COLORADO REAL ESTATE CASE LAW UPDATE

2016

For the 34th Annual Real Estate Symposium

Sponsored by the Real Estate Section of the Colorado Bar Association and

CLE in Colorado, Inc. Breckenridge, Colorado

July 22, 2016

Frederick B. Skillern Montgomery Little & Soran, P.C.

Greenwood Village, Colorado fskillern@montgomerylittle.com

INTRODUCTION Welcome back! This is my 18th attempt at summarizing the work of the Colorado appellate courts in interpreting our laws and developing our body of law relating to real estate. I feel more honored than ever to appear before this impressive group of professionals. Support your Real Estate Section, and get involved! A few notes on format. The cases are divided by subject area, roughly. No attempt is made to cross reference to other subject areas involved in the case. Citation form is generally the 2016 CO/COA __ used by our courts, and citation form is casual, for easy reading. As always, the CBA website has ready access to the decisions of our two appellate courts. In referring to the Supreme Court, I mean the Colorado Supreme Court, unless otherwise noted. Thanks once again to my assistant, Vicki Fields, for her assistance in putting all of this project together, year after year. Enjoy! Fred Skillern Montgomery Little & Soran, P.C. fskillern@montgomerylittle.com (303) 779-2758

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TABLE OF CONTENTS

Page 1. ARBITRATION, MEDIATION AND ADR ................................................................... 1

No reported cases. 2. BOUNDARIES AND ADVERSE POSSESSION ........................................................ 1

Aspen Springs Metropolitan District v. Keno, 2015 COA 97

3. BROKERS ................................................................................................................. 2 In re the Disciplinary Action Against the Real Estate Broker’s

License of McDonnell v. Colorado Real Estate Commission, 2015 COA 137

4. COMMON INTEREST COMMUNITIES, COVENANTS AND CCIOA ........................ 3

Hauer v. McMullin, 2015 COA 90 Houston v. Wilson Mesa Ranch HOA, 2015 COA 113

5. CONDEMNATION, EMINENT DOMAIN .................................................................... 5 Regional Transportation District v. 750 West 48th Avenue, LLC,

2015 CO 57 Town of Silverthorne v. Lutz, 2016 COA 17

6. CONTRACTS, PURCHASE AND SALE, TRANSACTIONS ..................................... 7 Ravenstar LLC v. One Ski Hill Place LLC, 2016 COA 11 Rocky Mountain Exploration v. Davis Graham & Stubbs, 2016 COA

33 7. CONSERVATION EASEMENTS AND TAX CREDITS ............................................ 11

No reported cases. 8. CONSTRUCTION DEFECTS ................................................................................... 11

Rogers v. Forest City Stapleton, 2015 COA 167

9. EASEMENTS AND PUBLIC ROADS ...................................................................... 12 Gold Hill Development Company v. TSG Ski & Golf, 2015 COA 177 Wal-Mart Stores, Inc. v. United Food and Commercial Workers International Union, 2016 COA 72

10. ESTATES AND PARTITION .................................................................................. 14

No reported cases.

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11. FORECLOSURE, DEBTOR-CREDITOR, RECEIVERS, LENDER LIABILITY ............................................................................................................. 14

McClure v. JP Morgan Chase Bank, 2015 COA 117 Liberty Mortgage Corp. v. Fiscus, 2016 CO 31 Hutchins v. La Plata Mountain Resources, Inc., 2016 CO 45

12. JUDGMENTS AND FRAUDULENT TRANSFER .................................................. 18 No reported cases.

13. LAWYERS AND PROFESSIONAL LIABILITY ..................................................... 18 J. Tucker, Trustee, v. Town of Minturn, 2015 CO 61 Baker v. Wood, Ris & Hames 2016 CO 5, Laleh v. Johnson, 2016 COA 4 Calvert v. Mayberry, 2016 COA 60 State v. The Castle Law Group LLC, 2016 CO 54

14. LEASING AND EVICTION ..................................................................................... 21 Zeke Coffee, Inc. v. Pappas-Alstad Partnership, 2015 COA 104

15. PREMISES LIABILITY, TRESPASS AND NUISANCE ......................................... 22 Lopez v. Trujillo, 2016 COA 53

16. PROPERTY TAXATION AND ASSESSMENTS.................................................... 23 Landmark Towers Association, Inc. v. UMB Bank, 2016 COA 61

17. TAX SALES AND TREASURER DEEDS .............................................................. 24 Sandstrom, Arapahoe County Treasurer v. Solen, 2016 COA 29 Klingsheim v. Cordell, 2016 CO 18

18. TITLES AND TITLE INSURANCE ......................................................................... 29

Oldham v. Pedrie, 2015 COA 95 Owens v. Tergeson, Trustee, 2015 COA 164

19. ZONING AND LAND USE CONTROL ................................................................... 31 City of Longmont v. Colorado Oil and Gas Association, 2016 CO 29 Open Door Ministries v. Lipschuetz, 2016 CO 37

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1. ARBITRATION, MEDIATION AND ADR No reported cases.

2. BOUNDARIES AND ADVERSE POSSESSION Aspen Springs Metropolitan District v. Keno Colorado Court of Appeals, July 16, 2015 2015 COA 97 Metropolitan district; fence law, C.R.S. § 35-46-101 et seq.; district’s right to enjoin willful trespass. A special district, by statute, has the power to regulate its property. Aspen Springs Metropolitan District was organized as a parks and recreation district. It has statutory authority to regulate the use of its real property to preserve or conserve open space. The story here begins when a neighboring sheep rancher desires to continue grazing on the District’s land, arguing that Colorado’s Fence Law allows the grazing, where the District does not “fence out” the hungry animals. The Fence Law, as it is described by the court, was enacted in the late 1800’s to reject the strict liability faced by owners of trespassing livestock under the English common law. But the Fence Law modified the common law of Colorado only “to the extent embraced in the statute, which may not be extended by construction, nor its application extended beyond its specific terms.” Therefore, the statute modifies actions in trespass by making the maintenance of a “lawful fence” a condition precedent to recovery of specified damages caused by trespassing livestock, C.R.S. § 35–46–102(1). However, the statute did not preclude common-law injunction actions against livestock owners for willful trespass. In short – the court holds that the Fence Law is “not a license for livestock owners to graze their animals anywhere they please.” The court cites Colorado cases going back to 1895 in support of this distinction between willful and non-willful conduct. The lower court issued two injunction orders which the rancher violated, leading to a finding of contempt. The court affirms the lower court’s imposition of attorney fees and costs as a remedial sanction, and a jail sentence as a punitive sanction. The former award was reversed, as an order under C.R.C.P. 107, for remedial sanctions must have a “purge clause” – and in this case, the sheep were already gone, so there was nothing to “purge.” The discussion on these points is useful in categorizing the different remedies available for contempt.

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3. BROKERS In re the Disciplinary Action Against the Real Estate Broker’s License of McDonnell v. Colorado Real Estate Commission Colorado Court of Appeals, September 24, 2015 2015 COA 137, 361 P.3d 1138 License suspension; embezzlement of HOA funds. In 2010 and 2011, while serving as president of the Pinecliff Homeowners Association (HOA), McDonnell writes four checks totaling $10,000 on the HOA’s account payable to himself or his business. McDonnell was a licensed real estate broker. When the treasurer discovered one of these checks, McDonnell claimed he had written the check by mistake and repaid the HOA. When the treasurer’s term ended, McDonnell took custody of the HOA’s accounting records and refused to appoint a new treasurer. A year later, an HOA board member calls for a meeting to discuss accounting issues. McDonnell declines to attend, resigns, and deposits the remaining $8,000 of the association’s money back into the HOA bank account. The HOA board discovered the checks, and reported McDonnell to the police and the Colorado Real Estate Commission. No criminal charges were filed, but the Commission opened an investigation and subsequently charged McDonnell with four violations of the Colorado Real Estate Broker License Law. McDonnell appeals the Commission’s order sanctioning him on some of those counts. The court of appeals concludes that the Commission has the authority to sanction McDonnell for his conduct, even though that conduct did not involve “selling, exchanging, buying, renting, or leasing” real estate. The court first rejected McDonnell’s contention that the Commission did not have authority to sanction him for conduct that does not involve “selling, exchanging, buying, renting or leasing” real estate. The court cites numerous provisions that allow the Commission to sanction a broker’s improper conduct outside of the real estate context, particularly when it speaks to the broker’s honesty, dignity, or moral character. See, among others, C.R.S. § 12-61-113(1)(g) (sanctions for failure to properly account for funds); and C.R.S. § 13-16-113(1)(g.5) (discipline for conversion of funds of others and diverting funds of others without authorization). The Commission’s conclusion that McDonnell took the funds from the HOA without authorization and used them was amply supported in the record. The court agreed with McDonnell that he could not be disciplined under C.R.S. § 12-61-113(1)(n) (providing for discipline for incompetency or endangerment to the public). The administrative rule implementing this section provides an exhaustive list of grounds for unworthiness or incompetence, none of which were done by McDonnell.

