Court Opinion

ID: 168461
Source: CourtListenerOpinion
Date Created: 2010-08-14 16:33:13+00
Date Added: 2024-06-11T11:51:50.057712
License: Public Domain

F I L E D
                                                           United States Court of Appeals
                                                                   Tenth Circuit
                   UNITED STATES COURT OF APPEALS
                                                               December 12, 2006
                                TENTH CIRCUIT                 Elisabeth A. Shumaker
                                                                  Clerk of Court

RSACO, LLC, a Delaware limited
liability company,

      Plaintiff-Appellant/Cross-Appellee,
v.                                              No. 05-1158 & 05-1160
RESOURCE SUPPORT ASSOCIATES,                    (D.C. No. 01-MK-1401)
INC., d/b/a RSA COMPANIES, INC., a                   (D. Colorado)
Colorado corporation; RSA MID-
RANGE, LLC, a Colorado limited
liability company; and ROBERT N.
FUGLEI, a Colorado resident,

     Defendants-Appellees/Cross-
     Appellants.
__________________________________
RESOURCE SUPPORT ASSOCIATES,
INC. d/b/a RSA COMPANIES, INC., a
Colorado corporation; and RSA MID-
RANGE, LLC, a Colorado limited
liability company,

     Third Party Plaintiffs-
     Appellees/Cross-Appellants,

v.

BENTLEY FORBES GROUP, LLC, a
Delaware limited liability company, and
BFG HOLDINGS 2000, LLC, a Delaware
limited liability company,

     Third Party Defendants-Appellants/
     Cross-Appellees.
                              ORDER AND JUDGMENT *

Before BRISCOE, HOLLOWAY, and LUCERO, Circuit Judges.

       This is a diversity action which was tried to a jury. The issues raised on appeal

concern the district court’s post-trial rulings on motions for judgment as a matter of law.

Plaintiff RSACO, LLC, appeals from the district court’s denial of its motion for judgment

as a matter of law on its claim for breach of a lease agreement against defendant Resource

Support Associates, Inc. Defendant RSA Mid-Range, LLC, cross-appeals from the

district court’s denial of its motion for judgment on its counterclaim for breach of an

option agreement against RSACO, LLC. We exercise jurisdiction pursuant to 28 U.S.C.

§ 1291 and affirm.

                                             I.

                                   Factual background

       Resource Support Associates, Inc. (RSA) is a Colorado-based computer consulting

services company owned and managed by Robert Fuglei. In late 1997 or early 1998,

Fuglei purchased a piece of land in Englewood, Colorado. Fuglei transferred ownership

of the land to RSA Mid-Range, LLC (Mid-Range), a company created by RSA to handle

       *
        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 (eff. Dec. 1, 2006) and 10 th Cir. R.
32.1 (eff. January 1, 2007.)

                                             -2-
RSA’s real estate transactions. Shortly thereafter, RSA hired a contractor to construct an

office building on the land for RSA’s use. RSA moved into the completed office building

in late 1999 or early 2000.

       Shortly after moving into the building, RSA experienced a substantial downturn in

its revenues. Accordingly, RSA decided to sell the building and obtain as much cash as it

could out of the sale. RSA hired a real estate broker and placed the building on the

market.

       Although RSA received several offers on the property, it ultimately settled on an

offer from Bentley Forbes Group, LLC (Bentley Forbes), a real estate acquisition

company founded in Delaware but headquartered in California. Bentley Forbes generally

negotiates real estate transactions, typically through sale-leaseback provisions, and then

transfers its rights to special purpose entities it forms specifically to own and possess the

real estate.

       On January 24, 2001, Mid-Range and Bentley Forbes entered into a sale and

purchase agreement for the building. On that same date, Mid-Range and Bentley Forbes

entered into an advisory fee agreement pursuant to which Mid-Range agreed to pay

$950,000 to Bentley if the sale occurred. No services were provided by Bentley Forbes to

Mid-Range in exchange for this payment. Instead, the advisory fee agreement essentially

amounted to a price concession on the part of Mid-Range.

