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Farm Credit of Southern Colorado, ACA v. Mason

Court of Appeals of Colorado, Fifth Division

April 6, 2017

Farm Credit of Southern Colorado, ACA; and Farm Credit of Southern Colorado, FLCA, Plaintiffs-Appellees,
v.
James C. Mason, a/k/a Jim Mason, Defendant-Appellant.

         Otero County District Court No. 12CV63 Honorable Mark A. MacDonnell, Judge

          Snell & Wilmer L.L.P., Scott C. Sandberg, John O'Brien, Denver, Colorado, for Plaintiffs-Appellees

          James M. Croshal, Attorney At Law, James M. Croshal, Pueblo, Colorado; Mullans Piersel and Reed, PC, Shannon Reed, Pueblo, Colorado, for Defendant-Appellant

          OPINION

          FOX JUDGE

         ¶ 1 After Farm Credit of Southern Colorado, ACA, and Farm Credit of Southern Colorado, FLCA (collectively, Farm Credit), refused to loan Zachary Mason[1] additional funds for his farming operations, Zachary's father, James C. Mason, took control of crops that constituted collateral for some of Zachary's loans. Farm Credit sued James, and James filed counterclaims. The trial court found James liable for converting the collateral and awarded damages. James appeals the trial court's orders denying his request for a jury trial and admitting evidence of Zachary's loan debt to Farm Credit. He also appeals the judgment. We affirm.

         I. Background

         ¶ 2 Zachary funded his farming operations in Colorado's Arkansas Valley with Farm Credit loans. By the spring of 2012, Zachary was having difficulty paying his debt to Farm Credit and had planted crops on seven farms for the coming harvest. Written agreements between Farm Credit and Zachary granted Farm Credit a perfected security interest in Zachary's crops (Crop Collateral) and their proceeds. In early March, Farm Credit refused to continue funding Zachary's farming operations.

         ¶ 3 Without additional loans from Farm Credit, Zachary was unable to cultivate the Crop Collateral. In May, James - who also funded his farming operations by borrowing from Farm Credit for about forty-six years - took over the cultivation of the Crop Collateral. During that time, James also executed documents to transfer Zachary's United States Department of Agriculture benefits to himself and began harvesting and selling the Crop Collateral. James never attempted to transfer the Crop Collateral or its proceeds to Farm Credit.[2] Farm Credit became aware that James had taken control of the Crop Collateral by late spring or early summer. Without James' cultivation, to which Farm Credit "acquiesced, " the Crop Collateral would not have been harvested.

         ¶ 4 On May 21, Farm Credit filed a complaint against Zachary and other parties, but not James. The complaint contained claims for judgment on Zachary's notes, foreclosure of real property collateral, replevin, conversion of insurance proceeds, civil theft of said proceeds, and fraud. At Farm Credit's request, the trial court issued a temporary order to preserve the collateral the complaint described. This preservation order was to be served on "any third party . . . that [Farm Credit] determine[d] may be in possession of or have control over" the property detailed in the complaint. Farm Credit served this order on James.

         ¶ 5 On August 1, after the parties engaged in unsuccessful settlement negotiations and James closed his accounts with Farm Credit, Zachary filed for bankruptcy, which halted Farm Credit's efforts to recover the collateral. The bankruptcy court later allowed Farm Credit to continue its efforts to replevy personal property collateral and foreclose real property collateral. On November 13, as part of a bankruptcy adversary proceeding, Farm Credit filed an amended complaint alleging that Zachary transferred the Crop Collateral to James and asserting claims for relief under 11 U.S.C. § 523 (2012).

         ¶ 6 On March 13, 2013, Farm Credit amended the state trial court complaint to add James as a defendant and include claims for replevin and conversion against James, accounting by James, foreclosure, and appointment of a receiver.

         ¶ 7 James' answer raised the affirmative defenses of waiver, estoppel, abandonment, and consent, and requested a jury trial. Farm Credit filed a motion to strike James' demand for a jury trial, which the trial court granted, finding that the "basic thrust of this action is equitable."

         ¶ 8 In November 2013, in response to James' interrogatories, Farm Credit disclosed the amount of Zachary's outstanding debt owed to Farm Credit as of June 2013. The response indicated that the debt, including principal and unpaid interest through June 2013, exceeded $7, 000, 000, and it provided the interest rates that continued to compound daily. Even though discovery in the underlying action, bankruptcy proceedings and settlement negotiations involving other defendants, and Farm Credit's replevin and foreclosure efforts were simultaneously ongoing, Farm Credit never supplemented its response or updated the disclosed amount of Zachary's outstanding debt.

         ¶ 9 Discovery disputes, including the one regarding Farm Credit's disclosures of Zachary's outstanding debt, were addressed by a court-appointed special master during a mediation in March 2014. The record does not indicate that the special master issued written findings or a written order, and the transcript does not reflect the entire proceeding. After the 2014 mediation, Farm Credit never disclosed an updated calculation of Zachary's debt, to which James did not object until the middle of trial.