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4. COMMON INTEREST COMMUNITIES, COVENANTS AND CCIOA Hauer v. McMullin Colorado Court of Appeals, July 2, 2015 2015 COA 90 CCIOA, open space; unincorporated association. Hauer brings this action on behalf of an unincorporated homeowner association to quiet title to a parcel described on a recorded plat as common “open space.” First, the court holds that the trial court acted properly in declaring that a recorded final plat, deeds recorded pursuant to the plat, and a recorded subdivision agreement established an implied common interest community and an unincorporated homeowners association. The trial court relied on the statutory definitions of a common interest community in the CCIOA, which are interesting, and the Supreme Court’s decision in Evergreen Highlands Ass’n v. West, 73 P.3d 1 (Colo. 2003), in which the court found a common interest community by implication, with the ability to assess members for expenses, even in the absence of a provision in the recorded Declaration granting such power. Here, the court relies on dicta in Evergreen Highlands concerning the court’s broad power to recognize the creation of a common interest community by implication. Restatement (Third) of Property: Servitudes § 6.2 cmt. a. The court concludes that a recorded subdivision agreement between the original landowner and the County (referencing a “to be named homeowners association”), a recorded plat identifying 17 acres as common open space, and the original sales contract to lot owners are sufficient, taken together, to create a common interest community. Put differently, the court concludes that these maps and plats and documents can meet the legal requirement for a “declaration,” which is required for creation of a common interest community. The court reasons:

However, the declarations satisfied many of the statute’s applicable requirements: they identified the common interest community as the “Two Rivers Estates,” § 38–33.3–205(1)(a); they stated that the property is located in Rio Blanco County, §(1)(b); they contained a legal description of the property, §(1)(c); they described the boundaries of each unit and identified each with a lot number, §(1)(e); and they identified the “common elements,” including the [Common Open Space], §(1)(f).

Judge Gabriel, now with the Supreme Court, dissents:

Here, unlike in Evergreen, we have no protective covenants and no homeowners’ association that was created for the purpose of managing common property or enforcing use restrictions and design controls. Accordingly, we have no homeowners’ association that was required to carry out functions on behalf of individual lot owners but that lacked a mechanism for raising the funds to do so. Thus, I perceive no basis for implying an obligation to levy assessments, which was what [Evergreen Highlands] concerned. Unlike the majority, I do not read that case so

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broadly as to allow us to imply the existence of a common interest community itself, notwithstanding the absence of a declaration and a homeowners’ association tasked with acting on behalf of individual lot owners.

Stay tuned! Certiorari granted, March 21, 2016, Justice Gabriel not participating. Summary of Issue [Reframed]: Whether the court of appeals erred in holding that Two Rivers Estates is a common interest community by implication. Houston v. Wilson Mesa Ranch HOA Colorado Court of Appeals, August 13, 2015 2015 COA 113, 360 P.3d 255 Restrictive covenants; association action to bar short term rentals. Judge Vogt of the court of appeals takes on an emerging hot topic, which is now being fought out in various city councils across the state. Here, an owners’ association attempted to address the evils of short term renters by enforcing a restrictive covenant prohibiting commercial use of single family homes. The appeals court panel affirms the San Miguel County District Court’s ruling that a restrictive covenant provision prohibiting commercial use of subdivision homes cannot be used to enjoin or prevent short-term rentals of a home. Mere temporary or short-term use of a house by vacation renters does not preclude the use from being “residential,” and an amendment to association by-laws that precluded unapproved short-term rentals and imposed fines for violations was unenforceable. The lower court reasons that “nothing in the covenants prohibited short-term rentals, either expressly or by implication; that the covenant language was ambiguous regarding the permissibility of short-term rentals; and that, because such ambiguity required that all doubts be resolved in favor of the free and unrestricted use of property, the covenants did not prohibit or limit Houston’s short-term vacation rentals.” The Association argues that the district court erred in finding that the by-law amendment was arbitrary and therefore unenforceable. The court disagrees, holding the by-law provision was unenforceable because the board did not have the authority to adopt a procedure to enforce a nonexistent covenant provision.

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5. CONDEMNATION, EMINENT DOMAIN Regional Transportation District v. 750 West 48th Avenue, LLC Colorado Supreme Court, September 14, 2015 (Chief Justice Rice, 7-0) 2015 CO 57, 357 P.3d 179 Eminent domain trial before commissioners; evidentiary rulings of commissioners. In the usual manner, in an eminent domain case in which the landowner elects to have the issue of valuation for a taking heard by a three-member commission of freeholders, the district court here heard in limine motions as to the admissibility of aspects of the valuation evidence. In that hearing, the trial judge excluded evidence offered by RTD from Appraiser 1 as to a valuation based on comparable sales, because the valuation was not submitted within a required deadline, but allowed testimony from that witness on an income-based approach, which apparently had been disclosed. The court’s ruling allowed the balance of the appraiser’s opinions, which included opinions based on an “average value” and an income analysis; it did not state whether the evidence based on comparable sales was relevant. At the commission trial, when RTD began offering the allowed evidence of average income of comparable properties through the appraiser, the owner objected to the appraiser’s opinions on relevance grounds (as opposed to objecting based on the court’s previous order); the commission chair sustained the objection, even though the district court had allowed the evidence. A second disputed piece of evidence involved the RTD’s evidence of the value of property acquired by the landowner in a different part of town in order to operate its business. This replacement property did not have certain luxury amenities that landowner had built into his original property. The commission allowed this evidence. However, after trial, the court issued an instruction to the commissioners to disregard this evidence as irrelevant. RTD appealed on both issues. The court of appeals affirmed both rulings, but the Supreme Court reverses on the first issue. The question of whether and when the commission is empowered to make its own evidentiary rulings stems from a potential conflict between C.R.S. § 38–1–101(2)(a)‘s mandate that the judge make every determination except the final award of compensation, and § 38–1–105(2)‘s statement that the commission “may request the court to make rulings upon the propriety of the proof or objections of the parties.” The court agrees with the district court that these provisions implicitly authorize the commission to make some evidentiary rulings, but the court takes a firm stand in support of the ultimate power of the district court to issue both in limine, pre-trial rulings on admissibility of evidence, and to revise rulings post-trial and instruct the commission to disregard individual items of evidence. The Supreme Court holds that pre-hearing (“in limine”) evidentiary rulings by the trial judge control in eminent domain valuation hearings. A valuation commission is bound by the supervising court’s evidentiary rulings. A supervising judge’s explicit denial of a motion to exclude certain expert testimony on relevance grounds – meaning that the evidence should be admitted – precludes the commission from sustaining an objection to

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that evidence. The court reverses the portion of the lower court’s ruling that permitted the commission to effectively alter the judge’s in limine evidentiary ruling sustaining an objection to evidence that the district court had already approved, to the detriment of the RTD. The court holds:

We reject the court of appeals’ likening of the commission to a “successor judge” for two reasons: first, commissioners need not have any legal knowledge or training and so should not be granted equal footing with the judge regarding legal questions such as the admissibility of evidence; and second, the judge is still on the case and is available to reconsider prior rulings, so there is no judicial entity for the commission to succeed. Therefore, although a commission may rule on evidence if the judge has not already done so, when a judge issues a definitive ruling on the admissibility of evidence – either on a motion or through [post-trial] instructions – the commission is bound to follow the judge’s ruling. (Author emphasis added).

On the second issue, the Supreme Court affirmed the ruling of both lower courts that the district court can instruct the commissioners, much as it would instruct a jury, to disregard evidence that the commissioner had agreed to hear over one party’s objection. Town of Silverthorne v. Lutz Colorado Court of Appeals, February 11, 2016 2016 COA 17, 370 P.3d 368 Immediate possession hearing; evidence of source of condemnor’s funds. This case involves a dispute between owners of land along the Blue River and the Town of Silverthorne, over the Town’s desire to construct a portion of its Blue River Trail on the owners’ land. As a preliminary matter, the trial court ruled, and the appeals court affirms, that a party does not waive any legal defenses by failing to file an answer within the time required by the rules of procedure. Why? The statutes enforce constitutional rights. M. Patrick Wilson, Eminent Domain Law in Colorado, 35 Colo. Law. 65, 72 (2006) (“Technically, there is no need to file an answer in a condemnation case, but it is good practice to do so.”). On the merits, the owners object that the Town lacked authority to condemn the easement in question because it was relying on funds from the Great Outdoor Colorado Trust Fund. The “GOCO amendment,” Article XXVII, section 9 of the Colorado Constitution, bars a GOCO fund recipient from using its funds to acquire property by condemnation. This defense fails, based on established authority from the Colorado Supreme Court.

In an immediate possession hearing, a district court hears challenges to a public entity’s condemnation based on an alleged lack of authority. . . . However, during condemnation proceedings, district courts may not

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consider the source of the condemning authority’s funds. See Public Service Company v. City of Loveland, 79 Colo. 216, 245 P. 493, 500–01 (1926). As the supreme court explained in City of Loveland, ”these questions present details of corporate finance that are wholly alien to a special statutory condemnation proceeding and they are not cognizable here.” Id. Condemnation actions are special statutory proceedings that must be conducted strictly according to statutory procedures, Story v. Bly, 217 P.3d 872, 876 (Colo.App.2008), aff’d, 241 P.3d 529 (Colo.2010), “and no issue can be injected into the case which will change its character,” City of Loveland, 79 Colo. at 234, 245 P. at 501 (citation omitted). The supreme court in City of Loveland made clear that evidence pertaining to project funding sources is the type of evidence which must be excluded under this reasoning.

The court notes that the Town is a home rule city with eminent domain powers. It has the power to condemn if it satisfies the necessary elements of the claim, which require proof of “good faith negotiations” and a public necessity. The Town’s initial offer to a group of landowners to acquire the requisite easements for the proposed trail was not evidence of a “bad faith” negotiation because a portion of the funds that would pay the offered sum were from GOCO. The second requirement is that the condemning authority act in good faith in determining the necessity of the project. “The question of necessity simply involves the necessity of having the property sought to be taken for the purpose intended.” Mortensen v. Mortensen, 135 Colo. 167, 170-71, 309 P.2d 197, 199 (1957). The court affirms the lower court’s rulings on these issues.

