May 22, 2019

Colorado Court of Appeals: Appellate Courts Would Most Likely Adopt Partial Subordination Approach; Request for Declaratory Relief Dismissed

The Colorado Court of Appeals issued its opinion in Tomar Development, Inc. v. Bent Tree, LLC on October 27, 2011.

Interlocutory Review Under C.A.R. 4.2.

Plaintiffs filed a petition for interlocutory review of several district court orders. The petition was denied and the case was dismissed.

This case involved a complex series of loans, deeds of trust, and subordination agreements. As relevant to the appeal, plaintiffs sought a declaratory judgment of their lien priority based on their view of applicable subordination principles and on equitable principles. Defendants moved to dismiss, arguing that the “partial subordination approach” should apply here. Under that approach, a subordinating creditor is viewed as having effectively assigned its higher priority to the holder of a junior lien. Plaintiffs argued that the “complete subordination approach” should apply.

The district court dismissed plaintiffs’ request for declaratory relief, concluding that the Colorado appellate courts would most likely adopt the partial subordination approach. The court also denied the motion to dismiss on equitable principles, stating that it could not conclude at the pleading stage that a set of facts could not be proven that would lead to the requested judgment.

The parties filed, and the district court granted, a stipulated motion for interlocutory appeal pursuant to C.A.R. 4.2. Under the Rule, the Court may grant an interlocutory appeal in its discretion when (1) immediate review may promote a more orderly disposition or establish a final disposition of the litigation; (2) the order from which an appeal is sought involves a controlling question of law; and (3) the order from which an appeal is sought involves an unresolved question of law.

The Court of Appeals found that the question of whether Colorado follows the complete or partial subordination approach appeared to be an issue of first impression. However, on the record presented, the Court could not conclude either (1) that immediate review may promote a more orderly disposition or establish a final disposition of the litigation; or (2) that the question presented was controlling. Because of other pending claims, the Court could not find that accepting the appeal would promote a more orderly or final disposition of the litigation or how the question was controlling. Accordingly, the petition was denied and the appeal was dismissed.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on October 27, 2011, can be found here.

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