In today’s blog, we are taking a look at a few of the Colorado Supreme Court decisions related to real estate matters from 2018. Some highlights are below with the summaries published by Justia. Follow the links to see the full decisions.
R. Parker Semler, a member of a condominium association, filed a breach-of-contract claim against the law firm that employed the association’s attorney. He alleged the attorney had a contract with the association’s president not to represent one association member against another. He also alleged that the attorney had, on behalf of other association members he was representing, acquired a deed conveying ownership of parking spaces over which Semler also claimed ownership, thereby breaching the contract and damaging Semler. The trial court dismissed the claim for lack of standing. A division of the court of appeals reversed, concluding that Semler had sufficiently alleged a breach-of-contract claim as a third-party beneficiary, and concluding that the strict privity rule, which “precludes attorney liability to non-clients absent fraud, malicious conduct, or negligent misrepresentation” did not bar Semler’s claim. The Colorado Supreme Court determined the strict privity rule barred Semler's breach-of-contract claim, and as such, he lacked standing to assert it.
Perfect Place v. Semler
This quiet title action called on the Colorado Supreme Court to determine whether the owner of a garage condominium unit could validly subdivide that unit under section 38-33.3-213, C.R.S. (2018) of the Colorado Common Interest Ownership Act (“CCIOA”) by merely painting or marking lines on the garage wall, and thereafter separately convey the spaces thus marked as individual condominium parking units. Petitioner Perfect Place, LLC (“Perfect Place”) claimed ownership of three parking spaces (spaces “C, D, and E”) in a mixed-use residential and commercial building. Respondent R. Parker Semler contended he owned spaces C and D. The dimensions of these parking spaces were not marked or otherwise discernible from the condominium declaration or accompanying map. Quail Street Company (“Quail Street”) obtained a majority of the building’s condominium units, including the Garage Unit, from the original owner. Quail Street’s manager and sole shareholder, John Watson, later physically marked the boundaries of spaces C, D, and E with paint or tape, purportedly subdividing the Garage Unit into three individual units that could be separately conveyed. However, there was no evidence that Watson ever recorded any amendment to the declaration reflecting the subdivision of the Garage Unit, as required by section 38-33.3-213 of CCIOA. Watson later transferred his interests in spaces C and D to different buyers; those buyers later transferred their interests to others, including Semler. In June 2013, Perfect Place filed a quiet title action, asserting superior title to spaces C, D, and E based on a quitclaim deed it obtained from Watson in 2011 (the “2011 Quitclaim Deed”) that purportedly conveyed the Garage Unit as a single, undivided condominium unit. Although the individual spaces C, D, and E had been conveyed to other owners, Perfect Place contended that these conveyances were invalid because Watson had never validly subdivided the Garage Unit. Perfect Place thus claimed title to all three parking spaces, contending that the quitclaim deed it obtained from Watson was the only valid conveyance of the Garage Unit. Semler claimed superior title to spaces C and D based on deeds that conveyed these spaces to him as individual units. He further argued that Perfect Place obtained the quitclaim deed from Watson through fraudulent misrepresentations. The court of appeals affirmed the trial court’s conclusion that the Garage Unit was properly subdivided and that Semler owned spaces C and D. The Colorado Supreme Court concluded Watson did not validly subdivide the Garage Unity; and the court of appeals erred in concluding the 2011 Quitclaim Deed was void for fraud in the factum.
McMullin v. Hauer
This land dispute concerned the ownership of seventeen acres of “common open space” in a purported common-interest community. Petitioners Crea and Martha McMullin (“the McMullins”) acquired thirty acres of land in Rio Blanco County, Colorado, intending to develop a rural subdivision. The McMullins recorded a final plat, which created seven lots along with seventeen acres of common open space, and entered into a subdivision agreement with the County. The plat identified the subdivision as “Two Rivers Estates.” For the next eight years, the McMullins were unable to sell any of the lots. During that time, the McMullins mortgaged six of the seven lots to finance the construction of a family lodge on one of the lots. They did not mortgage or encumber the common open space. When the McMullins became unable to pay the loans, the mortgagee foreclosed on Lots 2 and 3, which were then purchased by Respondents Joseph and Kelly Conrado (“the Conrados”) and John and Sena Hauer (“the Hauers”), respectively. Still under financial strain, the McMullins sold Lot 1 to the Hauers and Lots 4, 5, 6, and 7 to Lincoln Trust Company FBO John Hauer. After acquiring six of the seven lots, the Hauers and Lincoln Trust Company filed suit to quiet title to their respective lots. The Hauers asserted that Two Rivers Estates was a common-interest community under the Colorado Common Interest Ownership Act (“CCIOA”), and that their lots included appurtenant rights in the common open space through an unincorporated homeowners’ association created by the common-interest community. After a bench trial, the trial court found that the recorded final plat, certain deeds, and the subdivision agreement established both an implied common-interest community and an unincorporated homeowners’ association that held equitable title in the open space. The court further concluded that the Hauers, Lincoln Trust Company, and the Conrados were members of the unincorporated homeowners’ association; that each lot owner had a duty to contribute 1/7th of the common expenses to the homeowners’ association; and that the homeowners’ association had power to levy assessments to collect those expenses. The McMullins appealed, and the court of appeals affirmed in a split, published decision, with the majority largely agreeing with the trial court’s analysis. The Colorado Supreme Court concluded the recorded instruments were insufficient under CCIOA to create a common-interest community by implication. Accordingly, the Court reversed and remanded to the court of appeals for further proceedings.
