Bertoia v. Denver Gateway

539 P.3d 156

2023 COA 76

2023 COA 76

Wanda BERTOIA, Plaintiff-Appellant,

v.DENVER GATEWAY LLC, a Colorado limited liability company, Defendant-Appellee.

Court of Appeals No, 22CA1619

Colorado Court of Appeals, Div. II.

Announced August 24, 2023

City and County of Denver District Court Nos. 19CV33523 & 21CV30454, Honorable David H. Goldberg, Judge

Podoll & Podoll, P.C., Richard B. Podoll, Robert C. Podoll, Robert A. Kitsmiller, Jacqueline E.M. Hill, Greenwood Village, Colorado, for Plaintiff-Appellant

Chipman Glasser, LLC, Daniel W. Glasser, Jennifer M. Osgood, James A. Kin, Denver, Colorado, for Defendant-Appellee

Opinion by JUDGE TOW

¶ 1 Plaintiff-appellant, Wanda Bertoia, appeals the district court’s order striking the notice of lis pendens, recorded as to real property titled to defendant-appellee, Denver Gateway LLC, as a spurious document pursuant to C.R.C.P. 105.1.

[1] ¶ 2 In resolving this appeal, we first address whether subsequent events rendered the appeal moot. Doing so, we determine—as a matter of first impression—that a district court has the authority under the lis pendens statute, § 38-35-110, C.R.S. 2022, to condition the continuation of a notice of lis pendens pending appeal on the posting of a superse- deas bond. Despite Bertoia’s failure to post such bond, however, we conclude that this appeal is not moot. Turning then to the merits of the appeal, we reverse the district court’s order.

I. Factual Background

¶ 3 The following facts are taken from Bertoia’s two complaints filed in separate district court actions—one against Frisco Acquisition, LLC (Frisco) and other entities not parties to this appeal and one against Denver Gateway—that were originally assigned to different divisions of the Denver District Court.

¶ 4 WPB Hospitality, LLC (WPB), which Bertoia solely owned, received financing from American Lending Center, LLC (ALC) to construct a hotel near the Denver airport. In 2018, WPB filed for bankruptcy. While the bankruptcy proceeding was pending, WPB entered into two contracts with Frisco under which Frisco would purchase WPB and assume WPB’s liability to ALC and the other creditors in the bankruptcy proceeding. WPB sought approval from the bankruptcy court to enter into these contracts, and Frisco represented that it was ready and willing to perform the contractual obligations, subject to some limited due diligence. But then, Bertoia alleges, Frisco "failed or refused to perform its contracts with WPB." Bertoia sued Frisco and its sole owner, Jagmohan Dhillon, for fraud and breach of contract.

¶ 5 Meanwhile, ALC submitted a successful bid for the property at a foreclosure sale. Frisco filed notices of intent to redeem the property based on mechanics’ liens it had acquired during the WPB bankruptcy. ALC sued Frisco, alleging that the mechanics’ liens had expired, were not timely enforced, and could not be used to redeem the property because they were junior to ALC’s claims. ALC and Frisco ultimately settled, with ALC agreeing to convey the property to Frisco.

¶ 6 Frisco and ALC executed a purchase and sale agreement (PSA) for the property as contemplated by their settlement agreement. Shortly thereafter, Frisco assigned the PSA to the recently formed Denver Gateway, an assetless company wholly owned by Dhillon’s wife. Denver Gateway paid nothing for the assignment of the PSA. The assignment disposed of substantially all of Frisco’s assets. Frisco then filed a "no-asset" bankruptcy petition in Texas.

¶ 7 During the creditors’ meeting in Frisco’s bankruptcy case, Bertoia learned about the PSA and its assignment to Denver Gateway. As a result, she amended her complaint to include a claim under the Colorado Uniform Fraudulent Transfer Act (CUFTA), §§ 38-8-101 to -112,, C.R.S. 2022, against Frisco and Dhillon and a fraudulent omission claim against Dhillon. In addition she filed a separate action against Denver Gateway and Dhillon’s wife, also alleging a CUFTA claim. In both CUFTA claims, Bertoia sought avoidance of the assignment, among other relief. The two lawsuits were ultimately consolidated in the district court.

¶ 8 At the time she filed the complaint against Denver Gateway, Bertoia recorded a notice of lis pendens on the property at issue. Denver Gateway moved to expunge the notice of lis pendens pursuant to C.R.C.P, 105(f)(2).¹ After holding an evidentiary hearing, the district court found that Bertoia’s CUFTA claim would not affect title to the property; so it struck and expunged the notice of lis pendens.

