Garfield & Hecht, P.C., attorneys recently secured a cash settlement on behalf of two minor children whose 23-year-old mother was killed in a fatal traffic collision near Carbondale on Highway 82.  The wrongful-death lawsuit raised complex immigration and wrongful-death damages issues because the single mother was an undocumented worker at the time of the collision.  It also raised complex issues regarding the scope of the duties of a pilot-car escort driver under federal and state statutes and Colorado common law to protect other highway users from dangers posed by the movement of extra-legal-load vehicles on state highways.

The settlement brings to a close more than four years of litigation against the various parties involved in the collision.  Lead trial attorney, David Lenyo, and associate, Ryan Kalamaya, were in the midst of preparing for the five-day jury trial against the two remaining defendants, the pilot-escort driver and company, in the United States District Court for the District of Colorado before Senior Judge Richard Matsch when the case settled.  Garfield & Hecht, P.C., represented the two minor children and their conservator, Maritza Ramos, on a pro bono basis in the federal court lawsuit.  Previously, Garfield & Hecht, P.C., negotiated a settlement of the surviving children’s claims against the truck driver and trucking company prior to the filing of the pro bono federal court lawsuit against the remaining pilot-car Defendants.  Garfield & Hecht, P.C., is hopeful that the proceeds from this case that are periodically sent to the minor children’s caregiver in El Salvador by the conservator will be sufficient to provide for the children’s upbringing and possibly pay for their tuition if they choose to attend college.

The case involved the following facts: on January 8, 2008, at approximately 6:35 a.m. while it was still dark, a truck driver was hauling a mobile office trailer from near Carbondale to the ESPN Winter X-Games being held near Aspen.  The mobile office trailer did not have the requisite lighting on the side of the trailer as required by federal regulations, state law and Colorado Department of Transportation regulations.  A pilot-escort driver was hired to safely escort the extra-legal load to Buttermilk for the X-Games. 

While waiting to turn left onto east-bound Highway 82 near Catherine Store, the unlit trailer unlawfully blocked both west-bound lanes of the highway.  Because of this hazardous condition, a small Kia sedan carrying three people violently collided with the Kenworth truck and the extra-legal load.   The collision instantly killed the single mother of the two minor children who were, respectively, four years old and one year old at the time.

Financial institutions obtaining title to property in Colorado through public trustee foreclosures are sometimes surprised to learn that the foreclosure did not remove all the title problems that would be objectionable to a prospective buyer when the institution attempts to resell the property.
A foreclosure, among other things, is a means to extinguish liens and encumbrances junior to the foreclosed mortgage. Under Colorado’s “race notice” rule after recorded or unrecorded liens are ordinarily junior to the institution’s mortgage and will be extinguished in a foreclosure.  Unfortunately, this rule is fraught with exceptions.  Statutes, case law, and contract may all affect the relative seniorities of recorded, unrecorded, and after-recorded liens.
Anyone concerned with the value and marketability of foreclosed property must look beyond the typical title report to understand what will and will not survive the foreclosure.  By learning about and addressing any surviving liens or encumbrances, the institution can better prepare the property for resale.

• Examples of liens or encumbrances that may survive a public trustee foreclosure include the following:
  • If a lender had actual notice of an unrecorded lien at loan origination, the unrecorded lien may be deemed senior to the lender’s mortgage.
  • Homeowners’ associations, to a limited extent, enjoy a senior lien for an amount equal to the regular common expense assessments due during the six months immediately prior to the foreclosure.  Amounts above this “super-priority” lien will be extinguished.  Also, if the lender is foreclosing on a second mortgage, the entire amount due the association is a prior lien.  
  • Architects, builders, and other workers may be entitled to a so-called “mechanics lien,” which may in some instances enjoy a statutory seniority.  In particular, many lenders are not aware of Colorado’s doctrine of “relation back,” under which the priority of a mechanics lien may date back the commencement of first work by the first party entitled to record a mechanics lien (usually a surveyor, engineer, or architect). 
  • Some federal, state, or municipal liens (recorded or not) may enjoy a statutory seniority.  For example, property taxes are deemed senior to a mortgage. 
  • After recorded liens to which the foreclosing lender voluntarily subordinated its interests will survive. 
  • A residential lease may be deemed to be a senior lien under certain consumer protection laws now in effect.  Under the “Protecting Tenants at Foreclosure Act,” Federal Law mandates that a residential lease, if it meets certain requirements, may survive a foreclosure, and any lender may find it difficult to sell or even show this property until the lease expires.  This law sunsets in 2013.
  • A mortgage will oftentimes be contractually subordinated to commercial leases (though these agreements will most likely be of record). 
  • Zoning ordinances and building regulations typically survive a foreclosure, even if they arising after the mortgage.
  • Sometimes a foreclosing lender will intentionally (or accidentally) omit otherwise junior lien holders from a foreclosure; the liens of such omitted parties may survive.

