Affordable Country Homes, LLC v. Smith

194 P.3d 511, 2008 Colo. App. LEXIS 1418, 2008 WL 4140585

• Court: Colorado Court of Appeals
• Decided: September 4, 2008
• Docket: 06CA2222
• Status: Published

Opinions

Opinion by

Judge CARPARELLLI.

Plaintiff, Affordable Country Homes, LLC (ACH), appeals the district court's order denying its motion, under C.R.C.P. 60(b), to reform a settlement agreement with defendants, Rod Smith and Kevin Bunnell We affirm.

I. Settlement of the Underlying Case

ACH sued defendants alleging, among other things, breach of contract and fraud. After trial had begun, the parties informed the court that they had agreed to settle and stated the terms of the settlement on the record. The court entered a minute order stating that the terms of the agreement would be reduced to writing and become an order of the court. Thereafter, the parties submitted a stipulation for dismissal in which they confirmed that their agreement had been reduced to writing and was attached for the purpose of becoming an order of the court.

Among other things, the settlement agreement required defendants to transfer three properties to ACH, the legal descriptions of which were attached and referenced in the agreement. The parties agreed, "for the purposes of this [agreement," that the properties had a combined value of $150,000. In addition, the agreement stated that

ecach party had "independently ascertained, verified, and weighed all of the facts and circumstances likely to influence his judgment,"

@the parties "expressly assume any and all risks that the facts and law may be, or become, different from the facts and law as known to, or believed to be by any of the parties as of the date of this [algreement,"

® the parties had not relied on "any obligation or alleged obligation of any other party or its counsel to disclose information relevant to this [algreement,"

ethe negotiations were merged into the agreement and there were "no representations, covenants, warranties, understandings or agreements, oral or otherwise, in relation thereto between the parties, other than those incorporated herein and delivered hereunder."

The parties asked the court to dismiss all claims with prejudice with each party to bear its own fees and costs. The parties did not further request that the court incorporate the attached agreement as part of its order or retain jurisdiction over disputes that might arise in the course of executing the agreement.

The order granting the stipulation for dismissal is dated December 21, 2005, and states: "All claims by and between, Affordable Country Homes and Rod Smith and Keyv-in Bunnell, d/b/a Bunnell Real Estate Services are hereby dismissed with prejudice, with each party to bear its own costs and fees." There is no reference to the settlement agreement.

II. ACH's Motion to Reform the Settlement Agreement

About two months later, ACH filed the motion at issue here, which it captioned as a motion to reform the settlement agreement. The motion included forty-three allegations of fact regarding the negotiation of the settlement agreement and communications between the parties in January 2006, after the judgment of dismissal had entered. Among other things, ACH alleged that it had relied on misrepresentations of defendants and on defendants' obligation to disclose all material facts concerning the three lots in the settlement negotiations.

The motion stated that it was filed pursuant to C.R.C.P. 60(b)(2) and (b)(5). However, ACH did not seek relief from the judgment dismissing its claims. Instead, it asked the court to:

e Reform the settlement agreement by striking provisions that required defendants to convey the three properties;

e Reform the agreement by striking a provision that prohibited ACH from filing real estate commission complaints against defendants based on claims and demands settled and released in the agreement;

e Enter judgment requiring defendants to pay ACH $150,000, apparently in lieu of conveying the described property;

e Award ACH $375,000 in exemplary damages, which was the gross amount of the settlement agreement;

e Award ACH its reasonable attorney fees and costs "for the entire action";

e Award ACH postjudgment interest accruing from the date the trial was suspended pending settlement;

e Grant such other and further relief as the court deemed appropriate.

After reviewing the motion and related submissions, including affidavits and exhibits, the court denied the motion. The court ruled that ACH was on constructive notice of the allegedly undisclosed information because it was contained in public records, could have been easily ascertained by ACH, and would have been investigated by a reasonable party in ACH's position before accepting the property in partial settlement of the claims.

III. C.R.C.P. 60(b)

We requested supplemental briefs on the question of whether the court had authority to reform the settlement agreement under C.R.C.P. 60(b)(2) after it had dismissed the case with prejudice. See Archuleta v. Gomez, 140 P.3d 281, 283-84 (Colo.App.2006) ("Although neither party questioned the jurisdiction of the district court or the jurisdiction of this court to hear this appeal, jurisdiction is an issue that we may raise and resolve sua sponte."). We conclude that the court lacked authority to grant the relief ACH sought.

