June 19, 2013

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Colorado Court of Appeals: Loans to Personal Injury Plaintiffs During Pendency of Lawsuit Violated UCCC

June 4, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Oasis Legal Finance Group, LLC v. Suthers, Colorado Attorney General on Thursday, May 23, 2013.

Declaratory Judgment—Partial Summary Judgment—“Loans” Under the Colorado Uniform Consumer Credit Code.

In this declaratory judgment action, plaintiffs Oasis Legal Finance Group, LLC, Oasis Legal Finance, LLC, and Oasis Legal Finance Operating Company, LLC (collectively, Oasis), and plaintiff Funding Holding, Inc., doing business as LawCash, appealed the district court’s grant of partial summary judgment to defendants John W. Suthers, in his capacity as Attorney General of the State of Colorado, and Laura E. Udis, in her capacity as the Administrator of the Uniform Consumer Credit Code (collectively, Administrator). The Court of Appeals affirmed the judgment.

Oasis and LawCash contracted with people who had pending personal injury claims against third-parties (tort plaintiffs) to pay them money to assist them while their cases were pending. In exchange, the tort plaintiffs agreed that, once their personal injury claims resulted in a settlement or judgment, they would pay certain sums to Oasis or LawCash from the net litigation proceeds.

In the Oasis contractual payment schedule, the amount due increased over time. If the amount due couldn’t be covered from the net litigation proceeds, then the tort plaintiffs had to pay Oasis only the net proceeds received, if any. If nothing was recovered, then Oasis recovered nothing.

In the LawCash contracts, once the tort plaintiffs received the net litigation proceeds, they were required to repay LawCash the funded amount plus a “monthly user fee” of 3.5% of the funded amount, compounded monthly. LawCash also received a lien and security interest in the proceeds of their lawsuits. As with Oasis, the tort plaintiffs didn’t have to pay more than the net litigation proceeds and, if nothing was recovered, LawCash received nothing.

In 2010, the Administrator advised Oasis and LawCash that these types of transactions were loans made in violation of the Uniform Consumer Credit Code (UCCC). Oasis and LawCash filed this action, seeking a declaration that they had purchased contingent rights to receive a portion of the proceeds of personal injury lawsuits and did not make loans or create debt and thus were not subject to the UCCC. The Administrator moved for and was granted partial summary judgment that the transactions were loans governed by the UCCC.

On appeal, Oasis and LawCash argued that the transactions were purchases of litigation proceeds and not loans under the UCCC. The Court was not persuaded. The UCCC definition of “loan” includes “[t]he creation of debt by the lender’s payment of or agreement to pay money to [a] consumer.” The Colorado Supreme Court has endorsed a broad reading of the UCCC’s definition of “loan.” A debt would include a contingent debt under such a broad reading. It was undisputed that the funds paid by Oasis and LawCash to tort plaintiffs created contingent debt. Therefore, they were loans within the meaning of the UCCC. The judgment was affirmed.

Summary and full case available here.

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Colorado Court of Appeals: Statute of Limitations Tolled for Cross-Claims In Complicated Foreclosure and Quiet Title Proceeding

June 3, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Deutsche Bank Trust Company Americas v. Samora on Thursday, May 23, 2013.

Statute of Limitations—Equitable Tolling—Attorney Fees—Fraud in the Factum—Holder in Due Course—Spurious Lien.

Defendant Veronica E. Samora appealed the trial court’s judgment in favor of Deutsche Bank Trust Company Americas (Deutsche Bank). Samora also appealed the trial court’s dismissal of her claims against Saxon Mortgage, Inc. (Saxon). The Court of Appeals affirmed the judgment and the case was remanded with directions.

On June 30, 1997, Samora purchased real property at 4555 W. 33rd Avenue in Denver (property), financing the purchase with a note and deed of trust. In 2003, Samora fell behind on payments on the note and foreclosure proceedings were commenced. It was disputed whether Samora was aware of the foreclosure action.

In October 2003, Samora approached Randy Gonzales, a mortgage broker, to refinance the property to lower her monthly payments. In October, Samora executed a new promissory note and deed of trust in favor of BNC Mortgage, Inc., which was then transferred to Chase Bank.

On October 21, 2003, Gonzales and Kenneth Medina, his uncle, transferred title to the property into their names by forging Samora’s signature on a quitclaim deed. Medina then obtained a loan for $32,000 from a third party, which he secured by another note and deed of trust. Medina later executed a quitclaim deed conveying the property solely to Gonzales.

Samora was unaware of the foregoing transactions. In May 2004, she sought a second refinancing of the property to obtain an even lower interest rate. Chase Bank told her the property belonged to Gonzales. When Samora confronted him, he acted surprised to learn that title to the property was in his name. On September 9, 2004, Gonzales signed and filed a quitclaim deed conveying the property back to Samora.

Samora continued to work with Gonzales and Medina on the second refinance. When Medina determined Samora was ineligible for refinancing, he sold the property to his girlfriend, Amanda Wasia, who would then lease the property back to Samora. Samora was unaware of this.

