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Colorado Court of Appeals Opinions
January 2, 2014

The Court of Appeals summaries are written for the Colorado Bar Association by licensed attorneys Teresa Wilkins (Denver) and Paul Sachs (Steamboat Springs). Please note that the summaries of Opinions of the Colorado Court of Appeals are provided as a service by the Colorado Bar Association and are not the official language of the Court. The Colorado Bar Association cannot guarantee the accuracy or completeness of the summaries.

2013 COA 1. Nos. 11CA2639, 12CA0873 & 12CA1554. First Citizens Bank & Trust Co. v. Stewart Title Guaranty Co.
Construction Loan—Title Insurance—Deed of Trust—Attorney Fees—Costs.

United Western Bank (UWB), predecessor to First Citizens Bank & Trust Company (FCB),issued a construction loan to Leathem S. Stearn to build a private residence on his property. UWB requested a title insurance policy from Stewart Title Guaranty Company (Stewart). Stewart discovered that record title to the property was vested in a company (Ute) associated with Stearn. As a result, Stewart issued a title commitment containing a requirement that Ute convey title to Stearn. This requirement was never satisfied. Stearn defaulted on the loan, and UWB contacted Stewart seeking coverage for losses under the policy. Stewart issued a letter denying coverage based on an exclusion in the policy. The trial court found that Stewart had breached its title insurance contract with FCB, and awarded FCB attorney fees and costs. The Court of Appeals consolidated defendant’s appeals.

In this appeal, Stewart contended that UWB’s claim was barred by Exclusion 3(a) of the policy because UWB closed the loan in-house and was required to obtain a deed from Ute conveying title to Stearn but did not do so. However, the language of Exclusion 3(a) is ambiguous. The Court ruled that because Stewart failed to show that UWB made a conscious and deliberate act intended to bring about the conflicting claim, the trial court did not err by holding that Exclusion 3(a) of the policy did not bar coverage.

Stewart also contended that the trial court erred in holding that it waived its additional asserted defenses. However, Limitation 8(b), which is an embodiment of the foreclosure first doctrine, is inapplicable because Stewart conceded that the deed of trust was defective. Furthermore, because the deed of trust was invalid at its inception, plaintiff FCB could not, as a practical matter, foreclose on the property. Consequently, the trial court did not err when it awarded the full amount owed under the promissory note.

Stewart also contended that the trial court erred in awarding attorney fees to FCB for its suit against Stewart. FCB’s complaint did not identify attorney fees as special damages incurred as a result of Stewart’s conduct. Thus, FCB is precluded from recovering those fees as damages. Because there was no other contractual or statutory provision authorizing the award of attorney fees, the trial court’s award to FCB for the attorney fees associated with its lawsuit against Stewart was reversed. Because FCB was the prevailing party, however, the trial court did not err in awarding FCB its costs.

2013 COA 2. No. 12CA1802. Maxwell v. United Services Automobile Association.
Class Action—Uninsured/Underinsured Motorist (UM/UIM)—Fraudulent Concealment—Reliance—Circumstantial Evidence—Damages—Filed Rate Doctrine.

In this putative class action, plaintiffs James and Janet Maxwell and Leon Hill, individually and on behalf of all others similarly situated, asserted that defendants United Services Automobile Association and USAA Casualty Insurance Company (collectively, USAA) fraudulently concealed information necessary for plaintiffs to make informed decisions about purchasing UM/UIM coverage on their additional vehicles. They pleaded claims for fraudulent concealment, insurer bad faith, and violation of the Colorado Consumer Protection Act (CCPA). The trial court denied class certification.

On appeal, plaintiffs contended that the trial court erred in admitting data compiled by State Farm Mutual Insurance Company (State Farm) about its insureds’ retention of UM/UIM coverage on additional vehicles after these insureds were notified of the Colorado Supreme Court’s decision relating to this issue [DeHerrera v. Sentry Ins. Co., 30 P.3d 167 (Colo. 2001)]. The Court of Appeals disagreed, holding that none of the grounds on which the trial court ruled to admit the data constituted an abuse of discretion.

Plaintiffs also contended that the trial court abused its discretion by concluding that plaintiffs failed to satisfy the predominance requirement of CRCP 23(b)(3). Plaintiffs were required to prove reliance, which is an element of fraudulent concealment. Further, while uniform concealment of material information creates an inference of reliance, that inference may be rebutted by evidence that a reasonable consumer would have made the same decision, even if the information had been disclosed. Here, the trial court properly considered USAA’s circumstantial evidence in concluding that the inference on which plaintiffs relied to show commonality did not obviate the need for individualized inquiry, which would be inconsistent with the class action mechanism. Accordingly, the court did not abuse its discretion in denying class certification.

Plaintiffs further contended that the trial court erred in holding that the filed rate doctrine applies to the insurance industry, barring plaintiffs from obtaining a refund of UM/UIM premiums as damages. The Court held that the filed rate doctrine applies to Colorado’s insurance industry, including consumer fraud claims, and that this doctrine prohibits plaintiffs’ damages theory because it involves judicial second-guessing of the approved insurance rates. Accordingly, the trial court did not err in holding that a refund of UM/UIM premiums for additional vehicles was not a permissible theory of damages on the fraudulent inducement claim.

