March 3, 2015

Frederick Skillern: Real Estate Case Law — Judgments and Fraudulent Transfer

Editor’s note: This is Part 13 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick B. Skillern

Shigo, LLC v. Hocker
Colorado Court of Appeals, February 27, 2014
2014 COA 16

Execution upon water rights; homestead; water rights appurtenant to land.

A creditor obtains a judgment against Hocker for $4.4 million, and seeks to levy and execute upon Hocker’s shares in the Highland Ditch Company. Hocker owns an undivided 50 percent interest in two and three-quarter shares of Highland stock. The Highland shares represent Hocker’s right to use water that runs through a mutually owned ditch, a branch of which leads to a pond on the 35-acre farm that Hocker owns with her husband. Hocker files a claim under the homestead exemption, asserting that the shares, which represent water rights appurtenant to her farm, could not be levied. The court denies Hocker’s claim of exemption, and Hocker appeals.

The district court found that the homestead exemption “does not apply to water stock certificates.” The appeals court holds that the homestead exemption for a “farm” includes not just the farm’s soil, but also the water rights appurtenant to the land.

Shares of stock in a mutual ditch company represent water rights. However, because the record is not clear as to whether the water rights represented by the Highland shares are necessary to the use and enjoyment of the farm, the case was reversed and remanded to the trial court for further findings on that issue.

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

Frederick Skillern: Real Estate Case Law — Foreclosure, Debtor-Creditor, Receivers, Lender Liability

Editor’s note: This is Part 12 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick B. Skillern

Colorado Community Bank v. Hoffman
Colorado Court of Appeals, November 7, 2013
2013 COA 146

Receiver; order for sale certified as final judgment; C.R.C.P. 54(b); deadline to appeal; abuse of process; civil conspiracy.

This action arises from the judicial dissolution of certain companies in the course of a receivership proceeding. The companies were formed to develop golf courses. The bank sought appointment of a receiver when the companies defaulted on development loans. Certain individuals intervened and joined in the motion for appointment of a receiver. The companies asserted counterclaims for abuse of process and civil conspiracy.

The court granted a motion by the receiver for the companies to sell the golf courses to an entity controlled by the intervening individuals. The district court certified the sale orders as final under C.R.C.P. 54(b) to allow an appeal. The sale orders disposed of an “entire claim for relief” for purposes of C.R.C.P. 54(b) certification. Is a sale order in the course of a receivership action an “entire claim”? It can be, reasons the court. It states that prior cases have suggested that orders concerning property ownership can properly be certified. In Corporon v. Safeway Stores, Inc., 708 P.2d 1385 (Colo. App. 1985), the court held that “a quiet title claim is separable from slander and defamation claims, and therefore, properly certifiable under C.R.C.P. 54(b).” Because defendants did not appeal this order within forty-five days of the certification, but rather waited until the counterclaims had been resolved, the court of appeals lacked jurisdiction over this issue and that portion of the appeal was dismissed.

The court affirms the summary judgment order dismissing the abuse of process and civil conspiracy claims. Although the evidence might have proved that the interveners had an ulterior motive in bringing the receivership action, it did not establish the requisite improper use of process element. The rule was recently stated in Sterenbuch v. Goss, 266 P.3d 428 (Colo. App. 2011):

If the action is confined to its regular and legitimate function in relation to the cause of action stated in the complaint there is no abuse, even if the plaintiff had an ulterior motive in bringing the action or if he knowingly brought suit upon an unfounded claim.

The court agrees with the trial court that the claims failed this test. Because the companies’ conspiracy claims were based on the alleged underlying wrong of abuse of process, this claim also failed.

 

Armed Forces Bank v. Hicks
Colorado Court of Appeals, June 5, 2014
2014 COA 74

Guarantor; waiver of anti-deficiency rights; C.R.S. 38-38-106(6); good faith bid at foreclosure sale.

The bank makes a $6 million loan to a closely held, single asset company to build a condominium project in Glenwood Springs. The loan is personally guaranteed by Mr. and Mrs. Hicks, the principals of the company. After the loan goes into default in 2009, the bank agrees to several loan extensions, after which the company remained in default for failure to make certain payments and failure to obtain planning department approval of a condominium plat. After a trip by the company through bankruptcy court, the bank forecloses. At the foreclosure sale, the bank bids $3.7 million, leaving a $6 million deficiency, after all interest, costs and the like are added to the final tab. The bank files a civil action to collect the deficiency against Hicks. The Hicks attempt to assert defenses based on failure to make a bid based on a good faith estimate of fair market value, and alleging that the bank violated its duty of good faith and fair dealing by refusing to approve the plat ten months after the borrowers’ default. In effect, they argue that the bank failed to mitigate its damages by not allowing the plat to be recorded, even if the borrowers were in default, because the property would be more valuable at that point and the receiver would be able to lease the property, generating income to apply to the loan balance.

