LPG Holdings, Inc. v. Casino America, Inc.

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
NOV 1 2000
TENTH CIRCUIT
PATRICK FISHER
Clerk
LPG HOLDINGS, INC., a Virginia
corporation; MARTHA CHASE
McLAUGHLIN; CARROLL G.
MAYS,
Plaintiffs-Appellants,
v. No. 99-1037
CASINO AMERICA, INC., a (D.C. No. 98-M-1206)
Delaware corporation, (D. Colo.)
Defendant-Appellee.
ORDER AND JUDGMENT *
Before BRISCOE, HOLLOWAY, and POLITZ, **
Circuit Judges.
Plaintiffs LPG Holdings, Inc., Martha McLaughlin, and Carroll Mays
(collectively “LPG”) appeal the dismissal of their claims against defendant Casino
America, Inc. (“Casino America”). The district court held that LPG’s claims for
*
This order and judgment is not binding precedent, except under the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.
**
The Honorable Henry A. Politz, United States Court of Appeals for the
Fifth Circuit, sitting by designation.
breach of contract and breach of the implied covenant of good faith and fair
dealing were foreclosed by the unambiguous language of the parties’ agreement.
Our jurisdiction arises under 28 U.S.C. § 1291. We affirm.
I.
LPG alleges the following facts. On December 15, 1993, LPG acquired a
parcel of real estate in Cripple Creek, Colorado from Thomas Hudson. In
exchange for the property, LPG made “a substantial cash payment” and delivered
“two promissory notes secured by first and second deeds of trust.” Joint
Appendix (“Jt. App.”) at 9 (¶ 9). LPG acquired the property because it was
interested in “providing a first class casino/hotel/parking complex” in Cripple
Creek. Id. at 8 (¶ 9). 1
In the spring of 1994, LPG “began seeking a financially
strong casino company to build and operate the casino complex.” Id. at 9 (¶ 10).
LPG met with Casino America and several other casino companies to discuss a
potential deal. Casino America promised LPG that it would “conduct a serious
feasibility study of the proposed casino complex,” and that if the results of the
study were positive it would compensate LPG and Thomas Hudson for the
property in an amount “proportionate to the return Casino [America] would
Because the property “was not large enough for a complete casino
1
complex,” LPG also entered into a purchase contract with Martha Hudson for an
adjacent parcel. Jt. App. at 9 (¶ 9).
2
receive from its investment” in the complex. Id. (¶ 11). 2
On August 18, 1994, LPG and Casino America met in Denver and “reached
certain understandings” in connection with the proposed complex. Id. at 10(¶¶ 13-14). The parties agreed that Casino America “would build and operate the
casino” if the results of its investigation were favorable, but would be free to
“‘walk away’ at any time without making further payments” if the investigation
produced unfavorable results. Id. (¶ 14). On August 24, Casino America sent
LPG a memorandum stating that Casino America would pay certain amounts
“upon completion of the construction of the casino and commencement of the
operations therein.” Id. at 11 (¶ 15). On August 26, Casino America entered into
a letter agreement with Thomas Hudson and LPG. Among other things, the letter
agreement stated that: (1) Thomas Hudson had “commenced a foreclosure action”
on the property, and the purpose of the letter agreement was to “set forth the
terms of an extension” of an upcoming Public Trustee foreclosure sale scheduled
for August 31, 1994; (2) Thomas Hudson would postpone any such sale if Casino
America chose to make certain payments on behalf of LPG; (3) upon “closing” –
2
In July 1994, Casino America wired Martha Hudson $50,000 to “keep
alive” the company’s rights under the purchase contract for the adjacent parcel.
Jt. App. at 10 (¶ 12). LPG consequently informed other suitors that it had
“reached an agreement” with Casino America “to allow it to investigate building
and operating the casino complex,” and that LPG would “reopen negotiations”
only if Casino America “decided not to construct the casino complex.” Id.3
defined as the execution of certain documents restructuring the two promissory
notes – Casino America would “agree to construct a casino, restaurant and hotel
upon the Property” and would “agree to start construction . . . and to proceed to
completion in a diligent manner;” (4) if Casino America purchased the property or
leased it from LPG, it was the intent of the parties that Casino America would be
“personally obligated” to Thomas Hudson; and (5) the letter agreement
represented the “entire agreement of the parties concerning the extension of the
foreclosure sale,” superseded “[a]ll negotiations and any prior agreements,” and
could not be modified “except by written agreement of the parties.” Id. at 28-32.
“During the remainder of 1994,” Casino America made monthly payments
to Thomas Hudson on LPG’s behalf. Id. at 12 (¶ 18). At the same time, Casino
America “continued to investigate the feasibility of the casino complex,”
negotiated with Cripple Creek officials, and “prepared projections of revenues,
expenses, and profits.” Id. From September through December of 1994, Casino
America sent drafts of an agreement to LPG that were generally in accord with
“the understandings reached at the Denver meeting.” Id. at 13 (¶ 19).
