June 26, 2019

Frederick Skillern: Real Estate Case Law — Contracts, Purchase and Sale, Transactions (2)

Editor’s note: This is Part 5 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.

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By Frederick Skillern

Van Rees, Sr. v. Unleaded Software, Inc.
Colorado Court of Appeals, December 5, 2013
2013 COA 164

Economic loss rule; contract for design of website; no tort claim because no independent duty.

Although this is not a real estate case, I note it simply as an example of how the economic loss rule is spreading to preclude a wide array of fraud claims arising out of contractual relations. In this case, the court deals with the scope and applicability of Colorado’s economic loss rule in the context of an agreement for the design and maintenance of a website. Under the economic loss rule, no independent duty exists for tort claims of fraud, fraudulent concealment, constructive fraud, or negligent misrepresentation when the alleged misrepresentations and false statements are about the ability to perform contractual duties. The court affirms the trial court’s dismissal of the fraud, negligent misrepresentation, negligence, Colorado Consumer Protection Act, and civil theft claims. The breach of contract claim has it all.

 

Hickerson v. Vessels
Colorado Supreme Court, January 13, 2014
2014 CO 2.

Collections; statute of limitations; C.R.S. § 13-80-103.5 (1) (a) (six-year statute); partial payment doctrine; laches.

This case takes up the collection efforts of the holder of a $386,000 promissory note given in 1989 to the Vessels Oil Company. The note was due in ten years. Shortly after 1999, the maker started making payments on the note, and that continued for a couple of years. After payments stopped, Vessels sued to collect the entire balance. Under existing common law, which the court refers to as the partial payment doctrine, the running of the six-year statute of limitations begins anew whenever payments are made voluntarily, as the debt is recognized and acknowledged. The trial court held that the debtor should be protected under the circumstances of this case by the equitable defense of laches. The court of appeals reversed, but the Supreme Court reinstates the trial court’s ruling.

Four statutes refer to the partial payment scenario. See C.R.S. §§ 13-80-113 to 116. The court refers to these as examples of the common-law rule, and not a replacement of the rule.

In a fairly bold stroke in support of the exercise of equitable powers, the court holds that the separation of powers doctrine does not bar application of the equitable defense of laches to a debt collection action filed within the original or restarted six-year statute of limitations period. Laches does not conflict with the plain meaning of the relevant statute of limitations, nor does it conflict with the partial payment doctrine, which is a creature of Colorado common law. Since early statehood, Colorado case law has recognized the application of equitable remedies to legal claims. Accordingly, the Court reverses the judgment of the court of appeals and remands the case for consideration of issues it did not reach, to wit – does the record support a defense of laches. Maybe not.

“The essential element of laches is unconscionable delay in enforcing a right under the circumstances, usually involving a prejudice to the one against whom the claim is asserted.” The elements of laches are: (1) full knowledge of the facts; (2) unreasonable delay in the assertion of available remedy; and (3) intervening reliance by and prejudice to another. Laches requires “such unreasonable delay in the assertion of and attempted securing of equitable rights as to constitute in equity and good conscience a bar to recovery.”

The court remands the case to the court of appeals for review of whether the elements of laches are satisfied by evidence in the record. And father time marches on.

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.

Philip Gordon: Quon Decision Provides Useful Guidance for Private Employers While Skirting Broad Pronouncements

As anticipated in our blog post describing the oral argument before the U.S. Supreme Court in City of Ontario v. Quon (pdf), the Court declined today to make any broad pronouncements concerning employee privacy rights in electronic communications using employer-issued equipment. The Court reserved expressing an opinion given the newness and evolving nature of cell phone and text message communications. Instead, the Court held that the City of Ontario Police Department did not violate the Fourth Amendment rights of a SWAT team member, Sgt. Jeff Quon, by reviewing text messages sent and received by Quon on a department-issued pager because, even assuming that Quon had a reasonable privacy expectation, the City’s review of his text messages was motivated by a legitimate work-related purpose and was not excessive in scope. Notwithstanding its narrow and fact-specific nature, the Court’s ruling still provides useful guidance for private employers.