The court of appeals affirms the trial court’s grant of summary judgment in favor of the bank, holding that the guaranty contained a specific, and very broad, waiver of any right to challenge the bank’s bid at the foreclosure sale based on a “one action or antideficiency law.” In a case of first impression, the court holds that the statutory duty of a creditor under C.R.S. § 38-38-106(6) to bid its good faith estimate of fair market value may be waived, and that such an agreement is not void for violation of public policy. The court contrasts this statute, which has no provision barring a contractual waiver of its terms, with C.R.S. § 38-38-703, which explicitly prohibits agreements to waive, inter alia, the right of cure and redemption. The court notes that there is still a common law duty to make a good faith bid, under Chew v. Acacia Mutual Life, 165 Colo. 43, 437 P.2d 339 (1968) (bid not made in good faith on the basis of what the security could reasonably be expected to produce on sale at its fair market price), but the guaranty signed by Mr. and Mrs. Hicks included a waiver of “any defenses given to guarantors in law or in equity” except for payment of the indebtedness.

It will be interesting to see if the Supreme Court wants to take a look at this.

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

e-Legislative Report: February 17, 2015

legislationCBA Legislative Policy Committee

For followers who are new to CBA legislative activity, the Legislative Policy Committee (“LPC”) is the CBA’s legislative policy making arm during the legislative session. The LPC meets weekly during the legislative session to determine CBA positions from requests from the various sections and committees of the Bar Association.

Meeting held Friday, February 13

SB 15-129 — Preserving Parent-child Relationships
Sponsor: Senator Kevin Lundberg (R)
The LPC voted to oppose this bill in part because of the fundamental way that it changed the presumption of parenting time away from the “best interest of the child” to a different standard more focused on the parents in divorce proceedings. The bill was heard in committee on Wednesday the 11th and was passed on a party line vote after substantial amendments. SB-129 was referred to the Appropriations Committee for consideration of the bill’s fiscal impact.

SB 15-174 — Uniform Substitute Decision Making Documents Act
Sponsor: Senator Patrick Steadman (D)
The LPC voted to oppose this bill. The committee felt that the bill conflicts with existing statute, was unnecessary in many respects and that it potentially created more gaps and questions with existing law than its adoption would solve.

HB 15-1091 — Policies On Juvenile Shackling In Court
Sponsors: Representative Susan Lontine (D), Senator Michael G. Merrifield (D)
The LPC was concerned that while this bill was very well intentioned, it raised significant potential problems with separation of power between the legislative and judicial branches.

At the Capitol: Week of February 9

SB 15-049 — Real Estate Title Vests In Entity Once Formed
Sponsors: Senator Beth Martinez Humenik (R), Representative Jon Keyser (R)
This bill, supported by the Bar, passed through the Senate this past week. It has been assigned to the House Business Affairs and Labor Committee and has not yet been calendared for a hearing.

HB 15-1121 — Wind Energy Generation
Sponsors: Representative Jon Becker (R), Senator Jerry Sonnenberg (R)
The bill, supported by the Bar, also passed through its first chamber (the House) last week. It will next be heard in the Senate, where it has been assigned to the Agriculture, Natural Resources & Energy Committee. It will be heard by that committee on February 19.

SB 15-077 — Parents’ Bill of Rights
Sponsors: Senator Tim Neville (R), Representative Patrick Neville (R)
The bill passed out of the Senate committee hearing on a party line vote, and was debated on the floor. The bill was passed with amendments, and now moves to the House for consideration. It has not been calendared for consideration.

SB 15-042 — Mandatory Reports Of Animal Abuse
Sponsors: Senator Jerry Sonnenberg (R), Representative Jon Becker (R)
This bill was Postponed Indefinitely (killed) in committee. It will not be considered again this year. The CBA was opposed to the legislation.

HB 15-1101 — Public Defender ADC Records Open Records
Sponsors: Representatives Rhonda Fields (D), Polly Lawrence (R)
This bill was Postponed Indefinitely (killed) in committee. It will not be considered again this year. The CBA was opposed to the legislation.

HB 15-1174 — Information Protections Domestic Violence Victims
Sponsors: Representative Terri Carver (R), Senator Laura Woods (R)
The CBA has not taken a position on this bill—though we are working with the sponsors to ensure that the program will work as intended and not harm the real estate transaction process as a result of its adoption or implementation. It is likely that the CBA and its sections will participate in stakeholder groups and work sessions this summer.

New Bills of Interest

Senate

SB 15-177 — HOA Construction Defect Lawsuit Approval Timelines
Sponsors: Brian DelGrosso (R), Mark Scheffel (R), Jonathan Singer (D), Jessie M. Ulibarri (D)
The bill states that when the governing documents of a common interest community require mediation or arbitration of a construction defect claim and the requirement is later amended or removed, mediation or arbitration is still required for a construction defect claim. These provisions are in section 2 of the bill.

Section 2 also specifies that the mediation or arbitration must take place in the judicial district in which the community is located and that the arbitrator must:

  • Be a neutral third party;
  • Make certain disclosures before being selected; and
  • Be selected as specified in the common interest community’s governing documents or, if not so specified, in accordance with the uniform arbitration act.

Section 1 adds definitions of key terms. Section 3 requires that before a construction defect claim is filed on behalf of the association:

  • The parties must submit the matter to mediation before a neutral third party; and The board must give advance notice to all unit owners, together with a disclosure of the projected costs, duration, and financial impact of the construction defect claim, and must obtain the written consent of the owners of units to which at least a majority of the votes in the association are allocated.