Negotiations continued until January 1995, when Casino America requested a
“hurry up” closing. Id. (¶ 20).
On January 6, 1995, LPG and Casino America executed several documents.
One document was an agreement through which LPG transferred the property to a
4
subsidiary owned by Casino America. The agreement (dated January 5, 1995)
contained the following provisions:
3. Execution of Documents . . . . The parties acknowledge that
a letter among T. Hudson, Casino America and LPG has been
executed outlining the terms under which T. Hudson is willing to
extend the foreclosure sale of the Fee Property (the “T. Hudson
Letter”) and hereby consent thereto.
4. Investigation . Casino America agrees to proceed with the
investigation of the Casino Property . . . to determine the feasibility
of the construction of a casino, hotel and restaurant on the Casino
Property and of a parking structure on [nearby property]. All
determinations regarding feasibility shall be at the sole discretion of
Casino America. . . . It is specifically understood that Casino
America shall have no obligation to advance any amounts to T.
Hudson or M. Hudson, . . . to obtain title to the Fee Property, . . . to
enter into the Lease or otherwise proceed with the construction of a
casino on the Casino Property. All decisions relating to such matters
shall be at the sole discretion of Casino America. If Casino America
shall decide, at any time prior to acquiring the Fee Property, not to
proceed with the casino project on the Casino Property or does not
make the payments outlined in the T. Hudson Letter, this Agreement
may be terminated by LPG . . . or by Casino America. . . .
5. Termination by Casino America . Notwithstanding any
contrary provision hereof, at any time prior to obtaining title to any
portion, but not the entire Casino Property, Casino America shall
have the right and option to terminate this Agreement. . . .
6. Payments to Investors . In exchange for the agreements of
the Investors contained herein, Casino America hereby agrees to pay
to the Investors [certain] amounts upon the earlier of either
completion of the construction of a casino on the Casino Property . . .
or commencement of gaming operating on the Property . . . .
8. Conditions to Casino America’s Obligations . It is
specifically understood and agreed that Casino America shall have no
obligation to obtain title to any portion of the Property, to execute
the Lease, to construct the Casino or to otherwise elect to proceed
with the development of the Casino. The decision to proceed with
such development shall be at the sole option of Casino America.
Casino America’s obligation to pay any amount to any Investor
5
pursuant to the terms of this Agreement is conditioned upon Casino
America’s decision to obtain the Property. . . . [I]f Casino America
elects not to construct or operate the casino/hotel/parking deck, any
transferee of the Property shall be bound by this Agreement. . . .
14. Entire Agreement . This Agreement constitutes the entire
contract between the parties as to the matters addressed herein and
all prior negotiations, representations, understanding, or agreements
pertaining to such matters are merged into and superseded by this
Agreement.
Id. at 37-38, 41, 44. LPG, Casino America, and Thomas Hudson also executed
documents restructuring the promissory notes and modifying the deeds of trust.
These loan modification documents stated that (1) Casino America would
“construct a casino, restaurant and hotel upon the Property,” with an estimated
completion date of November 1, 1995; and (2) the loan documents and the
modifications represented the “entire agreement” between the parties, an
agreement that superseded all prior understandings and could only be altered in
writing. Id. at 51 (¶ 3A), 53 (¶ 9).
After the January 6 closing, events did not proceed as LPG had planned.
Casino America concluded its investigation of the property, “represented to the
City of Cripple Creek that it intended to build the casino complex,” obtained
“preliminary permits and approvals” for the complex, entered into a contract with
a building company, and ordered steel for construction. Id. at 17 (¶ 33).
Ultimately, however, Casino America did not build a casino. Casino America
continued to exercise ownership rights and “receiv[ed] income” from the
6
property, but “paid nothing” to LPG. Id. at 18 (¶ 35). LPG alleged that if the
casino complex had been built, LPG “would have received past and future
payments totaling a present value in excess of twenty million dollars.” Id. at 18(¶ 38).
LPG filed a diversity action against Casino America in May 1998. LPG
asserted claims against Casino America for breach of contract and breach of the
implied covenant of good faith and fair dealing. LPG alleged that the documents
executed on January 6, 1995, in conjunction with the letter agreement, obligated
Casino America “to construct [a] casino, hotel, and restaurant.” Id. at 18 (¶ 40).
LPG similarly alleged that Casino America “arbitrarily, and for reasons not
associated with the viability of the casino complex, concluded that it did not wish
to continue to construct the casino and stopped construction.” Id. at 20 (¶ 46).
Finally, LPG alleged that Casino America violated the agreement by failing to
transfer certain shares of stock. In July 1998, Casino America filed a motion to
dismiss the complaint pursuant to Federal Rule of Procedure 12(b)(6). LPG
opposed the motion and filed a motion for partial summary judgment, asserting
that the Letter Agreement, the January 5 agreement, and other documents
unambiguously required Casino America to construct a casino complex.
