The Colorado Court of Appeals issued its opinion in Former TCHR, LLC v. First Hand Mgmt LLC on August 2, 2012.
Fraudulent Concealment—Misrepresentation—Conversion—Economic Loss Rule—CRCP 41(b)(1).
Plaintiff Former TCHR, LLC appealed the trial court’s judgment rejecting its fraudulent concealment and misrepresentation claims against defendants Richard Oneslager, Jr. and Daniel P. Genovese, and the court’s midtrial dismissal of Former TCHR’s conversion claim against defendant Balmar Management Group LLC. Former TCHR also appealed the district court’s grant of attorney fees to Oneslager, Genovese, and Balmar. The judgment was affirmed in part and reversed in part, and the appeal was dismissed in part.
Through a predecessor in interest, Former TCHR, whose sole member was attorney and sophisticated real estate investor Samuel Brown, signed a Real Estate Sale Agreement with Town Center Investors, LLC (TCI) to purchase a shopping center from TCI. TCI was owned by Oneslager, and Genovese was the shopping center’s property manager. Former TCHR alleged that after the Sale Agreement was signed but before closing, Oneslager and Genovese had (1) fraudulently misrepresented the shopping center’s revenues, and (2) fraudulently concealed facts concerning Willary’s financial strength, including its substantial outstanding debt to Balmar. Former TCHR further alleged that Balmar had converted the Willary inventory.
Former TCHR contended that the trial court erred on numerous grounds in entering judgment for Oneslager and Genovese on the fraudulent misrepresentation and concealment claims. These claims, however, were barred by the economic loss rule, because Former TCHR failed to demonstrate that Oneslager and Genovese had violated any tort duty independent of defendants’ contractual duties. Therefore, Former TCHR’s arguments failed.
Former TCHR also contended that the trial court erred in dismissing its conversion claim against Balmar, pursuant to CRCP 41(b)(1). A secured party may bring a claim for conversion against a party who wrongfully obtained and sold property in which the secured party has a security interest, if the secured party’s interest has priority over the seller’s interest. Here, Former TCHR produced sufficient evidence to show that it had a valid unperfected security interest in the Willary inventory, that its interest in that inventory had priority over any interest that Balmar might have had, and that Balmar took and then sold the inventory to First Hand with knowledge of Former TCHR’s security interest. Therefore, the trial court erred in dismissing Former TCHR’s claim for conversion pursuant to CRCP 41(b)(1). The dismissal order was reversed and the case was remanded for a new trial on the conversion claim.
Former TCHR further argued that the trial court erred in awarding attorney fees to Oneslager, Genovese, and Balmar. Because that award had not yet been reduced to a sum certain, the Court of Appeals held it did not have jurisdiction to determine that claim and that portion of the appeal was dismissed without prejudice.
Summary and full case available here.
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