Section 4 adds to the disclosures required prior to the purchase and sale of property in a common interest community a notice that the community’s governing documents may require binding arbitration of certain disputes.

House

HB 15-1025 — Competency To Proceed Juvenile Justice System
Sponsors: Representative Paul Rosenthal (D), Senator Linda M. Newell (D)
The bill establishes a juvenile-specific definition of “incompetent to proceed” for juveniles involved in the juvenile justice system, as well as specific definitions for “developmental disability”, “intellectual disability”, “mental capacity”, and “mental disability” when used in this context. The bill clarifies the procedures for establishing incompetency, as well as for establishing the restoration of competency.

HB 15-1216 — Basis For Expert Opinion Testimony
Sponsors: Representative Kevin Priola (R), Senator John Cooke (R)
The bill prohibits a person from testifying concerning the person’s expert opinion unless certain conditions are met.

Frederick Skillern: Real Estate Case Law — Easements and Public Roads (2)

Editor’s note: This is Part 11 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

By Frederick B. Skillernfrederick-b-skillern

Maralex Resources, Inc. v. Chamberlain, Public Trustee of Garfield County Colo. App January 2, 2014 2014 COA 5 Oil and gas lease; prescriptive easement for access to wells; adverse or permissive use of roads; standing. Since 1996, Maralex has been a lessee under a series of federal oil and gas leases in Rio Grande County. Maralex operates and maintains various oil and gas wells located on federal land. To access the wells, Maralex and its predecessors in interest have historically used two roads crossing private property now owned by Nona Jean Powell. The Powell property is adjacent to the federal land. After issues arose between Maralex and Powell regarding use of the roads, Maralex filed a quiet title action seeking a decree that it has prescriptive easements over the roads for ingress and egress to the oil leaseholds. The trial court first found that Maralex lacked standing, as a real property lessee, to assert a prescriptive easement claim. Notwithstanding that finding, the court went on to consider the merits of the easement claims as a matter of judicial economy. It found that Maralex’s use of the roads was permissive and not adverse, and that Maralex did not establish the existence of the asserted prescriptive easements. On appeal, the court reverses the holding on standing. Citing a long string of cases, an oil and gas lessee has standing to bring a quiet title action and to enforce easement rights. One can even draw an analogy to surface cases in which use by a tenant may be tacked on to prior use by the fee owner in proving possession for the prescriptive period. The court finds sufficient evidence in the record to affirm the finding that the use by Maralex and its predecessors was permissive, not adverse. It was conceded that oil operators on the government land openly and continuously used the roads on Powell’s property for the statutory period. However, because Powell previously permitted the use, the use was not adverse. What made the use permissive? Like so many cases of this sort, we have gates on the roads, and cattle on a ranch. At one point a former owner of the Powell property gave keys to the oil company, telling a grazing tenant that he wanted to oil operation to be successful, but that he did not want his tenant’s herd to be impacted. Over the course of decades, there was all manner of evidence of a problematic nature, sufficient that the court could go either way on the “adversity” issue. The trial court resolved it like this – “By giving someone a key, it seems to the Court that the only reasonable interpretation is that ‘I want to keep people out, but not you. You have permission to use my road. Here is a key.’” The appeals court also notes that this could also be a recognition of a right of the user to access, with acquiescence by the easement claimant to blockage of use by others. The court goes along with the trial judge.   Sinclair Transportation Company d/b/a Sinclair Pipeline Company v. Sandberg Colorado Court of Appeals, June 5, 2014 2014 COA 76 Pipeline easement; assignability of easement in gross; proof of assignment of easement rights by parol evidence; abandonment. This is one in a series – one might say a family – of cases involving Sinclair’s pipeline between oil fields in Wyoming and Denver. At one point, the pipeline crosses land in Weld County, creating friction with residential development, and with owners of land such as the Sandbergs. Sinclair seeks to upgrade its pipeline from 6” to 10” according to terms of the written pipeline easement, which dates back to 1963. The easement was in favor of the original servient owner and its “successors and assigns.” In an extensive opinion, the court affirms a partial summary judgment ruling in favor of Sinclair on defenses raised by the landowners, who sought to block any expansion or to require movement of the easement in order to minimize its impact on their residential development. The first issue deals with the use of parol evidence to prove a part of Sinclair’s interest (ownership of a series of assignments from partial owners of the pipeline). The court upholds a ruling that Sinclair could prove a part of its chain of title by proving assignment of one 50 percent interest in the line through testimony of an attorney representing one of the parties to the assignment. The court holds that no statute of frauds bars oral testimony to prove of an assignment of an easement. More importantly, the court holds that an easement in gross, especially one created for commercial uses, is assignable. The court relies on the modern trend in case law and comments in the Restatement of Property (Servitudes) § 4.6(1)(c) (“a benefit in gross is freely transferable”), as well as C.R.S. § 38-30-101 (“any person . . . entitled to hold . . . any interest in real estate whatever, shall be authorized to convey the same to another”). The court cites a Utah case, Crane v. Crane, 683 P.2d 1062 (Utah 1984) which surveys the easement in gross case law as it applies to pipelines and other commercial uses. For those interested in the industry, the court goes on to discuss interpretation of the easement document in regard to how a pipeline company can expand and improve its pipeline – whether a pipeline company must “remove, then replace” or “replace, then remove.” Finally, the court holds that Sinclair’s attempt in a parallel case to condemn a way across the land in question did not effect an abandonment of its deeded easement rights. The attempt to condemn was derailed in a 2012 decision of the Colorado Supreme Court discussed in this space. Another court of appeals decision (not discussed in this outline) deals with the pipeline condemnation issues.