In December 1998, the district court granted Casino America’s motion to
dismiss and denied LPG’s motion for partial summary judgment. The court began
7
by reciting paragraphs 6 and 8 of the agreement, which state that Casino America
has “no obligation” to “construct the Casino or to otherwise elect to proceed with
the development of the Casino.” Id. at 106. The court rejected LPG’s argument
that language in paragraphs 4, 5, and 8 obligated Casino America to build a
casino after acquiring the property, reasoning that these provisions related to
Casino America’s “power to terminate the contract.” Id. at 107. The court then
found that the merger clause in paragraph 14 foreclosed any suggestion that the
agreement was a “multidocument contract including the Letter [A]greement and
Loan Modification Documents.” Id. The court further noted that the letter
agreement contained a promise by Casino America to pay LPG a percentage of
revenues from any casino complex constructed on the property, not a promise by
Casino America to build such a complex. The court concluded by holding that
LPG “lacked standing” to sue under the loan modification documents because (1)
Casino America’s obligations under the loan modification documents ran only to
Thomas Hudson; and (2) LPG was neither a party to the loan modification
documents nor a third party beneficiary. Id. at 108-09.
After the district court’s ruling, LPG filed a motion to alter the judgment
and to amend the complaint. LPG argued that the court “misconstrued and
misapplied” the critical provisions of the agreement, unjustifiably ignored the
provisions of the letter agreement and the loan modification documents, and
8
failed to address the implied covenant of good faith and fair dealing. Id. at 112-
13. LPG also argued that it should be permitted to add a claim for fraud based on
Casino America’s purported misrepresentations. On December 30, 1998, the
district court issued a separate order stating that LPG’s “motion to alter or amend
judgment is denied and the motion for leave to amend is also denied in that the
proposed amended complaint completely recasts this case and is therefore not a
timely motion[.]” Id. at 201.
II.
Casino America’s Motion to Dismiss/LPG’s Motion for Partial Summary
Judgment
Although Casino America’s motion was initially framed as a Rule 12(b)(6)
motion to dismiss, the district court effectively converted it into a motion for
summary judgment and considered matters outside the complaint. See generally
Whitesel v. Sengenberger , 222 F.3d 861, 866 (10th Cir. 2000) (holding that
district court may convert motion to dismiss into motion for summary judgment to
consider matters outside the complaint). We conclude this was proper. By
responding to Casino America’s motion and filing its own motion for partial
summary judgment, LPG was on notice that the district court might construe the
letter agreement and the January 5 agreement and issue a summary judgment
ruling. See id. Further, LPG clearly had an adequate opportunity to present to
the court all materials relevant to such a ruling. See id.9
We review de novo the grant or denial of a motion for summary judgment.
See Cooperman v. David , 214 F.3d 1162, 1164 (10th Cir. 2000). Summary
judgment is appropriate if “the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(c). When applying this
standard, “we view the evidence and draw reasonable inferences therefrom in the
light most favorable to the nonmoving party.” Cooperman , 214 F.3d at 1164(citation omitted) .
Alleged Breach of Contract
The parties agree that Colorado law governs our review of the contract. In
Colorado “[t]he primary goal of contract interpretation is to determine and give
effect to the intention of the parties.” USI Properties East, Inc. v. Simpson , 938
P.2d 168, 173 (Colo. 1997); see also Pepcol Mfg. Co. v. Denver Union Corp. , 687
P.2d 1319, 1313 (Colo. 1984) (“A fundamental rule of contract law is that the
court should strive to ascertain and give effect to the mutual intent of the
parties.”). The intent of the parties to a contract “is to be determined primarily
from the language of the instrument itself.” USI Properties , 938 P.2d at 173 . A
court may “look beyond the four corners of the agreement in order to determine
the meaning intended by the parties” only when the terms of the agreement are
10
ambiguous. KN Energy, Inc. v. Great Western Sugar Co. , 698 P.2d 769, 776
(Colo. 1985) . “Courts possess no authority to rewrite contracts and must enforce
unambiguous contracts in accordance with their terms.” Radiology Prof. Corp. v.
Trinidad Area Health Ass’n , 577 P.2d 748. 750 (Colo. 1978); see also May v.
United States , 756 P.2d 362, 369 (Colo. 1988) (reiterating that unambiguous
contracts must be “enforced according to their plain language”).
Colorado courts hold that a contract provision is ambiguous “when it is
reasonably susceptible to more than one meaning.” Cheyenne Mountain Sch.
Dist. #12 v. Thompson , 861 P.2d 711, 715 (Colo. 1993) . To determine whether a
contract is ambiguous, a court may consider “evidence bearing upon the meaning
of the written terms, such as evidence of local usage and of the circumstances
surrounding the making of the contract. However, the court may not consider the
parties’ own extrinsic expressions of intent.” Cheyenne , 861 P.2d at 715 (quoting
KN Energy , 698 P.2d at 777); see also Pepcol , 687 P.2d at 1314 (stating that “in
the absence of an ambiguity a written contract cannot be varied by extrinsic
evidence”). In addition, “the instrument’s language must be examined and
construed in harmony with the plain and generally accepted meaning of the words
employed, and reference must be made to all the provisions of the agreement.”
