October 22, 2017

Tenth Circuit: Jury Instructions Sufficient to Apprise Jury of Elements of Crime

The Tenth Circuit Court of Appeals issued its opinion in United States v. Wright on Tuesday, February 21, 2017.

Bruce Carlton Wright was convicted on one count of conspiracy to commit bank fraud in violation of 18 U.S.C. §§ 1349 and 1344, and on eleven counts of bank fraud in violation of 18 U.S.C. § 1344. Wright was sentenced to thirty-three months imprisonment and ordered to pay restitution to the bank involved. Wright appealed, claiming the district court erred by: (1) not including intent to defraud as an element of conspiracy to commit bank fraud in the jury instruction; (2) responding to a written question from the jury by directing the jury to consider each count of the indictment separately; (3) denying Wright’s motion for new trial based on a Brady violation; (4) improperly calculating of the bank’s loss amount under USSG § 2B1.1(b)(1); and (5) improperly calculating of the restitution amount.

Because Wright did not properly object during his original trial in relation to his first, second, fourth, and fifth claims on appeal, the court reviewed them under the plain-error standard, which requires a plaintiff to establish an “error, that is plain, which affects substantial rights, and seriously effects the fairness, integrity, or public reputation of judicial proceedings.” The court stated that a plain error affects a defendant’s substantial rights if there is a reasonable probability that, if the error had not occurred, the result of the proceeding would have been different.

Concerning Wright’s first claim, that the court erred by not including the necessary element of intent to defraud to convict on a charge of conspiracy to commit bank fraud in the jury instruction, the court reviewed the jury instructions in light of the context of the entire trial to see if the instructions accurately stated the law and provided the jury with a correct understanding of the facts of the case. The court rejected this claim, saying that Wright could not show error because, while the court did not list intent to defraud in the instruction, the omission was cured because the instruction relating to committing bank fraud did incorporate “intent to defraud” by requiring an agreement to commit bank fraud.

During deliberations, the jury asked the judge if it they had to find Wright guilty on count 1 in order to convict him on any of the subsequent counts. Over objection of counsel, who agreed with the legal answer provided by the court but requested different phrasing, the judge responded, “No, you must consider each count separately.” On appeal, Wright contends that the answer should have been “Yes,” because, citing Pinkerton v. United States, the conviction would have been based on the acts of a co-conspirator and not his own acts (as his co-conspirator was testifying at his trial). The court stated that Wright had waived his ability to assert error under Pinkerton by failing to object on that basis at the district court level.  Instead, because Wright had generally objected to the instruction, the court reviews for plain error. However, because Wright argued under an abuse of discretion, and not plain error he waived his right to argue the claim.

In support for his motion for new trial, Wright argued that the government withheld a victim impact statement that the bank president had prepared for his coconspirator’s sentencing. Wright claimed that the information would have helped him to impeach his co-conspirator at his own trial. In their assessment of Wright’s motion, the court stated that Wright would have to show the prosecution suppressed material evidence that was favorable to Wright.  While the court determined the statement was not given to Wright prior to the trial, and that it was favorable to him, he failed in showing that the information included in the impact statement was material enough that it could have undermined confidence in the outcome of the case because Wright already attacked his co-conspirator’s credibility extensively at trial.

In calculating Wright’s sentence and amount of restitution he would be required to pay to the victims, the district court looked to the amount of Wright’s fraudulent draw requests, and determined he owed to be $1,094, 490. Wright was provided the sum in the presentencing report, which he accepted. Because the Bank recovered sums due to its sale, the sales price should be subtracted from the outstanding loan balance to calculate restitution to avoid a windfall to the victim. However, because the amount of restitution and sentence is a factual question, Wright was required to object at the district court level for it to rise to the level of a plain error reviewable on appeal. Wright accepted the amount in the pre-sentencing report, and the court held that Wright had accepted the calculation of restitution and his sentence as correct.

The Tenth Circuit Court of Appeals affirmed the district court’s rejection of Wright’s motion for new trial and rejected Wright’s other claims as to the amount and length of his sentence.

Colorado Court of Appeals: Forbearance Fees and Interest Charges on Loan Were Not Usurious

The Colorado Court of Appeals issued its opinion in Blooming Terrace No. 1, LLC v. KH Blake Street, LLC on Thursday, May 18, 2017.

Usury—Motion to Dismiss—Attorney Fees.

