Silver v. S&D Law

• Court: Colorado Court of Appeals
• Decided: January 23, 2025
• Docket: 23CA1240
• Status: Unpublished

Opinion

23CA1240 Silver v S&D Law 01-23-2025

COLORADO COURT OF APPEALS

Court of Appeals No. 23CA1240 City and County of Denver District Court No. 17CV34514 Honorable Jill D. Dorancy, Judge

Joe L. Silver,

Plaintiff-Appellant and Cross-Appellee

v.

S&D Law, Steve Kelly, and Gary Blum,

Defendants-Appellees and Cross-Appellants.

JUDGMENT REVERSED AND CASE REMANDED WITH DIRECTIONS

Division II Opinion by JUDGE GOMEZ Fox and Lum, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e) Announced January 23, 2025

Haddon, Morgan and Foreman, P.C., Ty Gee, Adam Mueller, Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee

Davis Graham & Stubbs LLP, Theresa Wardon Benz, Claire Mueller, Denver, Colorado, for Defendants-Appellees and Cross-Appellants ¶1 Plaintiff, Joe L. Silver, a former shareholder of S&D Law,

appeals the district court’s entry of a declaratory judgment in favor

of defendants, S&D Law, Steve Kelly, and Gary Blum, on issues

relating to a 2001 S&D Law Shareholders’ Agreement. Defendants

cross-appeal the district court’s order denying their requests for

costs. We conclude that, following a remand from another division

of this court, the district court erred in assessing the severability of

the 2001 Agreement. Accordingly, we reverse the judgment,

remand the case with directions, and decline to consider the issues

of costs as they are premature at this time.

I. Background

A. The Underlying Dispute

¶2 In 1985, Silver and Bruce DeBoskey formed a law firm that

became S&D Law. Until 2001, Silver and DeBoskey were the only

and equal shareholders of the firm.

¶3 This case arises from a dispute concerning the 2001

Agreement, which governed DeBoskey’s imminent retirement and

departure from the firm, Silver’s eventual departure from the firm,

and the entry of new shareholders — specifically Kelly and Blum —

into the firm. Silver (acting for himself and S&D Law) and

1 DeBoskey negotiated and signed the agreement, and all of S&D

Law’s shareholders and directors at the time approved it.

¶4 The “DeBoskey Share Redemption” provision in the 2001

Agreement addressed the payout to DeBoskey upon his departure

from the firm. This provision entitled DeBoskey to $200,000,

representing the return of his ante plus interest. It also provided

that DeBoskey would be entitled to additional amounts from four

still-pending contingency cases, including 33% of the fees from a

case referred to as the Cook case. By 2006, S&D Law had paid

DeBoskey everything he was owed under this provision, except for

any potential Cook fees.

¶5 The “Silver Transition Amount” provision, in turn, addressed

the payout to Silver upon his eventual departure from the firm. The

first sentence of this provision, which the parties refer to as the

“Silver Clause,” provides,

To attain fairness for the transition resulting from [S&D Law’s] redemption of DeBoskey’s shares and [S&D Law’s] conversion to an ante system for the admission of new shareholders as herein provided, [S&D Law] shall attempt to equalize for Silver the benefits received by DeBoskey.

2 ¶6 When Silver retired in 2013, S&D Law agreed to pay him a

$115,000 “transition amount” plus additional payments for

redemption of his stock and for interest.

¶7 In 2017, S&D Law received about $14.6 million in attorney

fees from the Cook case. DeBoskey requested payment of 33% of

those fees pursuant to the DeBoskey Share Redemption provision in

the 2001 Agreement. Although S&D Law initially refused that

request, the parties eventually reached a settlement whereby the

firm paid DeBoskey $4,541,652 in Cook fees.

¶8 Silver then insisted that the “Silver Clause” in the 2001

Agreement entitled him to that same amount. When S&D Law

refused to pay Silver, he filed this action asserting claims for

(1) breach of contract; (2) breach of the covenant of good faith and

fair dealing; (3) declaratory judgment; and (4) unjust enrichment.

S&D Law brought counterclaims for (1) breach of contract;

(2) breach of the covenant of good faith and fair dealing;

(3) declaratory judgment; and (4) breach of fiduciary duty.

¶9 All claims, other than Silver’s claim for unjust enrichment

(which was dismissed before trial) and both sides’ claims for

declaratory judgment (which were reserved for the court), were

3 submitted to a jury. Following a trial, the jury found for Silver on

his claim for breach of contract and awarded him $4,541,652 (the

same amount DeBoskey had received in Cook fees) in damages.

The jury also found for Silver on his claim for breach of the

covenant of good faith and fair dealing and awarded him $1 in

nominal damages. The jury found against S&D Law on its contract

and good faith and fair dealing counterclaims but found in its favor

on its counterclaim for breach of fiduciary duty, awarding it about

$1.5 million in damages (of which 80% fault was attributed to Silver

and the other 20% to Kelly, Blum, and another individual).