May , 756 P.2d at 369 (quoting Radiology , 577 P.2d at 750); see also KN Energy ,
698 P.2d at 777 (indicating that a court must attempt to “harmonize and give
11
effect to all provisions so that none will be rendered meaningless”) (citation
omitted). It is axiomatic that “[t]he mere fact that the parties differ on their
interpretations of an instrument does not of itself create an ambiguity.” Dorman
v. Petrol Aspen, Inc. , 914 P.2d 909, 912 (Colo. 1996) (citation omitted) .
Agreement and Letter Agreement
There is much support for Casino America’s argument that the January 5
agreement does not require it to construct a casino on the property. Paragraph 4
of the agreement provides that Casino America “shall have no obligation” to
“enter into the Lease or to otherwise proceed with the construction of a casino on
the Casino Property.” Jt. App. at 38. Likewise, paragraph 8 of the agreement
states that Casino America “shall have no obligation” to “construct the Casino or
to otherwise elect to proceed with the development of the Casino.” Id. at 41.
Paragraph 8 goes on to say that “[t]he decision to proceed with such development
shall be at the sole option of Casino America.” Id. Where a contract is clear and
unambiguous, courts must give effect to the plain and ordinary meaning of its
terms. See Fox v. I-10, Ltd. , 957 P.2d 1018, 1022 (Colo. 1998).
LPG argues the reference to the August 26 letter agreement in paragraph 3
of the January 5 agreement made it a part of that agreement. Paragraph 3 of the
agreement states: “The parties acknowledge that a letter among T. Hudson,
12
Casino America and LPG has been executed outlining the terms under which T.
Hudson is willing to extend the foreclosure sale of the Fee Property . . . and
hereby consent thereto.” Jt. App. at 38. Even if we were to conclude that the
terms “acknowledge” and “consent” mean that the parties intended to incorporate
some or all of the terms of the letter agreement into the agreement, the letter
agreement does not aid LPG. As paragraph 3 of the January 5 agreement makes
clear, the letter agreement “outlin[es] the terms” under which Thomas Hudson
agreed to “extend the foreclosure sale” of the property. Id. Further, Casino
America’s agreement to construct a casino on the property is contained in one of
the subparts of paragraph 2 of the letter agreement, which is entitled
“Restructure.” The opening paragraph states:
If the fourth monthly payment of $20,000.00 is made, it would
continue the Public Trustee sale until approximately January 11,
1995. If such fourth payment is made, Hudson agrees that prior to
the expiration of the last continuance he will restructure the
remaining balance due under the $370,000.00 Promissory note and
the 1,200,000.00 Promissory Note. The term closing shall refer to
the execution of the restructuring documents. Said restructure to be
upon the following guidelines and other terms of this letter . . . .
Jt. App. at 29. The agreement to construct a casino on the property appears as
one of the listed “terms” of restructuring. Thus, even though LPG and Casino
America both signed the letter agreement, any obligations of Casino America to
build a casino upon closing flowed to Thomas Hudson and not LPG.
LPG advances three additional arguments to show that a court could
13
reasonably conclude the agreement requires Casino America to construct a casino.
First, LPG claims that several other provisions of the agreement eliminated
Casino America’s discretion once Casino America acquired the property. LPG
highlights the seventh sentence in paragraph 4 (stating that the agreement can be
terminated if Casino America decides not to proceed with the project “at any time
prior to acquiring the Fee Property”), the first sentence in paragraph 5 (stating
that Casino America has the right to terminate the agreement “at any time prior to
obtaining title” to the property), and the third sentence in paragraph 8 (stating that
“Casino America’s obligation to pay any amount to any Investor” is “conditioned
upon Casino America’s decision to obtain the Property”). Id. at 38, 41. Second,
LPG asserts that prior drafts of the agreement and a pre-agreement memorandum
demonstrate that Casino America had the discretion not to construct a casino prior
to – but not after – acquisition of the property. See , e.g. , Appellant’s Opening
Brief at 37-38; see also id. at 36-37 (insisting that “by the time of ‘closing’ on
January 6, 1995,” the “provisions relating to Casino America’s discretion
regarding construction of the project had become obsolete”). Third, LPG
maintains that Casino America’s interpretation of the agreement is unreasonable
because it “would yield the absurd conclusion that LPG intended to culminate this
complex transaction by simply giving away its property to Casino America.” Id.
at 40. None of these arguments are persuasive.
14
Contrary to LPG’s first argument, paragraphs 4, 5, and 8 of the agreement
do not require Casino America to build a casino upon acquisition of the property.
