Nelson v. Elway

908 P.2d 102, 19 Brief Times Rptr. 1760, 1995 Colo. LEXIS 760, 1995 WL 728254

• Court: Supreme Court of Colorado
• Decided: December 11, 1995
• Docket: 94SC453
• Status: Published

Opinions

Chief Justice VOLLACK

delivered the Opinion of the Court.

We granted certiorari to review the decision by the court of appeals in Nelson v. Elway, No. 93CA0629 (Colo.App. May 26, 1994), affirming in part and reversing in part the trial court’s grant of summary judgment in favor of the respondents. The court of appeals affirmed the trial court’s entry of summary judgment in the respondents’ favor as to the petitioners’ allegations of breach of contract, fraud and misrepresentation, dual agency, civil conspiracy, and punitive damages. The court of appeals reversed the trial court’s entry of summary judgment as to the promissory estoppel count in the petitioners’ complaint, ruling that there existed a material issue of fact as to this count. We reverse the court of appeals decision reversing summary judgment as to the promissory estoppel claim and affirm in all other respects.

I.

Mel T. Nelson (Nelson) was the president and sole shareholder of two car dealerships, Metro Auto and Metro Toyota, Inc. General Motors Acceptance Corporation (GMAC) provided all the financing for both dealerships. In the first half of 1990, both dealerships were experiencing financial difficulties. In July of 1990, Nelson retained John J. Pico and the Aspen Brokerage Company (Pico) to represent him in the selling or refinancing of one or both of the dealerships.

In early 1991, Pico, acting on behalf of Nelson and Metro Toyota, began negotiations with John A. Elway, Jr. (Elway) and Rodney L. Buscher (Buscher) regarding the sale of Metro Toyota and the property upon which it was situated. On March 14, 1991, pursuant to those negotiations, Elway and Buscher signed a “Buy-Sell Agreement” and a separate real estate contract to purchase Metro Toyota. The closing was scheduled for April 15, 1991.

Soon after the signing of these documents, Pico asked Nelson if he would be willing to sell both Metro Auto and Metro Toyota to Elway. Nelson stated that he would be willing to sell both dealerships along with the land upon which they were located if he received sufficient personal remuneration. Pico then began negotiating with Elway and Buscher regarding the sale of both dealerships. Through these negotiations it became apparent that Elway and Buscher were unwilling or unable to pay the full purchase price for the dealerships and the land upon which they were located.

In order to consummate the transaction, Pico suggested to Nelson that Elway and Buscher reimburse Nelson for his interest in Metro Toyota by paying Nelson $50 per vehicle sold by both dealerships for a period of seven years commencing on May 1, 1991. In exchange for this compensation arrangement, Elway and Buscher would purchase Metro Auto from Nelson at a greatly reduced purchase price. These terms, referred to by the parties as the “Service Agreement,” were reduced to writing but never signed by the parties. Subsequently, on March 16, 1991, the parties signed a “Buy-Sell Agreement” and a separate real estate contract for the purchase of Metro Auto. This written, signed agreement did not incorporate the terms of the Service Agreement.

By early 1991, the dealerships owed GMAC over $3 million. In order to protect its security interests, on April 3,1991, GMAC required Nelson to execute agreements referred to as “keeper letters,” allowing GMAC significant control over the dealerships. GMAC imposed this requirement as consideration for its agreement to pay in excess of $890,000 in debt owed by Metro Auto and Metro Toyota at the closing of the sale of the dealerships to Elway and Buscher. Nelson knew that execution of these letters would preclude his ability to file for bankruptcy protection and proceed through re-organization. He alleges that he thus sought and received assurances from Elway and Buscher that the orally agreed upon, but as yet unsigned, Service Agreement would be honored.

