Havana v. JERB

Colorado Court of Appeals·Decided July 10, 2025·No. 23CA1512·Unpublished

Opinion

23CA1512 Havana v JERB 07-10-2025 COLORADO COURT OF APPEALS

Court of Appeals No. 23CA1512 City and County of Denver District Court No. 21CV33157 Honorable J. Eric Eliff, Judge

Havana Operator, LLC, a Colorado limited liability company, and 51st Property Management Group, LLC, a Colorado limited liability company,

Plaintiffs-Appellants, v. JERB Limited, a Colorado limited liability company, Defendant-Appellee.

JUDGMENT AFFIRMED

Division I

Opinion by JUDGE WELLING

Schock and Berger*, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)

Announced July 10, 2025

Wysocki Law Group, P.C., Jeremy S. Wysocki, Zachary Crow, Denver, Colorado, for Plaintiffs-Appellants

Holland & Hart LLP, Matthew J. Smith, Nicholas W. Katz, Denver, Colorado, for Defendant-Appellee

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2024.

¶1 Plaintiffs, Havana Operator, LLC (Havana) and 51st Property Management Group, LLC (51st Property), appeal the trial court’s entry of judgment against them in their breach of contract action against defendant, JERB Limited (JERB). We affirm.

I. Background

A. Factual Background

¶2 Havana owned state and local marijuana cultivation licenses that allowed for the cultivation of marijuana at a unit located on East 101 Avenue (Unit 101). 51st Property held the commercial leasehold interest for Unit 101 and Havana subleased Unit 101 from 51st Property. 51st Property leased the location from 51st Montebello, LLC (the Landlord). Although Unit 101 was licensed for marijuana cultivation, the plaintiffs only used the space for storage. 51st Property’s lease with the Landlord was set to expire in April 2023 and contained a three-year renewal option.

¶3 On March 4, 2021, JERB sent Havana a letter of intent for an asset purchase agreement (APA) that contemplated JERB’s purchase of Havana’s marijuana cultivation licenses for Unit 101 and the remainder of 51st Property’s leasehold interest in Unit 101. In this letter of intent, JERB stated that its obligation to close the

proposed transaction was conditioned on “a new lease for [Unit 101] on terms satisfactory to [JERB],” among other things.

¶4 On March 24, 2021, the plaintiffs and JERB entered into the APA. In the APA, JERB agreed to purchase the remainder of 51st Property’s leasehold interest in Unit 101 and the corresponding marijuana cultivation licenses from Havana. But the APA conditioned closing on the execution of an assignment and assumption agreement for Unit 101 and final governmental approval — both state and local — for a change in ownership to the marijuana cultivation licenses.

¶5 Section 4 of the APA provided as follows:

At Closing, [JERB] and 51st Property shall enter into an assignment and assumption agreement in a form to be agreed upon by Landlord, 51st Property, and [JERB] (the “Assignment and Assumption Agreement”)

whereby the Leasehold Interest and all other rights and obligations of 51st Property under the Lease Agreement shall be assigned by 51st Property to [JERB] and shall be assumed by [JERB]. 51st Property represents and warrants that the Leasehold Interest shall be free and clear of any and all Liens and shall be in good standing and not in default as of April 1, 2021[,] and as of Closing.

¶6 Section 3 of the APA required JERB to make periodic payments into an escrow account toward the purchase price for the assets contemplated by the APA and the rent accruals on Unit 101 between April 11, 2021, and the closing date. Section 11 of the APA allowed JERB to conduct a due diligence investigation of Unit 101, including building inspections. Under section 17 of the APA, JERB could terminate the agreement if final governmental approval wasn’t granted within six months of the March 24, 2021, effective date.

¶7 The plaintiffs drafted the language of the APA, including section 4.

¶8 At the time that the parties entered into the APA, JERB intended to use Unit 101 for marijuana cultivation and needed to invest approximately $2.5 million into the space to bring it into compliance with local and state codes and make it suitable for its intended use. While Unit 101 had two grow rooms that could be used immediately, JERB’s anticipated build-out was expected to take four to five months for design and permitting, and another six months for construction. Given JERB’s contemplated investment and improvement to Unit 101, JERB wanted a longer lease term than the three-year option to extend that 51st Property currently

held. Havana understood that JERB and the Landlord would negotiate terms of a lease extension. 51st Property understood that nothing in the APA, including section 4, prevented JERB from seeking an extension of the lease once the lease had been assigned to JERB. Nor did the APA expressly prevent JERB from seeking an extension as part of the assignment.

