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International Network, Inc. v. Woodard

Court of Appeals of Colorado, Third Division

April 6, 2017

International Network, Inc., a Colorado corporation, Plaintiff-Appellee,
Michael W. Woodard, Defendant-Appellant.

         Elbert County District Court No. 13CV30038 Honorable Michael J. Spear, Judge

          Announced April 6, 2017 Reynolds Gillette LLC, Brian R. Reynolds, Patrick Gillette, Denver, Colorado, for Plaintiff-Appellee

          Richard J. Banta, P.C., Richard J. Banta, Denver, Colorado; Robinson Waters & O'Dorisio, P.C., Tracy L. Ashmore, Denver, Colorado, for Defendant-Appellant



         ¶ 1 This case involves the admitted breach of a clause contained in an exclusive right-to-sell real estate listing agreement obligating the seller to "conduct all negotiations for the sale of the property only through Broker, and to refer to Broker all communications received in any form from . . . prospective buyers . . . or any other source" (referral provision). Defendant, Michael W. Woodard (seller), appeals the judgment in favor of plaintiff, International Network, Inc., the real estate broker (broker), in the amount of the commission that would have been payable under the listing agreement had seller not breached the above-quoted clause. We affirm.

         I. Background

         ¶ 2 In April 2006, seller, who owned a ranch consisting of approximately 100 acres, signed an exclusive right-to-sell listing agreement with broker. As pertinent here, the agreement established a list price of $4.5 million and provided for a percentage commission to be paid to broker upon sale. The parties agreed to a six-month listing period, but seller could cancel the agreement at any time upon written notice.

         ¶ 3 Approximately four months into the listing period, seller began negotiating with an attorney who represented a group of potential buyers. Seller did not disclose his negotiations to broker and admitted at trial that he had intentionally concealed the discussions to avoid payment of a commission.

         ¶ 4 About a month after negotiations started, seller cancelled the listing agreement without providing a reason. Broker ceased any sales activity concerning the property. After the listing period had expired, but within a ninety-day holdover period set forth in the agreement, seller and the buyers finalized an agreement, resulting in the sale of the property for $3.6 million.

         ¶ 5 Almost seven years later, broker initiated this action against seller for breach of contract based upon seller's failure to comply with the referral provision.

         ¶ 6 Following trial, a jury found in favor of broker and awarded $252, 000 in damages - the commission that would have been owed under the listing agreement.

         II. Statute of Limitations

         ¶ 7 Seller contends that the trial court erred in denying his motion for directed verdict and his post-trial motion for judgment notwithstanding the verdict because broker's breach of contract claim was barred by the statute of limitations. We disagree.

         A. Standard of Review

         ¶ 8 We review de novo a trial court's rulings on motions for directed verdict and judgment notwithstanding the verdict. Hawg Tools, LLC v. Newsco Int'l Energy Servs., Inc., 2016 COA 176M, ¶ 18. When the motion concerns a factual matter, we view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences from the evidence in that party's favor. Hall v. Frankel, 190 P.3d 852, 862 (Colo.App. 2008). Such motions should be granted only when the evidence "compels the conclusion that reasonable jurors could not disagree and that no evidence or inference therefrom had been received at trial upon which a verdict against the moving party could be sustained." Boulders at Escalante LLC v. Otten Johnson Robinson Neff & Ragonetti PC, 2015 COA 85, ¶ 19.

         B. Applicable Law

         ¶ 9 A breach of contract claim "shall be commenced within three years after the cause of action accrues." § 13-80-101(1)(a), C.R.S. 2016. In this context, a cause of action accrues "on the date the breach is discovered or should have been discovered by the exercise of reasonable diligence." § 13-80-108(6), C.R.S. 2016.

         ¶ 10 The cause of action is discovered when the party obtains knowledge of the facts essential to the claim, not knowledge of the legal theory supporting it. Murry v. GuideOne Specialty Mut. Ins. Co., 194 P.3d 489, 492 (Colo.App. 2008). Such knowledge includes information that would lead a reasonable person to inquire further. Id.

         ¶ 11 When a claim accrues and whether it is barred by the statute of limitations are generally questions of fact for the jury to resolve. Sterenbuch v. Goss, 266 P.3d 428, 432 (Colo.App. 2011). But "when the material facts are undisputed and reasonable persons could not disagree about their import, these questions may be decided as a matter of law." Id.

         C. Analysis

         ¶ 12 It is undisputed that seller breached the referral provision in 2006. But the date when broker discovered or should have discovered seller's breach is not so clear cut.

         ¶ 13 Seller argued at trial that the abrupt manner in which he cancelled the listing agreement, the circumstances surrounding the cancellation, and the recording of a deed transferring the property a few months later gave rise to a duty on broker's part to inquire further into the sale. Upon broker's investigation, seller asserted it would have discovered the facts essential to its claim. Thus, the argument proceeded, through the exercise of reasonable diligence, broker should have discovered the breach of contract in 2006, and because broker filed this action more than seven years later, the statute of limitations barred its claim.

         ¶ 14 Broker agreed that seller cancelled the listing agreement in 2006. But it asserted that this cancellation provided no indication that seller had been negotiating with the buyers in violation of the agreement. Instead, broker asserted that it had no knowledge of seller's actions until 2011, when broker's agent heard seller's testimony in another lawsuit. In that case, seller testified that he had negotiated the sale of his property with the buyers' attorney in violation of the listing agreement and that he had intentionally concealed this negotiation from broker to avoid paying a commission. According to the agent, only upon hearing this testimony did he discover seller's breach. The agent also testified that, before hearing such testimony, he did not have any knowledge or suspicion that seller had breached the agreement. Broker therefore asserted that its commencement of this action in 2013, within three years of its discovery of the breach, was timely.

         ¶ 15 These arguments were presented to the jury, and it rejected seller's statute of limitations defense. Based upon the record, we cannot conclude that the evidence - viewed in the light most favorable to broker - compels a different result.

         ¶ 16 Seller had the absolute right to terminate the listing agreement at any time. Hence, the cancellation some four months into the six-month period did not, contrary to seller's contention, place broker on notice of a potential claim as a matter of law. And contrary to seller's additional contention, the recording of the deed conveying the property, by itself, did not put broker on notice of the ...

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