Westfield Development Co. v. Rifle Inv. Associates

• Decision Date: 12 February 1990
• Docket Number: No. 88SC628,88SC628
• Parties: WESTFIELD DEVELOPMENT COMPANY, a California corporation, Louis A. Conter, and James E. Rodgers, Petitioners, v. RIFLE INVESTMENT ASSOCIATES, a California limited partnership; and Edward L. Clabaugh, Respondents.
• Court: Colorado Supreme Court

Page 1112

786 P.2d 1112

WESTFIELD DEVELOPMENT COMPANY, a California corporation Louis A. Conter, and James E. Rodgers, Petitioners, v. RIFLE INVESTMENT ASSOCIATES, a California limited partnership; and Edward L. Clabaugh, Respondents.

No. 88SC628.

Supreme Court of Colorado En Banc.

Feb. 12, 1990.

Rehearing Denied March 5, 1990.

Nicholas W. Goluba, Jr., Glenwood Springs, Friedemann & Bronk, Robert A. Merring, Irvine, Cal., and Robinson & Wisbaum, Michael W. Robinson, Costa Mesa, Cal., for petitioners.

Brega & Winters P.C., Charles F. Brega and Margaret C. Gilliam, Denver, for respondents.

Justice ERICKSON delivered the Opinion of the Court.

We granted certiorari to determine whether the recording of a notice of a lis pendens constitutes a privileged statement made in the course of a judicial proceeding and, if such notice is not absolutely privileged, what the proper measure of damages is. The district court awarded substantial damages against petitioner Westfield Development Company (Westfield) in favor of respondent Rifle Investment Associates (RIA), and its general partner Edward L. Clabaugh, based on Westfield's filing of a notice of a lis pendens. In an unpublished opinion, the court of appeals generally affirmed the district court, except for the rate of prejudgment interest. Westfield Dev. Co. v. Rifle Invest. Assocs., No. 87CA0131 (Colo.App. Oct. 27, 1988).

We conclude that under the circumstances here the filing of a notice of lis pendens is not absolutely privileged, but that the district court's judgment is not supported by sufficient findings of fact and conclusions of law. We also find that the court of appeals correctly decided the issue of prejudgment interest. Accordingly, we affirm the judgment of the court of appeals in part and reverse in part and remand with directions.

I.

On October 15, 1980, Westfield brought suit against RIA and Clabaugh, seeking specific performance of an alleged contract for the sale of a 150 acre tract of land owned by RIA and located northeast of Rifle, Colorado. At the same time, Westfield filed a notice of lis pendens describing the RIA property and the nature of the lawsuit. C.R.C.P. 105(f). Clabaugh and RIA filed a counterclaim against Westfield, and named petitioners James E. Rodgers and Louis A. Conter as additional defendants to the counterclaim, C.R.C.P. 13(h). Rodgers was the president of Westfield, a California corporation, and Conter was an officer of Westfield and a partner in Westfield's operations in Colorado. The counterclaim alleged intentional interference with contract, malicious prosecution, and abuse of process.

The district court found the following facts. RIA was a limited partnership organized under the laws of California, and was the owner of a 150 acre tract of land near Rifle. Clabaugh was the only general partner, and as a limited partner he owned about 80% of the limited partners' interest. In February 1980, Clabaugh, on behalf of RIA, contacted Occidental Land, Inc. about a sale of the property, but Occidental was not at first interested. Clabaugh also contacted Westfield which expressed some interest in purchasing the land.

In July 1980, Occidental approached Clabaugh, and negotiated for the purchase of the Rifle property. On July 23, 1980, Clabaugh sent Occidental a draft of a sales contract for the land. Then, on July 28, 1980, as a result of negotiations between Clabaugh and Conter, Clabaugh received a letter and proposed contract for the purchase of the same property drafted by an attorney for Westfield. The proposed contract was not signed and it contained the following clause:

IN WITNESS WHEREOF, the Purchaser [Westfield] has executed this contract as of the ___ day of July, 1980. Upon Seller's [RIA's] acceptance of this Contract as noted by Seller's execution on this page of the Addendum, this Agreement shall constitute a binding contract between the parties hereto in accordance with the terms hereof.

The stated purchase price in the proposed contract was $1,200,000. Clabaugh did not sign the proposal. He redrafted it using the same language increasing the purchase price to $1,650,000, but did not sign the contract. Clabaugh's proposal also contained the clause set out above and was received by Westfield on the same day, July 28, 1980.

