August 26, 2019

Archives for January 19, 2015

Frederick Skillern: Real Estate Case Law — Contracts, Purchase and Sale, Transactions (4)

Editor’s note: This is Part 7 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

Taylor Morrison of Colorado, Inc. v. Bemas Construction
Colorado Court Appeals, January 30, 2013
2014 COA 10

Construction defects statute; willful and wanton breach of contract required to overcome liability limitation provisions in contract.

Taylor Morrison of Colorado, Inc. was the developer of a residential subdivision known as Homestead Hills. Pursuant to written contracts with Taylor, Terracon Consultants, Inc. performed geotechnical engineering and construction material testing services at the construction site. Bemas Construction performed site grading.

After many of the homes were constructed, Taylor began receiving complaints about cracks in the drywall of homes. Taylor remedied the defective conditions, and then sued Terracon and Bemas for breach of contract and negligence and other claims.

Taylor also moved for determination as to whether the Homeowner Protection Act of 2007 (HPA) invalidated the limitation of liability clauses in the contracts with Terracon. The trial court denied the motion on the ground that the HPA applies to residential property owners but not to commercial entities.

Terracon moved for leave to deposit into the court’s registry $550,000, representing the maximum amount that Taylor could recover from Terracon under the contractual limitation of liability clauses and the court order. It also requested that upon acceptance of such deposit, the court should declare Taylor’s claims against Terracon moot and dismiss them with prejudice. The trial court ruled in favor of Terracon. The money was deposited and the claims were dismissed with prejudice.

Taylor then went to trial against Bemas. The jury returned a verdict in Bemas’ favor on all of Taylor’s claims. Taylor appeals.

Taylor argued that it was error to rule that the HPA did not invalidate the limitation of liability clauses in Taylor’s contracts with Terracon. The court of appeals panel affirms the trial court’s judgment, but for different reasons. The court holds that regardless of whether the HPA applies to commercial entities, retroactive application of the HPA to these facts would be unconstitutionally retrospective. The Court concludes, however, that further proceedings are necessary to determine whether Taylor should have been permitted to introduce evidence of Terracon’s willful and wanton conduct to attempt to overcome Terracon’s assertion of the limitation of liability clauses.

The judgment is affirmed and the case is remanded to the trial court to determine whether Taylor should have been permitted to introduce evidence of Terracon’s willful and wanton conduct for the sole purpose of attempting to overcome Terracon’s assertion of the limitation of liability clauses at issue.


Jehly v. Brown
Colorado Court of Appeals, March 27, 2014
2014 COA 39

Fraudulent Concealment; Imputed Knowledge.

“Actual knowledge,” in the context of a fraudulent concealment claim, cannot be imputed to a principal through knowledge of its agent. Defendant Brown owned real property in Teller County and hired a general contractor to build a house on it. Before commencing, the contractor discovered that part of the property was located in a floodplain. Brown was not told of this fact.

Plaintiffs David and Peggy Jehly entered into a contact to purchase the house from Brown. Brown filled out a Seller’s Property Disclosure form by writing “New Construction” diagonally across every page and not checking any of the boxes. Before buying the house, the Jehlys were never informed that part of the property was located in a floodplain.

Approximately five years after the home purchase, heavy rains caused severe flooding and damage to the basement of the house. The Jehlys sued Brown, alleging he fraudulently concealed knowledge of the floodplain to induce plaintiffs to buy the house. During a bench trial, defendant denied having any personal knowledge of the floodplain at the time of the sale and denied that his general contractor or any subcontractors had so informed him. The trial court found as a matter of fact that he had no knowledge, and found in favor of defendant.

On appeal, plaintiffs asserts that it was error not to impute the general contractor’s knowledge that part of the property was in a floodplain to Brown. The court of appeals disagrees, and affirms. To prevail on a claim of fraudulent concealment, a plaintiff must show that a defendant actually knew of a material fact that was not disclosed. It is not enough that defendant should have or might have known the fact, and knowledge of his agent cannot be imputed for the purpose of this particular tort claim. Plaintiffs did not contest on appeal the trial court’s factual finding that defendant had no active or conscious belief or awareness of the existence of the floodplain. The trial court did not apply the wrong legal standard, because defendant did not have the requisite actual knowledge of the information allegedly concealed.