6. CONTRACTS, PURCHASE AND SALE, TRANSACTIONS Ravenstar LLC v. One Ski Hill Place LLC Colorado Court of Appeals, January 28, 2016 2016 COA 11 Condominium purchase and sale agreement; liquidated damage clause not unenforceable because party has option of both actual and liquidated damages; attorney fees for prevailing party; lodestar calculation; fees awarded for in-house counsel. In another case from Summit County, a group of unit purchasers brought an action against a developer for breach of contract after purchasers were unable to obtain financing for the full purchase prices and developer retained the purchasers’ deposits as liquidated damages. These deposits were substantial, roughly 15% of the cost of purchase. In Colorado, a liquidated damages provision is valid and enforceable if three elements are met: (1) the parties intended to liquidate damages; (2) when the contract was made, the amount of liquidated damages was a reasonable estimate of presumed actual

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damages; and (3) at the time of contract, it was difficult to ascertain the amount of actual damages that would result from a breach. Here, the unit owners conceded that the amount of liquidated damages was a reasonable estimate. The court holds, as a matter of first impression, that the mere presence of an option to elect between the liquidated and actual damages does not render the former unenforceable. The only Colorado cases cited on the issue involved the remedy for a vendor under an installment land contract. The choice of remedies there, the court reasons, is more a choice of damages vs. specific performance. The court notes a split of authorities in cases from other states. Some courts hold that the mere fact that one party has an option shows that there is no “agreement” on fixed damages. Other courts support the right of parties to agree on alternate remedies. This court allows a scholar, in a way, to break the tie, quoting from Dan B. Dobbs, HANDBOOK ON THE LAW OF REMEDIES § 12.11, at 855–56 (1973):

The presence of a liquidated damages provision does not automatically prevent the vendor from claiming his actual damages, and in the absence of any indication to the contrary, it probably should be assumed that the vendor is free to claim liquidated or actual damages, as its option.

With victory comes the spoils, and the developer gets to recover its attorney fees as provided in the fee-shifting provision of the sale contracts. Of note is a discussion on two issues. First, “block billing” – “Block billing does not preclude a fee award, but a district court retains discretion to reduce hours billed in that format if the court is unable to determine whether the amount of time spent on various tasks was reasonable.” Second, “the in-house counsel” conundrum – these guys and gals are on salary! The court joins the growing trend to focus, even in commercial cases, on the “lodestar,” rather than actual fees charged and paid.

The lodestar method provides an initial estimate of a reasonable attorney fee, whether the attorney is salaried or charges fees under a fee agreement. [Balkind v. Telluride Mountain Title Co., 8 P.3d 581, 587–88 (Colo. App. 2000)]. It is based on the number of hours reasonably expended multiplied by a reasonable hourly rate. . . . Where a fee agreement exists, it is merely a factor to be considered in determining reasonableness. Tallitsch v. Child Support Servs., Inc., 926 P.2d 143, 147 (Colo.App.1996) (A fee agreement “does not, of itself, require a court to award the amount agreed upon between the attorney and client.”).

Significantly, the court holds that it was not error for the court to award fees for in-house attorneys based on the lodestar method. Four attorneys from the defendant’s parent company, The Vail Corporation, worked on the case. As employees, they are exempt from having to produce a fee agreement. They had records of time expended, and an affidavit described their experience. The court did not abuse its discretion in awarding fees for the work of counsel employed by a parent company.

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Rocky Mountain Exploration v. Davis Graham & Stubbs Colorado Court of Appeals, March 10, 2016 2016 COA 33 Agency law; liability of agent for undisclosed or unidentified principal in purchase and sale contract. This is a case arising out of the recent North Dakota oil boom. We note it here because counsel for one of the parties in a purchase and sale transaction is sued for engaging in a civil conspiracy, fraud, and aiding and abetting the purchaser in breaching fiduciary duties alleged to be owed between buyer and seller arising out of oil field participation agreements. The real rub is this – does an attorney representing an undisclosed principal (the purchaser) in a transaction have a duty to disclose to the seller that the purported purchaser is merely the agent for another entity, where the purchase and sale agreement is silent on the subject of whether the purchaser is an agent and does not prohibit assignment of the purchaser’s contract rights or limit its right to sell its interests after closing? In a thorough opinion, relying heavily on a text authored by two University of Colorado law professors and the Restatement (Third) of Agency, the court affirms a summary judgment ruling of a Denver district court judge finding that a law firm that drafts documents for a transaction and closes the transaction in its offices in Denver had no duty to disclose to the seller that the firm represented a third company, for which the purchaser was acting as agent and “straw man” purchaser. This mattered a lot to the seller, Rocky Mountain Exploration, because it had a past relationship with the undisclosed principal, and would not have voluntarily done business with that entity. In 2006, Rocky Mountain (RMEI) sold 80% of its vast holdings to Tracker Resource Exploration ND, LLC (Tracker). The two companies entered into a joint operating agreement that expressly disclaimed any joint venture or fiduciary relationship between the parties. In 2009, Tracker offered to buy RMEI’s remaining 20% interest in the leaseholds, but the parties were unable to reach an agreement, as RMEI held out for $15M, and Tracker did not want to go that high. In May, 2010, Tracker and Lario Oil and Gas Company (Lario) agreed to “jointly attempt” to acquire RMEI’s 20% interest. Due to a strained relationship between Tracker and RMEI, Tracker’s involvement was not disclosed to RMEI. RMEI signed an agreement to sell its 20% interest to Lario for $14.25M. After the agreement was entered into, Lario asked RMEI if it had any objection to Lario being represented by the Davis Graham firm, which was actually Tracker’s attorney. It is unclear why this inquiry was made; there is no direct inference that Davis Graham had a relationship with RMEI. In any event, RMEI had no objection. The firm, however, decided that it could not represent Lario, because this would create a conflict of interest with Tracker. That was not communicated to RMEI. Davis Graham drafted the closing documents and handled the closing in its offices. Before the sale closed, in communications with RMEI, Lario referred to Davis Graham as “our attorney.” Although the attorneys were aware of the communication, it did not clarify that it represented only Tracker.

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After the sale closed, Lario and Tracker auctioned all of the interests (Tracker now owned all 100%) in the North Dakota leaseholds, and realized a substantial profit. RMEI sued Lario, Tracker and DGS. RMEI alleged that DGS (1) engaged in a civil conspiracy to use Lario as a strawman purchaser; (2) aided and abetted Tracker’s breach of its fiduciary duty to RMEI; (3) committed fraud; (4) aided and abetted fraud; and (5) engaged in a civil conspiracy to commit fraud. Our main interest is in the holding that the law firm could not be held liable for a civil conspiracy because the use of a “strawman purchaser” was not unlawful. An agent may act on behalf of an undisclosed principal. There are two exceptions to this rule, according to the Restatement of Agency, which, if established, can allow the third party to void the contract. These are: (1) the agent falsely represents that it does not act on behalf of a principal and (2) the principal or agent had notice that the third party would not have dealt with the principal. Restatement (Third) of Agency § 6.03 (2006). The court holds that neither exception applies here. Because the use of a strawman purchaser was lawful, there was no duty disclose this arrangement “in equity and good conscience” – the test in fraudulent concealment cases. The court emphasizes the distinction between undisclosed and unidentified principals. The exceptions apply only to undisclosed principals. By contrast, Tracker was an unidentified principal, as Lario had disclosed earlier to RMEI that it had “other investors or partners.” In addition, Lario had a right to assign its interests to third-party participants in the transaction. RMEI did not ask if Lario was acting as an agent for a principal, and it did not ask whom the “third parties” were. Furthermore, neither Lario nor the attorneys stated that the firm was not acting on behalf of Tracker. The court notes that there is “no suggestion” in Colorado case law that acting on behalf of an undisclosed or unidentified principal is fraudulent. The following quotes from the case, straight from the text by Professors J. Dennis Hynes & Mark J. Lowenstein, AGENCY, PARTNERSHIP, AND THE LLC: THE LAW OF UNINCORPORATED BUSINESS ENTERPRISES 351–52 (6th ed. 2003), restate the law and provide attorneys with guidance for dealing with this issue in the transactional world.

To the contrary, the ability of an agent to act on behalf of an unidentified or undisclosed principal has “practical importance.” Restatement § 6.03 note b. For example, by dealing as [an] undisclosed principal, [a] person interested in assembling [a] tract of land from multiple owners for [a] large-scale project can overcome [the] problem of hold-out owners who, once [the] buyer’s interest becomes known, may exploit [the] buyer’s vulnerability by demanding prices well in excess of current market value. Id.

Nevertheless, a third party may avoid a contract entered into by an agent acting for an undisclosed principal if (1) the agent falsely represents that it does not act

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on behalf of a principal and (2) “the principal or agent had notice that the third party would not have dealt with the principal.” Id. § 6.11(4). In all but such narrow circumstances, however, a third party may not rescind the contract. This is so because, ordinarily, “[i]f a third party wishes certainty that the party with whom it deals will be the only party with rights and liabilities under the contract, the third party may insist that the contract so provide.” Id. Restatement at cmt. d. Moreover, the third party may “insist on a provision prohibiting assignment of the contract.” Id. Lastly, the third party is always free to “ask the person with whom it deals whether that person acts as agent for an undisclosed principal.” Id.