       On April 6, 2001, Bentley Forbes created RSACO, LLC (RSACO) to hold title to

the property and enter into a leaseback agreement with RSA. In turn, Bentley Forbes

                                              -3-
utilized a holding company it had previously created, BFG Holdings 2000, LLC (BFG),

to hold RSACO (BFG also held all of the other single-purpose landlord entities created by

Bentley Forbes). Notably, Bentley Forbes, RSACO, and BFG were operated by the same

core group of individuals: Frederick Wehba, Sr. (the co-founder of Bentley Forbes), Carl

Wehba (Frederick Wehba’s son, who also co-founded Bentley Forbes and managed

RSACO), Chad Wehba (Frederick Wehba’s son, who worked for Bentley Forbes and

helped manage RSACO), Christopher Cates (Frederick Wehba’s nephew, who worked for

Bentley Forbes), and Christian Wehba (Frederick Wehba’s son, who worked for Bentley

Forbes). It is undisputed that Fred Wehba, Sr., generally made the key decisions with

respect to all of these entities.

       On April 24, 2001, the parties formally closed the deal. Along with the sale and

purchase agreement for the property, the parties entered into four related agreements: (1)

BFG executed a $2,350,000 promissory note payable to RSA in monthly installments of

$19,876.29; (2) RSA entered into a lease agreement with RSACO, under which RSA

agreed to lease the property for a period of twenty years for $1,190,000 per year (or

$99,166.67 monthly), and to pay all expenses associated with the property; (3) Bentley

Forbes loaned Mid-Range $250,964.34 1 , which was to be disbursed to Mid-Range in

twelve monthly payments of approximately $25,000 each, and was to be repaid by Mid-

Range in part by cash and in part by RSA’s provision of $100,000 worth of computer

       1
         The purpose of this loan was to provide RSA with additional cash during the first
year of the leaseback agreement.

                                            -4-
consulting services to Bentley Forbes (in order to create custom software to automate

Bentley Forbes’ core functions); and (4) Mid-Range and RSACO entered into an option

agreement, pursuant to which Mid-Range retained the right to exercise an option and own

1.6 acres of the parcel for a nominal sum.2

       In early May 2001, RSA made its first lease payment to RSACO. Shortly

thereafter, Fred Wehba, Sr., called Fuglei, the CEO of RSA, and complained about the

computer consulting services that RSA was providing to Bentley Forbes in connection

with the $250,964.34 loan agreement between Bentley Forbes and Mid-Range. In

response, Fuglei and Mary Cooley, the RSA employee who was responsible for

overseeing RSA’s provision of computer consulting services to Bentley Forbes, flew to

California and met with Wehba Sr., in his office on or about May 7, 2001. Wehba Sr., in

a belligerent and profane manner, vented at Fuglei and Cooley, complaining that Bentley

Forbes could have achieved the goal of automating its functions by purchasing off-the-

shelf software, rather than paying RSA for custom-designed software.

       Following the meeting, Wehba Sr. left a voice-mail message for Fuglei

apologizing for his behavior and saying that what he really wanted was for RSA to “put

together a summary of what the additional time and costs would be in order to complete

the project.” Tr. at 576. Based upon this message, Fuglei instructed Cooley to compile

such a summary, which Cooley did. Although RSA sent this summary to Wehba Sr., he

       2
         The parties had originally intended that Mid-Range would retain, and not sell,
this 1.6 acre parcel to RSACO. However, Mid-Range was unable to obtain a subplat
prior to closing and, accordingly, the parties entered into the option agreement.

                                              -5-
never responded to it. Instead, on May 21, 2001, Bentley Forbes sent a letter to RSA

asserting that RSA and Mid-Range had defaulted on their obligations under the

$250,964.34 loan agreement by failing to adequately provide the computer consulting

services allegedly called for under the loan agreement.

