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Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

LOWELL STAATS MINING COMPANY, INC., a ) 

Colorado corporation, } 

) 

Third-party Plaintiff-Appellant, ) 

) 

FILED 

United Bt!iw~ Co~rt of Apf)eals Tenth Circuit 

JUN 1 91999 

ROBERT L. HOECKER 

Clerk 

v. ) 

) 

No. 86-2626 

PIONEER URAVAN, INC., a Texas ) 

corporation, ) 

) 

Defendant-Appellee, ) 

) 

and ) 

) 

PIONEER CORPORATION and PIONEER ) 

NUCLEAR, INC. , ) 

) 

Third-party Defendants-Appellees. ) 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. CIV. 82-K-2039) 

Joseph Coleman of Coleman, Brown & Jouflas, Grand Junction, 

Colorado, for Third-party Plaintiff-Appellant. 

Theodore Allegra of Nelson, Hoskin, Groves & Prinster (Gregory K. 

Hoskin of Nelson, Hoskin, Groves & Prinster; and James Golden of 

Golden, Mumby, Summers & Livingston with him on the briefs), Grand 

Junction, Colorado, for Defendant-Appellee and Third-party 

Defendants-Appellees. 

Before LOGAN, BARRETT, and BRORBY, Circuit Judges. 

BRORBY, Circuit Judge. 

Appellate Case: 86-2626 Document: 01019565559 Date Filed: 06/19/1989 Page: 1 
Lowell Staats Mining Company, Inc. (Staats), an independent 

mining contractor, entered into a contract with Pioneer Uravan, 

Inc. (Uravan) to develop mining property owned by Uravan. When 

Uravan terminated the contract, Staats sued Uravan for breach of 

the contract. Uravan then brought a separate suit against Staats 

seeking to recover overpayments for ore deliveries under the 

contract. Staats filed a third-party complaint against Pioneer 

Corporation (Pioneer) and Pioneer Nuclear, Inc. (Nuclear) seeking 

to recover from these corporations any liability attributed to 

Uravan under the theories of the alter ego doctrine or piercing 

the corporate veil, and fraudulent conveyances. The cases were 

consolidated and removed to federal district court based on 

diversity jurisdiction, 28 U.S.C. § 1332 (1988). 

At the conclusion of Staats' case, the district court granted 

the directed verdict motions of Pioneer and Nuclear on all claims 

in the third-party complaint. The jury returned a verdict against 

Uravan on its counterclaim and on Staats' breach of contract claim 

awarded $629,512 in damages. The district court denied Staats' 

request for prejudgment interest. Lowell Staats Mining Co. v. 

Pioneer Uravan, Inc., 645 F. Supp. 254 (D. Colo. 1986). Staats 

appeals, asserting the district court erred in granting the motions for directed verdict and denying the request for prejudgment 

interest. 

I 

Piercing the Corporate Veil 

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Staats contends the district court erred in granting directed 

verdicts to Pioneer and Nuclear. Nuclear asserts that Staats' 

third-party complaint contains no claim that Nuclear was liable as 

the alter ego, agent or instrument of Uravan. We agree. Staats' 

complaint seeks to impose liability under these theories solely 

upon Pioneer. In the Second Amended Pretrial Order, Nuclear 

objected to the implicit amendment of this claim to allege Uravan 

was the alter ego or instrumentality of Nuclear. Staats never 

amended the third-party complaint in response to Nuclear's 

objection. See Fed. R. Civ. P. 15. Staats is not entitled to 

reversal of the directed verdict against Nuclear on the claim of 

piercing the corporate veil, alter ego, instrumentality or agency, 

where the complaint fails to state such a claim for relief. See 

A.R.A. Mfg. Co. v. Brady Auto Accessories, Inc., 622 P.2d 113, 114 

(Colo. App. 1980). Even if we treat Staats' claim against Nuclear 

as implicitly tried, the district court properly directed the 

verdict for Nuclear on the claim of piercing the corporate veil, 

alter ego, instrumentality or agency, because the evidence Staats 

presented fails to create an issue for the jury on this claim. 

We will review the directed verdicts for Pioneer and Nuclear 

under the standard eloquently stated in Motive Parts Warehouse v. 

Facet Enters., 774 F.2d 380 (10th Cir. 1985): 

The standard of review in assessing whether a verdict 

should have been directed is the same standard applied 

by the trial court in passing on the motion for directed 

verdict initially, i.e., whether the evidence is sufficient to create an issue for the jury. Swearngin v. 

Sears Roebuck & Co., 376 F.2d 637, 639 (10th Cir. 1967). 

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The trial court may direct a verdict only where the 

evidence and all inferences to be drawn therefrom are so 

clear that reasonable minds could not differ on the 

conclusion. Taylor v. Gilmartin, 686 F.2d 1346 [1353-

54] (10th Cir. 1982), cert. denied, 459 U.S. 1147, 103 

s.ct. 788, 74 L.Ed.2d 994 (1983). The evidence must be 

viewed in the light most favorable to the party against 

whom the directed verdict is sought, and if, on the 

basis of the evidence and inferences to be drawn 

therefrom, reasonable and fair-minded persons might form 

different conclusions as to the facts in issue, a 

directed verdict is improper. Zelinger v. Uvalde Rock 

Asphalt Co., 316 F.2d 47 [SO] (10th Cir. 1963). 

