* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### MAR 25 1999 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

ROCKY MOUNTAIN MICROSYSTEMS, INC. a Colorado corporation, Plaintiff-Appellee,

v. PUBLIC SAFETY SYSTEMS, INCORPORATED, a Virginia corporation, Defendant-Appellant. No. 98-1059 (D.C. No. 95-WM-726) (D. Colo.)

ORDER AND JUDGMENT *

Before PORFILIO , BALDOCK , and HENRY , Circuit Judges.

After examining the briefs and appellate record, th is panel has determined unanimously that oral argument would not materiallyassist the determination of2--

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). T he case is therefore ordered submitted without oral argument. Defendant Public Safety Systems, Inc. (PSSI) appeal s from an adverse judgment entered after a bench trial on plaintiff R ocky Mountain Microsystems, Inc.’s (RMMI’s) claims for breach of contract and q uantum meruit. Pursuant to contractual stipulation, Colorado law controls in this diversity action. See Appellant’s Appendix (App.) at 270. We review the district court’s legal conclusions de novo and its factual findings for clear error, see Salve Regina College v. Russell , 499 U.S. 225, 231, 233 (1991), and affirm for sub stantially the reasons stated in its opinion, see generally Rocky Mountain Microsystems, Inc. v. Public Safety Sys., Inc. , 989 F. Supp. 1352 (D. Colo. 1998). The district court’s extensive discussion of the ev idence need not be repeated in full here. Some discussions of the fac ts are necessary to understand the outcome. PSSI contracted to provide the City a nd County of Denver with an integrated computer-aided dispatching (“CAD”) syste m for the city’s fire, police, and emergency medical service departments. PSSI th en subcontracted with RMMI, which agreed to design and install combined h ardware-and-software devices, called “Interface Modules,” to connect the city’s existing dispatching equipment with the CAD system PSSI was to provide. The PSSI-RMMI agreement set out a payment schedule tied to three performance “milestones.”3--

The first, consisting of twenty-five percent of the contract price due (and paid) upon execution of the contract, is not in dispute. This case involves RMMI’s effort to obtain payment for the second and third m ilestones, regarding delivery/installation and demonstration/acceptance of the Interface Modules. PSSI, whose contract with the city was definitivelyterminated after RMMI had invoiced the last two milestones, defended against the suit on the basis that RMMI had not satisfied certain conditions precedentto payment. Delivery/Installation Section 3.3 of the parties’ contract states that RM MI “shall deliver the Hardware [and associated software] to PSSI and inst all the Hardware at the Facilities.” App. at 259; see also id. at 260. “Facilities” is elsewhere specified to be the Combined Communications Center for the city’ s fire, police, and emergency medical services. See id. at 258, 281. The second milestone payment, consisting of fifty percent of the contract total, was due “[u]pon completion of the installation.” Id. at 280. PSSI contends RMMI failed to comply with a contractual duty to deliver the Hardware to PSSI independently of the delivery and installation at the Center. The district court rejected PSSI’s dual-delivery po sition, reading the quoted provision of section 3.3 instead to contemplate a s ingle delivery and installation1 Our agreement with the district court over the impo rt of the contract’s

delivery provision obviates some collateral points argued by PSSI. For example, PSSI’s contention that it had not formally authoriz ed anyone at the Center to receive delivery from RMMI merely reflects an omiss ion on PSSI’s part, not any noncompliance by RMMI, which fulfilled its contract ual duty when it completed delivery to the specified destination and notified PSSI of that fact by invoice. See also Colo. Rev. Stat. § 4-2-503. And, as PSSI itself s tates, the “title” issue discussed in its brief is immaterial. See Colo. Rev. Stat. § 4-2-401. 4-- at the Center in Denver, where PSSI’s CAD system was located. See Rocky Mountain Microsystems, Inc. , 989 F. Supp. at 1356-57. We agree. In addition to the points made by the district court, we note that PSSI is located in Maryland, and no reasonable constructionof the parties’ contract would require a redundant delivery thousands of mil es from the actual installation site without fairly clear language to that effect i ncluding, for example, some indication of the location intended for such delive ry. The only site specified in the contract, however, is the Center in Denver. In deed, that location is repeated without qualification in the warranty section of the contract as well. See App. at 265 (Section 9.1 of the contract stating RMMI’s warranty of “the Hardware, at the time of delivery to the Facilities”). In addition to its objections regarding delivery, 1 PSSI contends RMMI did not complete installation of the Interface Modules, which was necessary to consummate its duty with respect to the second mile stone. PSSI argues, as a general matter, that the Interface Modules were notfully installed and functioning-5-