On April 8,1991, after the execution of the keeper letters, Pico, Elway, and Buscher met at Pico’s office. During this meeting, GMAC telephoned Pico’s office and informed Pico, Elway, and Buscher that as a condition to its agreement to finance the acquisition of the land and assets of the dealerships by Elway and Buscher, Nelson was not to receive any proceeds from the sale of the dealerships. The respondents then informed Nelson they would not be able to enter into the Service Agreement with him, and the Service Agreement was therefore not executed at the closing on April 12, 1991. After closing, Nelson demanded that the respondents honor the Service Agreement. When the respondents refused, Nelson filed the instant action.

In his complaint, Nelson sought damages from Elway and Buscher for breach of contract, promissory estoppel, fraud, conspiracy, and dual agency. Additionally, Nelson sought exemplary damages. The respondents then moved the trial court for summary judgment, which the court granted as to all counts. The court of appeals affirmed with respect to all counts except for promissory estoppel. On that claim the court of appeals held there was a genuine issue of material fact and remanded the case to the trial court for trial on that issue alone.

II.

Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Cung La v. State Farm Auto. Ins. Co., 830 P.2d 1007, 1009 (Colo.1992). The burden to show that there exists no genuine issue of material fact is on the moving party, id., and the court must resolve all doubts as to whether an issue of fact exists against that party. Id.

III.

The first issue is whether the court of appeals erred in ruling that the petitioners failed to allege facts sufficient to support the unlawful overt act element of a civil conspiracy claim. The petitioners assert that Pico breached his fiduciary duty, and that this breach constituted the requisite unlawful overt act to give rise to liability for civil conspiracy. The respondents maintain that no valid conspiracy claim exists here because the petitioners failed to show an unlawful overt act. Moreover, the respondents contend that even if Pico breached his fiduciary duty to the petitioners, this is insufficient to impose liability upon the respondents in the absence of evidence that the respondents either committed an unlawful overt act or conspired with Pico to do so. The court of appeals held that:

the negotiations cited by plaintiffs which allegedly gave rise to a civil conspiracy contain no reference to any unlawful overt acts necessary to support a civil conspiracy....

Here, the parties entered into negotiations which culminated in the signing of the buy-sell agreements and contracts for the sale of real estate. After those negotiations, GMAC informed defendants that Nelson was not to receive any proceeds from the sale, and defendants promptly informed plaintiffs about this condition. There is no evidence that Elway or Busch-er engaged in unlawful overt acts in negotiating this sale.

Nelson, slip op. at 10.

We agree with the court of appeals. To establish a civil conspiracy in Colorado, a plaintiff must show: (1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds on the object or course of action; (4) an unlawful overt act; and (5) damages as to the proximate result. Jet Courier Serv., Inc. v. Mulei, 771 P.2d 486, 502 (Colo.1989). The court will not infer the agreement necessary to form a conspiracy; evidence of such an agreement must be presented by the plaintiff. More v. Johnson, 193 Colo. 489, 494, 568 P.2d 437, 440 (1977). Additionally, the purpose of the conspiracy must involve an unlawful act or unlawful means. A party may not be held liable for doing in a proper manner that which it had a lawful right to do. Contract Maintenance Co. v. Local No. 105, 160 Colo. 190, 194-95, 415 P.2d 855, 857 (1966).

In this case, as was held by the trial and appellate courts, the petitioners alleged no facts giving rise to any unlawful overt act required to support a conspiracy claim. In their brief, the petitioners claim that “Elway and Pico either prompted GMAC or conspired with GMAC to impose an additional condition, eliminating compensation for Nelson.” The petitioners’ amended complaint, however, is devoid of such an allegation. Indeed, the record contains no support at all for such an assertion.

While the petitioners do allege that Pico, as the agent of Metro Toyota, breached his fiduciary duty to the petitioners, this alone does not give rise to a claim for relief against the respondents. Without an allegation that the respondents committed, or participated in the commission of, an unlawful overt act, conspiracy liability may not be imposed against them. The record indicates that the respondents negotiated, at arm’s length, the best deal they could for the purchase of the dealerships. We decline to impose liability upon the respondents for doing in a proper manner that which they had the lawful right to do: attempt to obtain the most advantageous position for themselves in purchasing the dealerships. We thus hold that the court of appeals correctly affirmed the trial court’s entry of summary judgment in favor of the respondents on this issue.