In September 2004, Gonzales completed a loan application for Wasia with Saxon. The loan application provided a false income and stated that she would be using the property as her primary residence. Wasia did not qualify for the loan. Matthew Libby, a loan officer with Saxon, suggested to Medina and Gonzales that they submit a falsified gift letter stating that Wasia was Samora’s granddaughter and that Samora was gifting the equity in her home to Wasia. Based on this, Wasia obtained a loan from Saxon for $172,000.

On September 20, 2004, Medina told Samora her loan was approved and had her come to his office to sign the documents. When she arrived, he placed a document in front of her with the top covered by his hand and told her to sign. She noticed it was titled “Warranty Deed” and that Wasia, whom she had never heard of, was on the deed. When she asked Medina about this, he stated that Wasia was a co-signer and on the deed for her protection. She signed it and it was recorded on October 4, 2004.

Also on the same day, Wasia executed a note and deed of trust in favor of Saxon for the $172,000 loan. The proceeds were used in part to pay off Samora’s existing loan on the Property. Saxon endorsed the note in blank, and the note and deed of trust were deposited in the trust res of Saxon Asset Securities Trust 2004-3 (Trust). Deutsche Bank was the indentured trustee of the Trust.

In 2005, this whole scheme fell apart. After investigation by the Denver District Attorney’s Office, Gonzales, Wasia, Medina, and Libby were indicted by a grand jury for crimes, including fraud. They all pleaded guilty and, as part of the plea agreement, each executed a quitclaim deed in favor of Samora.

No payments were made on the note during the criminal proceedings. In October 2006, Deutsche Bank commenced foreclosure proceedings. Based on the fraud committed by the parties and the complexity of the underlying transactions, the magistrate denied the requested foreclosure.

In July 2007, Deutsche Bank filed this CRCP 105 action to quiet title in the Trust. A default judgment was entered, which Samora appealed and a division of this Court reversed (Samora I). After reversal, Deutsche Bank amended its complaint to include a claim for unjust enrichment. Samora filed an amended answer on November 2, 2009, alleging for the first time counterclaims against Deutsche Bank and cross-claims against Saxon.

Saxon filed a motion to dismiss based on the two-year statute of limitations applicable to the cross-claims. On February 17, 2012, the trial court granted the motion to dismiss. A trial to the court was held on Deutsche Bank’s and Samora’s claims and counterclaims, and the court found in favor of Deutsche Bank.

On appeal, Samora argued it was error to grant Saxon’s motion to dismiss based on the statute of limitations. The Court disagreed. Samora filed its cross-claims on November 2, 2009. They sounded in tort and therefore had to be brought within two years after the cause of action accrued. Similarly, its spurious documents and lien claims had to be brought within two years of accrual. Accrual of such claims occurs on “the date both the injury and its cause are known or should have been known by the exercise of reasonable diligence.” Samora argued accrual occurred in October 2006 when Deutsche Bank started its foreclosure proceedings. The Court found that Samora was injured when she executed the deed to Wasia in September 2004, which made it possible for Wasia to execute the note and deed of trust. In December 2005, indictments were issued against Medina, Gonzales, Libby, and Wasia based on their scheme to transfer title to the property. The Court found that Samora either knew of the indictments or should have known of them based on her participation in pursuing these actions against the perpetrators.

Samora argued the doctrine of equitable tolling should have prevented the application of the statute of limitations. The Court disagreed. Equitable tolling of a statute of limitations is restricted to situations in which the defendant has wrongfully impeded the plaintiff’s ability to bring the claim or truly extraordinary circumstances prevented the plaintiff from filing the claim despite diligent efforts. The Court found neither of these circumstances was present.

Saxon was awarded reasonable attorney fees pursuant to CRS § 13-17-201, and the Court held it was entitled to reasonable attorney fees for defending this appeal. The Court remanded the case to the trial court for a determination of reasonable attorney fees.

Samora then argued it was reversible error for the trial court to find that she failed to establish fraud in the factumin the execution of the warranty deed. Fraud in the factum results in an instrument that is void and not merely voidable. The Court agreed with Samora that the trial court erred in using an objective standard of “ordinary prudence,” rather than a subjective standard based on her education, age, and other considerations to determine whether she was excusably ignorant in signing the warranty deed. However, the Court concluded that Samora failed to establish fraud in the factum because she was not fraudulently deceived about the nature of the document she signed and because she had a reasonable opportunity to obtain knowledge; therefore, she was not excusably ignorant. Samora knew the nature of the document she signed; she was deceived by Medina’s fraudulent misrepresentations about the use of the warranty deed. As a result, the deed was voidable but not void. In addition, the Court agreed with the trial court that Samora was not excusably ignorant.

