No. 97CA1820Colorado Court of Appeals. Division II.
April 29, 1999. Rehearing Denied July 15, 1999. Certiorari Denied January 24, 2000.
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Silver Deboskey, P.C., Joe L. Silver, Steven W. Kelly, Denver, Colorado, for Plaintiff-Appellees and Cross-Appellants
Kelly/Haglund/Garnsey Kahn LLC., Edwin S. Kahn, Lori J. Potter, Denver, Colorado, for Appellee
Burns, Figa Will, P.C., Phillip S. Figa, Alexander R. Rothrock, Audrey A. Baker, Englewood, Colorado, for Defendants-Appellants and Cross-Appellees
[3] Opinion byPLANK, Judge.
[4] Defendants, Market Square Discount Liquors, Inc., a Colorado corporation, and Donna Levine and Freid Zarie, individuals associated with that business, (sellers) appeal the amount of damages awarded by the trial court on their counterclaim in a contract dispute. Plaintiffs, Amcap/Denver Limited Partnership, a Delaware limited partnership, and Jay Kaiser, president of Amcap/Denver’s general partner, (buyers) cross-appeal the amount of that judgment. Sellers also appeal the trial court’s dismissal of a contempt citation against buyers and their attorneys. We reverse and remand with directions. [5] Buyers leased to sellers space in their Aurora, Colorado, shopping center for the operation of sellers’ retail liquor business. Subsequently, buyers desired to relocate or purchase sellers’ business to accommodate the expansion request of a supermarket located near the liquor store. Sellers initially declined to relocate or sell the business, but eventually agreed to do so for a price based upon its annual “net operating income.” The sale was to include certain personal property and the transfer or assignment of various rights of sellers to buyers. [6] Before the deal could be closed, a dispute arose between the parties over various matters, which resulted in this lawsuit. In an attempt to settle the suit, buyers and sellers entered into a stipulation for the sale of the business which incorporated their prior agreement with modifications. The stipulation required a higher but fixed purchase price of $285,000, not based upon the business’ income, set a closing date, and required sellers to confess judgment for possession of the premises on that date regardless of whether the closing actually occurred. [7] At the attempted closing on the date set, buyers did not have certified funds or cash to pay a portion of the purchase price to sellers as required by the stipulation, and sellers could not establish that certain conditions had been met After sellers had signed a relinquishment of the business’ liquor license and other documents, buyers objected to continuing the closing. Sellers offered to put funds in escrow to ensure that their obligations would be met, but buyers rejected that offer. Buyers instead proposed to modify the stipulation, most notably by reducing the purchase price, but sellers rejected that proposal. The closing then failed, and buyers refused to return the documents signed by sellers. [8] Buyers took possession of the premises pursuant to the judgment earlier confessed by sellers and, using sellers’ relinquishment obtained at the failed closing, acquired a temporary liquor license through another entity, and eventually a permanent license, for a new retail liquor business located elsewhere in the shopping center. [9] Two days after the failed closing, sellers sought and were granted a temporary restraining order (TRO) to prevent buyers from demolishing the building on the premises in which the liquor store was located. However, within an hour after the TRO entered, buyers’ agents destroyed the building to prepare for the supermarket’s expansion. Before trial, the court dismissed a contempt citation against buyers and their attorneys because sellers had not posted the required bond in the amount of $1 prior to the demolition of the building. [10] Before trial, the court granted a preliminary injunction which, among other provisions, ordered buyers to pay the indebtednessPage 640
of sellers to a bank, secured by their leasehold, as well as sellers’ trade payables owing to liquor suppliers and others, totaling approximately $87,000.
[11] After a bench trial, the court ruled that buyers had materially breached the stipulation by failing to have cash or certified funds at closing, while sellers had committed minor breaches. The court awarded sellers $75,000 as the balance of damages for buyers’ breach of contract. Sellers thus received approximately $162,000 of the stipulated purchase price of $285,000. [12] The trial court initially stated that its reduction in the award of damages from the purchase price was justified by the doctrine of mitigation of damages, noting that sellers had failed to meet certain conditions prior to closing and had thus contributed to its failure. Upon reconsideration, noting that mitigation of damages is an affirmative defense that must be properly pled, the trial court modified the judgment to indicate that the reduction in damages was because sellers did not come before the court with “clean hands” and was based upon the “totality of the circumstances.” This appeal and cross-appeal followed. I.
[13] After judgment entered in favor of sellers, they filed a notice of appeal in this court with a contemporaneous motion to determine if the judgment was an appealable final order. A division of this court ruled that it was, and buyers then sought and were granted leave to file an out-of-time cross-appeal by another division of this court, over sellers’ objection. Sellers contend that we should dismiss the cross-appeal, but we decline to revisit that determination, and conclude that buyers’ cross-appeal was properly filed.
II.
[14] Sellers contend that the trial court erred by improperly reducing their award of damages. We agree.
A.
[15] In a breach of contract action, the objective is to place the injured party in the position it would have been in but for the breach. The prevailing party is therefore entitled to recover the amount of damages necessary to accomplish that result. McDonald’s Corp. v. Brentwood Center, Ltd., 942 P.2d 1308 (Colo.App. 1997).