7. CONSERVATION EASEMENTS AND TAX CREDITS No reported cases.

8. CONSTRUCTION DEFECTS

Rogers v. Forest City Stapleton Colorado Court of Appeals, November 19, 2005, as modified 2015 COA 167 Implied warranty of suitability; residential lot suitable for a house with a finished basement; warranty extends to subsequent purchasers. Here, developer Forest City Stapleton sells a lot to a homebuilder, and Rogers buys a new home from the builder. Rogers claims that the lot was not suitable because it could not support a basement. Rogers paid the builder an extra fee to include a basement that could later be finished. The home also included a foundation drain system designed to collect ground water into a sump pit and be pumped out into the yard by a sump pump. After Rogers moved into the home, replete with the planned basement, he noticed that the sump pump was operating more often than he expected and, after hiring engineers to investigate, discovered that the ground water level was higher than he had believed it to be. Rogers sues Forest City for breach of implied warranty, nuisance and negligent misrepresentation. On the warranty claim, he argues that Forest City impliedly warranted to him that the lot was suitable for a home with a basement that could be finished. The nuisance claim is based on the use of recycled concrete aggregate base course (RABC) in the roads in Stapleton, which apparently can leach a mineral called calcite, which interferes with the foundation drain system. The jury found for Rogers, and Forest City appeals. The appeals court, in a 2-1 decision, reverses the verdict on the breach of warranty claim, and remands for a new trial. The trial court improperly instructed the jury that a breach of implied warranty runs from a

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developer to a homeowner in these circumstances. Applying the reasoning in two prior cases, the implied warranty can apply in this kind of case – but does the warranty extend to a homeowner who is not a first purchaser? The court concludes that it can, applying the reasoning of an Indiana case, Jordan v. Talaga, 532 N.E. 2d 1174 (Ind. App. 1989). An implied warranty of suitability exists between a developer of a vacant lot and the owner of a home on that lot who is not the first purchaser if: (1) the developer improves the lot for a particular purpose, and (2) all subsequent purchasers rely on the developer’s skill or expertise in improving the lot for that particular purpose. Here, the trial court failed to instruct the jury on what it means to “impliedly warrant.” Specifically, the trial court did not instruct the jury that if Forest City improved the lot for a particular purpose, an implied warranty would exist that the lot was suitable for that particular purpose if the subsequent purchasers relied on Forest City’s expertise and skill in improving the lot. The court holds that the developer must improve and sell a lot for a particular purpose and the lot must be unsuitable for that same particular purpose. The court suggests a form of instruction, which ultimately must tie the claim into “the particular purpose for which the lot was improved.” One can only hope that this ties into whether the developer’s purpose was single family homes with finished basements. The judgment on the nuisance claim is reversed without a remand, because a special district, not Forest City, constructed the roads and placed RABC in the road base. Regardless of whether Forest City caused the special district to be created or the extent to which it may control the district, the district is a separate legal entity, and Forest City could not be liable under the terms of the court’s own jury instructions. Two judges file dissents, one on the nuisance issue, and one on the breach of warranty issue. On the implied warranty issue, Judge Furman disagrees with the majority that Forest City could be liable to Rogers on the claim of implied warranty of suitability because (1) Rogers was not the first purchaser of the lot; (2) Rogers did not rely on Forest City’s expertise; and (3) the lot at issue was generally suitable for the purpose of residential construction. He concludes that the evidence presented at trial also was insufficient, as a matter of law, to support the claim of implied warranty against Forest City. Stay tuned.

9. EASEMENTS AND PUBLIC ROADS Gold Hill Development Company v. TSG Ski & Golf Colorado Court of Appeals, December 17, 2015 2015 COA 177 RS 2477, public road by prescription, implied easements. A developer, Gold Hill, owned several patented mining claims in San Miguel County in the vicinity of various properties owned by the TSG defendants, who also owned a variety of mining claims. Gold Hill alleged that access to its mining properties was historically accomplished by means of a trail known as Gold Hill Road, which traverses a portion of

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TSG’s properties. Gold Hill claimed the right to use and maintain the route where it crossed over TSG’s mining lode properties. Gold Hill brought claims against TSG and the County, seeking the declaration of, in the alternative, an express easement; an implied easement by prior use; a way of necessity; a public road pursuant to R.S. 2477, and public road pursuant to CRS §§ 43-2-201(1) and 43-1-202. San Miguel County defended against some of the claims regarding a public highway. Following a bench trial, the court granted TSG’s motion for a directed verdict as to Gold Hill’s express easement claim and ruled against Gold Hill on all other claims. The court also granted the County’s R.S. 2477 counterclaims for a public road on a portion of the road, and a “public prescriptive easement” as to another portion of the road. On appeal, Gold Hill argues that the trial court erred in imposing additional requirements not supported by Colorado law for its R.S. 2477 claim across the TSG properties. It argued that the trial court erred in concluding that Gold Hill failed to show the public was using the route. However, the appeals court found sufficient evidence in the record to support the court’s findings, and affirms. The trial court’s findings were based on maps and mineral surveys, the testimony of a mining geologist, as well as on extensive testimony from multiple witnesses regarding the use and nonuse of the various routes. As one finds in similar cases, mining traffic in certain mountain communities in the 1880-1910 period was chaotic and ill-defined. Wal-Mart Stores, Inc. v. United Food and Commercial Workers International Union Colorado Court of Appeals, May 5, 2016 2016 COA 72 Labor union protests; land subject easement; trespass. A district court in Jefferson County enjoined a union from engaging in protests and “entering onto or inside any store, facility, or other property in the State of Colorado, including any apron sidewalk or parking lot, that is owned, operated, or controlled by Walmart or any of their subsidiaries, affiliates or operating entities” without permission or authorization from Walmart for any purpose other than shopping for and/or purchasing Walmart merchandise. While the labor and First Amendment issues are well beyond our ken in the real estate bar, I note this case briefly for how it treats the subject of easements. For example, if Walmart owns or leases property, it has standing to complain of a trespass. However, if it only has a nonexclusive easement over the land on which customers park, is entry on that land by noncustomers for a labor protest a trespass? Put differently, must Walmart, in order to prevail on a claim for an injunction to stop a “trespass,” have the right to exclusive possession of the property, or if it is sufficient that Walmart has an easement for use of associated parking lots and driveways? The court does not clearly state which situation applies here.

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The appeals court affirms the lower court’s injunction. A plaintiff bringing a suit for trespass must show that she or he has either actual or constructive possession of the land. . . . “Constructive possession is generally established through ownership of title, while actual possession is demonstrated by occupancy or control over the land, but does not require ownership.” Once [it] proves possession, a trespass plaintiff must prove the elements of the tort of trespass, which, as we stated above, are “a physical intrusion upon the property of another without the proper permission from the person legally entitled to possession of that property.” Here is where the analysis gets sticky. A dominant user, with easement access and rights of use, may or may not be in “possession,” or have rights to exclude other users, absent an exclusive easement. Without discussing this distinction, or really fleshing out the particular easement right at issue, the court holds:

We have not located, and the unions have not cited, any Colorado statute or case law dictating a different standard for owners of land subject to nonexclusive easements or those who lack exclusive possession generally. To the contrary, a “party with title may sue for trespass.” [cite omitted] A landlord-tenant relationship does not foreclose the landlord’s right to bring an action for trespass.). The unions do not dispute that Walmart possesses and has title to the property in question. . . . To sustain its trespass claim, Walmart needed only prove that the unions entered its property without its permission. It was not required to show that the unions unreasonably interfered with its use and enjoyment of the property.”

This is a little confusing. It seems that the court holds that if Walmart owns the property, and the unions do not have an easement, it should not matter whether others with an easement – say, an adjoining shop owner or legitimate customers – are inconvenienced. The owner may evict a trespasser at its will. If Walmart has only an easement, however, the question might arise as to whether it has standing to complain of a trespass. It would not be a party “in title.”

10. ESTATES AND PARTITION No reported cases.

11. FORECLOSURE, DEBTOR-CREDITOR, RECEIVERS, LENDER LIABILITY McClure v. JP Morgan Chase Bank Colorado Court of Appeals, August 13, 2015 2015 COA 117 LLC charging order; relative lien priority; enforcement of foreign judgments.

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By their nature, charging orders are a clumsy way to collect judgments against individual creditors, for several reasons. One must be persistent – unlike a garnishment, there is no simple form, and no easy recipe. Here, the claim against a wealthy individual and his defunct corporation operating out of Arizona presents interesting facts, and the opportunity for Judge Terry of the court of appeals to develop some new law in Colorado. Reginald Fowler and Spiral Broadcasting LLC, an Arizona corporation with broad financial interests and an amazing network of privately held business interests in a variety of industries, owned or controlled investments in a variety of commercial buildings in Colorado, owned in a variety of in limited liability entities. Both McClure and Chase sue in state court and get judgments. The race for the Colorado assets begins. Chase gets a judgment and obtains a charging order against Fowler’s interests in one or more Colorado LLC’s. Fowler is served with that order, and McClure then seeks to domesticate the judgment and the order in Colorado under the Uniform Enforcement of Foreign Judgments Act. McClure takes a different tack, taking his Arizona judgment to the Colorado district court in Arapahoe County, domesticating the judgment, and obtaining a charging order from the Arapahoe County court. The charging order is then served on Fowler. The key: while the Chase charging order (from the Arizona court) is served on the judgment debtor first, McClure was first to serve a charging order that was both issued by a court with jurisdiction and domesticated in Colorado. The court holds that the first lien on the Fowler/Spiral membership interest in the Colorado LLC’s is held by McClure. The basic reasoning is that the charging orders were not enforceable in Colorado until they were issued in Colorado, either in aid of a judgment issued by a Colorado court or in aid of a foreign judgment “domesticated” in Colorado under the procedures set out in the Uniform Act. In short: The court held the priority of charging orders issued against Colorado LLCs is determined by first-in-time service of charging orders enforceable in Colorado. Liberty Mortgage Corp. v. Fiscus Colorado Supreme Court, May 16, 2016 (Justice Eid, 4-2, two justices dissent) 2016 CO 31 Deed of trust; forgery; Article 3 of UCC inapplicable; holder in due course status does not bar forgery defense. We reported on the lower court decision in 2014. The Supreme Court accepted review on this issue: Whether a lender in possession of a promissory note secured by a deed of trust on real property may assert a holder-in-due-course defense under section 4–3–305, C.R.S. (2014), to a claim that the deed of trust was forged. Briefly, Ray and Vickie marry. Ray buys a house in 1987, which they live in for many years. Ray finances the purchase with a mortgage. Vickie does all the finances for the