As a result of the warranty deed being voidable and not void, to defeat Deutsche Bank’s claim to quiet title in the trust, Samora needed to show that Deutsche Bank as trustee was not advancing a claim by the trust as a holder in due course of the note and deed of trust. Samora argued that the interrelated Saxon companies and the trust shared such a “close connectedness” that the trust’s status as a holder in due course should be defeated. The trial court simply concluded that Deutsche Bank was a holder in due course.

Samora argued the focus should have been on the status of the trust, and the Court agreed. However, Samora introduced no evidence that Saxon and the other Saxon entities shared employees, officers, directors, or other members, or that any one entity controlled the actions of another. Absent such evidence, the Court was unwilling to decide that corporate status was enough to establish a close relationship causing the conduct of Saxon to be imputed to the Trust.

Finally, Samora contended that it was error not to find that the deed of trust was a spurious document under CRS § 38-35-201(3). A deed of trust is a lien. The Court agreed with Deutsche Bank that the deed of trust should have been examined under CRS § 38-35-201(4) as a spurious lien, not as a spurious document. Samora executed a voidable warranty deed in favor of Wasia. When Wasia executed the note and deed of trust, she was the legal owner of the property and the deed of trust was not a spurious lien. The judgment was affirmed.

Summary and full case available here.

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Colorado Court of Appeals: Agent’s Error in Proceeding with Closing Despite Lack of Proof of Compliance with Underwriter’s Terms Constituted Violation of Contract

May 31, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Fidelity National Title Co. v. First American Title Insurance Co. on Thursday, May 23, 2013.

Contractual Duties of a Real Estate Closer.

Defendant Fidelity National Title Company (Agent) appealed the trial court’s judgment in favor of third-party defendant First American Title Insurance Company (Underwriter). The Court of Appeals affirmed the judgment.

Agent issued title insurance policies underwritten by Underwriter pursuant to an underwriting agreement (contract). Under the contract, Agent was to perform title and closing services. Toward the end of 2007, Agent wrote two title insurance commitments underwritten by Underwriter, each of which committed to insure a different bank as the first-position lienholder for the same parcels of real estate. The policies were issued in 2008.

The first commitment was issued with respect to Brown Financial, LLC (Brown), which loaned money to the developer of the parcels (Developer). Brown assigned its deed of trust to Academy Bank (Academy), and Brown serviced the loan by collecting money from Developer and forwarding it to Academy. The policy insured Academy as the first-position lienholder.

Two months after Agent had issued the commitment for the Brown title policy, it issued a commitment to insure the interest of Colorado East Bank & Trust (CEB&T) as first position lienholder on the same parcels in connection with a new loan from CEB&T to Developer. The CEB&T commitment had a requirement that the previous deed of trust be released, and noted it had been assigned to Academy.

Agent closed both loans within two months. Agent failed to pay Academy from the closing proceeds of the CEB&T loan and failed to obtain a release of Academy’s deed of trust on the parcels. Both Academy and CEB&T were insured in their respective policies as first position lienholders for the same parcels. Agent did not notify Underwriter of this fact.

After Academy began foreclosure proceedings on the parcels in 2009, CEB&T sought to enjoin the foreclosure. Because the Academy lien had not been paid or released, Academy asserted a claim against Underwriter under the Brown title policy, and CEB&T asserted a claim against Underwriter under CEB&T’s policy. Underwriter paid CEB&T $986,000 to resolve the latter’s claims in foreclosure and $55,000 to reimburse CEB&T for its attorney fees.

The claims in this appeal are by Underwriter against Agent under the terms of the contract. The trial court found in favor of Underwriter.

On appeal, Agent argued the trial court misconstrued section 7.3 of the contract and erroneously found Agent liable for committing “[an] error, fault, or negligence in handling funds in connection with [an] escrow.” Requirement G of the title commitment required that the deed of trust on the property be released. It indicated that Academy would need to release the deed of trust. A letter from Brown was received before closing, stating it would provide a release of the deed of trust and the original promissory note marked “paid in full” within fourteen days of the closing. No mention was made of Academy. The closer was not happy with this, but her branch manager authorized her to proceed. The trial court found this was negligent handling of funds in connection with an escrow by Agent, in violation of section 7.3 of the contract.

Agent argued it was not “handling funds,” but simply performing a title search and completing a closing. Also, Agent contended that any errors occurred in the context of a real estate closing and that those services do not fall within the meaning of “escrow.” The Court held that the record and the plain meaning of those terms supported the trial court’s finding that Agent’s error was a breach of section 7.3 of the contract.

Agent also argued that under CRS § 38-35-124.5, the letter it received from Brown was a “payoff statement” on which Agent was entitled to rely. The Court found the letter was not a payoff statement within the meaning of the statute. The testimony of the expert witnesses and the plain language of the statute support the finding that a payoff statement is a statement that a certain sum of money would need to be paid at closing in exchange for release of a deed of trust. The Brown letter was simply a statement that no money was due to Brown; it did not specify how much was due to Academy, which was the holder of the indebtedness.