As the district court rightly recognized, the language highlighted by LPG in
paragraphs 4 and 5 pertains to Casino America’s “power to terminate the
contract,” not to Casino America’s discretion to construct a casino. Jt. App. at
107. Indeed, if anything, these sentences demonstrate that the parties knew how
to expressly link certain rights to Casino America’s acquisition of the property. It
follows that if the parties intended to link Casino America’s property acquisition
to its building of a casino, they would have done so expressly. Nor does the third
sentence of paragraph 8 support an inference that Casino America is required to
construct a casino because any ambiguity created by this sentence can be
“resolved by reference to other contractual provisions.” See Pepcol , 687 P.2d at
1314. The third sentence must be read in harmony with the remainder of
paragraph 8, which explicitly contemplates that Casino America might “elec[t]
not to construct or operate” a casino complex. Jt. App. at 41. The third sentence
of paragraph 8 also must be read in harmony with paragraph 6, which expresses
Casino America’s agreement to pay certain amounts to investors either upon
“completion of the construction of a casino” or upon “commencement of gaming
operating on the Property.” Id. at 39. Read in context, therefore, the third
sentence of paragraph 8 provides only that Casino America’s acquisition of the
15
property is a necessary condition for payments to investors, not that acquisition is
a sufficient condition for such payments.
LPG’s second argument – that prior drafts and memoranda support an
inference that Casino America is required to build a casino complex – also misses
the mark. As an initial matter, LPG forfeited its “prior drafts” argument for
purposes of this appeal by failing to present it to the district court in a timely
fashion. LPG does not deny that it did not submit prior drafts of the agreement in
its motion for partial summary judgment, instead introducing them for the first
time in its motion to alter or amend the judgment pursuant to Federal Rule of
Civil Procedure 59(e) or 60(b). It is settled that “[a] Rule 59(e) motion cannot be
used to present evidence that could and should have been presented prior to entry
of final judgment.” Retired Chicago Police Ass’n v. City of Chicago , 76 F.3d
856, 867 (7th Cir. 1996); see also Global Network Technologies, Inc. v. Regional
Airport Auth. of Louisville and Jefferson County , 122 F.3d 661, 665-66 (8th Cir.
1997) (stating that a Rule 59(e) motion cannot be used to present “new evidence
that could have been introduced during pendency of the summary judgment
motion”) (citation omitted). As a corollary, issues or evidence “presented for the
first time” in a Rule 59(e) motion normally are “not preserved for appellate
review.” Holland v. Big River Minerals Corp. , 181 F.3d 597, 605 (4th Cir. 1999),
cert. denied , 120 S. Ct. 936 (2000); accord Thurman v. Yellow Freight Sys., Inc. ,
16
97 F.3d 833, 834 (6th Cir. 1996). In any event, prior drafts of the agreement
obviously qualify as “extrinsic evidence,” and are therefore inadmissible to vary
the plain language of paragraph 4 and paragraph 8.
Equally unconvincing is LPG’s third argument – that Casino America’s
interpretation of the agreement must be rejected out-of-hand as “unreasonable.”
It is true that “[a]n interpretation which makes [a] contract or agreement fair and
reasonable will be preferred to one which leads to a harsh or unreasonable result.”
Grossman v. Sherman , 599 P.2d 909, 911 (Colo. 1979); accord Davis v. M.L.G.
Corp. , 712 P.2d 985, 990 (Colo. 1986). But even if we assume that under Casino
America’s interpretation LPG would receive minimal compensation for the
property (an allegation that Casino America denies), that does not permit us to
ignore the unambiguous language of paragraphs 4 and 8 or to restructure the
agreement to make it more equitable. In the words of the Colorado Supreme
Court,
[t]he court’s duty is to interpret and enforce contracts as written
between the parties, not to rewrite or restructure them. The court
will not interfere with the valid bargain of the parties: “The
impossibility of courts attempting to act as business clearing houses
for the readjustment of legitimate profits and losses occurring in the
marts of trade and commerce is obvious at a glance. To attempt it
. . . would be an unwarranted interference with the freedom of action
of business men in their private affairs.”
Fox , 957 P.2d at 1022 (quotation marks inserted and citation omitted); see also id.
(explaining that parties to a contract “may agree on whatever terms they see fit so
17
long as such terms do not violate statutory prohibitions or public policy”). In
short, LPG’s purported failure to receive adequate compensation for the property
does not mean that Casino America’s interpretation of the agreement is invalid.
Loan Modification Documents
LPG also contends that it is either a party to or a third party beneficiary of
the loan modification documents. Those documents unquestionably require
Casino America to build a casino on the property. Under Colorado law, “[a]
person not a party to an express contract may bring an action on such contract if
the parties to the agreement intended to benefit the non-party, provided that the
benefit claimed is a direct and not merely an incidental benefit of the contract.”
E.B. Roberts Constr. Co. v. Concrete Contractors, Inc. , 704 P.2d 859, 865 (Colo.
1985); see also Bayou Land Co. v. Talley , 924 P.2d 136, 153 n.26 (Colo. 1996)
(“In order to be a third party beneficiary of a contract, the parties to the contract
must intend to bestow a benefit on the third party.”). “While the intent to benefit
the non-party need not be expressly recited in the contract, the intent must be
apparent from the terms of the agreement, the surrounding circumstances, or
both.” E.B. Roberts , 704 P.2d at 865 .
