United States District Court, D. Colorado
A. BRIMMER United States District Judge
The Court presided over a 3-day bench trial in this case,
involving the alleged breach of a lease agreement between
Boxer F2, L.P. (“Boxer”), the owner of commercial
space, and Flamingo West, Ltd. (“Flamingo West”),
a business owned by William Bronchick (“Mr.
Bronchick”). This Court has subject-matter jurisdiction
based on 28 U.S.C. § 1332(a).
brings four claims against defendants. Plaintiff’s
first claim, against Flamingo West, Bronchick &
Associates, and Mr. Bronchick, is for breach of the lease
agreement. Docket No. 65 at 10. Plaintiff’s second
claim for relief, also for breach of the lease agreement, is
against Bronchick & Associates, P.C. (“Bronchick
PC”) as the alleged successor entity of Bronchick &
Associates. Id. at 13. Plaintiff’s third claim
is against Bronchick PC for quantum meruit based on Bronchick
PC’s occupation of a portion of the leased premises.
Id. at 14. Plaintiff’s fourth claim is against
Flamingo West and Mr. Bronchick for fraudulent transfers
pursuant to the Colorado Uniform Fraudulent Transfer Act
("CUFTA"), Colo. Rev. Stat. § 38-8-101,
etseq. Id. at 15. Defendants Flamingo West and
Bronchick PC assert the affirmative defenses of constructive
eviction and failure to mitigate damages. See Docket
No. 66 at 11-12, ¶¶ 88-89, 92; Docket No. 148 at
October 23, 2015, the Court g ranted summary judgment in the
amount of $2, 428, 625.03 to plaintiff on its breach of lease
claim against Flamingo West. Docket No. 191. Flamingo West,
by not responding to plaintiff's summary judgment motion,
did not contest any of the facts the plaintiff used to
support its motion and to calculate damages. The damages
figure in plaintiff's summary judgment motion was
supported by the calculations, charts, and discussion
provided in a March 20, 2015 report by Mr. Robert Aucone, an
accountant certified in forensic accounting. Exhibit 137, pp.
called three witnesses at the trial: Mr. Bronchick, Mr.
Aucone, and Mr. Zachary Segal, an asset manager for Boxer
Property Management Corporation, which was retained by Boxer
as the leasing agent and property manager for the Pavilion
Towers - the property in which the premises leased by
Flamingo West was located. Defendant called one witness: Mr.
FINDINGS OF FACT
are three sources of facts from which the Court determines
whether plaintiff sustained its burden of proof on its
claims: facts to which the parties have stipulated, facts
established as a result of a sanctions order, and facts found
parties stipulated to the following facts:
1. Plaintiff Boxer is a Texas limited partnership. Flamingo
West is a Colorado corporation. Bronchick PC is a Colorado
corporation. Docket No. 192 at 1, ¶¶ 1-3.
2. On or about April 14, 2003, Flamingo West, dba Legalwiz
Publications and Bronchick & Associates, executed a lease
for premises located in the Pavilion Tower Building at 2821
South Parker Road, Suite 405, Aurora, Colorado 80014 (the
“Initial Premises”). The landlord in the 2003
Lease was RMC/Pavilion Towers, LLC. Docket No. 192 at 1-2,
3. On or about December 5, 2006, the First Amendment to the
2003 Lease was signed by RMC/Pavilion Towers, LLC and
“Flamingo West dba Legalwiz Publications and Bronchick
& Associates.” Id. at 2, ¶ 8.
4. On or about March 7, 2010, the same parties executed the
Second Amendment to the 2003 Lease. Id., ¶ 9.
5. On or about March 29, 2011, the same parties executed the
Third Amendment to the 2003 Lease. Flamingo West signed as
“Flamingo West Limited Corp.” Pursuant to the
Third Amendment, the premises leased was Suite 505 (the
“Leased Premises”) instead of the Initial
Premises. Id., ¶ 10-11.
6. On or about June 2, 2011, Boxer acquired the Pavilion
Tower Building. Id., ¶ 12.
7. On or about August 1, 2011, Boxer and Flamingo West
entered into and executed the Fourth Amendment to the 2003
Lease. Flamingo West signed as “Flamingo West Limited
Corp.” Pursuant to the Fourth Amendment, Boxer became
Flamingo West’s landlord. The term of the lease
agreement under the Fourth Amendment expired on October 1,
2016. The Fourth Amendment specifies that from October 1,
2011 through September 30, 2016 the monthly rent due under
the Lease Agreement is $10, 546.00. Id. at 2-3,
8. Bronchick PC occupied a portion of the Leased Premises
from June 2003 through November 1, 2012. Id. at 3,
9. Flamingo West made late and partial monthly rent payments
from April 2012 through August 2012. Id., ¶ 19.
