No. 81CA1073Colorado Court of Appeals.
Decided June 14, 1984. Rehearing Denied July 26, 1984.
Appeal from the District Court of the City and County of Denver Honorable Susan G. Barnes, Judge
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Butler, Landrum, Pierce Turner, P.C., Robert G. Pierce, for plaintiffs-appellants and cross-appellees.
Hamil Hitt, P.C., J. Lawrence Hamil, for defendant-appellee and cross-appellant, J. David Huskin.
Head Moye, John E. Moye, for defendant-appellee and cross-appellant, Huskin Co.
Division I.
Opinion by JUDGE BABCOCK.
[1] Following trial to a jury in this class action, special verdicts were returned in favor of plaintiffs and against defendant Huskin and Company (Company) on plaintiffs’ claims for deceit based on fraud arising from false representations and from concealment or nondisclosure of material facts in connection with the offering for sale of limited partnership units in Elk River Associates (limited partnership). Plaintiffs also prevailed on their claim against the Company and defendant J. David Huskin (Huskin) for constructive fraud based on breach of confidential relationship. Damages in the amount of $236,400, representing the difference between the actual value of the property as of January 28, 1972, and its value had the representations been true or the nondisclosed facts not existed, were awarded to plaintiffs. [2] After hearing post-trial motions, the trial court entered judgment in favor of those plaintiffs who testified at trial and against the Company in the amount of $166,793.33 on plaintiffs’ claims for actual fraud. Judgment notwithstanding the verdict was granted in favor of the Company and Huskin on plaintiffs’ claims of constructive fraud on the ground that such claims were barred by the applicable statute of limitation. Plaintiffs appeal, challenging the amount of damages awarded to plaintiff C. Grant Wilkins, the dismissal of the nontestifying plaintiffs’ claims, and the propriety of the trial court’s entry of judgment notwithstanding the verdict on their constructive fraud claims. Huskin and the Company cross-appeal raising numerous contentions of error. We affirm in part, reverse in part, and remand with directions.Page 1151
I.
[3] On December 1, 1982, the Company filed a motion to dismiss plaintiffs’ appeal on the ground that plaintiffs had accepted the benefits of the judgment entered by the trial court. The motion was denied without opinion, but with leave to renew it upon oral argument. The motion, having been renewed and reconsidered, is hereby denied.
II.
[6] This matter is before us on an agreed statement of facts. In the fall of 1971, Huskin and the Company decided to purchase real property for syndication by offering limited partnership units to investors. On December 22, 1971, the Company conducted a sales meeting during which its salesmen were given oral and written information concerning the property as well as the limited partnership. The written information consisted of a “preliminary offering circular or information sheet” prepared by an officer of the Company which was to be used in contacting investors, but not to be distributed to them. The initial offer and sale of units of the limited partnership commenced that day and continued through May 1972.
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made to the Company’s receiver. Following removal of Huskin and the Company as general partners and termination of the receivership, plaintiffs continued to make capital contributions to the limited partnership. These contributions, some of which were made after discovery of the alleged fraud, were used to pay expenses of the limited partnership and amounts due on the note secured by the deed of trust on the property owned by the limited partnership.
[10] Following commencement of this class action on March 10, 1976, the limited partnership sold the property to a third party, leaving the limited partnership with a promissory note secured by a deed of trust as its only asset. The proceeds of the sale, approximately $34,000, were distributed to plaintiffs. Thereafter in October 1980, plaintiffs’ claims were tried to a jury. A.
[11] The jury was instructed that a confidential relationship existed between plaintiffs and defendants. However, following hearing on the post-trial motions, the trial court determined that had it not granted defendants’ motion for judgment notwithstanding the verdict, it would have granted defendants’ motion for new trial on the basis that it erred in instructing the jury that a confidential relationship existed as a matter of law. Plaintiffs contend that the trial court’s error, if any, was in failing to instruct the jury that a fiduciary, rather than a confidential, relationship existed between the parties as a matter of law. To the contrary, defendants contend that the trial court’s post-trial ruling was correct. We agree with plaintiffs.
(Colo.App. 1981); Breeden v. Dailey, 40 Colo. App. 70, 574 P.2d 508
(1977), a general partner owes a fiduciary duty to the limited partners as a matter of law. Gundelach v. Gollehon, 42 Colo. App. 437, 598 P.2d 521
(1979). And, while formation of a limited partnership requires substantial compliance in good faith with the requirements of § 7-61-103, C.R.S. (then C.R.S. 1963, 104-2-2), a fiduciary relationship between the parties to a limited partnership can attach during the negotiations which precede formal execution of the certificate of limited partnership. See Lucas v. Abbott, 198 Colo. 477, 601 P.2d 1376 (1979). [13] Therefore, we conclude that defendants owed a fiduciary duty as a matter of law to plaintiffs from the time that sale of limited partnership units commenced until defendants were removed as general partners of the limited partnership.
B.