Although LPG signed the loan modification documents on the same day
that it executed the agreement, it did so simply “for the purpose of acknowledging
18
its consent and agreement to th[e] Modification.” Jt. App. at 53 (¶ 5). LPG is not
listed as a party in the loan modification documents. Further, the parties who
executed the loan modification documents could have designated LPG as a third
party beneficiary, but did not. The parties clearly knew how to make such a
designation, because in the text of the loan modification documents they expressly
identified Thomas Hudson as a third party beneficiary of the agreement. Finally,
even if we assume arguendo that LPG is a third party beneficiary of the loan
modification documents, Casino America is still entitled to prevail. Under the
loan modification documents, the exclusive remedy for any failure to construct a
casino is an acceleration of payments. Thus, even if LPG were a third party
beneficiary of the loan modification documents and could “bring an action on
such contract,” see E.B. Roberts , 704 P.2d at 865, it could not obtain the remedies
it seeks in this case (including damages for Casino America’s alleged breach of
the agreement).
Perhaps in recognition of these difficulties, LPG argues in its reply brief
that its status as a third party beneficiary under the loan modification documents
is immaterial. LPG maintains that even if it is not a third party beneficiary, the
loan modification documents must be construed together with the agreement to
19
determine the parties’ intent. 3
LPG emphasizes that the loan modification
documents (1) were executed on January 6, 1995, the same day the parties
executed the agreement; (2) were “an integral part” of the underlying transaction;
and (3) “mak[e] it even more manifest that in closing the transaction the parties
intended that Casino America would promptly proceed with the construction of
the casino.” Reply Brief at 18-19.
LPG’s argument ultimately cannot prevail. Colorado law recognizes that
[w]hen necessary to ascertain the agreement of the parties, separate
instruments that pertain to the same transaction should be read
together even though they do not expressly refer to each other, and
even though they are not executed by the same parties. In this way
each document can provide assistance in determining the meaning
intended to be expressed by the others.
Town of Estes Park v. Northern Colorado Water Conservancy Dist. , 677 P.2d 320,
327 (Colo. 1984) (citation omitted); see also Powder Horn Constructors, Inc. v.
3
LPG also raised this argument in its opening brief, see Appellant’s
Opening Brief at 55, but relied solely on Sterling Colorado Agency, Inc. v.
Sterling Ins. Co. , 266 F.2d 472 (10th Cir. 1959). Sterling acknowledges that two
instruments executed at the same time by the same parties relating to the same
subject matter can be “taken in connection as forming together the several parts
of one agreement.” Id. at 476 (citation omitted). However, Sterling goes on to
say that this principle “is merely a rule of construction to give effect to the intent
of the parties. The provisions of one instrument are not thereby imported bodily
into another. The application of the rule does not result in actual consolidation
of the several contracts.” Id. (citation omitted). Sterling further provides that
“considering several instruments as one is not the natural construction, and is
resorted to only to effectuate the intention. They may be intended to be separate
instruments and to provide for different things.” Id. (citation omitted).
20
City of Florence , 754 P.2d 356, 365 (Colo. 1988) (“Intent may be determined by
reference to separate ancillary instruments.”). The problem for LPG is that (1)
the agreement specifically provides that Casino America has “no obligation” to
build a casino on the property; and (2) the agreement expressly states that it is the
“entire contract” with respect to the underlying transaction. Jt. App. at 38, 41,
44. Even if the agreement and the loan modification documents are “construed
together,” one cannot be used to rewrite the explicit language of the other. This
is especially true given that the loan modification documents can be interpreted in
a manner that makes them consistent with the agreement: In the former, Casino
America ostensibly was willing to promise Thomas Hudson that it would build a
casino because Thomas Hudson’s remedies were limited to accelerated payments;
in the latter, Casino America was not willing to extend the same promise to LPG
(and in fact inserted language to the opposite effect) because no such limitation of
remedies existed.
Alleged Breach of Implied Covenant of Good Faith and Fair Dealing
In addition to claims for breach of contract, LPG’s complaint contains a
claim for breach of the implied covenant of good faith and fair dealing.
“Colorado, like the majority of jurisdictions, recognizes that every contract
contains an implied duty of good faith and fair dealing.” Amoco Oil Co. v. Ervin ,
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908 P.2d 493, 498 (Colo. 1995); accord Occusafe, Inc. v. EG&G Rocky Flats,
Inc. , 54 F.3d 618, 624 (10th Cir. 1995) (applying Colorado law). This “good faith
performance doctrine” is “generally used to effectuate the intentions of the parties
or to honor their reasonable expectations.” Amoco Oil , 908 P.2d at 498 .
Reliance on the implied covenant of good faith and fair dealing is justified when
“the manner of performance under a specific contract term allows for discretion
on the part of either party.” Amoco Oil , 908 P.2d at 498; see also Bayou Land ,
924 P.2d at 154 (commenting that courts find an implied duty “when one party
has discretionary authority to determine certain terms of the contract, such as
quantity, price, or time”).