KH Blake Street, LLC and Kresher Holdings, LLC (collectively, lender) loaned Blooming Terrace No. 1 LLC (borrower) $11 million for an origination fee of $220,000. The loan was secured by a deed of trust and memorialized by a promissory note (note) that contained an accrual interest rate of 11% per annum, a default interest rate of 21% per annum, a 5% late charge on any late monthly payments, and an $110,000 exit fee. The note required monthly interest payments calculated at the rate of 8% per annum, with none of the monthly payments being applied to the principal.

Borrower defaulted. The parties executed a forbearance agreement whereby lender agreed to forbear from foreclosing on the deed of trust in exchange for a $110,000 forbearance fee plus continued accrual of default interest, late charges, and certain additional fees. At that time, the amount of all outstanding charges was $778,583.33. The loan was not paid when due, and the forbearance agreement was amended for $220,000. Borrower then paid off the loan, including all outstanding interest, fees, and costs.

Borrower sued lender, claiming that the fees, interest, costs, and expenses exceeded the 45% per annum interest allowable under Colorado’s usury law. Lender moved to dismiss under C.R.C.P. 12(b)(5), arguing the loan fees did not constitute interest above the maximum allowable rate. The district court agreed, concluding that the effective rate of interest was 12.924% based on the total amount of interest charged during the life of the loan. The complaint was dismissed. Lender sought attorney fees pursuant to the note, and the district court awarded attorney fees in the amount of $15,407.20 to lender.

On appeal, borrower argued that the court of appeals should annualize the forbearance charges. The district court had measured the interest charged on a purely per annum rate based on the entire amount of interest charges over the life of the loan. The court concluded that borrower’s computation would not accurately reflect the rate of interest actually charged. Although it found the district court overlooked some charges, the court agreed with the district court’s computation approach and calculated an interest rate of 17.60%. The court concluded that the interest charges were not usurious and the complaint failed to state a claim for which relief could be granted

Borrower then argued it was error to grant attorney fees, asserting that because the forbearance agreements were not loan documents, the litigation regarding those agreements was not related to any loan document. The note provided for attorney fees incurred in any litigation related to any “Loan Document.” This litigation concerned the interest charged by lender under both the note and the forbearance agreements. Therefore attorney fees were properly awarded.

Borrower further contended that the district court abused its discretion in calculating the fees awardable to lender. The court rejected this contention.

The judgment was affirmed and the case was remanded for determination of the amount of reasonable appellate attorney fees to be awarded to lender.

Summary provided courtesy of The Colorado Lawyer.

Bills Signed Regarding Amending State Constitution, Revising Victim Rights Laws, and More

On Friday, April 28, 2017, the governor signed 29 bills into law and vetoed one bill. To date, he has signed 195 bills and vetoed one bill this legislative session. Some of the bills signed Friday include a bill to implement voter-approved changes to make it more difficult to amend the state constitution, a bill changing reporting requirements from the State Judicial Department to the General Assembly, a bill revising victim rights laws, a bill mandating minimum sentences for persons convicted of sex trafficking, and more. The bills signed Friday are summarized here.