The above list is non-exhaustive, and subtle nuances apply to each item. In many foreclosures, legal counsel can be an invaluable resource to help identify and in some cases assist in the removal of these problem liens and encumbrances.

Counties often require proof of an adequate water supply as a condition of land use approval.  Where a development will not be served by a central water provider such as a city or metro district, counties may refer a proposed water supply plan to the State Engineer for review.  Previously, such State Engineer review was limited to subdivision applications.  In 2011, the State Engineer enacted new policies for the review of water supplies which now apply to land divisions even when they are exempt from the county subdivision process.

Under Colorado law, a “35-acre exempt well permit” may be obtained for a parcel of land that is 35 acres or larger, and the well can be used to serve up to three houses plus one acre of irrigated land, fire protection, and the watering of poultry, domestic animals and livestock.  Until recently, if such a permit was already in place, counties permitted the landowner to divide the land and rely on the exempt well to serve the same number of houses and irrigated area on separate parcels.  That has now changed.

 In 2011, the State Engineer issued a new policy and memorandum to all county land use planning directors recommending that all proposed divisions of land (including subdivision exemptions) with existing wells or well permits be forwarded to the State Engineer for review.  If the proposed land division will result in a well being located on a new parcel of land that is smaller than the acreage required for issuance of the original permit, then the State Engineer will recommend the county to require a new permit.

 This policy eliminates the possibility of sharing an existing 35-acre exempt well between newly created, smaller parcels.  Instead, each new parcel – including the parcel on which the existing well is located – will have to obtain a new well permit or water supply consistent with the new parcel size (if less than 35 acres).  The only exempt well that may be used for residential purposes on a parcel of land that is less than 35 acres is for in-house use only inside one single-family dwelling.  Therefore, any irrigation or other outside water use would have to be supplied from another source.

 Each county in Colorado will need to decide whether to comply with this recommendation, so the practical implications of the new policy may depend on where a subject property is located.  Both Eagle County and Garfield County are following the recommendation.

 Property owners considering a division of land that is not served by a central water service provider should consult with an experienced water attorney before pursuing an application with their county land use planning department.  For more information about our water law practice, please visit www.garfieldhecht.com.

For the calendar year 2011 the Garfield &Hecht, P.C. law firm assisted Bank of America Private Banking with closing documentation for loans aggregated over $145M.  This represents an increase of approximately 40% over 2010.  The law firm assists Bank of America Private Banking with loan closing documentation on the western slope of Colorado including Aspen, Snowmass, Avon, Beavercreek and Vail. 

On October 31, 2011, Garfield & Hecht, P.C. attorneys David H. McConaughy and Eric D. Musselman obtained a favorable jury verdict in Garfield County District Court in a commercial real estate case (Parachute Development Corporation, et al. vs. Judith Day, Case No. 2008-cv-322).  The case involved a vacant commercial subdivision in Parachute, Colorado, known as Parachute Park PUD.  The subdivision had been created in the 1980s just before “Black Sunday” when Exxon pulled out of its local oil shale project, resulting in collapse of the local economy.  The original developer ran out of money and never completed the roads, and the water and sewer lines fell into disrepair from non-use over the next 30 years.  In 1992, a limited partnership called HMC acquired 16 of the 26 vacant lots in the hope that a statewide vote would legalize gambling in Parachute.  The gambling vote failed, but HMC was able to sell off two of the lots as well as leasing the mineral rights and distributing the royalties to its partners.  In 2005, one of the general partners, Hayden Rader, made an offer to purchase the remaining 14 lots for the “actual value” stated by the Garfield County Assessor.  The other two general partners voted to complete the sale, and the proceeds were sent to all the partners (limited and general), who more than doubled their initial investments.  Mr. Rader, through his company Parachute Development, could now combine the 14 lots with 10 others he owned in the project.  The Town of Parachute was delighted to have a single developer that could finally put the zoning back in place and complete the infrastructure.  Parachute Development signed an agreement with the Town to complete the roads and took out over $5 million in construction loans.  In October 2008, Parachute Development was under contract to sell the first lot to an oil company wanting to build in Parachute.