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family. In 2008 she signs Ray’s name on several powers of attorney, including one specifically for real estate. She uses the forged powers to refinance the mortgage loan for a larger sum in 2008, and refinanced again with Liberty Mortgage in 2009 for a larger sum. That mortgage was then assigned to Branch Banking & Trust. Ray ultimately learns of his problems when Vickie began withdrawing funds from Ray’s IRA. He filed an identity theft complaint with the sheriff and discovered the unauthorized loans in a credit check. He then sued Liberty and Branch Banking & Trust under the spurious lien statute, C.R.S. § 38-35-201, seeking to have the 2009 deed of trust invalidated. The trial court found the deed of trust to be invalid and spurious, as it was not “created, suffered or assumed” by Ray, and contained a material misstatement, Ray’s signature. It rejected Branch Banking’s defense that it was a holder in due course of the deed of trust, which it characterized as a negotiable instrument. It also found that Ray had not ratified the 2009 loan transaction. The court of appeals affirmed, and the Supreme Court does likewise, but on different grounds, resulting in a split decision with two justices (Hood and Marquez) partially dissenting, and with Coates concurring. The majority concludes that it does not matter whether a deed of trust is a negotiable instrument, because Ray has a valid forgery defense to any claim that the lender could raise as a holder in due course, and that this defense is not precluded by any negligence or ratification on Ray’s part. The court holds that a forgery defense addresses the existence of the obligation itself, and not the right to enforce the obligation, which is the issue in the holder in due course statue. The governing authority is C.R.S. § 4-3-403(a) – an unauthorized signature does not bind a person whose name is signed absent ratification. The court explains that this is why forgery is not listed as a defense to enforcement under section 3-305 of the UCC. The debate in the concurring decisions between Justices Hood and Coats is heated, by standards of this court, and makes for good reading. Justice Coats seems to get the better of the argument, pointing out that his colleague overlooks the fact that pre-UCC case law has been displaced by not only the UCC but by the express terms of the spurious lien statute. “In light of the legislature’s express provision for the removal of any lien that is “spurious,” however, even if a deed of trust collateralizing a promissory note could be considered a combination lien and negotiable instrument, the lien would nevertheless be subject to removal, as long as it was “not created, suffered, assumed, or agreed to by the owner of the property it purports to encumber.” Justice Coats concludes:

[The] contention that the reasoning of cases pre-dating our adoption of the commercial code remains valid today seems to me best explained as an attempt to substitute a court-devised solution to the dilemma of the bona fide purchaser for the one chosen by the legislature. With regard to the class of which this case stands as a good example, it is a mystery to me

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how one could find greater equities to lie with a trader in commercial paper than with a homeowner who has been victimized by forgery.

By contrast, Justice Hood would find with four other jurisdictions that have held that a deed of trust securing a promissory note is a negotiable instrument, subject to the protections of the UCC, and remand for a hearing as to whether Ray was, under the provisions of Code section 3-406. Hutchins v. La Plata Mountain Resources, Inc. Colorado Supreme Court, June 20, 2016 (Justice Coats, 4-3) 2016 CO 45 Statute of limitations on enforcement of deed of trust; acknowledgement of existing debt. In this appeal from a 2013 unreported decision of the court of appeals, the Supreme Court holds that a debtor’s written, signed acknowledgement of the underlying debt owed to two individual creditors was sufficient to set a new accrual date for a legal action to foreclose on the collateral securing the debt. The debtor argued that the purported acknowledgement was contained in a proposed amendment to the debt instrument which never became effective, for failure to achieve consent of a sufficient percentage of all holders of the company’s debt. The case was tried before Judge Romero in Lake County, and concerns a series of convertible “debentures” given by Leadville Mining to evidence loans made to the mining company by two individuals, Hutchins and Gasper, other investors who had subsequently converted their debt instruments into stock, and a company, La Plata Mountain Resources, who had timely commenced foreclosure in 2003. All of the various debentures were secured by a single deed of trust. The trial judge ruled that the debtor’s “acknowledgement” was signed and acknowledged the debt, but only as part of a document which undertook to amend the terms of the debentures. That agreement never came into effect, according to the lower court, because the parties failed to get written consent of holders of at least two-thirds “in aggregate principal amount of outstanding Debentures.” The lower courts interpreted this to mean two-thirds of the current outstanding debt, not two-thirds of the outstanding debentures, many of which had been converted to stock and were no longer in force. The court reverses on a narrow margin, holding that a written acknowledgement of the debt by the debtor constituted a new promise to pay, establishing a new accrual date and a new limitations period. The court goes through an exhaustive review of the history of the acknowledgment of debt doctrine. Justice Hood, writing for the three dissenters, would hold that the failed amendments to the debentures were void, and therefore the “attempted acknowledgement” of the debt failed as well.

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12. JUDGMENTS AND FRAUDULENT TRANSFER No reported cases.

13. LAWYERS AND PROFESSIONAL LIABILITY J. Tucker, Trustee, v. Town of Minturn Colorado Supreme Court, October 26, 2015 2015 CO 61 Trustees; pro se litigants; unauthorized practice of law. The Supreme Court considers whether a non-attorney trustee of a trust may appear and make arguments before the water court on behalf of the trust. Put differently, may a trust appear and argue in a lawsuit “pro se”? The water court’s order was predictable. As trustee of a trust, Mr. Tucker was not permitted to proceed pro se because he was representing the interests of others. Tucker appealed the water court’s order on this issue, and the substantive issues relating to the water court’s finding of reasonable diligence in connection with a conditional water right. He asserted that the water court erred in granting his adversary’s application because its supporting affidavit was deficient. The court concludes that the water court correctly ruled that a non-attorney trustee cannot proceed pro se on behalf of a trust. In light of this determination, the court declined to reach the merits of the dispute, and affirmed. Baker v. Wood Ris & Hames Colorado Supreme Court, January 19, 2016 (Justice Gabriel, 7-0) 2016 CO 5, 364 P.3d 872 Claim by estate beneficiary against counsel for testator; strict privity rule. In this case, the Supreme Court recently upholds the “strict privity” rule for legal malpractice claims by non-clients. Without privity – without an attorney-client relationship - there must be evidence of fraud, malicious conduct, or negligent misrepresentation in order to sustain a tort claim by a non-client. Many states have moved away from this rule in recent times. Colorado does not follow the trend. Do dissatisfied beneficiaries of a testator’s estate have standing to bring legal malpractice or contract claims against the attorney who drafted the testator’s estate planning documents? Here, Baker and a sibling seek to bring malpractice and contract claims against a law firm and two of its attorneys. The attorneys were retained by their father, Floyd Baker, to prepare his estate plan. They believe that their father intended assets to be distributed in a way not reflected in the final will. The plaintiffs ask the court to abandon what has come to be called the “strict privity rule,” which precludes attorney liability to non-clients absent fraud, malicious conduct, or negligent misrepresentation. This rule has been applied in several recent court of appeals decisions. Glover v. Southard, 894 P.2d 21, 23 (Colo.App.1994);

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Southard, 892 P.2d 417, 418–19 (Colo.App.1994). They urge the court instead to adopt the so-called “California Test,” and to adopt an extension of the third-party beneficiary theory of contract liability frequently called the “Florida–Iowa Rule.” They argue that both theories would allow them, as alleged intended beneficiaries of their father’s estate, to sue the attorneys for legal malpractice and breach of contract. The court, in an interesting opinion by Justice Gabriel, declines to abandon the strict privity rule, and reaffirms that where potential beneficiaries are concerned, an attorney’s liability is generally limited to the narrow set of circumstances in which the attorney has committed fraud or some other malicious or tortious act, which may include negligent misrepresentation. The court explains the policy reasons for the ruling in this way:

While the testator/client is alive, the lawyer owes him or her a “duty of complete and undivided loyalty.” The strict privity rule protects an attorney’s obligation to direct his or her full attention to the needs of the client. An attorney’s preoccupation or concern with potential negligence claims by third parties might result in a diminution in the quality of the legal services received by the client as the attorney might weigh the client’s interests against the attorney’s fear of liability to a third party. Such a result, in turn, would tend to undermine the purpose of the attorney-client relationship, which requires that an attorney act in his or her client’s best interest.

The court notes that the Colorado Probate Code provides a means by which disappointed beneficiaries can litigate what they believe to be the testator’s true intent. In C.R.S. § 15-11-806, a court is authorized to “reform the terms of a governing instrument, even if unambiguous, to conform the terms to the transferor’s intention if it is proved by clear and convincing evidence that the transferor’s intent and the terms of the governing instrument were affected by a mistake of fact or law, whether in expression or inducement.” Laleh v. Johnson Colorado Court of Appeals, January 14, 2016 2016 COA 4 Attorney fees of court-appointed special master. This case is noted briefly to assist those among us who may accept appointment as a special master or a court appointed expert in matters relating to real estate. In this case, a court initially appointed Gray Johnson as a court-appointed expert to assist the court in sorting out the affairs of three small family-run businesses in a dispute over a lease of property. The two brothers had commingled “hundreds of thousands of dollars between themselves and their entities. Johnson, a certified public accountant, was appointed to sort out the accounts as an expert under C.R.E. 706. Johnson had both brothers sign an engagement agreement, in which they agreed to be jointly and severally liable for his fees. Subsequently, Johnson was appointed special master by the court under C.R.C.P. 53. Johnson engaged counsel to assist in certain functions required in his capacity as

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special master. At the conclusion of the case, Johnson obtained an order from the court ordering the parties to pay his professional fees, as well as the fees charged by Johnson’s attorney in pursuing collection.

The appeals court affirms the orders of the trial court and orders payment of the special master, as well as attorney fees incurred by him in pursuing collection of his fees, even though the engagement agreement did not call for a fee recovery. The court construes the award of fees as within the trial court’s discretion in upholding the dignity of the court.

Fairness and efficient operation of the judicial system dictate that we ensure that those appointed by the court to assist the court are appropriately compensated. This includes honoring the trial court’s discretion to grant such fees as it deems necessary to collect outstanding balances due to a court-appointed expert or special master. A contrary holding would create a disincentive to those whose assistance the court may seek in various capacities. The trial court acted within its inherent authority when it ordered the brothers to pay Johnson’s collection costs. Because the trial court’s action was not arbitrary or contrary to law, there was no abuse of discretion in the court’s grant of these fees.