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

Colorado Court of Appeals: Park Board’s Failure to Follow Own Process Arbitrary but No Prejudice

The Colorado Court of Appeals issued its opinion in Rags Over the Arkansas River, Inc. v. Colorado Parks and Wildlife Board on Thursday, February 12, 2015.

Colorado Division of Parks and Outdoor Recreation—Special Activities Permit—Regulations.

Several years ago, artists Christo and Jeanne-Claude began a quest to install a large-scale art display over the Arkansas River (Project). The artists formed Over the River Corporation (OTR), an intervenor in this action, to facilitate the Project. More than a decade after the initial application, the Colorado Division of Parks and Outdoor Recreation (Parks Division), through its Board, authorized the Project. Rags Over the Arkansas River, Inc. (ROAR), a nonprofit organization, sought judicial review of the Parks Division’s authorization of the Project.

ROAR asserted that the Board was required to follow its special activities permit regulation, and the failure to do so was arbitrary and capricious. The General Assembly delegated the authority to develop regulations for management of the state parks and recreation areas and development of outdoor recreation programs to the Parks Board. Consistent with this statutory guidance, the Board issued regulations to manage the use of state parks and recreation areas. The regulations outline procedures for allowing members of the public to obtain a permit to conduct a special activity on areas under the Parks Division’s jurisdiction, including prior approval in the form of a Special-Activities Permit. The plain language of the special activities permitting regulation is mandatory. At the May 2011 Board meeting, the Board, with little explanation, abandoned the special activities permitting process, instead approving negotiation of a cooperative agreement with OTR. Because the Parks Division failed to adhere to its own special-activities permit regulation in approving the Project, its decision was arbitrary and capricious. However, because the Board’s authorization of the Project was supported by sufficient evidence and ROAR was unable to demonstrate prejudice as a result of the procedure by which the Project was approved, the Parks Division’s approval of the Project was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

e-Legislative Report: February 10, 2015

legislationCBA Legislative Policy Committee

For followers who are new to CBA legislative activity, the Legislative Policy Committee (“LPC”) is the CBA’s legislative policy making arm during the legislative session. The LPC meets weekly during the legislative session to determine CBA positions from requests from the various sections and committees of the Bar Association.

Meeting held Friday, February 6
The following bills were discussed for action during last Friday’s LPC meeting.  Other bills of interest from that agenda are tracked and updated below.

SB 15-042 – Mandatory Reports Of Animal Abuse
(Senator Sonnenberg & Representative J. Becker)
The intent of the sponsors was to criminalize the recording of undercover videos showing animal cruelty in farming practices.  The Bar sections could not support the bill, or a subsequent “strike below”* amendment, because the language was overly broad, potentially unconstitutional and would lead to unintended consequences.  The LPC voted to oppose this bill at the recommendation of the Animal Law and Agricultural Law Sections.

HB 15-1101 – Public Defender ADC Records Open Records
(Representatives Field and Lawrence)
The LPC voted to oppose this bill as well.  The committee was concerned about the impact of Rule 1.6 and the financial impact of the bill to the State.  There was also concern that this bill would open the door for CORA requests of the Judicial Branch – and the potential impact that would have.  The LPC voted unanimously to oppose this bill.

HB 15-1037 – Freedom of Conscience Higher Ed
(Representative Priola & Senator Neville)
This bill was considered at the request of the Civil Rights Committee who presented that the bill was intended to “protect religious freedom and the right of association.”  After some discussion, the LPC voted to take no position on this bill.

At the Capitol: Week of February 2

HB 15-1135 – Terminally Ill Individuals End-of-life Decisions
(Representatives Court and Ginal & Senator Guzman)
HB 1135 was the big bill last week at the capitol.  Testimony began a little after 9:30am and concluded shortly before 10pm!  The emotional level of testimony was compelling.  There were approximately 120 people that signed up to testify for the bill ranging from all types of organizations and all walks of life. Many made passionate testimony on both sides of the bill which was a true indicator that our group made the correct policy decision to fix the issues and then maintain our neutrality. It is an issue that people either feel at a core level to support or they don’t.  The Committee voted to send the bill to the next committee Appropriations.  That motion failed 8-5.  There was a motion to Postpone the bill indefinitely, (passing 9-4) killing the bill for the remainder of the session.

Many Bar sections weighed in on the bill, its technical merits, and the drafting problems of the bill.  While individual sections had vigorous debates on the policy of “death with dignity” or physician assisted suicide, the LPC took no position on the bill itself.