A close examination of the agreement reveals that LPG’s claim is
insufficient as a matter of law. It is beyond cavil in Colorado that the implied
covenant of good faith and fair dealing “will not contradict terms or conditions
for which a party has bargained.” Amoco Oil , 908 P.2d at 498; see also Soderlun
v. Public Serv. Co. of Colorado , 944 P.2d 616, 623 (Colo. Ct. App. 1997) (noting
that the covenant cannot be invoked to “inject new substantive terms into a
contract or change its existing terms”); Wells Fargo Realty Advisors Funding,
Inc. v. Uioli, Inc. , 872 P.2d 1359, 1363 (Colo. Ct. App. 1994) (explaining that the
covenant “does not obligate a party to accept a material change in the terms of the
contract or to assume obligations that vary or contradict the contract’s express
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provisions”). Here, paragraphs 4 and 8 of the agreement not only leave the
development of a casino to Casino America’s discretion, but also affirmatively
state that Casino America has “no obligation” to proceed with such development.
Jt. App. at 38, 41. To hold that Casino America has an implied obligation to
build a casino under certain conditions would flatly contradict the language of
these provisions. Such a holding would also lead to a curious result: Casino
America would be subject to heightened obligations simply because the agreement
states that certain matters are committed to the company’s “sole discretion.”
LPG also asserts that its “reasonable and justified expectations” were
frustrated because Casino America (1) represented to LPG that it would conduct a
feasibility study and build a casino if the results of the study were positive; (2)
requested a “hurry up” closing and informed LPG that it intended to construct a
casino; and (3) secured a construction contract, obtained permits, and obtained
other construction materials after acquiring the property. The “reasonable
expectations” protected by the covenant must derive from and be consistent with
the terms of the underlying contract. See Amoco Oil , 908 P.2d at 498. The facts
alleged by LPG satisfy neither of these criteria.
LPG’s Motion to Alter Judgment and Amend Complaint
LPG’s final argument is that the district court erroneously refused to grant
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leave to amend the complaint. LPG contends that it “learned for the first time in
Casino America’s Motion papers” that on January 6, 1995 Casino America “had
not yet made a decision to build the casino complex and needed to conduct further
feasibility studies.” Appellant’s Opening Brief at 56. According to LPG, this
directly contradicted Casino America’s prior promises to construct a casino on the
property. It follows, says LPG, that the district court should have permitted it to
amend its complaint and add a claim for fraud. We review the denial of a motion
for leave to amend for an abuse of discretion. See Scott v. Hern , 216 F.3d 897,
906 (10th Cir. 2000) .
“[O]nce judgment is entered, the filing of an amended complaint is not
permissible until judgment is set aside or vacated” pursuant to Federal Rule of
Civil Procedure 59(e) or 60(b). Seymour v Thornton , 79 F.3d 980, 987 (10th Cir.
1996) (quoting Cooper v. Shumway , 780 F.2d 27, 29 (10th Cir. 1985)). LPG’s
appellate briefs do not mention Rules 59(e) or 60(b) or the specific standards a
party must meet in order to set aside a judgment under those rules. “[A] party
who refers to an issue in passing and fails to press it by supporting it with
pertinent authority, or by showing why it is sound despite the lack of supporting
authority, forfeits the point.” In re Robinson , 987 F.2d 665, 668 (10th Cir. 1993)
(citation and internal quotation marks omitted); see also Coleman v. B-G
Maintenance Management of Colorado, Inc. , 108 F.3d 1199, 1205 (10th Cir.
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1997) (“Issues not raised in the opening brief are deemed abandoned or waived.”).
By failing to adduce any authority showing that the district court misapplied
Rules 59(e) and 60(b), LPG forfeited its right to challenge the denial of its motion
for leave to amend.
AFFIRMED.
Entered for the Court
Mary Beck Briscoe
Circuit Judge
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No. 99-1037, LPG Holdings, Inc., et al. v. Casino America, Inc.
HOLLOWAY, CIRCUIT JUDGE, CONCURRING AND DISSENTING:
Although I agree with the affirmance of the district court’s refusal to grant LPG leave
to amend its complaint, I am unable to agree that the district court did not err in dismissing
LPG’s claims for breach of contract and breach of the implied covenant of good faith and fair
dealing.
Colorado law is clear that when construing a contract, a court may consider extrinsic
evidence if the text of the contract in question is ambiguous. KN Energy, Inc. v. Great
Western Sugar Co., 698 P.2d 769, 776 (Colo. 1985) (“‘[W]here the terms of an agreement
are ambiguous . . . the court may look beyond the four corners of the agreement in order to
determine the meaning intended by the parties.’”) (quoting Pepcol Manufacturing Co. v.
Denver Union Corp., 687 P.2d 1310, 1314 (Colo.1984)). I believe that the January 5
Agreement between LPG and Casino America presents such an ambiguity. On the one hand,
paragraph 8 states that Casino America was not obligated to construct a casino:
Conditions to Casino America’s Obligations. It is specifically understood and
agreed that Casino America shall have no obligation to obtain title to any
portion of the Property, to execute the Lease, to construct the Casino or to
otherwise elect to proceed with the development of the Casino. The decision
to proceed with such development shall be at the sole option of Casino
America.
