United States District Court, D. Colorado
HANOVER INSURANCE GROUP, a subrogee of KTB Inc., doing business as Navis Pack & Ship Center and CINCINNATI INSURANCE COMPANY, as subrogee of Window Technology Inc., doing business as Wintech, Wintech Real Estate, LLC, Plaintiff,
ICARPETS, INC., Defendant, VEHICLE PROJECTS, INC., Plaintiff-Intervenor.
ORDER ON PENDING MOTIONS
BROOKE JACKSON, UNITED STATES DISTRICT JUDGE
matter is before the Court on four motions: iCarpets'
motions for partial summary judgment on Vehicle Projects'
breach of contract claim and on the measure of damages [ECF
Nos. 26, 27]; and Vehicle Projects' motions for summary
judgment and for sanctions [ECF Nos. 28, 29]. For the reasons
stated herein, the Court GRANTS iCarpets' first motion
for partial summary judgment on Vehicle Projects' breach
of contract claim; GRANTS in part and DENIES in part
iCarpets' motion for partial judgment with respect to the
measure of damages; GRANTS in part and DENIES in part Vehicle
Projects' motion for summary judgment with respect to
liability and causation, and GRANTS in part and DENIES in
part Vehicle Projects' motion for sanctions.
plaintiffs, Hanover Insurance Group and Cincinnati Insurance
Company, are the subrogees of Navis Pack & Ship Center
and Wintech, Wintech Real Estate, LLC, respectively. Both
Navis and Wintech leased units in a commercial property in
Denver, Colorado. iCarpets was also a tenant in the
commercial property. It stored carpets in its warehouse unit
adjacent to Navis' unit. In December 2014 a fire
originating in iCarpets' unit damaged both Navis' and
Wintech's property. On Navis' and Wintech's
behalf, Hanover and Cincinnati brought this suit alleging
claims of negligence and breach of contract against iCarpets.
Hanover and Cincinnati brought their breach of contract
claims as third-party beneficiaries of iCarpets' lease
agreement with the commercial landlord, Revere Limited
Partnership I, LLLP.
Vehicle Projects also alleges that its property was damaged
in the December 2014 fire. Vehicle Projects was subleasing
space from Navis in the commercial property at the time of
the fire and suffered property damage to the specialized
equipment it was storing in the unit. Vehicle Projects'
motion to intervene was granted (ECF No. 12), and it filed
its complaint in this suit in September 2016. ECF No. 14.
Vehicle Projects' complaint, like that of Hanover and
Cincinnati, alleges claims of negligence and breach of
contract as a third-party beneficiary of iCarpets' lease
agreement with Revere. Id. at 4.
Court may grant summary judgment if “there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). The moving party has the burden to show that there is
an absence of evidence to support the nonmoving party's
case. Celotex Corp. v. Catrett, 477 U.S. 317, 325
(1986). The nonmoving party must “designate specific
facts showing that there is a genuine issue for trial.”
Id. at 324. A fact is material “if under the
substantive law it is essential to the proper disposition of
the claim.” Adler v. Wal-Mart Stores, Inc.,
144 F.3d 664, 670 (10th Cir. 1998) (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). An issue
of material fact is genuine if “the evidence is such
that a reasonable jury could return a verdict for the
nonmoving party.” Anderson, 477 U.S. at 248.
The Court will examine the factual record and make reasonable
inferences therefrom in the light most favorable to the party
opposing summary judgment. Concrete Works of Colo., Inc.
v. City & Cnty. of Denver, 36 F.3d 1513, 1517 (10th
iCarpets' Motion for Partial Summary Judgment on
Vehicle Projects' Breach of Contract Claim [ECF No.
noted, Hanover, Cincinnati, and Vehicle Projects all allege
breach of contract claims as third-party beneficiaries of
iCarpets' lease agreement with Revere. See ECF
No. 1 at 7, 9; ECF No. 14 at 4. A third-party beneficiary may
enforce a contract only if the parties to that contract
intended to confer a benefit on the third party when
contracting; it is not enough that some benefit incidental to
the performance of the contract may accrue to the third
party.” Everett v. Dickinson & Co., 929
P.2d 10, 12 (Colo. App., 1996) (citing McPheeters v.
McGinn, Smith & Co., 953 F.2d 771 (2d Cir. 1992)).
Courts assessing parties' intent to confer benefits on
third parties consider the contractual provisions
“together with the circumstances surrounding the
execution of the agreement.” Id. at 13. A
“third party beneficiary need not be named in a
contract in order to sue under the contract.”