  • HB 17-1158“Concerning the Regulation of Charitable Solicitations by the Secretary of State, and, in Connection Therewith, Modifying and Clarifying Filing Requirements and Enforcement of the ‘Colorado Charitable Solicitations Act,’ by Rep. Hugh McKean and Sens. Beth Martinez Humenik & Jim Smallwood. The bill clarifies that a charitable organization’s registration with the secretary of state must be renewed on an annual basis if the charitable organization intends to solicit donations in Colorado, and an organization may not continue to solicit if it fails to renew its registration. The bill also requires an organization to update information in its registration within 30 days after any change.
  • HB 17-1172“Concerning Criminal Penalties for Persons who Commit Human Trafficking of a Minor for Sexual Servitude,” by Reps. Terri Carver & Clarice Navarro and Sen. John Cooke. The bill requires a court to sentence a person convicted of a class 2 felony for human trafficking of a minor for sexual servitude to the Department of Corrections for a term of at least 8 years.
  • HB 17-1189“Concerning the Limit on the Number of Terms a Member of the Colorado Wine Industry Development Board may Serve,” by Reps. Jessie Danielson & Dan Thurlow and Sen. Ray Scott. The bill allows a member of the Colorado Wine Industry Development Board to serve two full 4-year terms insteat of one. Members may also continue to serve after the expiration of their terms until the appointment of a successor.
  • HB 17-1205“Concerning Changing the Definition of ‘Salvage Vehicle,’ by Rep. Jovan Melton and Sen. Beth Martinez Humenik. The bill changes the definition of ‘salvage vehicle’ to add another test of when an insurer determines the vehicle to be a total loss. The bill also adds theft damage as an exclusion to the types of damage that can cause a vehicle to be a salvage vehicle.
  • HB 17-1218“Concerning an Expansion of the State’s Ability to Share Information about State Financial Institutions with Other Governmental Regulators,” by Rep. Alec Garnett and Sen. Kevin Priola. The bill allows the banking board and the state bank commissioner to share records and other information about banks, trust companies, and money transmitters with banking or financial institution regulatory agencies of other states or United States territories if the governmental agency is required to maintain the confidentiality of the records and shares similar information with the division of banking.
  • HB 17-1241: “Concerning the Nonsubstantive Relocation of Laws Related to Indian Arts and Crafts Sales from Title 12, Colorado Revised Statutes, as Part of the Organizational Recodification of Title 12,” by Rep. Leslie Herod and Sen. Bob Gardner. The bill relocates Article 44.5 of Title 12, which imposes requirements and penalties pertaining to the sale or offering for sale of authentic Indian and other arts and crafts, to a new Part 2 in Article 15 of Title 6 of the Colorado Revised Statutes, governing consumer and commercial affairs.
  • HB 17-1272“Concerning the Scheduled Repeal of Reports by the Department of Labor and Employment to the General Assembly,” by Rep. Edie Hooten and Sen. Dominick Moreno. The bill amends repeal dates and reporting requirements from the Department of Labor and Employment to the General Assembly.
  • HB 17-1316“Concerning Delaying the Implementation of House Bill 16-1309,” by Rep. Susan Lontine and Sen. Vicki Marble. The bill delays the implementation of HB 16-1309, which was enacted by the 2016 General Assembly and concerns a defendant’s right to counsel in certain cases considered by municipal courts, until July 1, 2018.
  • SB 17-051“Concerning the Rights of Crime Victims,” by Sens. Bob Gardner & Rhonda Fields and Reps. Polly Lawrence & Mike Foote. The bill makes several amendments to victim rights statutes, including amendments to the definitions of “crime,” “critical stages,” and “modification of sentence”; creation of a right for a victim to be informed of parole or pardon decisions; and more.
  • SB 17-083: “Concerning Implementation of Recommendations of the Committee on Legal Services in Connection with Legislative Review of Rules and Regulations of State Agencies,” by Sen. Daniel Kagan and Rep. Mike Foote. The bill extends all state agency rules and regulations that were adopted or amended on or after November 1, 2015, and before November 1, 2016, with the exception of the rules and regulations specifically listed in the bill.
  • SB 17-152“Concerning the Implementation of Voter-Approved Changes to the Colorado Constitution that Make it More Difficult to Amend the State Constitution, and, in Connection Therewith, Prohibiting a Petition for an Initiated Amendment to the State Constitution from Being Submitted to Voters Unless the Petition is Signed by the Constitutionally Required Number of Registered Electors who Reside in Each State Senate District and Total Number of Registered Electors, Requiring at Least Fifty-Five Percent of the Votes Cast on Any Amendment to the State Constitution to Adopt the Amendment Unless the Amendment Only Repeals in Whole or in Part a Provision of the State Constitution, in Which Case Requiring a Majority of the Votes Cast on the Amendment to Adopt the Amendment, and Making an Appropriation,” by Sen. Lois Court and Rep. Chris Kennedy. The bill implements changes to the Colorado constitution approved by voters at the 2016 general election that make it more difficult to amend the state constitution.
  • SB 17-179“Concerning the Limitation on the Amount of Fees that Can be Assessed for Allowing Solar Energy Device Installations, and, in Connection Therewith, Extending the Repeal Date,” by Sens. Andy Kerr & Bob Gardner and Reps. Lang Sias & Leslie Herod. The bill extends the repeal date of existing laws that limit the amount of permit, plan review, or other fees that counties, municipalities, or the state may charge for installing solar energy devices or systems.
  • SB 17-220“Concerning the Continuation of the Restorative Justice Coordinating Council,” by Sen. Lois Court and Rep. Jeni James Arndt. The bill extends the Council and moves it from Title 19, Colorado Revised Statutes, which relates to the juvenile code, to Title 13, Colorado Revised Statutes, which relates to the judicial code, since restorative justice use has expanded from juvenile cases to adult cases.
