July 16, 2019

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.
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