Ratner v. MRC P'ship, 156 F.2d 1244, 1998 WL
567972, at *6, (10th Cir. 1998) (unpublished).
case, the plaintiffs and plaintiff-intervenor focus on the
requirement in iCarpets' lease agreement that iCarpets
“keep and maintain the leased premises in good
condition and repair, ” “not take actions to
endanger other tenants in the subject property, ” and
“keep the electrical system in working order.”
ECF No. 1 at 9; see also ECF No. 26-2 at 2
(“Tenant shall not . . . take any other action which
would constitute a nuisance or would disturb or endanger any
other tenants in the building.”). iCarpets moves for
summary judgment on Vehicle Projects' breach of contract
claim, alleging that as a sublessee of space in Navis'
unit, Vehicle Projects does not have standing to bring a
breach of contract claim against iCarpets as a third-party
beneficiary. ECF No. 26 at 6.
argument relies on both its lease agreement with Revere and
Vehicle Projects' sublease agreement with Navis, which it
argues preclude Vehicle Projects' third-party beneficiary
claims. ECF No. 26 at 2-4. iCarpets' argument that the
sublease agreement between Navis and Vehicle Projects waives
claims by Vehicle Projects against Navis is inapposite.
Id. at 4-5, 7. Vehicle Projects is circumventing its
relationship with Navis and suing iCarpets in its own right
as a third-party beneficiary, relying only on iCarpets'
lease agreement with Revere. I am similarly not persuaded by
iCarpets' arguments that sublessees may not be
third-party beneficiaries. See ECF No. 26 at 6. The
lease agreement's prohibition on sublessees without
Revere's approval does not support iCarpets'
contention that Vehicle Projects-or any other sublessees, for
that matter-were not contemplated by the lease agreement or
intended to benefit thereby. Instead, because this provision
in fact anticipates sublessees, it would not be unreasonable
for the parties to have intended to extend to sublessees the
same protections that tenants enjoy. See, e.g., ECF
No. 26-2 at 2, 3.
I am persuaded by iCarpets' argument that the waiver
clause in iCarpets' lease agreement with Revere precludes
Vehicle Projects' third-party claims. Id. at 7.
Under “traditional principles of contract
interpretation . . . third-party beneficiaries generally have
no greater rights in a contract than does the
promisee.” United Steelworkers of Am. v.
Rawson, 495 U.S. 362, 375 (1990). In this case the
“Waiver of Subrogation” section of the lease
agreement provides that “Landlord and Tenant hereby
release each other from any loss or damage to property caused
by fire or any other perils insured through or under them by
way of subrogation.” Id. at 7. As a result,
even if Vehicle Projects were a third-party beneficiary to
the contract, its contractual rights against iCarpets for
fire-related damage would be limited because Revere's
contractual rights against iCarpets are limited by the waiver
provision. Because Vehicle Projects may not assert a breach
of contract claim against iCarpets for the damage caused by
the fire, summary judgment is appropriate on this claim.
reaching this conclusion, I note that I am not persuaded by
Vehicle Projects' reference to iCarpets' expert's
testimony that iCarpets should have fixed or repaired the
electrical system “for the overall safety of the
occupants of the building.” ECF No. 36 at 2 (citing ECF
No. 37 at 54:3-9). The expert's opinion about
iCarpets' obligation does not illuminate iCarpets' or
Revere's intent with respect to third parties in
establishing the lease agreement. Ultimately, because Vehicle
Projects' contractual rights with respect to the damage
caused by the fire may not exceed those of the parties to the
lease agreement, iCarpets' motion for summary judgment on
Vehicle Projects' breach of contract claim is GRANTED.
iCarpets' Motion for Partial Summary Judgment on
Vehicle Projects' Measure of Damages [ECF No.
iCarpets' second motion for partial summary judgment it
seeks a determination of law as to the appropriate measure of
Vehicle Projects' damages. ECF No. 27 at 1. Vehicle
Projects' alleged damages are based on the damage caused
by the fire to specialized equipment it was storing in
Navis' unit at the time of the fire. Id. at 2.
