Flannery Properties v. Byrne ( 2000 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
MAY 30 2000
TENTH CIRCUIT
PATRICK FISHER
Clerk
FLANNERY PROPERTIES, a
California general partnership;
MICHAEL FLANNERY,
Plaintiffs-Counter-Claim-
Defendants - Appellants
- Cross-Appellees,
v. Nos. 98-1122 & 98-1134
(D.C. No. 95-Z-1870)
RON BYRNE; BMS VAIL LIMITED (D.Colo.)
PARTNERSHIP, a Colorado Limited
Partnership; BMS VAIL GENERAL
PARTNERSHIP, a Colorado general
partnership; RON BYRNE &
ASSOCIATES REAL ESTATE,
Defendants-Counter-Claimants
- Appellees - Cross-Appellants.
ORDER AND JUDGMENT *
Before BRORBY, HOLLOWAY, and BRISCOE , Circuit Judges .
This order and judgment is not binding precedent, except under the
*
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
In this diversity action, plaintiffs Flannery Properties and Michael Flannery
appeal the jury verdict rejecting their fraudulent misrepresentation claim.
Flannery also appeals the district court’s denial of prejudgment interest on the
jury’s damage award for negligent misrepresentation. Defendants Ron Byrne,
BMS Vail Limited Partnership, BMS Vail General Partnership, and Ron Byrne &
Associates cross-appeal the jury verdict against them on their counterclaim for
abuse of process. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and
affirm both the appeal and the cross-appeal.
I.
In 1991, Michael Flannery, a resident of California, became interested in
purchasing property in Colorado. 1
In October 1991, Mark Cadmus, a real estate
broker, showed Flannery a house at 146 Forest Road owned by Ron Byrne. 2
Cadmus and Flannery later looked at the house with Byrne. According to
Flannery, Byrne told him the eastern property line “was just below the light
columns [] just where the driveway intersects the street.” Aplt. App. II at 428-
30. Byrne denied telling Flannery that the property ran from the light posts.
1
Flannery Properties is a partnership with Flannery and his three children.
The distinction between Flannery Properties and Flannery individually was not
relevant at trial and we will refer to both as “Flannery.”
2
The distinction between Ron Byrne individually and BMS Vail Limited
Partnership, BMS Vail General Partnership, and Ron Byrne & Associates was not
relevant at trial and we will refer to all as “Byrne.”
2
Byrne owned the adjacent property, Lot 5, and told Flannery that he planned to
build a single-family home on the back part of the lot. Flannery claimed Byrne
told him an easement would keep the house on Lot 5 “far out of the view from
anything at this house.” Id. at 432. Flannery believed that “everything between
the light columns to the house was included in this property, including the deck
and walkway that went from the patio out on to this property.” Id. at 433. Byrne
testified that he never pointed out the property line to Flannery. Much of the area
that Flannery believed was part of the 146 Forest Road property was actually part
of Lot 5.
In October 1991, Flannery offered to buy the house at 146 Forest Road for
$4 million. Byrne rejected the offer and made a counter-offer of $4.5 million,
which Flannery rejected. Flannery then purchased a house at 636 Forest Road for
$2 million. Shortly after Flannery moved into the 636 Forest Road house, Byrne
and Flannery agreed to an exchange of houses – Flannery would give Byrne the
636 Forest Road house and pay Byrne $2.1 million in exchange for the 146
Forest Road house. Flannery again looked at the 146 Forest Road house the next
day. According to Flannery, Byrne assured him that any development on Lot 5
would be on the back part of the lot. Flannery did not have a survey done on the
property. On November 18, 1991, Flannery and Byrne completed the exchange
of real estate.
3
According to Flannery, Byrne approached him at various times from early
1992 through 1993 to discuss Flannery’s purchase of Lot 5. In the fall of 1993,
Flannery made an offer of $2.35 million for Lot 5, which Byrne rejected.
Flannery testified that in October 1994, he discovered the property line between
146 Forest Road and Lot 5 was next to his house. Flannery told Byrne that if
they could not resolve the property line issue, he would initiate litigation against
Byrne. In November 1994, Flannery instituted a lawsuit against Byrne in
California. Flannery testified that after the lawsuit was filed, he became aware
that construction was beginning on Lot 5 and that Byrne planned to build a
duplex and an employee housing unit only 20 to 25 feet from Flannery’s house.
