Pentelute v. Batenburg

23CA1586 Pentelute v Batenburg 12-19-2024

COLORADO COURT OF APPEALS

Court of Appeals No. 23CA1586
City and County of Denver District Court Nos. 19CV34536, 19CV34558 &
19CV34695
Honorable Ross B.H. Buchanan, Judge
Honorable Andrew J. Luxen, Judge

Justin Pentelute, Maggie Regalia, and Tellus Core, Inc.,

Plaintiffs-Appellees,

v.

Richard M. Batenburg, Jr.; Clear Cannabis, Inc.; Subtle Escape, LLC; Subtle
Relief, LLC; Cliintel Capital Group Aggressive Growth IV, LLC; Batmann
Consulting, Inc.; Cliintel, LLC; Cliintel Capital Management Group, LLC; and
Cliintel Capital Group, LLC, d/b/a Clear Colorado Group,

Defendants-Appellants.

JUDGMENT AFFIRMED IN PART AND REVERSED IN PART,
AND CASE REMANDED WITH DIRECTIONS

Division II
Opinion by JUDGE FOX
Johnson and Schock, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)
Announced December 19, 2024

Fortis Law Partners LLC, Cara Thornton, Henry M. Baskerville, Denver,
Colorado, for Plaintiffs-Appellees

Haddon, Morgan and Foreman, P.C., Adam Mueller, Jacob McMahon, Denver,
Colorado, for Defendant-Appellant Richard M. Batenburg, Jr.
Allen Vellone Wolf Helfrich & Factor P.C., Jordan Factor, Jeremy T. Jonsen,
Vandana S. Koelsch, Denver, Colorado, for Defendant-Appellant Clear
Cannabis, Inc.

Recht Kornfeld, P.C., Thomas M. Rogers III, Nathan A. Bruggeman, Denver,
Colorado, for Defendants-Appellants Subtle Escape, LLC; Subtle Relief, LLC;
Cliintel Capital Group Aggressive Growth IV, LLC; Batmann Consulting, Inc.;
Cliintel, LLC; Cliintel Capital Management Group, LLC; and Cliintel Capital
Group, LLC, d/b/a Clear Colorado Group
¶1 Richard M. Batenburg, Jr.; Clear Cannabis Inc. (CCI); Subtle

Escape, LLC (SE); Subtle Relief LLC (SR); Cliintel Capital Group

Aggressive Growth IV, LLC (CCAG IV); Batmann Consulting, Inc.

(Batmann); Cliintel LLC, d/b/a EvolutionZ Consulting (Cliintel);

Cliintel Capital Management Group, LLC (CCMG); and Cliintel

Capital Group, LLC, d/b/a Clear Colorado Group (CCG)

(collectively, Joint Appellants), appeal the district court’s judgment

in favor of Justin Pentelute, and Maggie Regalia1 and Tellus Core

Inc. (Tellus). We affirm in part, reverse in part, and remand the

case with directions.

I. Background

¶2 This case arises out of a contract dispute between Pentelute

and Batenburg after their business relationship deteriorated.

Pentelute joined Batenburg’s company, Batmann, in late 2016 and

served as its CEO. Batmann, and Batenburg through Batmann,

owned and operated several companies. The companies relevant for

this appeal are as follows:

1 The claims against Regalia, and her counterclaims, were

dismissed in the district court by stipulation, and she did not
participate in this appeal.

1
• Batmann: The holding company owned by Batenburg

that many of the companies involved in this case were

affiliates of and for which Pentelute served as CEO until

2019.

• Cliintel: A company owned by Pentelute, formerly known

as EvolutionZ Consulting (Sunny Money, d/b/a

EvolutionZ Consulting), that was merged with Cliintel

and became an affiliate of Batmann in 2017 and of which

Pentelute served as CEO until 2019.

• SR: A company formed by Pentelute after he joined

Batmann that produces cannabidiol (CBD) vaping oil.

• SE: A company formed by Pentelute after he joined

Batmann that produces CBD vaping hardware products.

• CCG: A marijuana-infused products manufacturer.

• CCAG IV: A private equity investment fund.

• CCMG: A venture capital firm.

• CCI: The new company Batenburg formed — to absorb

assets from SE, SR, and Cliintel — with the founders of

Headspace International (Headspace). (Headspace is a

2
flavored vape cartridge manufacturer that sold its

products under a brand called “Clear.”)

¶3 When Pentelute joined Batmann, he merged his company into

Batmann in exchange for a 35% ownership of Batmann’s common

stock, with Batenburg retaining the remaining shares (65%).

Pentelute then negotiated a master license agreement (MLA)

between Headspace and Batmann, designating Batmann as the

“global licensee” for Headspace’s flavored vape products under the

Clear brand for five years and allowing Batmann to serve as a

licensor for sublicensees selling Clear brand products to

dispensaries. Because of royalties from sublicensing agreements

via the MLA, and the corresponding increase in demand for

packaging and hardware produced by SE and CBD products

produced by SR, marijuana product sales through CCG and

consulting by Cliintel, SE, SR, and CCG soon became important

profit sources for Batmann.

¶4 In early 2018, however, Pentelute and Batenburg’s

relationship soured. Pentelute initially sought to buy out

Batenburg, with Batenburg’s initial support. Pentelute created

Tellus to buy out Batenburg’s shares and hoped to later acquire the

3
MLA, SR, SE, and Cliintel. But a deal never materialized, and

Pentelute instead sued Batenburg in December 2018. After

mediation, the parties reached a settlement. The settlement was

memorialized in four different documents, the (1) “Settlement

Agreement and Mutal Release” (the Settlement Agreement);

(2) “Stock Redemption Agreement”; (3) “Promissory Note”; and

(4) “Security Agreement,” all executed on February 17, 2019.

¶5 Under the Settlement Agreement, Pentelute agreed to release

Batenburg, Batmann, and Batmann’s affiliates from all claims in

exchange for Batenburg redeeming all Pentelute’s shares in

Batmann. The Settlement Agreement defined Batmann’s affiliates

to include, as relevant here, SE, SR, Cliintel, CCG, CCAG IV, and

CCMG. Batenburg signed the Settlement Agreement individually

and on behalf of Batmann and its affiliates. The parties agreed to

pay Pentelute for the shares in accordance with the Stock

Redemption Agreement, incorporated as Exhibit A to the Settlement

Agreement.

¶6 The Stock Redemption Agreement detailed that Batmann

would pay Pentelute $2.5 million for his shares of Batmann with

$200,000 paid immediately and the remaining $2.3 million paid in

4
installments under the Promissory Note, incorporated as Exhibit A

to the Stock Redemption Agreement. The Stock Redemption

Agreement also required that parties execute the Security

Agreement, incorporated as Exhibit B to the Stock Redemption

Agreement.2 The Stock Redemption Agreement provided that the

Stock Redemption Agreement, the Settlement Agreement, the

Promissory Note, and the Security Agreement together constituted

“the entire agreement of the parties with respect to the subject

matter hereof.” Batenburg signed the Stock Redemption Agreement

in his capacity as Batmann’s president.

¶7 Under the Promissory Note, Batmann, as the “Maker,” agreed

to pay Pentelute $2.3 million plus interest in monthly payments

over two years. The Note defined “Maker” to include Batmann and

Batmann’s “respective heirs, successors, legal representatives and

assigns, whether voluntary by action of the parties or involuntary

by operation of law” and provided that its “rights and obligations

2 The Stock Redemption Agreement referenced two other exhibits

not relevant for this appeal: (1) Pentelute’s original stock certificates
along with a “duly executed Stock Transfer Power” form transferring
the shares to Batmann (Exhibit C); and (2) Pentelute’s letter of
resignation from Batmann (Exhibit D).