C.R.C.P. 60(b) permits courts to relieve a party or a party's legal representative from a final judgment, order, or proceeding. Among other reasons, a court may do so on the basis of fraud, misrepresentation, or other misconduct of an adverse party or any other reason justifying relief from the operation of the judgment. C.R.C.P. 60(b)(2), (5). The resolution of such a motion is committed to the trial court's sound discretion, and we will only reverse the court's order if we conclude it abused that discretion. Sharma v. Vigil, 967 P.2d 197, 199 (Colo.App.1998). An abuse of discretion is established only where the trial court's ruling is manifestly arbitrary, unreasonable, or unfair. Wark v. McClellan, 68 P.3d 574, 578 (Colo.App.2003).

C.R.C.P. 60(b)@) is similar to its federal counterpart, Fed.R.Civ.P. 60(b)(8). Therefore, we find case law interpreting the federal rule to be persuasive when analyzing the Colorado rule. Antolovich v. Brown Group Retail, Inc., 183 P.3d 582, 604 (Colo.App.2007).

An order granting relief under C.R.C.P. 60(b)(2) is designed to restore the parties to the position they were in before the final judgment, as if the vacated judgment had not been entered. See Bronisz v. Ashcroft, 378 F.3d 632, 637 (7th Cir.2004) (effect of granting a motion under Fed. R.Civ.P. 60(b) is to vacate the previous judgment, thus reinstating the case and proceeding from that point); McCall-Bey v. Franzen, 777 F.2d 1178, 1186 (7th Cir.1985){court has authority under Fed.R.Civ.P. 60(b) to restore a dismissed case to its docket to adjudicate the issues in that suit).

Thus, "Rule 60(b) is available ... only to set aside a prior order or judgment. It cannot be used to impose additional affirmative relief" Adduono v. World Hockey Ass'n, 824 F2d 617, 620 (8th Cir.1987); United States v. One Hundred Nineteen Thousand Nine Hundred Eighty Dollars, 680 F.2d 106, 107 (11th Cir.1982)(same); United States v. One (1) Douglas A-26B Aircraft, 662 F.2d 1372, 1377-78 (11th Cir.1981)("claims for affirmative relief beyond the reopening of a judgment cannot be adjudicated on a Rule 60(b) motion but must be asserted in a new and independent suit"); Bishop v. United States, 266 F.2d 657, 659 (5th Cir.1959)(same); 12 James Wm. Moore, Moore's Federal Practice § 60.25, at 60-85 (8d ed.1997)("a court may not use Rule 60 to grant affirmative relief in addition to the relief contained in the prior order or judgment"). By setting aside an order or judgment, the court sets the stage for further proceedings in the case in which the order or judgment was entered. See Broyles v. Fort Lyon Camal Co., 695 P.2d 1136, 1144 (Colo.1985).

In Bishop, the trial court entered judgment in a condemnation case and awarded the titleholder of record $185,000 for the property. The government later filed a pleading styled as an "Amended and Supplemental Complaint," which alleged that the titleholder fraudulently obtained the property from the government while he was a government employee. The government alleged that the conveyance to the titleholder was void, that it was the rightful owner of the property, and that the titleholder was not entitled to the judgment. The titleholder argued that the only relief the court could grant was to set aside the judgment.

The trial court granted far-reaching relief, including rescission of the original deeds and an accounting related to the property. The Fifth Cireuit Court of Appeals reversed, holding that the relief granted was not within the permissible scope of Fed.R.Civ.P. 60(b). The court reasoned that the judgment was final, that setting aside the judgment would have left the condemnation action open and unresolved, and that such affirmative relief was beyond the seope of that action. Bishop, 266 F.2d at 659.

In Adduono, hockey players and others sued the National Hockey League (NHL), the World Hockey Association (WHA), and others. The parties settled and entered into a stipulation of dismissal, and the court dismissed all claims and counterclaims with prejudice. Payments under the settlement agreement were conditioned on representations in the agreement and included payment of the plaintiffs' attorney fees.

The WHA filed a motion to reopen the matter under Fed.R.Civ.P. 60(b), alleging that the plaintiffs' attorney had knowingly misrepresented facts in the settlement agreement. The district court heard arguments, found that the attorney had knowingly misrepresented facts in the agreement, imposed a fine on the attorney, and awarded attorney fees to the NHL and WHA. The Eighth Cireuit Court of Appeals reversed and held that under Fed.R.Civ.P. 60(b), the district court was limited to setting aside its order of dismissal and did not have authority to impose sanctions or award attorney fees.