       On June 1, 2001, RSA paid its June rental payment to RSACO under the lease

agreement. However, BFG did not make its June payment to RSA under the $2,350,000

promissory note (or any subsequent payments thereunder), nor did Bentley Forbes make

its June disbursement to Mid-Range under the $250,964.34 loan agreement (or any

subsequent disbursements thereunder). The effect on RSA was, according to Fuglei,

“catastrophic.” Tr. at 580. Because of RSA’s net operating loss during 2001, its cash

flow was minimal or non-existent. Thus, the lack of the note payment from BFG and the

disbursement from Bentley Forbes rendered RSA unable to make the July payment due

under the lease agreement with RSACO.

       Following RSA’s failure to pay its July rent, Bentley Forbes contacted the building

subtenants and directed them to pay their rent directly to Bentley Forbes. According to

Fuglei, this “took away all of any kind of ability” for RSA to make any subsequent rental

payments to RSACO. Id. at 582. On September 6, 2001, RSACO demanded that RSA

either pay the past due rent or vacate the property. On November 9, 2001, RSA vacated

the property. At that time, RSA’s main lender, Citywide Bank, had recorded a $500,000

deed of trust on the property, and several contractors (who had performed work on the

inside of the building to prepare it for other subtenants) had filed mechanics liens against

                                             -6-
the property. The 1.6 acre parcel that was the subject of the option agreement was never

transferred to Mid-Range.

                                 Procedural background

      On July 20, 2001, RSACO filed this diversity action against RSA, Mid-Range, and

Fuglei asserting various claims, including a claim against RSA for breach of the lease

agreement. Mid-Range asserted various counterclaims against RSACO and third-party

claims against Bentley Forbes and BFG, including one for breach of the option

agreement. These claims proceeded to trial in July 2004. At the conclusion of all the

evidence, the jury found, with respect to RSACO’s breach of lease claim, that RSA

“failed to perform its obligations under the lease agreement” and that RSACO “was

damaged” as a result thereof. App. at 304. However, the jury also found that RSA

proved by a preponderance of the evidence “that its performance under the lease was

excused because it was prevented from performing under the lease.” Id. at 305.

Accordingly, judgment was entered in favor of RSA on the breach of lease claim. Id. As

for Mid-Range’s claim for breach of the option agreement, the jury found, in pertinent

part, that Mid-Range had failed to perform its obligations under the option agreement. Id.

at 310. Accordingly, judgment was entered in favor of RSACO and BFG on that claim.

Id.

                                           -7-
                                              II.

                              RSACO’s Appeal - No. 05-1158

       At the close of all the evidence, RSACO moved for judgment as a matter of law on

its claim for breach of the lease agreement, arguing that what the parties refer to as “hell

or high water” provisions in the lease agreement precluded RSA’s affirmative defense of

prevention of performance. The district court denied RSACO’s motion, concluding that

the prevention of performance defense was viable and should be submitted to the jury. In

its appeal, RSACO contends the district court’s ruling was erroneous because: (1) under

Colorado law, the hell or high water provisions should have been construed as precluding

the defense of prevention of performance; and (2) in any event, the evidence presented at

trial was insufficient to establish the prevention defense.

       We review the district court’s ruling de novo, applying the same standard as the

district court. Smith v. Aztec Well Servicing Co., 462 F.3d 1274, 1287 (10th Cir. 2006).

Judgment as a matter of law “is warranted only if the evidence points but one way and is

susceptible to no reasonable inferences supporting the party opposing the motion.”

McInnis v. Fairfield Communities, Inc., 458 F.3d 1129, 1136 (10th Cir. 2006). “We do

not weigh the evidence, pass on the credibility of the witnesses, or substitute our

conclusions for those of the jury.” Id. “However, we must enter judgment as a matter of

law in favor of the moving party if there is no legally sufficient evidentiary basis with

respect to a claim or defense under the controlling law.” Id. “We must view the evidence

and any inferences to be drawn therefrom most favorably to the non-moving party.” Id.