When (through Mr. Rader’s efforts) the project appeared successful, one of the limited partners in HMC decided that she wanted more money from the sale to Mr. Rader.  In addition to more money, the limited partner and a second limited partner joined in the claims against Mr. Rader asking that title to the 14 lots be restored to HMC, which would make it impossible for Parachute Development to sell to the oil company and would also jeopardize the construction loan agreement and the agreement with the Town. 

After a 5-day trial, the jury returned a verdict in favor of Mr. Rader and the other two general partners – Michael Stascavage and Chalmers Morse — completely exonerating them from all claims asserted.  The jury also determined that the limited partners breached the partnership agreement of HMC by asserting their claims and attempting to unwind the sale.  Because they prevailed on the contract claims, the general partners will now seek to recover their attorney fees and costs.  Finally, because the claims caused the oil company not to buy the lot, the jury awarded Parachute Development $435,000 in damages for interference with contract.

On June 6, 2011, Garfield & Hecht attorneys David McConaughy and Dan Reynolds presented a seminar in association with the Aspen Young Professionals Association on the law of ECommerce and Doing Business in Cyberspace. The seminar was well-attended and included a lively discussion of current issues regarding the interplay of law and technology. The seminar included a step-by-step description of how to select and register a unique domain name for a website, issues to consider in designing and launching a new website, and options for electronic billing and payment. With any new business, but especially when doing business in cyberspace, it is vitally important to have policies and procedures in place to avoid the misuse of data or information that may be protected by copyright or other means, to protect customer data and proprietary intellectual property, and to provide for secure financial transactions. Additionally, these policies should be reflected in employee handbooks so that employees are required to protect and keep confidential certain information such as passwords and company and customer data. Employees should also have restrictions on personal use of the internet and sending personal e-mails from work. Federal law imposes requirements and restrictions on unsolicited e-mail or “spam.” (Federal courts have defined “spam” in reference to a Monty Python sketch from the 1970s.) Businesses can be liable for business-promotion spam that does not comply with the federal requirements, even if the source of the spam is a third party and not the business itself.

E-commerce presents new issues for entering into contracts electronically. Under both Colorado and Federal law, signatures on contracts will not be declared invalid simply because they are in electronic format. However, a wide variety of avenues exist to create legally binding electronic contracts, ranging from “click-wrap” agreements to passwords and user accounts to the emerging area of biometrics. Different approaches are suited to different applications.

The potential for identity theft and internet fraud is enormous, and companies should take steps to protect themselves including the adoption of policies to identify and prevent fraud. The Federal Trade Commission has adopted requirements for certain types of business to have protective policies in place. Social Security numbers must never be required for use as usernames or passwords.

The slide show from the presentation, including links to helpful websites and internet resources, can be found below. The web pages mentioned in this slide show are offered as examples for general reference, and their inclusion in the slide show should not be considered an endorsement or recommendation of any particular company, product, or service by Garfield & Hecht, P.C.

AYPA Presentation

PRESS RELEASE

COURT FINDS IN FAVOR OF WESTLB AG IN BANKRUPTCY PROCEEDINGS CONCERNING THE DANCING BEAR DEVELOPMENT IN ASPEN — FORECLOSURE OF DANCING BEAR MAY PROCEED

On May 25, 2011, the Honorable Michael E. Romero, a federal judge with the United States Bankruptcy Court for the District of Colorado, entered a 23-page written Opinion granting WestLB AG’s Motion for Relief from Automatic Stay. WestLB AG is a bank that had provided over $58 million in financing for development and construction of the Dancing Bear, a fractional-unit private residence club in Aspen, Colorado.

The Dancing Bear development consists of a fully constructed building adjacent to Wagner Park in downtown Aspen and a skeleton frame of an unfinished building across the street. The Dancing Bear project was not completed, experienced large cost overruns, as well as difficulty marketing and selling its inventory of fractional units.

