Published Court Decisions
MARTINEZ VS. AFFORDABLE HOUSING NETWORK, INC. ET AL
123 P.3d 1201 (Colo. 2005) Buyers who have notice of facts that might mean their seller’s title was acquired fraudulently had a duty to inquire further and are deemed to know everything they would have learned if they had investigated further. As a result, buyers are not bona fide purchasers for value.
Equity skimmers at Affordable Housing Network, Inc. (AHN) defrauded homeowners whose mortgage was in default by persuading them to give AHN a quitclaim deed to their house in return for a loan of $9,000 to cure the mortgage default. The quit claim deed was not notarized and was supposed to be held in trust in case the homeowners didn’t repay the loan. The homeowners used AHN’s money to cure their default and went on to keep the mortgage current. But AHN recorded the quitclaim deed anyway and then sold the house to fix-&-flip investors for $25,000. The investors began an eviction. Ms. Underhill represented the homeowners in a lawsuit against AHN, its owners and agents, and the investors. During trial, the judge ruled that the investors, not the homeowners, owned the house because they were “bona fide purchasers for value” who didn’t know about AHN’s fraud. The case went to trial against AHN and its owners and agents. At the end of the trial, the jury returned a favorable verdict for the homeowners. After trebling the verdict and awarding attorneys fees, judgment was entered in the homeowners’ favor against each of the four AHN defendants in the amount of $1.5 million each. But these defendants were judgment proof, and the homeowners wanted to keep their home.
On behalf of the homeowners, Ms. Underhill filed an appeal of the judge’s ruling that the investors owned the house. The ruling was affirmed by the Court of Appeals, then reversed in 2005 by the Colorado Supreme Court on the grounds that the investors had inquiry notice of the defects in their grantor’s (AHN’s) title because of the suspicious circumstances surrounding the $25,000 sale. Following the Supreme Court’s decision, the eviction case was dismissed. Thanks to the Supreme Court’s decision, the Martinez family kept their home.
FEDERAL HOME LOAN BANK BOARD VS. EMPIE
778 F.2d 1447 (10th Cir. 1985) Federal regulations governing savings and loan associations preempt (override) state advertising laws.
The Oklahoma State Banking Commissioner began to enforce an Oklahoma advertising law imposing criminal penalties against any savings and loan association or federal savings bank in Oklahoma that used “Bank” in its name or referred to “banking services” in its advertising. The Federal Home Loan Bank Board (FHLBB) filed a lawsuit to enjoin (prohibit) the Commissioner from interfering with the Bank Board’s exclusive right to regulate the advertising practices of federally-chartered savings institutions under the federal statutes and regulations governing the industry. The trial court granted the injunction, applying the federal preemption doctrine. On appeal, the Tenth Circuit affirmed the trial court’s grant of summary judgment to the Bank Board. The case is important because of the breadth of the authority confirmed to the federal government under the federal preemption doctrine. Ms. Underhill handled the appeal for the federal agency.
SHOTKOSKI VS. DENVER INVESTMENT GROUP, INC. ET AL.
134 P.3d 513 (Colo.App. 2006)
TESMER VS. COLORADO HIGH SCHOOL ACTIVITIES ASSOCIATION
140 P.2d 249 (Colo.App. 2006)
FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION VS. SHEARSON AMERICAN EXPRESS, ET AL.
658 F. Supp. 1331 (D. Puerto Rico 1987) A parent company is liable for the criminal conduct of its subsidiary’s agent under the federal RICO law
After Home Federal Savings and Loan Association of Ponce, Puerto Rico failed, the Federal Savings and Loan Insurance Corporation (FSLIC) was appointed receiver for the institution. FSLIC’s investigation of the reasons for the savings and loan’s failure determined that some of the largest losses came from investments recommended to the board of directors by Miguel Serrano, a broker at Shearson American Express’ Puerto Rico subsidiary, who earned large commissions on the transactions. The FLSIC, acting as receiver for Home Federal, then sued Shearson American Express and Miguel Serrano to recover the losses, asserting RICO claims against Shearson American Express and fraud claims against Serrano. This case is the first time a parent corporation was sued successfully under the federal RICO statute under an agency theory. The trial court denied Shearson’s motion to dismiss the case, agreeing with FLSIC that the claims could be asserted against the parent company based on the actions of its Puerto Rico subsidiary and agent. Shearson paid FSLIC $7.4 million to settle the case shortly after the court’s decision.
Ms. Underhill was the FSLIC attorney responsible for Home Federal’s receivership litigation. She identified the nature of the losses Home suffered, directed the efforts of outside counsel to develop and litigate RICO claims against Shearson American Express and civil fraud claims against Mr. Serrano, coordinated FSLIC’s civil recovery strategies with the Assistant U.S. Attorney prosecuting a parallel criminal fraud case against Mr. Serrano, and prepared the notice of claim and proof of loss under Home Federal’s fidelity bond.
GUARANTY SAVINGS AND LOAN ASSOCIATION VS. FEDERAL HOME LOAN BANK BOARD ET AL.