Agent argued that the trial court misconstrued section 7.4 of the contract by ruling that Agent had knowledge of a claim or loss stemming from a title report, and its failure to give notice of such a claim or loss caused Underwriter to sustain “actual prejudice.” The Court disagreed. Agent contended that it didn’t know about the claim or loss because parts of the knowledge were held by various employees. The Court found that Agent must be held accountable for the knowledge of its employees. Agent knew and therefore had a duty to report to Underwriter that it was ensuring two different entities as the first priority lien holders with respect to the same parcels of property. Clearly, Underwriter suffered “actual prejudice” as a result of the lack of this knowledge. Had it known of the potential claim in advance, it could have taken proactive steps to mitigate the damages it ultimately had to pay. The judgment was affirmed.

Summary and full case available here.

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Bills Regarding Job Protection, Authorization for Foreign Investments, Electric Vehicle Charging Stations, and More Signed by Governor Hickenlooper

May 7, 2013 by Leave a Comment

As the 2013 legislative session winds down, bills continue to reach Governor Hickenlooper’s desk for review and signature. Since January 31, 2013, the governor has signed 169 bills.

Governor Hickenlooper signed the “Job Protection and Civil Rights Enforcement Act,” HB 13-1136, on Monday, May 6, 2013. HB 13-1136 - Concerning the Creation of Remedies in Employment Discrimination Cases Brought Under State Law, by Reps. Claire Levy and Joe Salazar and Sens. Morgan Carroll and Lucia Guzman, establishes provisions for complaining parties who have exhausted administrative remedies to bring actions in state court. It also allows claims to be brought by employees of companies with fewer than 15 employees, which are exempt under Federal anti-discrimination provisions.

On May 5, the governor signed one bill, SB 13-176 - Concerning Authorization for the State Treasurer to Invest State Moneys in Debt Obligations Backed By the Full Faith and Credit of the State of Israel. This bill was sponsored by Sens. Mark Scheffel and Morgan Carroll and Reps. Justin Everett and Angela Williams, and it authorizes the state treasurer to invest state moneys in Israeli bonds.

The governor signed 10 bills on Friday, May 3, 2013. Three of the ten bills signed are summarized here.

  • SB 13-126 - Concerning the Removal of Unreasonable Restrictions on the Ability of the Owner of an Electric Vehicle to Access Charging Facilities, by Sen. Lucia Guzman and Rep. Crisanta Duran. The bill requires landlords and common interest communities to allow unit owners to install electric vehicle charging stations on their own property.
  • HB 13-1167 - Concerning the Collection of Business Information by the Secretary of State, by Reps. Brittany Pettersen and Crisanta Duran and Sen. Larry Crowder. The bill requires the Secretary of State to request certain demographic information from business owners, which will be available to the public on the Secretary of State website. The demographic information includes gender, race, veteran status, disability status, and NAICS code, and submission of the information is voluntary.
  • HB 13-1222 - Concerning the Expansion of the Group of Family Members for whom Colorado Employees are Entitled to Take Leave from Work under the “Family and Medical Leave Act of 1993″, by Rep. Cherylin Peniston and Sen. Jessie Ulibarri. The bill allows employees to take leave under FMLA to care for their partners in civil unions.

On April 29, 2013, the governor signed six bills. These included the long appropriations bill, three Joint Budget Committee bills regarding the General Fund, and a bill to allow students who complete high school in Colorado to qualify for in-state tuition classification (SB 13-033 – Concerning In-State Classification at Institutions of Higher Education for Students who Complete High School in Colorado, by Sens. Angela Giron and Mike Johnston and Reps. Crisanta Duran and Angela Williams.) Governor Hickenlooper also signed the budget bill, SB 13-230, on April 29.

On April 26, 2013, Governor Hickenlooper signed 16 bills. Five of these are summarized here.

  • HB 13-1025 - Concerning an Increase in the Amount of the Authorized Deductible for Workers’ Compensation Insurance Policies, by Rep. Spencer Swalm and Sen. Cheri Jahn. The bill increases the allowable deductible for employers’ workers’ compensation insurance policies.
  • HB 13-1123 - Concerning the Right of a Person to Waive Confidentiality Requirements Protecting Personal Work Information Obtained by the Department of Labor and Employment for Unemployment Benefit Claims to Permit the Department to Forward Certain Information to Potential Employers, by Rep. Tony Exum and Sen. Jim Kerr. The bill allows the Department of Labor and Employment to offer job seekers the opportunity to waive confidentiality so that their personal information may be made available to bona fide employers seeking employees.
  • HB 13-1258 - Concerning Local Government Involvement with Federal Immigration Issues, by Rep. Joe Salazar and Sens. Irene Aguilar and Morgan Carroll. The bill repeals C.R.S. Title 29, Article 29, which required local law enforcement officers to report any suspected illegal immigrants to federal immigration officials.
  • SB 13-048 - Concerning the Use of Highway User Tax Fund Moneys Allocated to Local Governments for Multimodal Transportation Infrastructure, by Sen. Nancy Todd and Reps. Max Tyler and Jeanne Labuda. The bill allows counties and municipalities to spend moneys received from the Highway User Tax Fund on transit-related projects.
  • SB 13-070 - Concerning the Purchase of Vehicles that Operate on Alternative Fuels for the State Motor Vehicle Fleet System, by Sen. Gail Schwartz and Reps. Ray Scott and Max Tyler. The bill requires the Department of Personnel and Administration to report on the number of alternative fuel vehicles purchased, the use of alternative fuel, and a plan to develop the infrastructure necessary to utilize more alternative fuel vehicles.