SB 15-077 – Parents’ Bill of Rights
(Senator Neville & Representative Neville)
This Senate Bill sponsored by the father-son legislative team from Jefferson County was heard and passed out of the Senate committee last week.  The bill is set for its key second reading on Wednesday. Senate Bill 77, the so-called “Parents’ Bill of Rights” sponsored by Sen. Tim Neville and Rep. Patrick Neville, would give parents certain rights over the health care, education and mental health care of minor children.  The Bar Association voted to oppose this legislation at its LPC meeting on January 30.

SB 15-049 – Real Estate Title Vests In Entity Once Formed
(Senator Martinez Humenik & Representative Keyser)
This bill – supported by the bar – continues through the legislature on a straightforward course. It has now passed the Senate and will be heard in the Hose Business Affairs and Labor Committee, where Rep. Keyser will be the key sponsor.

HB 15-1121 – Wind Energy Generation
(Representative J. Becker & Senator Sonnenberg)
This Bar supported bill is also progressing through the legislative process.  Representative Becker has successfully completed the House process, and the bill passes to Senator Sonnenberg for the final leg of its legislative journey.

New Bills of Interest

Senate

SB 15-129 – Preserving Parent-child Relationships
(Senator Lundberg)
The bill amends provisions relating to best interests of a child in domestic relations actions and certain other actions in the juvenile code. With respect to such actions, the bill:

Amends the legislative declaration to emphasize the fundamental liberty interest of both parents and children in maintaining the parent-child relationship;

With respect to temporary orders hearings, if there has been a temporary or permanent protection order entered against one or both parties either prior to or in conjunction with the domestic relations action, requires the court to grant an expedited hearing at the request of either party for purposes of modifying provisions in the protection order relating to parenting time, communication, and access to a child. The court shall order substantially equal parenting time and access to the child unless it finds that such orders are clearly not in the child’s best interest. The court shall also enter any orders necessary for the safety of the protected party relating to the restrained party’s parenting time with the child.

Changes the nature of an investigation by a court-appointed child and family investigator (CFI) from evaluation and recommendations to investigation and fact-finding. CFIs will conduct an objective investigation of issues as specifically directed by the court and will provide written factual findings to the court that are supported by credible evidence. A CFI’s report will not make recommendations regarding the allocation of parental responsibilities but will provide the court with the factual findings the court deems necessary to make such determinations.

Amends language in the legislative declaration regarding the allocation of parental rights and responsibilities relating to the best interests of the child. Also, the bill requires the court to allocate substantially equal parenting time unless the court finds that doing so would endanger a child’s physical health or significantly impair the child’s emotional development. In addition, the court shall award mutual decision-making responsibilities with respect to the child unless the court finds that such an order is clearly not in the child’s best interest.

For purposes of temporary orders in a domestic relations action, requires the court to award substantially equal parenting time to the parties unless the court finds that doing so would endanger a child’s physical health or significantly impair the child’s emotional development. In addition, the court shall order mutual decision-making responsibilities unless mutual decision-making is clearly not in the child’s best interest.

Changes the nature of an evaluation by a court-appointed parental responsibilities evaluator to an investigation by a mental health professional. The mental health investigation is limited to mental health diagnoses, assessments of relevant addictions, or other mental health-related issues that are relevant to the court’s allocation of parental responsibilities for the child. The investigator’s report shall contain findings of fact but shall not contain conclusions or recommendations relating to the allocation of parental rights and responsibilities.

Clarifies that the 2-year restriction on filing motions that request a substantial change in parenting time and that also change the party with whom the child resides the majority of the time do not apply to moderate changes to parenting time when the existing parenting time order awarded substantially equal parenting time to the parties; and

Amends the provisions relating to modification of decision-making responsibility for a child from requiring the court to retain the prior decision-maker unless certain criteria are met to permitting the court to change the decision-maker after considering certain criteria, including whether an award of mutual decision-making responsibilities is now in the child’s best interest.

SB 15-174 – Uniform Substitute Decision Making Documents Act
(Senator Steadman)
Colorado Commission on Uniform State Laws. The bill adopts, with amendments, the “Uniform Substitute Decision-making Documents Act” as Colorado law. The bill establishes the circumstances under which a substitute decision-making document (document) executed outside this state is valid in this state. A person may assume in good faith that a document is genuine, valid, and still in effect and that the decision-maker’s authority is genuine, valid, and still in effect. A person who is asked to accept a document shall do so within a reasonable amount of time. The person may not require an additional or different form of document for authority granted in the document presented. A person who refuses to accept a substitute document is subject to:  A court order mandating acceptance of the document; and Liability for reasonable attorney’s fees and costs incurred in an action or proceeding that mandates acceptance of the document. A person is not required to accept a substitute document under certain described conditions.

