June 15, 2019

Archives for April 20, 2015

Frederick Skillern: Real Estate Case Law — Titles and Title Insurance (4)

Editor’s note: This is Part 19 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. Skillernfrederick-b-skillern

Whiting v. Atlantic Richfield
Colorado Supreme Court, March 3, 2014
2014 CO 16

Rule against perpetuities; options; reformation of option agreement under the USRAP, C.R.S. 15-11-106; common law rule does not void commercial option contract.

This is an important case that addresses much of the change in the law of the rule against perpetuities over the last 25 years. As the case came to Colorado Supreme Court the issue was twofold. First, the court accepted certiorari to examine whether the statutory right to reform a commercial contract under the Colorado version of the statutory rule against perpetuities is unconstitutional because it requires a court to reform a vested contract – in this case the right to declare one’s contract void under the common law rule against perpetuities. Second, the court sought to address as a matter of statutory interpretation whether the right of reformation only applied to what the statute refers to as “donative” transfers of property, as opposed to a commercial contract such as an option to purchase mineral rights.

The supreme court changed to focus of the case and addresses in its decision a different question, thereby avoiding the questions upon which certiorari was granted. It holds instead that the interest in question – a twenty-five year option to purchase mineral rights – does not violate the common law rule against perpetuities. As such, there is no need to resort to the reformation procedure provided in the statute.

ARCO entered into a deal in 1968 with a small oil company (Equity, now owned by Whiting) to explore Colorado shale oil development in Garfield County. It gave development money to Equity, and received a partial ownership interest in the mineral rights. Equity was given an option to repurchase ARCO’s interest within the 25-year term of the deal. In 1983, the agreement (including the option) was extended for another 25 years. The terms are summarized succinctly by the court:

Pursuant to the 1983 amendment, Equity’s right to exercise the option would not expire until 11:59 p.m. on February 1, 2008. Importantly, the parties agreed that “ARCO shall retain the sole and exclusive right to cancel this Option at any time during its term,” with the exception that Equity was granted a right of first refusal if ARCO received an offer from another party to buy its interest in the Boies Block.

Equity exercised the option shortly before the deadline. ARCO claimed that the option was void under the common law rule against perpetuities. The trial court, in a decision affirmed by the court of appeals, agreed but applied the reformation provision in CRS § 15-11-1106(2) to add a “savings clause” in the manner outlined in the statute.

The result here is to put off for another day the constitutional validity of the reformation provision of the USRAP. The court instead finds that the common law has changed sufficiently to determine, consistent with past cases of the Colorado Supreme Court, that the purpose of the common law rule is not served by applying the “21 years after the death of lives in being test” to an arms-length transaction between sophisticated oil companies. More particularly, the court holds, in a well developed decision that explores the recent development of case law in considerable depth, the fact that the option right was revocable at will by ARCO demonstrates that the option was not preventing development of the land. For that reason, the underlying the policy of the common law rule would not be served by voiding the option simply because its term extended longer than 21 years.

The Real Estate Section of the CBA submitted an amicus brief in support of the lower court’s ruling and in support of the right to reform real estate contracts found to violate the rule. This is motivated in part by the obvious liability risks confronting lawyers who may unwittingly accompany their clients into the “RAP trap.” The risk areas center around long term options, rights of first refusal, and other rights or interests contained in deeds or leases that may “walk or talk” like an executory interest or a right of reversion. As a practice point, it is important in dealing with such interests to keep the USRAP in mind, as it treats “donative transactions” differently than commercial transactions.

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 Supreme Court: Lone Pine Orders Not Allowable Under Colorado Rules of Civil Procedure

The Colorado Supreme Court issued its opinion in Antero Resources Corp. v. Strudley on Monday, April 20, 2015.

CRCP 16—Lone Pine Orders.

In this decision, the Supreme Court granted certiorari to consider whether a specialized type of modified case management order known as a “Lone Pine order” is authorized under the Colorado Rules of Civil Procedure. After the initial exchange of Rule 26 disclosures, Antero Resources Corporation asked the trial court to enter a modified case management order requiring the Strudleys to present prima facieevidence that they suffered injuries attributable to the natural gas drilling operations of Antero Resources. The trial court granted the motion and issued a Lone Pine order directing the Strudleys to provide prima facie evidence to support their allegations of exposure, injury, and causation before the court would allow full discovery. The trial court determined that the Strudleys failed to present sufficient evidence and dismissed their case with prejudice. The court of appeals reversed, concluding that, as a matter of first impression, Lone Pine orders “are not permitted as a matter of Colorado law.”

The Court affirmed the court of appeals’ judgment. The Court held that the Colorado Rules of Civil Procedure do not allow a trial court to issue a modified case management order that requires a plaintiff to present prima facie evidence in support of a claim before a plaintiff can exercise its full rights of discovery under the Colorado Rules.