For a complete list of legislation signed into law by the governor in 2013, click here.

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HB 13-1289: Allowing Electronic Transmission of Motor Vehicle Titling and Lien Information

April 24, 2013 by Leave a Comment

On April 2, 2013, Rep. Dominick Moreno and Sen. Cheri Jahn introduced HB 12-1289 - Concerning Authority for the Electronic Transmission of Information Relating to Motor Vehicles. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

As amended in the House, the bill provides authority to the department of revenue to establish a system to allow the electronic registration and titling of motor vehicles and electronic transmission of motor vehicle lien information. The title certificate is considered to be held by the mortgage or lien holder when an electronic mortgage or lien is used. A copy of the electronic mortgage or lien is admissible as evidence in judicial or administrative proceedings. The department is authorized to accept gifts, grants, or donations into the electronic motor vehicle registration cash fund but may not accept them from a vendor who responds to a request for proposal from the department concerning the new system for electronic registration and titling of motor vehicles.

On April 17 the House passed the bill on 3rd and final reading; it has been assigned to the Transportation Committee in the Senate.

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HB 13-1249: Tightening the Rules for Documentation from Holder of Evidence of Debt Prior to Commencing Foreclosure

April 10, 2013 by Leave a Comment

On March 4, 2013, Rep. Beth McCann and Sen. Angela Giron introduced HB 13-1249 - Concerning Residential Foreclosures, and, in Connection Therewith, Requiring that Foreclosures be Initiated Only by Persons with a Security Interest in the Property and Requiring Good-Faith Dealing in Loan Modification Negotiations. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Current law allows a “holder of an evidence of debt” (holder), generally a bank or other financial institution, to foreclose on real property under a deed of trust even if the holder’s interest is based on an assignment from the original lender and the assignment or other intermediate documents are not produced, simply by providing a statement from the holder’s attorney that the holder’s interest in the property is valid. The bill removes this provision and otherwise tightens the rules for documentation of the holder’s interest that must be filed with the public trustee and with a court before a foreclosure sale is authorized. The bill also removes an existing limitation on the liability of a holder that forecloses without having possession of the original documents, to all parties damaged by the foreclosure.

The bill adds and amends definitions used throughout the bill.

The bill requires the notice that a residential borrower receives when a holder seeks an order authorizing sale (OAS) under rule 120, C.R.C.P., to include new disclosures specifying that:

  • A statement or opinion offered by the holder or its attorneys or agents is not advice to the borrower, and that those persons’ sole loyalty is to the party that claims to be the holder;
  • In response to the motion for an OAS, the borrower may challenge the sale on specified grounds, including whether the applicant has a right to enforce a recorded security interest in the real property affected by the foreclosure; and
  • It is illegal for a foreclosure consultant to charge an up-front fee.

The bill addresses “dual tracking,” in which a lender simultaneously negotiates with the borrower for a loan modification and pursues foreclosure through the public trustee. This section requires the servicer of the loan to establish a single point of contact by which the borrower may stay apprised of the status of his or her application for a loan modification. Section 4 also prohibits the lender from starting or continuing with the foreclosure process if the borrower is complying with the terms of a trial payment plan or other foreclosure prevention alternative.

The bill explicitly authorizes any party to an OAS proceeding to raise, and requires the court to consider, the issue of whether the moving party has an enforceable legal interest in the property. The bill also requires that the notice posted on the property in advance of the OAS proceeding contain a prominent disclosure that the borrower must respond in writing by a specific date or lose the right to object to a sale of the property.

At the request of the Real Estate Section, the CBA Legislative Policy Committee has voted to oppose the bill in its current form. The bill is assigned to the Business, Labor, Economic, & Workforce Development Committee; the committee will consider the bill on Thursday, April 11, at 1:30 p.m.

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Governor Hickenlooper Signs Several Bills Into Law

April 2, 2013 by Leave a Comment

Governor Hickenlooper signed the first bills of the 2013 legislative session on January 31, 2013. Since then, he has signed an additional 116 bills, for a total of 118 bills.

On March 22, 2013, Governor Hickenlooper signed 29 bills. Five of them are summarized here.