House

HB 15-1043 – Felony Offense For Repeat DUI Offenders
(Senators Cooke and Johnson & Representatives McCann and Saine)
Under current law, a DUI, DUI per se, or DWAI is a misdemeanor offense. The bill makes such an offense a class 4 felony if the violation occurred: (1) After 3 or more prior convictions for DUI, DUI per se, or DWAI; vehicular homicide; vehicular assault; or any combination thereof; or (2) not more than 7 years after the first of 2 prior convictions for DUI, DUI per se, or DWAI; vehicular homicide; vehicular assault; or any combination thereof, if the violation included at least one of the following circumstances: One or more persons less than 18 years of age were present in the person’s vehicle at the time of the violation;  In committing the violation, the person caused damage or injury to any property or persons;  After committing the violation, the person fled the scene; or At the time of the violation, or within 2 hours after the violation, the person’s BAC was 0.15 or higher. Under current law, aggravated driving with a revoked license is a class 6 felony. The bill changes the penalty to a class 1 misdemeanor but requires a sentencing court to ensure that an offender spends a minimum of 60 days in the custody of a county jail. Under current law, a person whose privilege to drive was revoked for multiple convictions for any combination of a DUI, DUI per se, or DWAI must hold an interlock-restricted license for at least one year following reinstatement prior to being eligible to obtain any other driver’s license. The bill expands this period to a minimum of 2 years and a maximum of 5 years. The bill repeals provisions relating to the crime of aggravated driving with a revoked license when the offender also commits DUI, DUI per se, or DWAI as part of the same criminal episode. The bill makes conforming amendments.

HB 15-1161 – Public Accommodation First Amendment Rights
(Representative Klingenschmitt)
The bill specifies that neither the civil rights division, the civil rights commission, nor a court with jurisdiction to hear civil actions brought under the public accommodations laws may compel involuntary speech or acts of involuntary artistic expression or involuntary religious expression by a person when such speech or acts of artistic or religious expression would lead to that person directly or indirectly participating in, directly or indirectly supporting, or endorsing or impliedly endorsing an ideology, ceremony, creed, behavior, or practice with which the person does not agree.

HB 15-1189 – Uniform Fiduciary Access to Digital Assets Act
(Representative Keyser & Senator Steadman)
Colorado Commission on Uniform State Laws. The bill enacts the “Uniform Fiduciary Access to Digital Assets Act”, as amended, as Colorado law. The bill sets forth the conditions under which certain fiduciaries may access: The content of an electronic communication of a principal or decedent; A catalog of electronic communications sent or received by a decedent or principal; and  Any other digital asset in which a principal has a right or interest or in which a decedent had a right or interest at death. As to tangible personal property capable of receiving, storing, processing, or sending a digital asset, a fiduciary with authority over the property of a decedent, protected person, principal, or settlor may access the property and any digital asset stored in it and is an authorized user for purposes of computer fraud and unauthorized computer access laws.

“Fiduciary” means a personal representative, a conservator, an agent, or a trustee. A custodian and its officers, employees, and agents are immune from liability for an act or omission done in good-faith compliance with the provisions of the bill.

HB 15-1203 – Concerning earned time for certain offenders serving life sentences as habitual offenders
(Representative Rosenthal & Senator Steadman)
Under current law, an offender who was sentenced to a habitual offender 40-calendar-year life sentence before July 1, 1993, is not accruing earned time. The bill permits those sentenced under those circumstances to accrue earned time.

HB 15-1212 – Authority To Sell State Trust Lands To Local Gov
(Representative KC Becker & Senator Kerr)
In 2010, a law was enacted that allowed the state board of land commissioners (board) to convey land to units of local government if the conveyance would add value to adjoining or nearby state trust property, benefit board operations, or comply with local land use regulations. When enacted, the authority was set to repeal on July 1, 2015. The bill repeals that automatic repeal and makes the board’s authority permanent.

 

*a “Strike Below” amendment essentially replaces the entire bill below the title with an entirely different bill.  In practice this changes almost everything about the bill – but addresses the same topic, allowing for the sponsor to retain his/her bill and to continue working on the topic.  It is generally used when interested parties and stakeholders need a complete rewrite of the bill as originally introduced in ordrr to try and reach consensus.

 

Colorado Supreme Court: Entity that was Non-Existent when Contractual Duty Created Still May Be Subject to Interrelated Contracts Doctrine

The Colorado Supreme Court issued its opinion in S K Peightal Engineers, Ltd. v. Mid Valley Real Estate Solutions V, LLC on Monday, February 9, 2015.

Economic Loss Rule—Interrelated Contracts Doctrine.

In this civil case, the Supreme Court considered: (1) whether entities that did not exist at the time the relevant contracts were completed can still be subject to the economic loss rule through the interrelated contracts doctrine; and (2) whether commercial entities situated similarly to respondent, which was a third-party beneficiary to a contract that interrelated to the contract by which the home at issue was built, are among the class of plaintiffs entitled to the protections of the independent tort duty to act without negligence owed by construction professionals to subsequent homeowners when constructing residential homes. The Court held that (1) the fact that an entity was nonexistent at the time the relevant contracts were completed does not alter the analysis under the interrelated contracts doctrine; and (2) the independent duty at issue does not apply here because, as a third-party beneficiary of a commercially negotiated contract that interrelates to the contract under which the home was built, respondent cannot properly be considered a subsequent homeowner. The judgment was reversed and the case was remanded to the court of appeals to return to the trial court for further proceedings consistent with this opinion.

Summary and full case available here, courtesy of The Colorado Lawyer.