After Flannery filed another lawsuit, Byrne built the duplex farther back from the
property line.
In June 1996, Flannery filed a third amended complaint against Byrne in
Colorado federal district court, raising claims, inter alia , of fraud and negligent
misrepresentation. 3
Byrne raised counterclaims, inter alia , of slander of title,
3
The district court dismissed Flannery’s three claims for specific
performance of covenants and his claim for promissory estoppel. At trial, the
district court dismissed Flannery’s claims for reformation of deed due to mutual
mistake of the parties, constructive trust, and breach of contract. Flannery
voluntarily dismissed his claim for trespass. None of these claims are at issue on
appeal.
4
abuse of process, and trespass. 4
Flannery also filed a lis pendens against Lot 5.
In January 1998, a jury found against Flannery on his claims of fraudulent
misrepresentation and fraudulent concealment, but in favor of Flannery on his
claim that Byrne made a negligent misrepresentation of material fact and awarded
Flannery damages of $60,000. The jury found against Byrne on his
counterclaims for slander of title and abuse of process, but for Byrne on his
counterclaim for trespass and awarded Byrne damages of $1.00. 5
The district
court denied Flannery’s motion to amend the judgment to include prejudgment
interest.
II.
District court’s evidentiary rulings – appeal and cross-appeal
Flannery argues the district court erred in two evidentiary rulings: (1)
allowing Byrne’s counsel to cross-examine Byrne with leading questions, and (2)
excluding documents from the Colorado Real Estate Commission. In the cross-
appeal, Byrne argues the district court erred in excluding evidence that Flannery
previously used litigation improperly. We review evidentiary rulings for abuse of
discretion. Woodworker’s Supply, Inc. v. Principal Mut. Life Ins. Co. , 170 F.3d
4The district court dismissed Byrne’s counterclaim for business
disparagement. This claim is not at issue on appeal.
5
The parties do not appeal the verdicts on Byrne’s slander of title and
trespass counterclaims.
5
985, 992 (10th Cir. 1999).
Leading questions on cross-examination. Flannery called Byrne as a
witness in his case-in-chief. Before beginning cross-examination, Byrne’s
attorney stated: “I intend to cross only on those points raised by the plaintiffs,
reserving the right to recall Mr. Byrne in the defendant’s case-in-chief.” Aplt.
App. III at 846. After cross-examination began, Flannery objected to Byrne’s
counsel asking leading questions because Byrne was not an adverse witness. The
district court ruled Byrne’s counsel could ask leading questions because it was
cross-examination.
Federal Rule of Evidence 611(c) states:
Leading questions should not be used on the direct examination of a
witness except as may be necessary to develop the witness’
testimony. Ordinarily leading questions should be permitted on
cross-examination. When a party calls a hostile witness, an adverse
party, or a witness identified with an adverse party, interrogation
may be by leading questions.
The advisory committee notes to Rule 611(c) state that “[t]he purpose of the
qualification ‘ordinarily’ is to furnish a basis for denying the use of leading
questions when the cross-examination is cross-examination in form only and not
in fact, as for example the ‘cross-examination’ of a party by his own counsel after
being called by the opponent.” Cross-examination by leading questions is not a
matter of right when a party is being cross-examined by his own counsel. Shultz
v. Rice , 809 F.2d 643, 654 (10th Cir. 1986).
6
Under the abuse of discretion standard, this court will not disturb the
district court’s ruling unless this court has a “definite and firm conviction that the
[district] court made a clear error of judgment or exceeded the bounds of
permissible choice in the circumstances.” Hidalgo v. Fagen, Inc. , 206 F.3d 1013,
1020 (10th Cir. 2000) (internal quotations omitted). See Shultz , 809 F.2d at 655(finding district court did not abuse its discretion when it allowed leading
questions on cross-examination of a client that were “archetypical of those
allowed during direct examination to develop testimony and expedite entry into
evidence of time-consuming foundational information”). Some of Byrne’s
counsel’s leading questions went to the substance of the case, but our review of
the transcript does not establish that this affected Flannery’s substantial rights.