Oakwood Holdings, LLC v. Mortgage Investments Enterprises, LLC
Petitioner Oakwood Holdings, LLC and respondent Mortgage Investments Enterprises LLC each claimed a right to the deed on a piece of foreclosed property. In 2014, Mortgage Investments purchased the property at a foreclosure sale. On or around the date of the foreclosure sale, Oakwood purchased junior liens on the property and then attempted to redeem pursuant to section 38-38-302, C.R.S. (2017). Mortgage Investments, however, did not provide redemption figures and instead, acting under a limited power of attorney granted by the prior property owner, attempted to pay off the amount due to Oakwood under the junior liens. Oakwood, however, refused the payment. Mortgage Investments then filed for a declaratory judgment action, seeking a declaration that its payoffs were valid and that Oakwood was not entitled to redeem the property. The parties ultimately filed cross-motions for summary judgment, the district court granted summary judgment for Oakwood, Mortgage Investments appealed, and in a unanimous, published opinion, a division of the court of appeals reversed. The Colorado Supreme Court reversed the appellate court’s judgment, concluding that under the plain language of the applicable redemption statutes, a junior lienor who complied with its obligations under section 38-38-302 by timely filing its notice of intent to redeem is entitled to redeem, and at that point, it has no duty to accept a tendered lien payoff from a certificate of purchase holder. Although a debtor-owner is sometimes entitled to cure, the statute is clear that he or she must do so before the foreclosure sale is complete, and Mortgage Investments gained no additional rights by obtaining the limited power of attorney from the debtor-prior owner after the sale in this case. Accordingly, once Oakwood complied with the statutory requirements to redeem, it was permitted to do so and had no obligation to accept what amounted to cure funds tendered by Mortgage Investments on behalf of the debtor-prior owner.
Am. Family Mut. Ins. Co. v. Barriga
In 2009, a fire started in an apartment building owned by respondents Guillermo and Evelia Barriga and insured by petitioner American Family Mutual Insurance Company (“American Family”). American Family made various payments to the and on behalf of the Barrigas, totaling $209,816.43. However, after a substantial amount of repair work had been completed, the contractor revised its estimate for the cost of the repairs. The revised estimate was higher than American Family’s initial estimate, primarily because of the need for additional repairs and asbestos remediation. In response, American Family initiated a third-party appraisal process outlined in the insurance policy intended to provide an impartial assessment of the needed repair costs. The appraiser fixed the award at $322,141.79. American Family then paid that award, less the $209,816.43 that had been previously paid to the Barrigas, resulting in a payment of $122,325.36. American Family also made an additional payment of $5435.44 for emergency board-up services. The Barrigas sued American Family for breach of contract, common law bad-faith breach of insurance contract, and unreasonable delay and denial of insurance benefits under section 10-3-1116(1), C.R.S. (2017). The jury found for the Barrigas on all claims, awarding damages, as relevant here, of $9270 for breach of contract and $136,930.80 for benefits unreasonably delayed or denied. The issue raised on appeal for the Colorado Supreme Court's review centered on whether an award of damages under section 10-3-1116(1), C.R.S. (2017), had to be reduced by an insurance benefit unreasonably delayed but ultimately recovered by an insured outside of a lawsuit. The Court held that an award under section 10-3-1116(1) must not be reduced by an amount unreasonably delayed but eventually paid by an insurer because the plain text of the statute provided no basis for such a reduction. The Court also concluded that a general rule against double recovery for a single harm did not prohibit a litigant from recovering under claims for both a violation of section 10-3- 1116(1) and breach of contract.
Love v. Klosky
Carol Bishop and Mark Klosky (“Klosky”), and Shannon and Keith Love (the Loves) owned adjacent parcels of land in a residential neighborhood. Klosky wanted to remove a large tree sitting primarily on their property, but part of the tree sat on the Loves’ property. The Loves wanted to keep the tree. The controlling Colorado case law holds that when a tree encroaches onto a neighbor’s land, the tree remains the sole property of the owner of the land where the tree first grew, unless the tree was jointly planted, jointly cared for, or treated as a partition between the properties. Any such joint activity implied a shared property interest. Here, the trial court and appellate courts concurred the Loves failed to prove any such shared property interest, and the Colorado Supreme Court declined to overturn the prevailing case law. Thus, finding no reversible error, the Supreme Court affirmed rulings in Klosky’s favor.
Mallon Lonnquist Morris & Watrous, LLC is a strategic real estate law firm located in Denver, Colorado, with practice focused in all major aspects of business, real estate, financial transactions, estate planning, tax, and related litigation. MLMW can be reached directly at (303) 777-1411 and www.mlmw-law.com