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shall not be assignable or transferable” without Pentelute’s written

consent. Lastly, it added that the Promissory Note was secured by

a lien on Batmann’s assets in accordance with the Security

Agreement. Batenburg signed the Promissory Note as Batmann’s

president.

¶8 The Security Agreement identified Pentelute as the “Secured

Party” and Batmann and Batmann’s affiliates (defined as SR, SE,

and Cliintel) as the “Borrowers.” As collateral for the Promissory

Note, the Security Agreement granted Pentelute a security interest

in the “Borrower’s present and future right, title and interest in all

of the Borrower’s accounts receivable existing from time to time.”

The Borrowers represented that until their obligations under the

Promissory Note were satisfied, they would not (1) create any other

security interests to the accounts receivable collateral; (2) “[p]erform

a corporate restructuring” except for in the ordinary course of

business; or (3) create security interests in, sell, or assign any of

their assets except in the ordinary course of business.

¶9 Significantly, the Security Agreement added that it was

binding on all “the Borrower’s successors and assigns, and shall

inure to the benefit of the Secured Party, its successors, and

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assigns.” Batenburg signed the Security Agreement on behalf of

Batmann and its affiliates as Batmann’s president. Throughout the

litigation, Batmann, Cliintel, SR, and SE were referred to as the

“Borrower Entities.”

¶ 10 Batenburg testified that from the end of 2018 through early

2019, during the negotiations of the agreements, he had been

planning to “roll up” several of the Batmann companies into

another corporate entity, CCI (the Roll Up). At Batenburg’s

instruction, CCI was incorporated on February 5, 2019, shortly

before the four settlement documents were executed on February

17, 2019, and Batenburg became CCI’s CEO. In April 2019, CCI

initiated the Roll Up, providing CCI stock to Headspace in exchange

for the Clear brand’s intellectual property and providing CCI stock

to Batmann in exchange for SE, SR, and Cliintel (which became

“wholly-owned subsidiaries” of CCI).

¶ 11 After the Roll Up, CCI began collecting the royalty payments

made to Batmann under the MLA, including payments from CCG,

and Batmann no longer had any accounts receivable for its Clear

brand sublicense agreements. And, as subsidiaries of CCI, SE, SR,

7
and Cliintel3 channeled all income to CCI and transferred all

accounts receivable and assets to CCI.

¶ 12 According to an offering memorandum prepared for CCI in

September 2019, Batenburg was CCI’s chairman, president, and

secretary and owned 82% of its outstanding shares. The same

memorandum detailed that Batenburg owned 98% of Batmann,

“30% of CCAG IV” and “65% of CCMG” indirectly through Batmann,

and “40% of [CCI]” directly. Further, it provided that CCAG IV

owned “30% of [CCI].” Batenburg served as the manager for CCMG,

and CCMG (under Batenburg’s majority control), in turn, acted as

CCAG IV’s manager.

¶ 13 In accordance with the Stock Redemption Agreement, in

February 2019, Pentelute received the initial $200,000 payment.

Pentelute also received monthly payments from March to October

2019 per the Promissory Note. Batenburg personally loaned the

payments to Batmann, except for the October payment, which was

only a partial interest payment and the last payment Pentelute

received. Batenburg testified that he could not continue paying

3 Batenburg testified that Cliintel had “no ongoing operations” and

“does not exist” as it was previously known.

8
Pentelute on Batmann’s behalf until CCI went public. Because

Batmann had no other revenue, Batenburg sought to renegotiate

the payment schedule with Pentelute.4

¶ 14 When Batenburg proposed renegotiating the payment

schedule, Pentelute requested financial information on Batmann

and soon realized that his collateral had been transferred to CCI.

Pentelute gave a notice of default for Batmann’s failure to make

payments under the Promissory Note, with an opportunity to cure,

on November 22, 2019, but Batenburg did not cure the breach.

Instead, on November 26, Batenburg sued Batmann for the unpaid

loans he made to Batmann, and thereafter, Cliintel sued Maggie

Regalia (Cliintel’s financial “controller”) and Tellus. Pentelute sued

Joint Appellants on December 10, 2019. The district court

consolidated all three cases on January 29, 2020.

4 Batenburg answered affirmatively during his direct examination

that he “controlled all agreements that Batmann made[,] . . all
contracts it entered into[,] . . . [and] what assets Batmann
transferred.” He also testified that he had the same level of control
over SE, SR, and Cliintel. He also testified that he was the
“managing member” of CCMG, which owned CCAG IV, and was the
managing member of CCG. To clarify, Pentelute’s counsel asked
Batenburg, “[E]ither you or a company you control, is a majority
owner of every single entity named in Mr. Pentelute’s complaint,
right?” Batenburg answered, “I believe that’s accurate.”

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II. The District Court’s Judgments

¶ 15 After a bench trial, the district court largely found in

Pentelute’s favor. As relevant here, the court found that, as part of

the Roll Up, Batmann fraudulently transferred the MLA and its

interests in SE, SR, and Cliintel to CCI, including their accounts

receivable, and that Batmann had not received “reasonably

equivalent value” in the illiquid CCI stock it received in return.

Therefore, Batmann’s transfers were fraudulent as defined in

section 38-8-106(1), C.R.S. 2024. It also found that the transfers

were fraudulent under section 38-8-105(1)(a), C.R.S. 2024, as the

transfers were made “[w]ith actual intent to hinder, delay, or

defraud” Pentelute.

¶ 16 The court also found that “Batmann and CCG engaged in civil

theft” under sections 18-4-401 to -405, C.R.S. 2024, when CCG (at

Batenburg’s direction) began paying royalties to CCI instead of to

Pentelute, despite Pentelute having sent notice of his secured

interests per section 4-9-607(a)(1), C.R.S. 2024, to “some of CCI’s

customers.” The court found CCG knowingly obtained control over

Pentelute’s property without authorization with the intent to

permanently deprive Pentelute of his property.

10
¶ 17 Next, the court found that two breaches of contract occurred.

First, it found that there was “little question that the Secured

Promissory Note was breached” by its Maker, and its assigns

(including CCI), because the required payments were not made.

Second, the court found that “it is equally clear that Batenburg and

the Borrower Entities” (SR, SE, and Cliintel) violated the Security

Agreement when “Mr. Batenburg assigned the accounts receivable

of the Borrower Entities to CCI, restructured through the Roll-Up

transactions in a manner that impaired the collateral, and sold or

assigned the Borrower Entities[’] assets to CCI.” The court also

found that “CCI is a successor to each of the Borrower Entities” per

the Security Agreement.

¶ 18 The court rejected Joint Appellants’ defense that Pentelute had

not performed under the Security Agreement by failing to return or

destroy all of Batmann’s property and by Pentelute retaining access

to Batmann’s digital information synced to his computer. The court

found that Pentelute’s failure to return or destroy these materials

did not constitute a material breach of the Security Agreement and

thus did not excuse nonperformance by Batmann and its affiliates.

11
¶ 19 Next, the district court found that Joint Appellants engaged in

a civil conspiracy when the relevant companies transferred their

assets to CCI, rendering Batmann “a worthless shell” so that

“Pentelute would have nothing to execute upon.” The court

highlighted that CCI and Batmann pursued this objective because

both were parties to the Stock Redemption Agreement under which

Batmann agreed to transfer the MLA and ownership interests in

SE’s, SR’s, and Cliintel’s assets to CCI in exchange for stock. And it

noted that CCAG IV also sought this objective because it owned

stock in SE and SR which it also assigned to CCI. Finally, CCG

furthered the conspiratorial objective transferring MLA royalty

payments to CCI.