774 F.2d at 385-86. With this standard in mind, we have 

thoroughly reviewed the record in this case, and conclude the 

district court's ruling must be affirmed. 

In the third-party complaint, Staats sought to pierce 

Uravan's corporate veil and recover from Pioneer, the sole 

shareholder of Uravan. Staats alleged Uravan was the alter ego or 

an instrumentality of Pioneer. The alter ego doctrine is a means 

by which creditors may hold stockholders personally liable for 

corporate obligations. Rosebud Corp. v. Boggio, 39 Colo. App. 84, 

561 P.2d 367, 371 (1977). 

Because this is a suit based on diversity jurisdiction, we 

apply the law of the forum state, in this case Colorado. Erie 

R.R. Co. v. Tompkins, 304 U.S. 64 (1938); Brady v. Hopper, 751 

F.2d 329, 332 (10th Cir. 1984). In Micciche v. Billings, 727 P.2d 

367 (Colo. 1986) the Colorado Supreme Court discussed piercing the 

corporate veil, stating: 

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Generally, a corporation is treated as a legal 

entity separate from its shareholders, thereby 

permitting shareholdets to commit limited capital to the 

corporation with the assurance that they will have no 

personal liability for the corporation's debts. Krendl 

& Krendl, Piercing the Corporate Veil: Focusing The 

Inquiry, 55 Den. L.J. 1 (1978). When, however, the 

corporate structure is used so improperly that the 

continued recognition of the corporation as a separate 

legal entity would be unfair, the corporate entity may 

be disregarded and corporate principals held liable for 

the corporation's actions. Id. at 2. Thus, if it is 

shown that shareholders used the corporate entity as a 

mere instrumentality for the transaction of their own 

affairs without regard to separate and independent 

corporate existence, or for the purpose of defeating or 

evading important legislative policy, or in order to 

perpetrate a fraud or wrong on another, equity will 

permit the corporate form to be disregarded and will 

hold the shareholders personally responsible for the 

corporation's improper actions. See Fink v. Montgomery 

Elevator Co., 161 Colo. 342, 350, 421 P.2d 735, 739 

(1977); Gutheil v. Polichio, 103 Colo. 426, 431, 86 P.2d 

972, 974 (1939); La Fond v. Basham, 683 P.2d 367, 369 

(Colo. App. 1984); Krendl & Krendl, supra at 28-43. 

Micciche, 727 P.2d at 372-73. 

A variety of factors are to be considered by the court in 

making the ultimate determination whether recognition of the 

separate corporate entity would result in injustice in a given 

case. 1 The determination of whether a subsidiary is an 

instrumentality of the parent corporation is primarily a question 

of fact based upon consideration of the following factors: 

1 Staats asserts the district court considered only the lack of 

corporate formalities in dismissing its claim of piercing the 

corporate veil. Appellant's brief at 32. We do not read the 

district court's decision to be based solely on the lack of legal 

corporate formalities. Regardless 6f the basis of the district 

court's decision, we have reviewed the evidence de novo based on 

all of the factors discussed in Fish v. East, 114 --P.~177, 191 

(10th Cir. 1940). 

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(1) The parent corporation owns all or majority of 

the capital stock of the subsidiary. (2) The parent and 

subsidiary corporations have common directors or 

officers. (3) The parent corporation finances the 

subsidiary. (4) The parent corporation subscribes to 

all the capital stock of the subsidiary or otherwise 

causes its incorporation. (5) The subsidiary has 

grossly inadequate capital. (6) The parent corporation 

pays the salaries or expenses or losses of the 

subsidiary. (7) The subsidiary has substantially no 

business except with the parent corporation or no assets 

except those conveyed to it by the parent corporation. 

(8) In the papers of the· parent corporation, and in the 

statements of its officers, "the subsidiary" is referred 

to as such or as a department or division. (9) The 

directors or executives of the subsidiary do not act 

independently in the interest of the subsidiary but take 

direction from the parent corporation. (10) The formal 

legal requirements of the subsidiary as a separate and 

independent corporation are not observed. 

Fish v. East, 114 F.2d 177, 191 (10th Cir. 1940) (applying 

Colorado law). Fish has been cited with approval in Friedman & 

Son, Inc. v. Safeway Stores, 712 P.2d 1128, 1131 (Colo. App. 

1985), and New Sheridan Hotel & Bar, Ltd. v. Commercial Leasing 

Corp., 645 P.2d 868, 869 (Colo. App. 1982). All of the factors 

discussed in Fish need not be present for a court to determine a 

subsidiary is the alter ego of the parent corporation. Friedman, 

712 P.2d at 1131: see also DeWitt Truck Brokers v. w. Ray Flemming 

Fruit Co., 540 F.2d 681, 687 (4th Cir. 1976). 

We have reviewed the record in the light most favorable to 

Staats under the criteria cited in Fish. Pioneer owns all of the 

capital stock of Uravan. The fact that Pioneer owns all the stock 

of Uravan, standing alone, is an insufficient basis to depart from 

the general rule that the corporation and its shareholder are to 

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be treated as distinct legal persons. Industrial Comm'n v. 