Most importantly, the Court emphasized, in the following language, the importance of a well crafted and broadly distributed electronic resources policy when defending against an employee’s claim that an employer tortiously reviewed the employee’s electronic communications:

[E]mployer policies concerning communications will of course shape the reasonable expectations of their employees, especially to the extent that such policies are clearly communicated.

The Court also highlighted a key distinction between corporate e-mail and text messages sent by cell phone, i.e., such text messages typically are transmitted through the cell phone provider’s server, rather than an employer-owned server. In Quon, this distinction was important because the department’s e-mail policy focused on e-mail sent through the department’s server and did not mention text messages. However, the Court emphasized that the department had informed SWAT team members, when issuing pagers to them, that the e-mail policy would be applied to text messages transmitted through the service provider. Similarly, private employers should ensure that their electronic resources policy is not limited to e-mail or to communications transmitted through the company’s e-mail server.

Although not deciding the issue of Quon’s privacy rights, the Court did give some weight in passing to Quon’s contention that a management-level police official had created an expectation of privacy for Quon by telling him that the official would not audit Quon’s text messages if Quon paid any required overage charges. Private employers should take care through policy language and training to avoid a situation where an employee could allege that a management-level employee countermanded corporate policy aimed at defeating employees’ privacy expectations in their electronic communications.

The Court’s holding — that Quon’s claim failed because the department’s search was legitimate and reasonable — demonstrates that private employers can substantially reduce their potential exposure on privacy-based claims by acting reasonably when searching and reviewing employees’ electronic communications. In Quon, for example, the department initiated its investigation for the legitimate purpose of determining whether the department’s character restrictions on text messages were too low and, therefore, forced SWAT team members to pay overage charges for work-related texts. In addition, the department reviewed only a relevant sampling of Quon’s texts, and the internal investigator who conducted the review redacted all messages sent or received by Quon during non-working hours. The department’s precautions demonstrate that, by conducting an investigation to accomplish a legitimate business purpose and in a manner that is not excessive, private employers can defeat claims based upon a review of an employee’s electronic communications, even if a court were to find that the employee had a reasonable expectation of privacy in those communications.

While private employers can take heart from Quon, they also should take heed of the following statement by the Court:

[The department’s] audit of messages on Quon’s employer-provided pager was not nearly as intrusive as a search of his personal e-mail account or pager, or a wiretap on his home phone line, would have been.”

As employees increasingly access personal e-mail accounts using employer-issued equipment and rely more heavily on personal smart phones to conduct company business, the privacy issues confronted by private employers (and the courts) will become only more complex. Here again, a well crafted and broadly distributed policy that puts employees on notice of how and when the employer will access these communications can go a long way towards strengthening the employer’s hand in litigation. At the same time, employers should beware that, as reflected by a recent decision of the New Jersey Supreme Court, even the most comprehensive electronic resources policy may not always win the day.

Philip L. Gordon blogs at Littler Mendelson’s Workplace Privacy Counsel and this post originally appeared here on June 17, 2010. Click here to read all posts by this author.

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Case Law: State Supremes Distinguish “Voidable,” “Void” in Beethe

The Colorado Supreme Court distinguished the meaning of “voidable” from “void” in Lake Canal Reservoir Co. v. Beethe, a treasurer’s deed challenge in Weld County. The case, which arose in 2003, stemmed from a dispute over how two adjacent land tracts should be taxed and later evolved into a question of the validity of a treasurer’s deed.

Writing the opinion for the court, Justice Allison H. Eid noted that:

. . . the line between a void and a voidable tax deed does not depend on the nature of the evidence used to determine the deed’s defect, but rather on the nature of the defect itself. When a defect goes to the jurisdiction or authority of the taxing entity, that defect will render a deed void. . . . In [Beethe], the defects –- errors in assessment, notice, and description –- challenge the manner in which the deed was issued but do not challenge Weld County’s jurisdiction or authority to tax the property or to issue the deed. We therefore hold that the treasurer’s deed was voidable, rather than void.

Because Lake Canal Reservoir Co. brought its claim against the Beethes after the statutes of limitations had tolled, the attempt to void the treasurer’s deed was time barred, and the case was remanded for additional proceedings.

Photo via Flickr, by umjanedoan