¶ 20 The court rejected the claims raised against Pentelute and

Tellus with prejudice. As a result, the court entered judgment in

favor of Pentelute for fraudulent transfer, breaches of the

Promissory Note and Security Agreement, and civil conspiracy and

against Batenburg (individually), Batmann, CCI, SE, SR, Cliintel,

CCMG, CCAG IV, and CCG. The court awarded “damages in the

amount of the unpaid payments due under the Secured Promissory

Note” plus interest.

12
¶ 21 Next, the court entered judgment in Pentelute’s favor for civil

theft and against Batenburg and CCG, “awarding damages in the

amounts paid by CCG to CCI which were due by contract to

Batmann, Cliintel, or any of the Borrower Entities, together

with the penalty [in section] 18-4-405[, C.R.S. 2024,]” plus interest.

¶ 22 CCMG, CCAG IV, CCG, Batmann, Cliintel, SR, SE, and

Batenburg all filed motions for judgment notwithstanding the

verdict (JNOV) pursuant to C.R.C.P. 59, but they were denied by

operation of law. See C.R.C.P. 59(j).

III. Issues on Appeal

¶ 23 Joint Appellants raise seven main arguments in their merits

appeal, arguing that the district court erred by

• rejecting Joint Appellants’ fraudulent inducement

affirmative defense;

• finding CCMG, CCAG IV, CCG, and Batenburg —

nonparties to the Promissory Note and Security

Agreement — liable for breach;

• finding Joint Appellants liable for civil theft;

• finding Joint Appellants liable for fraudulent transfer;

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• finding Joint Appellants liable for civil conspiracy when

affiliated corporate entities cannot conspire with each

other;

• altering the liability determinations made in the court’s

“Findings of Fact, Conclusions of Law, and Judgment”

(findings order) via entry of the “Modified Judgment in

Sum Certain Order” (Amended Final Judgment Order);

and

• miscalculating the damage award for breach of contract.

Joint Appellants also argue that because a new trial is required

based on these errors, the district court’s cost award must be

vacated. Pentelute requests appellate attorney fees and Tellus

requests costs.

IV. Preservation and Standard of Review

¶ 24 “To properly preserve an argument for appeal, the party

asserting the argument must present ‘the sum and substance of the

argument’ to the district court.” Gebert v. Sears, Roebuck & Co.,

2023 COA 107, ¶ 25 (citation omitted). Arguments raised for the

first time in a post-trial motion or motions for reconsideration are

not preserved for appellate review. Briargate at Seventeenth Ave.

14
Owners Ass’n v. Nelson, 2021 COA 78M, ¶ 66; Fid. Nat’l Title Co. v.

First Am. Title Ins. Co., 2013 COA 80, ¶ 51 (where an argument

raised in a trial management order differed from the argument

raised in a post-trial C.R.C.P. 59 motion, the latter argument was

not preserved for appeal); see also People v. Schaufele, 2014 CO 43,

¶¶ 43, 46, 49 (Boatright, J., concurring) (“Motions for

reconsideration are designed to correct erroneous court rulings;

they are not designed to allow parties to present new legal

arguments for the first time and then appeal their denial . . . .”).

¶ 25 Further, affirmative defenses raised for the first time in a post-

trial motion are waived because they were not affirmatively pleaded

in accordance with C.R.C.P. 8 and are not preserved for appellate

review when later raised for the first time in a post-trial motion.

C.R.C.P. 8(c) (Any claim “constituting an avoidance or affirmative

defense . . . [or] mitigating circumstances to reduce the amount of

damage shall be affirmatively pleaded.”); see Blood v. Qwest Servs.

Corp., 224 P.3d 301, 328-29 (Colo. App. 2009), aff’d, 252 P.3d 1071

(Colo. 2011); see also Hawg Tools, LLC v. Newsco Int’l Energy Servs.,

Inc., 2016 COA 176M, ¶ 43; Fid. Nat’l Title, ¶ 51; Crocker v. Colo.

Dep’t of Revenue, 652 P.2d 1067, 1071 (Colo. 1982).

15
¶ 26 “The interpretation of a contract is a question of law that we

review de novo.” French v. Centura Health Corp., 2022 CO 20, ¶ 24.

We defer to the district court’s factual findings “unless they are

clearly erroneous.” Id. And when “interpreting a contract, our

primary goal is to give effect to the parties’ intent.” Id. at ¶ 25.

When a contract’s language is clear, we enforce it as written. Id.

¶ 27 We interpret contracts according to the document’s plain

language and avoid interpretations that lead to absurd results,

defeat the parties’ intentions, Quarky, LLC v. Gabrick, 2024 COA

76, ¶ 11, or render any provision meaningless, Newflower Mkt., Inc.

v. Cook, 229 P.3d 1058, 1061 (Colo. App. 2010). We also ascertain

a contract’s meaning by looking to the entire document rather than

“viewing clauses or phrases in isolation.” Univ. of Denver v. Doe,

2024 CO 27, ¶ 50 (citation omitted).

V. Analysis

A. Fraudulent Inducement Defense

¶ 28 Joint Appellants first argue that the district court erred by not

considering their fraudulent inducement defense for Pentelute’s

breach of contract claims. They argue that Pentelute fraudulently

16
induced them to execute the Settlement Agreement by representing

that he had returned or destroyed all company property.

¶ 29 While the district court did not directly address this argument,

evidently deeming it abandoned, Joint Appellants’ fraudulent

inducement defense is substantively identical to their material

breach of contract defense against Pentelute, which the district

court rejected. Thus, any alleged error would be harmless because

the court found that the breach of contract defense failed, so a

fraudulent inducement defense would have also failed for the same

reasons.

In order to prevail on a claim for fraud, one
must establish: (1) a false representation
concerning a material existing fact;
(2) knowledge on the part of the one making
the representation of its falsity; (3) ignorance of
its falsity on the part of the one to whom the
representation was made; (4) an intention by
the person making the representation that it
be acted upon; and (5) action on the
representation resulting in damage to the
claimant.

W. Cities Broad., Inc. v. Schueller, 830 P.2d 1074, 1077 (Colo. App.

1991), aff’d, 849 P.2d 44 (Colo. 1993) (citation omitted).

¶ 30 Joint Appellants argue that Pentelute falsely represented that

he had returned or destroyed all Batmann’s property when

17
company documents remained on his personal computer. They

argue that this misrepresentation was material and that Batenburg

justifiably relied on these representations. And they further argue

that the misrepresentation caused them damages because the

records taken were valuable, they “could” provide Pentelute a

business advantage, and Pentelute’s failure to return or destroy

them breached the MLA.

¶ 31 But the district court addressed these allegations in its

discussion of Pentelute’s breach of contract claims and Joint

Appellants’ material breach defense, noting that much “of the

evidence at trial concerned whether Pentelute had performed under

the agreements, and specifically whether he had complied with his

obligation” to return or destroy Batmann’s property. That

contractual representation, namely that “Pentelute represents that

he has returned and/or destroyed all property of Batmann

Consulting and its Affiliates,” also supported the allegations for the

fraudulent inducement claim.

¶ 32 In other words, Joint Appellants contend that Pentelute failed

to perform this contractual representation but also that their

execution of the agreements was conditioned on it. But the court

18
found that Pentelute did not materially breach this representation.

It found that the key categories of documents Pentelute retained

included “(1) spreadsheets listing the ingredients of The Clear flavor

formulas developed by Headspace; (2) Cliintel’s Investor Logs; and

(3) portions of Cliintel’s ‘SalesForce’ software.”