  • HB 13-1126 - Concerning Statutorily Established Time Intervals, by Rep. Jared Wright and Sen. Irene Aguilar. The bill continues amending statutes in order to comply with “rule of seven” date calculations.
  • HB 13-1166 - Concerning the Repeal of Certain Crimes that Include Marital Status as an Element of the Crime, by Rep. Elena Kagan and Sen. Pat Steadman. The bill repeals the crimes of adultery and promoting sexual immorality.
  • SB 13-012 - Concerning Reporting of Suspected Child Abuse and Neglect by Youth Sports Organizations, by Sen. Rollie Heath and Rep. Jonathan Singer. The bill mandates that coaches, directors, and athletic personnel for youth sports organizations report suspected child abuse and neglect.
  • SB 13-078 - Concerning Points of Diversion that are Not Located at the Physical Location Specified in the Decrees for Diverted Water Rights, by Sen. Angela Giron and Rep. Jerry Sonnenberg. The bill allows owners of water rights to correct established but erroneously recorded points of diversion without having to apply for a change in water right.
  • SB 13-118 - Concerning Clarification of the Exemptions from the Laws Regulating Mortgage Loan Originators, and, in Connection Therewith, Exempting Real Estate Licensees Representing Persons Providing Seller Financing for the Sale of a Limited Number of Residential Properties Annually as Allowed by Law, by Sen. Mary Hodge and Rep. Dan Pabon. The bill allows a private property owner to provide seller financing to up to five properties without needing to fulfill licensing and registration requirements of mortgage brokers.

Governor Hickenlooper signed 12 bills into law on March 29, 2013. Four of them are summarized here.

  • HB 13-1016 - Concerning the Distribution to Beneficiaries of Amounts on Payable-on-Death (POD) Financial Institution Accounts Pursuant to Written Designation in the Records of the Financial Institution, by Rep. Bob Gardner and Sen. Cheri Jahn. The bill  specifies that funds held in a payable-on-death account may be distributed in an unequal manner if such intent is clearly written in the records of the financial institution.
  • HB 13-1168 - Concerning an Expansion in the Ability of a Ditch to Operate as an Acequia Ditch, by Rep. Edward Vigil and Sen. Gail Schwartz. The bill allows acequia ditch corporations to operate on properties other than long lots.
  • SB 13-008 - Concerning Elimination of the Waiting Period for Children’s Eligibility Under the Children’s Basic Health Plan, by Sen. Linda Newell and Rep. Beth McCann. The bill removes the waiting period for CHP+ health insurance, in hopes that removing the waiting period will encourage people to leave group plans and join CHP+.
  • SB 13-177 - Concerning Changes to the Juvenile Corrections Programs Resulting in Cost Reductions and Reducing the Juvenile Detention Bed Cap, Reducing the Appropriation for Commitment Beds and Assessment Services, and Making an Appropriation for Transportation, by the Joint Budget Committee. The bill reduces the maximum number of beds available in the Division of Youth Corrections due to a decreased number of youth offenders.

Finally, Governor Hickenlooper signed one bill on April 1, 2013. It is summarized here.

  • SB 13-194 - Concerning a Repeal of a Telephone Assistance Program for Low-Income Individuals and Reducing an Appropriation, by Sen. Pat Steadman and Rep. Cheri Gerou. The bill repeals the Low-Income Telephone Assistance Program.

For a complete list of Governor Hickenlooper’s 2013 legislative decisions, click here.

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Tenth Circuit: Genuine Issue of Material Fact Existed as to Whether Plaintiff Suffered Emotional Damages Because of Defendant Loan Servicers’ Actions

April 1, 2013 by Leave a Comment

The Tenth Circuit published its opinion in Llewellyn v. Allstate Home Loans, Inc. on Thursday, March 28, 2013.

Plaintiff Glen Llewellen purchased property located in Aurora, Colorado. In connection with this purchase, Plaintiff executed a note with Allstate Home Loans. The loan was funded by Allstate’s subsidiary, Equity Pacific Mortgage, Inc., (“EPMI”). Plaintiff timely made his first monthly payment. Shortly thereafter, Nomura Credit and Capital, Inc. (“NCCI”) purchased the loan and transferred the servicing rights to Ocwen. On the date of the transfer, Plaintiff’s loan was current.

Prior to the service transfer to Ocwen, Plaintiff initiated the process of refinancing the loan. Plaintiff signed the refinance documents on June 1, 2006, but did not advise the closing agent that the servicing rights had been transferred to Ocwen. Plaintiff then spoke with an Ocwen representative on June 5 and incorrectly informed Ocwen that his loan had been refinanced—at the time, he had not yet delivered the funds to the closing agent. Two days later, Plaintiff delivered the funds he owed to close the transaction.

On June 14, the closing agent wired the refinancing payoff funds to Washington Mutual Bank, identifying EPMI as the beneficiary. EPMI wired the funds to Allstate on July 11. From there, it remains unclear what became of the funds. It is undisputed, however, that neither Ocwen nor NCCI ever received the payoff funds.

Ocwen sent Plaintiff a past-due notice on the loan and a letter discussing foreclosure and its alternatives. Ocwen then provided a negative credit report regarding Plaintiff to a credit reporting agency (“CRA”).