[14] In granting defendants’ motion for judgment notwithstanding the verdict, the trial court concluded that the doctrine of equitable estoppel did not apply to toll the running of the statute of limitation, § 13-80-108, C.R.S., and therefore, plaintiffs’ claims of constructive fraud were barred. Plaintiffs contend that this ruling was erroneous, or in the alternative, that § 13-80-114, C.R.S., rather than § 13-80-108, C.R.S., is the applicable statute of limitation. Because a fiduciary relationship existed between the parties as a matter of law, we agree with plaintiffs’ latter contention.
C.
[16] On cross-appeal defendants contend that by continuing to make payments to the
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limited partnership, plaintiffs ratified the purchase and waived the fraud as a matter of law; hence, the trial court erred by submitting the question of ratification and waiver to the jury. We disagree.
[17] To sustain the defense of ratification and waiver, it must appear that the defrauded party, with full knowledge of the truth respecting the false representations, elected to continue to carry out the agreement. Holland Furnace Co. v. Robson, 157 Colo. 347, 402 P.2d 628 (1965); Bankers Trust Co. v. International Trust Co., 108 Colo. 15, 113 P.2d 656 (1941). This determination involves questions of fact, particularly the fact of intent Holland Furnace Co. v. Robson, supra. Under the agreed statement of facts submitted on appeal, we conclude that this question was properly submitted to the jury. Holland Furnace Co. v. Robson, supra. [18] Defendants also contend that the trial court erred in failing to submit to the jury a special verdict form concerning the facts necessary to establish ratification and waiver. The submission of special verdicts or interrogatories under C.R.C.P. 49(a) is discretionary. Lambrecht v. Archibald, 119 Colo. 356, 203 P.2d 897 (1949); Felder v. Union Pacific R.R. Co., 660 P.2d 911 (Colo.App. 1982). Here, the trial court’s refusal did not constitute an abuse of discretion.D.
[19] Defendants also contend that the trial court erred in failing to require plaintiffs to elect remedies upon defendants’ motion at the close of plaintiffs’ case. Defendants assert that the failure to require election was prejudicial in that had plaintiffs elected rescission at the close of their case, a later ruling by the trial court prohibiting rescission would have resulted in dismissal. We conclude that the error was harmless.
(1931). This election must be promptly made, and once made, is final Tisdel v. Central Savings Bank Trust Co., supra. The purpose of requiring election of remedies is to prevent double recovery for the wrong done. Stewart v. Blanning, 677 P.2d 1382 (Colo.App. 1984); Trimble v. City County of Denver, 645 P.2d 279 (Colo.App. 1981). [21] Here, the case was submitted to the jury only as a suit for damages affirming the agreement. Therefore, the purpose of the doctrine of election of remedies, to prevent double recovery, was realized. Moreover, had plaintiffs been required to elect remedies at the close of their case, they might well have opted to affirm the agreement and sue for damages. Therefore, the claim of prejudice accruing to defendants by virtue of the trial court’s failure to rule on the motion to elect remedies is speculative, and thus constitutes harmless error. C.R.C.P. 61.
E.
[22] Defendants next contend that the trial court erred in permitting the case to proceed as a class action because an order certifying the class of plaintiffs named in the second amended complaint was never entered. The class certification included those plaintiffs who relied upon the offering circular in purchasing their limited partnership units; as tried, the plaintiff class included those who relied upon the preliminary offering circular or information sheet as well as those who relied upon the offering circular. We conclude that this did not constitute error.
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alter or amend a class certification consistent with the evidence as it develops during trial. Herm v. Stafford, 461 F. Supp. 508 (W.D. Ky. 1978). And, where a second amended complaint expands the plaintiff class but does not change the basic nature of the lawsuit, orders entered after the filing of the second amended complaint may implicitly confirm the propriety of the class action. Herm v. Stafford, supra.
[24] Here, the orders of the trial court entered subsequent to the filing of the second amended complaint, which as appears from the record before us did not alter the basic nature of the suit, included those plaintiffs who relied upon the preliminary offering circular or information sheet in purchasing their limited partnership units. Under these circumstances, we cannot conclude that the plaintiff class was so ill-defined as to require the action to proceed on an individual basis. See 7 C. Wright A. Miller, Federal Practice Procedure § 1760.F.
[25] Plaintiffs also assert error in the trial court’s dismissal of the claims of those members of the plaintiff class who did not testify during trial. We agree with this assertion.
G.
[29] Defendants also contend that the trial court erred in denying their motion for judgment notwithstanding the verdict with respect to the amount of damages awarded and the method of determining those damages. Essentially, defendants urge us to apply a measure of damages which would permit recovery of the difference between the actual market value of the property at the time of the sale and the amount actually paid by the defrauded parties for the property. This we decline to do.
(Colo.App. 1983).
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Because the jury was properly instructed as to this measure of damages and is presumed to have followed the instruction, Lindauer v. LDB Drainlaying, 38 Colo. App. 266, 555 P.2d 197 (1976), the trial court did not err in denying defendants’ motion for judgment notwithstanding the verdict on this ground.
[31] Because of our direction upon remand, we do not address plaintiffs’ contention that the amount awarded to C. Grant Wilkins was inadequate.H.
[32] Defendants also contend the trial court erred in awarding plaintiffs attorney fees under § 13-17-101, et seq., C.R.S. (1983 Cum. Supp.) because this action was commenced prior to the effective date of that act. We agree.