See Hidalgo , 206 F.3d at 1020 (noting that a party is entitled to a new trial only
if the error affected his substantial rights). Although the district court erred in
stating that cross-examination by leading questions was a matter of right, we are
convinced this did not rise to an abuse of discretion. See Fed. R. Ev. 611(c),
advisory committee’s notes (noting that “[a]n almost total unwillingness to
reverse for infractions has been manifested by appellate courts”).
Admission of documents from Colorado Real Estate Commission . Flannery
sought to admit
redacted factual findings by the . . . Commission that find . . . that
probable cause and reasonable grounds exist[] that [] Byrne violated
7
the real estate licensing laws by misrepresenting the location of the
eastern boundary from approximately 1989 to 1991, and that as a
result of that, [they recommended] . . . Byrne’s real estate license be
publicly censured for a six-month period, and that he admit to the
public and the real estate community that he engaged in those
misrepresentations.
Aplt. App. I at 243. The district court refused to admit the evidence as hearsay,
concluding that it was not a factual finding from an investigation of a public
agency admissible under Federal Rule of Evidence 803(8)(C). 6
Flannery
unsuccessfully sought to admit the Commission evidence numerous times during
trial.
The Commission found there was probable cause to refer Flannery’s
complaint against Byrne to a hearing for violation of the real estate licensing law.
The investigative report of the Commission consisted of a summary of various
statements from individuals. Flannery argues the Commission evidence was
admissible under Federal Rule of Evidence 803(8)(C). Rule 803(8)(C) is an
exception to the hearsay rule, which allows the admission of “[r]ecords, reports,
statements, or data compilation, in any form, of public offices or agencies, setting
forth . . . (C) in civil actions and proceedings . . ., factual findings resulting from
The district court also concluded the Commission evidence was
6
inadmissible under Federal Rule of Evidence 408 as evidence of conduct or
statements made in compromise negotiations. We conclude the district court
abused its discretion in excluding the evidence under Rule 408 because there is
no indication that the Commission matter involved offers of compromise or
settlement by Byrne or Flannery.
8
an investigation made pursuant to authority granted by law, unless the sources of
information or other circumstances indicate lack of trustworthiness.”
There are three requirements for a document to be admissible under Rule
803(8)(C): (1) the report was prepared “pursuant to authority granted by law”;
(2) the evidence constitutes “factual findings”; and (3) circumstances do not
indicate the report is untrustworthy. Perrin v. Anderson , 784 F.2d 1040, 1046-47
(10th Cir. 1986). The term “factual findings” is construed broadly and includes
“conclusions and opinions found in evaluative reports of public agencies.” Id. at
1047. Byrne argues the Commission has no authority to make factual findings
but can only impose sanctions on real estate licensees found to have violated the
licensing law. See Colo. Rev. Stat. § 12-61-114(1) (stating that “[e]xcept as
otherwise provided in this section, all proceedings before the commission with
respect to disciplinary actions . . . shall be conducted by an administrative law
judge”). The Colorado Supreme Court has stated that “the Commission is not the
fact-finder in the agency process, and the Commission is not required to make
findings regarding the relationship between the conduct, the public need and the
sanction.” Colorado Real Estate Comm’n v. Hanegan , 947 P.2d 933, 936-37
(Colo. 1997). Further, the evidence Flannery sought to admit does not contain
factual findings. The district court did not abuse its discretion in not admitting
9
the Commission evidence under Rule 803(8)(C). 7
Flannery contends these evidentiary rulings amounted to cumulative error
requiring reversal. “‘A cumulative-error analysis merely aggregates all the errors
that individually have been found to be harmless, and therefore not reversible,
and it analyzes whether their cumulative effect on the outcome of the trial is such
that collectively they can no longer be determined to be harmless.’” McCue v.
Kansas Dept. Human Resources , 165 F.3d 784, 791 (10th Cir. 1999) (quoting
United States v. Rivera , 900 F.2d 1462, 1470 (10th Cir.1990) (en banc)). The
record does not indicate that the rulings amounted to cumulative error. Flannery
was able to introduce evidence that Byrne acted fraudulently in representing the
property lines to him and he was able to fully examine Byrne on the matters
elicited during Byrne’s cross-examination.
Exclusion of evidence that Flannery previously used litigation coercively .