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

Colorado Supreme Court: Exigent Circumstances Justified Warrantless Blood Draw

The Colorado Supreme Court issued its opinion in People v. Ackerman on Monday, April 20, 2015.

Suppression of Evidence—Exigent Circumstances.

In this interlocutory appeal, the People sought review of the trial court’s order suppressing the results of a blood draw taken from defendant. The trial court found that a warrant was required before the police could order a blood draw and that the police lacked exigent circumstances that would justify the involuntary, warrantless blood draw under the Fourth Amendment. The People appealed on the sole issue of whether the facts of this case constituted exigent circumstances.

The Supreme Court held that exigent circumstances existed. The police were still investigating the scene of the crime and were not finished preparing the affidavit for a warrant when they learned that hospital personnel were taking the unconscious and injured defendant for medical procedures that could alter his blood-alcohol content. Under the totality of the circumstances, these exigent circumstances made it impractical for the police to obtain a search warrant and, thus, justified the blood draw. Accordingly, the Court reversed the trial court’s suppression order and remanded the case to the trial court.

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

Tenth Circuit: Automatic Bankruptcy Stay Deprives Tenth Circuit of Appellate Jurisdiction

The Tenth Circuit Court of Appeals issued its opinion in Eastom v. City of Tulsa on Monday, April 20, 2015.

Dustin Eastom filed § 1983 claims for malicious prosecution against the City of Tulsa, a Tulsa police officer (Mr. Henderson), and an ATF agent (Mr. McFaddon). Mr. Eastom also filed a negligence claim against the city under Oklahoma’s Governmental Tort Claims Act. After Mr. Eastom filed suit, Mr. McFaddon filed for bankruptcy, and Mr. Eastom’s claim against him was automatically stayed by 11 U.S.C. § 362. The district court entered summary judgment for the City and Mr. Henderson, dismissing Mr. Eastom’s claims with prejudice. It declined to exercise jurisdiction over Mr. Eastom’s state law claims against the City and also dismissed them with prejudice.

Mr. Eastom appealed the summary judgment order, and the Tenth Circuit issued an order to show cause why the appeal should not be dismissed because there was no final judgment as to all parties. Mr. Eastom voluntarily dismissed his district court claim against Mr. McFaddon without prejudice and responded to the show cause order that his appeal was now final because he was time-barred from refiling the claim. However, under Oklahoma’s savings statute, Mr. Eastom had an additional year to re-file his voluntarily withdrawn claims against Mr. McFaddon despite the time bar.

Mr. Eastom waited a year and again appealed to the Tenth Circuit. However, the § 362 stay was still in place, and the Tenth Circuit again ordered Mr. Eastom to show cause why his appeal should not be dismissed for lack of jurisdiction. Mr. Eastom contended the district court’s summary judgment was final because the time for refiling under the savings statute had elapsed.

The Tenth Circuit examined the interplay between the applicable statute of limitations, the savings statute, and the bankruptcy stay, and found that Mr. Eastom’s claims were still not final because the bankruptcy stay was still in place, tolling the statute of limitations. Because the automatic stay prevented Mr. Eastom from exercising legal remedies against the debtor, Oklahoma law prevents the running of the savings statute while the stay is in place.

The Tenth Circuit dismissed the appeal for lack of jurisdiction.

Tenth Circuit: Unpublished Opinions, 4/20/2015

On Monday, April 20, 2015, the Tenth Circuit Court of Appeals issued one published opinion and five unpublished opinions.

Sun v. Holder

United States v. Neighbors

Brunson v. Provident Funding Associates

Farris v. Frazier

Chavez-Acosta v. Southwest Cheese Co., LLC

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

Law School for Journalists: Issues that Arise in Death Penalty Cases

LawSchoolForJournalistsOn Thursday, April 16, Our Courts Colorado and the Colorado Bar Association hosted “Law School for Journalists: Issues that Arise in Death Penalty Cases,” at the CBA-CLE offices. Speakers Forrest W. Lewis, Bob Grant, and Judge Marcia S. Krieger discussed what unfolds, procedurally and factually, in death penalty cases. They also answered specific questions regarding the Aurora movie theater shooting case. The presentation was streamed online for those who could not attend in person.

The Colorado Bar Association and the Colorado Judicial Branch jointly offer “Law School for Journalists,” an ongoing series of classes designed to provide reporters with background information about issues in the legal system and judiciary.

Colorado Supreme Court: Announcement Sheet, 4/20/2015

On Monday, April 20, 2015, the Colorado Supreme Court issued two published opinions.

Antero Resources v. Strudley

People v. Ackerman

Summaries of these cases are forthcoming, courtesy of The Colorado Lawyer.