Lavach, 165 Colo. 433, 439 P.2d 359, 361 (Colo. 1968). Pioneer 

and Uravan shared some common officers and directors. Exhibits 

45, 47, 48, 49, 50, 51. Uravan and Nuclear also shared some 

common officers. Exhibits 30, 45, 47, 48, 50, 102. The identity 

of officers and directors is insufficient to allow corporate veil 

piercing. Quarles v. Fuqua Indus., Inc., 504 F.2d 1358, 1364 

(10th Cir. 1974) (applying Kansas law); Taylor v. Standard Gas & 

Elec. Co., 96 F.2d 693, 705 (10th Cir. 1938) (applying Oklahoma 

law), rev'd on other grounds, 306 U.S. 307 (1939). Uravan's 

financial statements show it received financial advances from 

Pioneer of $456,000 in 1982, Exhibit 103; $292,000 in 1981, 

Exhibit 104; $3,887,000 in 1980, Exhibit 105; and $5,000,000 in 

1979, Exhibit 106. These advances ~ere treated as long-term loans 

on Uravan's financial statements. Pioneer will not be exposed to 

liability for the obligations of Uravan when Pioneer contributes 

funds to Uravan for the purpose of assisting Uravan in meeting its 

financial obligations and not for the purpose of perpetuating a 

fraud. Hill v. Dearmin, 609 P.2d 127, 128 (Colo. App. 1980). The 

record contains no evidence these advances were made for 

fraudulent purposes. 

Based solely on exhibits and no elucidative testimony, Staats 

asserts Uravan is undercapitalized. The obligation to provide 

adequate capital begins with incorporation and is a continuing 

obligation thereafter during the corporation's operations. DeWitt 

Truck Brokers, 540 F.2d at 686. Inadequate capitalization means 

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capitalization very small in relation to the nature of the 

business of the corporation and the risks the business necessarily 

entails. J-R Grain Co. v. FAC, Inc., 627 F.2d 129, 135 (8th Cir. 

1980); accord Anderson v. Abbott, 321 U.S. 349, 362 (1944); DeWitt 

Truck Brokers, 540 F.2d at 685; Luckenbach S.S. Co. v. W.R. Grace 

& Co., 267 F. 676, 681 (4th Cir.), cert. denied, 254 U.S. 654 

(1920). Uravan was incorporated in 1975. Exhibit 51. Uravan's 

1979 financial· statements show $10,000 of capital stock had been 

issued as of December 31, 1978. In addition to the paid in 

capital, Uravan had an unappropriated earned surplus of $622,595 

and $26,898,678 in assets consisting of accounts receivable, 

inventories, plants, and miscellaneous other assets. Exhibit 106. 

Our review of the record shows Staats failed to establish what an 

adequate level -0f capitalization would be in a uranium exploration 

business, leaving ·the jury and this court to speculate whether 

Ura van was undercapitalized. Staats' evidence on 

undercapitalization was insufficient to create an issue for the 

jury. 

Staats contends that Uravan did not act independently of 

Pioneer because Uravan's operations manager, Mr. Robison, reported 

the status of the Staats' mining project directly to a Nuclear 

vice president, Mr. Ruhfus, see, ~' Exhibits 129, 130; and 

Uravan's development of the San Miguel mill project was subject to 

approval by Pioneer's board of directors. Exhibit 28. 

Exercise of some degree of supervision by a 100% 

stockholder is not sufficient to render the subsidiary 

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Appellate Case: 86-2626 Document: 01019565559 Date Filed: 06/19/1989 Page: 8 
its instrumentality or alter ego. "That a stockholder 

should show concern about the company's affairs, ask for 

reports, sometimes consult with its officers, give 

advice, and even object to proposed action is but the 

natural outcome of a relationship * * *·" United States 

v. Elgin, J. & E. Ry., 298 U.S. 492, 503-504, 56 s.ct. 

841, 844, 80 L.Ed. 1300 (1936). In Steven v. Roscoe 

Turner Aeronautical Corporation, supra, 324 F.2d [157,] 

162 [7th Cir. 1963], similar supervisory concern was 

held to be "sound business practice" which did not raise 

"a genuine factual issue under the instrumentality 

rule." Such participation in a subsidiary's affairs 

does not amount to the domination of day to day business 

decisions and disregard of the corporate entity 

necessary to impose liability on a parent. Davis v. 

John R. Thompson Co., 239 Ill. App. 469, 475 (1926); 

Dregne v. Five Cent Cab Co., 381 Ill. 594, 602-603, 46 

N.E.2d 386 (1943); United States v. Reading Co., 253 

U.S. 26, 62-63, 40 s.ct. 425, 64 L.Ed. 760 (1920). 

American Trading & Prod. Corp. v. Fischbach & Moore, Inc., 311 F. 

Supp. 412, 415 (N.D. Ill. 1970). 

Staats contends corporate assets were commingled when Uravan 

began liquidating its uranium assets. A review of the record 

indicates Uravan was in charge of the San Miguel Mill project, and 

held title to the site of the uranium mill. Pursuant to a 

settlement agreement among Uravan, Nuclear and Philadelphia 

Electric Company (PEC), PEC paid Nuclear $94,000 as reimbursement 

for the final installment on the millsite property. Exhibit 39. 

