Court Opinion

ID: 1039856
Source: CourtListenerOpinion
Date Created: 2013-09-04 19:08:53.870207+00
Date Added: 2024-06-11T12:49:08.169131
License: Public Domain

FILED
                                                  United States Court of Appeals
                     UNITED STATES COURT OF APPEALS       Tenth Circuit

                            FOR THE TENTH CIRCUIT                      September 4, 2013

                                                                      Elisabeth A. Shumaker
                                                                          Clerk of Court
iFREEDOM DIRECT, f/k/a New
Freedom Mortgage Corporation,

             Plaintiff-Appellant,
                                                          No. 12-4164
v.                                                (D.C. No. 2:09-CV-00205-DN)
                                                            (D. Utah)
FIRST TENNESSEE BANK
NATIONAL, successor-in-interest to
First Horizon Home Loan Corporation,

             Defendant-Appellee.

                            ORDER AND JUDGMENT*

Before HARTZ, Circuit Judge, BRORBY, Senior Circuit Judge, and EBEL, Circuit
Judge.

      In this diversity case, Plaintiff iFreedom Direct Corporation (“iFreedom”)

appeals from the district court’s judgment entered after a jury verdict in favor of

defendant First Tennessee Bank National Association (“First Tennessee”) on

*
      After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
iFreedom’s claim for breach of contract. Exercising jurisdiction pursuant to

28 U.S.C. § 1291, we affirm.

                                   I. Background

      In August 2006, iFreedom and First Tennessee’s subsidiary, First Horizon

Home Loan Corporation, entered into an Asset Purchase Agreement (“APA”) in

which iFreedom sold its retail and wholesale mortgage loan operations to

First Tennessee. In the APA, the parties agreed on a purchase price consisting of a

lump-sum payment, as well as the possibility of additional “Earnout Payments.” See

Aplt. App., Vol. I at A62-63. The Earnout Payments were contingent on the former

iFreedom employees meeting certain threshold targets for loan production.

      In August and November 2007, First Tennessee made Earnout Payments to

iFreedom for both retail and wholesale loan production. In 2008, First Tennessee

decided to sell the mortgage operations to MetLife Bank National Association

(“MetLife”). After the sale to MetLife, First Tennessee attempted to make an

Earnout Payment of $220,588 to iFreedom, but iFreedom refused to accept it.

      In March 2009, iFreedom filed a lawsuit against First Tennessee, bringing

claims for breach of contract and breach of the covenant of good faith and fair

dealing. First Tennessee moved for summary judgment on iFreedom’s complaint.

The district court denied the motion, concluding there were disputed issues of

material fact as to whether: (1) iFreedom waived the non-assignment provision in the

APA, (2) the non-assignment provision applied to First Tennessee’s sale to MetLife,

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and (3) the sale or assignment caused any damages. The case proceeded to a jury

trial.

         At the close of evidence, First Tennessee and iFreedom both moved for

directed verdicts. The district court granted in part First Tennessee’s motion,

concluding that First Tennessee was entitled to judgment in its favor for any alleged

breach of §§ 2.5(b), 4.5, 5.6, and 10.1 of the APA. The court denied the motion as to

First Tennessee’s alleged breach of § 10.5 (the non-assignment provision). The

district court also granted in part and denied in part iFreedom’s motion, directing a

verdict on First Tennessee’s affirmative defense of estoppel, but denying it as to the

waiver defense. The jury ultimately determined that First Tennessee had not

breached § 10.5. This appeal followed.

                                       II. Discussion

         iFreedom contends that the district court erred in five ways during trial by:

(1) giving only part of iFreedom’s proposed jury instruction on assignment;

(2) rejecting one of iFreedom’s proposed jury instructions; (3) directing a verdict in

favor of First Tennessee on several claims; (4) using an improper special verdict

form; (5) denying a directed verdict on First Tennessee’s affirmative defense of

waiver and instructing the jury on the waiver defense.

         A. Jury Instructions

         We review for abuse of discretion the district court’s refusal to give a

proposed jury instruction. See Zokari v. Gates, 561 F.3d 1076, 1090 (10th Cir.

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2009). We review de novo whether the instructions as a whole accurately informed

the jury of the governing law. See id. The parties agreed in the APA that the

agreement would be governed by Texas law.

       iFreedom alleged that First Tennessee breached the non-assignment provision

in § 10.5 of the APA when it sold its mortgage operations to MetLife. That section

states in relevant part: “No Party hereto may assign any of its rights or obligations

hereunder to any other Person, without prior written consent of the parties . . . .”