In Kokkonen v. Guardian Life Insurance Co., 511 U.S. 375, 378-82, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994), the parties executed a stipulation of dismissal with prejudice and the court entered judgment dismissing all claims. There, as here, in a Rule 60(b) motion, the moving party was not seeking to merely reopen the dismissed lawsuit based on an alleged breach of the settlement agreement, but sought enforcement of the agreement itself. See Margaret Meriwether Cordray, Settlement Agreements and the Supreme Court, 48 Hastings L.J. 9, 56 n. 191 (1996). The Supreme Court concluded that after the district court entered final judgment, the movant's Fed.R.Civ.P. 60 motion did not invoke the court's limited authority to grant relief beyond setting aside the judgment of dismissal.

IV. Analysis

Here, ACH's motion did not ask the court to set aside the judgment of dismissal, to reinstate the claims stated in the complaint and resume litigation, or to enter judgment in its favor with regard to the original claims and allegations. Instead, ACH alleged new facts, asserted new claims, and asked the court to "reform" the settlement agreement, to "enter judgment" on its motion, to award it damages against defendants, apparently for fraudulent concealment of information regarding the property identified in the agreement, and to award ACH attorney fees it had incurred before and after the judgment entered. ACH's request that the court award it exemplary damages appears to be premised on defendants' alleged bad faith breach of the settlement agreement.

However, even if ACH had asked the court to set aside the judgment and to resume litigation, it could not have pursued its new claims without obtaining leave to amend the complaint. Similarly, when the court denied ACH's motion to reform the settlement agreement, ACH moved for reconsideration and again asked the court to modify the terms of the settlement agreement. It did not ask that the dismissal of its original claims be vacated and litigation resumed.

Contract reformation is an equitable remedy. When a court's jurisdiction has been properly invoked, the court may grant such relief if the evidence clearly and unequivocally shows that an instrument does not express the true intent or agreement of the parties. Poly Trucking, Inc. v. Concentra Health Servs. Inc., 93 P.3d 561, 563 (Colo.App.2004); Boyles Bros. Drilling Co. v. Orion Indus., Ltd., 761 P.2d 278, 281 (Colo.App.1988). Reformation is permissible when there was a mutual mistake or one party made a unilateral mistake and the other party engaged in fraud or inequitable conduct. Boyles Bros. Drilling Co., 761 P.2d at 281.

However, the relief explicitly requested by ACH is not available under C.R.C.P. 60(b)(2) and we conclude the court lacked authority to grant such relief We also conclude that ACH's request for "such other and further relief" cannot be construed as a request to set aside the judgment, to reinstate the complaint, and to resume the litigation because ACH

® captioned the motion as one to reform the settlement agreement,

® prayed to reform the settlement agreement by, among other things, striking a provision preventing administrative action based on the settled and released claims and demands,

® prayed for damages and exemplary damages,

e the absence of any analysis or argument regarding setting aside the judgment and resuming litigation of the original claims, _ __

e stated that, ACH "would be within its rights to seek rescission of the [slettlement [algreement rather than reformation," but that doing so would entail the cost of another trial, and

enever stated or suggested that, if the court denied the relief it explicitly requested, it wanted the judgment set aside and the litigation resumed.

To the extent that ACH argues that its motion was proper because the settlement agreement was incorporated into the order of dismissal, we are not persuaded. Assuming, without deciding, that the agreement was incorporated into the order of dismissal, the appropriate action would have been to file a motion to enforce compliance with the order and, perhaps, to seek sanctions for contempt. But here, ACH sought to reform the agreement, entry of judgment on its original claims, and damages based on its new factual allegations of fraud and bad faith breach of the settlement agreement. It did not seek to enforce the order.

Because ACH sought relief that was not available under C.R.C.P. 60, we conclude that the trial court lacked authority to grant that relief. Accordingly, we conclude that the court did not abuse its discretion when it denied ACH's motion to reform the settlement agreement. We express no opinion about whether ACH may initiate a separate action in accordance with C.R.C.P. 3 based on the same factual allegations.

V. Attorney Fees and Costs

We deny Smith's and Bunnell's requests for attorney fees and costs on appeal.

Given the absence of specific Colorado authority and our reliance on federal cases, we conclude the appeal is not groundless and frivolous.

The order is affirmed.

Judge ROTHENBERG concurs. Judge BERNARD specially concurs.