August 24, 2019

Archives for January 13, 2015

Frederick Skillern: Real Estate Case Law — Contracts, Purchase and Sale, Transactions (3)

Editor’s note: This is Part 6 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. Skillern

Top Rail Ranch Estates, LLC v. Walker
Colorado Court of Appeals, January 30, 2014
2014 COA 9

Sale of residential lots; claim preclusion; fraud; economic loss rule.

Top Rail Ranch entered into a contract with Walker Development to purchase a subdivision of platted residential lots for $1 million, with $200,000 down, and a promissory note for the balance, secured by a second lien deed of trust which it agreed to subordinate to bank financing with Canon National Bank for the subdivision development. Walker Development then attempted to rezone adjoining property that it owned to Agricultural Forestry, with plans to sell the adjoining parcel to a mining company. Walker told Top Rail’s owner, Jensen, that the rezoning was to facilitate a conservation easement.

At this point, everything fell apart, and it is not over yet. Walker sold the adjoining land to a mining company after the rezoning was approved. When the sale was announced, Top Rail sales to potential homeowners froze. The County reversed the mining company’s zoning approval. Top Rail defaulted on its loan with Canon National, which foreclosed on the subdivision lots. Top Rail could not cure; Walker Development redeemed from its second lien position, acquiring title to all but two of the subdivision lots. The parties sued each other in separate actions, and this consolidated appeal follows.

In the first case, Top Rail sued Walker for fraud, breach of contract, bad faith breach of contract and other claims. Walker Development counterclaimed for breach of the covenants in its deed of trust, seeking to recover damages for $200,000 that it had paid to cure a lien for nonpayment of a water tap. The trial court granted a directed verdict on the counterclaim, on the basis that the Walker Development deed of trust had merged into the Public Trustee’s deed after the Canon National Bank foreclosure, and the jury found for Top Rail on its tort and contract claims, awarding in excess of $1 million.

In the meantime, Walker Development sued Top Rail and its principals on the promissory note given in purchase of the property, and for foreclosure on the two lots not covered by Canon National Bank’s foreclosure. The district court dismissed Walker Developments on the basis of claim preclusion, based on the judgments entered in the first action.

On appeal, the court holds that the district court improperly dismissed Walker Development’s counterclaims in the first action on a motion for directed verdict. Regardless of whether the lien imposed by the Walker Development deed of trust was extinguished by foreclosure of the bank’s senior lien – Walker Development acquired title through its certificate of redemption – the contractual covenants in the deed of trust were not extinguished by the foreclosure. Schwab v. Martin, 165 Colo. 547, 441 P.2d 17, 19 (1968). Walker had a valid claim for the money spent to remove the water tap lien.

The court then holds that the fraud and bad faith breach of contract claims asserted by Top Rail are barred by the economic loss rule. It affirms the judgment on Top Rail’s breach of contract claim ($500,000) is affirmed. The case is then remanded for trial on Walker Development’s counterclaim on the tap lien.

Addressing the second case, Walker Development argues that its claims are not barred by claim preclusion, as its promissory note claims were not compulsory counterclaims in the first action; the counterclaims were only permissive. The appeals court agrees. Adjudication of the claims on the promissory notes would not result in inconsistent verdicts or a deprivation of rights established in the first litigation.

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: Status as VA Designated Payee Does Not Confer Priority for Appointment as Conservator

The Colorado Court of Appeals issued its opinion in In re Estate of Runyon on Wednesday, December 31, 2014.

Appointment of Uniform Veterans’ Guardianship Act Guardian—Appointment of Guardian by Incapacitated Person.

Gladys Runyon (mother) was the authorized payee for Sidney Runyon’s Department of Veterans Affairs (VA) benefits until August 2011, when Elizabeth Knight (sister) became the payee. In February 2012, the VA designated Colorado State Bank and Trust (Bank) as payee.

The Bank petitioned for appointment as Runyon’s guardian under the Uniform Veterans’ Guardianship Act (UVGA). It also petitioned to have Jeanette Goodwin appointed as Runyon’s guardian under the Colorado Probate Code. The Denver Probate Court concluded that the Bank’s petitions were filed in the wrong venue but appointed Goodwin as emergency guardian through August 2012.

Ten months after the expiration of the emergency guardianship, mother and sister sought appointment as co-guardians and conservators in Arapahoe County. Runyon advised the court-appointed visitor that he didn’t want mother and sister appointed. The court appointed counsel for Runyon.

The Bank then entered an appearance and sought appointment as conservator and UVGA guardian, and nominated Goodwin as guardian. At the hearing, Runyon’s attorney advised the court of Runyon’s preferences to appoint the Bank and Goodwin as conservator and guardian, and the court granted the appointments.