After the Dancing Bear entities defaulted on their loans, followed by numerous work-out attempts and agreements to forbear, WestLB commenced foreclosure proceedings in Pitkin County District Court. The Court subsequently appointed a receiver to oversee and manage day-to-day operations of the Dancing Bear project. In 2010, various single-asset real estate entities affiliated with the Dancing Bear project sought protection from its creditors by filing for bankruptcy, which, under federal statute, automatically stayed all other proceedings. As the Debtors in the bankruptcy case, the Dancing Bear entities sought to reorganize and to obtain the upwards of $35 million in additional financing from other sources to complete the project.

Judge Romero’s detailed Opinion concluded that the automatic stay should be lifted so that WestLB can pursue its remedies as a creditor of the Dancing Bear project. The bankruptcy court determined that WestLB would not be “adequately protected” because the Debtors had no feasible plan to ensure repayment to its creditors, the largest of which was WestLB. Specifically, the court found that the Debtors’ proposals “are simply too speculative and too attenuated to comprise a reasonable probability of a successful reorganization within a reasonable time.”

WestLB Dancing Bear Judgment
WestLB Danging Bear Written Opinion

GARFIELD & HECHT, P.C.
Attorneys at Law
Since 1975
www.garfieldhecht.com

We are proud to announce the opening of our new office in Rifle, Colorado, formally Carter & Sands, P.C. at:

Downtown Professional Building
450 West Avenue, Ste 204
P.O. Box 192
Rifle, CO 81650

Telephone: (970) 625 – 1075
Facsimile: (970) 625 – 3989

Garfield & Hecht, P.C. is also pleased to announce that

Stephen L. Carter
&
Edward P. Sands

Have joined the firm as Of Counsel Attorneys, and will continue to work in the Rifle Office.  Mr. Sands will continue to specialize in the areas of municipal law and government law.

Aspen      Avon       Basalt       Glenwood Springs     Rifle

2009 is a revaluation year for real property in Colorado, meaning everyone who owns property in Colorado will be receiving a notice of valuation from their county assessor.  In many cases the property value reflected on the notice will show a dramatic increase from the current assessed value of the property, and may be greater than the market value of the property today.  Property owners are often concerned about the impact of this change on their property taxes and wonder about their rights.

Garfield & Hecht, P.C., established in 1975, has considerable expertise and experience in appealing property tax valuations to assessors, Boards of Equalization, and the Board of Assessment Appeals.

For more information regarding the firm’s property tax appeal practice, please contact one of the following attorneys:

For property in Pitkin County, please contact Greg Gordon at ggordon@garfieldhecht.com.

For property in Eagle County, please contact Kursten Canada at kcanada@garfieldhecht.com.

For property in Garfield, Gunnison, or another Counties, please contact David McConaughy at dmcconaughy@garfieldhecht.com.

As a convenience to our clients we are now accepting credit cards as a form of payment. Clients desiring to make payments via credit card have a choice. You may call our accounting department at 970-927-1946 and provide the necessary credit card information. We are accepting Visa, MasterCard, Discover, and American Express. Credit card information will be kept confidential. In the alternative, we now have a secure section on our website that allows on-line payment by credit card and provides on-line instructions. Please go to www.garfieldhecht.com, and then click on Pay My Bill. On line payment and the acceptance of credit cards is a direct response to the requests from our clients for alternative methods to pay their bills, and we have upgraded our billing department technology accordingly.

On March 30, 2011, Judge Denise K. Lynch, Pitkin County District Court, Colorado, applied the Interstate Land Sales Full Disclosure Act (“ILSA”) in favor of Garfield & Hecht, P.C.’s (“G&H, P.C.”) purchaser clients.  The Court held that the developer (a Related Companies (NYC) development entity) of the massive and stalled Base Village Project in Snowmass Village, Colorado violated ILSA §1703(a)(1)(C) by selling luxury hotel/condominium units (“Units”) in a Viceroy Hotel with untrue statements about the actual square footage of the Units as filed with the U.S. Department of Housing and Urban Development (“HUD”).  This March 30th ruling follows another favorable March 1st summary judgment ruling in favor of G&H, P.C.’s clients finding that each had a right of rescission under ILSA because the Units offered for sale were not clearly identifiable, ILSA §1703(d)(1).