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.

Proposed Changes to Colorado Rules of Civil Procedure

The Colorado Supreme Court is seeking public comment on proposed changes to the Colorado Rules of Civil Procedure. Amendments to rules 1, 12, 16, 16.1, 26, 30, 31, 34, 37, 54, and 121, § 1-22 are proposed; some of the amendments, including those for Rule 16, “Case Management and Trial Management,” are extensive. A redline of the proposed changes is available here.

Written comments to the proposed rule changes can be submitted to Christopher Ryan, the Clerk of the Colorado Supreme Court, at 2 East 14th Ave., Denver, CO 80203. Comments must be received no later than 5 p.m. on April 17, 2015.

A public hearing on the changes will be held on April 30, 2015, at 1:30 p.m. in the Colorado Supreme Court courtroom. The courtroom is located on the 4th floor of the Ralph Carr Justice Center at 2 East 14th Avenue in Denver.

Colorado Court of Appeals: Assets in Revocable Trust are Assets of Settlor and Can Be Sold to Satisfy Creditor Claims

The Colorado Court of Appeals issued its opinion in Independent Bank v. Pandy on Thursday, January 15, 2015.

Foreign Judgment—Domesticated Judgment—Lien—Statute of Limitations—Interlocutory Appeal—Quiet Title.

In August 2010, Independent Bank (Bank) obtained two judgments against Joseph Pandy in a Michigan state court. In April 2012, the Bank domesticated the Michigan judgment in the district court in Grand County, Colorado. It then filed transcripts of the domesticated judgments with the Grand County Clerk and Recorder in January 2013 to obtain a judgment lien against Joseph Pandy’s real property in the county, including the C Lazy U Homesteads. At that time, the Joseph Pandy, Jr. and Elizabeth Pandy Living Trust (Trust) held title to the C Lazy U Homesteads. In March 2014, the Bank filed a “Complaint for Quiet Title and Decree of Foreclosure” against the Pandys in Colorado. The complaint sought a decree that the judgment lien against Joseph Pandy individually was valid against his interest in the Trust. After the court denied the Pandys’ motion to dismiss, the Pandys filed a CAR 4.2 petition for interlocutory appeal.

The Pandys contended that their petition for interlocutory appeal satisfies the requirements of CAR 4.2. Here, if the statute of limitations in CRS § 13-80-101(1)(k) bars the Bank’s complaint, the litigation would be resolved without the need for a trial. Because the issue presented is both case dispositive and presents an unresolved question of law, the Pandys’ petition for interlocutory appeal satisfies the requirements of CAR 4.2.

The Pandys also contended that the three-year statute of limitations in CRS § 13-80-101(1)(k) bars the Bank’s complaint. The three-year statute of limitations is inapplicable to the Bank’s complaint because the Bank was not seeking a judgment. The applicable statute here is CRS § 13-52-102(1), which gives the Bank six years from the date of the Michigan judgment to foreclose on the judgment lien. Because the Bank brought its quiet title and foreclosure action within six years of the Michigan judgment, the action is not precluded by the statute of limitations. Accordingly, the three-year statute of limitations in CRS § 13-80-101(1)(k) does not bar the Bank’s complaint for quiet title on and foreclosure of the Trust’s property. The order was affirmed and the case was remanded for further proceedings.

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

Colorado Court of Appeals: Complaint Timely Filed in ICCES Despite Selection of Wrong District Court

The Colorado Court of Appeals issued its opinion in Maslak v. Town of Vail on Thursday, January 15, 2015.

CRCP 106(a)(4)—Complaint—E-filing—Lack of Subject Matter Jurisdiction.

The Town of Vail (Town) and the Vail Recreation District (VRD) submitted an application to the Planning Commission to amend the Vail Golf Course’s conditional use permit so the golf course could be expanded to accommodate an events center. Over the objections of plaintiffs (collectively, homeowners), the Planning Commission approved the application. The homeowners appealed the Planning Commission’s decision to the Town Council, which upheld the decision. The homeowners then filed a CRCP 106(a)(4) complaint, seeking review of the Town Council’s decision. Although the complaint was timely filed, it was inadvertently e-filed in Denver District Court, the wrong district court. The complaint was thereafter e-filed in the Eagle County District Court, the correct district court, but by then it was not timely. The court granted defendants’ motions to dismiss for lack of subject matter jurisdiction and awarded defendants their attorney fees.

