Former TCHR, LLC v. First Hand Management LLC
2012 COA 129
Colo. Ct. App.2012Background
- Former TCHR signed a real estate sale agreement with Town Center Investors (TCI) to purchase a shopping center owned by Oneslager (TCI's principal) and managed by Genovese.
- The agreement required delivery of due-diligence materials and included an extensive 'as is' clause releasing TCI from warranties and mandating reliance on Former TCHR's investigation.
- After signing but before closing, Willary (the anchor tenant) faced financial trouble; Former TCHR entered a side letter with First Hand Management for a Replacement Option if Willary defaulted.
- Former TCHR closed, took Willary's lease, and Willary defaulted; First Hand assumed Willary's lease, with Balmar financing Willary's debt and later selling inventory to First Hand.
- Former TCHR alleged fraud and concealment by Oneslager and Genovese, and a conversion claim against Balmar for Willary's inventory; the trial court dismissed the conversion claim at trial.
- On appeal, the court affirmed the fraud/concealment dismissal under the economic loss rule, reversed the conversion dismissal, and remanded for a new trial on the conversion claim; fee-award appeal deemed not final.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the economic loss rule bar Former TCHR's fraud claims? | TCHR: independent tort duty exists apart from contract. | Oneslager/Genovese: duties arise out of contract; claims barred. | Yes; fraud claims barred |
| Is Former TCHR's conversion claim viable against Balmar for inventory | Balmar knew of TCHR's security interest and took inventory with fault; priority argues for conversion. | Balmar: no possession/right; crediting value defeats conversion. | Yes; remand for new trial on conversion claim |
| Should the attorney-fees award be reviewed on appeal? | Appeal of fee award proper on finality grounds. | Fees not final; no jurisdiction to review yet. | No jurisdiction; fee appeal dismissed without prejudice |
Key Cases Cited
- BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004) (economic loss rule and contract damages distinction)
- Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282 (Colo. App. 2009) (implied covenant vs. tort duties; contract duties may subsume fraud claims)
- Longtree, Ltd. v. Resource Control Int'l, Inc., 755 P.2d 195 (Wyo. 1988) (priority of unperfected security interests when buyer knows of interest)
- United States v. Handy & Harman, 750 F.2d 777 (9th Cir. 1984) (unperfected security interest and consideration given in exchange for inventory)
- Parr v. Triple L & J Corp., 107 P.3d 1104 (Colo. App. 2004) (officers of a corporation barred by contract-based duties when arising from contract)
- Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256 (Colo. 2000) (economic loss rule framework and independent tort duties)
- Makoto USA, Inc. v. Russell, 250 P.3d 625 (Colo. App. 2009) (three-factor test for independent tort duty)
- American Guar. & Liab. Ins. Co. v. King, 97 P.3d 161 (Colo. App. 2003) (standard for 41(b) dismissal; trial court as trier of fact)