On appeal, mother and sister argued that the trial court erred because (1) their purported status as designated payees for Runyon’s VA and Social Security Administration (SSA) benefits entitled them to be appointed, and (2) the court should not have given effect to Runyon’s preferences. The Court of Appeals disagreed with the first point and remanded for further proceedings on the second.

The appointment of a guardian lies within the sound discretion of the probate court. A respondent’s nomination of a guardian creates a priority for that nominee, but only if the respondent had “sufficient capacity to express a preference” at the time of the nomination. The respondent may make an oral nomination at an appointment hearing. There is a similar scheme for appointment of conservators and UVGA guardians.

Here, mother and sister had no priority claim to be a guardian or conservator, and being appointed as designated payees of Runyon’s SSA and VA benefits did not confer any such priority claim on them. By nominating the Bank and Goodwin at the hearing, Runyon conferred on them a priority for appointment. However, the record did not reflect whether the trial court found that Runyon had sufficient capacity to express a preference at the time of the nomination. The Court remanded for such a determination, but noted that a finding that a respondent is an “incapacitated person” under the statute does not necessarily mean that the respondent lacks sufficient capacity to express a preference as to a guardian or conservator.

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

Colorado Court of Appeals: Jury Instructions Erroneously Failed to Consider Parent’s Actions; Error Not Harmless

The Colorado Court of Appeals issued its opinion in People in Interest of J.G. on Wednesday, December 31, 2014.

Dependency and Neglect—Proof as to Each Parent.

In January 2014, the Fremont County Department of Human Services (FCDHS) learned that 5-year-old S.L. had told her parents that her half-brother, 11-year-old Jo.G., had touched her inappropriately while she was trying to sleep. Mother and Father immediately reported the incident to police. Investigation found that Jo.G. had also inappropriately touched his 8-year-old sister. Jo.G was criminally charged and moved to an offense-specific foster home.

FCDHS then filed a petition in dependency and neglect, alleging that all five of the children living in the home were dependent and neglected because the environment in which Jo.G. was able to sexually act out against his sisters was injurious to all of the children. Mother admitted that Jo.G was dependent and neglected, but denied the allegation as to the other four children, and requested a jury trial on the issue of their adjudication.

The jury found that although none of the children lacked proper parental care and none were homeless, each child’s environment was injurious to his or her welfare. Accordingly, the court adjudicated all as dependent and neglected.

On appeal, the Court of Appeals found that the court erred by providing jury instructions and a special verdict form that allowed the jury to determine the status of each child without considering each parent’s actions, availability, ability, andwillingness to provide reasonable parental care. The Court further concluded that the trial court’s errors were prejudicial to mother, and therefore constituted grounds for reversal. As instructed, the jury was permitted to find that a child’s dependent status in relation to any respondent parent was sufficient to find that the child was dependent and neglected as to all respondent parents. If properly instructed to separately examine the children’s status in relation to each parent, the jury might have concluded that the children’s environment was notinjurious to their welfare, because mother was available, willing, and able to provide reasonable parental care. Had the jury made such a determination, the children could not have been adjudicated as dependent and neglected.

Accordingly, the order was reversed and the case was remanded for a new adjudicatory trial. If FCDHS does not pursue adjudication, the order and decree of adjudication must be vacated and the petition dismissed.

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

Tenth Circuit: Four Year Age Difference Mandate for SORNA Registration Equals 48 Months

The Tenth Circuit Court of Appeals issued its opinion in United States v. Black on Tuesday, December 9, 2014.

Jay Black pleaded guilty for one count of sexual abuse of a minor for a consensual act between him, an 18-year-old, and a 14-year-old victim. A comparison of their birthdays revealed that Black was 55 months older than the victim. Black contests that he is not required to register as a sex offender because the Sex Offender Registration and Notification Act (SORNA) provides that a person does not qualify as a sex offender if the victim is at least 13 years of age and the offender was not more than four years older than the victim. Black contended that, because he was 18 and the victim was 14, he need not register. The district court disagreed, concluding that § 16911(5)(C) requires a comparison of the offender’s and victim’s birth dates. Black appealed.

The Tenth Circuit affirmed, adopting the reasoning of the Third Circuit in a similar case, United States v. Brown, 740 F.3d 145 (3d Cir. 2014), which found that considering “years” to mean whole years only would lead to strange results in application of SORNA. The Tenth Circuit advanced an additional reason, in that Black’s interpretation could reach offenders who were barely more than three years older than their victim, and would exclude offenders who were nearly five years older. The Tenth Circuit found no grievous ambiguity necessary to implicate the rule of lenity, and affirmed.


Tenth Circuit: Unpublished Opinions, 1/12/2015

On Monday, January 12, 2015, the Tenth Circuit Court of Appeals issued one published opinion and no unpublished opinion.

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.