¶ 33 The court first found that the flavor formulas were not

Batmann’s or its affiliates’ property, nor did they have a proprietary

interest in them. Next, the investor logs’ retention did not

constitute a material breach because they predated Pentelute’s time

at the company and “largely consisted of his friends and contacts

from previous business ventures.” At trial, “defendants could only

document a single investor who . . . was listed on the investor log

and had been contacted by Pentelute.” Finally, the court found,

regarding the SalesForce software, that “Defendants did not offer

evidence regarding exactly what the documents were, other than to

suggest that they might be helpful to starting a new business,” and,

again, they were largely simple forms that Pentelute had been

compiling before his time with Batmann.

¶ 34 The court recognized that, “[t]o be sure, the sheer volume of

the documents Mr. Pentelute retained might suggest that his

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retention of them was intentional, and not merely incidental or an

oversight.” But it credited Pentelute’s testimony that he was

unaware these files were even on his computer and ultimately

found that “Mr. Pentelute had played no role in requesting or

storing” the documents on his computer because the syncing of

corporate documents to Pentelute’s personal computer from the

intranet was automatic, until it was turned off (once Batmann’s

“oversight” was discovered).

¶ 35 Further, the district court found that “Batmann was unable to

demonstrate that Mr. Pentelute had utilized any of the documents

to its detriment.” This was particularly true given that immediately

upon receiving notice that Pentelute had these files, he made a

forensic copy of his hard drive, which he provided to Joint

Appellants, and then deleted the files. Therefore, the district court

found that Pentelute’s possession of the files was not a material

breach of the Settlement Agreement, and we must defer to the

district court’s factual findings where they are not clearly

erroneous. See French, ¶ 24.

¶ 36 While these findings relate to breach of contract, they provide

insight into the merit (or lack thereof) of Joint Appellants’

20
fraudulent inducement defense. See Deutsche Bank Tr. Co. Ams. v.

Samora, 2013 COA 81, ¶ 38 (“An appellate court may affirm the

trial court’s ruling based on any grounds that are supported by the

record.”). In particular, the findings illustrate that Joint Appellants

failed to prove that Pentelute’s representation that he had returned

or destroyed all of Joint Appellants’ documents was materially false.

¶ 37 Moreover, the court’s finding that Pentelute “played no role in

requesting or storing” the documents that were synced to his

computer undermines the knowledge element of the fraudulent

inducement defense. See Schueller, 830 P.2d at 1077. In other

words, the district court’s finding that Pentelute did not materially

breach the representation provision in the Settlement Agreement

necessarily forecloses a finding that the same representation was a

fraudulent inducement. See id. The district court’s factual findings

on these points enjoy record support and are not clearly erroneous.

See French, ¶ 24.

¶ 38 Thus, even if the district court erred by not separately

addressing Joint Appellants’ fraudulent inducement defense, any

such error was harmless because the outcome necessarily would

have been the same given the court’s breach of contract findings.

21
See C.A.R. 35(c) (“The appellate court may disregard any error or

defect not affecting the substantial rights of the parties.”).

B. Breach of Contract

¶ 39 Next, Joint Appellants argue that the district court erred by

imposing contractual liability on nonparties to the Promissory Note

and the Security Agreement — namely CCMG, CCAG IV, CCG, and

Batenburg. They also argue that the court erred by holding CCI

liable as a “Maker” and “successor” of the Promissory Note and an

“assign” of the Security Agreement because it was not a party to

these agreements. We conclude that the court erred by holding

CCMG, CCAG IV, CCG, and Batenburg liable for breaching the

Promissory Note and Security Agreement, but that CCI is an assign

and successor to these agreements and could be held liable for

breaching these agreements.

¶ 40 “[A] contract cannot bind a nonparty.” Equal Emp. Opportunity

Comm’n v. Waffle House, Inc., 534 U.S. 279, 294 (2002). Only

Batmann was a signatory to the Promissory Note, and only

Batmann and its affiliates SR, SE, and Cliintel, were signatories to

the Security Agreement. Thus, only Batmann could be held liable

for breaching the Promissory Note, and only Batmann, SR, SE, and

22
Cliintel could be held liable for breaching the Security Agreement.

To hold otherwise would undermine the parties’ intent in

designating different companies as signatories to the respective

agreements. See Quarky, ¶ 11.

¶ 41 CCI, however, was properly held liable as a “Maker” and

“successor” of the Promissory Note and Security Agreement. The

district court found that CCI was Batmann’s assignee by looking to

the Stock Exchange Agreement (signed by Batenburg on behalf of

CCI and Batmann). Batmann agreed to transfer the MLA and 86%,

34%, and 90% of its membership interests in Cliintel, SE, and SR,

respectively, to CCI in exchange for over six million shares of CCI

common stock for $0.00001 per share. The court found that CCI

was a successor to the Borrower Entities, i.e., Batmann, SR, SE,

and Cliintel, because the Borrower Entities transferred their

accounts receivable to CCI. These findings reflect no error.

¶ 42 The Promissory Note explicitly details that Batmann was

bound to the agreement as well as Batmann’s “respective heirs,

successors, legal representatives and assigns, whether voluntary by

action of the parties or involuntary by operation of law.” And the

Security Agreement detailed that it was binding on all of the “the

23
Borrower’s successors and assigns” and would “inure to the benefit

of the Secured Party, its successors, and assigns.” Joint Appellants

argue that because CCI was not a party to the Promissory Note and

Security Agreement, and because it did not assume Batmann’s

obligations when Batmann continued to make payments to

Pentelute from March through October 2019, CCI cannot be

deemed an assign or successor of Batmann.

¶ 43 Black’s Law dictionary broadly describes an assignee (also

called an “assign”) as “[s]omeone to whom property rights or powers

are transferred by another.” Black’s Law Dictionary 145-46 (12th

ed. 2024); see also Allstate Ins. Co. v. Med. Lien Mgmt., Inc., 2015

CO 32, ¶ 9 (An assignment is “taken generally as a transfer of rights

or property from one person to another.” (citing Black’s Law

Dictionary 142 (10th ed. 2014))). It defines a “successor” as “[a]

corporation that, through amalgamation, consolidation, or other

assumption of interests, is vested with the rights and duties of an

earlier corporation.” Black’s Law Dictionary 1738 (12th ed. 2024);

see also Ginny’s Kids Int’l, Inc. v. Off. of Sec’y of State, 29 P.3d 333,

336 (Colo. App. 2000) (citing Black’s Law Dictionary 1446 (7th ed.

1999)) (providing the same definition of “successor”).

24
¶ 44 CCI meets both definitions. Batmann transferred its most

profitable assets to CCI in exchange for (essentially worthless)

stock, and the Borrower Entities became subsidiaries of CCI; thus,

CCI became the successor to the Borrower Entities. CCI was also

an assignee of Batmann’s assets, including the Borrower Entities’

accounts receivable. Therefore, CCI is liable for the breach of the

Promissory Note and Security Agreement.

¶ 45 Joint Appellants rely on the principle that “[g]enerally, a

corporation that acquires the assets of another corporation does not

become liable for the debts of the selling corporation.” CMCB

Enters., Inc. v. Ferguson, 114 P.3d 90, 93 (Colo. App. 2005). But

this ignores the relevant exception that “successor corporations

have been held liable if . . . there is an express or implied

assumption of liability.” Id. The Promissory Note and Security

Agreement expressly provided that the parties’ assigns and

successors would be bound by the agreements — which reflects the

clear intent of the parties because otherwise, as here, the relevant

companies’ assets could be transferred and the subject collateral

jeopardized. See French, ¶ 24 (noting that we interpret contracts de

novo, seeking to effectuate the parties’ intent).