  • SB 17-223“Concerning the Nonsubstantive Relocation of Laws Related to the Treatment of Human Bodies After Death from Title 12, Colorado Revised Statutes, as Part of the Organizational Recodification of Title 12,” by Sen. Bob Gardner and Rep. Leslie Herod. The bill relocates Parts 1 and 2 of Article 34 of Title 12 of the Colorado Revised Statutes related to anatomical gift and unclaimed human bodies to new Parts 2 and 3 of Article 19 of Title 15.
  • SB 17-224“Concerning the Nonsubstantive Relocation of Laws Related to Commercial Driving Schools from Title 12 of the Colorado Revised Statutes as Part of the Organizational Recodification of Title 12,” by Sen. Daniel Kagan and Rep. Pete Lee. The bill relocates the statutes governing commercial driving schools to part 6 of article 2 of title 42.
  • SB 17-226: “Concerning the Nonsubstantive Relocation of Laws Related to the Regulation of Financial Institutions from Title 12, Colorado Revised Statutes, as Part of the Organizational Recodification of Title 12,” by Sen. Daniel Kagan and Rep. Mike Foote. The bill relocates Article 13 of Title 12, pursuant to which the Commissioner of Financial Services and the Financial Services Board regulate life care institutions, to Article 49 of Title 11, and Article 52 of Title 12, pursuant to which the Banking Board and the State Bank Commissioner regulate money transmitters, to Article 110 of Title 11.
  • SB 17-231“Concerning the Scheduled Repeal of Reports by the Department of Transportation to the General Assembly,” by Sen. Dominick Moreno and Rep. Dan Thurlow. The bill amends repeal dates and reporting requirements from the Department of Transportation to the General Assembly.
  • SB 17-233“Concerning the Scheduled Repeal of Reports by the Department of Law to the General Assembly,” by Sen. Jack Tate and Rep. Jeni James Arndt. The bill amends repeal dates and reporting requirements from the Department of Law to the General Assembly.
  • SB 17-234“Concerning the Scheduled Repeal of Reports by the Department of Human Services to the General Assembly,” by Sen. Andy Kerr and Rep. Dan Thurlow. The bill amends repeal dates and reporting requirements from the Department of Human Services to the General Assembly.
  • SB 17-241“Concerning the Scheduled Repeal of Reports by the Judicial Department to the General Assembly,” by Sen. Jack Tate and Rep. Edie Hooten. The bill amends repeal dates and reporting requirements from the State Judicial Department to the General Assembly.
  • SB 17-246“Concerning the Treatment of Persons with Mental Health Disorders in the Criminal and Juvenile Justice Systems and Making a Corresponding Change to the Name of the Associated Task Force,” by Sen. Beth Martinez Humenik and Reps. Jonathan Singer & Dafna Michaelson Jenet. The bill changes the name of the ‘Legislative Oversight Committee Concerning the Treatment of Persons with Mental Illness in the Criminal and Juvenile Justice Systems’ to the ‘Legislative Oversight Committee Concerning the Treatment of Persons with Mental Health Disorders in the Criminal and Juvenile Justice Systems’. The bill makes a corresponding change to the associated task force and cash fund. The bill also modernizes terminology related to mental health disorders.
  • SB 17-255“Concerning the Creation of the Technology Advancement and Emergency Fund in the Office of Information Technology, and, in Connection Therewith, Making an Appropriation,” by Sen. Kent Lambert and Rep. Bob Rankin. The bill creates the Technology Advancement and Emergency Fund in the Office of Information Technology. Subject to annual appropriation by the General Assembly, the Office may expend money in the fund to cover one-time costs associated with emergency information technology expenditures, to address deferred maintenance of state agency information technology assets, and to provide additional services to address unforeseen service demands.
  • SB 17-257“Concerning the Creation of the Community Museums Cash Fund for the Administration of Revenues Generated by Community Museums Operated by the State Historical Society, and, in Connection Therewith, Making an Appropriation,” by Sen. Dominick Moreno and Rep. Bob Rankin. The bill deposits revenues from the community museums in a new community museums cash fund which would be appropriated specifically for the activities of the community museums.
  • SB 17-260“Concerning Transfers to the General Fund from Cash Funds with Severance Tax Revenues,” by Sen. Kent Lambert and Rep. Millie Hamner. The bill requires the state treasurer to make certain transfers from the cash funds to the general fund on June 30, 2018.
  • SB 17-261“Concerning the Creation of the 2013 Flood Recovery Account in the Disaster Emergency Fund,” by Sen. Kevin Lundberg and Rep. Dave Young. The bill creates the 2013 flood recovery account in the disaster emergency fund and requires the state treasurer to transfer $12.5 million from the general fund to the account on July 1, 2017.
  • SB 17-262“Concerning the Transfer of Money from the General Fund to Cash Funds that are Used for the State’s Infrastructure,” by Sen. Kent Lambert and Rep. Millie Hamner. The bill requires the state treasurer to make transfers for this fiscal year and the next three fiscal years from the general fund to the capital construction fund and the highway users tax fund, and requires percentage-based transfers after that.
  • SB 17-263“Concerning Capital-related Transfers of Money,” by Sen. Kent Lambert and Rep. Millie Hamner. The bill makes certain transfers from the general fund.
  • SB 17-265“Concerning a Transfer of Money from the State Employee Reserve Fund to the General Fund,” by Sen. Kent Lambert and Rep. Millie Hamner. The bill requires the state treasurer to transfer $26.3 million from the state employee reserve fund to the general fund on July 1, 2017.
  • SB 17-266“Concerning a Reduction in the Amount of the General Fund Reserve Required for the Fiscal Year 2016-17,” by Sen. Kent Lambert and Rep. Millie Hamner. The bill reduces the statutorily required general fund reserve from 6.5% to 6% of the amount appropriated for expenditure from the general fund.