                                             -8-
       Should the hell or high water provisions have been interpreted as
       precluding the defense of prevention of performance?

       RSACO contends that the hell or high water provisions contained in the lease

agreement were intended by the parties, and should have been treated by the district court,

as precluding all defenses on the part of RSA, including the defense of prevention of

performance. Because this is a diversity case, the substantive law of the forum state, i.e.,

Colorado, governs the analysis of RSA’s arguments. Haberman v. The Hartford Ins.

Group, 443 F.3d 1257, 1264 (10th Cir. 2006).

       The interpretation of a contract under Colorado law is a legal question. Grant v.

Pharmacia & Upjohn Co., 314 F.3d 488, 491 (10th Cir. 2002); Fibreglas Fabricators, Inc.

v. Kylberg, 799 P.2d 371, 374 (Colo. 1990). Whether a contractual term is ambiguous is

also a question of law. Fibreglas, 799 P.2d at 374. If a contract is ambiguous, external

evidence may be considered to determine the contract’s meaning, and the interpretation of

the contract becomes a question of fact. Stegall v. Little Johnson Assocs., Ltd., 996 F.2d

1043, 1048 (10th Cir. 1993).

       Here, the question is whether the following provisions contained in the lease

agreement, which the parties generally refer to as the hell or high water provisions,

precluded RSA from asserting the defense of prevention of performance:

       3.1 Basic Rent. * * * Tenant unconditionally and irrevocably agrees to
       pay the Basic Rent . . . .

       ***

                                             -9-
3.5 Net Lease; No Termination.
      3.5.1 This is an absolutely net lease to Landlord. It is the intent of
      Landlord and Tenant that the Basic Rent payable under this Lease
      shall be an absolutely net return to Landlord and that Tenant shall
      pay all costs and expenses of every kind and nature provided in this
      Lease. Any amount or obligation herein relating to the Property,
      which is not expressly declared to be that of Landlord shall be
      deemed to be an obligation of Tenant to be performed by Tenant at
      Tenant’s expense. Basic Rent, Additional Rent and all other sums
      payable hereunder by Tenant, shall be paid without notice . . . ,
      demand, set-off, counterclaim, abatement, suspension, deduction or
      defense.

       3.5.2 This lease shall not terminate nor shall Tenant have any right
       to terminate this Lease (except as otherwise expressly provided in
       Article 7), nor shall Tenant be entitled to any abatement or reduction
       of rent under this Lease (except as expressly provided in Article 7 of
       this Lease), nor shall the obligations of Tenant under this Lease be
       affected by reason of: (i) any damage to or destruction of all or any
       part of the Property from whatever cause; (ii) the taking in whole or
       in part of the Property or any portion thereof by condemnation,
       requisition or otherwise except as provided in Article 7; (iii) the
       prohibition, limitation or restriction of Tenant’s use of all or any part
       of the Property, or any interference with such use; (iv) Tenant’s
       acquisition or ownership of all or any of the Property otherwise than
       as expressly provided herein; (v) any default on the part of Landlord
       under this Lease, or under any other agreement to which Landlord
       and Tenant may be parties; (vi) any abandonment of the Property by
       Tenant; or (vii) any other cause whether similar or dissimilar to the
       foregoing, any present or future law to the contrary notwithstanding.
       It is the intention of Landlord and Tenant that the obligations of
       Tenant under this Lease shall be separate and independent covenants
       and agreements, that the Basic Rent, the Additional Rent and all
       other sums payable by Tenant under this Lease shall continue to be
       payable in all events and that the obligations of Tenant under this
       Lease shall continue unaffected, unless the requirement to pay or
       perform the same shall have been terminated pursuant to Article 7 of
       this Lease.

       ***

                                      -10-
              3.5.4 Tenant waives all rights which may now or hereafter be
              conferred by law (i) to voluntarily quit, terminate or surrender this
              Lease or the Property or any part thereof, or (ii) to any abatement,
              suspension, deferment or reduction of the Basic Rent, Additional
              Rent or any other sums payable under this Lease, except as otherwise
              provided in Article 7 of this Lease.