¶9 In addition, just before the hearing on the first notice of lis pendens, Bertoia recorded a second notice of lis pendens—the one at issue in this appeal—on the property under the caption of the Frisco litigation. At the same time, Bertoia filed a request to consolidate the two cases. Before either judge presiding over the cases had ruled on the request to consolidate, Denver Gateway filed— in its case—a C.R.C.P. 105.1 petition to strike the second notice of lis pendens as a spurious document. The judge presiding over the Denver Gateway action transferred the hearing on the Rule 105.1 petition to the judge presiding over the Frisco action. The judge presiding over the Frisco action held a hearing on the Rule 105.1 petition. The court granted the request to consolidate the cases and, in a separate order, granted Denver Gateway’s. Rule 105.1 petition, declaring the second notice of lis pendens invalid for the same reason it found the first notice of lis pendens invalid and releasing the second notice. The district court’s order also concluded that, pursuant to C.R.C.P. 105.1(d), Bertoia was obligated to pay the reasonable attorney fees and costs incurred by Denver Gateway in defending the action. Bertoia appeals this order.

¶ 10 The district court later entered an attorney fees and costs award of $20,000 against Bertoia pursuant to a stipulation by the parties. The order provided that (1) Denver Gateway shall not attempt to collect any attorney fees until the appeal in this case is resolved; and (2) if this court reverses the order striking the second notice of lis pendens, the attorney fees and costs order shall also be vacated.

¶ 11 After Bertoia initiated an appeal of the order expunging the first notice of lis pendens,² the district court entered an order requiring her to post a supersedeas bond of $25 million within ten days or else both notices of lis pendens would be released. No bond was posted, and the court clerk issued a certificate to be recorded with the county clerk and recorder’s office, releasing both the first and second notices of lis pendens.³

¶ 12 This court then issued an order to show cause why Bertoia’s appeal of the order striking the second notice of lis pendens should not be dismissed as moot because both notices of lis pendens were released. Resolution of this show cause order was deferred to the merits division.

¶ 13 During the pendency of this appeal, a jury trial was held in the district court, and the jury found against Bertoia on her breach of contract, fraud, and fraudulent omission claims. The district court then found that the CUFTA claim was moot and dismissed it.

¶ 14 After laying out the relevant law, we address the deferred mootness issue and then turn to the merits of the appeal.

II. Applicable Law

[2, 3] ¶ 15 After filing a pleading in an action wherein relief is claimed affecting the title to real property, any party to the action may record a notice of lis pendens against the real property in the county in which the real property is situated. § 38-35-110(1). "The notice of lis pendens is intended to provide notice of pending litigation to anyone interested in acquiring an interest in the subject property." Pierce v. Francis, 194 P.3d 505, 507 (Colo. App. 2008). "A lis pendens notice effectively renders title unmarketable and prevents its transfer until the litigation is resolved or the notice is expunged." Id. at 508.

¶ 16 If a notice of lis pendens is spurious, a person whose real property is affected by it may petition the district court in the county in which the notice was filed for an order to show cause why the document should not be declared invalid. § 38-35-204(1), C.R.S. 2022; C.R.C.P. 105.1(a). A "[s]purious document" is "any document that is forged or groundless, contains a material misstatement or false claim, or is otherwise patently invalid." § 38-35-201(3), C.R.S. 2022.

¶ 17 In general, a notice of lis pendens automatically expires forty-nine days after the entry of final judgment in the underlying action. § 38-35-110(2). But if a timely appeal is filed, the notice of lis pendens remains in effect for the duration of the appeal unless the district court rules otherwise. § 38-35-110(3).

III. Mootness

¶ 18 Bertoia contends that this appeal is not moot because (1) the district court did not have authority to condition the continuation of her second notice of lis pendens during her appeal on her posting a supersedeas bond; and (2) even if it had the authority to do so, her failure to post the bond does not result in the appeal being moot. We disagree with her first, contention but agree with her second.

[4] ¶ 19 Contrary to Bertoia’s contention, the district court had the equitable authority to impose a supersedeas bond as a condition of the continued effectiveness of the notice of lis pendens during her appeal of the order striking it as spurious. See Wellman v. Travelers Ins. Co., 689 P.2d 1151, 1154 (Colo. App. 1984), rev’d on other grounds, 721 P.2d 685 (Colo., 1986). In Wellman, a division of this court concluded that the district court had equitable authority to condition the continuation of the notice of lis pendens through appeal oh the posting of a supersedeas bond. Id. (citing C.R.C.P. 105(f)(4) (1984)). Bertoia argues that Wellman is no longer the operative law because Rule 105(f)(4) has since been repealed. But Bertoia neglects to acknowledge that this repeal resulted from the General Assembly’s codification of the...