Additionally, the governor vetoed one bill on Friday. That bill was SB 17-139, “Concerning the Extension of the Credit for Tobacco Products that a Distributor Ships or Transports to an Out-of-State Consumer.” The governor stated that he was unpersuaded there would be a significant economic impact, and he was concerned about educating Colorado consumers on the dangers of tobacco use.

For a list of the governor’s 2017 legislative actions, click here.

Colorado Supreme Court: Membership Interest of Non-Colorado LLC Member Located in Colorado for Charging Order Purposes

The Colorado Supreme Court issued its opinion in JP Morgan Chase Bank, N.A. v. McClure on Monday, April 10, 2017.

Limited Liability Companies—Membership Interests—Charging Orders—Priority.

This case concerns the relative priority of competing charging orders filed by multiple judgment creditors against a foreign judgment debtor’s membership interests in several Colorado limited liability companies (LLCs). The Colorado Supreme Court concluded that for purposes of determining the enforceability of a charging order, a membership interest of a non-Colorado citizen in a Colorado LLC is located in Colorado, where the LLC was formed. The court further concluded that when, as here, a judgment creditor obtains a foreign charging order that compels certain action by a Colorado LLC, the charging order is ineffective as against the LLC until the creditor has taken sufficient steps to obligate the company to comply with that order. Although the authorities are not uniform as to the steps to be taken, under any of the applicable scenarios, the charging orders obtained by the petitioner did not become effective until after the respondents had obtained and served their competing charging orders. Accordingly, the court concluded that respondents’ charging orders are entitled to priority over petitioner’s competing charging orders and therefore affirmed the judgment of the court of appeals.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Trial Court Correctly Found that Crop Recovery Claims were Equitable in Nature

The Colorado Court of Appeals issued its opinion in Farm Credit of Southern Colorado, ACA v. Mason on Thursday, April 6, 2017.

Credit Agreement—Jury Demand—Equitable—Non-Disclosure—Abandonment—Estoppel—Waiver—Consent—Conversion—Bankruptcy—Collateral Estoppel—Damages.

Zachary funded his farming operations with loans from Farm Credit of Southern Colorado, ACA and Farm Credit of Southern Colorado, FLCA (collectively, Farm Credit). Zachary was having difficulty paying his debt to Farm Credit and had planted crops on seven farms for the coming harvest. Written agreements between Farm Credit and Zachary granted Farm Credit a perfected security interest in Zachary’s crops (Crop Collateral) and their proceeds. Farm Credit refused to continue funding Zachary’s farming operations and Zachary was unable to cultivate the Crop Collateral. Zachary’s father, James, thereafter took over the cultivation of the Crop Collateral. James never attempted to transfer the Crop Collateral or its proceeds to Farm Credit. Farm Credit filed a complaint for various claims against Zachary and other parties, but not James. Zachary thereafter filed for bankruptcy. As part of a bankruptcy adversary proceeding, Farm Credit filed an amended complaint alleging that Zachary transferred the Crop Collateral to James. Farm Credit later amended the state trial court complaint to add James as a defendant. Ultimately, the trial court entered a judgment against James, finding him liable for converting the Crop Collateral and awarding Farm Credit damages plus interest.