App. at 535-37.

       To be sure, the above-quoted clauses are broadly written. In particular, clause

3.5.2 precludes RSA from relying on most available reasons for not fulfilling its

obligations under the lease (e.g., destruction of the building). However, it is also clear

that “prevention of performance” by RSACO or its related entities is not one of the

specifically listed defenses that is precluded by clause 3.5.2. Thus, RSACO is left to rely

on clause 3.5.2’s “catch-all” language (as well as the more general language of the other

clauses), which, as noted, states: “any other cause whether similar or dissimilar to the

foregoing, any present or future law to the contrary notwithstanding.” Although RSACO

argues that this language, on its face, clearly prohibits RSA’s reliance on the prevention

of performance defense, we disagree. In our view, the “catch-all” clause is, at best,

ambiguous when applied to the defense of prevention of performance.3 Thus, we have

looked beyond the lease agreement to determine if there is additional evidence in the

record indicating whether the parties intended for the “catch-all” clause to apply to the

       3
        As noted by RSA, “the clause makes no reference to tortious conduct and
therefore cannot reasonably be read as waiving a defense sounding in tort.” Aplee. Br. at
19.

                                            -11-
defense of prevention of performance. No such evidence exists in the record.4 Thus,

under Colorado law, the “catch-all” clause must be strictly construed against its drafter,

RSACO. E.g., B & B Livery, Inc. v. Riehl, 960 P.2d 134, 140 (Colo. 1998). In turn, we

conclude the district court did not err in holding that the defense of prevention of

performance remained viable, notwithstanding the hell or high water provisions cited by

RSACO. See generally 9 A. Corbin, Contracts § 947, p.721-22 (2002) (noting that where

the parties to a contract do not “say nor think anything about” prevention of performance,

it is proper to treat the contract as containing an implied promise not to prevent or hinder

performance).

       Even assuming, for purposes of argument, that the “catch-all” clause

unambiguously applies to the defense of prevention of performance, we are persuaded

that the clause would be unenforceable under Colorado law. As noted by the district

court, Colorado has “a strong public policy in favor of protecting tort victims . . . .”

Friedland v. Travelers Indem. Co., 105 P.3d 639, 646 (Colo. 2005). Similarly, Colorado

“[p]ublic policy prohibits indemnifying a party for damages resulting from intentional or

willful wrongful acts.” Equitex, Inc. v. Ungar, 60 P.3d 746, 750 (Colo. App. 2002)

(internal quotation marks omitted). And, the Colorado courts “will not enforce a contract

that violates public policy even if the failure to do so is ‘unfair’ to one of the parties . . . .”

       4
         Indeed, we are persuaded, based upon our review of the trial transcript, that RSA
would not have entered into the lease agreement had it known the lease provisions were
intended to be binding even in the event of wrongful conduct on the part of RSACO or its
related entities.

                                               -12-
Id. Considering all of these principles together, we conclude that the Colorado courts

would not enforce the hell or high water provisions of the lease to the extent that they

sought to protect RSACO or its related entities from engaging in the wrongful act of

preventing RSA from fulfilling its obligations under the contract. See generally 9 Corbin,

supra § 947 at 721 (noting that “prevention or hindrance is a breach of contract in any

case in where the facts justify the implication of a promise.”); id. at 722 (“Generally, . . .

the parties . . . neither say nor think anything about it; and prevention or hindrance should

clearly be regarded as wrongful.”); id. (“In some cases the wrongful conduct could have

been treated as a tort; and it can still be so treated if the courts find it of advantage in the

course of justice.”).

       Finally, we reject RSACO’s contention that the district court’s decision conflicts

with our decision in Colorado Interstate Corp. v. CIT Group/Equipment Financing, Inc.,

993 F.2d 743 (10th Cir. 1993). To be sure, the lease agreement at issue in Colorado

Interstate (for computer equipment) contained some language that was similar to that

contained in the lease at issue here.5 Importantly, however, there was no allegation of

prevention or hindrance of performance. Thus, we were not asked to determine whether

the hell or high water language at issue in that case encompassed such a defense.

