Maverick Benefit Advisors, LLC Mountain Benefit Associates, LLC Taylor H. Haynes and Elisabeth A. Wasson v. David J. Bostrom Bostrom Enterprises, LLC and Mountain States Review, Inc.
2016 WY 96
| Wyo. | 2016Background
- Maverick (Haynes and Wasson) purchased Mountain Benefit Associates (MBA) via an Asset Purchase Agreement for $4,395,582, paying half in cash and executing a promissory note for the balance, personally guarantied.
- Pre-sale representations included a 98% client retention rate and enrollment figures (notably for WABIT); post-closing Maverick discovered significant undisclosed client losses and declines in WABIT enrollment and advances by MBA to WABIT.
- Maverick ran the business for about 18 months after discovering the inaccuracies, then stopped payments on the promissory note and sued for breach of contract (seeking damages, not rescission).
- Mountain States (seller interests) counterclaimed on the promissory note and guaranty for the unpaid balance; Maverick asserted the affirmative defense that seller first materially breached.
- At trial, after Maverick rested, the district court granted judgment as a matter of law for Mountain States, finding Maverick failed to prove damages and barring the first-to-breach defense; the court entered judgment for the note balance.
- On appeal, the Supreme Court of Wyoming affirmed, holding Maverick waived the first-to-breach defense by continuing to accept contractual benefits with knowledge of the alleged breach, and awarded appellate attorney fees to Mountain States under the contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May Maverick assert a first-to-breach affirmative defense to Mountain States’ counterclaim? | Maverick: availability of the defense is a legal question distinct from Maverick’s failure to prove damages; it should be allowed. | Mountain States: allowing the defense would impermissibly let Maverick both affirm the contract (by continuing performance) and disaffirm it (avoid payment). | Held: No — Maverick waived the defense by continuing to operate and accept benefits with knowledge of the alleged breach. |
| Is Mountain States entitled to contractual attorney fees on appeal? | Mountain States: Promissory Note and Personal Guaranty permit recovery of fees after an Event of Default, including enforcement on appeal. | Maverick: (did not successfully oppose on appeal). | Held: Yes — contractual language entitles Mountain States to reasonable appellate attorney fees; amount to be determined on submission. |
Key Cases Cited
- Fryer v. Campbell, 43 P.2d 994 (Wyo. 1935) (continuing to use property after discovering misrepresentation can waive right to rescind)
- White v. Empire Express, Inc., 395 S.W.3d 696 (Tenn. Ct. App. 2012) (acceptance of contract benefits with knowledge of breach can waive first-to-breach defense)
- Edwards v. Allied Home Mortg. Capital Corp., 962 So.2d 194 (Ala. 2007) (continuing to accept benefits after learning of alleged breach defeats the defense that the other party breached first)
- Kinstler v. RTB South Greeley, Ltd. LLC, 160 P.3d 1125 (Wyo. 2007) (one party’s material breach may excuse the other’s performance)
- Lokey v. Irwin, 374 P.3d 311 (Wyo. 2016) (where contract allows attorney fees, fees on appeal are recoverable)