The March 30, 2011 order was also entered in the consolidated lawsuits titled Michael Keefe et al. v. Base Village Owner, LLC, et al., pending in the Pitkin County Colorado District Court, Case No. 09 CV 273.  The developer provided each purchaser with a HUD Property Report and a Unit Plan prior to construction that represented the Units square footage.  After the Viceroy Hotel was built, the developer recorded a Condominium Map that contained substantially less as-built square footage for each Unit, varying between 6.734% to 23.413% of lost square footage.  The developer’s untrue statements in the HUD Report resulted in estimated losses of square footage valued at $8 Million.

Judge Lynch rejected (1) the developer’s argument that there are different methods for measuring square footage, and (2) a receiver’s argument that square footage is not a material item of concern to purchasers.  Instead, Judge Lynch adopted G&H, P.C.’s ILSA § 1703(a)(1)(C)  argument and found that a “reasonable buyer of a condominium unit would consider the square footage of the unit to be important in making a decision as to whether to buy the unit.”  The District Court found that the discrepancy was a material fact and that the developer made untrue statements about the size of the Units in its HUD Report.  The purchasers are now entitled to a return of their deposits (nearly $15 Million), their damages, including attorneys’ fees, costs, prejudgment interest, appraiser fees and travel costs to and from the Units.

Matthew C. Ferguson and Chad J. Schmit, partners with the Aspen, Colorado based law firm of Garfield & Hecht, P.C. are acting as lead counsel in the consolidated lawsuit involving the approximately sixty-five (65) purchasers.  For more information concerning this ruling or the nature of this lawsuit, please contact G&H, P.C. attorneys Matthew C. Ferguson at ferguson@garfieldhecht.com or Chad J. Schmit at cschmit@garfieldhecht.com.

On March 1, 2011, Matt Ferguson, partner with the Aspen, Colorado based law firm of Garfield & Hecht, P.C. (“G&H, P.C.”) acting as lead counsel for numerous consolidated cases and representing approximately sixty-five (65) Plaintiffs-vendees obtained a state court judgment having implications for all attorneys prosecuting or defending claims under the Interstate Land Sales Full Disclosure Act (“ILSA”) (15 U.S.C. §§ 1701, et seq.).

The case concerns Plaintiffs who entered into Purchase and Sale Agreements for the purchase of condo-hotel units in the Viceroy Hotel in Snowmass, Colorado, and sought rescission and return of their deposits of 15% of the purchase price – totaling nearly $15.0 Million.  G&H, P.C. and its co-counsel asserted various claims under ILSA for rescission and common law claims for fraud and breach of contract. The Viceroy Hotel developer is a Related Companies (NYC) development entity currently in receivership and subject to a foreclosure by HYPO Real Estate Capital Company, the U.S.-based arm of the now-nationalized German bank Hypo Real Estate Holding, AG, which lead a consortium of German banks that agreed to lend $520,000,000 to the Related Companies subsidiary developing the massive Base Village Project outside Aspen, Colorado.

G&H, P.C. successfully argued that the units offered for sale were not clearly identified and thus each plaintiff had a rescission right under ILSA.  In this case, the developer’s HUD property report and contract square footage representations of unit square footages did not comport with the as-built usable square footages.  The discrepancies were significant and in the order of 6.734% to as high as 23.413%.

The developer, the receiver and HYPO all unsuccessfully argued that such a discrepancy did not violate ILSA and particularly the provisions of 15_U.S.C. § 1703(d)(1) because the discrepancy was purportedly solely the result of using a different methodology for square footage measurements in the property report as opposed to what was used to measure the as-built unit sizes. The trial court rejected Defendants’ notion that the claims were fraud only and stated: “The Court agrees that it is a fraud issue but the square footage issue is also a clearly identifiable issue under ILSA.”