25
¶ 46 Thus, signatories to the Promissory Note and Security

Agreement are liable for breaches of these agreements, but CCI also

assumed liability as those entities’ assign and successor as defined

in the contracts. But we reject Joint Appellants’ argument that

Pentelute’s civil theft, fraudulent transfer, and conspiracy claims

are dependent on the alleged breach of contract. Those claims are

independent of the breach of contract claims, and we address them

separately below.

C. Civil Theft and the Uniform Commercial Code (UCC)

¶ 47 Joint Appellants contend that the district court’s civil theft

judgment must be reversed. Joint Appellants argue Pentelute failed

to prove that he provided CCI’s customers, including CCG, with a

UCC creditor letter providing notice of his security interests in the

Borrower Entities’ accounts receivables; thus, Pentelute did not

prove that he had an ownership interest in the property at issue.

They further argue that this also means that Pentelute failed to

prove that they “knowingly” deprived him of his property.

¶ 48 Alternatively, Joint Appellants argue that the district court’s

civil theft findings are “irreconcilably in conflict” because the court

found that only Batmann and CCG, not Batenburg, engaged in civil

26
theft, yet it still entered judgment against Batenburg individually on

Pentelute’s civil theft claim. Because it is impossible to know which

party the court meant to find liable, they contend reversal is

required.

¶ 49 Pentelute argues that these contentions were only preserved

by CCG, the only Joint Appellant to raise this UCC argument in

post-trial motions. And Joint Appellants point to nowhere else in

the record where they preserved this issue for appeal, though they

argue that “[o]bjections to the court’s findings are preserved by

C.R.C.P. 52.” A party need not take action to preserve objections to

the adequacy of the district court’s factual findings pursuant to

C.R.C.P. 52 for appeal, however. C.R.C.P. 52 (“Neither requests for

findings nor objections to findings rendered are necessary for

purposes of review.”); see also Rocky Mountain Health Maint. Org.,

Inc. v. Colo. Dep’t of Health Care Pol’y & Fin., 54 P.3d 913, 918

(Colo. App. 2001) (For a trial court’s findings of fact and conclusions

of law to be adequate for purposes of Rule 52, they must be

“sufficiently explicit to give an appellate court a clear understanding

of the basis of its order.”).

27
¶ 50 Here, Joint Appellants argue that the district court’s UCC

findings are insufficient, though admittedly, there is a fine line

between a new, and unpreserved, legal argument and Joint

Appellants’ adequacy of the findings argument here. While we

conclude the issue has been partially preserved for appeal, C.R.C.P.

52, these contentions are without merit.

¶ 51 The district court addressed two different allegations of civil

theft raised by Pentelute. The first involved Batmann, Batenburg,

and CCG and their efforts to ensure CCG began paying the Clear

brand royalty payments to CCI instead of Batmann and the

Borrower Entities; the district court found that “Batmann and CCG

engaged in civil theft” as a result. The court noted that “Pentelute

issued letters pursuant to [the UCC] to some of CCI’s customers

demanding that the recipients send the amounts due to any of the

Borrower Entities or their successors to Pentelute instead . . . .”

Joint Appellants contend Pentelute’s issuance of UCC letters to

“some of CCI’s customers” is insufficient to prove that Pentelute

ever sent UCC letters to CCG. But the district court also noted that

“Mr. Batenburg acknowledged in his testimony that he had directed

28
CCG to start paying CCI rather than the Borrower Entities,” a

finding the record supports.

¶ 52 Batenburg testified that he was the “managing member” of

CCG, that he controlled CCG, and that he assigned Batmann and

CCG’s sublicensing agreement to CCI. As a result, CCG knew of

Pentelute’s security interest through Batenburg’s involvement, so it

“knowingly” obtained control over it without authorization,

regardless of whether Pentelute issued a UCC letter to CCG. § 18-

4-401(1), (1)(a). Additionally, while a creditor “may notify an

account debtor or other person obligated on collateral to make

payment or otherwise render performance to or for the benefit of the

secured party” after a default, the statute does not require a

secured party to issue UCC letters to establish a civil theft claim,

nor can we find a case that requires as much. § 4-9-607(1)(a).

¶ 53 Joint Appellants go further, however, and argue that a security

interest that does not follow the UCC process cannot support a

claim for civil theft where the claim is based on UCC remedies.

They also argue that Pentelute had to prove that he had an

ownership interest in every payment CCG made to CCI. However,

these arguments go beyond the adequacy of the district court’s civil

29
theft findings and were only raised post-trial. Therefore, these

arguments have not been preserved for appeal, and we will not

consider them. See Briargate, ¶ 66.

¶ 54 Next, Joint Appellants argue that the district court’s civil theft

findings are irreconcilably inconsistent. Specifically, they point to

its finding that “Batmann and CCG engaged in civil theft” after the

discussion of the CCG asset transfers to CCI and its rejection of

Pentelute’s second civil theft claim.

¶ 55 Pentelute’s rejected civil theft claim argued “that civil theft

occurred by means of fraudulent inducement with respect to Mr.

Batenburg’s back channel communications with Headspace to

implement the CCI enterprise.” But Joint Appellants argue that,

because the district court rejected this claim, it could not have

found (in its findings order) that Batenburg and CCG were liable for

civil theft, necessitating reversal because it is impossible to

determine what the district court meant. Pentelute argues that the

district court’s findings do not conflict and that the district court

found Batenburg, Batmann, and CCG liable for civil theft.

¶ 56 Because the court’s findings order was supported by adequate

findings of fact and because we can discern the basis of its

30
judgment, we reject Joint Appellants’ argument. See Rocky

Mountain Health, 54 P.3d at 918. The district court’s most

important findings for civil theft included that

[a]lthough CCG, the Colorado licensee for The
Clear, still had a contract with Batmann to pay
royalty payments, it voluntarily began paying
CCI what it previously had paid to the
Borrower Entities. Mr. Batenburg
acknowledged in his testimony that he had
directed CCG to start paying CCI rather than
the Borrower Entities. The court finds that
this amounts to knowingly obtaining control
over Pentelute’s property without
authorization, and was done with the specific
intent to permanently deprive him of the
benefit of the property.

These findings, in essence, highlight that Batenburg committed civil

theft by directing Batmann’s royalty payments to CCI instead of the

Borrower Entities, as discussed above. And when CCG agreed to do

this, it was aware of Pentelute’s security interest (given Batenburg’s

involvement). As a result, we conclude that the district court’s

findings order intended to hold Batmann, Batenburg, and CCG

liable for civil theft.

¶ 57 That the district court rejected Pentelute’s second civil theft

claim against Batenburg does not undermine this result.

Batenburg was personally involved in the events that constituted

31
civil theft under in Pentelute’s first civil theft claim, and the record

supports the district court’s findings that Batmann, Batenburg, and

CCG committed acts constituting civil theft. Therefore, we decline

to reverse the judgment for inconsistency.

D. Fraudulent Transfer

¶ 58 Next, Joint Appellants argue that the district court’s

fraudulent transfer judgment must be reversed, arguing that its

factual findings were insufficient because it failed to individually

analyze each party’s culpability and that its findings are internally

inconsistent. They also argue that the district court could not have

awarded Pentelute the unpaid principal from the Promissory Note

because that value is greater than the value of the transferred

assets, particularly because the district court ascribed no specific

value to the MLA (and if it did, then its rejection of their

misappropriation of trade secrets claim conflicts with this value

determination). We agree, in part.