IV.

The next issue is whether the court of appeals erred in upholding the trial court’s entry of summary judgment on the petitioners’ claim of breach of contract. The petitioners’ claim for breach of contract is based on the alleged March 15, 1991, Service Agreement orally agreed upon by Nelson, Elway and Buscher.

A.

The first issue with regard to the breach of contract claim is whether the merger clauses in the Buy-Sell Agreements precluded the consideration of evidence that the parties intended the Service Agreement to be part of the overall agreement to sell the dealerships.¹ The petitioners argue that the court of appeals erred by ruling that the merger clauses precluded the consideration of the intent of the contracting parties. The respondents assert that the merger clauses wholly manifest the intention of the parties that only those terms of the transaction reduced to writing and signed at the closing would be enforceable terms of the agreement.

We agree with the court of appeals that the merger clauses preclude consideration of extrinsic evidence to ascertain the intent of the parties. Integration clauses generally allow contracting parties to limit future contractual disputes to issues relating to the express provisions of the contract. Keller v. A.O. Smith Harvestore Prods., 819 P.2d 69, 72 (Colo.1991). Therefore, the terms of a contract intended to represent a final and complete integration of the agreement between the parties are enforceable, and extrinsic evidence offered to prove the existence of prior agreements is inadmissible. Id.; Sentinel Acceptance Corp. v. Colgate, 162 Colo. 64, 66, 424 P.2d 380, 382 (1967). Even when extrinsic evidence is admissible to ascertain the intent of the parties, such evidence may not be used to demonstrate an intent that contradicts or adds to the intent expressed in the writing. KN Energy, Inc. v. Great Western Sugar Co., 698 P.2d 769, 777 n. 9 (Colo.1985).

In this ease, the merger clauses plainly and unambiguously manifest the intent of the parties that the Buy-Sell Agreements executed on March 16, 1991 constitute the entire agreement between the parties pertaining to the subject matter contained therein. Where, as here, sophisticated parties who are represented by counsel have consummated a complex transaction and embodied the terms of that transaction in a detailed written document, it would be improper for this court to rewrite that transaction by looking to evidence outside the four corners of the contract to determine the intent of the parties.

The petitioners and respondents signed the March 16, 1991 Buy-Sell Agreements after extensive negotiation and numerous drafts of documents. By doing so, all parties expressly agreed, pursuant to the merger clauses, that the terms of those Buy-Sell Agreements would control the transaction and that all other agreements, oral or written, would be void. We will not step into a commercial transaction after the fact and attempt to ascertain the intent of the parties when that intent is clearly manifested by an express term in a written document. We thus conclude that the merger clauses in the March 16, 1991, Buy-Sell Agreements are dispositive as to the intent of the parties in this ease. As there is no dispute as to any material fact with regard to this issue, the court of appeals correctly affirmed the trial court’s order of summary judgment in favor of the respondents on this issue.

B.

The next issue with regard to the breach of contract claim is whether the court of appeals erred in ruling that the doctrine of part performance did not bar application of the statute of frauds to preclude the petitioners’ breach of contract claim against the respondents based on the alleged oral Service Agreement. In so holding, the court of appeals stated the standard for determining the applicability of the part performance doctrine as follows:

[A]n oral contract otherwise unenforceable under the statute of frauds may substitute for a writing if there is part performance of the oral contract.... However, such performance must be at least substantial part performance and must be required by, and referable to, no other theory than that of the alleged oral agreement.

Nelson, slip op. at 5 (citations omitted).

The petitioners argue that the court of appeals applied the incorrect standard to determine that the doctrine of part performance was inapplicable here. The respondents contend that the standard applied by the court of appeals was proper, as was the application of that standard to the facts of the case.