Calvert v. Mayberry Colorado Court of Appeals, April 21, 2016 2016 COA 60 Illegal contract rule; public policy; contract between attorney and client violating Rule 1.8(a) of the Rules of Professional Conduct is void and unenforceable. In a 2009 disciplinary proceeding, the Colorado Supreme Court disbarred Mr. Calvert after a hearing board determined he had committed ethical violations involving two former clients. People v. Calvert, 280 P.3d 1269 (Colo.O.P.D.J. 2011). As relevant to this case, the hearing board found that the attorney had “plied a vulnerable client” - the former client in this particular case - “with loans in excess of one hundred thousand dollars.” Id. at 1272. To secure his interest in those loan funds, Calvert recorded a false deed of trust on the former client’s home in a second client’s name without the clients’ knowledge or consent. He then attempted to persuade the second client to assign the deed of trust to Calvert’s real estate company which, taken together with his earlier acts, signaled a calculated scheme to deprive the former client of her home. In the disciplinary case, the hearing board expressly found that Calvert had not complied with Colo. RPC 1.8(a) when he made the loans to the former client. Not deterred by the order of disbarment, Calvert then filed this case to recoup money he had loaned to the former client, claiming that he had an oral agreement with the client for repayment of the loans, and alternatively asserting that the trial court should impose an equitable lien on the former client’s house. The claim exceeded $100,000. The trial court granted summary judgment for the former client and her daughter (to whom she had quitclaimed her interest in the house), finding that because the oral contract between the

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former client and the attorney violated Colo. RPC 1.8(a), the attorney was legally prohibited from enforcing that agreement. This ruling is affirmed on appeal. The court of appeals holds that the loan agreement is unlawful and in violation of public policy, and is therefore unenforceable. The reasoning is similar to cases refusing to enforce gambling debts, or to award real estate commission to unlicensed brokers. The court remands this case to the trial court for a determination as to whether the appeal was brought for the sole purpose of delaying lawful collection efforts. State v. The Castle Law Group LLC Colorado Supreme Court, July 5, 2016 (Justice Marquez, 5-2) 2016 CO 54 Colorado Consumer Protection Act; deceptive trade practice; disclosure of true facts; foreclosure related services. This case appears to be another step in the continuing saga of the state’s actions against the leading foreclosure law firms concerning past practices in how charges for process service and other necessary costs were incurred by the firms and passed on to lenders and third-parties purchasing at foreclosure sales and borrowers who attempted to cure a default. While specialists will already have read this carefully, for the real estate generalist, it is helpful to know the court’s holding. Disclosure by the law firm to its client or to loan servicers of the amount paid to a vendor (whether an independent third party or an entity that is controlled or owned by principals of the law firm), even if accurate, does not insulate the firm and its attorneys from a claim that the price is deceptive. Evidence of market rates charged to law firms by unaffiliated vendors is directly relevant to establishing whether the costs invoiced by the vendors were the actual or reasonable costs of such services. The case was brought by the Attorney General under C.A.R. 21 to challenge a pre-trial order of the trial court excluding such evidence of “reasonable market rates” as irrelevant. The case goes forward.

14. LEASING AND EVICTION Zeke Coffee, Inc. v. Pappas-Alstad Partnership Colorado Court of Appeals, July 30, 2015 2015 COA 104 Commercial lease; damages remedy for tenant where eviction order reversed on appeal. Zeke rented space in a building for a coffee shop. At the end of its initial five-year lease, Zeke sought to exercise an option to renew for another five year term. Landlord refused to recognize the option, and claimed that Zeke was on a month-to-month lease. Zeke brought a declaratory judgment action to enforce its right to renew the lease for another five year term. Landlord counterclaims, seeking eviction. The trial court in a first round agrees with landlord, and the tenant is evicted. Tenant appeals, and the eviction order is reversed. However, in the meantime, the landlord had leased the space to a new occupant. On remand, a different judge awards $168,000 in restitution to the tenant,

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which apparently included all potential rental income received by landlord after the eviction, discounted to present value, but without deducting expenses as one would in a loss of profits analysis. The court affirms, holding that the trial court did not abuse its discretion by failing to subtract from the restitution award the rent that the tenant would have paid if the eviction had not occurred, or by failing to subtract expenses the landlord incurred in re-letting the premises, or by failing to subtract rent the landlord did not receive in the gap between the order for eviction and the location of a new tenant. The court reasons: “A person who has conferred a benefit upon another in compliance with a judgment, or whose property has been taken thereunder, is entitled to restitution if the judgment is reversed or set aside, unless restitution would be inequitable (quoting RESTATEMENT (FIRST) OF RESTITUTION § 74 (1937)) . . . . Where the judgment has been reversed or set aside on appeal, “comment m to [section 74 of the Restatement] provides that if the judgment creditor [i.e., the landlord after winning in the trial court] acted in good faith, the sale was properly conducted, and the property was acquired by a bona fide purchaser, the judgment debtor is entitled to recover only the proceeds from the sale, plus interest.”

15. PREMISES LIABILITY, TRESPASS AND NUISANCE Lopez v. Trujillo Colorado Court of Appeals, April 7, 2016 2016 COA 53 Vicious dog; proximate cause; injury to child on sidewalk. The court of appeals, in a split decision, affirms the dismissal of a complaint against a dog owner for failure to state a claim for relief under C.R.C.P. 12(b)(5). Two children were walking down a sidewalk in front of the defendant’s home. The sidewalk was separated from defendant’s yard by a four-foot-high chain link fence. The dogs, according to the complaint, jumped up on and rattled the fence. The dogs did not jump over the fence or touch the children. One of the children, scared by the pit bulls, “darted from the sidewalk out into [the street]” and was struck by a service van. According to the majority, “while the injuries were tragic, their likelihood was not foreseeable.” Judge Vogt writes an articulate dissent, relying heavily on the test in Taco Bell v. Lennon, 744 P.2d 43, 46 (Colo. 1987) for determining whether a duty exists.

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16. PROPERTY TAXATION AND ASSESSMENTS Landmark Towers Association, Inc. v. UMB Bank Colorado Court of Appeals, April 21, 2016 2016 COA 61 Municipal bond financing; challenge by HOA under TABOR; waiver of affirmative defense not argued at trial. A real estate developer created a special district, the Marin Metropolitan District, as a vehicle for financing the infrastructure of a to-be-developed residential community next to the Landmark Towers known as the European Village. The District issued bonds to finance the development, which were to be paid for by property taxes imposed on landowners within the District. A group of condominium owners at Landmark Towers who did not live in the European Village learned that their properties had been included in the District under “suspicious circumstances.” The condominium owners received no benefit from the European Village development, and had not been notified of the elections to create the District and approve the bonds and taxes. Acting through their homeowners association, the Landmark Towers Association, they brought two actions; one to invalidate the creation of the District (see Marin Metropolitan District v. Landmark Towers Association, 2014 COA 40, §11) and the other - this case - to invalidate the approval of the bonds and taxes and to recover taxes they had paid to the District. Following a bench trial and a “TABOR refund hearing,” the district court granted Landmark part of the relief it requested, ordering partial refund of taxes paid and enjoining the District from continuing to collect taxes from the Landmark condominium owners. The appeals court affirms in part. It holds that the special district election was invalid, in that some voters in the election were not eligible electors, and that the condominium purchasers were eligible electors who were not notified of their rights to vote. The court holds that the defendants waived the thirty-day time bar set out in C.R.S. § 11-57-212. Although the District cited § 11-57-212 in its answer and in the trial management order, it did not raise the issue at trial. The case is remanded for further proceedings. This case received a bit of publicity when it came out, with concerns raised about the marketability of municipal bonds if the short statute of limitations is not scrupulously observed. If this is your line of work, a close reading of the case is advised.

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17. TAX SALES and TREASURER DEEDS Sandstrom, Arapahoe County Treasurer v. Solen Colorado Court of Appeals, February 25, 2016 2016 COA 29 Voidable tax deed; diligent inquiry to locate and give notice to owners; redemption rights of tenants in common. Greg Solen and his sister owned mineral rights beneath a forty acre parcel of land in eastern Arapahoe County. The land was purchased in 1972 by their father Albert. He acquired the entire surface interest and a 50% interest in the mineral rights. The other 50% interest in minerals had been reserved by the seller. In 1973, Albert sold the surface estate to Mr. and Mrs. Thomas, but reserved the mineral rights – 50% of the whole. The County assessor created a new parcel number. In 1984, Albert passed away, and the mineral rights passed to Greg Solen and Colorado National Bank as trustee for his sister (Bank) by personal representative deed. Each received an undivided one-half interest in the mineral rights as tenants in common, and unity of ownership in the assessed Parcel, which itself was one-half of the original mineral estate. In 1994, the Trustee conveyed its interest to the beneficiary, Greg’s sister Patti, according to the terms of the trust established by Albert. As luck would have it, the assessor failed to note the address of Greg’s sister, Patti Ibbotson, in its records. It is unclear why – her address in Littleton, where she still lives, is on the face of the trustee’s deed. As a result, only Greg got the annual property tax bills on the account. Greg paid the tax bills annually from 1984 through 2004. However, the taxes were not paid in 2005 for the 2004 tax year, and subsequent tax years through 2007. The surface owner, Bradford, was notified of the tax debt, and purchased the tax lien certificate for 2004 and each year through 2007. In 2008, Bradford applied for a treasurer’s deed. The Treasurer sent notice to Greg of the application for the tax deed – which was returned as “undeliverable” – but did not obtain title work for the Parcel or check the County Clerk and Recorder’s records for the address of Patti. On February 26, 2009, without a redemption by Greg or Patti, a tax deed was issued to Bradford by the Treasurer. The deed transferred all mineral interests taxed under the assessed Parcel, that is, the entire undivided one-half interest in the mineral estate. In 2013, the Treasurer was notified by an oil and gas lessee that Patti claimed an ownership interest in the Parcel that was the subject of the Bradford tax deed. On August 26, 2013, 4 ½ years after the treasurer’s deed was issued, the Treasurer issued and recorded a declaration of invalid treasurer’s deed, purporting to invalidate the tax deed given to Bradford. In December 2013, the Treasurer filed the current action seeking a declaratory judgment that the declaration of invalid treasurer’s deed was a valid document, thereby cancelling