Vehicle Projects was storing the components of a fuel cell
locomotive engine it had developed and built for Rustenburg
Platinum Mines Limited pursuant to a Development Agreement
between Rustenburg and Vehicle Projects. Id.
iCarpets argues that the value of this lost equipment should
be measured in terms of the diminution of its market value,
which can be determined using the contract price contained in
the Development Agreement. Id. According to the
terms of this contract, the cost to build four locomotive
“units” and perform related services would be
$500, 000. Id. at 3. As such, iCarpets argues that
the market value of the single locomotive engine (or
“unit”) damaged by the fire can be determined by
the contract price as one-fourth of $500, 000, or $150, 000
[sic]. ECF No. 27 at 4-5.
matter of law, iCarpets is correct that the appropriate
measure of damages is the property's market value. Though
iCarpets finds support for this contention from real property
cases (see, e.g., Bd. of Cnty. Comm'rs v.
Slovek, 723 P.2d 1309, 1314 (Colo. 1986)), the same rule
holds for cases involving personal property like the
equipment at issue here. In Colorado, “[g]enerally, the
measure of damages for injury to personal property is the
difference between its market value immediately before and
after the injury.” Biosera, Inc. v. Forma
Scientific, Inc., 941 P.2d 284, 286 (Colo.App. 1996).
Vehicle Projects does not dispute that market value is the
appropriate measure of damages, it does dispute iCarpets'
attempt to set the amount of damages as a matter of law,
noting that the amount of damages is a question of fact for
trial. ECF No. 35 at 1-2 (citing Ryan v. Mineral Cnty.
High Sch. Dist., 146 P. 792, 795 (Colo.App. 1915)).
Vehicle Projects argues that by asking the Court to enter
judgment on the amount of damages at $150, 000, iCarpets is
conflating the question of law about the measure of damages
with a disputed question of fact about the amount.
with Vehicle Projects that iCarpets' attempt to have the
Court determine the market value of the equipment destroyed
is inappropriate. iCarpets has failed to show the absence of
a genuine issue of fact with respect to its proffered figure
of $150, 000. Instead, Vehicle Projects has established a
genuine dispute over the damages amount, noting that the
“cost to build” four locomotive units, as
expressed in the Development Agreement, does not necessarily
convey the value of each unit. Id. at 6. As Vehicle
Projects' president and owner, Dr. Miller, points out,
the company would not have sold the unit for $125, 000 on the
open market, as such a price would not reflect the unit's
value. ECF No. 35-1 at 4. In other words, Vehicle Projects
rejects iCarpets' reliance on the contract price of the
unit as opposed to the price it would fetch on the open
market. Vehicle Projects instead contends that the real value
of a single unit takes into account the previous work that
went into developing the technology, despite the fact that
Vehicle Projects' client paid these costs according to
the terms of the Development Agreement. Id. at
Moreover, I note that while “the contract price-the
product of arms length negotiations between sophisticated
market participants” has been deemed “to be an
excellent determination of market value, ” it is not
the only determination of market value, and does not preclude
alternative calculations. Eastman Kodak Co. v. Trans
Western Exp., Ltd., 765 F.Supp. 1484, 1486 (D. Colo.
Dr. Miller's affidavit provides two plausible alternative
calculations of the value of the equipment destroyed in the
December 2014 fire. ECF No. 35-1 at 3. The first, which
results in a value of $372, 800 per unit, involves accounting
for the amortized cost to develop the product, the cost to
manufacture it, and the profit per unit. Id. The
second method accounts for the cost of materials for each
unit, and it results in a unit value of $269, 051.
Id. iCarpets disputes Vehicle Projects' reliance
on Dr. Miller's opinions, as he was not designated as an
expert witness, and his opinions were not disclosed or
supported by facts or data. ECF No. 39 at 2. It is true that
Dr. Miller has not been designated as an expert, so Vehicle
Projects may not proffer his opinions at trial as such.
See ECF Nos. 39-2, 39-3. However, Vehicle Projects
has not purported to present Dr. Miller's opinions as
those of an expert, but instead indicates that they are those
of the owner of the property at issue. See ECF No.
35 at 5. Owner opinions as to the value of lost property are
considered competent. See, e.g., Grange Mut.
Fire Ins. Co. v. Golden Gas Co., 298 P.2d 950, 955
(Colo. 1956) (“Some of the individual plaintiffs
testified from their written memoranda as to what they owned
that was destroyed by the fire and how they arrived at their
final values for loss purposes. This was proper.”). As
a result, I have considered Dr. Miller's opinion as to
the market value of the damaged equipment, and I find that it
supports the existence of a genuine fact dispute.
the genuine dispute over the amount of damages, it is
inappropriate for the Court to decide the amount of damages
at this stage. As a result, iCarpets' motion for partial
summary judgment is GRANTED insofar as the Court agrees that
the correct measure of damages is the difference in the
equipment's market value before and after it was damaged,