On appeal, James argued that the trial court erred in striking his demand for a jury trial. Based on the complaint, Farm Credit’s remedy was in the nature of a foreclosure, an equitable action. Because the basic thrust of the underlying action was equitable and not legal in nature, the trial court did not err in striking James’s demand for a jury trial.

James also asserted that the trial court erred in admitting evidence of Zachary’s debt because Farm Credit did not disclose it before trial, and this nondisclosure was intentional and material. However, this nondisclosure was harmless because the amount of debt far exceeded the most optimistic estimate given for the Crop Collateral’s value at the time of conversion. Therefore, James was not denied an adequate opportunity to defend against Farm Credit’s assertion that the value of the outstanding debt exceeded the value of the collateral, and the trial court did not abuse its discretion in refusing to dismiss the action as a result of this nondisclosure.

James next contended that the trial court reversibly erred when it determined that the defenses of abandonment, estoppel, waiver, and consent did not relieve him of liability for conversion. The written agreements evidencing Farm Credit’s perfected security interest in the Crop Collateral were “credit agreements” within the meaning of the Credit Agreement Statute of Frauds. Thus, any waiver involving Farm Credit’s rights to the Crop Collateral, including proceeds, would need to be in writing to be effective. Here, there was never a written waiver. Additionally, while the record shows that Farm Credit acquiesced to James’s cultivation and harvest of the otherwise doomed Crop Collateral, it does not show that Farm Credit consented to its security interest being completely extinguished. Finally, there is no evidence in the record showing Farm Credit manifested intent, or took action, to abandon the Crop Collateral and related claims at any point, including during the bankruptcy adversary proceeding. Accordingly, the trial court did not err in rejecting James’s defenses of waiver, consent, abandonment, and estoppel.

James further contended that the trial court erred when it determined that the bankruptcy court’s decision did not preclude Farm Credit from recovering on its claims and denied James’s motion for a directed verdict. Here, the legal issues before the bankruptcy court were different from those before the trial court. Because the issues litigated in the two proceedings at issue were not identical, the trial court correctly determined that collateral estoppel did not apply to the legal issues before it and properly denied James’s motion for a directed verdict.

Lastly, James argued that the trial court misapplied the law when assessing damages by determining that the date of conversion was the date of harvest rather than when James took over the crops’ cultivation. Because the trial court applied the correct standard in assessing damages and the record supports the trial court’s factual findings, there was no error with the damages award.

The orders and judgment were affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Holder of Evidence of Debt May Initiate Foreclosure with Copy of Evidence of Debt

The Colorado Court of Appeals issued its opinion in Edwards v. Bank of America, N.A. on Thursday, August 25, 2016.

Mortgage—Foreclosure—Standing—Summary Judgment—Affidavit.

Plaintiff obtained a loan to finance the purchase of property. When she defaulted on the loan, defendant sold the house through foreclosure. During the foreclosure proceedings, plaintiff filed a complaint alleging that defendant lacked standing to file a C.R.C.P. 120 motion and to commence foreclosure proceedings. The district court granted defendant’s summary judgment motion and subsequently denied plaintiff’s motion to reconsider the judgment.

On appeal, plaintiff contended that the district court erred in granting defendant’s summary judgment motion. The holder of an evidence of debt may initiate foreclosure proceedings with a copy of the evidence of debt and deed of trust, rather than the original documents. Here, defendant produced sufficient evidence to establish that it was entitled to foreclose and that plaintiff failed to demonstrate there was a genuine issue of material fact as to defendant’s standing to foreclose. Accordingly, the district court did not err in granting defendant’s motion for summary judgment.

Plaintiff also contended that the district court erred in denying her motion to reconsider summary judgment because the court prematurely granted summary judgment without giving her sufficient opportunity to conduct discovery. C.R.C.P. 56(f) allows a party who cannot produce facts essential to its opposition to a motion for summary judgment to submit an affidavit explaining why it cannot do so. Plaintiff did not submit a C.R.C.P. 56(f) affidavit. Accordingly, the district court properly denied plaintiff’s motion to reconsider summary judgment.

The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Economic Loss Rule Bars Tort Claims Against Mortgage Lender

The Colorado Court of Appeals issued its opinion in Miller v. Bank of New York Mellon on Thursday, June 16, 2016.

Dual Tracking—Failure to State a Claim for Relief—Economic Loss Rule—Implied Duty of Good Faith and Fair Dealing—Intentional Infliction of Emotional Distress—Fraud—Negligence.