¶9 Within days of executing the APA, JERB reached out to the Landlord to start negotiating a lease term extension as part of the assignment. JERB also communicated to the Landlord its hope that the Landlord would reduce the rent for an initial period of the extended lease given JERB’s anticipated investment in improving Unit 101. The Landlord seemed open to discussing a lease term extension with JERB but communicated to JERB that it wouldn’t agree to an assignment of the current lease on Unit 101 until 51st Property became current on rent and paid the approximately $120,000 balance owed.

¶ 10 While JERB and the Landlord began negotiating the lease term for the assignment of Unit 101, JERB and Havana worked together to submit a change of ownership application to the Colorado Marijuana Enforcement Division (MED) for Unit 101’s marijuana

cultivation licenses. In the application to the MED, the parties included a letter of conditional consent for the lease assignment from the Landlord, stating that the assignment of the lease for Unit 101 was contingent on the Landlord and JERB coming to “mutually agreeable terms for any contemplated extension of the Lease Agreement.” JERB sent a copy of this letter to Havana on March 31, 2021.

¶ 11 On April 1, 2021 — the day the APA provided that 51st Property would be “in good standing and not in default” on Unit 101 — 51st Property owed $128,000 in unpaid rent.

¶ 12 On April 27, 2021, the MED conditionally approved Havana and JERB’s change in ownership application contingent on two things: (1) the parties’ agreement on an effective date for the change in ownership to take place and (2) local approval.

¶ 13 On May 7, 2021, the Landlord told 51st Property that it couldn’t agree to a lease assignment with JERB for Unit 101 because 51st Property still owed past due rent. That same day, the Landlord told JERB the same thing.

¶ 14 On May 13, 2021, 51st Property came current on its unpaid rent to the Landlord.

¶ 15 On May 18, 2021, Havana and JERB received conditional local approval contingent on the parties’ ability to provide a copy of a lease or lease assignment reflecting that JERB legally possessed Unit 101.

¶ 16 In mid-June 2021, the Landlord emailed 51st Property and JERB and asked if the parties could connect to help facilitate “the heavily negotiated lease assignment.” On June 30, 2021, Landlord asked Havana and 51st Property to participate in the lease negotiations with JERB to help facilitate the assignment.

Free access — add to your briefcase to read the full text and ask questions with AI

Havana v. JERB, (Colo. Ct. App. 2025).

Havana v. JERB (Havana v. JERB) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

Dorman v. Petrol Aspen, Inc.
914 P.2d 909 (Supreme Court of Colorado, 1996)
Cheyenne Mountain School District 12 v. Thompson
861 P.2d 711 (Supreme Court of Colorado, 1993)
KN Energy, Inc. v. Great Western Sugar Co.
698 P.2d 769 (Supreme Court of Colorado, 1985)
Nelson v. Elway
908 P.2d 102 (Supreme Court of Colorado, 1995)
Hock v. New York Life Insurance Co.
876 P.2d 1242 (Supreme Court of Colorado, 1994)
Ehrlich Feedlot, Inc. v. Oldenburg
140 P.3d 265 (Colorado Court of Appeals, 2006)
Vu, Inc. v. Pacific Ocean Marketplace, Inc.
36 P.3d 165 (Colorado Court of Appeals, 2001)
Robinson v. City and County of Denver
30 P.3d 677 (Colorado Court of Appeals, 2000)
Tisch v. Tisch
2019 COA 41 (Colorado Court of Appeals, 2019)
Wholecheese v. State
100 P.3d 14 (Court of Appeals of Alaska, 2004)
Pepcol Manufacturing Co. v. Denver Union Corp.
687 P.2d 1310 (Supreme Court of Colorado, 1984)
Marcellot v. Exempla, Inc.
2012 COA 200 (Colorado Court of Appeals, 2012)
Gagne v. Gagne
2014 COA 127 (Colorado Court of Appeals, 2014)
Champagne v. United States
40 F.3d 946 (Eighth Circuit, 1994)