794 F.2d 1339 (8th Cir. 1986); trial court decision unreported (W.D. Ark. 1984) Judicial challenge to the appointment of FSLIC as receiver for an insolvent Arkansas savings and loan association
As a young government attorney, Ms. Underhill tried a complex lawsuit challenging the appointment of the Federal Savings and Loan Insurance Corporation’s (FSLIC) as the receiver for a failed savings and loan association on one day’s notice and without any pretrial discovery — and won. On appeal, the Eighth Circuit Court of Appeals issued a ruling in the agency’s favor that established the standard under which the courts review the government’s decision to place a federally-insured savings and loan association into receivership. Ms. Underhill was assisted by outside counsel at trial and was the lead appellate attorney for the government.
GOODMAN VS. SVAHN
614 F.Supp. 726 (D.D.C. 1985)
AMOCO PRODUCTION CO., ET AL. VS. DEPARTMENT OF ENERGY
512 F.Supp. 815 (D. Del. 1981), aff’d, 912 F.2d 472 (Temp. Emer. Ct. App. 1982)
The major U.S. producers of natural gas liquids (“NGL’s”) filed a lawsuit in federal court challenging the U.S. Department of Energy’s regulations interpreting the price treatment required for interaffiliate transfers of NGL’s under recently adopted federal price control and allocation regulations governing NGL’s. The NGL industry challenged the agency’s interpretation of the new regulations and contended that the agency’s rulemaking process was defective under the Administrative Procedure Act. The trial court agreed with the plaintiffs and invalidated the new regulations. Ms. Underhill authored the summary judgment brief on the rulemaking issues for the industry plaintiffs.
Unpublished Court Decisions
JUDY K. COREY, M.D. VS. DANIEL ESCAJEDA, M.D. AND NORTHWEST ANESTHESIA, INC.
Court of Appeals Case No. 2009CA468 (Opinion November 25, 2009)
Dr. Corey and Dr. Escajeda were 50/50 partners in Northwest Anesthesia, Inc. Dr. Corey was diagnosed with cancer and took a leave of absence for treatment. During and after her leave, Dr. Escajeda paid all of the company’s revenues to himself and refused to buy out her ownership interest for more than a token dollar amount. A Boulder, Colorado jury returned a large six-digit verdict in Dr. Corey’s favor for her share of the profits from the business. On appeal, the court of appeals sustained the verdict, rejecting Dr. Escajeda’s legal arguments under the Colorado Medical Practice Act. Ms. Underhill and Mr. Moriarty represented Dr. Corey. Mr. Moriarty was the principal appellate attorney.
CAPITAL BANKERS LIFE INSURANCE COMPANY VS. COMMUNITY FIRST NATIONAL BANK VS. CHEMICAL BANK
Jefferson County District Court Civil Action No. 92-CV-496, Capital Bankers Life Insurance Company vs. FirstBank of West Arvada vs. Chemical Bank, and Civil Action No. 92-CV-497 (Judge DeMoulin)(Order On Summary Judgment, February 1993)
A Colorado insurance agent for Capital Bankers Life Insurance Company did business in Colorado under the name “Capital Bankers Group.” For several years the agent sold Capital Bankers Life policies and instructed the policy-holders to write the premium checks to “Capital Bankers” and mail them to his Colorado office. He opened an account at a money market fund in New York City under the name of Capital Bankers Group and diverted the checks to that account. In several instances, he also sent premium checks made payable to “Capital Bankers Life” to the money market fund in the name of “Capital Bankers Group.” The money market fund presented the checks to Chemical Bank, which paid on them and then sent the checks through the banking system for collection.
The fraudulent scheme went undetected until a policy-holder telephoned Capital Bankers Life Insurance Company’s main office about his policy; the Wisconsin office had no record of him being a policy-holder and began an investigation. In other words, none of the Colorado agent’s customers actually had life insurance from Capital Bankers Life Insurance Company; the agent had just pocketed their premium payments. Working with the Colorado Department of Insurance, Capital Bankers Life Insurance Company either “refunded” the defrauded Colorado policy-holders their premium payments or provided them with insurance at its own cost and took an assignment of the policy-holders’ claims. Then, Capital Bankers Life sued Chemical Bank for reimbursement.
Ms. Underhill represented Chemical Bank. The case involved the question of who should bear the losses caused by the insurance agent’s fraud: the insurance company, or Chemical Bank, the first bank to accept and pay on the checks. Under the Uniform Commercial Code adopted throughout the United States, the first bank in the banking system to accept and honor a check bears the risk of loss under the UCC (here, Chemical Bank) unless there are extenuating circumstances. The Jefferson County District Court agreed with Chemical Bank, ruling that a loss within the meaning of the Uniform Commercial Code had not occurred because of the agent’s fraud. Therefore, Capital Bankers Life Insurance Company had to bear the losses caused by the fraudulent conduct of its Colorado agent.
IN THE MATTER OF THE COMPLAINT FILED BY STEVE DURHAM REGARDING ALLEGED CAMPAIGN AND POLITICAL FINANCE VIOLATIONS BY “HOLTZMAN FOR GOVERNOR” AND “IF C WINS YOU LOSE”
Colorado Secretary of State, Case No. OS 2006-0004 (2006)