“The fox chases the rabbit around the tree and down the hole. That’s how the tie works buddy.” Dirk Pitt – Sahara. Plaintiff Bristol Bay (BB) produced Sahara, based on a Clive Cussler novel. Cussler told BB he had sold over 100 million books; actually it was 40 million. The movie failed and BB lost around $50 million. BB sued Cussler in California for fraudulent inducement. A CA jury found that BB’s damages were not caused by Cussler’s lie. BB then sued different defendants – Cussler’s agents – in Colorado for the same exact claim. Defendants moved to dismiss, arguing the claims were precluded by the CA action and won. The Court agreed because the identity of the defendant is irrelevant to whether plaintiff’s reliance caused damages. But, the trial court should have converted the CRCP 12 motion to CRCP 56 because preclusion was an affirmative defense based on matters outside the pleadings.
Tag Archives: Fraud
Bristol Bay Productions, f/k/a Crusader Entertainment v. Peter Lampack; The Peter Lampack Agency; Simon & Schuster; and Penguin Group USA, 2013CO60 (October 21, 2013)
Premier Members Federal Credit Union, v. Henry Block and South Broadway Automotive Group, Inc., d/b/a Quality Mitsubishi, Inc., v. Darrell Einspahr, 2013COA128 (Aug. 29, 2013)
If you want a jury trial, you have to pay the fee. (If you file electronically through ICCES, Colorado’s E-filing system, jury trial fees are added automatically). Here, a pro se defendant demanded a jury on his cross-claim but did not pay the jury fee. He later moved under CRCP 6 to pay out-of-time but was denied. The court of appeals affirmed. “According to the rule [CRCP 38] and the statute [CRS 13-71-144], the failure to pay the jury fee at the time of filing of the jury demand constitutes a waiver of a jury trial.” CRCP 6 does not permit a trial court to enlarge the statutory time to pay jury fees. Plaintiff’s cross-claim for indemnification was also dismissed by the trial court. The court of appeals again affirmed because “an employee-tortfeasor is barred from seeking indemnification from his vicariously liable employer when [ ] that employee knew he was engaging in wrongful conduct.”
Dennis Shaw and First Horizon Home Loan Corporation, v. 17 West Mill St, LLC, 2013CO37 (June 24, 2013)
“Rather fail with honor than succeed by fraud.” – Sophocles. In this case the attorney for a borrower signed a request for a release of a lender’s deed of trust as “attorney for lender.” Lender later found out and sued, seeking to set aside the release because CRS 38-39-102 voids releases based on a “fraudulent request.” The Court upheld the trial court and reversed the court of appeals by holding that “fraudulent” means proof of actual fraud by a preponderance of the evidence, similar to common law fraud. It did so to fulfill the purpose of the statute: creating certainty, predictability, and relieving public trustees from a duty to inspect releases to determine validity. Here, borrower’s attorney signed for the lender because he had done so before and was under time pressures. It was negligent, not fraudulent. Thus, the later bona fide purchaser obtained title to the property.
Deutsche Bank Trust Co. Americas, and Saxon Mortgage, v. Veronica E. Samora, 2013COA81 (May 23, 2013)
“Samora chose to accept … misrepresentations rather than … investigate the transaction after discovering the document was a warranty deed with the name of an individual [Wasia] she had never met.” (Opinion). Samora was the victim of a complex real estate fraud. As part of the fraud, she relied on misrepresentations about a warranty deed she signed, and unknowingly transferring title to Wasia. Wasia deeded the house to Saxon for a loan. Deutsche Bank (DB), Saxon’s trustee, sought to quiet title. The appellate court held that the Samora-Wasia deed was valid. As a consequence: 1) Samora’s claims accrued when she alerted the DA to the fraud, 2) there was no fraud in the factum because she knew she signed a deed, and 3) DB (who was not “closely related” to Saxon) was a holder in due course. Thus, the deed was not voided and the Wasia-Saxon deed was not a spurious lien. Title quieted in Saxon.
Federal Deposit Insurance Corporation [as Receiver for Community Banks] v. Yale Fisher, 2013CO5 (January 22, 2013)
There is an old saying, “Banks will only lend money to people who don’t need a loan.” Actually, banks normally off-set the risk of non-payment by adding a 36% default interest rate. But in this case, the original agreement did not include 36% default interest. A series of later modifications added a 36% default rate, but without noting it as a changed term. That seemed to make the rate ambiguous. The Supreme Court disagreed, finding the later modifications unambiguously included the 36% rate. The Credit Agreement Statute of Frauds, CRS 38-10-124, allows for extrinsic evidence to be considered to resolve ambiguous credit agreements. Here, extrinsic evidence suggested that the 36% rate was only added later as a computer error. However, as the contract was unambiguous, the statute didn’t apply and the evidence could not be considered. The borrower owed 36% on the defaulted amount.
Hard money lenders are private investment companies that offer shorter term loans secured by real property when traditional commercial real estate loans are not available from banking institutions. Here, a hard money lender, CCI, insured against its own losses for want of fidelity by CCI’s own officers, with a fidelity bond from Lloyds. CCI officers allegedly committed fraud in attracting investors to invest in CCI, which made hard money loans to commercial real estate borrowers. Following CCI’s bankruptcy, investors sued Lloyds on behalf of CCI, and CCI itself, to recover losses. Lloyds claimed its policy did not cover the investors’ losses. The court of appeals agreed. Indirect losses to investors are protected by liability policies, not fidelity bonds. Because Lloyds issued a fidelity bond to protect CCI directly, it did not cover indirect losses by investors.