Opinion by
A jury fоund for plaintiff, Makoto USA, Inc., on three claims against defendants, Paul R. Russell, Alysn Hassenforder, and Inner Quests, Inc. The third claim, a theft claim under Colorado's stolen property statute, § 18-4-405, C.R.8.2009, resulted in a trebled judgment and an award of attorney fees. Defendants' appeal challenges the judgment on this third claim only. We hold this theft claim was precluded by the economic loss rule, and so we reverse the judgment and fee award on that claim.
I. Background
This case arises out of an asset purchase agreement in which plaintiff agreed to pay $500,000 over time-$250,000 at closing and five annual payments of $50,000 thereafter-to acquire the Makoto product line, which *627 included a design patent, a utility patent, a trademark, and other things.
Plaintiff made the initial $250,000 payment in 2002, followed by $50,000 payments in 2008 and 2004. It later learned that the utility patent had become unenforceable in 2001 because defendants had failed to make required maintenance payments. In July 2004, the United States Patent and Trademark Office issued a written decision declining to reinstate the patent.
Having paid a total of $350,000, plaintiff made no further payments. Instead, it filed suit against defendants.
The parties went to triаl on three claims: the first for breach of contract, the second for fraud, and the third for civil theft under the stolen property statute. Defendants timely moved for a directed verdict on the third claim, arguing that it was precluded as a matter of law and was duplicative of plaintiffs contract claim. The trial court denied defendants' directed verdict motion, and all three claims were submitted to the jury.
The jury found for plaintiff on each claim. It awarded plаintiff: (1) $1 nominal damages for breach of contract; (2) $25,000 on the fraud claim; and (8) $50,000 on the theft claim.
The trial court entered judgment for plaintiff on all three claims, but defendants' appeal challenges only the theft claim. On that clаim, the trial court trebled the damages and entered a $150,000 judgment in favor of plaintiff. It also awarded plaintiff statutory attorney fees of more than $117,000 because it had prevailed on the theft claim. The trial court subsequently denied dеfendants' post-judgment motion to alter or amend the judgment on the theft claim.
II. Standard of Review
Whether the economic loss rule precludes a particular claim raises a legal issue subject to de novo appellate review. See Hamon Contractors, Inc. v. Carter & Burgess, Inc.,
Although the jury did not issue special findings, both sides have predicated their arguments on the premise that the jury relied on the last payment of $50,000 in 2004. Plaintiff confirmed at oral argument that it was relying on this last payment. Accordingly, in resolving this appeal, we accept the parties' premise that the theft award was based on the final $50,000 contractual payment.
III. Discussion
The economic loss rule "maintain{s] the boundary between contract law and tort law." Town of Alma v. AZCO Construction, Inc.,
Here, as in most economic loss rule cases, the dispute involves whether the tort duty was "independent" of a contractual duty. In trying to show independence, plaintiff posits that even non-contracting parties have a duty not to commit fraud and theft. This premise leads plaintiff to conclude that the economic loss rule never precludes fraud or theft claims.
Contrary to plaintiff's premise, independence is not shown simply because a duty also exists outside the contract. Instead, "two conditions must be met": "[flirst, the duty must arise from a source other than the relevant contract"; and "[slecond, the duty must not be a duty also imposed by the contract." Haynеs Trane Service Agency, Inc. v. American Standard, Inc.,
Because plaintiff's premise is incomplete, its conclusion-that fraud and theft claims are never precluded by the economic loss rulе-is overbroad. Indeed, another division of this court recently rejected a similar contention that "a claim for fraud in the performance of a contract necessarily is based on a duty independent of the contract." Hamon,
Comparison of plaintiff's contract and theft claims in this case makes clear that the latter is dependent on the former. Plaintiff sought the same relief in its contract claim as it did in its theft claim. At trial, plaintiff urged the jury to order the entire $850,000 returned, because the contract was breached by defendants' failure to deliver the utility patent and becаuse that same failure resulted in that $350,000 being stolen. Indeed, even in its appellate brief, plaintiff continues to maintain that its claims arise from defendants' "failure to transfer title to all of the intellectual property as represented in the parties' Asset Purchase Agreement."
The theft claim could not have been proven without first proving that defendants also breached their contract with plaintiff. Defendants were entitled, on the face of the contract, to all the monies paid by plaintiff, including the last payment of $50,000 that plaintiff contends was stolen by defendants. In return for these payments, defendants had reciprocal contractual duties to deliver the utility patent and other property to plaintiff. Had defendants complied with their reciprocal contractual duties, plaintiff would have no colorable claim that defendants "stole" a contractual payment.
The linkage bеtween the contract and theft claims is confirmed by the contractual warranty provision. In that provision, defendants warranted that they had complete ownership of and the unencumbered right to transfer the intellectual property. Another contractual provision gave plaintiff the right to recover its earnest money payment for breach of this warranty. Plaintiffs theft claim was based in part on the theory that defendants accepted сontractual payments knowing they could not honor this warranty.
Plaintiff has not identified any legal duty underlying the theft claim that was not also memorialized in the parties' contract. The division in Hamon recently suggested that pre-contraсtual claims of fraudulent inducement might be considered independent of the contract-and hence not be barred by the economic loss rule. See
Plaintiff relies on Rhino Fund, LLLP v. Hutchins,
*629 Here, unlike in Rhino Fund and Burke, plaintiff's contract and theft claims were inextricably intertwined: the latter could not be proven without first proving the former. This underscores the need for an economic loss rule precluding contract cases from being "recast as tort cases in order to escape the limitations that the law has placed on suits for breach of contract." Richard A. Posner, Common-Law Economic Torts: An Economic and Legal Analysis, 48 Ariz. L.R. 735, 745 (2006).
Plaintiff finally argues that the eсonomic loss rule, as a judicial construct, cannot be applied to preclude a statutory claim. We agree with plaintiff to this extent: if the legislature intended to provide a remedy in addition to a contractual оne, the statutory remedy would trump the economic loss rule. Cf. Boehme v. U.S. Postal Service,
There is no indication that the stolen property statute was intended to expand contractual remedies. To the contrary, that statute, which dates to 1861, has been construed narrowly in contract cases precisely to avoid expanding contractual remedies. See, e.g., West v. Roberts,
West held that a Uniform Commercial Code (UCC) provision had "abrogate[d] the stolen property statute so that 'theft' in that provision does not include any theft in which an owner voluntarily relinquishes property to a thief under a transaction of purchase."
We conclude that applying the economic loss rule on the facts of this case to preclude a civil theft claim does not improperly deny plaintiff a statutory remedy. Plaintiff was not entitled to pursue a civil theft claim in this action for breach of contract.
IV. Conclusion
The judgment on the theft claim and the related attorney fee award are reversed.