Without more evidence we cannot determine whether this payment was 

without consideration or otherwise was improper. The transfer 

pursuant to the settlement agreement of other Uravan assets to 

Umetco by C.D. Culver, the president of Pioneer, is without 

significance because Culver was also the president of Uravan at 

the time of these transfers. Exhibits 42, 43, 44. Staats has 

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failed to of fer any evidence the transfer of other Uravan assets 

to Nuclear's Creede project was improper. Exhibit 108. We are 

unable to determine the disposition of Uravan assets listed in 

Exhibits 109 and 110. Even if we assume these transactions prove 

commingling of assets, this factor alone is an insufficient basis 

to impose liability on Pioneer and Nuclear. See Harding v. 

Lucero, 721 P.2d 695, 698 (Colo. App. 1986) (in which application 

·of alter ego doctrine was based on control of corporation, 

commingling of corporate and personal assets, and sale of 

corporate property by president in his personal capacity); and 

Ward v. Cooper, 685 P.2d 1382, 1383 (Colo. App. 1984) (in which 

the court considered several factors in 

commingling of assets}. 

addition to the 

Staats contends Pioneer's consolidated financial reports with 

its subsidiary establish Uravan is an instrumentality of Pioneer. 

This argument is without merit. The Internal Revenue Code allows 

a parent corporation to file consolidated income tax returns with 

its subsidiaries when the parent owns at least eighty percent of 

the subsidiary. 26 U.S.C. § 1501 (1982). Section 1501 allows a 

parent corporation to shelter taxable income from a profitable 

subsidiary by offsetting it against losses from an unprofitable 

subsidiary. It is a common business practice. Additionally, 

Uravan maintained separate records and financial reports. Where 

Staats has failed to prove any dominion or control by either 

Pioneer or Nuclear over Uravan, we do not consider the fact of 

consolidated financial reports to be a sufficient basis to impose 

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liability under the alter ego doctrine. Compare Sabine Towing & 

Transp. Co. v. Merit Ventures, Inc., 575 F. Supp. 1442, 1447 (E.D. 

Tex. 1983) (consolidated income tax returns becomes a factor in 

proving the alter ego relationship when corporate domination has 

been established). 

In order to hold Pioneer liable for Uravan's obligations, 

Staats must prove the corporate entity was used to defeat public 

convenience, or to justify or protect wrong, fraud or crime. Fink 

v. Montgomery Elevator Co., 161 Colo. 342, 350, 421 P.2d 735, 739 

(1966). The possibility that Staats may have difficulty enforcing 

a j~dgment against Uravan alone is not the type of injustice that 

warrants piercing the corporate veil. Luckett v. Bethlehem Steel 

Corp.,_ 618 F.2d 1373, 1379 (10th Cir. 1980) (applying Oklahoma 

law). Staats argues it has proven injustice because unsecured 

creditors, like itself, are not required to "accept·as a risk 

without remedy the possibility that a corporation will transfer 

the assets of its business to its shareholders without 

consideration," citing Ficor, Inc. v. McHugh, 639 P.2d 385, 394 

(Colo. 1982). However, Staats has failed to present evidence that 

Uravan transfered its assets without consideration. We have found 

no other evidence in the record establishing fraud or some other 

wrong. We hold the district court did not err in directing a 

verdict for Pioneer and Nuclear on Staats' claim of piercing the 

corporate veil, alter ego, instrumentality or agency. Based upon 

the evidence presented by plaintiff and all inferences to be drawn 

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therefrom, reasonable minds could not differ on the conclusion. 

The evidence is clearly insufficient. 

II 

Fraudulent Conveyances 

Staats asserts the district court erred in directing a 

verdict on its claim that Uravan fraudulently conveyed its assets 

to Pioneer and Nuclear to hinder creditors. In reviewing the 

propriety of the directed verdict, we must review the evidence and 

inferences therefrom in the light most favorable to Staats and 

determine whether an issue for the jury exists on the claim of 

fraudulent conveyances. Motive Parts Warehouse, 774 F.2d at 385-

86. In this diversity case we apply Colorado law. 

Colo. Rev. Stat. § 38-10-117 (Repl. Vol. 1982) defines 

fraudulent conveyances as every conveyance of land br goods made 

with the intent to hinder, delay, or defraud creditors of their 

lawful suits, damages or debts. 2 The question of fraudulent 

intent, under this statute, is a question of fact, Colo. Rev. 

2 Section 38-10-117 states: 

Conveyances to defraud creditors void. Every 

conveyance or assignment in writing or otherwise of any 

estate or interest in lands, goods, or things in action 

or of any rents and prof its issuing thereupon, and every 

charge upon lands, goods, or things in action or upon 

the rents and profits thereof made with the intent to 

hinder, delay, or defraud creditors or other persons of 

their lawful suits, damages, forfeitures, debts, or 

demands, and every bond or other evidence of debt given, 

suits commenced, or decree or judgment suffered with the 

like intent as against the person so hindered, delayed, 

or defrauded shall be void. 

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Stat. § 38-10-120 (Repl. Vol. 1982), but this provision does not 

deprive the courts of the power to rule as a matter of law that 

the facts are insufficient to prove fraudulent intent. People ex 

rel. Wilson v. Court of Appeals, 28 Colo. 442, 65 P. 42, 43 (1901) 

(citing Burr v. Clement, 9 Colo. 1, 9 P. 633, 639 (1885)). A 

conveyance is not fraudulent solely because of lack of valuable 

consideration. Colo. Rev. Stat. § 38-10-120. 