On appeal, the homeowners contended that, because their complaint was timely filed (albeit in the wrong court), the Eagle County District Court erred in dismissing it for lack of subject matter jurisdiction. The Court of Appeals agreed. The fact that the homeowners e-filed their complaint with the Denver District Court did not deprive the Eagle County District Court of its subject matter jurisdiction over the action. Furthermore, submitting the complaint to the “correct court” pursuant to the Denver District Court Clerk’s e-filing rejection notice instructions, did not constitute the filing of an entirely new and separate action for purposes of invoking district court jurisdiction within the twenty-eight-day jurisdictional window. The orders were vacated and the case was remanded with directions.

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

Colorado Court of Appeals: Trial Court Erred By Refusing Self-Defense Instruction for Reckless Manslaughter Charge

The Colorado Court of Appeals issued its opinion in People v. McClelland on Thursday, January 15, 2015.

Reckless Manslaughter—Self-Defense—Jury Instruction—Burden of Proof—In Life Photographs—Evidence.

Defendant’s father and the victim were involved in a physical altercation. Defendant pulled a gun out of his father’s backpack and shot the victim seven times, killing the victim. The jury found defendant guilty of reckless manslaughter.

On appeal, defendant contended that the trial court erred by not giving the jury a “self-defense law instruction” on the charge of reckless manslaughter.Instruction Number 19, which addressed the applicability of self-defense to the reckless manslaughter count, directed the jurors not to apply Instruction Number 18, which explained the legal meaning of self-defense. Therefore, the jurors received no guidance as to the meaning of self-defense with respect to the offense of reckless manslaughter. This cast serious doubt on the fairness of defendant’s conviction. Because the error was seriously prejudicial and obvious, it constituted plain error. Accordingly, defendant’s conviction was reversed and the case was remanded for retrial.

Defendant also contended that the trial court erred by placing the burden on him to prove self-defense to the charges of reckless manslaughter and criminally negligent homicide.Here, the trial court did not err. Defendant had the burden of proving self-defense to the charges of reckless manslaughter and criminally negligent homicide.

Defendant further argued that the trial court abused its discretion when it admitted three “in life” photographs depicting the victim participating in family events. In life photographs of homicide victims are not per se inadmissible; rather, their admissibility must be determined on a case-by-case basis. Here, the photographs were evidence of an undisputed fact—that the victim was alive prior to the shooting. Because the photographs had almost no probative value, and because the prosecutor sought to elicit the jury’s sympathy based on those photographs, the admission of the photographs unfairly prejudiced defendant and the trial court erred by admitting them. On retrial, the court should reconsider whether to allow in life photographs in light of the above discussion, and if so, how many, and whether to limit the prosecution’s comments about them so as to avoid the risk of unfair prejudice.

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

Tenth Circuit: Privilege Cannot Be Used as Both Sword and Shield

The Tenth Circuit Court of Appeals issued its opinion in Seneca Insurance Co., Inc. v. Western Claims, Inc. on Monday, December 22, 2014.

Seneca hired Western Claims to investigate an insured’s claim for wind and hail damage to buildings. Western’s adjuster investigated and found some damage but determined the buildings had not suffered hail damage to the roof. Later, the insured asked Seneca to reopen its claim based on an estimate from its roofing contractor that it had suffered hail damage to the roof. Eventually, the insured sued Seneca, Western, and the adjuster in Oklahoma state court, claiming all three had mishandled its claims, and sued Seneca for breach of insurance contract, bad faith, and fraud.

During the litigation, Seneca’s claims examiner prepared a large loss report and distributed it to several Seneca executives. Seneca also sought advice from two attorneys in separate firms regarding the lawsuit. The attorneys advised Seneca regarding its potential bad faith liability and recommended settling the lawsuit for $1 million and then suing Western and the adjuster to recover. Seneca followed this advice. In discovery, Seneca disclosed that it had settled the litigation “on advice of counsel.” Western Claims filed a motion to compel documents Seneca relied on in settling the litigation. Seneca objected to the motion and again at trial, claiming the attorney-client privilege and work product doctrine, but the district court found Seneca had put the documents in issue. At trial, several Seneca executives testified that they agreed upon the $1 million settlement “on advice of counsel.”

