First National Bank of Durango, Mancos Valley Bank, Citizens Bank of Pagosa Springs, and Farmers Savings Bank, Plaintiffs-Appellees,
William S. Lyons, Jr., and William S. Lyons, III, Defendants-Appellants
La Plata County District Court No. 08CV272. Honorable Gregory G. Lyman, Judge.
JUDGMENT REVERSED AND CASE REMANDED WITH DIRECTIONS.
Newbold Chapman & Geyer PC, A. Michael Chapman, R. Thomas Geyer, Durango, Colorado; Law Firm of Ice Miller, LLP, Philip A. Whistler, Aaron D.
Grant, Indianapolis, Indiana, for Plaintiffs-Appellees.
Fowler, Schimberg & Flanagan P.C., Timothy P. Schimberg, Andrew R. McLetchie, Denver, Colorado, for Defendants-Appellants.
Opinion by JUDGE BERGER. Lichtenstein and Navarro, JJ., concur.
[¶1] In this securities fraud action, the district court denied the motion of defendants, Williams S. Lyons, Jr., and Williams S. Lyons, III (collectively, Lyons), to dismiss for lack of subject matter jurisdiction. The Lyons contended that claims against them under the Colorado Securities Act (CSA) were subject to the Colorado Governmental Immunity Act (CGIA) and therefore barred because the plaintiffs, First National Bank of Durango, Mancos Valley Bank, Citizens Bank of Pagosa Springs, and Farmers Savings Bank (Banks), did not give timely notice under the CGIA. The district court held that the CGIA does not apply to claims under the CSA and denied the motion. The Lyons appeal that denial, pursuant to section 24-10-118(2.5), C.R.S. 2014.
[¶2] Under controlling authority, the dispositive question on appeal is whether the Banks' CSA claims against the Lyons lie in tort or could lie in tort. Because we conclude that the Banks' CSA claims lie in tort or could lie in tort for purposes of the CGIA, we reverse and remand for further proceedings on the motion to dismiss.
I. Relevant Facts and Procedural History
[¶3] The Lyons, along with other members of their family and a business associate, comprised the Board of Directors of Lincoln Creek Metropolitan District (the District). The District is a statutory special district formed to provide public facilities to Lincoln Creek Village, a proposed residential community in Douglas County. The Lyons' company, LCV, LLC, owned almost all of the property in the District and was the developer of Lincoln Creek Village.
[¶4] In March 2006, the Banks purchased $4.13 million of General Obligation Tax Bonds issued by the District to partially fund construction of Lincoln Creek Village. Additional financing for the project was provided by a separate development loan. In July 2008, the bank that held the deed of trust securing the development loan foreclosed on the encumbered Lincoln Creek Village property. Several months later, the Banks filed the action underlying this appeal against the Lyons; LCV; and Stifel, Nicolaus & Company, Inc., the underwriter of the bonds. The Banks did not sue the District, the issuer of the bonds.
[¶5] The Banks alleged that, in connection with the offer and sale of the bonds (which all parties agree for purposes of this appeal are securities under the CSA), the defendants misrepresented and omitted material facts, mostly in the official offering statements issued by the District in connection with the sale of the bonds. The District issued two offering statements, the Preliminary Limited Offering Memorandum and the
Limited Offering Memorandum. Both were signed by William S. Lyons, III, as President of the Board of Directors of the District.
[¶6] The Banks alleged in their complaint that the offer and sale of the bonds violated section 11-51-501(1), C.R.S. 2014, of the CSA because the defendants, " recklessly, knowingly, or with an intent to defraud the [Banks],"
(a) employed devices, schemes or artifices to defraud the [Banks], (b) made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and (c) engaged in acts, practices, and courses of business that operated or would operate as a fraud or deceit upon [the Banks].
The Banks sought to recover, upon the tender of the bonds, the consideration paid less the amount of any income received (plus interest, costs, and attorney fees) pursuant to the CSA, subsections 11-51-604(3), (4), and (5), C.R.S. 2014.
[¶7] The Lyons asserted the defense of governmental immunity and filed a C.R.C.P. 12(b)(1) motion to dismiss for lack of subject matter jurisdiction. In their motion, the Lyons argued that the claims against them had to be dismissed because the Banks had failed to provide notice of the claims to the District, a jurisdictional prerequisite under the CGIA. The district court denied the motion to dismiss, concluding that CSA claims do not sound in tort and thus the CGIA does not apply and statutory notice was not required.
[¶8] The Lyons filed this interlocutory appeal. The parties' arguments focus on whether (1) the Banks' CSA claims against the Lyons lie in tort or could lie in tort and (2) the acts or omissions on which the claims are based occurred during the performance of the Lyons' duties for, and within the scope of their employment with, the District.
[¶9] II. Colorado Governmental Immunity Act -- Law and Analysis
[¶10] We review de novo the district court's determination that the CGIA does not apply to CSA claims. See Medina v. State, 35 P.3d 443, 452-53 (Colo. 2001).
[¶11] Subject to certain exceptions not applicable here, the CGIA provides that
[a] public employee shall be immune from liability in any claim for injury, whether brought pursuant to this article, section 29-5-111, C.R.S., the common law, or otherwise, which lies in tort or could lie in tort regardless of whether that may be the type of action or the form of relief chosen by a claimant and which arises out of an act or omission of such employee occurring during the performance of his duties and ...