Staats 

fraudulent. 

has the burden of proving the conveyances were 

Sickman v. Abernathy, 14 Colo. 174, 23 P. 447, 451 

(1889). Staats contends that Pioneer and Nuclear have the burden 

of proving the conveyances were for valuable consideration and 

without intent to hinder creditors because of their relationship 

as parent and subsidiary corporations. Staats has cited no 

authority for this proposition other than cases based on family 

relationships. See United States v. Morgan, 554 F. Supp. 582, 

585-86 (D. Colo. 1982) (husband-wife conveyance}; Myers v. Hayden, 

82 Colo. 98, 257 P. 351 (1927) (father-daughter conveyance). We 

find these cases distinguishable because the relationship of 

parent and subsidiary corporations is not analogous to the 

relationship between family members. Parent and subsidiary 

corporations are treated as independent legal entities unless the 

corporate veil is pierced because the corporations have ignored 

their separate identities. Staats failed to establish the 

liability of Pioneer and Nuclear under the alter ego doctrine; 

likewise, it failed to establish the close relationship between 

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these entities necessary to shift the burden of proof to them on 

the claim of fraudulent conveyances. 

Staats' proof of fraudulent conveyances was based solely upon 

exhibits admitted without any testimony explaining the 

significance of the exhibits. Exhibit 39 is a settlement 

agreement dated July 31, 1984 among Uravan, Nuclear, PEC, and 

Umetco Minerals Corporation. The settlement agreement terminates 

a 1978 letter agreement whereby PEC made advance payments to 

Uravan for development of uranium properties. The letter 

agreement grants PEC the right to receive certain assets upon 

Uravan's notice that it will no longer perform under the letter 

agreement. The settlement agreement conveys the San Miguel 

millsite and AE-26 uranium property to PEC. PEC and Uravan convey 

other uranium properties to Umetco. The settlement agreement 

provides PEC will pay $94,000 to Nuclear for the final installment 

on the millsite. This settlement agreement alone does not 

indicate the transaction is fraudulent or made with the intent to 

hinder or delay creditors. Staats has presented no evidence to 

overcome the presumption of innocence in this transaction. 

Exhibit 108 lists equipment and supplies transferred to 

Nuclear's Creede project, Exhibit 48 at 28, from Uravan in 1983 

and 1984. Exhibits 109 and 110 list Uravan's vehicles and mining 

equipment, but we cannot determine the disposition of these assets 

from the exhibits. These exhibits without further development by 

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testimony fail to show Pioneer's or Nuclear's intent to hinder, 

delay or defraud creditors. 

Exhibits 103, 104, 105 and 106 are Uravan's financial 

statements for 1979 through 1982. These financial statements show 

losses in 1981 and 1982. Staats asserts these losses indicate 

Uravan's insolvency and therefore any conveyances after 1982 were 

fraudulent. Staats' argument ignores the fact that Colorado has 

not adopted the balance-sheet approach to insolvency. Love v. 

Olson, 645 P.2d 861, 864 (Colo. App. 1982). The Colorado courts 

treat insolvency as a fact question based on several factors. 

These factors include: whether a debtor, in the ordinary course 

of its business, is able to pay its debts with money or by 

application of its other assets; whether the debtor has so little 

property left after the alleged fraudulent conveyance that its 

creditors' ability to collect their debts through judicial process 

is impaired; and the type of business in which the debtor is 

engaged. Id. Staats presented no evidence on Uravan's ability to 

pay its debts in the ordinary course of business, nor whether 

Uravan's ass~ts remaining after the conveyance to PEC, Umetco or 

Nuclear are insufficient to pay other creditors, nor on the nature 

of finances in the uranium business. Without more, these 

exhibits, which establish only the existence of conveyances and 

operating losses for two years, fail to meet Staats' burden of the 

proving conveyances hindered, delayed or defrauded creditors 

under Colo. Rev. Stat. § 38-10-117. The district court's order 

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directing a verdict for Pioneer and Nuclear on Staats' claim of 

fraudulent conveyance is affirmed. 

III 

Misrepresentation 

Staats claims the district court erred in dismissing by 

directed verdict its claim that Pioneer and Nuclear negligently or 

fraudulently misrepresented they would install a vent hole at the 

mine Staats was developing for Uravan. 

To establish a claim of negligent misrepresentation, Staats 

had to prove the following elements: 

"One who, in the course of his business 

profession or employment, or in any other· 

transaction in which he has a pecuniary interest, 

supplies false information for the guidance of 

others in their business transactions, is subject 

to liability for loss caused to them by their 

justifiable reliance upon the information, if he 

fails to exercise reasonable care or competence in 

obtaining or communicating the information." 

First Nat'! Bank v. Collins, 44 Colo. App. 228, 616 P.2d 154, 155 

(1980) (quoting Restatement (Second) Torts§ 552 (1976)). The 

elements of a cause of action for fraudulent misrepresentation 

are: (1) a representation; (2) of material facts; (3) that is 

false or misleading; (4) made with knowledge of the falsity or 

with indifference to its truth or falsity; (5) the party claiming 

fraud must have relied on the representation; (6) have had a right 

to have relied on it; and (7) acted in accordance with the 

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reliance; and (8) in doing so suffered damage. See Zimmerman v. 