Byrne contends the district court erred in excluding four items of evidence: (1)
Byrne’s testimony that Flannery’s attorney said Flannery would sue Byrne if he
did not sell Flannery Lot 5, (2) newspaper advertisements placed by Flannery
7
At oral argument, Flannery contended the Commission evidence was also
admissible under Federal Rule of Evidence 803(8)(A) as a record setting forth the
activities of a public office or agency. Flannery did not raise this issue with the
district court or in his appellate brief and we will not consider it for the first time
on appeal. See Tele-Communications, Inc. v. Commissioner , 104 F.3d 1229,
1232 (10th Cir. 1997) (noting that “[g]enerally, an appellate court will not
consider an issue raised for the first time on appeal”).
10
publicizing the lawsuit, (3) testimony of William Dorricott that Flannery
breached an agreement, then sued him, and (4) testimony of David Black that
Flannery breached an agreement, then sued him.
The district court excluded Byrne’s testimony that Flannery’s trial attorney,
Dale Kinsella, told Byrne that if he did not give Flannery part of Lot 5 Flannery
would make his life miserable. The district court excluded the testimony under
Federal Rule of Evidence 403, finding that “the prejudicial effect and the
disruption to the trial in having Mr. Kinsella have to argue his own credibility
outweighs the possible probative effect.” Aplt. App. IV at 1590. Under the facts
of the case, the district court did not abuse its discretion. Byrne testified that
Flannery threatened him with litigation; the testimony concerning Kinsella
repeating that threat was not necessary and would have been more prejudicial
than probative under the circumstances.
The district court granted Flannery’s motion in limine to exclude the
newspaper advertisements as irrelevant. The advertisements, which publicized
the lawsuit between Flannery and Byrne and sought fact witnesses, are not
relevant to whether Flannery engaged in abuse of process. Further, Byrne
presented other evidence of Flannery’s state of mind in filing the lawsuit.
Byrne sought to admit the testimony of Dorricott and Black under Federal
Rule of Evidence 404(b), which allows evidence of prior acts to show, among
11
other things, the actor’s motive, intent, or state of mind. Byrne argues this
testimony would support the inference that Flannery’s motive in filing the lawsuit
was to avoid the terms of his agreement with Byrne. However, Byrne testified to
this motive and Dorricott testified to limited facts surrounding Flannery’s lawsuit
against him. Although it may have been relevant, the district court did not abuse
its discretion in excluding evidence of prior litigation by Flannery.
District court’s denial of Flannery’s motion for judgment as a matter of law on
Byrne’s abuse of process counterclaim
We review de novo the district court’s denial of a motion for judgment as a
matter of law. Baker v. Barnard Constr. Co. , 146 F.3d 1214, 1220 (10th Cir.
1998). Judgment as a matter of law “is warranted only if the evidence points but
one way and is susceptible to no reasonable inferences supporting the party
opposing the motion.” Baty v. Willamette Indus., Inc. , 172 F.3d 1232, 1241
(10th Cir. 1999) (internal quotation omitted). We do not “weigh the evidence,
pass on the credibility of the witnesses, or substitute our conclusions for [those]
of the jury,” but we “must enter judgment as a matter of law in favor of the
moving party if ‘there is no legally sufficient evidentiary basis . . . with respect to
a claim or defense . . . under the controlling law.’” Id. (quotations omitted). We
view the evidence and any inferences to be drawn therefrom most favorably to
the non-moving party. Id.12
Flannery moved for judgment as a matter of law on Byrne’s counterclaim
after the close of evidence, pursuant to Federal Rule of Civil Procedure 50(a).
Byrne’s abuse of process counterclaim concerned Flannery’s filing of a lis
pendens against Lot 5. In addressing Flannery’s argument that there was no
evidence that he used the process in an improper way, the district court stated
that “[Byrne’s] position is that it was to force [] Byrne to sell the property to []
Flannery.” Aplt. App. IV at 1647, 1650. The district court denied Flannery’s
motion for judgment as a matter of law and the jury eventually found for
Flannery on the counterclaim.