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title in Bradford. The Treasurer’s complaint admitted that she had failed to conduct diligent inquiry pursuant to C.R.S. § 39-11-128(1)(a) prior to issuing the tax deed in favor of Bradford and requested the court to approve her declaration of invalid treasurer’s deed. The Treasurer named Bradford, Solen, and Ibbotson as defendants. Bradford and cross-claimed against Solen and Ibbotson for a decree quieting title in the Parcel.6 Solen and Ibbotson answered and claimed the mineral rights interest as equal tenants in common. Ultimately, the district court concluded:

There is no dispute that the Treasurer failed to determine all persons having title of record of the property and failed to provide notice to those persons, specifically ... Ibbotson. The evidence fully justifies that the Treasurer did not make “diligent inquiry” to locate ... Ibbotson. Had the Treasurer obtained title work for the mineral rights or checked the County Clerk and Recorder’s records ... Ibbotson could have been served. Accordingly, the Treasurer’s Deed issued on or about February 26, 2009 is invalid and void and the Declaration of Invalid Treasurer’s Deed issued on August 23, 2013, is valid.

The court ordered the County assessor to pay to Bradford redemption funds that had been tendered to the assessor by Ms. Ibbotson. On appeal, the court of appeals affirms, in a detailed and articulate opinion by Judge Graham. First, the court rejects Bradford’s argument that Solen lacked standing, because proper notice was sent to him, though there is no evidence of actual receipt. However, Solen has standing because he was sued by Bradford in the quiet title action. Traditional standing rules do not apply to defendants. Second, the court holds that C.R.S. § 39-11-128(1) requires that notice to all owners of the mineral interest was required, and that Ms. Ibbotson’s address was of record with the county clerk and recorder, discoverable in a grantor and grantee search. When given notice of the past due taxes in 2013, Ms. Ibbotson tendered the past due tax payments with interest and costs to the assessor. A redemption by one cotenant is a redemption by all. The court rejects Bradford’s argument that the County assessor should have set up a separate tax account for each cotenant, and that the district court should have “at least” awarded Solen’s one-half interest to Bradford. Bradford was unable to cite any statutory authority for requiring a treasurer or an assessor to give each cotenant of real property a separate tax parcel number. Finally, the court rejects Bradford’s argument that the tax deed could not be set aside because it is not “void,” under the test set out in Lake Canal Reservoir Co. v. Beethe, 227 P.3d 882, 886 (Colo. 2010). Although that case holds that a tax deed is voidable, not void, for failure to conduct diligent inquiry, the court of appeals ultimately concludes here, as did the district court, that the tax deed issued to Bradford was voidable for failure to provide Ibbotson with notice, and void upon a fact finding that notice was insufficient.

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What is the practical difference between a “void” deed and a “voidable” deed? The latter must be proven to be void in a court action filed within five years of the recording of the treasurer’s deed. Here, the Treasurer filed her action within the five year limitation, allowing Solen and Ibbotson to keep their property and receive rental income. There being no issues of fact, the court of appeals the district court’s summary judgment order, voiding the treasure’s deed and quieting title in Greg and Patti. Note – author represented one of the parties in the trial court and on appeal. Klingsheim v. Cordell Colorado Supreme Court, April 4, 2016 2016 CO 18 Treasurer deeds; treasurer statutory duty of diligent inquiry to give notice of forthcoming issuance of deed unless owner or interested party redeems We reported on this case last year, and noted that this fact pattern presents a sort of post script to the supreme court’s decision in Lake Canal Reservoir Company v. Beethe, 227 P.3d 882 (Colo. 2010). Both cases deal with the issue of notice to a property owner, and in the earlier Beethe case, notice to parties claiming an interest in the property, such as easement holders or adverse possessors, of the pending issuance of a treasurer deed. Such a deed is powerful, in that it creates a new “original” title in the tax lien purchaser after an extended three-year redemption period. The requirement that the treasurer give notice to all record interest holders is set out in C.R.S. § 39-11-128, and the failure to give adequate notice can result in an order setting aside the treasurer deed, according to fairly well developed case law, which was perhaps best summarized before Beethe in the 1963 case of Siler v. Investment Securities Company. The court in Siler held that failure of the treasurer to make diligent inquiry to locate an owner pursuant to the statute rendered a treasurer deed “void,” and was a jurisdictional requirement. In Beethe, the Court stepped into what I termed a quagmire, trying to draw a “void vs. voidable” distinction between questionable treasurer deeds, delving back into a different but related body of jurisprudence dealing with such deeds that are “void on their face.” Fortunately, the court in this case helps to clarify some of the confusion caused by the court’s earlier decision, on an interesting, well developed set of facts.

I will copy the pertinent portions of the statute, because we have two cases this year dealing with the text: Section 39–11–128 provides, in pertinent part:

(1) Before any purchaser, or assignee of such purchaser, of a tax lien on any land ... sold for taxes or special assessments due either to the state or any county ... at any sale of tax liens for delinquent taxes levied or assessments authorized by law is entitled to a deed for the land ... so purchased, he shall make request upon the treasurer, who shall then comply with the following: (a) The treasurer shall serve or cause to be served, by personal service or by either registered or certified mail, a notice of such purchase on every person in actual possession or occupancy of such land and also on the person in whose name the same was taxed or specially assessed if, upon

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diligent inquiry, such person can be found in the county or if his residence outside the county is known, and upon all persons having an interest or title of record in or to the same if, upon diligent inquiry, the residence of such persons can be determined.... (b) In all cases or instances where the valuation for assessment of the property is five hundred dollars or more, the treasurer shall publish such notice [at designated times] ..., and he shall send by registered or certified mail a copy of such notice to each person not found to be served whose address is known or can be determined upon diligent inquiry.

Now to the facts. Carl and Wanda Cordell were the record owners of a tract of land in La Plata County (Tract 1). Carl Cordell also owned the adjoining Tract 2. The Cordells failed to pay the taxes owed on the two properties, and Brenda Heller purchased the tax liens on the properties at the annual tax lien sale. Heller assigned the tax liens to Klingsheim, who later filed the necessary request for issuance of a treasurer’s deed after the requisite three-year redemption period. The county treasurer attempted to send the notice to the Cordells of the plan to issue the treasurer’s deeds. C.R.S. §39-11-128 sets forth specific requirements for this notice.

The notice was sent, sort of, to the last known address for the Cordells as shown in the La Plata County records. The Treasurer properly sent the notices by certified mail to 705 N. Vine, Farmington, New Mexico, the address listed for them in the county tax rolls. The return receipts from the mailings, however, indicated that the notices were not delivered to 705 N. Vine, and were not directly delivered to Carl and Wanda. Rather, the receipts indicated that the notices were delivered to a Cleo Cordell at 703 N. Vine. The box for “agent” on the return receipts had not been checked.

Despite this discrepancy, the treasurer conducted no further inquiry to determine whether 705 N. Vine was indeed the plaintiffs’ residence. As a result, the Cordells never got the required notice of their right to redeem the tax liens. After discovering that treasurer deeds were issued to Klingsheim, the Cordells filed an action seeking a declaratory judgment that the treasurer’s deeds are void. The district court granted the requested relief, and this judgment was affirmed in a 2-1 decision.

Klingsheim, the lien purchaser, argues on appeal that the trial court erred in concluding that the county treasurer had failed to undertake diligent inquiry to determine where the Cordells lived, as required by statute. The majority holds that the failure of the treasurer to inquire further after learning that the notices were not delivered either to plaintiffs or to a person claiming to be their “agent” does not constitute “diligent inquiry” in attempting to effect notice on the taxpayers. Because a treasurer’s “full compliance” with the requirements of C.R.S. § 39-11-128 is jurisdictional, the trial court properly set aside the deeds as void. It may be noted that the United States Supreme Court addressed a similar situation in Jones v. Flowers, 547 U.S. 220 (2006), with the same result. In Jones, the notice was also sent by certified mail to the property owner, but the property was rented to a tenant, and returned “undeliverable – no such addressee.”

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In an interesting dissent, Judge Jerry Jones notes first that Cleo was Carl’s mother, and that the record had sufficient evidence to lead him to conclude that Cleo was Carl’s agent as a matter of law. Second, he notes that Mrs. Cordell (Wanda) lived in Illinois, not New Mexico, and that further inquiry in the Colorado public records would have been futile. Put differently, further inquiry “would not have made a difference.” Given that premise, failure to make the additional inquiry did not violate section 128 or deprive Ms. Cordell of due process. “Though I agree with the majority that “full compliance” with the statute is required [citing Siler v. Investment Securities Company, 125 Colo. 438 at 444], I do not believe such compliance requires futile efforts. It is not enough to say that the treasurer did not re-check county records, we must ask whether doing so would have furthered the obvious goal of the notice statute to provide notice.”

The Supreme Court accepted review and reverses the trial court and the appeals court, adopting in large part the views of Judge Jones. The court focuses on the relative paucity of cases addressing the statutory and due process requirements of due diligence after the treasurer learns that its notice did not get to the owner. This question was left open in the U.S. Supreme Court’s decision in Jones v. Flowers, where the record showed that the property owner did not receive notice – and the Court held only that the treasurer at that point has to do something further, without defining what that means, and intentionally avoiding a decision on whether there is a duty to go beyond the county’s own property records to locate a “good” address for the owner.