       5
         Like the lease agreement at issue here, the lease agreement at issue in Colorado
Interstate provided: “the rights of Lessor and Assignee in and to such Rent, are absolute
and unconditional and are not subject to any abatement, reduction, setoff, defense,
counterclaim or recoupment due or alleged to be due to, or by reason of, any past, present
or future claims, which Lessee may have against Lessor, Assignee, the manufacturer or
seller of the equipment, or against any person for any reason whatsoever.” 993 F.2d at
747.

                                              -13-
Moreover, we noted, in dicta, that there was no allegation of “fraud or deceit,” thereby

suggesting that wrongful conduct would be sufficient to undermine the effect of the hell

or high water provision. 993 F.2d at 749. In sum, then, Colorado Interstate was not

controlling, and did not preclude the district court from ruling that the lease provisions at

issue here did not preclude RSA from asserting the defense of prevention of

performance.6

       Was RSA’s evidence in support of its prevention defense insufficient as a
       matter of law?

       RSACO argues that, even assuming the district court did not err in allowing RSA’s

defense of prevention to go to the jury, RSA failed, as a matter of law, to present

sufficient evidence to support that defense. In this regard, RSACO argues that: (1) RSA

failed to prove that Bentley Forbes or BFG were agents of RSACO; (2) all of the conduct

on which RSA based its prevention defense was contractually authorized (e.g., collection

of rent from RSA’s subtenants; Bentley Forbes’ decision to declare RSA in default under

the loan agreement; BFG’s decision to cease payments under the promissory note); and

(3) RSA failed to prove that RSACO, Bentley Forbes, or BFG actually prevented or

substantially interfered with RSA’s ability to pay rent (because RSA had ample funds in

escrow to meet its rent obligations).

       RSACO is mistaken on all of these points. Turning first to RSACO’s agency

arguments, it is beyond dispute that each of the agreements entered into by the parties on

       6
       It is also worth noting that the contract at issue in Colorado Interstate was
governed by Texas law, not Colorado law.

                                             -14-
April 24, 2001, were necessary not only to the transfer of ownership of the property from

Mid-Range to RSACO, but also to the ultimate success of the lease agreement between

RSACO and RSA. Thus, as noted by the district court, RSACO was, at a minimum, the

third-party beneficiary of the non-lease agreements. See Jefferson County School Dist.

No. R-1 v. Shorey, 826 P.2d 830, 843 (Colo. 1992) (discussing third-party beneficiary

doctrine). In addition, the uncontroverted evidence presented at trial indicated that all of

the Bentley Forbes-related entities were owned and operated by the same, limited number

of family members, that all of the important decisions with respect to each of the Bentley-

Forbes-related entities were made by Frederick Wehba, Sr., the co-founder of Bentley-

Forbes, and that corporate formalities were largely ignored in the day-to-day operations

of those entities. In other words, each of the Bentley-Forbes-related entities could

reasonably be said to be instrumentalities or agents of not only Bentley Forbes, but each

other as well. See generally Dworkin, Chambers & Williams, P.C. v. Provo, 81 P.3d

1053, 1058 (Colo. 2003) (discussing definition of agent). Given these circumstances, we

are not persuaded that the district court erred in concluding that the equitable doctrine of

prevention was a viable defense to RSACO’s claim against RSA for breach of the lease

agreement. To conclude otherwise would elevate form over substance and allow RSACO

to accomplish through its related entities what the doctrine of prevention was clearly

intended to prohibit.

