454 B.R. 146
D. Colo.2011Background
- Mascio owned MAM Asset Management, Inc. (MAM) and formed Capital with Gronewoller, transferring assets to Capital and advancing funds via a promissory note.
- Associates (Gronewoller’s entity) lent $164,640 and transferred assets to Capital; MAM assets were contributed to Capital around January 2001.
- Disputes arose in 2001; Mascio allegedly locked Gronewoller out, leading to a state-court suit.
- Mascio filed for bankruptcy; Gronewoller and Associates pursued a §523(a) nondischargeability claim based on fraud.
- Bankruptcy Court held Mascio’s misrepresentation that MAM was SEC-registered and failed disclosure of an SEC de-registration letter supported nondischargeability; damages were awarded.
- District Court remanded for waiver and damages issues; on remand, damages were recalculated, ultimately leading to a determination of benefit-of-the-bargain damages and remand for proper calculation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of fraud claim based on knowledge of the SEC Letter | Gronewoller did not have full knowledge; the Letter pertained to 1999 and corroborating post-2000 documents existed. | Gronewoller had full knowledge once the Letter was known, constituting waiver of the fraud claim. | Waiver not proven; Gronewoller did not have full knowledge of the fraud. |
| Award of benefit-of-the-bargain damages | Damages should reflect the difference between the represented value at purchase and the actual value, considering Gronewoller’s 49% stake. | Court improperly relied on extrinsic value evidence and treated the agreed value as the sole measure. | Court properly considered extrinsic evidence; damages awarded must reflect the 49% share of the difference between actual and represented value at purchase; remanded for recalculation. |
| Calculation methodology for damages | Damages should be computed using the standard difference between actual and represented value at purchase, 49% of that difference. | Vacate the $150,355 award; remand to compute 49% of the difference between actual and represented value on the purchase date; reopen record if needed. |
Key Cases Cited
- Keller v. A.O. Smith Harvestore Prods., Inc., 819 P.2d 69 (Colo. 1991) (integration clause does not bar extrinsic evidence in tort misrepresentation actions)
- Tisdel v. Cent. Sav. Bank & Trust Co., 90 Colo. 114, 6 P.2d 912 (Colo. 1931) (waiver requires knowledge and choice to continue under the agreement)
- Gladden v. Guyer, 162 Colo. 451, 426 P.2d 953 (Colo. 1967) (full knowledge requires substantial facts constituting the fraud)
- Holland Furnace Co. v. Robson, 157 Colo. 347, 402 P.2d 628 (Colo. 1965) (timing of knowledge relevant to waiver inquiry)
- Wagner v. Dan Unfug Motors, Inc., 35 Colo.App. 102, 529 P.2d 656 (Colo.App. 1974) (measure of damages in misrepresentation actions under Colorado law)
- Colorado Performance Corp. v. Mariposa Assocs., 754 P.2d 401 (Colo.App. 1987) (damages for misrepresentation: difference between actual and represented value at purchase)