2020 COA 51
Colo. Ct. App.2020Background
- Tenant (Better Baked) leased warehouse space; Article 42 granted a right of first refusal (ROFR) for the five‑year lease term.
- On Nov. 20, 2017 the parties executed a First Amendment stating tenant “waives and terminates” the ROFR with respect to a pending sale (the Reeds) and providing that Article 42 is deleted as of the Effective Date.
- Landlord later entered a different purchase contract with Peak/Dorenka; tenant disputed whether its waiver applied to that sale and recorded two lis pendens (one referencing a dismissed prior suit; a second tied to a new complaint seeking declaratory relief that tenant was entitled to exercise the ROFR).
- Petitioners (landlord and buyers) sued under the Spurious Liens and Documents statute to have both lis pendens released; the district court found both groundless, released them, and awarded attorney fees.
- The Court of Appeals: affirmed invalidation of the first lis pendens; reversed invalidation of the second lis pendens (holding the question is whether the lis pendens was filed in connection with a claim that can affect title, not whether that claim will ultimately succeed); remanded on attorney‑fees allocation. A concurring/dissenting judge would have affirmed invalidation of the second lis pendens because the Lease Amendment unambiguously terminated the ROFR.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a lis pendens is "spurious" under the Spurious Liens and Documents Act | Tenant: lis pendens lawfully recorded with complaint alleging ROFR violation; not spurious. | Petitioners: lis pendens groundless because ROFR was waived/terminated and thus could not affect title. | A lis pendens is spurious only if it is not filed in connection with a claim that can affect title; the court reversed the finding that the second lis pendens was spurious. |
| Whether an ROFR qualifies as a claim that can "affect the title to real property" for lis pendens purposes | Tenant: ROFR is an interest in land that can justify a lis pendens. | Petitioners: ROFR no longer existed as to the later sale, so it could not affect title. | ROFRs can affect title (equitable interest; may support specific performance); thus they may justify a lis pendens. |
| Whether the district court properly resolved the merits (waiver/termination) at the show‑cause hearing | Tenant: court should not decide merits at an expedited C.R.C.P. 105.1 show‑cause; inquiry should be whether complaint alleges a claim that could affect title. | Petitioners: hearing may include evidence and merits (Westar approach); Lease Amendment unambiguously terminated ROFR. | Majority: show‑cause hearings should not become mini‑trials on merits; focus on whether the claim could affect title. Dissent: precedent supports full evidentiary hearing including merits and the Lease Amendment unequivocally terminated the ROFR. |
| Attorney fees award tied to invalidation order | Tenant: contest award because second lis pendens was not spurious. | Petitioners: entitled to fees for prevailing on spurious‑document claim. | Because the court erred as to the second lis pendens, award vacated and remanded for allocation of fees attributable to the first lis pendens. |
Key Cases Cited
- Hewitt v. Rice, 154 P.3d 408 (Colo. 2007) (lis pendens proper where claim relates to possession, use, or enjoyment of real property)
- Kerns v. Kerns, 53 P.3d 1157 (Colo. 2002) ("affecting the title to real property" construed broadly)
- Pierce v. Francis, 194 P.3d 505 (Colo. App. 2008) (lis pendens appropriate for disputes that determine rights incident to ownership)
- Cambridge Co. v. East Slope Inv. Corp., 672 P.2d 211 (Colo. App. 1983) (ROFR creates an interest in land subject to condition precedent)
- Houtchens v. United Bank of Colorado Springs, N.A., 797 P.2d 814 (Colo. App. 1990) (ROFR may be treated as an interest in land for statute of frauds purposes)
- Thompson v. Maryland Casualty Co., 84 P.3d 496 (Colo. 2004) (ROFR holders have recorded lis pendens to protect interests)
- Platt v. Aspenwood Condo. Ass’n, Inc., 214 P.3d 1060 (Colo. App. 2009) (a lis pendens is not groundless merely because the underlying claim may ultimately fail if a rational argument supports it)
- Westar Holdings P’ship v. Reece, 991 P.2d 328 (Colo. App. 1999) ("hearing" under the Act may include presentation of evidence and merits inquiry)