       As for RSACO’s arguments that all of the actions of its related entities were

contractually authorized, this misses the key point that it was not RSA that triggered the

                                            -15-
chain of events that led to the default, but rather Fred Wehba, Sr.’s decision to declare

RSA in default on the computer consulting contract. According to the record on appeal,

Wehba Sr. had little or no computer experience, and unreasonably believed that RSA

would be able to fully automate all of Bentley Forbes’ corporate functions for a total price

of $100,000. Further, the record indicates that, although Wehba Sr. voiced his concerns

to RSA, he made no true effort to resolve those concerns (e.g., by discussing with RSA

how much total time and expense they estimated it would take to complete the project, or

to discuss with RSA the possibility of a price concession). In sum, it was Wehba Sr.’s

unfounded decision to declare RSA and Mid-Range in default on their obligations under

the $250,964.34 loan agreement that initiated the chain of events that rendered RSA

unable to make its monthly lease payments.7

       Finally, contrary to RSACO’s assertions, the evidence presented at trial was

sufficient to allow a reasonable jury to find that RSACO and its related entities actually

prevented or substantially interfered with RSA’s ability to pay rent. To be sure, RSACO

presented at trial the deposition testimony of Don Jacobsen, the president of RSA, which

included Jacobsen’s statement that RSA “absolutely” could have paid its rent under the

lease agreement with money that RSA had “escrowed to make the payments . . . .” Tr. at

425. However, RSA put on substantial evidence countering Jacobsen’s statement. In

particular, RSA’s founder and CEO, Fuglei, testified that RSA lost approximately $1.58

       7
         Bentley Forbes’ own counsel at the time of these transactions, Shailendra Halbe,
testified that he believed that Wehba Sr.’s decision to declare RSA in default on the
computer consulting agreement was pretextual. Tr. at 943.

                                            -16-
million during the first half of 2001, and thus was relying on the monthly promissory note

payments from BFG and the monthly disbursements from Bentley Forbes to make its own

lease payments to RSACO. Id. at 561. Fuglei further testified that when BFG and

Bentley Forbes failed to make those monthly payments in June of 2001, the effect on

RSA was “frankly catastrophic,” rendering it unable to make its monthly lease payments.

Id. at 580. Benjamin Kelly, who worked for RSA as the chief financial officer (on a

contract basis), likewise testified that, as of June 2001, RSA was unprofitable and “in a

tough cash situation.” Id. at 1222. Thus, Kelly testified, the payments RSA was to

receive from BFG and Bentley Forbes were important to RSA’s ability to make its

monthly lease payments.

                        Mid-Range’s Cross-Appeal - No. 05-1160

       In its cross-appeal, Mid-Range contends that the district court erred in ruling that

Mid-Range was not entitled to the 1.6 acre parcel of property as a matter of equity.

Although Mid-Range acknowledges that the jury found in RSACO’s favor on Mid-

Range’s claim for breach of the option agreement, it contends that this verdict was

advisory only and not binding on the district court.

       In ruling on Mid-Range’s post-trial motion for judgment on its claim for breach of

the option agreement, the district court addressed and rejected these same arguments:

          At trial, the jury found that neither RSACO nor BFG breached the option
       agreement between RSA Mid-Range and RSACO. RSA Mid-Range now
       asserts that it is entitled to judgment as a matter of equity regarding its
       claim that RSACO and BFG breached the option agreement. In particular,
       RSA Mid-Range asks the Court to order that the 1.6 acres of land subject to

                                            -17-
       the option agreement be returned to RSA Mid-Range. It contends that even
       though the jury found that it failed to fulfill the conditions precedent to
       exercising the option agreement, the Court should treat the jury’s verdict as
       advisory, find a breach of the agreement and return the property. Both
       RSACO and BFG object to the motion.

          During the jury charging conference, counsel for RSA Mid-Range
       contended that the issue of whether there was a breach of the option
       agreement should be decided by the jury, and the Court could later
       determine whether the equitable remedy of specific performance was
       appropriate. At that time, RSACO and BFG objected to allowing the jury
       to decide the issue of breach, but they now seek to be bound by the verdict.
       The Court stated that the jury’s verdict would not be advisory as to the issue
       of breach but suggested that if this ruling was in error, it would take the
       jury’s findings as advisory.