Although he recognized that Clabaugh had changed the purchase price, as president of Westfield, Rodgers signed the proposal on the evening of July 28, and gave it to Mike Howell, Westfield's in-house counsel, for transmission to Clabaugh the next day. Conter talked to Clabaugh on the morning of July 29 about some proposed changes in the agreement and Clabaugh indicated that he would think them over. However, about 2:00 o'clock that afternoon, Clabaugh's office received a letter from Occidental purporting to accept Clabaugh's offer to sell the property to them, along with a check for $25,000 as a deposit. After consulting with his Colorado attorney, Clabaugh sent a Western Union telegram to Westfield which said: "Rifle Investment Associates hereby revokes and rescinds any offer it may have made to you to sell to you our property in Rifle, Colorado."

Howell telephoned Clabaugh on the afternoon of July 29, 1980 and said he was bringing over the agreement. Clabaugh told him not to bother since there had been a change in circumstances and he could not sign it. At 5:15 p.m. that afternoon Western Union delivered the telegram from Clabaugh to Westfield by telephone. The following day, July 30, Clabaugh's office received a letter from Westfield stating that it was transmitting a copy of the contract "[i]n accordance with your [Clabaugh's] written acceptance on July 28, 1980 of our [Westfield's] offer...."

After some further haggling, a contract was executed and signed by RIA and Occidental on August 7, 1980 for the purchase of the property for $1,500,000. Realizing that Clabaugh and RIA did not intend to sell the property to Westfield, and after discovering the existence of the contract between RIA and Occidental, Rodgers authorized attorneys for Westfield to file suit in Colorado seeking specific performance of the claimed contract between Westfield and RIA. ¹ Suit was filed on October 15, 1980, and a notice of lis pendens was recorded in Garfield County.

After suit and notice of lis pendens was filed, Occidental backed out of its contract for sale of the property, apparently taking the position that the title to the property had become unmerchantable. RIA returned the $25,000 deposit to Occidental and treated the contract as at an end.

At a bifurcated bench trial in April 1981, the district court first held that there was no contract between Westfield and RIA for the sale of the property because the intent of the parties was for RIA to sign the proposal before it could become a binding agreement, and neither RIA nor Clabaugh signed it. The petitioners have not appealed that ruling. The counterclaim was tried by the court in October and November 1986. On December 11, 1986, the district court awarded judgment in favor of RIA against the petitioners for $1,894,659.32 actual damages, including $747,860 prejudgment interest, and $150,000 exemplary damages. The court also awarded Clabaugh $150,000 in actual damages for emotional distress. Factual findings supporting the recovery of damages were not set forth with the required specificity in the district court's decision.

Except for the prejudgment interest, the court of appeals affirmed, stating:

There was evidence that the three plaintiffs interfered with RIA's contract, and the filing of the lis pendens was unjustified. As to the issue of damages, while the evidence could have supported a contrary finding, the record does support the trial court's conclusion that the economic losses to RIA and Clabaugh had been incurred and that their efforts to mitigate damages were proper.

Westfield Dev. Co., No. 87CA0131, slip op. at 2. The district court awarded prejudgment interest at the rate of 9% per year compounded annually pursuant to section 13-21-101(1), 6A C.R.S. (1987). The court of appeals concluded that section 13-21-101 was inapplicable since it only governed damages for personal injuries, not lost profits. Westfield Dev. Co., No. 87CA0131, slip op. at 3. RIA could recover prejudgment interest, but only at the rate of 8% compounded annually under section 5-12-102(1)(b), 2 C.R.S. (1989 Supp.). Westfield Dev. Co., No. 87CA0131, slip op. at 3. The court of appeals remanded for recalculation of the prejudgment interest. Id. The respondents have not petitioned for review of the judgment of the court of appeals.

We granted certiorari to consider four issues raised by the petitioners: (1) whether recording a notice of a lis pendens constitutes a privileged statement made in the course of a judicial proceeding; (2) whether the measure of damages in an action for tortious interference with a contract for the sale of real property should be the difference between the contract price and the fair market value of the property as of the date of the wrong; (3) whether the general partner of a limited partnership may be awarded damages for emotional distress in an action for interference with contractual relations; and 4) whether prejudgment interest was properly awarded pursuant to section 5-12-102.

II.

The petitioners first claim that filing the notice of lis pendens under C.R.C.P. 105(f) is absolutely privileged, and thus may not be the cause of an award of damages. In their counterclaim, RIA and Clabaugh alleged that the filing of the notice of lis pendens was actionable under any of three theories: intentional interference with contract, malicious prosecution, and abuse of process. We conclude that there is a qualified privilege to file a notice of lis pendens with respect to a claim based on intentional interference with contract, but there is no specific privilege against a claim for malicious prosecution. ²

A. Intentional Interference...