The Millers obtained a note and deed of trust in 2004 to purchase a house, and the loan was transferred several times. They began missing payments in 2007 and filed for bankruptcy and received discharges in 2009. Bank of America, N.A. (BANA) then told the Millers to vacate their house, but they stayed and eventually entered into negotiations with BANA regarding a loan modification. In February 2012, Bank of New York Mellon (BNY Mellon) moved for an order authorizing the public trustee to proceed with a foreclosure sale, pursuant to C.R.C.P. 120. While this Rule 120 action was pending, the Millers filed a complaint against five financial institutions (collectively, the Banks) to quiet title to the house in their favor. The Millers alleged that the Banks improperly subjected them to dual tracking (a process under which banks pursue foreclosure on a home while negotiating a loan modification) in violation of the consent judgment that resulted from the National Mortgage Settlement, which generally prohibits dual tracking. The district court dismissed for failure to state a claim for relief. The court in the Rule 120 action authorized the sale in July 2012, but the Millers kept negotiating a loan modification with BANA. In 2013, BANA and the Millers agreed to a loan modification, the Millers began making payments, and BNY Mellon dismissed the Rule 120 action. In October 2014, the Millers amended their complaint, asserting claims for breach of the implied duty of good faith and fair dealing, intentional infliction of emotional distress, fraud, and negligence. The Banks moved to dismiss, and the court granted the motion.

On appeal, the Millers argued that the court erred in determining that the economic loss rule barred their tort claims. The economic loss rule provides that “a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law.” Here, the consent judgment in a federal case challenging dual tracking did not create a private cause of action for third parties and there was no special relationship between the parties that established an independent duty.

The Millers also argued that the court erred in dismissing their contract claim, because they had a reasonable expectation that the Banks would not engage in dual tracking and would modify their loan. Although there is an implied duty of good faith and fair dealing in every contract, there was no reasonable expectation on the part of the Millers that their loan would be modified or that the Banks would refrain from dual tracking. Neither allegation has any basis in their contractual agreement.

The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: Property Titled in Name of Revocable Trust Also Can Be Debtor’s Property

The Colorado Supreme Court issued its opinion in Pandy v. Independent Bank on Monday, June 20, 2016.

Revocable Trust—Settlor—Judgment Lien.

This case principally concerns whether property titled in the name of a judgment debtor’s co-settled revocable trust is subject to a judgment lien against the debtor. The petitioners are co-settlors and co-trustees of a revocable trust that holds title to certain real property in Colorado. Respondent obtained two judgments against one of the petitioners in another state. After domesticating those judgments and recording transcripts of the Colorado judgments, respondent filed an action to quiet title and for a decree of foreclosure. The petitioner moved for judgment on the pleadings, arguing that respondent’s complaint was barred by what the petitioner argued was the applicable statute of limitations set forth in C.R.S. § 13-80-101(1)(k). The district court denied the motion, a division of the Court of Appeals granted leave to file an interlocutory appeal and affirmed that ruling, and the Supreme Court granted certiorari.

The Court concluded that as a settlor of a revocable trust, the petitioner held an ownership interest in the trust’s assets. Accordingly, respondent could properly seek to enforce its judgment against the petitioner in this case, and its action was not barred by the statute of limitations set forth in C.R.S. § 13-80-101(1)(k).

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: CUFTA Limitations Period May Be Tolled by Express Agreement

The Colorado Supreme Court issued its opinion in Lewis v. Taylor on Monday, June 20, 2016.

Uniform Fraudulent Transfer Act—Limitation of Actions—Agreements Tolling Limitation.

Under the Colorado Uniform Fraudulent Transfer Act (CUFTA), CRS §§ 38-8-101 to -112, any action to avoid an intentionally fraudulent transfer is extinguished if not brought within four years after the transfer was made or, if later, within one year after the transfer was or could reasonably have been discovered. Here, the Supreme Court held that these time limitations may be tolled by express agreement. Because the parties to this case signed a tolling agreement, and petitioner’s CUFTA claims were properly brought within the tolling period, the Court concluded that his claims were timely filed and were not barred by CUFTA’s limitations period. Therefore, the Court reversed the judgment of the Court of Appeals.

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: Written Extensions of Acknowledgments of Debt Extended Statute of Limitations for Foreclosure

The Colorado Supreme Court issued its opinion in Hutchins v. La Plata Mountain Resources, Inc. on Monday, June 20, 2016.

Limitations of Actions—Acknowledgments of Existing Debt—Form and Essential Elements of Acknowledgements.