Frederick Skillern: Real Estate Case Law — Easements and Public Roads (1)

Editor’s note: This is Part 10 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick B. Skillern

Durango & Silverton Narrow Gauge Railroad Company v. Wolf
Colorado Court of Appeals, August 1, 2013
2013 COA 118

Railroad right-of-way; incidental use doctrine.

A property owner whose land is subject to a railroad company’s easement for railroad purposes objects when the railroad company leases a portion of its right-of-way to a local nonprofit for a bicycle path. The owner’s predecessor in title granted the railroad company this right in 1881:

[Grantor] does hereby sell, grant, convey, and release unto the said Denver and Rio Grande Railway Company the right of way for a width of one hundred feet—fifty feet on each side of center line—for the construction of the said Railway. . . . Giving and granting unto [the D&RG] the right to excavate, fill, ditch, drain, erect cattle guards and crossings [etc.].

The property owners appeal the trial court’s summary judgment in favor of the Durango & Silverton Narrow Gauge Railroad. The court of appeals affirms.

In 2009, the Durango & Silverton agreed to grant the City of Durango a nonexclusive easement to extend a public recreation trail over its right-of-way and adjacent to the railroad tracks. The tracks remain in use. Part of the trail crosses the Wolf’s property. Durango paid DSNGRR $1 million specifically for continued operations and maintenance. The trail also will promote safe use of the right-of-way by pedestrians and bicyclists who walk and ride directly on the railroad tracks.

Wolf opposed the agreement, arguing that the 1881 right-of-way permitted use only for “railroad purposes” and that a recreation trail is not such a purpose. On cross-motions for summary judgment, the trial court held that the original deed conveyed an exclusive easement. It held that a railroad right-of-way is an expansive form of easement, giving the railroad company exclusive use and control of the right-of-way as long as it continues to operate a railroad. It also found that the use by the public was a railroad purpose, because it eliminated safety and liability problems and increased efficiency on any rail repairs.

Relying on state and federal case law, the court of appeals agrees that the right-of-way is more expansive than a typical easement, and that the Durango & Silverton has the right to exclusive use and control of the servient tenement. This use includes the right to lease portions of the right-of-way. It therefore affirms the judgment.

The appeals court does not address whether a public recreation trail is a “railroad purpose,” as the district court had found, relying instead on the “incidental use” doctrine. This doctrine, which has never been invoked in Colorado, states that a railroad may lease a portion of its right-of-way where the use is incidental to or not inconsistent with the railroad’s continued use of its right-of-way for railroad purposes. The public recreation trail meets both of these criteria, in the court’s view.

Wolf argues that the trial court erred by not requiring the joinder of five neighbors that he alleges are indispensable parties. Their property is also subject to DSNGRR’s right-of- way and are affected by the public recreation trail. The Court disagrees, holding that this dispute is governed in large part by the interpretation of the deed from Wolf’s predecessor, which is specific to Wolf’s property.

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

Tenth Circuit: Plain Language of Regulation Requires Mortgage Subordination at Date of Conservation Easement Donation

The Tenth Circuit Court of Appeals issued its opinion in Mitchell v. Commissioner of Internal Revenue on Tuesday, January 6, 2015.

Ms. Mitchell and her late husband purchased property from Mr. Sheek subject an agreement to pay the balance to Mr. Sheek in yearly installments. In 2003, they granted a conservation easement on part of their property to the Montezuma Land Conservancy. At the time of the donation, the Mitchells did not obtain a mortgage subordination agreement from Mr. Sheek, but they did obtain one in 2005. The Mitchells claimed a charitable contribution deduction on their 2003 tax return.

In 2010, the Commissioner of the IRS mailed a notice of deficiency to Ms. Mitchell disallowing the charitable contribution for failure to meet certain Code requirements, specifically for not obtaining a mortgage subordination agreement at the time of the donation. Ms. Mitchell challenged the Commissioner’s determination in Tax Court, but the Tax Court denied the claimed charitable contribution, concluding the Code and its implementing regulations mandated that the mortgage be subordinated on the date of the donation. Ms. Mitchell appealed to the Tenth Circuit.

The Tenth Circuit first analyzed the applicable Code provisions, in particular noting the Code mandates that a contribution shall not be treated as exclusively for contribution purposes unless the contribution is protected in perpetuity. The Commissioner developed the mortgage subordination provision as a means to protect the conservation in perpetuity. The Tenth Circuit accordingly focused its inquiry on whether the regulations can be interpreted to entitle Ms. Mitchell to the deduction despite the undisputed fact that the mortgage was not subordinated on the date of the donation.

The Tenth Circuit first turned to Ms. Mitchell’s claim that, because the regulations are silent on the date of subordination, she is entitled to the deduction because the mortgage was eventually subordinated. The Tenth Circuit disagreed, finding the plain language of the regulation precluded her interpretation, and even if they were to view the regulation as ambiguous, they would defer to the Commissioner’s reasonable interpretation.

Ms. Mitchell next argues that strict compliance with the regulation was unnecessary because the risk of foreclosure was so remote as to be negligible, and because of a Deed provision that allegedly protected the property in perpetuity. The Tenth Circuit found that the plain language of the regulation required it to reject Ms. Mitchell’s arguments.