At the close of Seneca’s case-in-chief, the district court granted Western Claims’s motion for judgment as a matter of law regarding Seneca’s equitable indemnity claim, but allowed the negligence claim to be submitted to the jury, where Western Claims ultimately prevailed. Seneca appealed the district court’s decision to allow Western Claims to discover the correspondence from its attorneys. Western Claims cross-appealed the district court’s denial of its motion for judgment as a matter of law as to the negligence claim.

Seneca argued the district court erred in concluding it waived its right to claim attorney-client privilege and work product protection regarding the correspondence from its attorneys. The Tenth Circuit evaluated whether some “affirmative act” by Seneca waived the privilege. It found that, when Seneca claimed it relied on “advice of counsel” for the settlement amount, it put that advice at issue and thus waived privilege. Seneca claimed that the information was available in other sources, but the Tenth Circuit disagreed, finding that Seneca expressly relied on “advice of counsel” and could not use the advice both as a sword and a shield.

The district court’s judgment was affirmed.

Tenth Circuit: Federal Appellate Rules Provide for Bond Only for Costs Allowable by Rule or Statute

The Tenth Circuit Court of Appeals issued its opinion in Tennille v. Western Union Co. on Monday, December 22, 2014.

Plaintiffs initiated a class action against Western Union based on Western Union’s retention of funds from failed wire transfers. After several years of litigation, plaintiffs and Western Union settled the case. The district court preliminarily certified a class of more than one million customers who experienced a failed wire transfer between January 1, 2001 and January 3, 2013, and ordered the class administrator to notify those class members of the class action, the proposed settlement, and the opportunity for them to opt out of the class or to object to the settlement. Several class members objected. The district court overruled all objections, certified the class, approved the settlement, and entered final judgment. Objectors Dorsey and Nelson appealed the district court’s denial of their objections. Plaintiffs asked the district court to require Dorsey and Nelson, as a condition of their appeal, to post a $1,007,294 appeal bond—$647,674 to notify class members of Objectors’ merits appeals challenging the settlement, $334,620 as administrative costs to maintain the settlement agreement pending Objectors’ appeal, and $25,000 as costs for printing and copying and preparing a supplemental record. The district court granted plaintiffs’ request, and Objectors appealed.

The Tenth Circuit first addressed plaintiffs’ contention that it lacked jurisdiction to hear the appeal, since the bond order was not a final, appealable order. The Tenth Circuit determined it had jurisdiction over the appeal on at least two bases. The district court’s bond order was entered “in aid of appellate court jurisdiction,” and since the Tenth Circuit has jurisdiction to review Objectors’ merits appeals, it also has jurisdiction over the bond appeal. Second, the district court’s bond order was a final order ending the post-judgment bond proceeding, and as such the Tenth Circuit has jurisdiction to hear the appeal.

Moving to the bond itself, the Tenth Circuit found unanimous circuit precedent allowing Rule 7 cost recovery only for costs expressly provided for by rule or statute. Because no rule or statute provides for costs for notifying class members or administrative costs, the district court erred in allowing those costs. The Tenth Circuit rejected plaintiffs’ argument that the district court has discretion to include in an appeal bond any cost a defendant may encounter in defending an appeal. The Tenth Circuit characterized plaintiffs’ argument as seeking damages for the delay caused by Objectors’ merits appeal, but noted the Federal Appellate Rules do not have separate provisions for class actions and the purpose of a Rule 7 bond is not to compensate for damages.

Next, Objector Dorsey challenged the district court’s imposition of a $25,000 bond to cover costs of preparation and transmission of the record. Plaintiffs failed to justify the need for $25,000. Because Objector Dorsey suggested he would be amenable to imposition of a $5,000 bond to cover such costs, the Tenth Circuit reduced the bond accordingly. Objector Nelson claimed she would experience hardship from the imposition of any bond, but the Tenth Circuit found that a $5,000 bond is not so burdensome as to deprive her of due process or equal protection of law, and found that she failed to establish that the smaller bond would deprive her of due process.