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certified funds at closing as required by the stipulation, which states in pertinent part:
[22] We agree with the trial court’s interpretation of the stipulation, and, thus, conclude that buyers were required to pay to sellers the sum of $175,000 in cash at closing. [23] The trial court found that buyers’ inability to tender the purchase price in cash or certified funds at closing was a material breach of the stipulation. Because there is support in the record for this finding, we will not disturb it on appeal. The trial court also implicitly found that sellers’ breaches were not material, and that finding also has support in the record and will not be disturbed. See Converse v. Zinke, supra Page v. Clark, 197 Colo. 306, 592 P.2d 792 (1979). [24] Furthermore, sellers, by granting possession to buyers in advance, had already substantially performed under the stipulation prior to the closing. [25] Sellers were entitled to the benefit of their bargain and to be placed in the same position they would have been in absent buyers’ material breach and their own nonmaterial breaches. Hence, the trial court erred by not awarding damages in accordance with the contract. [26] The trial court’s finding of sellers’ unclean hands is not sufficient to justify a reduction of damages to be awarded to sellers, nor can the trial court do so on the basis of the “totality of the circumstances.” See USI Properties East, Inc. v. Simpson, supra. [27] The clean hands doctrine can be used only as a defense to a claim in equity, not to a claim at law such as that presented here. Golden Press, Inc. v. Rylands, 124 Colo. 122, 126, 235 P.2d 592 (1951). [28] Sellers are entitled to have the amount of damages determined with reasonable certainty. See Tull v. Gundersons, Inc., supraThe purchase price payable by [buyers] shall be modified to $285,000, payable in the amount of $175,000 in cash at closing, and by the execution of a purchase money promissory note in the amount of $110,000. . . .
Therefore, on remand the trial court must make findings setting forth the basis for its calculation and determine with reasonable certainty the amount of sellers’ damages.
B.
[29] Buyers nevertheless argue that neither party is entitled to enforce a contract and recover damages when both parties have breached, and that their performance was excused by sellers’ failure to meet certain conditions precedent. We disagree.
(Colo.App. 1985).
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[33] Moreover, even if both parties materially breach a contract, rescission is the proper remedy when, as here, there has been part performance. Tromp v. Martinez, 719 P.2d 380 (Colo.App. 1986). [34] In order to effect mutual rescission of a contract, both parties must be restored to the status quo ante: all payments and things of value must be returned, and all benefits conferred must be adequately compensated. EarthInfo, Inc v. Hydrosphere Resource Consultants, Inc, 900 P.2d 113 (Colo. 1995). Also, a party may not rescind a contract in part and affirm it in part, or rescind a contract but retain some benefit arising from it. Gerbaz v. Hulsey, 132 Colo. 359, 288 P.2d 357 (1955). [35] Here, sellers confessed judgment of possession in advance of closing, thereby granting possession of the premises to buyers on a date certain. Thereafter, in the absence of a material breach by sellers, buyers were required to elect either to rescind the contract, and thus to return possession of the premises to sellers, or to perform the contract as written and then seek compensatory damages. Cooper v. Peoples Bank Trust Co., 725 P.2d 78 (Colo.App. 1986). [36] Instead, buyers argue in effect that they may affirm a portion of the stipulation and retain possession of the premises, but repudiate the remainder and avoid payment of damages. In short, buyers argue that they are entitled to reap nearly the entire benefit of the bargain without paying any of what they agreed to pay. As made clear in Gerbaz v. Hulsey, supra, such is not permitted. [37] Buyers’ acceptance of possession of the premises constitutes a waiver of the conditions precedent set forth in the original agreement, and their refusal to return possession of the premises to sellers constitutes an election on their part to affirm the contract by retaining a benefit conferred thereunder. Consequently, sellers may properly seek compensatory damages for buyers’ breach. III.
[38] Buyers contend that the trial court erred by not finding a waiver of the requirement to pay with cash or certified funds at closing, by finding that funds in their attorneys’ trust account were not cash available at closing, and by awarding sellers damages at all because there was insufficient evidence to support such an award. Sellers contend that the trial court erred by finding that certain items of personal property were to be transferred to buyers pursuant to the stipulation. We reject all of these contentions.
IV.
[41] Sellers contend that the trial court erred by dismissing a contempt citation against buyers and their attorneys for violating the TRO. We agree that a remand is required.
[43] Here, the trial court granted a TRO enjoining buyers from demolishing the building, along with other relief, and set the required bond at $1. Sellers do not dispute that they did not post the bond until approximately one week after the building had been demolished by buyers and others. [44] Generally, strict compliance with the security provisions of C.R.C.P. 65 is required(c) . . . No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.
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for the enforcement of an injunction. Cross v. Board of Directors, 39 Colo. App. 569, 570 P.2d 1307 (1977). Also, when a trial court does not make findings or set an appropriate bond based on those findings, the resulting injunction is void and unenforceable. Renner v. Williams, 140 Colo. 432, 344 P.2d 966
(1959).
(S.D.N.Y. 1988). [49] We find the reasoning of those federal decisions persuasive. Therefore, we conclude that an injunction, including a TRO, is not void or invalid for failure to post a bond, and unless the court’s order provides to the contrary, the injunction remains in effect until it is vacated by subsequent order of the court or it otherwise terminates by its own terms. [50] Contrary to buyers’ argument, this holding is not inconsistent with that of Cross v. Board of Directors, supra. In that case, upon the motion of the restrained parties, the trial court “dismissed” a restraining order for failure to post a bond. On appeal, a division of this court ruled that the dismissal was a proper remedy for the failure to post a bond, but did not address the issue of the injunction’s enforceability prior to dismissal. [51] Thus, we conclude that the trial court erred by ruling that sellers’ failure to post the nominal bond rendered the TRO unenforceable. [52] Buyers argue that we should nevertheless affirm the dismissal of the contempt citation on other grounds. However, all their arguments are based on questions of fact that have not been ruled upon by the trial court. The trial court is in a superior position to make such findings, and we may not properly make them on appeal. On remand, buyers may argue alternative grounds for dismissal of the contempt citation. [53] The judgment is reversed, and the cause is remanded for further proceedings in accordance with this opinion. [54] Judge CRISWELL and Judge KAPELKE concur.
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