We agree with the respondents. Section 38-10-112(l)(a), 16A C.R.S. (1982), provides that an oral agreement is unenforceable if, by its terms, it is not to be performed within one year after its formation. See also McCrea & Co. Auctioneers, Inc. v. Dwyer Auto Body, 799 P.2d 394, 397 (Colo.App.1989). When applicable, the part performance doctrine operates to preclude the application of the aforementioned statute. Id. The part performance doctrine will apply if there is part performance of an oral contract which is: (1) substantial; and (2) required by, and fairly referable to no other theory besides that allegedly contained within the oral agreement. L.U. Cattle Co. v. Wilson, 714 P.2d 1344,1347 (Colo.App.1986).² This rule is based on the premise that the conduct constituting the partial performance must convincingly evidence the existence of the oral agreement. John D. Calamari & Joseph M. Perillo, Contracts § 19-15, at 799 (3d ed. 1987).

In this case, Nelson’s conduct does not fulfill the requirements for invocation of the part performance doctrine. The petitioners allege that Nelson’s conduct in selling the dealerships constituted part performance of his obligations under the alleged March 15 oral agreement. The petitioners further allege that Nelson engaged in part performance by taking preliminary steps to create a new consulting corporation. The steps allegedly taken were Nelson’s selection of a corporate name, Nelson’s being “in the process of incorporating,” and Nelson’s providing information about the corporation to his attorney. This conduct, however, does not meet the requirement of the part performance doctrine that the conduct be fairly referable to no other theory besides that allegedly contained within the oral agreement. Moreover, even assuming arguendo that Nelson’s allegations of conduct involving formation of a new corporation were referable to the alleged agreement, it would not be substantial enough to constitute part performance.

Here, Nelson’s actions in selling the dealerships were referable to the written agreements signed on March 16, and thus cannot constitute part performance of the oral Service Agreement. Because the March 16 written Buy-Sell Agreements required that Nelson sell the dealerships and land to Elway and Buscher, the fact that Nelson actually did so is not probative of the existence of the alleged March 15 oral agreement. Additionally, the fact that Nelson received a commitment from GMAC to pay in excess of $890,000 of the dealerships’ debt upon closing of the March 16 written Buy-Sell Agreement is consistent with the existence of the March 16 written agreement rather than the March 15 oral agreement.

Moreover, Nelson’s allegations of conduct involving formation of a new corporation were not clearly referable to the alleged Service Agreement. Nelson merely alleges in his affidavit accompanying his response to Elway s summary judgment motion that he chose a corporate name, was “in the process” of incorporating, and had spoken to his attorney regarding the alleged Agreement and the new corporation. Such ambiguous conduct falls below the standard set by our cases that conduct must be fairly referable to the alleged contract in order to fall within the part performance exception to the statute of frauds. Moreover, even were we to hold that this conduct on Nelson’s part was referable to the alleged Service Agreement, it would still be too insubstantial to trigger application of the part performance doctrine.

We therefore hold that the petitioners failed to establish facts indicating substantial part performance of the alleged Service Agreement, and the court of appeals thus correctly entered summary judgment in favor of the respondents on the ground that the petitioners’ breach of contract action was barred by the statute of frauds.

Y.

The respondents argue, in their cross-petition, that the court of appeals erred by holding that summary judgment was precluded because genuine issues of material fact exist as to the petitioners’ promissory estoppel claim. The respondents urge this court to adopt Restatement (Second) of Contracts § 91, and to hold that the conditional nature of any promise made to the petitioners by the respondents precludes the petitioners’ promissory estoppel claim as a matter of law. The petitioners argue that the court of appeals correctly determined that the existence of a genuine issue of material fact with respect to the petitioners’ promissory estoppel claim precluded entry of summary judgment in favor of the respondents on that claim.

We agree with the respondents that section 91 is applicable to the facts of this case. We thus reverse the holding of the court of appeals, and hold that the conditional nature of the alleged promise the respondents made to the petitioners regarding the March 15 Service Agreement precludes application of the promissory estoppel theory embodied in Restatement (Second) of Contracts § 90.