when further work was curtailed by the breakdown of PSSI’s relationship with the city and, more specifically, that the Interface Mod ules were never connected to PSSI’s CAD system, the last step necessary for comp lete installation. With respect to installation generally, the distric t court found from conflicting evidence that RMMI had completed its wo rk connecting the Interface Modules to the city’s equipment at the Center: “Ev erything was installed except for the connection to [PSSI’s CAD] computer.” Rocky Mountain Microsystems,
Inc. , 989 F. Supp. at 1355. The record is sufficient t o support this factual determination. As for connection to PSSI’s CAD sys tem, the undisputed evidence showed this step “could only be accomplished by [PSSI],” id. , because PSSI had expressly prohibited RMMI and city personnel from t ouching the CAD system. We agree with the district court that PSSI “should not be allowed to frustrate any of [RMMI’s] remaining performance by [its] own inaction.” Id. at 1357 (citing Comment 3 to Colo. Rev. Stat. § 4-2-311(3), which provides that “when . . . cooperation by one party is necessary to or materia lly affects the other party’s performance, but it is not seasonably forthcoming; th[is] subsection relieves the other party from the necessity for performance or e xcuses his delay in performance as the case may be”); see also I.M.A., Inc. v Rocky Mountain Airways, Inc. , 713 P.2d 882, 889 (Colo. 1986) (applying same gen eral rule of contract law, without relying on § 4-2-311).2 PSSI invokes the source code provision as a conditi on precedent, and hence

a complete defense, to payment of the second milest one; it has not argued for any set-off or damages for breach. Indeed, there is no evidence that RMMI’s nonperformance of this covenant--after the benefici ary city prohibited further efforts to complete the terminated PSSI contract--c aused PSSI any injury. -6- PSSI’s brief also includes a passing, conclusory ob jection that RMMI did not deposit the source code for the Interface Modul es’ software into escrow, as required by section 3.5 of the contract. We do notconsider this pertinent to the issue at hand. The source code was to be deposited in escrow “ [u]pon completion of the installation,” App. at 260 (emphasis added), not as part ofthe installation, and, in any event, the undisputed evidence showed t hat the purpose of this provision was to protect the city--not PSSI--shouldRMMI cease to be available for maintenance of the Interface Modules at some future date. Id. at 518-19, 557-59. Any suggestion that this obligation of RMM I was a “dominant purpose” of its contract with PSSI, and thus a condition precedent to a milestone payment, 2
is meritless. Johnson v. Benson , 725 P.2d 21, 24 (Colo. App. 1986). See generally Rohauer v. Little , 736 P.2d 403, 409 (Colo. 1987) (unless language “unequivocally” indicates otherwise, construction o f provision as promise rather than condition preferred). In sum, RMMI completed delivery and installation inaccordance with its legal and contractual duties. Accordingly, we affi rm the district court’s award of the second milestone payment.-7- Demonstration/Acceptance Acceptance, the third and last milestone, is govern ed by section 4 of the contract, which sets up a three-step scheme. First , RMMI “shall demonstrate to PSSI, or its designated representative, the functio ns of [the Interface Modules];” second, “following successful demonstration . . . P SSI shall, for a period of thirty days, conduct acceptance testing;” and third, “PSSI shall advise [RMMI] of any detected deficiencies” but “[i]f no such deficienci es are reported during said thirty day period, the Interface Module[s] shall be deemed accepted.” App. at
260. The district court found that RMMI demonstrated the Interface Modules “to the satisfaction of City representatives,” but also that they “were not designated representatives of [PSSI] pursuant to the contract.” Rocky Mountain Microsystems, Inc. , 989 F. Supp. at 1357. However, the court conclud ed these facts were ultimately nondispositive because, in any event, after receiving RMMI’s invoices for the second and third milestones , PSSI not only did not reject the Interface Modules but “acted as if it had fully accepted [RMMI’s] performance by billing Denver for the two milestone s . . . and then, following termination [of its contract with the city], demand ing payment from Denver for those milestones as ‘work completed.’” Id. Thus, the court concluded, “[PSSI’s] conduct following installation constituted acceptan ce of the goods under3 PSSI points out that it eventually responded to RMM I’s invoice by noting