Plaintiff called Ocwen and informed their representative his loan had been refinanced and his new loan was being serviced by Washington Mutual. The representative informed Plaintiff that Ocwen had not received any payoff funds and advised him to speak with Washington Mutual to obtain details about the status of the loan. Ocwen sent Plaintiff another past due notice and issued a foreclosure referral to the law firm of Castle Meinhold & Stawiarski, LLC (“CMS”).

After receiving the foreclosure referral from Ocwen, CMS sent a letter to Plaintiff informing him that CMS had been retained to commence foreclosure proceedings against the property.

Plaintiff sent a fax to CMS with a copy of a HUD settlement statement showing that EPMI was to receive the refinancing funds, and a letter from Washington Mutual to Plaintiff stating that if OCWEN was to be paid off and was not, please contact the closing agent for research on the payoff. CMS forwarded the information to Ocwen.

Over the course of the following months, Plaintiff’s loan was transferred to NCC Servicing, and Ocwen continued to file negative credit reports regarding Plaintiff. Plaintiff’s credit report was not reversed, in spite of assurances that it would be addressed.

Glen Llewellyn filed this action asserting a Fair Debt Collection Practices Act claim, a Fair Credit Reporting Act claim, and a state law outrageous conduct claim against Ocwen and Nomura Credit and Capital (the “Ocwen Defendants”) based on their alleged credit reporting inaccuracies, and asserting an FDCPA and an outrageous conduct claim against Castle Meinhold & Stawiarski in connection with the foreclosure actions it took against Plaintiff. The district court granted summary judgment for the Defendants on each of Plaintiff’s claims. Plaintiff appealed, arguing summary judgment was inappropriate on his Fair Credit Reporting Act (“FCRA”) and Fair Debt Collection Practices Act (“FDCPA”) claims.

I. FAIR CREDIT REPORTING ACT

Plaintiff alleges the Ocwen Defendants violated § 1681s-2(b) of the FCRA. Under this section, a furnisher of information who has received notice of a dispute from a CRA is required to: (1) investigate the disputed information; (2) review all relevant information provided by the CRA; (3) report the results of the investigation to the CRA; (4) report the results of the investigation to all other CRAs if the investigation reveals that the information is incomplete or inaccurate; and (5) modify, delete, or permanently block the reporting of the disputed information if it is determined to be inaccurate, incomplete, or unverifiable. Pinson v. Equifax Credit Info. Servs., Inc., 316 F. App’x 744, 750 (10th Cir. 2009).

The district court granted summary judgment to the Ocwen Defendants, concluding Plaintiff had failed to provide evidence of actual damages, either economic or emotional, or willfulness, to support his FCRA claim.

A. Economic Damages

Plaintiff argued he suffered economic damages as a result of the Ocwen Defendants’ alleged violation of the FCRA. The record showed that Plaintiff’s credit score dropped three points during these events. Plaintiff’s allegations that his credit score dropped over 100 points as a result of Ocwen’s actions were conclusory allegations and did not create a genuine issue of material fact. Additionally, Plaintiff provided no evidence he had applied for, and been denied, additional loans. Accordingly, the district court’s grant of summary judgment in favor of the Ocwen Defendants was affirmed on this basis.

B. Emotional Damages

Plaintiff alleged that, as a result of the Defendants’ actions, his health began to rapidly deteriorate.

Plaintiffs who rely on their own testimony to establish emotional harm must “explain [their] injury in reasonable detail and not rely on conclusory statements. Bagby v. Experian Info. Solutions, Inc., 162 F. App’x 600, 605 (7th Cir. 2006). An injured person’s testimony alone may suffice to establish damages for emotional distress provided he reasonably and sufficiently explains the circumstances surrounding the injury.

Viewing Plaintiff’s affidavit in the light most favorable to him and drawing  all reasonable inferences in his favor, the Tenth Circuit concluded Plaintiff provided sufficient evidence he suffered emotional damages as a result of the Ocwen Defendants’ actions. His affidavit created a genuine dispute as to whether the Ocwen Defendants’ actions caused him to suffer emotional damages.

C. Willful Violation

Plaintiff contended he was entitled to statutory and punitive damages under 15 U.S.C. § 1681n because the Ocwen Defendants willfully violated the FCRA. The Tenth Circuit concluded that, at most, Plaintiff offered evidence that the Ocwen Defendants negligently violated their obligations, which was insufficient to support a claim.

II. FAIR DEBT COLLECTION PRACTICES ACT 

A. Claims Against Ocwen Defendants

Plaintiff alleged the Ocwen Defendants violated the FDCPA by communicating or threatening to  communicate to CRAs false information concerning his credit worthiness after being informed that the debt had been paid off and by failing to communicate the debt was in dispute after Plaintiff notified them of this fact.