¶ 59 The district court found that Pentelute had advanced

fraudulent transfer claims arising under sections 38-8-105 and 38-

8-106. It found that

32
Batmann exchanged not only the MLA, but its
entire ownership interest in [SE], [SR], and
Cliintel in exchange for 6 million shares of CCI
common stock and majority control the
company. These amounted to essentially 100
percent of the assets of the Borrower Entities,
including their accounts receivable as to which
Pentelute had a perfected security interest at
the time.

Based on the value of the Borrower Entities’ accounts receivable,

the court found that “Batmann was owed $196,717.39, [SE] was

owed $657,462.85, [SR] was owed $24,336.57, and Cliintel was due

$270,920.00” ($1,149,418.81 total). Cf. Bertoia v. Denver Gateway

LLC, 2023 COA 76, ¶¶ 36-38 (holding that transferring title to a

property may be a cognizable fraudulent transfer claim).

¶ 60 The court found that these transfers were fraudulent under

section 38-8-106(1) because Batmann did not receive “reasonably

equivalent value” from the illiquid CCI stock it received, and that

“Batmann could not pass the liquidity or cash flow test for

insolvency.” It also found that Batenburg knew that Batmann

could not pay its debts as they became due, especially having

agreed to the settlement terms. These findings are supported by

the record, and Joint Appellants do not contest them; rather, their

33
fraudulent transfer contentions focus entirely on the court’s

findings related to section 38-8-105(1)(a).

¶ 61 To that point, the court found that the transfers were

fraudulent under section 38-8-105(1)(a) as transfers made “with

actual intent to hinder, delay, or defraud any creditor of the

debtor.” The court specifically made several factual findings

concerning Joint Appellants’ “actual intent” pursuant to section 38-

8-105(2). But, as Joint Appellants point out, the district court

entered judgment jointly and severally against all Joint Appellants

(Batenburg, Batmann, CCI, SE, SR, Cliintel, CCMG, CCAG IV, and

CCG) without individualized intent findings.

¶ 62 Further, Joint Appellants point out that the district court’s

Amended Final Judgment Order seemingly relied on section 38-8-

105(1)(a) when it awarded Pentelute $5,227,444.50 for Joint

Appellants’ fraudulent transfer, a one-and-one-half-multiplied

enhanced damages award (based on the court’s underlying breach

of contract award of $3,484,963)5 pursuant to section 38-8-

108(1)(c), C.R.S. 2024. But unlike the district court’s judgment for

5 We address this baseline calculation in greater detail below in Part

V.G.

34
civil theft — which explicitly authorized enhanced damages

pursuant to section 18-4-405 — the district court did not explicitly

grant enhanced damages for the fraudulent transfer pursuant to

section 38-8-108(1)(c).

¶ 63 The district court’s generalized intent findings are not

sufficient to convey the basis for its damages award for fraudulent

transfer — which depends on finding that each Joint Appellant had

the requisite intent under 38-8-105(1)(a) to merit an enhanced

damages award pursuant to 38-8-108(1)(c). See Rocky Mountain

Health, 54 P.3d at 918. But, because Joint Appellants do not

contest the validity of the district court’s fraudulent transfer

findings under section 38-8-106, any challenge to this finding is

waived. See Melat, Pressman & Higbie, L.L.P. v. Hannon Law Firm,

L.L.C., 2012 CO 61, ¶ 18 (“A basic principle of appellate

jurisprudence is that arguments not advanced in the trial court and

on appeal are generally deemed waived.”)

¶ 64 As a result, we conclude that the district court’s finding that

Joint Appellants engaged in a fraudulent transfer stand but that it

was improper to award enhanced damages pursuant to 38-8-

108(1)(c) without the required intent findings for each Joint

35
Appellant. Accordingly, we remand the case to the district court to

determine the appropriate amount of damages for fraudulent

transfer, without enhancement, pursuant to section 38-8-109(2),

C.R.S. 2024, under which Pentelute may “recover judgment for the

value of the asset transferred, as adjusted under subsection (3) . . .

or the amount necessary to satisfy the creditor’s claim, whichever is

less.” We decline to address Joint Appellants’ contention

concerning whether the district court attributed value to the MLA.

Whether the MLA had value as it relates to the fraudulent transfer

judgment is a question of fact the district court may resolve on

remand.

E. Civil Conspiracy

¶ 65 Next, Joint Appellants argue that the district court’s civil

conspiracy findings must be reversed because they were inherently

based on the fraudulent transfer as the underlying unlawful act,

which it contends must be also reversed. Although we have already

rejected this position, they also contend that they cannot be found

liable for civil conspiracy because, as a matter of law, “commonly

owned affiliates cannot conspire with each other,” and Batenburg’s

involvement with the entities cannot establish a conspiracy because

36
“corporate employee[s] cannot conspire with the corporations they

serve.”

¶ 66 Pentelute contends that the issue was not preserved, and

Joint Appellants point only to their Rule 59 motions as proof they

preserved the issue. We agree that Joint Appellants failed to

preserve this issue. See Briargate, ¶ 66; see also Blood, 224 P.3d at

328-29. And it goes beyond a challenge to the adequacy of the

district court’s findings. See People v. Shifrin, 2014 COA 14, ¶ 90.

Accordingly, we may not review this contention for the first time on

appeal.

F. The Final Amended Judgment’s Alterations of the Findings
Order’s Liability Determinations

¶ 67 Next, Joint Appellants contend that when Judge Luxen issued

the Amended Final Judgment Order (the challenged order) he

“deviate[d] substantively” from Judge Buchanan’s findings order

and improperly altered its liability determinations. Specifically,

Joint Appellants contend that the district court erred by including

the trebled civil theft damages in its civil conspiracy damages

calculation and that the challenged order erroneously awarded

Pentelute shares in Batmann per the Promissory Note. They also

37
contend that the district court erred by awarding enhanced

fraudulent transfer damages, but we have already addressed this

contention above.

¶ 68 The challenged order awarded Pentelute (1) $3,484,963.00 in

damages for breach of contract against Joint Appellants with

interest, jointly and severally, in addition to “560 Default Shares in

Batmann, or an equivalent percentage of Batmann based on a

calculation that 750 shares is equal to 35% of Batmann” consistent

with the Promissory Note; (2) $5,227,444.50 in damages and

interest for fraudulent transfer against all Joint Appellants, jointly

and severally; and (3) $10,454,889.00 in damages for civil theft with

interest against Batenburg and CCG, jointly and severally. The

order also made Joint Appellants jointly and severally liable for civil

conspiracy for Pentelute’s claims for fraudulent transfer and civil

theft (with interest). The court capped Pentelute’s maximum

recovery for all claims at $10,454,889 (excluding interest, attorney

fees, and costs).

¶ 69 First, Joint Appellants contend that the civil conspiracy

findings were based solely on the fraudulent transfer because the

findings order established that “the unlawful act was the fraudulent

38
transfer of those assets to CCI.” See Jet Courier Serv., Inc. v. Mulei,

771 P.2d 486, 502 (Colo. 1989) (one of the elements of a civil

conspiracy claim is that defendants commit “one or more unlawful

overt acts”). The challenged order awarded damages for civil

conspiracy against all Joint Appellants. But Joint Appellants argue

that the challenged order could not impose joint and several liability

for Pentelute’s civil conspiracy claim for all defendants based on

civil theft because the findings order only held CCG and Batenburg

liable for civil theft and the civil conspiracy claim only concerned

the underlying fraudulent transfer.