that the “projects are currently in abeyance due to contractual differences [with] the City,” and that “PSSI has submitted a proposal to the city on which we are waiting to hear back.” App. at 353. Nowhere, thou gh, did PSSI disapprove, or even suggest any deficiency in, RMMI’s tendered pro ducts or performance. We cannot say the district court erred in finding no r ejection under the circumstances. -8- [Colorado’s version of the Uniform Commercial Code (UCC)] because it failed to timely reject the goods . . . and acted inconsisten t with [RMMI’s] continued ownership.” Id. (citing Colo. Rev. Stat. § 4-2-606). We agree with the district court’s UCC analysis. S ection 4-2-606(1)(c) provides that “[a]cceptance of goods occurs when th e buyer . . . [d]oes any act inconsistent with the seller’s ownership.” The cas e law reflects a straightforward implementation of this acceptance-by-conduct principle. See, e.g. , Lockhart v. Elm , 736 P.2d 429, 430-31 (Colo. Ct. App. 1987); Western Conference Resorts,
Inc. v. Pease , 668 P.2d 973, 976-77 (Colo. Ct. App. 1983); Surplus Elecs. Corp. v. Gallin , 653 P.2d 752, 753 (Colo. Ct. App. 1982). The iss ue is one of fact, and “[t]he resale of goods by a buyer is generally an a ct inconsistent with the seller’s ownership and, thus, is an important factor in dete rmining whether acceptance occurred.” Lockhart , 736 P.2d at 431. Here, the district court relied on PSSI’s efforts to effectively resell the Interface Modules to the city--long after delivery, installation, and invoicing by RMMI without rejection by PSSI 3 --as grounds for-9-

finding acceptance under § 4-2-606. That factual determination was not cle arly

erroneous. PSSI argues that it was improper for the district court to apply § 4-2-606 when the matter of acceptance was already addressed in the contract. As the court recognized, Colo. Rev. Stat. § 4-1-102(3) permits contracting parties to alter the effects of UCC provisions. However, there is nothi ng in the parties’ contract that touches on, much less preempts, the operation of § 4-2-606 on our facts. Simply because the contract specified one means of accepta nce does not bar application of the acceptance-by-conduct principle controlling here. See, e.g. , Pease , 668 P.2d at 975, 976-77 (assessing factual circumstances for application of § 4-2-606 although purchase agreement already contained accep tance provision conditioning approval upon inspection of goods). Once again, we affirm the district court’s determin ation that RMMI has established its right to the disputed milestone pay ment. Because we have upheld RMMI’s entitlement to full payment pursuant to the parties’ contract, properly supplemented by applicable UCC law, we need not rea ch the separate question of substantial performance. Attorney Fees Section 12.2 of the parties’ agreement provides that in the event of any dispute over breach, “[t]he non-prevailing party sh all be liable for costs and-10-

reasonable attorneys fees incurred by the prevailin g party.” App. at 268. Pursuant to this provision, RMMI has requested, without objection from PSSI, that we remand the case to enable the district court to augment its existing award under section 12.2 with an amount representing the additional fees and costs incurred on this appeal. We grant that request. Accordingly, the judgment of the United States District Court for the District of Colorado is AFFIRMED, and the cause is REMANDED for an award of appellate fees and costs consistent with the parties’ contractual stipulation.

Entered for the Court

Bobby R. Baldock Circuit Judge