This court, in Vigoda v. Denver Urban Renewal Auth., 646 P.2d 900, 905 (Colo.1982), adopted the doctrine of promissory estoppel, articulated in section 90.³ The elements of a claim for promissory estoppel are: (1) a promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee; (2) action or forbearance induced by that promise; and (3) the existence of circumstances such that injustice can be avoided only by enforcement of the promise. The presence of these elements will prevent the lack of a written contract from defeating a plaintiffs claim. Chidester v. Eastern Gas & Fuel Associates, 859 P.2d 222, 225 (Colo.App.1992).

The essence of section 90 is the plaintiffs reasonable reliance on the defendant’s representations. Section 91 states:

Effect of Promises Enumerated in §§ 82-90 When Conditional

If a promise within the terms of §§ 82-90 is in terms conditional or performable at a future time the promisor is bound thereby, but performance becomes due only upon the occurrence of the condition or upon the arrival of the specified time.

Section 91 interlocks with section 90, and relates to the reasonableness of the plaintiffs change of position based on promises of the defendant. It would be manifestly unreasonable for a party to rely on a promise that may or may not bind the promisor depending on whether or not a condition occurs. We hold that when a defendant makes a conditional representation to a plaintiff, as contemplated by section 91, any detrimental change of position on the part of the plaintiff prior to the occurrence of the condition is unreasonable as a matter of law.⁴ This holding is consistent with prior Colorado cases which hold that promissory estoppel may not lie where the asserted reliance is not justified or reasonable. Kiely v. St. Germain, 670 P.2d 764, 767 (Colo.1983); Hansen v. GAB Business Servs., Inc., 876 P.2d 112, 114 (Colo.App.1994).

In this case, the promise upon which the petitioners purport to rely as grounds for their promissory estoppel claim is the alleged March 15 oral Service Agreement. This promise was made expressly conditional on GMAC’s approval of the sale. In this regard, the court of appeals stated:

According to Nelson, on March 15, 1991, Elway and Buscher agreed that if the sale could be structured so Elway’s cash investment would be limited to $1.2 million, and if General Motors Acceptance Corporation (GMAC) approved of the sale, then Elway and Buscher would buy the dealerships and Nelson would receive his compensation through the Service Agreement.

Nelson, slip op. at 10 (emphasis added). This is consistent with Nelson’s affidavit sworn on November 24, 1992 in which he stated:

I agreed with Mr. Elway and Mr. Buscher on March 15, 1991, that if a sale of my Dealerships’ assets and my land could be structured so that Mr. Elway’s cash investment was limited to 1.2 million dollars, and if Mr. Elway and Mr. Buscher could obtain GMAC approval of the Agreement, then Mr. Elway and Mr. Buscher would buy both of my Dealerships and the land upon which they were located, and I would receive, through a separate side deal agreement, $50.00 for every new or used retail vehicle sold by the Dealerships for the next seven years commencing May 1, 1991.

Nelson Aff. at ¶ 12.

This demonstrates not only that the alleged oral Service Agreement of March 15 was conditioned on GMAC approval, but also that Nelson was aware of the conditional nature of the promise. We thus hold, as a matter of law, that it was unreasonable for Nelson to rely upon the alleged representations made to him by Elway and Buseher on March 15. We thus reverse the court of appeals’ ruling on this issue and remand for proceedings consistent with this opinion.

VI.

For the foregoing reasons, the court of appeals is reversed in part and affirmed in part. The case is thus remanded to the court of appeals with directions to remand to the trial court to enter judgment in favor of the respondents.

LOHR, J., dissents, and KIRSHBAUM and SCOTT, JJ., join in the dissent.

1 . Paragraph 14 of both of the Buy-Sell Agreements (the "Merger Clauses”) for Metro Toyota and Metro Auto, both signed on March 16, 1991, by Nelson, Elway, and Buscher, states:

This Agreement constitutes the entire Agreement between the parties pertaining to the subject matter contained herein, and supersedes all prior agreements, representations and understandings of the parties. No modification or amendment of this Agreement shall be binding unless in writing and signed by the parties....