          The Court stands by its original assessment that the jury’s verdict as to
       the issue of breach was not advisory. However, even if the verdict should
       be treated as advisory, RSA Mid-Range makes no compelling argument for
       the Court to disregard the jury’s advice, and having reviewed the record, the
       Court is not inclined to reject the jury’s finding. Because there was no
       breach of the option agreement by RSACO or BFG, there is no available
       equitable remedy to be considered now.

Aplt. App. at 465-66.

       We agree with the district court that the jury was not advisory. To be sure, Mid-

Range’s claim for specific performance of the option agreement was equitable in nature

and, as such, would typically have been tried to the court. See Fischer Imaging Corp. v.

General Elec. Co., 187 F.3d 1165, 1168-69 (10th Cir. 1999). However, Federal Rule of

Civil Procedure 39(c) allows a district court, in an action not triable of right by a jury, to

“try any issue with an advisory jury . . . .” Alternatively, a district court, “with the

consent of both parties, may order a trial with a jury whose verdict has the same effect as

if trial by jury had been a matter of right.” Fed. R. Civ. P. 39(c). We conclude the latter

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provision applies in this case. According to the record on appeal, both sides, prior to trial,

treated the claim as one that would be tried and decided by the jury.8 Only during the jury

instruction conference, which occurred at the close of all the evidence, was the possibility

of an advisory jury first mentioned. Tr. at 1560-61. And, notably, Mid-Range argued at

that time that it had elected, prior to trial, to have the claim decided by the jury. Id.

Although RSACO/BFG objected at that point to the jury deciding the issue, the district

court concluded that RSACO/BFG had waived its objection by failing to raise it at an

earlier time. Id. at 1562. Given these circumstances, we conclude that the parties

effectively consented to having the jury definitively decide Mid-Range’s counterclaim.

That consent is now binding, and the district court had no authority to treat the jury’s

verdict as advisory.9 See Thompson v. Parkes, 963 F.2d 885, 888 (6th Cir. 1992)

(holding that where no mention was made during trial preparation that the jury was to be

advisory, the verdict ultimately reached by the jury had to be treated as if the trial by jury

       8
         For example, the amended final pretrial order listed the breach of option
agreement claim as one of the claims to be tried (including the various witnesses and
exhibits relevant to the claim), and expressly indicated that “[t]he trial in this matter [wa]s
to a jury.” Aplt. App. at 264.
       9
          Mid-Range argues that this court’s decision in Dilley v. SuperValu, Inc., 296
F.3d 958, 965-66 (10th Cir. 2002), authorized the district court, even after the verdict, to
treat the jury as advisory. Mid-Range, however, reads too much into Dilley. Indeed,
there is no indication in Dilley whether or not the parties consented, prior to trial, to
having the jury decide the issues. Even assuming, for purposes of argument, that Dilley
would have authorized the district court to treat the jury’s verdict in this case as advisory,
it is clear from the record that the district court would have reached the same result.

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had been as of a matter of right, and it was beyond the power of the district court to set

aside the verdict on the theory that it was advisory).

       Even assuming, for purposes of argument, that the jury’s verdict was advisory, it is

apparent from the record that the district court would have accepted the jury’s finding,

i.e., the district court would not have found in Mid-Range’s favor on its claim for breach

of the option agreement and thus would not have awarded specific performance. In

particular, the district court specifically found, as noted above, that “there was no breach

of the option agreement by RSACO or BFG . . . .” Aplt. App. at 465. Having reviewed

the trial transcript, we conclude this finding was not clearly erroneous. In particular,

there was no evidence presented at trial that Mid-Range submitted to RSACO either a

notice of exercise of its intention to exercise its rights under the option agreement or an

approved replat from the county, both of which were required under the option

agreement.

       AFFIRMED.

                                                    Entered for the Court

                                                    Mary Beck Briscoe
                                                    Circuit Judge

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