Appendix at 41.
On the other hand, the categorical nature of the above quoted paragraph 8 is
contradicted by two other paragraphs of the Agreement, both of which indicate that Casino
America’s discretion to decide whether to construct the casino applied only until it had
acquired the property. Paragraph 4 specifies that:
If Casino America shall decide, at any time prior to acquiring the Fee Property,
not to proceed with the casino project on the Casino Property or does not make
the payments outlined in the T. Hudson Letter, this Agreement may be
terminated by LPG or the Investors or by Casino America. Casino America
shall promptly notify LPG, Veterans and the Investors if Casino America
decides not to proceed with the casino project.
Appendix at 38.
Paragraph 5 further buttresses paragraph 4’s suggestion that Casino America’s right
not to build the casino was limited to the period before acquisition:
Notwithstanding any contrary provision hereof, at any time prior to obtaining
title to any portion, but not the entire Casino Property, Casino America shall
have the right and option to terminate this Agreement.
Appendix at 38.
The Colorado Supreme Court has directed that in ascertaining “whether certain
provisions of a contract are ambiguous,” the contract language must be “construed in
harmony with . . . all the parts and provisions of the agreement. . . .” Cheyenne Mountain
Sch. Dist. #12 v. Thompson, 861 P.2d 711, 715 (Colo. 1993) (quoting Christmas v. Cooley,
406 P.2d 333, 335 (Colo. 1965)); see also Northern Ins. Co. of New York v. Ekstrom, 784
P.2d 320, 323 (Colo.1989) (holding that a document is ambiguous “when it is reasonably
susceptible to more than one meaning”). Given the inconsistency between paragraph 8’s
specification that Casino America had no obligation to construct the casino, and the
suggestion in paragraphs 4 and 5 that Casino America could decide not to build the casino
only before the purchase of the property, I am convinced that the January 5 Agreement is
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“ambiguous.” See Cheyenne Mountain, 861 P.2d at 715.
Faced with this ambiguity, the district court should have considered LPG’s extrinsic
evidence indicating that notwithstanding paragraph 8 of the January 5 Agreement, Casino
America was obligated to construct the casino once it had purchased the property. The
earlier August 26 Agreement, for instance, states that “[u]pon closing, Casino America will
agree to construct a casino, restaurant and hotel upon the Property.” Appendix at 29.
Likewise, the Loan Modification Documents provide that Casino America “shall construct
a casino, restaurant and hotel upon the Property. . . .” Appendix 51. I believe that these
statements are of sufficient weight to permit LPG to survive a motion for summary judgment.
Nor do I believe that Casino America is helped by arguing that the January 5
Agreement is a complete integration. Although that agreement does contain a merger and
integration clause, it also contains the provision that “[t]he parties acknowledge that a letter
[the August 26 Agreement] among T. Hudson, Casino America, and LPG has been executed
outlining the terms under which T. Hudson is willing to extend the foreclosure sale of the Fee
Property . . . and hereby consent thereto.” Appendix at 38 (emphasis added). This reference
to the prior agreement and the stipulation that the parties “hereby consent thereto” suggests
that the August 26 Agreement (and with it Casino America’s obligation to build a casino)
was incorporated into the January 5 Agreement. Since under Colorado law where “it is
shown that a writing was not intended to be fully integrated, terms other than those set forth
in the writing may be proved by parol evidence,” the district court should have considered
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those documents manifesting Casino America’s obligation to construct the casino. Harmon
v. Waugh, 414 P.2d 119, 121 (Colo. 1966) (quoting Coulter v. Anderson, 357 P.2d 76, 80
(Colo. 1960)).
I also cannot agree with the court that LPG’s claim for breach of the implied covenant
of good faith and fair dealing is insufficient as a matter of law. Under Colorado law, “[t]he
good faith performance doctrine is generally used to effectuate the intentions of the parties
or to honor their reasonable expectations.” Amoco Oil Co. v. Ervin, 908 P.2d 493, 498
(Colo. 1996). Although the court is correct that the covenant of good faith and fair dealing
does not introduce obligations that contradict the terms of the contract, that is not the case
here. As discussed above, there is considerable ambiguity as to whether Casino America’s
discretion to build a casino continued to apply after it purchased the property. Thus, the
obligation that LPG seeks to enforce though the covenant of good faith and fair dealing --
that Casino America was required to satisfy LPG’s reasonable expectation that it would build
a casino -- may be read harmoniously with the express language of the contract.
Accordingly, I do not believe that Casino America was entitled to summary judgment
and thus would reverse the district court’s grant of that motion. Concerning LPG’s claim that
the district court erred in refusing to grant its motion for partial summary judgment, however,
I would affirm the ruling below as I believe that the contract language is too ambiguous to
warrant summary judgment for LPG. And as noted, I would affirm the denial of leave to
amend LPG’s complaint. Therefore, as explained above, I must respectfully concur in part
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and dissent in part.
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