2 . The petitioners assert that the requirement articulated in L.U. Cattle, and relied upon by the court of appeals in this case, that the part performance "must be required, and referable to, no theory other than that of the oral agreement,” is an out-dated and criticized doctrine. This is incorrect. While the petitioner is correct the case relied upon by L.U. Cattle, has been criticized by legal encyclopedias, see, e.g., 73 Am. Jur.2d, Statute of Frauds § 408 (1974), that criticism has not gone to the exclusively referable requirement. Specifically, Knoff v. Grace, 68 Colo. 527, 190 P. 526 (1920), the case relied upon by L.U. Cattle, has been criticized for the erroneous supposition that "the act of part performance must be an actual execution of some express provision or requirement of the contract.”

The court of appeals did not cite L.U. Cattle for this proposition, nor do we. We simply reaffirm the well established and widely recognized principle that the part performance must be substantial and fairly referable to no other theory than that of the alleged agreement. Kiter v. Owen, 115 Colo. 7, 11, 168 P.2d 254, 255 (1946); Knoff v. Grace, 68 Colo. 527, 530, 190 P. 526, 528 (1920); Von Trotha v. Bamberger, 15 Colo. 1, 12, 24 P. 883, 887 (1890); L.U. Cattle Co. v. Wilson, 714 P.2d 1344, 1347-48 (Colo.App.1986); see also Glass v. Kirkland, 29 F.3d 1266, 1271 (8th Cir.1994); Chevron U.S.A. Inc. v. Schirmer, 11 F.3d 1473, 1478 (9th Cir.1993); Sanders v. McMullen, 868 F.2d 1465, 1467 (5th Cir.1989); Cinema North Corp. v. Plaza at Latham Assocs., 867 F.2d 135, 141 (2d Cir.1989); Beverly Enterprises, Inc. v. Fredonia Haven, Inc., 825 F.2d 374 (11th Cir.1987); Keller v. Security Fed. Sav. & Loan Ass'n, 555 So.2d 151, 156 (Ala.1989); Dunham v. Dunham, 204 Conn. 303, 528 A.2d 1123, 1130 (1987); Bear Island Water Ass'n, Inc. v. Brown, 125 Idaho 717, 874 P.2d 528 (1994); Knight v. Anderson, 292 N.W.2d 411, 416 (Iowa 1980); Unitas v. Temple, 314 Md. 689, 552 A.2d 1285, 1291 (1989); Quirin v. Weinberg, 252 Mont. 386, 830 P.2d 537, 541 (1992); Sayer v. Bowley, 243 Neb. 801, 503 N.W.2d 166 (1993); Anostario v. Vicinanzo, 59 N.Y.2d 662, 463 N.Y.S.2d 409, 450 N.E.2d 215, 216 (1983); Skjoldal v. Myren, 86 S.D. 111, 191 N.W.2d 809, 813 (1971); Martin v. Scholl, 678 P.2d 274, 275 (Utah 1983); Weber v. Weber, 176 Wis.2d 1085, 501 N.W.2d 413 (1993); Williston Coop. Credit Union v. Fossum, 459 N.W.2d 548, 551 (N.D.1990). The legal encyclopedia cited by the petitioner is also in accord with this proposition. 73 Am.Jur.2d, Statute of Frauds § 406 (1974) ("The acts of part performance, in order to be effective to remove an oral agreement from the operation of the statute of frauds, must be referable to and induced by the contract relied upon.... Otherwise there is nothing to show that the plaintiff changed his position to his prejudice because of the contract, so as to give rise to an estoppel”) (emphasis added).

3 . Section 90 states in pertinent part:

Promise Reasonably Inducing Action or Forbearance

(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding only if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

4 . This holding is in accord with other jurisdictions which have considered and adopted section 91. See, e.g., Corbit v. J.I. Case Co, 70 Wash.2d 522, 424 P.2d 290, 301 (1967) (adopting section 91 and reversing promissory estoppel based judgment against defendant where promise upon which that claim was based was conditional).