¶ 70 “In general, ‘[e]very ruling or order made in the progress of an

on-going proceeding may be rescinded or modified during that

proceeding upon proper grounds.’” S. Cross Ranches, LLC v. JBC

Agric. Mgmt., LLC, 2019 COA 58, ¶ 43 (quoting Broyles v. Fort Lyon

Canal Co., 695 P.2d 1136, 1144 (Colo. 1985)). The “proper

grounds” standard “requires that the trial court’s action be within

the bounds of discretion.” Id. at ¶ 44. Because the challenged

order made no additional explicit findings, we must “refer to the

entire record and to the circumstances surrounding the order” to

39
resolve any ambiguities. Blecker v. Kofoed, 672 P.2d 526, 528

(Colo. 1983).

¶ 71 The findings order supports the conclusion that the civil theft

claim could also serve as an unlawful underlying act for Pentelute’s

civil conspiracy claim. Indeed, the district court noted in its civil

conspiracy analysis that “CCG agreed to accomplish the objective

[of the conspiracy] by transferring its payments under its sublicense

agreement with Batmann and [SE] and [SR] to CCI even though its

contractual obligations remained with Batmann and those Borrower

Entities.” This mirrors the court’s civil theft findings. Further, a

civil conspiracy can be the result of one or more unlawful acts, and

“the essence of a civil conspiracy claim is not the conspiracy itself,

but the actual damages resulting from the acts done in furtherance

of the conspiracy.” Resol. Tr. Corp. v. Heiserman, 898 P.2d 1049,

1055 (Colo. 1995); see Jet Courier, 771 P.2d at 502.

¶ 72 Civil conspiracy is an independent tort and “joint liability shall

be imposed on two or more persons who consciously conspire and

deliberately pursue a common plan or design to commit a tortious

act.” § 13-21-111.5(4), C.R.S. 2024; see also Heiserman, 898 P.2d

at 1055-56 (“[T]he term ‘tortious act’ encompasses any wrongful act,

40
other than breach of contract, causing injury or damages . . . .”).

Thus, the district court did not abuse its discretion in finding in the

challenged order that all parties that conspired to commit civil theft

and fraudulent transfer were jointly and severally liable for the

corresponding civil conspiracy damages (even if the civil theft

damages were trebled). Civil theft was one of the unlawful acts

underlying the civil conspiracy, and these findings were sufficiently

detailed.

¶ 73 Joint Appellants next argue that the district court could not

have awarded Pentelute shares in Batmann, despite the Promissory

Note’s provision that Pentelute could demand the “immediate”

issuance of shares of Batmann stock in the event of a default (the

exact number of demandable shares depended on how much the

Maker had paid), because the findings order made no such award.

But the plain language of the Promissory Note shows that Pentelute

is entitled to such an award once he demanded it following a

default. The district court did not abuse its discretion by amending

the judgment to award these shares based on the parties’

contractual obligations. See S. Cross Ranches, ¶¶ 43-44.

41
G. The Court Erred by Applying Payments Made Under the
Promissory Note to Offset Attorney Fees

¶ 74 Finally, Joint Appellants contend that the district court should

have applied the $646,200 in payments made under the Promissory

Note to offset the principal due under the Promissory Note, rather

than applying the payments to offset Pentelute’s attorney fees

award. We agree, in part, and remand to the district court to give

effect to the requested offset.

1. Preservation and Waived or Invited Error

¶ 75 Pentelute argues in a single sentence that Joint Appellants did

not preserve this issue. Alternatively, he suggests that Joint

Appellants waived or invited any error. We disagree.

¶ 76 Before the April 2023 fees hearings, Joint Appellants objected

to Pentelute’s request that the $646,200 in pre-breach payments be

applied towards attorney fees and costs, as opposed to the

Promissory Note’s principal. In their joint motion to amend the

attorney fees judgment, Joint Appellants reiterated this position. In

a subsequent hearing, Joint Appellants made it clear they believed

“the court should have reduced the principal damage by the

[$]646,000 . . . paid pre-breach.” Alternatively, they asked that the

42
payments “at least . . . be applied to reduce the fee judgment.”

(Emphasis added.) Pentelute contends that raising or accepting

this alternative argument precludes Joint Appellants from claiming

error on appeal.

¶ 77 We must “indulge every reasonable presumption against

waiver” and will not find waiver absent evidence of an “intentional

relinquishment of a known right or privilege.” People v. Rediger,

2018 CO 32, ¶ 39 (citations omitted). Similarly, we apply the

invited error doctrine narrowly to prevent parties from raising on

appeal errors that they “invited or injected” in the district court. Id.

at ¶ 34.

¶ 78 Joint Appellants’ conduct here does not rise to the level of

waived or invited error. See City of W. Palm Beach v. Visionair, Inc.,

199 F. App’x 768, 770 n.1 (11th Cir. 2006) (“The doctrine of invited

error does not preclude parties from making alternative

arguments.”). They consistently maintained their original position,

while asking — at a minimum — that the court reduce some part of

the judgment to account for the pre-breach payments they

completed under the Promissory Note. We conclude that the issue

43
was preserved and that neither waived nor invited error precludes

our review.

2. Analysis

¶ 79 The parties primarily dispute the following language in the

Promissory Note concerning the order of application for payments

by the Maker (Batmann) to the Holder (Pentelute):

Any payments made shall be applied first to
any reasonable costs advanced or expended by
Holder under this Note and any collection
costs incurred by Holder in procuring Maker’s
performance hereunder, then to payment of
the interest then accrued and due on the
outstanding principal balance hereunder, and
the remainder of all such payment shall be
applied to the reduction of the unpaid principal
balance.

(Emphasis added.)

¶ 80 The district court’s decision to deduct the $646,200 in pre-

breach payments to reduce Pentelute’s attorney fees award may

have been based on this provision.6 We conclude that the court

should have deducted these payments from the principal and

interest due under the Promissory Note — thereby reducing the

6 The court’s order does not explicitly state that it relied on the

contract language in amending the fees award, but given the
parties’ fees arguments this is a logical conclusion.

44
breach of contract damages — rather than the attorney fees award.

Read in isolation, the quoted provision lends some support to the

district court’s ultimate conclusion. However, the Promissory Note

as a whole, with the district court’s initial findings order, supports

Joint Appellants’ position that their pre-breach payments should

not have been applied to offset Pentelute’s attorney fees award. See

Doe, ¶ 50.

¶ 81 First, the Promissory Note also provides that “[i]f from time to

time costs or fees are incurred for collection or to defend or enforce

any of Holder’s rights under this Note, Maker shall pay to Holder

upon demand all costs of collection, reasonable attorneys’ fees, and

court costs and expenses incurred in connection therewith.”

(Emphasis added). By its plain language, this provision concerns

the Holder’s entitlement to fees and costs for enforcement and/or

collection, if incurred. See Quarky, ¶ 11. The disputed language

quoted above, by contrast, governs what happens when the Holder

incurs fees and costs; namely, any payments made after the Holder

has incurred such costs must be first applied to those costs and

then to the interest and principal.

45
¶ 82 We read the Promissory Note to mean that when a payment

has been made before the Holder has incurred any collection-

related costs or fees, the payment is applied to reduce the principal

and interest due under the Promissory Note. If no costs or fees

have yet been incurred, payments made under the Promissory Note

cannot logically apply to such costs. Then, if and when the Holder

incurs such costs or fees, the Holder is entitled to recover them.

Finally, if payments are made under the Promissory Note after the

Holder incurs collection-related expenses, those payments apply

first to costs and fees, then to the interest, and finally to the

principal.

¶ 83 Other parts of the Promissory Note support this interpretation.