Hutchins and Gasper petitioned for review of the Court of Appeals’ judgment affirming the district court’s ruling in favor of La Plata Mountain Resources, Inc. (La Plata), in an action brought by La Plata to collect on certain debentures issued by Leadville Mining and foreclose on a deed of trust securing the debts. Although Leadville’s authorized agent had signed documents acknowledging its obligations for the amounts owed on other similar debentures held by Hutchins and Gasper, which were secured by the same deed of trust, the Court of Appeals reasoned that because these documents lacked the two-thirds consent required for modification of the debentures, the included acknowledgments were insufficient to restart the applicable limitations period. The Court of Appeals therefore concluded that the statute of limitations had run on any action by Hutchins and Gasper to collect on the debts or foreclose on the deed of trust.

The Supreme Court reversed. The documents in question were in writing, were signed by Leadville, and contained a clear and unqualified acknowledgement of the debt owed to Hutchins and Gasper. Therefore, they constituted a new promise to pay, establishing a new accrual date and effectively extending the limitations period on collection of the debt.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Choice of Law Provision Unambiguously Governs Contract

The Colorado Court of Appeals issued its opinion in Mountain States Adjustment v. Cooke on Thursday, May 19, 2016.

Summary Judgment—Debt Collection—Choice of Law Provision.

In August 2004, Cooke signed a note (Note) with Commercial Federal Bank (CFB) for a home equity loan. Cooke resided in Colorado and the home that was collateral for the Note (subject property) was in Colorado. CFB was headquartered in Nebraska and the Note stated that it was “governed by federal law, and to the extent applicable, the laws of Nebraska.”

CFB merged into Bank of the West, a California bank, in December 2005. Cooke’s  repayment terms under the Note didn’t change as a result nor was he asked to sign a new agreement. In April 2009, the company holding the first mortgage on the subject property commenced foreclosure proceedings. Bank of the West did not participate, but on June 19, 2009, Bank of the West sent a “30 Day Notice of Demand and Intent to Accelerate” letter to Cooke.

On February 14, 2014, Bank of the West assigned Cooke’s note to Mountain States Adjustment (MSA). On July 15, 2014, MSA filed this collection action against Cooke in Denver District Court. Cooke answered and alleged an affirmative defense that MSA’s claim was barred by the applicable statute of limitations.

In January 2015, MSA filed a motion for summary judgment alleging that Cooke admitted to being the signatory under the Note and that the facts were undisputed that he was in default. Cooke filed a cross-motion for summary judgment asserting that MSA’s claim was barred by the five-year statute of limitations set forth in Nebraska law. The district court decided that Colorado law and its six-year statute of limitations applied and entered summary judgment in MSA’s favor. The sole issue on appeal was whether it was error to hold that Colorado law applied.

The Court of Appeals found the choice of law terms in the Note were clear, express, and unambiguous. As a matter of law, Nebraska law governs the statute of limitations issue because the undisputed record shows both that Nebraska had a substantial relationship to the parties or the transaction and that there was a reasonable basis for the contracting parties’ choice of law. Because it was undisputed that MSA filed its complaint outside of the applicable Nebraska limitations period, MSA’s claim was barred and Cooke was entitled to entry of judgment in his favor.

The judgment was reversed and the case was remanded.

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: Holder-in-Due-Course Status Does Not Preclude Forgery Defense

The Colorado Supreme Court issued its opinion in Liberty Mortgage Corp. v. Fiscus on Monday, May 16, 2016.

Negotiable Instruments—Holders in Due Course—Forgery—Ratification—Negligent Contribution.

Respondent Fiscus’s wife forged his name on three powers of attorney and used them to procure a promissory note that was ultimately assigned to petitioner Branch Banking and Trust Company. The note was secured by a deed of trust purporting to encumber property held in Fiscus’s name alone. Branch Banking and Trust claimed holder-in-due-course status under Article 3 of Colorado’s Uniform Commercial Code, and Fiscus raised a forgery defense. The Court of Appeals held that Article 3 does not apply to deeds of trust because they are not “negotiable instruments” as defined in the Code. The Supreme Court held that, even assuming Article 3 applies to such deeds of trust, holder-in-due-course status does not preclude a purported maker from asserting a forgery defense. Thus, because Fiscus had a valid forgery defense, not barred by any negligence or ratification on his part, the Court affirmed the judgment of the Court of Appeals but on different grounds. The Court did not address the negotiability of deeds of trust that secure promissory notes under Article 3.

Summary provided courtesy of The Colorado Lawyer.