Aplt. App., Vol. I at A86. First Tennessee asserted there was no breach of § 10.5

because it retained its rights and obligations to make the Earnout Payments to

iFreedom.

       iFreedom proposed the following jury instruction on assignment:

              The word “assignment” means the transfer or setting over of
       property, or some right or interest from one person to another. The
       person who “assigns” something generally loses all control over the
       thing that is assigned and can do nothing to defeat the rights of the
       person to whom the thing is assigned.

Id. at A209. First Tennessee objected to the instruction, arguing that it was

unnecessary and inapplicable to the facts of the case. The district court kept the first

sentence of the instruction, but declined to include the second sentence, explaining

that the instruction was “adequate” as is. Aplee. Supp. App. at SA242-43. iFreedom

contends that the district court erred in not giving its full instruction.

       We see no abuse of discretion in the district court’s decision not to include the

second sentence of iFreedom’s proposed instruction on assignment. The first part of

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the instruction provides the general definition of “assignment” as found in Texas law.

See Johnson v. Structured Asset Servs., LLC, 148 S.W. 3d 711, 721 (Tex. Ct. App.

2004) (“The word ‘assignment’ has a comprehensive meaning and in its most general

sense means the transfer or setting over of property, or some right or interest.”). The

second sentence relates to the rights of the parties after an assignment takes place.

Because the dispute in this case was whether First Tennessee breached the

non-assignment provision in § 10.5 when it sold its mortgage operations to MetLife,

the jury did not need to be instructed on the legal rights of the parties post-

assignment because it was not deciding any issue about those rights in this case.

Accordingly, the district court acted within its discretion in instructing the jury on the

general definition of assignment.

       iFreedom also contends that the district court erred in not giving the following

proposed instruction: “Whenever one party to an agreement has relied on the skill,

character or credit of the other party to the agreement, the law will not permit one of

the parties to substitute for himself another person in whom the opposite party may

not repose an equal trust or confidence.” Aplt. App., Vol. I at A156. First Tennessee

objected to the instruction as inapplicable to the facts of this case.

       iFreedom cited to Lancaster v. Greer, 572 S.W.2d 787, 790 (Tex. Civ. App.

1978), as the basis for this jury instruction. See Aplt. App., Vol. I at A156. In

Lancaster, the court was considering the assignability of an earnest money contract

that was silent on assignment. See Lancaster, 572 S.W.2d at 789 (“Nowhere does the

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contract authorize assignment, nor does the contract prohibit assignment.”). In

determining whether the contract could be assigned, the court explained the general

rule that all contracts are assignable, but noted an exception for credit contracts

because they “involve a relationship between the seller and buyer of personal

confidence and trust.” Id. at 790. The court further explained that such contracts are

not assignable unless the original contracting party consents, and it was “undisputed

that Greer did not consent to the assignment.” Id. The court therefore held that the

earnest money contract at issue in that case was not assignable.

      This case is distinguishable from Lancaster and the other cases iFreedom cites

in its opening brief that relate to the same legal proposition prohibiting the

assignability of a contract involving personal trust and confidence without the

original contracting party’s consent.1 Here, there was express language in

Section 10.5 prohibiting the assignment of any rights or obligations under the

contract without the other party’s consent, and the jury’s task was to decide whether

First Tennessee had breached that provision. Accordingly, there was no need for
1
       See, e.g., Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp.,
823 S.W.2d 591, 596 (Tex. 1992) (internal citations omitted) (“As a general rule, all
contracts are assignable. An exception to this rule is that a contract that relies on the
personal trust, confidence, skill, character or credit of the parties, may not be
assigned without the consent of the parties.”), superseded by statute on other grounds
as recognized in Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212,
225-26 (Tex. 2002)); Peniche v. Aeromexico, 580 S.W. 2d 152, 156 (Tex. Ct. App.
1979) (“The evidence establishes that the contract before this court was based upon
the personal trust, acquaintance and confidence that existed between [the contracting
parties], and hence was one for personal services. This being true, the contract could
not be assigned without an agreement of the parties.”).

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iFreedom’s requested instruction about the non-assignability of a contract involving

personal trust and confidence. Although iFreedom argues in its opening brief that

there is a distinction between assignment and delegation, and that its proposed

instruction related to an alternate common law theory prohibiting the delegation of

obligations under a contract involving personal trust and confidence, the case it

presented to the district court does not support this alternate theory. Under these

circumstances, the district court acted within its discretion in refusing to give

iFreedom’s proposed instruction.

      Finally, we have reviewed the jury instructions as a whole and conclude that

they adequately stated the governing law. Accordingly, we find no reversible error

involving the jury instructions.

