Defendant-Appellant.

Opinion by Judge HAWTHORNE.

Defendant, Elizabeth C. Cook, appeals the trial court's entry of summary judgment for plaintiff, Newflower Market, Inc. We affirm.

In this case of first impression in Colorado, we consider whether "the generally accepted rule" that "interest ceases to accrue on funds deposited by a stakeholder in an interpleader action during the time the funds are on deposit with the court," Vento v. Colorado National Bank, 985 P.2d 48, 51 (Colo.App.1999) (statutory interest), applies to contractual interest. We conclude that it does when the funds are properly interpleaded.

I. Factual and Procedural History

Cook owned all of Newflower's common stock. In dissolving their marriage, she and her former husband, Michael Gilliland, entered into a Memorandum of Understanding (MOU) in December 2005. Cook, Gilliland, and Newflower signed an amended separation agreement in May 2007, which was approved and entered as a court order. In the agreement, Cook transferred ninety-one percent of her Newflower common stock to Gilliland, retaining nine percent, which subsequent agreements reduced to five percent.

Pursuant to the agreement, Gilliland, as Newflower's president, signed a promissory note for $4,850,000 payable to Cook (Cook note). In addition, Newflower also signed a promissory note for $5,750,000 payable to the Gilliland/Cook Family Limited Partnership (FLP), which represented the aggregated separate amounts owed to FLP's partners (FLP note). The agreement further provided that on FLP's dissolution, Newflower would execute and deliver separate replacement promissory notes for each FLP partner's share, including one to Cook for $1,939,825 (Cook's individual FLP note).

Cook, Gilliland, and Newflower subsequently entered into a settlement agreement in October 2007 that provided Newflower would pay $4,850,000 toward principal on its obligations to Cook on January 2, 2008. It also stated that Cook "may apply Newflower's payment towards either obligation/note as she deems appropriate and within her sole discretion." Additionally, Newflower agreed to pay Cook $1,939,825 principal plus accrued and unpaid interest on its "remaining indebtedness" to her when it obtained additional funding, but no later than January 2, 2009. An addendum to the settlement agreement provided,

The distribution of $1,939,825 principal due to Cook under the Settlement Agreement upon Funding shall be held by a mutually acceptable third party in an interest bearing or investment account directed by Cook and shall be distributed to Cook upon the earlier of the filing of an Amended 2005 joint income tax return or January 2, 2009.

On January 2, 2008, Newflower wired $4,850,000 plus accrued interest to Cook's personal bank account. Cook had provided Gilliland wiring instructions to deposit $1,939,825 in a Lehman Brothers account, but he refused to comply with that instruction because it did "not comport with the clear intent and purpose of the Settlement Agreement." On January 7, 2008, Cook notified Newflower that she wished to allocate $1,939,825 of the $4,850,000 payment to Newflower's FLP obligation to her individually, thus satisfying that obligation. However, she did not deposit $1,939,825 into a third-party investment account.

Newflower filed a complaint for interpleader and declaratory relief against Gilliland, Cook, and FLP, and with the district court's approval, deposited $1,939,825 in the court's registry. In an amended complaint, Newflower confirmed that it had tendered the $1,939,825 to the court for distribution to the parties entitled to it as determined by the court. It also sought declaratory judgment

(1) concerning the account to which the interpleaded payment should be made;

(2) that such payment satisfied Newflower's obligations to Cook;

(3) that the payment partially satisfied the FLP note; and

(4) that its common stock obligations to Cook had been completed and Cook's stock ownership rights were the same as those of any other holder of common stock.

In her answer to Newflower's original complaint, Cook asserted counterclaims that Newflower

(1) had breached the Cook note and the settlement agreement by failing to pay the $1,939,825 into an escrow account; and

(2) had breached the implied covenant of good faith and fair dealing in the settlement agreement by failing to consent to the Lehman Brothers escrow account.

Newflower and Cook filed motions for partial summary judgment. The district court entered summary judgment for Newflower because (1) Cook admitted that the FLP note was not replaced by new promissory notes payable to FLP's partners, including Cook, and (2) Cook and Gilliland had failed to designate a mutually acceptable third-party account to hold the $1,939,825. Cook appeals.