The district court’s bond imposition was affirmed, but the bond was reduced to $5,000. Objectors were ordered to post the bond within 14 days or their merits appeals would be dismissed.

Tenth Circuit: Insurance Requirement for Parade Not Narrowly Tailored to Serve Government Interest

The Tenth Circuit Court of Appeals issued its opinion in iMatter Utah v. Njord on Monday, December 22, 2014.

iMatter Utah is a voluntary association concerned with climate change that sought to have a parade on State Street in Salt Lake City. The city granted iMatter a permit for the event, conditioned on the group’s ability to obtain an additional permit from the Utah Department of Transportation. Before granting a permit for a parade on a state highway (State Street is considered a state highway for this purpose), the Utah DOT requires applicants to obtain liability insurance coverage with minimums of $1,000,000 per occurrence and $2,000,000 aggregate, and also to sign a waiver of indemnity. iMatter claimed it could not afford the insurance and sought a waiver of the requirement, which the Utah DOT denied. iMatter then sought a temporary restraining order in the U.S. District Court for the District of Utah, which was denied. iMatter held its parade anyway, but because it failed to obtain the permit, it could only march on the sidewalks. iMatter held a second parade later that year, again refusing to comply with the insurance and indemnity requirements and again marching on the sidewalks. Another environmental group also held a parade on the sidewalks because it could not afford the cost of insurance. Both groups sued Utah in the U.S. District Court for the District of Utah, naming several individual defendants and alleging constitutional violations. All parties moved for summary judgment, and the district court granted plaintiffs’ motion. Utah appealed on a single question: whether its insurance and indemnification requirements violate the First Amendment.

The Tenth Circuit discussed the First Amendment’s mandate of free speech and the balance allowed for protecting government interests. The parties agreed that State Street is a traditional public forum, and in order for the government to impose restrictions on free speech in a traditional public forum, those restrictions must (1) be justified without reference to the content of the speech, (2) be narrowly tailored to serve a significant government interest, (3) leave open ample alternative channels for the communication, and (4) not delegate overly broad licensing discretion to a government official. iMatter brought facial and as-applied challenges to Utah’s insurance and indemnity requirements. The Tenth Circuit addressed the as-applied challenge first.

iMatter argued Utah’s requirements were unconstitutional as applied to its permit application because indigent applicants were not exempt from the requirements. The Tenth Circuit noted a circuit split regarding whether the government must exempt indigent applicants from otherwise constitutional permit requirements, and agreed with the First and Sixth Circuits that the constitution does not require indigency exemptions as long as there are suitable alternative forums for the speech. In the instant case, there was a suitable alternative that iMatter utilized—the sidewalk. Therefore, the as-applied challenge failed.

Turning to the facial challenge, the Tenth Circuit examined Utah’s insurance and indemnification requirements under the four criteria for restrictions on free speech in a traditional public forum. The parties agreed that the restrictions are content-neutral, satisfying the first prong. However, the Tenth Circuit found that Utah could not explain how the requirements were narrowly tailored to serve a significant government interest. Utah asserted that its insurance and indemnity requirements were necessary to maintain public order and safety, but the Tenth Circuit found no connection between the insurance and maintaining order and safety. As for Utah’s interest in protecting itself from liability, the Tenth Circuit found very little possibility that Utah would be liable for any activity connected with a parade, given the broad scope of Utah’s Governmental Immunity Act. Utah’s insurance requirement is not narrowly tailored to any objective characteristic of a parade, and as such is unconstitutional. The Tenth Circuit next examined Utah’s indemnity requirement and likewise found that it was not narrowly tailored to protect the state from financial liability.

The district court’s grant of summary judgment was affirmed.

Tenth Circuit: Unpublished Opinions, 1/16/2015

On Friday, January 16, 2015, the Tenth Circuit Court of Appeals issued three published opinions and five unpublished opinions.

United States v. Richardson

Ragsdell v. Regional Housing Alliance of La Plata County

Norman v. Randolph

Pierre v. Aurora Loan Services, LLC

Baig v. Hargis

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