In essence, sales prices in the contracts (calculated at approximately $2,000.00 per sq. ft.) were based on the unit sizes as appearing in the HUD property report even though the as-built units were almost all significantly smaller.  Accordingly, the actual square footage price of the as-built units was considerably more than the $2,000.00 per sq. ft. or conversely there was approximately $8.7 million missing in actual property value. G&H, P.C. successfully demonstrated to the court that the evidence was uncontroverted that the property descriptions required by ILSA were not valid because of the discrepancy in square footage between the as-built condition and what was depicted in the HUD report and contracts.
Under § 1709 of ILSA, Plaintiffs are entitled to rescind their contracts, the return of approximately $15.0 in deposits, interest and attorneys’ fees, interest of approximately $3.7 million. Plaintiffs await a ruling pursuant to § 1703(a)(1)(C) of ILSA that also prohibits untrue statements in the HUD report and is essentially a strict liability fraud provision. Plaintiffs contend that HYPO is liable to Plaintiffs, as it dictated the minimum release prices for units based on as-advertised square footage prices.
Those wishing to follow this case are referred to Michael Keefe, et al. v. Base Village Owner, LLC, et al., pending in the Pitkin County (Colorado) District Court, Case No. 09 CV 273. Inquires about this case, other ILSA violations, or other legal disputes concerning real property may be made to G&H, P.C. attorney, Matthew C. Ferguson at ferguson@garfieldhecht.com.

On February 28, 2011, in a mold litigation case, David McConaughy and Chris Bryan of the Colorado law firm of Garfield & Hecht, P.C. obtained a state court judgment awarding costs and attorneys’ fees to their clients in the amount of approximately $58,000.00.  The award was for prevailing-party costs and court sanctions following Garfield & Hecht, P.C’s success in winning the case for their clients.  The order was entered against the plaintiffs on a joint and several basis.  Part of the award of costs and attorneys’ fees was entered as a rare Rule 37 sanction against plaintiffs’ own lawyers for failure to comply with the Colorado Rules of Civil Procedure’s disclosure obligations.

The case concerned 17 plaintiffs, some of whom formerly worked at a commercial building in Garfield County outside Glenwood Springs, Colorado. The plaintiffs alleged that they had suffered from mold contamination at the building in 2006 and filed a potentially multi-million dollar lawsuit against Garfield & Hecht, P.C.’s clients.  Garfield & Hecht, P.C. successfully defended the landowners of the building and obtained summary judgment in their favor.  Garfield & Hecht, P.C. successfully excluded in limine some of the plaintiffs’ key expert witnesses under Rule 702 of the Colorado Rules of Evidence.  By winning on summary judgment, Garfield & Hecht, P.C. served their clients’ interests and avoided a costly and time-consuming 10-day jury trial.

Plaintiffs contended that they suffered from various respiratory problems that their physician diagnosed as “mold illness.”  Garfield & Hecht, P.C. succeeded in having the physician excluded from testifying on the grounds that he was not qualified to render expert opinion under People v. Shreck, the Colorado Supreme Court’s standard for expert admissibility.  Garfield & Hecht, P.C. attorneys read and analyzed the medical literature regarding mold contamination, toxicology, immunology, and related issues and proved to the trial court that the plaintiffs’ physician used unreliable and unsound methods that were not accepted within the scientific community.

The case is now on appeal with the Colorado Court of Appeals, where oral arguments are to be held in the summer of 2011.

Those wishing to follow this case are referred to Bailey, et al. v. Willison, et al. in the Garfield County (Colorado) District Court, Case No. 07 CV 224, and in the Colorado Court of Appeals, Case No. 10 CA 0609. Garfield & Hecht, P.C. lawyers try cases and prosecute appeals throughout the state and federal courts of Colorado and handle a wide array of cases.  Inquires about this case, trial practice, appeals, or other legal disputes may be made to Garfield & Hecht, P.C. attorneys David H. McConaughy (e-mail: dmcconaughy@garfieldhecht.com) or Chris Bryan (e-mail: cbryan@garfieldhecht.com).

Robert E. Kendig is a shareholder in the Aspen-based law firm Garfield & Hecht, P.C. (G&H), a full service, AV-rated firm. His practice consists primarily of family law matters including complex and high conflict marital dissolution and parental responsibilities cases, as well as issues relating to marital agreements, common law marriage, rights of unmarried cohabitants and similar subjects.   He graduated from the University of Denver College of Law in 1976 and was a member of the Denver Law Journal and Order of St. Ives.  He has frequently lectured on issues related to Family Law and Litigation at accredited continuing legal education seminars and authored the Colorado Bar Association Annual Survey of Colordo Law in the Family Law area for five years.