10. The last payment that Flamingo West or any other occupant
of the Leased Premises made to plaintiff was a payment of
$11, 546.00 on August 30, 2012. Id., ¶ 20.
11. On or shortly before November 2, 2012, Flamingo West and
the other occupants of the Leased Premises vacated the Leased
Premises without plaintiff’s consent. Id.,
12. Flamingo West breached the Lease Agreement by failing to
make required monthly rent payments under the Lease Agreement
and by abandoning the Leased Premises. Id. at 4,
13. “Bronchick & Associates” was never
registered with the Colorado Secretary of State as a d/b/a or
trade name of Flamingo West. Id., ¶ 26.
14. Section 11.1 of the Lease Agreement provides, in
pertinent part, that:
following shall be deemed to be events of default by Tenant
under this Lease: (1) Tenant shall fail to pay when due any
installment of Rent or any other payment required pursuant to
this Lease; (2) Tenant shall abandon any substantial portion
of the Leased Premises . . .
Id., ¶ 27.
15. Under Section 2.5 of the Lease Agreement:
if any regular monthly installment of Rent is not received by
Landlord on or before the fifth (5th) day of the month for
which such Rent is due, a late payment charge of ten percent
(10%) of such past-due amount shall become due and payable in
addition to any other amounts due and payable.
Id., ¶ 28.
16. Pursuant to Section 2.5 of the Lease Agreement, past-due
rent and other past-due amounts owed under the Lease
Agreement bear an interest rate of 18% per annum.
Id. at 5, ¶ 30.
17. Under Section 11.2 of the Lease Agreement, if the tenant
is in default under the Lease Agreement, the landlord is
entitled to recover damages from the tenant, which include,
without limitation, the following: 1) the costs of repairs
and alterations made to the Leased Premises in connection
with re-leasing the premises; 2) an amount equal to the rent
and any associated late fees owed by the tenant for the
remainder of the term of the Lease Agreement less any rent
payments received by the landlord from any new tenant
occupying the Leased Premises; and 3) all reasonable
attorneys’ fees and costs incurred by landlord in
connection with the tenant’s breach of the lease
agreement. Id. at 4-5, ¶ 29.
May 4, 2015 Sanctions Order
After a protracted discovery dispute, the assigned magistrate
judge, in a February 2015 order, concluded that
“Defendants - all Defendants - have conducted
themselves in bad faith and have intentionally failed to
honor their discovery obligations under the Federal Rules of
Civil Procedure.” Docket No. 86 at 11. He also found
that defendants acted in “flagrant disregard” of
the magistrate judge’s order compelling discovery and
“offer[ed] only frivolous arguments in defense of their
failure to provide discovery.” Id. at 12. The
magistrate judge rejected plaintiff’s proposed sanction
- striking defendants’ answer to the amended complaint
- as excessive. Id. Applying the factors established
in Ehrenhaus v. Reynolds, 965 F.2d 916, 920-22 (10th
Cir. 1992), the magistrate judge concluded that the
appropriate sanction was for the Court to draw adverse
inferences, taken as established facts under Fed.R.Civ.P.
37(b)(2)(A)(i). Id. at 12-13. However, the
magistrate judge gave defendants a last chance to comply with
their discovery obligations before the sanction was imposed.
Id. at 13-14.
March 2, 2015, plaintiff filed a renewed motion for
sanctions. Docket No. 89. On April 29, 2015, the magistrate
judge held a hearing on plaintiff’s renewed motion.
See Docket No. 123. On May 4, 2015, the magistrate
judge granted plaintiff’s renewed motion for sanctions
and, as a sanction for defendants’ discovery
violations, ordered that certain paragraphs of
plaintiff’s second amended complaint be established as
facts for purposes of trial. Docket No. 130 at 9. On October
16, 2015, the Court overruled defendants’ objections to
the May 4, 2015 sanctions order. Docket No. 185 at 15. Thus,
pursuant to the magistrate judge’s sanctions order, the
following facts are established:
a. Mr. Bronchick is the sole owner, operator, officer, and
shareholder of Flamingo West. Mr. Bronchick is the only
person who operates the business of Flamingo West, and he has
sole decision-making authority for Flamingo West.
See Docket No. 65 at 11, ¶ 55a-c.
b. Mr. Bronchick did not maintain enough money in Flamingo
West’s bank account(s) to cover the costs of Flamingo
West’s financial obligations under the Lease Agreement.