Neither State Judicial nor the Colorado Bar Association provides case summaries for unpublished appellate opinions. The case announcement sheet is available here.

Tenth Circuit: Election of Remedies Doctrine Inapplicable Where Plaintiffs Neither Affirmed Nor Repudiated Contract

The Tenth Circuit Court of Appeals issued its opinion in Donner v. Nicklaus on Thursday, February 19, 2015.

Legendary golfer Jack Nicklaus lent his name to a golf course and luxury development, claiming in a press release he was so impressed with the land that he became a “founding charter member” of the development and urging others to purchase charter memberships at $1.5 million. The Donners are a married couple who purchased a charter membership. When the developer’s parent company declared bankruptcy, the developer was not able to build the golf course or luxury development. The Donners settled with the parent company in its bankruptcy proceedings, then sued Jack Nicklaus and Jack Nicklaus Golf Club, LLC for intentional misrepresentation, negligent misrepresentation, and violation of the Interstate Land Sales Full Disclosure Act.

The district court dismissed the action, holding the complaint failed to state a valid claim for relief and the defendants were entitled to summary judgment because the Donners elected their remedies by entering into a settlement agreement with the other parties. The Donners appealed, and the Tenth Circuit addressed five issues: (1) Defendants’ argument that the claims were untimely; (2) the district court’s dismissal of claims under the Interstate Land Sales Full Disclosure Act because the purchase of a charter membership did not concern a “lot”; (3) the district court’s dismissal of the Donners’ intentional misrepresentation claims; (4) the district court’s dismissal of the Donners’ negligent misrepresentation claims; and (5) the district court’s grant of summary judgment to Defendants on the grounds that the Donners elected the remedy of settlement.

The Tenth Circuit dismissed Defendants’ argument that the Donners’ claims were untimely because it was raised for the first time in district court in a reply brief. The District of Utah does not allow parties to assert new arguments in a reply brief, so the argument was waived.

Next, the Tenth Circuit addressed the Donners’ claims that they bought a lot based on Mr. Nicklaus’ fraudulent misrepresentations. However, under the Interstate Land Sales Full Disclosure Act, the misrepresentations must concern a lot, which Mr. Nicklaus’ statements did not. The Donners were promised an estate lot certificate with the purchase of a charter membership in the development, but the certificate did not refer to a specific parcel of land. No lots were ever developed and the Donners never had an opportunity to redeem their certificates, so the Interstate Land Sales Full Disclosure Act did not apply. The Tenth Circuit affirmed the district court’s dismissal of this argument.

Turning to the intentional misrepresentation claims, the Tenth Circuit found the Donners adequately alleged misrepresentation of Mr. Nicklaus’ membership status. The Donners purportedly relied on Mr. Nicklaus’ purchase of a charter membership when deciding to purchase a charter membership in the development due to his statements about being a “founding charter member.” The Tenth Circuit found that Mr. Nicklaus’ statements implied that he had purchased a charter membership, and that the Donners reasonably relied on those statements, and reversed the dismissal of the intentional misrepresentation claims pertaining to Mr. Nicklaus’ membership status. The Tenth Circuit found no other basis for intentional misrepresentation.

The Donners invoked the economic loss doctrine to support their claims for negligent misrepresentation. The Tenth Circuit found that the Donners did not adequately allege any duty of Mr. Nicklaus or Jack Nicklaus Golf Club, LLC outside of their contractual obligations, and affirmed dismissal on the negligent misrepresentation claims. No special relationship existed between the Donners and Defendants to support an outside duty.

Finally, the Tenth Circuit found erroneous the district court’s grant of summary judgment to Defendants on the grounds that the Donners elected their remedies against Defendants through the settlement agreement. Defendants argued the Donners were seeking inconsistent remedies involving both affirmance and repudiation of the charter membership agreement, but the Tenth Circuit found the Donners did neither by settling with the developer. Because the election of remedies doctrine was inapplicable, summary judgment failed.

The district court’s judgment was affirmed in part, reversed in part, and remanded for further proceedings.

Tenth Circuit: Sua Sponte Amendment of Original Opinion by Tenth Circuit

The Tenth Circuit Court of Appeals re-issued its opinion in ConAgra Foods, Inc. v. Americold Logistics, LLC on Thursday, April 9, 2015. The opinion was originally published on January 27, 2015, but the court sua sponte amended a sentence in the conclusion of the decision. Read the previous Legal Connection summary here.

Tenth Circuit: Unpublished Opinions, 4/17/2015

On Friday, April 17, 2015, the Tenth Circuit Court of Appeals issued one published opinion and three unpublished opinions.

Chavez v. Franco

United States v. Rogers

Li v. Holder

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