For example, interest accrues on “the unpaid Principal Sum,” and

the “Maker shall make payments of the Principal Sum and accrued

interest under this note according to the schedule set forth in

Exhibit A.” (Emphasis added.) The Promissory Note also states

that partial prepayments of principal reduce the “Principal Sum,”

not the monthly installments. (Emphasis added.) Finally, the

“Default Clause” provides that in the event of a default, additional

interest accrues on the “outstanding principal amount . . . at the

46
rate of ten percent” annually, and the Holder may demand payment

of “the entire unpaid principal.” (Emphasis added.)

¶ 84 The default clause states that any unpaid principal due after

default is subject to a 10% interest rate, not that the entire

principal becomes subject to a 10% interest rate upon default

regardless of how much of the principal has already been paid. So

the Promissory Note does not allow the Holder to reallocate pre-

default payment to collection costs or fees, nor does it allow the

Holder to apply the default clause to subject the entire principal to

an increased interest rate when some of the principal and interest

has already been paid.7 To conclude otherwise would render the

Promissory Note’s repeated references to “unpaid” or “outstanding”

principal meaningless, see Cook, 229 P.3d at 1061, and leads to

absurd and unintended results, see Quarky, ¶ 11.

7 In Weston v. T & T, LLC, 271 P.3d 552, 560-61 (Colo. App. 2011), a

division of this court considered similar language in a promissory
note. There, the promissory note first provided that, upon default,
interest would accrue on the “unpaid principal . . . from and after
the date of any such Default” and stated that the Maker was liable
for all costs, expenses, and attorney fees related to collecting on the
Promissory Note. Id. at 560. The court found that the default
interest rate applied only to the unpaid principal and vacated the
district court’s judgment applying the interest rate to attorney fees
and costs. Id. at 560-61.

47
¶ 85 The court awarded Pentelute $3,484,963 in damages for

breach of contract. This number correlates with Pentelute’s

damages calculation, which reflects $2.3 million in unpaid principal

(the entire balance of the Promissory Note), $941,084 in interest,

and $243,879 in late fees. Pentelute’s interest calculation was

based on the Promissory Note’s increase of the annual interest rate

from 5% to 10% in the event of a default. Although the Promissory

Note indicates that the 10% post-default interest rate applies to the

outstanding principal, Pentelute’s interest calculation applied to the

entire principal amount.8 Therefore, under the district court’s and

Pentelute’s interpretation, Pentelute was entitled to demand the

entire principal amount upon default and not, as the Promissory

Note provides, the unpaid principal.

¶ 86 This interpretation contradicts the Promissory Note’s plain

language and leads to an absurd result that penalizes the Maker

upon default for the Promissory Note’s entire balance, no matter

how much it has paid. This would mean that all payments apply to

the principal and interest unless the Maker defaults and the Holder

8 The $941,084 in interest reflects 40.1% of the total $2.3 million

principal, or a 10% yearly interest rate for just over four years.

48
incurs collection costs and fees, in which case the payments

already made are retroactively reallocated to the costs of collection,

and the entire principal becomes due, subject to the same interest

rate as if no payments had been made.

¶ 87 Suppose that the default occurred after making the twenty-

third of twenty-four scheduled payments. According to the

Promissory Note’s loan amortization schedule, this would mean

$2,246,086.33 had been paid, with $2,117,847.92 allocated to

principal and $128,238.41 allocated to interest. If all other facts

remained the same, the judgment would still include $941,084 in

interest.9 So no matter how many pre-breach payments were made,

the 10% post-breach interest rate would apply to the entire

principal balance. That cannot be what the parties intended.

¶ 88 Applying the pre-breach payment to offset the attorney fees

award also contradicts the original judgment in favor of Pentelute in

the findings order. The district court’s findings order awarded

Pentelute “damages in the amount of the unpaid payments due

9 This is because the district court’s damages award includes

interest on the balance of the entire $2.3 million due under the
Promissory Note plus a 10% annual interest rate on that balance.

49
under the [Note], together with interest calculated . . . on each such

payment from the date originally due.” (Emphasis added.) We read

“unpaid payments” to mean the outstanding principal amount and

interest accrued on that amount, not that the amounts already paid

should have been applied to offset Pentelute’s attorney fees award.

¶ 89 Finally, although the district court accepted Joint Appellants’

request to account for the $646,200 in the attorney fees award,

applying the payments to offset the attorney fees award does not

cure the court’s error.

¶ 90 According to Pentelute’s calculations from a 2023 motion,

applying the pre-breach payments to the principal and interest due

under the Promissory Note as of January 31, 2023, resulted in a

total remaining balance of $2,508,217. Omitting the pre-breach

payments from the calculation increases that amount to

$3,434,118. This difference is significantly more than $646,200.

Furthermore, the district court used the incorrectly calculated

breach of contract damages to calculate the fraudulent transfer and

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civil theft damage awards.10 So the erroneous interpretation

increased all three damages awards. Reducing the attorney fees

award by $646,200 does not correct the court’s erroneous damages

calculation, which increased the judgment against Joint Appellants

by far more than $646,200. For these reasons, this error was not

harmless. See C.R.C.P. 61; Gebert, ¶ 30.

¶ 91 We therefore remand for the district court to deduct the pre-

breach payments from the principal and interest due on the

Promissory Note at the time each payment was made.11 Using the

correctly calculated remaining balance, we also remand for the

district court to correct the damages judgments on each claim

accordingly. We remand for an amendment of the attorney fees

award only in light of our conclusion that the $646,200 in pre-

10 The fraudulent transfer and civil theft damages calculations

included the incorrectly calculated breach of contract damages,
multiplied by one and a half and three, respectively. Although we
conclude the damages multiplier is inapplicable to the fraudulent
transfer award in this case, our analysis here remains the same
because the court’s incorrect breach of contract calculation
increased the damages awards for fraudulent transfer and civil
theft.
11 Joint Appellants ask us to apply the pre-breach payments only to

the principal; we conclude that the payments should be applied to
the principal and accrued interest, in accordance with the
amortization schedule, and the Promissory Note’s plain language.

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breach payment should have been applied to offset damages, not

attorney fees. On remand, the court may amend the attorney fees

award to reflect the amount originally awarded (before it deducted

the pre-breach payments).

H. Costs Award and Attorney Fees

¶ 92 Joint Appellants lastly argue that, because we must vacate the

judgments in Pentelute’s favor, we must also vacate Pentelute’s cost

award. As we have largely declined to vacate the judgments in

Pentelute’s favor, we decline to vacate the cost award.

¶ 93 Lastly, Pentelute requests costs and appellate attorney fees,

and Tellus requests costs. We address this contention in the

related appeal concerning attorney fees in Pentelute v. Batenburg,

(Colo. App. No. 24CA0137, Dec. 19, 2024) (not published pursuant

to C.A.R. 35(e)).

VI. Disposition

¶ 94 We affirm the district court’s judgments in part but remand

the case to the district court to (1) amend the breach of contract

judgment concerning the Promissory Note and Security Agreement

to hold Batmann, and Batmann, SE, SR, and Cliintel liable to each

agreement, respectively, and to hold CCI liable for breaching both

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agreements as an assign and successor; (2) determine a fraudulent

transfer award without enhanced damages in accordance with

section 38-8-109(2) and determine the value of the MLA, if any, in

the transfer, and; (3) recalculate the base pre-default breach of

contract damages award to reflect the payments made per the

Promissory Note to the principal and interest before the default and

to adjust the damages awards for fraudulent transfer (as

necessary), civil theft, and the attorney fees award, accordingly.

JUDGE JOHNSON and JUDGE SCHOCK concur.

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