Loose, 162 Colo. 80, 88, 425 P.2d 803, 807 (1967) (citing Morrison 

v. Goodspeed, 100 Colo. 470, 68 P.2d 458, 462, 71 P.2d 154 

(1937)). 

Viewing the evidence in a light most favorable to Staats, we 

find Staats failed to establish an issue for the jury on its claim 

of negligent or fraudulent misrepresentation. The evidence 

established that Staats entered into the mine development contract 

solely with Uravan. Exhibit 1. Staats' officers met with Mr. 

Robison, Mr. Bethurum and Mr. Ruhfus in January 1981 to discuss 

the vent hole. Exhibit 4. Mr. Robison was the manager of 

operations for Uravan. 

both Uravan and Nuclear. 

Mr. Bethurum was the vice president of 

Mr. Ruhfus was the manager of operations 

for Nuclear. Mr. Robison's memorandum of the meeting indicates: 

"We committed to providing Staats with two working faces and a 

vent hole as soon as possible." Exhibit 4. A Staats employee 

testified: "As I understood it, [the commitment for providing the 

vent hole] came from all those parties concerned [both Nuclear and 

Uravan]." 

The evidence presented by Staats fails to establish Pioneer's 

involvement in the promise to provide a vent hole. As to the 

claim against Nuclear, even if Messrs. Bethurum and Ruhfus were 

participating in the January meeting in their capacities as 

Nuclear employees, Staats has failed to prove Nuclear was acting 

in the course of its business or had a pecuniary interest in the 

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mine, or that Staats justifiably relied on their representation to 

.provide a vent hole where Nuclear was not a party to the mining 

contract. Additionally, a claim of misrepresentation, either 

negligent or fraudulent, cannot be predicated upon the mere 

nonperformance of a promise or contractual obligation or upon the 

failure to fulfill an agreement to do something at a future time. 

State Bank of Wiley v. States, 723 P.2d 159, 160 (Colo. App. 

1986). To render the nonperformance of a promise to be performed 

in the future fraudulent, the promise to perform must be 

accompanied by an intent not to perform. Farmers Union Co-op. 

Royalty Co. v. Southward, 183 Okla. 402, 82 P.2d 819, 822 (1938) 

(cited with approval in State Bank of Wiley, 723 P.2d at 160). 

Staats presented no evidence of Nuclear's intent, prior to the 

January 1981 meeting, not to provide the vent hole as allegedly 

promised. Where Staats failed to prove essential elements of 

these claims of misrepresentation, the district court did not err 

in directing verdicts for Nuclear and Pioneer on both the 

negligent and fraudulent misrepresentation claims and on any 

general tort claim of Staats based on agency. 

Likewise, the district court properly directed a verdict for 

Nuclear and Pioneer on Staats' claims for punitive damages. In 

order to be entitled to punitive damages, Staats had to prove the 

conduct of Pioneer and Nuclear caused actual damages. Failure to 

prove the existence of actual damages means that no punitive 

damages may be recovered. Leo Payne Pontiac, Inc. v. Ratliff, 29 

Colo. App. 386, 486 P.2d 477, 479 (1971), rev'd on other grounds, 

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178 Colo. 361, 497 P.2d 997 (1972); Colo. Rev. Stat. § 13-21-

102(l)(a) (Repl. Vol. 1987). There was no potential for actual 

damages where all of Staats' claims against Nuclear and Pioneer 

had been dismissed. 

IV 

Prejudgment Interest 

Staats asserts the district court erred in denying Staats' 

request for prejudgment interest pursuant to Colo. Rev. Stat. § 5-

12-102 (Supp. 1988) on the verdict of $629,512 awarded against 

Uravan on Staats' breach of contract claim. 3 Initially the 

district court awarded prejudgment interest of eight percent per 

year. Subsequently the district court amended the judgment and 

deleted all prejudgment interest. Lowell Staats Mining Co. 1 645 

F. Supp. at 255. 

In diversity actions the federal court looks to state law in 

order to determine the allowability of prejudgment interest on a 

recovery. Casto v. Arkansas-Louisiana Gas Co., 562 F.2d 622, 625 

(10th Cir. 1977). The right to interest, independent of an 

agreement to pay it, is statutory. Weaver v. First Nat'l Bank, 

138 Colo. 83, 330 P.2d 142, 149 (1958). The mining contract 

between Staats and Uravan contains no agreement for the payment of 

3 Originally Staats claimed prejudgment interest without 

distinguishing whether the request was based on moratory interest 

or the statute. Complaint at 5. The district court dismissed 

Staats' request for interest on both grounds. Lowell Staats 

Mining Co., 645 F. Supp. 254. Staats has appealed only the 

district court's denial of interest based on the statute. 

Appellant's brief at 45-49. · 

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interest on any judgment awarded. Exhibit 1. Colo. Rev. Stat. 

§ 5-12-102 makes the following pertinent provisions for the award 

of statutory interest: 

(1) Except as provided in section 13-21-101, 

C.R.S., when there is no agreement as to the rate 

thereof, creditors shall receive interest as follows: 

(a) When money or property has been wrongfully 

withheld, interest shall be an amount which fully 

recognizes the gain or benefit realized by the person 

withholding such money or property from the date of 

wrongful withholding to the date of payment or to the 

date judgment is entered, whichever first occurs; or, at 

the election of the claimant. 