The FDCPA applies only to “debt collectors.” Because the Ocwen Defendants acquired Plaintiff’s loan on May 15, 2006, when it was undisputedly current, they are not considered debt collectors under the FDCPA. The Tenth Circuit found no basis from which to conclude the Ocwen Defendants qualified as debt collectors under the FDCPA.

B. Claims Against CMS

Plaintiff’s FDCPA claim against CMS is barred by the one-year statute of limitations.

Order granting summary judgment to the Ocwen Defendants on Plaintiff’s FCRA claim based on his alleged emotional damages REVERSED and REMANDED for further proceedings. The district court’s order is otherwise AFFIRMED.

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SB 13-154: Continuing Division of Banking, and Implementing Recommendations of Sunset Report

March 4, 2013 by Leave a Comment

On Monday, February 4, 2013, Sen. Cheri Jahn introduced SB 13-154 – Concerning Continuation of the Division of Banking, and, in Connection Therewith, Implementing the Recommendations of the 2012 Sunset Report by the Department of Regulatory Agencies. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill implements the recommendations of the sunset review and report on the division of banking by:

  • Extending the repeal date of the division, including the banking board, until Sept. 1, 2024;
  • Repealing industrial banks;
  • Extending the time the banking board has to approve or disapprove a merger agreement between banks from 30 to 60 days;
  • Repealing the authority for and regulation of private family trust companies;
  • Allowing interstate banks to establish a branch in Colorado by either the creation of a new financial institution or through the acquisition of an existing financial institution; and
  • Requiring banks exercising trust powers to invest fiduciary funds within a reasonable time.

The bill makes a variety of amendments to facilitate compliance with changes in federal law. The bill requires the directors of a trust company to have fidelity bonds for its officers and employees, to carry hazard insurance, and to annually specify the amount of the bonds and insurance in its minutes. On Feb. 20, the Business, Labor, & Technology Committee amended the bill and sent it to the Appropriations Committee for consideration of the fiscal impact.

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HB 13-1017: Requiring Successor Loan Servicers to Honor Modification Terms Offered by Predecessor Loan Servicers

January 30, 2013 by Leave a Comment

On January 9, 2013, Rep. Steve Lebsock introduced HB 13-1017 - Concerning a Requirement that Successor Servicers of Residential Mortgage Loans Follow Through with Loan Modifications Offered to Borrowers, and, in Connection Therewith, Requiring a Servicer to Inform a Successor Servicer of the Terms of Any Modification Offer Upon Any Transfer of Servicing Rights for the Loan. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill addresses situations in which a homeowner has been offered a modified payment schedule or other loan modifications by one loan servicer, but the loan is then transferred to another loan servicer, which enforces the loan according to its original terms without regard to the modification offer.

The bill requires a loan servicer that has made any such offer to notify a successor loan servicer of the terms of the offer upon transfer of the servicing rights, and states that the successor servicer is subject to, and shall honor the homeowner’s acceptance of, the offer.

The bill adds a violation of these requirements to the existing list of violations for which a homeowner may sue for actual damages plus a $1,000 additional penalty, attorney fees, and costs. On Jan. 24, the bill was amended and approved by the Business, Labor, Economic, & Workforce Development Committee.

Since this summary, the bill passed Second Reading Special Order with amendments and passed Third Reading in the House.

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HB 13-1016: Changing Distribution Mechanism for Payable-On-Death Amounts

January 25, 2013 by Leave a Comment

On Wednesday, January 9, 2013, Rep. Bob Gardner and Sen. Cheri Jahn introduced HB 13-1016 - Concerning the Distribution to Beneficiaries of Amounts in Pay-On-Death (POD) Financial Institution Accounts Pursuant to Written Designation in the Records of the Financial Institution. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Current law provides that a financial institution account with a pay-on-death (POD) designation naming two or more beneficiaries must be paid to the surviving beneficiaries in equal shares, with no ability of the account owner to designate different proportions to each beneficiary. The bill changes the law to allow an account owner to specify something other than an equal division of a POD account. If one or more beneficiaries of the POD account predecease the account owner, the designation reverts to equal distribution unless the account owner amends the POD designation to dictate some other distribution. Assigned to the Judiciary Committee.

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Colorado Supreme Court: Question of Whether Colorado Credit Agreement Statute of Frauds Allows Introduction of Evidence Not Reached Because Credit Agreement’s Terms Unambiguous

January 24, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Federal Deposit Insurance Corp. v. Fisher on Tuesday, January 22, 2013.

Contract Interpretation—Ambiguous Contract—CRS §38-10-124(2)—Colorado’s Credit Agreement Statute of Frauds.

The Supreme Court reversed the court of appeals’ holding that a credit agreement between a lender and a bank was ambiguous as to the default interest rate. Because the Court held that the credit agreement was not ambiguous, it did not address whether Colorado’s Credit Agreement Statute of Frauds, CRS § 38-10-124(2), allows for the introduction of extrinsic evidence to resolve a facially ambiguous credit agreement.

Summary and full case available here.

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