## Facts

- Roy C. Palm operated Frying Pan Anglers, Inc. (FPA), a fly-fishing retail and guide business, and personally held a U.S. Forest Service outfitting permit needed for certain commercial guiding.
- Palm agreed to sell all FPA stock to Robyn J. Lawry for $150,000 payable over 18 months and to work for FPA as a consultant for 10 years for $36,000 per year.
- The agreement required Palm to hold the outfitting licenses “absolutely” for FPA’s benefit, stating the licenses’ continued availability was “integral” to FPA’s viability; the provision reflected Palm’s representation that the permit could not be transferred into FPA’s name.
- Lawry received the stock transfer and made substantial payments, leaving an unpaid balance under the purchase agreement.
- The relationship deteriorated; Palm stopped performing, removed inventory, resigned, and revoked FPA’s ability to operate under the Forest Service permit, impairing FPA’s guiding operations.
- Lawry and FPA sued for breach of contract, conversion, and equitable relief (including a constructive trust over the permit); Palm counterclaimed for damages including wrongful termination under the employment agreement.
- After a bench trial, the court entered judgment for Lawry and FPA on breach of contract and conversion, awarded Palm limited damages on his counterclaim, imposed a constructive trust for FPA’s benefit over the permit, found no confidential relationship, and denied prejudgment interest, attorney’s fees, and certain costs.

## Issues

1. Whether Palm’s refusal to work, removal of inventory, and revocation of permit use constituted a material breach or anticipatory repudiation excusing Lawry’s remaining performance and supporting damages.
2. Whether a constructive trust was properly imposed over the Forest Service permit based on the agreement and unjust enrichment principles.
3. Whether the parties’ dealings created a confidential relationship beyond an arm’s-length business transaction.
4. Whether the trial court erred in its damages rulings, and in denying prejudgment interest, attorney’s fees, and statutory costs.

## Decision

- The Colorado Court of Appeals affirmed the judgment in all respects.
- The court upheld findings of breach/repudiation and conversion in favor of Lawry and FPA.
- The court upheld the constructive trust imposed for FPA’s benefit over the outfitting permit.
- The court affirmed the finding that no confidential relationship existed.
- The court affirmed the damages awarded to Palm on his counterclaim and the denials of prejudgment interest, attorney’s fees, and costs sought by Lawry and FPA.

## Legal Principles

- A contract term is material if it “goes to the root of the matter or essence of the contract,” and materiality is evaluated in the context of the contract as a whole.
- A party’s material breach or anticipatory repudiation may excuse the other party’s remaining performance and allow recovery of damages.
- A constructive trust is an equitable remedy to prevent unjust enrichment where one holds property that, in fairness, should benefit another; an express agreement that property is held for another’s benefit supports such relief.
- A confidential relationship requires more than trust or reliance in a negotiated transaction; it requires a relationship of superiority or influence justifying reliance beyond arm’s-length dealing.
- Appellate review generally defers to supported trial-court findings and discretionary rulings on interest, fees, and costs absent legal error.

## Conclusion

The court affirmed that Palm’s permit-related obligations were central to the parties’ bargain, supported the trial court’s findings of material breach and conversion, and approved equitable relief ensuring the outfitting permit was held for FPA’s benefit, while leaving intact the trial court’s determinations on the absence of a confidential relationship and on damages, interest, fees, and costs.


Lawry v. Palm, 192 P.3d 550 (Colo. App. 2008)