Although S&D Law pursued six different theories on its breach of

fiduciary duty claim, the general verdict form (given at Silver’s

insistence) didn’t specify which breach or breaches the jury found.1

1 Those six theories were that Silver (1) created an agreement that

allowed him and DeBoskey collectively to claim nearly two-thirds of the Cook fees; (2) created an agreement that allowed him to collect over $4.5 million in Cook fees although he only worked 16.5 hours on the case; (3) created an agreement that risked S&D Law having to pay taxes on any payout of Cook fees to DeBoskey and himself; (4) repeatedly failed to disclose his interpretation of the 2001 Agreement to other firm directors; (5) engaged in a self-interested transaction; and (6) exposed S&D Law to DeBoskey’s claims and overpayments.

4 ¶ 10 After trial, S&D Law filed a motion for a declaratory judgment,

asking the court to sever and void the 2001 Agreement’s Silver

Clause due to Silver’s breach of fiduciary duty, in lieu of entering

judgment on the damage awards. The district court denied the

motion on the basis that S&D Law had already elected — and was

bound to — its chosen remedy. The court then entered judgment

on the damage awards.

B. First Appeal and Remand

¶ 11 As relevant here, in the first appeal, a division of this court

reversed the district court’s post-verdict order denying S&D Law’s

motion for a declaratory judgment. See Silver v. S&D Law, slip op.

at ¶ 103 (Colo. App. Nos. 19CA1784 & 19CA2177, Dec. 9, 2021)

(not published pursuant to C.A.R. 35(e)). The division concluded

that the district court had erred by denying the motion on the basis

of election of remedies and remanded the case for consideration of

the motion on the merits. Id. at ¶¶ 86, 92. The division explained

that the district court needed to consider the merits of the motion

in the first instance, given that the decision whether to grant

declaratory relief lay within its sound discretion and that there were

several unresolved issues underlying the requested relief. Id. at

5 ¶ 88. Among those issues were whether S&D Law could void just

the Silver Clause or would have to void the entire 2001 Agreement,

and whether voiding part or all of the agreement would be

impractical or inequitable. Id. at ¶ 90.

¶ 12 On remand, a different judge on the district court granted the

motion for a declaratory judgment, severing and voiding the Silver

Clause. Regarding the issue of whether S&D Law could void just

the Silver Clause (at least as it pertains to the Cook fees), the

court’s entire reasoning, after reciting the applicable law, was as

follows:

The Court finds that the 2001 Agreement contained multiple promises and agreements incorporated into one contract. Had the Cook fees not been awarded, the remainder of the contract would have already been fulfilled and there would be no dispute about whether the entire contract should be void. Thus, the Silver Clause was not contingent on any other provision in the 2001 Agreement.

Considering that the remainder of the terms of the contract have already been fulfilled, the Court finds that the agreement is severable and that the Court has the authority to void only the Silver Clause rather than the entire contract.

6 The court then concluded that the Silver Clause is voidable, that

voiding the clause is not impractical or inequitable, and that a

declaratory judgment to that effect is appropriate. The court

entered judgment accordingly.

¶ 13 Silver appeals that judgment. Defendants cross-appeal,

challenging the denial of their requests for an award of costs.

II. Declaratory Judgment

¶ 14 We first consider Silver’s challenge to the district court’s entry

of a declaratory judgment. Silver challenges the court’s

determinations that (1) the Silver Clause is severable; (2) voiding the

clause is not impractical or inequitable; and (3) a declaratory

judgment severing and voiding the clause is appropriate. Because

we agree that the district court erred in resolving the issue of

severability, we don’t reach the other two issues.

A. Standard of Review

¶ 15 We review a district court’s entry of a declaratory judgment for

an abuse of discretion. Nash v. Mikesell, 2024 COA 68, ¶ 15. A

court abuses its discretion when its decision is manifestly arbitrary,

unfair, or unreasonable or when it misapplies the law. In re

Marriage of Herold, 2021 COA 16, ¶ 5.

7 ¶ 16 However, we review a court’s interpretation and application of

the law de novo. Id. Likewise, when the basis for a declaratory

judgment is a matter of contract interpretation, we review the

court’s determination de novo. See Markwell v. Cooke, 2021 CO 17,

¶ 22; CapitalValue Advisors, LLC v. K2D, Inc., 2013 COA 125, ¶ 17.

