April 23, 2019

Frederick Skillern: Real Estate Case Law — Titles and Title Insurance (2)

Editor’s note: This is Part 17 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

Egelhoff v. Taylor
Colorado Court of Appeals, August 15, 2013
2013 COA 137,
312 P.3d 270

Spurious lien statute; phony lien against judge.

Lest anyone be confused about why the legislature passed the spurious lien statute in 1998, we give you the case of Denver District Judge Egelhoff. In 2008, the judge sentenced Taylor to prison on a felony conviction. After he was sentenced, Taylor began mailing the judge various documents, claiming that Judge Egelhoff was indebted to him. The judge understandably did not respond. Taylor filed suit, claiming that the judge’s failure to respond created liability to Taylor under a terrific doctrine called the “commercial affidavit process.” Robin Hood could not have done better.

Taylor contends that the “commercial affidavit process” permits an individual to send an affidavit to a purported debtor, claiming the recipient owes the sender a debt, and if the recipient does not specifically rebut the alleged debt, he is deemed to have agreed to the debt and its collection by any means. At our social gathering tonight, perhaps someone can advise us from whence this legal doctrine derives. According to Taylor, a recipient’s silence results in a “self-executing contract,” binding the recipient to pay the amount of the alleged debt. Thus, Taylor argues that, because the judge did not respond to his affidavit, his honor “agreed” that the five hundred million dollar debt was valid.

The panel of the court of appeals, seemingly lacking any sense of humor, goes on for several pages as to why this procedure does not form a contract between judge and convict. An opportunity was missed. It is interesting that this case was selected for publication, when many other real estate cases of considerable substance are passed over.

Ute Mesa Lot 1, LLC v. First-Citizens Bank & Trust Co. (In re Ute Mesa Lot 1, LLC)
United States District Court, District of Colorado, November 25, 2013
No. 12-1134

Bankruptcy; lis pendens; preferential transfer.

Ute Mesa Lot 1, LLC (Ute Mesa) borrowed $12 million from United Western Bank to finance the construction of a home in Aspen. The deed of trust incorrectly named the property’s owner, so the deed of trust was ineffective in giving the Bank a lien on the property. Later, the Bank filed suit to reform the deed of trust and give it a first priority lien on the property. The Bank then recorded a notice of lis pendens with the county real property records. Two months later, Ute Mesa filed for bankruptcy and sought to avoid the lis pendens as a preferential transfer. The bankruptcy court and district court dismissed Ute Mesa’s claim. Ute Mesa appealed, arguing that the lis pendens would prevent a bona fide purchaser from acquiring an interest in the property superior to the Bank’s. Therefore, it was a “transfer of an interest in property” and an avoidable preferential transfer.

The Tenth Circuit holds that a lis pendens is merely a notice and does not constitute a lien, despite the fact that under Colorado law, a lis pendens renders title unmarketable. The lis pendens is not a transfer, so it was not subject to the bankruptcy provision allowing a debtor-in-possession to avoid a transfer of an interest in property that occurs within ninety days before the filing of the bankruptcy petition. The judgment is affirmed.

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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