2013 COA 3. No. 12CA2267. Farmer v. Raemisch, Exec. Dir., Colorado Dep’t of Corrections.
Inmate’s Civil Complaint—CRS § 13-17.5-102.7—Ineligibility to Proceed Without Prepayment of Filing Fee—Denial of Access to Courts.

Plaintiff D. Thomas Farmer, a state inmate, filed a complaint alleging that unnamed prison employees had used excessive force against him, causing him various physical and psychological injuries. Farmer requested to proceed in forma pauperis—without prepaying the filing fee applicable to civil cases. The court determined that on three occasions, civil complaints filed by Farmer had been dismissed as frivolous, groundless, or malicious, or for failure to state a claim on which relief could be granted, or because they sought monetary relief from persons immune from such liability. The district court denied Farmer’s request and dismissed his complaint for failing to pay a filing fee.

On appeal, Farmer argued that CRS § 13-17.5-102.7 violates his right to access to the courts as guaranteed by the U.S. Constitution. The Court of Appeals disagreed. Because each of Farmer’s previous complaints was dismissed for at least one reason expressly identified by § 13-17.5-102.7, each qualifies as a dismissal. The trial court therefore did not err in denying Farmer’s request to proceed in forma pauperis. The order was affirmed.

2013 COA 4. No. 12CA2334. In re the Marriage of de Koning.
Dissolution—Attorney Fees—Discovery—Hearing.

During this highly contested dissolution of marriage proceeding, wife incurred approximately $90,000 in attorney fees. By court order, husband paid $20,000 of those fees before the permanent orders hearing. At the permanent orders hearing, wife requested that husband pay her remaining attorney fees. Following the hearing, the court entered a decree of dissolution of marriage and permanent orders, reserving the issue of payment of wife’s attorney fees for a separate hearing. Wife thereafter requested additional production of documents regarding husband’s finances, and the court granted husband’s motion for protective order, finding that husband’s current finances were not relevant to the upcoming hearing on attorney fees. At the hearing on attorney fees (six months after permanent orders), the court ordered the parties to pay their own attorney fees.

On appeal, wife argued that the court erred in denying her request for production of documents and not considering evidence of the parties’ financial circumstances on the date of the attorney fees hearing. The attorney fees hearing was an extension of the permanent orders hearing; therefore, the permanent orders were not fully resolved until the attorney fees order was entered. As such, evidence of the parties’ financial resources when the attorney fees hearing occurred was not only relevant but was necessary for the court to determine whether wife was entitled to fees under CRS § 14-10-119. The court therefore erred by prohibiting evidence of the parties’ financial resources as of the date of the attorney fees hearing. The Court of Appeals reversed that part of the judgment pertaining to the attorney fees award and vacated the protective order, finding that the parties are entitled to discover any relevant information on that issue. The Court remanded the case for the trial court to reconsider the issue based on the parties’ financial circumstances at the time of the hearing on remand.

2013 COA 5. No. 12CA2575. Maralex Resources, Inc. v. Chamberlain, Public Trustee of Garfield County.
Lessee—Oil and Gas Lease—Prescriptive Easement—Adverse Use—Quiet Title—Standing.

Since 1996, Maralex Resources, Inc. (Maralex) has been the lessee under oil and gas leases issued by the United States. Under the leases, Maralex operates and maintains various oil and gas wells located on land owned by the federal government. To access the wells, Maralex and its predecessors in interest historically have traversed two roads located on what is now Nona Jean Powell’s property, which is adjacent to the federal land. After issues arose between Maralex and Powell regarding access to the roads on Powell’s property, Maralex filed an action seeking a declaration that it is the owner, by prescription, of access easements across Powell’s property. Maralex also sought a decree quieting title for its continued use of the easements. The trial court concluded that Maralex lacked standing to assert a prescriptive easement claim. In addition, despite concluding that it lacked jurisdiction over Maralex’s claims, the court considered and resolved the merits of the suit “to promote judicial economy and to avoid multiple appeals.” The court found that Maralex’s use of the roads was permissive and not adverse, and that Maralex did not establish the existence of the asserted prescriptive easements.

On appeal, Maralex contended that the trial court erred in concluding that it lacked standing. The Court of Appeals agreed. An oil and gas lessee has a legally protected property interest in the mineral estate covered by the leases. Thus, the trial court erred in finding Maralex did not have standing to maintain its prescriptive easement claim.

Maralex also argued that the trial court erred in finding that Maralex did not establish a prescriptive easement across Powell’s property. The parties did not dispute that Maralex and its predecessors openly and continuously used the roads on Powell’s property for the statutory period. However, because Powell previously permitted the use, the use was not adverse, which is a necessary finding to establish a prescriptive easement. The trial court’s finding that Maralex’s use was permissive was sufficiently supported by the record. The judgment was affirmed.

Colorado Court of Appeals Opinions

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