B. Severability

¶ 17 As a preliminary matter, we assume that in order to void the

Silver Clause based on Silver’s breach of fiduciary duty, the 2001

Agreement must be severable. Silver cites case law indicating that

a contract must be severable for a provision in the contract to be

voided. See, e.g., Univex Int’l, Inc. v. Orix Credit All., Inc., 914 P.2d

1355, 1357 (Colo. 1996) (“[A] contract cannot be severed unless the

language of the contract manifests each party’s intent to treat the

contract as divisible.”);Woodward v. Jacobs, 541 P.2d 691, 692

(Colo. App. 1975) (not published pursuant to C.A.R. 35(f)) (“Where

an illegal condition or promise on one side is a part of the

consideration for the entire obligation on the other side, it is owing

to the impossibility of determining the weight or extent of such

portion of the consideration which moved to induce the engagement

thereupon, that such void promise for consideration is held to be

8 unseverable, and avoids the whole contract.” (quoting Giles v.

DeCow, 70 P. 681, 681 (Colo. 1902))). See generally CapitalValue,

¶¶ 22-24. S&D Law neither develops any contrary argument nor

cites any directly contrary authority.

¶ 18 “In determining whether a contract is severable, ‘[t]he primary

objective is to ascertain the intent of the contracting parties . . . .’”

CapitalValue, ¶ 24 (quoting John v. United Advert., Inc., 439 P.2d

53, 56 (Colo. 1968)). Thus, when considering whether the promises

in a contract are severable from one another, the court should

inquire “whether the parties assented to all the promises as a single

whole, so that there would have been no bargain whatever, if any

promise or set of promises were struck out.” Id. (quoting John, 439

P.2d at 56); see also L.U. Cattle Co. v. Wilson, 714 P.2d 1344, 1349

(Colo. App. 1986) (“For a contract to be divisible, it must be

apparent that the parties have assented separately to successive

divisions thereof upon performance of which the other party will be

bound.”).

¶ 19 The parties’ intent may be manifested by the terms of the

contract itself, as well as by the circumstances surrounding the

contract’s formation. John, 439 P.2d at 56; CapitalValue, ¶ 24. For

9 instance, a severability clause would likely indicate that the parties

intended a contract to be severable, though the absence of such a

clause “does not conclusively establish that the parties did not

intend that [an] [a]greement be severable.” CapitalValue, ¶ 29. In

addition, “the singleness or apportionability of the consideration”

may be relevant to determining severability. John, 439 P.2d at 56;

see also Woodward, 541 P.2d at 692. And the parties’ conduct

before the dispute arose may also point to their intent regarding

severability. John, 439 P.2d at 56; CapitalValue, ¶ 29.

¶ 20 Here, in determining that the 2001 Agreement is severable, the

district court didn’t make any findings about the contracting

parties’ intent. Rather, the court found only that the agreement

contains “multiple promises and agreements incorporated into one

contract” and that all of those promises and agreements, other than

the payment of Cook fees under the Silver Clause, had already been

fulfilled by the time the dispute arose.

¶ 21 But the fact that a contract “contains multiple promises, each

of which may constitute a separate agreement or contract,” doesn’t

negate the requirement that the parties intended for those promises

to be severable. CapitalValue, ¶ 35. Concluding that a contract

10 includes more than one promise is only the first step; the court

then must consider, based on the language of the contract and any

evidence surrounding its formation and application, whether the

parties intended for those promises to be severable. See id. at ¶ 22;

see also Homier v. Faricy Truck & Equip. Co., 784 P.2d 798, 801

(Colo. App. 1988) (“[I]t is not the number of items in the contract

which is determinative of whether it is severable, but the nature of

the object or objects in the contract.”).

¶ 22 The district court didn’t undertake that analysis here and

didn’t make any findings concerning the contracting parties’ intent

as to severability. This was error. See CapitalValue, ¶¶ 25, 30

(reversing a district court’s determination on severability where the

court “did not ascertain the intent of the parties in concluding that

the contract was not severable”).

¶ 23 Although both sides cite evidence from the trial that they

contend shows the parties either did or did not intend for the 2001

Agreement to be severable, it is solely within the district court’s

province — not ours — to make findings based on that evidence.

See Carousel Farms Metro. Dist. v. Woodcrest Homes, Inc., 2019 CO

11 51, ¶ 19 (“[A]ppellate tribunals don’t (and, indeed, can’t) make

findings of fact.”).

¶ 24 We therefore reverse the judgment and remand the case for

the district court to make findings regarding the parties’ intent as to

the severability of the 2001 Agreement. In its discretion, the court

may determine whether to make findings on the existing record or

allow the parties to submit additional evidence.

III. Cost Award

¶ 25 Because we are reversing the judgment and remanding for

additional findings, any rulings concerning the availability of costs

as a prevailing party are premature. Accordingly, we don’t address

the cost issues raised in defendants’ cross-appeal.

IV. Disposition

¶ 26 The judgment is reversed, and the case is remanded for the

district court to make findings as to whether the parties to the 2001

Agreement intended for that agreement to be severable.

JUDGE FOX and JUDGE LUM concur.