         ¶ 10 Farm Credit's suit against James went to trial in December 2014. On December 31, 2014 - after the evidence had been presented but before the trial court issued a judgment - the bankruptcy court issued its ruling in the adversary proceeding against Zachary.[3] James promptly filed a motion for a directed verdict based upon the bankruptcy court's findings. The trial court denied this motion, concluding that there was "no identity of the issues actually litigated and necessarily adjudicated" in the bankruptcy adversary proceedings and in the trial court proceedings.

         ¶ 11 The trial court subsequently entered a judgment against James, finding him liable for converting the Crop Collateral and awarding Farm Credit $251, 435 plus 8% interest accruing from November 1, 2012, through April 6, 2015, the date of the judgment.[4]

         II. Request for a Jury Trial

         ¶ 12 James argues that the trial court erred in striking his demand for a jury trial. James asserts that, when deciding whether he was entitled to a jury trial under C.R.C.P. 38(a), the court should have considered only the claims against James, not the equitable claims against other parties. We disagree.

         A. Preservation, Standard of Review, and Applicable Law

         ¶ 13 The parties agree that James has preserved this issue.

         ¶ 14 We review de novo a party's asserted right to a jury trial in a civil case. Stuart v. N. Shore Water & Sanitation Dist., 211 P.3d 59, 61 (Colo.App. 2009).

         ¶ 15 "The right to a trial by jury in civil actions exists only in proceedings that are legal in nature." Id.; see also C.R.C.P. 38(a). Courts look to the "nature of the relief" sought to determine whether a party is entitled to a jury trial. Stuart, 211 P.3d at 61 (citation omitted). "Actions for money damages are considered legal, and actions seeking to invoke the coercive powers of the court are considered equitable." Id. at 62. But, "not all forms of monetary relief need necessarily be characterized as legal relief for purpose of the jury trial requirement." Watson v. Pub. Serv. Co. of Colo., 207 P.3d 860, 865 (Colo.App. 2008) (citation and alteration omitted). A party is not necessarily entitled to a jury trial, even where a plaintiff seeks to recover money damages. People v. Shifrin, 2014 COA 14, ¶ 17.

         ¶ 16 The original complaint, not any counterclaims or defenses, fixes the nature of the action. See Carder, Inc. v. Cash, 97 P.3d 174, 187 (Colo.App. 2003) (considering only the original complaint, not the amended complaint, when affirming the denial of a demand for a jury trial). Where a party seeks legal and equitable remedies, courts "must determine whether the basic thrust of the action is equitable or legal." Am. Family Mut. Ins. Co. v. DeWitt, 216 P.3d 60, 63 (Colo.App. 2008), aff'd, 218 P.3d 318 (Colo. 2009).

         B. Analysis

         ¶ 17 We agree with the trial court that the basic thrust of the underlying action was equitable.

         ¶ 18 The May 21, 2012, complaint contained claims for judgment on Zachary's notes, foreclosure of real property collateral, replevin of personal property collateral, conversion of insurance proceeds paid after collateral was damaged or destroyed by fire, civil theft of those proceeds, and fraud regarding those proceeds. The complaint evidences that the action involved a debtor in default, and the relief requested mainly concerned judgment on promissory notes and the foreclosure and disposition of collateral. Under these circumstances, Farm Credit's "remedy is in the nature of a foreclosure, an equitable action which is to be tried to the court." See W. Nat'l Bank of Casper v. ABC Drilling Co., 42 Colo.App. 407, 413, 599 P.2d 942, 947 (1979) (The right to a jury trial under C.R.C.P. 38 "is not intended to extend to actions involving the repossession of collateral by a secured party."). That such foreclosure-like proceedings typically involve calculations of debt and "a personal monetary award against the debtor founded in contract" does not undercut our conclusion that the basic thrust of the action was equitable. See First Nat'l Bank of Meeker v. Theos, 794 P.2d 1055, 1059 (Colo.App. 1990); see also Shifrin, ¶ 17.

         ¶ 19 We reject James' contention that the trial court erred in considering the May 21, 2012, complaint's claims because Farm Credit did not name James as a defendant until it filed the March 13, 2013, amended complaint. While a party may invoke its right to a jury trial in a civil action where all other parties have waived this right, a party may only assert a demand for a jury trial in actions where it is entitled to one; if no right to a jury trial exists because the basic thrust of the action is equitable, as it is here, no party may invoke that right. See In re Trust of Malone, 658 P.2d 284, 286 (Colo.App. 1982); see also Simpson v. Digiallonardo, 29 Colo.App. 556, 488 P.2d 208 (1971).

         ¶ 20 Accordingly, we conclude that the basic thrust of the underlying action was equitable and that the trial court did not err in striking James' demand for a jury trial. See Stuart, 211 P.3d at 61; see also DeWitt, 216 P.3d at 63.

         III. Evidence of Zachary's Debt to Farm Credit

         ¶ 21 James asserts that the trial court erred in admitting evidence of Zachary's debt because Farm Credit did not disclose it before trial, and this nondisclosure ...


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