II. Law

We review entry of summary judgment de novo. Williams v. State Farm Mutual Auto. Ins. Co., 195 P.3d 1158, 1160 (Colo.App.2008). Summary judgment is appropriate where no genuine material factual issue exists, and the moving party is legally entitled to judgment. C.R.C.P. 56(c); Churchey v. Adolph Coors Co., 759 P.2d 1336, 1339-40 (Colo.1988). The moving party has the initial burden to establish that no triable factual issue exists. Churchey, 759 P.2d at 1340. The burden then shifts to the nonmoving party to establish that there is one. Id. All doubts concerning whether such an issue exists must be resolved against the moving party because the nonmoving party is entitled to all favorable inferences that may be drawn from the facts. Id.

Interpreting contract language poses a legal question that we review de novo. Chandler-McPhail v. Duffey, 194 P.3d 434, 437 (Colo.App.2008). Our primary obligation is to implement the contracting parties' intent according to the contract's plain language and meaning by giving effect to all provisions so that none is rendered meaningless. Id. Contracts must be construed as a whole, and specific phrases and terms should not be interpreted in isolation. Rogers v. Westerman Farm Co., 29 P.3d 887, 898 (Colo. 2001). In interpreting a contract with multiple parts, we construe them together as a single instrument and give effect to all provisions. Aronoff v. Western Federal Savings & Loan Ass'n, 28 Colo.App. 151, 154, 470 P.2d 889, 891 (1970).

If the trial court reached the correct result, we may affirm its determination on different grounds. Barham v. Scalia, 928 P.2d 1381 (Colo.App.1996).

III. Interest on Interpleaded Funds

Cook contends that she is entitled to interest on the $1,939,825 deposited with the court in Newflower's interpleader action. We disagree.

A. Allocation Clause

Cook first argues that the district court's summary judgment rendered the clause allowing her to apply payment toward either note meaningless. We are not persuaded.

Cook maintains that her right to allocate part of the $4,850,000 payment to the $1,939,825 obligation meant that Newflower was not required to issue a new note to her individually for her portion of the FLP note. However, as the district court correctly observed, her interpretation conflicts with the amended separation agreement's express provisions setting forth FLP's dissolution process, which were subsequently reaffirmed in the settlement agreement.

The amended separation agreement provides that, "as part of the dissolution of the FLP, and in substitution of the FLP Note, Newflower shall execute and deliver new promissory notes to each of the partners of FLP" in specified principal amounts, Cook's being $1,939,825. According to the agreement, the individual notes were due and payable on or before December 31, 2008. In addition, the parties and FLP agreed to retain a certified public accountant (CPA) "to promptly undertake any and all actions to unwind, liquidate, and dissolve the FLP as quickly as possible."

Subsequently, Gilliland, Cook, Newflower, and others entered into the settlement agreement to "reach a final and binding resolution and settlement" of disputes regarding the MOU's and amended separation agreement's terms and conditions. In the settlement agreement, Gilliland and Cook, individually and as FLP partners, "instructed the CPA to expedite division and distribution of FLP's assets by November 15, 2007." The partners' proposed individual promissory notes attached to the agreement were dated December 1, 2007 and were "due and payable in full on or before December 31, 2008." The agreement also provided that "as a part of FLP's dissolution, and consistent with the Amended Agreement, Newflower will owe Cook an additional $1,939,825 principal," and that "on January 2, 2008 (and not before), Newflower shall pay Cook $4,850,000.00 towards principal on its obligation(s) to Cook" (emphasis added). The language granting Cook the right to allocate Newflower's payment follows these provisions.

The agreements' plain language indicates the parties intended that the FLP note, as one of FLP's assets, be divided and distributed on December 1, 2007, approximately thirteen months before Newflower paid the Cook note. The parties also intended that the FLP's partners' individual notes would be paid on or before December 31, 2008, almost a full year after the Cook note's due date. However, if Cook's individual FLP note was not paid by the time Newflower paid the Cook note on January 2, 2008, the settlement agreement's allocation language allowed Cook to apply Newflower's $4,850,000 payment to either her individual FLP note or the Cook note within her sole discretion.

Thus, Cook's right to allocate the $4,850,000 payment depended on her individual FLP note...