Here, the court is persuaded that the record indicates that (a) the return receipt did not prove that Cleo did not receive notice, and that (b) since neither Cleo nor Wanda lived in Colorado, and the only address the officials had was the address they used, and (c) that Cleo intended for his mother to receive such official mail for him when he was out of town, that any further search in the county records for a way to reach Cleo would have been futile.

Cases are accumulating on this topic across the country, motivated in part by the increasing ability of anyone to locate people through internet searches, and in part by the potential liability of county officials under our federal civil rights statutes, especially 42 U.S.C. 1983, which provides a claim enforceable in state or federal courts for land owners deprived of property without due process. [See an interesting commentary by Robert L. Shuman, Esq. on the use of the civil rights statutes in this situation at 111 W. Va. L. Rev. 707 at 753]. The Solen case, above, shows how proactive a responsible county official can be when she learns that her office failed to give adequate notice to a property owner. More and more county treasurers are going to considerable lengths to make sure proper notices are given, even to the point of paying title examiners for title searches.

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18. TITLES AND TITLE INSURANCE

Oldham v. Pedrie Colorado Court of Appeals, July 15, 2015 2015 COA 95 Real property lien priority; probate code claim procedures. Under the Colorado and Michigan probate codes, the court addresses an unanswered question – what happens when a mortgagee holding a first lien deed of trust on Colorado property, files a claim in the Michigan probate proceeding administering the mortgagor’s estate that is denied in part. The case concerns an “unconditional claim” – a claim that seeks to satisfy a claim from the assets of the estate without stating that the claim is contingent on enforcement of the security interest. If the mortgagee (1) files such a claim in a foreign proceeding, (2) the claim is disallowed by the personal representative, and (3) the mortgagee does not contest the disallowance, is the mortgagee precluded from foreclosing on the security in a Colorado non-judicial foreclosure proceeding? The court agrees with the mortgagee, and holds that the security against the property survives. A secured creditor’s lien on real property is not extinguished when the creditor presents an unconditional claim against a decedent’s estate but does not pursue a disallowed claim in the probate court (here, in Michigan) within sixty-three days. The creditor in this situation may forfeit a claim against assets of the estate, but does not forfeit the underlying security, the deed of trust on the Colorado land. A second issue arises due to a transaction in 2005 intended to renew the underlying debt. The original note and deed of trust were executed in 1976. In 2005, the mortgagee had the debtor sign a new note, with the apparent intent that the deed of trust continue to secure the replacement note. The property owners (taking title through the probate proceeding) argue that this transaction was a novation, and, without a new deed of trust, the lien of the 1976 deed of trust terminated. The court disagrees, and remands the case to the trial court for a determination of the amount due on the secured debt. Owens v. Tergeson, Trustee Colorado Court of Appeals, November 5, 2015 2015 COA 164, 363 P.3d 826 Deed interpretation; mineral rights reservation in habendum clause; warranty and reddendum clauses; quiet title decree void as to party not served where public records contained an address for the party in a nearby state. Holy habendum, Professor! In the 1950’s, two deeds conveyed four parcels of land in Weld County from A to B. Language in the habendum clause reserved all mineral rights to A, the grantor. So what is the habendum clause? And what must a deed contain? And is this a problem for poor A and his successors in title, who now stand to collect profits from mineral development?

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A deed has few formal requirements in the common law – like a contract, the deed must identify the grantor and the grantee, must describe land, must have some words evidencing an intent to convey title, and it must have the grantor’s signature. Consideration language is, in most states, optional. However, the forms that have survived over the decades follow a more precise format, including in addition to the above basics:

• a granting clause, describing the land and the estate;

• an habendum clause (from the Latin habendum et tenendum, or “to have and to hold”), noting any limitations to the estate, i.e., describing whether something less than fee simple is intended;

• a reddendum clause, noting any reservation of some part of the estate being conveyed; and

• a warranty clause (“warrants the title . . . subject to . . . “).

Of course, modern forms frequently combine the latter three clauses into one long sentence with a big blank at the end, where attentive parties with counsel usually not exceptions to the general warranty described in the deed. In particular, the reddendum clause suffers the most, having no real “blank” to fill. See Cunningham, Stoebuck & Whitman, THE LAW OF PROPERTY § 11.1 at 764 (West Hornbook Series, 1993). As Prof. Cunningham notes, “. . . none of this formality is necessary . . . . No habendum nor reddendum is required, although of course the grantor must say so if he wishes to limit the estate or make a reservation.” Given this hornbook law background, one might think that the reservation of mineral rights might fit nicely in a reddendum clause. As many of us have experienced, especially after a recent decade-long run up in oil prices, mineral reservations seem to end up just about anywhere. In this case, B’s successors claim the attempted reservation of mineral rights by A was ineffective, and that the rights passed to B and her successors. The argument from B is that the language in the 1950’s deeds reserving all oil, gas, etc. appeared in the habendum clause, not in the granting clause, where it (presumably) belonged. The appeals court disagrees, noting the “clear modern trend” in favor of reading the deed as a whole, and that noting the reservation in the habendum clause works nicely, so long as the intent is clear. Title to the minerals is quieted in A’s successors. The court distinguishes the favorite case of some trial lawyers, O’Brien v. Village Land Co., 794 P.2d 246, 251 (Colo. 1990) (exceptions inserted only in the covenant of warranty cannot limit the estate or title described in the granting clause). On a second issue, the court holds that a 1973 decree in a quiet title action was void as against A’s successors in title, as A was named in the quiet title action (involving only one of the 4 lots), but served only by publication. Note that it was common practice under the former version of Rule 4 to routinely serve out of state parties by publication.

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See Willis Carpenter, “The Rules Have Changed for Quiet Title Actions,” 27 COLO. LAW 69 (May 1998). The court here noted that A’s address was listed as “Tulsa Oklahoma” on the 1950 deeds, and that a recorded 1960 mineral lease reflected A’s street address in Tulsa. The court voided the 1973 action judgment for failure to use due diligence in searching for an address and withholding pertinent information when moving for service by publication. The appeals court panel agrees with the district court’s analysis. It rejects an argument by defendants that they only had to demonstrate that there was no address in Colorado for the defendants in the 1973 action. A rule to remember: “[A] clear and special designation of the particular estate conveyed, whether contained in the granting or in the habendum clause, will prevail over conflicting but merely general or formal language of the opposing clause.” The reddendum be darned!

19. ZONING AND LAND USE CONTROL City of Longmont v. Colorado Oil and Gas Association Colorado Supreme Court, May 2, 2016 (Justice Gabriel, 7-0). 2016 CO 29 Fracking; city bans preempted by state law. Although this is not a real estate case, the supreme court’s recent decision on the preemption by state law of local ordinances banning or regulating “fracking” received a fair amount of publicity, and is good reading. Justice Gabriel reviews the law on preemption, the questions raised as to whether such bans are matters of statewide, local or mixed concern, and whether a determination of these issues is a question of fact for the district court or a question of law. The former would involve a complex factual inquiry into how regulations, ordinances and state statutes interact “on the ground,” while a purely legal review looks only at how the state and local regulatory schemes play out “on paper.” The rather courageous decision of the Boulder district court judge in ruling against Longmont’s ordinance is affirmed. Open Door Ministries v. Lipschuetz Colorado Supreme Court, May 23, 2016 (Chief Justice Rice, 7-0) 2016 CO 37 Neighbor seeking revocation of permit for rooming and boarding permit; Colorado Governmental Immunity Act does not bar claim for injunctive relief as to prospective damage. In an important case, the Supreme Court holds that the Colorado Governmental Immunity Act (CGIA) does not apply to bar a claim by an individual for injunctive relief directed at a governmental entity to prevent future injury. This may be of interest to real estate attorneys encountering a need to take enforcement action in boundary disputes and other cases involving rights and interests in real property. Mr. Lipschuetz challenged the validity of a rooming and boarding permit that the City and County of Denver issued to Open Door Ministries. Lipschuetz, who owns a property

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adjacent to Open Door’s property, filed claims against the City and Open Door seeking revocation of the permit. Open Door filed cross-claims against the City, seeking declaratory and injunctive relief to prevent the revocation of its permit. The trial court concluded that the City should not have issued the permit, but stayed its order to revoke the permit until Open Door’s cross-claims were resolved. Several months later, the trial court reversed course and granted summary judgment in favor of Open Door on its claim for injunctive relief against the City. The question is whether Open Door’s claim against Denver for injunctive relief is a claim which may “could lie in tort” and is therefore barred by the CGIA for failure to give a prescribed statutory notice. On appeal, Lipschuetz argues that Open Door’s cross-claims against the City are barred by the CGIA because they “could lie in tort.” C.R.S. § 24–10–106. To make a claim under the CGIA, a party must notify the governmental entity prior to filing the claims. § 24–10–109(1). This notice requirement is jurisdictional. Because Open Door did not notify the City prior to filing its cross-claims, Lipschuetz argued that the trial court lacked subject matter jurisdiction over the cross-claims. The court of appeals, in an unpublished decision, agreed with Lipschuetz and held that the trial court lacked subject matter jurisdiction over the cross-claims. The Supreme Court reverses, holding that the court should have determined whether, at the time of filing, Open Door had suffered a monetary injury that would subject its cross-claims to the CGIA. It holds that the CGIA does not apply to Open Door’s request for prospective relief to prevent future injury – its claim to enjoin future action that could cause damage to Open Door. Because Open Door had not suffered an injury before it filed its cross-claims, the CGIA did not bar its cross-claims seeking prospective relief from future injury, and the trial court had jurisdiction over the cross-claims. This is of some interest to real estate attorneys in cases where a local entity may have a boundary or easement dispute with an adjacent landowner that happens to be a school district, a recreation center, or some other governmental or quasi-governmental entity. For example, does a claim to enjoin interference with an easement right involve a “trespass,” which “could lie in tort”? July 8, 2016 fbs