(b) Interest shall be at the rate of eight percent 

per annum compounded annually for all moneys or the 

value of all property after they are wrongfully withheld 

or after they become due to the date of payment or to 

the date judgment is entered, whichever first occurs. 

(2) When there is no agreement as to the rate 

thereof, creditors shall be allowed to receive interest 

at the rate of eight percent per annum compounded 

annually for all moneys after they become due on any 

bill, bond, promissory note, or other instrument of 

writing, or money due on mutual settlement of accounts 

from the date of such settlement and on money due on 

account from the date when the same became due. 

(3) Interest 

subsection (1) of 

unliquidated at the 

the time when due. 

shall be allowed as provided in 

this section even if the amount is 

time of wrongful withholding or at 

The district court, after reviewing this statute and the various 

Colorado Court of Appeals cases construing this section, 

determined the provisions of § 5-12-102 were not applicable based 

upon the following reasoning: 

I cannot, however, agree with the loose construction 

which those cases [Isbill Associates, Inc. v. City and 

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County of Denver, 666 P.2d 1117 (Colo. App. 1983); 

LaFond v. Basham, 683 P.2d 367 (Colo. App. 1984); and 

Hott v. Tillotson-Lewis Construction Co., 682 P.2d 1220 

(Colo. App. 1983)] have bestowed on the statute. 

Specifically, I take issue with applying the statutory 

phrase "money or property ••• withheld" to all gardenvariety breach of contract cases. Such an 

interpretation strays too far from the plain, ordinary 

meaning of the statutory language. I disagree with 

Isbill and its progeny to the extent they have expanded 

§ 5-12-102 to a point where all contract actions become 

actions for "money ••• withheld." 

Lowell Staats Mining Co., 645 F. Supp. at 259. The district court 

did not err in reserving the issue of interest computation to 

itself. Wood v. Hazelet, 77 Colo. 442, 237 P. 151, 152 (1925). 

[W]here it is unquestionably clear that the jury allowed 

no interest, or where the court reserved the question of 

allowance of interest until after verdict, and it is 

clearly ascertainable from the verdict or from 

uncontroverted facts, the court may make the 

computation, and add.the interest to the verdict. 

Id. In the case of a general verdict, the district court is 

required to make findings regarding the entitlement to prejudgment 

interest, the rate of interest and the date from which interest 

accrues. Tripp v. Cotter Corp., 701 P.2d 124, 126 (Colo. App. 

1985). Accord Pierson v. United Bank, 754 P.2d 431, 432 (Colo. 

App. 1988). The district court found Staats was not entitled to 

prejudgment interest under the statute. We disagree. 

In Colorado the determination whether a particular factual 

circumstance falls within the prejudgment interest statute is a 

question of law. Rocky Mountain Mach. Co. v. First Nat'l Bank, 

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767 F.2d 722, 725 (10th Cir. 1985); Colorado Performance Corp. v. 

Mariposa Assocs., 754 P.2d 401, 410 (Colo. App. 1987); Tripp, 701 

P.2d at 126-27 (citing Hayes v. North Table Mountain Corp., 43 

Colo. App. 467, 608 P.2d 830, 832 (1980)). Therefore we review 

under a de novo standard the district court's decision to deny 

Staats' request for prejudgment interest under Colorado law. 

Colorado Performance, 754 P.2d at 410. Cf. U.S. Industries, Inc. 

v. Touche Ross & Co., 854 F.2d 1223, 1255 n.43 (10th Cir. 1988), 

in which the court applied an abuse of discretion standard of 

review to determine the award of prejudgment interest based on 

Utah law and federal statutes. 

In the absence of a state supreme court ruling, a federal 

court must follow an intermediate state court decision unless 

other authority convinces the federal court that the state supreme 

court would decide otherwise. Delano v. Kitch, 663 F.2d 990, 996 

(10th Cir. 1981), cert. denied, 456 U.S. 946 (1982) (citing West 

v. American Tel. & Tel. Co., 311 U.S. 223, 237 (1940)); accord 

Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569, 1574 (10th Cir. 

1984). The Supreme Court states: 

In [the absence of a state supreme court decision] a 

federal court is not free to reject the state rule 

merely because it has not received the sanction of the 

highest state court, even though it thinks the rule is 

unsound in principle or that another is preferable .••. 

[I]t is the duty of the [federal court] in every case to 

ascertain from all the available data what the state law 

is and apply it rather than to prescribe a different 

rule, however superior it may appear from the viewpoint 

of "general law" and however much the state rule may 

depart from prior decisions of the federal courts. 

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West, 311 U.S. at 236-37. 

The district court's decision to deny Staats' request for 

prejudgment interest ignores the state appellate court decisions 

which have allowed other claimants to recover prejudgment interest 

in similar situations. The district court has failed to cite us 

to other authority which convinces it that the Colorado Supreme 

Court would decide otherwise than as the Colorado Court of Appeals 

in Isbill, LaFond or Hott. 

In Isbill, the Colorado Court of Appeals was asked to review 

the propriety of a district court's award of prejudgment interest 

in a proper~y damage case. An engineering consulting firm prought 

an action to recover for water damage to technical draws. ·The 

court found the statutory language that prejudgment interest would 

be awarded only when "money or property has been wrongfully 

withheld" to be unclear, and resorted to legislative history to 

determine the intent of the legislature in using this language. 