To establish a claim for abuse of process under Colorado law, Byrne must
prove: “(1) an ulterior purpose for the use of a judicial proceeding; (2) willful
action in the use of that process which is not proper in the regular course of the
proceedings, i.e., use of a legal proceeding in an improper manner; and (3)
resulting damage.” Lauren Corp. v. Century Geophysical Corp. , 953 P.2d 200,
202 (Colo. App. 1998). Flannery contends there was no evidence that he filed
the lis pendens in an improper manner.
A litigant’s motive is relevant in determining whether there was an ulterior
purpose for the use of the process, but the plaintiff must still establish there was
an objectively improper use of the process. James H. Moore & Assoc. Realty,
Inc. v. Arrowhead at Vail , 892 P.2d 367, 373 (Colo. App. 1994). “Classic
13
examples of the requisite improper use include the use of process to accomplish a
coercive goal which is not the intended legal purpose of the process.” Id. Byrne
contended the actual purpose of Flannery’s action was to force Byrne to sell Lot
5 to Flannery. Byrne testified that just before Flannery sued him, Flannery said
that “if I did not sell him this lot for his price or give him the property that he
would sue me, my life would be miserable, and I would not be able to sell it to
anyone.” Aplt. App. IV at 1581-82. This is evidence of an improper purpose.
Although the filing of a lis pendens relates to a right of possession, use, or
enjoyment of real property, “[t]he intended purpose for filing a notice of lis
pendens is to provide notice to anyone who may acquire an interest in the
property during the pendency of the litigation so that he or she will be bound by
its outcome.” Moore , 892 P.2d at 373. Flannery could have had a proper
purpose in filing the lis pendens, but there was also evidence that he used the lis
pendens for the improper purposes of preventing other individuals from
purchasing Lot 5 and forcing Byrne to sell the property to him. The district court
did not err in denying the motion for judgment as a matter of law and allowing
the jury to decide the claim.
District court’s denial of prejudgment interest on the jury’s award for negligent
misrepresentation
Flannery asserts the district court erred in denying him prejudgment
14
interest on the damages awarded for his negligent misrepresentation claim. We
review the district court’s decision to deny prejudgment interest for abuse of
discretion. United Phosphorus, Ltd. v. Midland Fumigant, Inc. , 205 F.3d 1219,
1236 (10th Cir. 2000). Because this issue involves prejudgment interest on a
state law claim, the propriety of interest is determined by Colorado law. See id.After trial, Flannery filed a motion to amend the judgment to include
prejudgment interest of $96,443.80. The district court summarily denied the
motion. Colorado statutes provide that at the claimant’s election, “[i]nterest shall
be at the rate of eight percent per annum compounded annually for all moneys or
the value of all property after they are wrongfully withheld or after they become
due to the date of payment or to the date judgment is entered, whichever first
occurs.” Colo. Rev. Stat. § 5-12-102(1)(b). Flannery contends the “time of the
wrong” was no later than November 18, 1991, when he acquired the 146 Forest
Road property.
The jury awarded Flannery $60,000, but did not specify the nature of the
damages. “Damages recoverable for negligent misrepresentation include (1) the
difference between the value of what the plaintiff received and its purchase price
or other value given for it (out-of-pocket expenses); and (2) other pecuniary loss
suffered as a consequence of the plaintiff’s reliance upon the misrepresentation
(consequential damages).” Western Cities Broadcasting, Inc. v. Schueller , 849
15
P.2d 44, 49 (Colo. 1993). The trial testimony showed that the fair market value
of the property was equal to or greater than the price paid by Flannery. Based on
the testimony, there was no evidence of a negative difference between the value
Flannery received and the purchase price he paid.
Because there was no evidence of out-of-pocket expenses for the negligent
misrepresentation, Flannery is left with consequential damages for the negligent
misrepresentation. Flannery testified he spent $60,000 for Byrne to move the
planned house on Lot 5; the jury awarded Flannery $60,000 in damages for his
negligent misrepresentation claim. Flannery did not testify when he incurred
those damages. Prejudgment interest for consequential damages may only be
awarded from the time the damages were incurred. Pegasus Helicopters, Inc. v.
United Tech. Corp. , 35 F.3d 507, 513 (10th Cir. 1994) (applying Colorado law).
Flannery has presented no evidence of when the consequential damages were
incurred.
III.
We AFFIRM on all issues raised in both the appeal and the cross-appeal.
16
Entered for the Court
Mary Beck Briscoe
Circuit Judge
17