The Tenth Circuit affirmed the Tax Court’s decision.

Colorado Court of Appeals: Interlocutory Review Dismissed Because No Question of Law Involved

The Colorado Court of Appeals issued its opinion in Rich v. Ball Ranch Partnership on Thursday, January 29, 2015.

Contract—Question of Law—Interlocutory Appeal—CRCP 56(h)—CAR 4.2(b).

This case involves a dispute over operation of the Ball Ranch Partnership. Petitioners moved for a determination of a question of law pursuant to CRCP 56(h), asking the court to interpret a section of the partnership agreement.

CRS § 13-4-102.1(1) and CAR 4.2(b) authorize the Court of Appeals to allow “an interlocutory appeal of a certified question of law” in a civil case, if the lower court “certifies that immediate review may promote a more orderly disposition or establish a final disposition of the litigation” and “[t]he order involves a controlling and unresolved question of law.” Although the lower court certified this case for immediate review, a typical issue of contract interpretation, such as the issue in this case, is not such a question of law within the meaning of CRS § 13-4-102.1 and CAR 4.2. Because this case does not present any abstract or pure question of law underlying the district court’s interpretation of the contract, the petition was dismissed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Frederick Skillern: Real Estate Case Law — Construction Defects

Editor’s note: This is Part 9 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick B. Skillern

Mid Valley Real Estate Solutions V, LLC v. Hepworth-Pawlak Geotechnical, Inc.
Colorado Court of Appeals, August 1, 2013.
2013 COA 119

Construction defects; economic loss rule; duties of builder-vendor run to commercial entity that purchases house built for residential purpose.

Alpine Bank was lender on a construction project. The builder-developer defaulted. The bank threatened foreclosure, and ultimately took a deed in lieu of foreclosure. Consistent with its usual practice, the property was conveyed to the bank’s REO subsidiary, which then sued for construction defects on the property.

The soils and structural engineers appeal an order denying their motion for summary judgment on the plaintiff’s negligence claim. Does a commercial entity — a wholly owned subsidiary of a construction lender — have the rights of a residential consumer to sue design professionals for negligence, under the claims set out in Cosmopolitan Homes v. Weller, or are such claims barred by the economic loss rule? The court of appeals affirms the district court’s ruling that the “independent duties” outlined in Cosmopolitan Homes and its progeny inure to the benefit of a commercial entity that buys a residential property, so that the claim is not barred by the economic loss rule.

The court reviews the economic loss rule and holds that there is an independent duty of care on the part of a builder in residential construction that renders the economic loss rule inapplicable in that context. Of course, the independent duty, which arises from the holding of our supreme court in Cosmopolitan Homes, would not apply to the typical commercial construction project.

The court then looks to whether Mid Valley — whose sole function is to hold foreclosure property for resale by the bank — falls within the class of plaintiffs who may enforce this independent duty of care. It concludes that the duty arises from the residential nature of a project, not from the characteristics of the owner of that property. While Mid Valley is not a traditional homeowner, the court reasons that allowing defendants to avoid liability for this reason would afford them a “windfall” resulting from the fortuity that the latent defect caused damage before Mid Valley sold the house. Accordingly, the denial of summary judgment was affirmed and the case was remanded for further proceedings. The Supreme Court has accepted the case for review:

Petition for Writ of Certiorari GRANTED, March 3, 2014, S K Peightal Engineers v. Mid Valley Real Estate Solutions V, LLC

Summary of the Issues:

  • Whether the economic loss rule bars a homeowner’s negligence claim against a construction professional when the owner is a commercial entity rather than a natural homebuyer.
  • Whether the interrelated contract doctrine as defined in BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004), can apply to a wholly-owned subsidiary that did not exist when the initial contracts were drafted but instead was created after work on the relevant contracts had been completed.

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

SB 15-079: Increasing County Clerk Document Recording Surcharge

On January 14, 2015, Sen. Jessie Ulibarri introduced SB 15-079 – Concerning Modifications to the Document Recording Fee Imposed by Counties for the Purpose of Financing a Statewide Affordable Housing Investment FundThis summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Section 1 of the bill raises to $2 the surcharge to be imposed by each county clerk and recorder (clerk) for each document received for recording or filing in his or her office on or after July 1, 2015. The surcharge is in addition to any other fees permitted by statute. Out of each $2 collected, the bill requires the clerk to retain one dollar to be used to defray the costs of an electronic or core filing system in accordance with existing law. The bill requires the clerk to transmit the other dollar collected to the state treasurer, who is to credit the same to the statewide affordable housing investment fund (fund). Section 2 of the bill creates the fund in the Colorado housing and finance authority (authority). The bill specifies the source of moneys to be deposited into the fund and that the authority is to administer the fund. Moneys in the fund are to be expended by the authority for the development and preservation of affordable housing on a statewide basis. Section 2 of the bill also requires the authority to submit a report, no later than June 1 of each year, specifying the use of the fund during the prior calendar year to the governor and to the senate and house finance committees.

The bill was assigned to the Senate State, Veterans, & Military Affairs Committee.