      B. Directed Verdict

      iFreedom argues that the district court erred in granting First Tennessee’s

motion for a directed verdict on its claims that First Tennessee breached certain

representations and warranties in the APA. “We review a district court’s grant of a

motion for directed verdict de novo.” Tanberg v. Sholtis, 401 F.3d 1151, 1156

(10th Cir. 2005).

      iFreedom contends that First Tennessee breached representation and

warranties in §§ 4.5, 5.6, and 10.1 of the APA when it sold its mortgage business to

MetLife in 2008. But we agree with the district court that the plain language of the

APA supports First Tennessee’s position that the representations and warranties in

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§ 4.5 were made as of the date of the Agreement and did not represent a continuing

obligation on its part after the closing date, § 5.6 pertains to the period before

closing, and § 10.1 is a contractual statute of limitations.

      Article 4 of the APA begins with First Tennessee stating that it “represents and

warrants to the Seller and Shareholder as of the date of this Agreement as follows,”

and in § 4.5, it makes all of its representations and warranties in the present tense.

Aplt. App., Vol. III at A507-08 (emphasis added). There is no language indicating a

continuing obligation to maintain the representations and warranties in § 4.5 after the

closing. See id. Section 5.6 is in Article V, “Closing Covenants,” and is an

obligation to give notice of any changes in the representations and warranties during

the period between the signing of the agreement and the closing date. See id. at

A509-10. The APA has separate articles for closing covenants and post-closing

covenants, see id., and iFreedom did not assert a breach of any of the post-closing

covenants. The district court’s interpretation that § 5.6 required notice of changes

before closing is further supported by First Tennessee’s compliance certificate in

which it certified that: “The representations and warranties made . . . in Article IV of

the Agreement were accurate in all material respects as of the date of the Agreement

and are accurate in all material respects as of the date of this Certificate.” Aplee.

Supp. App. at SA031.

      Finally, we, like the district court, read § 10.1 as a contractual statute of

limitations that allows a claim for breach to survive for three years from the closing

                                           -8-
date if a party discovers that representations and warranties made in the APA as of

the closing date were not accurate. Accordingly, we see no error in the district

court’s decision to grant First Tennessee a directed verdict on iFreedom’s claims for

breach of §§ 4.5, 5.6, and 10.1 of the APA.

      C. Special Verdict Form and Waiver Defense

      iFreedom contends that the district court used a flawed special verdict form

because it “was not adjusted to the claims in the case, and did not even permit the

jury to award amounts that [First Tennessee] admitted it owed but had failed to pay.

Instead, the verdict form erroneously asked only if [First Tennessee] had breached

the non-assignment provision in the Freedom APA.” Aplt. Br. at 48. We disagree.

The only claims that remained after the district court’s oral ruling on directed verdict

were the alleged breaches of §§ 2.5(b) and 10.5, and iFreedom admitted it was only

seeking damages for breach of § 10.5, see Aplee. Supp. App. at SA231.2 The district

court specifically asked if iFreedom had a breach of contract claim for failure to pay

“the earnouts,” and iFreedom’s counsel responded, “No.” Id. at SA233-34. We see

no abuse of discretion in the district court’s use of the special verdict form.

      iFreedom also asserts that the district court erred in not directing a verdict in

its favor on First Tennessee’s affirmative defense of waiver and including the waiver

defense on the special verdict form. We need not resolve these issues because any

2
       In its written order, the district court also granted the motion for directed
verdict on § 2.5(b). See Aplt. App., Vol. II at A374.

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alleged error is harmless. See Fed. R. Civ. P. 61 (“At every stage of the proceeding,

the court must disregard all errors and defects that do not affect any party’s

substantial rights.”). The jury did not reach the question of waiver on the special

verdict form because it found that First Tennessee had not breached the contract.

See Aplt. App., Vol. I at A350. Although iFreedom argues that the failure to grant

the directed verdict on the waiver defense “negatively influenced the jury in its

deliberations on Freedom’s claims,” Aplt. Br. at 49, it has pointed to no authority to

support its position. In a similar situation where a party argued that an erroneously

submitted claim “tainted” the jury even though the jury did not find against the party

on that claim, we held that any alleged error in submitting to a jury a claim that

resulted in no damages should be disregarded. See Strickland Tower Maint., Inc., v.

AT&T Commc’ns, 128 F.3d 1422, 1430 (10th Cir. 1997). We see no reversible error

in the district court’s denial of the directed verdict on the waiver defense and its

decision to include it on the special verdict form.

                                    III. Conclusion
      We affirm the judgment of the district court.

                                                   Entered for the Court

                                                   Wade Brorby
                                                   Senior Circuit Judge

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