The court stated: 

A senator who was a joint sponsor of the bill which 

repealed and reenacted § 5-12-102 in its present form 

explained, during hearings on the bill, the previous 

Colorado law on prejudgment interest, the changes in the 

statute, and its precise implications. He explained 

that the new section was "an attempt to clear up the 

mistakes of the past." Specifically he noted that: 

"All plaintiffs, or 

counterclaim, for that matter, 

interest from the time the action 

the time the suit was filed, 

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defendants who 

are entitled to 

accrued, not from 

not from the time 

Appellate Case: 86-2626 Document: 01019565559 Date Filed: 06/19/1989 Page: 23 
judgment was entered, but from the time they were 

wronged.... The present state of the law 

encourages the wrongdoer to stall because in some 

cases they have the money until judgment or 

settlement." 

Senate Hearings on S. 463 (March 12, 1979). 

Isbill, 666 P.2d at 1121-22. Based on its understanding of the 

legislative history, the court affirmed the award of prejudgment 

interest on property damages from the date of injury. The court's 

liberal construction of the statute has been cited with approval 

in Colorado Performance, 754 P.2d at 411; and Bassett v. Eagle 

Telecommunications, Inc., 750 P.2d 73, 75 (Colo. App. 1987). 

In Hott, the plaintiffs brought an action for breach of a 

construction contract, but the trial court failed to award them 

prejudgment interest. Upon appeal, the Colorado Court of Appeals 

concluded for the same reasons stated in Isbill that "prejudgment 

interest may be awarded in a breach of construction contract case, 

even if the amount is unliquidated at the time of the wrongful 

withholding." Hott, 682 P.2d at 1223. In LaFond, the plaintiffs 

brought an action against a construction contractor for breach of 

contract. The Colorado Court of Appeals affirmed the award of 

prejudgment interest from the time the action accrued, citing 

Isbill. La Fond, 683 P.2d at 370. 

Based upon our reading of these three cases, we can find no 

indication that the Colorado Supreme Court would not follow these 

cases and award prejudgment interest on the breach of contract 

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claim of Staats. An award of prejudgment interest is also 

supported by the Colorado Court of Appeals' decision in Jasken v. 

Sheehy Constr. Co., 642 P.2d 58 (Colo. App. 1982), in which a 

subcontractor brought an action against ·a general contractor to 

recover expenses and lost prof its caused by the general 

contractor's unilateral termination of the contract. The Court of 

Appeals upheld the trial court's award of prejudgment interest 

from the date of the general contractor's refusal to pay, stating: 

"[T]he court did not err when it awarded interest on the 

wrongfully withheld sum even though the exact amount was 

unliquidated until the date of judgment." Id. at 60. Under 

Colorado case law, we believe Staats is entitled to prejudgment 

interest under the provisions of S 5-12-102. 

Staats asserts it is entitled to an interest rate in excess 

of the eight percent provided by statute and that the district 

court erred in excluding its Exhibit 119 which calculated interest 

on actual damages at 107 percent of the prime rate. Where the 

district court has reserved for itself the determination of 

interest, it was not error for the district court to exclude 

Exhibit 119 from the jury's consideration. 

The Colorado prejudgment interest statute allows the court to 

award interest in "an amount which fully recognizes the gain or 

benefit realized by the person withholding such money," S 5-12-

102(1) (a), or at the statutory rate of eight percent per annum 

compounded annually, S 5-12-102(l)(b). The rate of interest is 

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the statutory rate in the absence of specific proof of the benefit 

derived by the defendant from its breach. Davis Cattle Co., Inc. 

v. Great Western Sugar Co., 393 F. Supp. 1165, 1194 (D. Colo. 

1975), aff'd, 544 F.2d 436 (10th Cir. 1976), cert. denied, 429 

U.S. 1094 (1977). In our review of the record we could not find 

any specific proof of the benefit Uravan gained by wrongfully 

withholding Staats' lost profits after November 1, 1981. Exhibits 

32 and 33 are interoffice memoranda from Mr. Ruhfus to Mr. 

Bethurum, both officers of Nuclear. Each memorandum loosely 

refers to the cost of money being twenty percent or ten percent 

above the inflation rate for purposes of estimating a settlement 

proposal with Staats. These exhibits are insufficient to 

establish an alternate interest rate for Uravan, because the 

exhibits do not refer to Uravan and the interest rates are mere 

talk for the purpose of discussing a settlement position rather 

than a rate Uravan was obligated to pay. Exhibit 45 is Pioneer's 

annual financial report for 1980. It lists one interest rate at 

107 percent above prime rate. Staats has failed to make any 

showing that this rate should apply to Uravan, a separate 

corporate entity. Where Staats ·has failed to prove Uravan's cost 

of money, Staats is entitled to interest at the statutory rate of 

eight percent per annum compounded annually. § 5-12-102(l)(b). 

We were unable to determine on the record before us the date 

from which interest accrues. We remand this case for 

determination of that date and entry of prejudgment interest 

consistent with this opinion. 

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( 

v 

We AFFIRM the district court's directed verdict dismissing 

Staats' third-party complaint against Pioneer and Nuclear. We 

REVERSE the district court's denial of prejudgment interest and 

remand for entry of an order consistent with this decision. 

AFFIRMED IN PART and REVERSED IN PART. 

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