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Bertoia v. Denver Gateway.

2023 COA 76. No. 22CA1619. Lis Pendens—Spurious Document—Colorado Uniform Fraudulent Transfer Act—Supersedeas Bond—Mootness of Appeal.

August 24, 2023

Bertoia owned WPB Hospitality, LLC (WPB), which received financing from American Lending Center, LLC (ALC) to construct a hotel near the Denver airport (the property). WPB later filed for bankruptcy, and while the bankruptcy was pending, WPB contracted with Frisco for it to purchase WPB and assume WPB’s liability to ALC and other bankruptcy creditors. Bertoia subsequently sued Frisco and its sole owner, Dhillon, for fraud and breach of contract, alleging that Frisco failed to perform its contracts with WPB. Meanwhile, ALC successfully bid on 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. Following litigation, ALC agreed to convey the property to Frisco, and the parties executed a purchase and sale agreement (PSA) for the property. Shortly thereafter, Frisco assigned the PSA to Denver Gateway, an assetless company wholly owned by Dhillon’s wife. Denver Gateway paid nothing for the PSA assignment, which disposed of substantially all of Frisco’s assets. Frisco then filed a “no-asset” bankruptcy petition in Texas. Bertoia learned about the PSA and its assignment to Denver Gateway during the creditors’ meeting in Frisco’s bankruptcy case, and she amended her complaint to include a claim under the Colorado Uniform Fraudulent Transfer Act (CUFTA) against Frisco and Dhillon and a fraudulent omission claim against Dhillon. Bertoia also separately sued Denver Gateway and Dhillon’s wife alleging a CUFTA claim. In both CUFTA claims, Bertoia sought avoidance of the assignment, among other relief. When she filed the complaint against Denver Gateway, Bertoia recorded a notice of lis pendens on the property, which Denver Gateway moved to expunge under CRCP 105(f)(2). The district court granted the motion. In addition, just before the hearing on the first notice of lis pendens, Bertoia recorded a second notice of lis pendens on the property in the Frisco litigation and a request to consolidate the two cases. Before a ruling was made on the consolidation request, Denver Gateway filed, in its case, a CRCP 105.1 petition to strike the second notice of lis pendens as a spurious document. The cases were ultimately consolidated, and Denver Gateway’s petition was granted. The district court also ordered Bertoia to pay Denver Gateway’s reasonable attorney fees and costs.

Bertoia initiated an appeal of the order expunging the first lis pendens notice—which is a separate appeal—and the district court entered an order requiring her to post a supersedeas bond of $25 million within 10 days or else both notices of lis pendens would be released. No bond was posted, and the court clerk issued a certificate releasing both the first and second notices of lis pendens. The court of appeals 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. While the appeal was pending, a 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.

On appeal, Bertoia contended that this appeal is not moot because the district court lacked authority to condition the continuation of her second lis pendens notice during her appeal on her posting a supersedeas bond; and even if the court had such authority, her failure to post the bond does not result in the appeal being moot. However, a district court has authority under CRS § 38-35-110, the lis pendens statute, to condition the continuation of a lis pendens notice pending appeal on the posting of a supersedeas bond. Accordingly, the district court had equitable authority to impose a supersedeas bond as a condition of the continued effectiveness of the notice of lis pendens during Bertoia’s appeal of the order striking it as spurious. But while the posting of the supersedeas bond was required to stay execution of the district court’s order releasing the notice of lis pendens, it was not a prerequisite for filing and pursuing an appeal of the underlying order striking the notice as a spurious document. Bertoia’s failure to post a bond simply means that the second notice of lis pendens is not in effect during the pendency of the appeal. Further, reversing the order striking the notice of lis pendens as a spurious document would render the underlying basis for the attorney fees and costs award invalid. Accordingly, Bertoia’s failure to post the supersedeas bond does not render this appeal moot.

On the merits, Bertoia argued that Frisco’s assignment of the PSA to Denver Gateway falls within CUFTA, so the notice of lis pendens was properly recorded because if she had prevailed on this claim, it could have affected title to real property. She therefore contended that the notice of lis pendens was not spurious. As a threshold issue, the court noted that the fact that Bertoia’s CUFTA claim was ultimately unsuccessful does not impact the analysis, because the question is whether the notice of lis pendens was spurious when it was filed. Here, it is uncontroverted that Frisco had an interest in the property as the purchaser under the PSA. This interest was an “asset” that could be fraudulently transferred under CUFTA. Thus, Bertoia’s CUFTA claim sought relief affecting the title to real property, the notice of lis pendens was properly recorded, and as such, it could not have been spurious.

The order striking the notice of lis pendens as a spurious document was reversed.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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