See id., ¶ 55d.
c. Mr. Bronchick received “distributions” or
payments from Flamingo West even when Flamingo West was
unable to meet its outstanding financial obligations. See
id., ¶ 55e.
d. Adequate corporate records for Flamingo West were not
maintained. See id. at 12, ¶ 55f.
e. Flamingo West is not operated as a separate and distinct
business entity. At one time, Flamingo West operated under
the name “Bronchick & Associates.” See
id., ¶ 55g.
f. Flamingo West used the marks “Legalwiz” and
“Legalwiz Publications” in connection with its
business. “Legalwiz” and “Legalwiz
Publications” are also used in connection with another
business owned by Mr. Bronchick: Bronchick Consulting Group,
LLC. See id., ¶ 55g.
g. In or about April 2012, Flamingo West became insolvent or
otherwise unable to pay liabilities as they came due. See
id. at 15, ¶ 74.
h. Flamingo West’s intent to hinder, delay, or defraud
creditors is evidenced by, inter alia, the
following: 1) transfers of Flamingo West’s assets were
made to Mr. Bronchick, a shareholder of Flamingo West; 2) Mr.
Bronchick retained possession or control of the assets
transferred; and 3) Flamingo West owes a substantial debt to
Boxer. See id. at 16, ¶ 83.
i. Flamingo West made fraudulent transfers to at least Mr.
Bronchick. Flamingo West made said transfers with actual
intent to hinder, delay, or defraud its creditors, including
Boxer. See id., ¶¶ 79-80.
j. Flamingo West did not receive a reasonably equivalent
value in exchange for the transfers it made. The assets of
Flamingo West that remained after the transfers were made
were and are insufficient for Flamingo West to pay its
outstanding liabilities. See id., ¶ 81-82.
k. Bronchick & Associates was operating as a sole
proprietorship or unincorporated partnership on April 14,
2003, the date the Lease Ag reement was executed. Bronchick
PC was formed as a Colorado professional corporation on or
about June 10, 2003. At some time after the formation of
Bronchick PC, Bronchick PC acquired the assets of Bronchick
& Associates and, expressly or impliedly, assumed the
liabilities of Bronchick & Associates. See id.
at 13, ¶ 62a-c.
l. Bronchick PC’s acquisition of the assets and
liabilities of Bronchick & Associates resulted in a
merger or consolidation of the two entities, and Bronchick PC
is a mere continuation of Bronchick & Associates. See
id. at 14, ¶ 62d-e.
m. The address of the registered agent for Bronchick PC is
the address of the Initial Premises. See id., ¶
n. In November 2011, Bronchick PC filed a Statement of Change
with the Colorado Secretary of State, changing its registered
agent address to the address of the Leased Premises. See
id., ¶ 62h.
o. Bronchick PC openly operated out of the Leased Premises.
See id., ¶ 62f.
Findings of Fact from Trial Evidence
Pursuant to Federal Rule of Civil Procedure 52(a)(1), the
Court makes the following findings of fact:
The Lease Agreement
Bronchick was present when the original 2003 Lease Agreement
was signed. Mr. Bronchick testified that he signed the lease
agreement as president of Flamingo West and that there was
only one tenant, Flamingo West. Mr. Bronchick said that
neither Bronchick & Associates nor Legalwiz was ever a
party to the lease agreement, and that he did not personally
guarantee the lease. The Court finds Mr. Bronchick credible
as to this testimony. Mr. Segal admitted that he does not
recall asking Mr. Bronchick to sign a personal guarantee.
There are two “Base Rent” provisions in the 2003
first Base Rent provision, Section 1.7, states in relevant
Tenant shall pay, in accordance with the terms and provisions
of Section 2.2 of this Lease, Base Rent for the lease and use
of the Leased Premises at the annual rental rate per rentable
square foot of space in the Leased Premises for the specific
time periods set forth below. . . .
1, p. 2. The lease then provides the applicable monthly rent,
the rental rate per square foot, and the applicable time
period of each rate.
second Base Rent provision, Section 2.2, states in relevant
Tenant agrees to pay monthly the Base Rent set forth in
Section 1.7 of this Lease. . . . One (1) monthly installment
of Base Rent shall be due and payable on the date of
execution of this Lease by Tenant for the first
(1st) month’s Base Rent and a like monthly
installment shall be due and payable on or before the first
(1st) day of each calendar month . . . and all
succeeding installments of Base Rent shall be payable on or
before the first (1st) day of each succeeding
calendar month during the Lease Term.
Id. at 3.
2003 Lease’s Additional Rent provision, Section 2.4,
Tenant agrees to pay all rent and other sums of money
(whether specified in this Article 2, pursuant to indemnity
or reimbursement obligations or otherwise) as shall become
due from and payable by Tenant to Landlord under this Lease
(collectively, the “Rent”) at the times and in
the manner provided in this Lease, without abatement, notice,
demand, offset, reduction or counterclaim (except as
otherwise provided in this Lease). All Rent in addition to
Base Rent shall constitute additional rental under this Lease