Source: http://co.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20180517_0000439.CO.htm/qx
Timestamp: 2019-04-22 04:12:52+00:00

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¶ 1 In a case of first impression in the Colorado courts, we address whether the Colorado Consumer Protection Act (CCPA) and the Colorado Fair Debt Collection Practices Act (CFDCPA) prohibit foreclosure attorneys and title companies from billing mortgage servicer clients foreclosure commitment charges when those full costs were not actually incurred, despite knowing that these fraudulent costs would be assessed against homeowners in foreclosure. We conclude that such a practice violates the CCPA and CFDCPA.
¶ 2 Plaintiffs, the State of Colorado, ex rel. Cynthia H. Coffman, Attorney General for the State of Colorado; and Julie Ann Meade, Administrator, Uniform Consumer Credit Code, brought a civil law enforcement action against defendants, foreclosure lawyer Robert J. Hopp; his law firms, Robert J. Hopp & Associates, LLC, and The Hopp Law Firm, LLC (collectively, the law firms); as well as Hopp's affiliated title companies, National Title, LLC, d/b/a Horizon National Title Insurance, LLC, and First National Title Residential, LLC; and Safehaus Holdings Group, LLC, a company owned by Hopp and his wife Lori L. Hopp, which, through its subsidiary, provided accounting and bookkeeping services for the law firms and title companies. The State alleged that Hopp, the law firms, and their affiliated companies violated the CCPA and the CFDCPA by engaging in the billing practice described above. The district court agreed, for the most part, with the State and imposed penalties totaling $624, 000. While Hopp's wife, Lori Hopp, was a defendant in the district court action, she was not found liable for any claims and is not named as a party to this appeal.
¶ 3 Defendants appeal the trial court's judgment; plaintiffs cross-appeal an evidentiary ruling.
¶ 4 We affirm the district court's judgment and remand the case with directions.
¶ 5 The trial court, in a thorough written order, found the following facts and described the mechanics of the foreclosure process in Colorado. The parties do not dispute these facts or description.
¶ 6 Generally, in Colorado, a person who borrows money from a lender to purchase real property signs a promissory note and an accompanying deed of trust. A deed of trust is "a security instrument containing a grant to a public trustee together with a power of sale." § 38-38-100.3(7), C.R.S. 2017. In the deed of trust, the borrower agrees that, upon default, the lender can initiate a nonjudicial foreclosure proceeding, which can result in the public trustee's eventual sale of the property.
¶ 7 A foreclosure may be withdrawn prior to sale for various reasons, such as the borrower's agreement to a loan modification, disposal of the property through a short sale, the lender's agreement to a deed-in-lieu of foreclosure, or the borrower's cure of the default. The public trustee for El Paso County testified that between 2008 and 2016, approximately half of the foreclosures filed in Colorado were withdrawn before sale.
¶ 8 If a borrower wishes to end the foreclosure proceedings by curing the default on the property, he or she may file a written notice of intent to cure with the public trustee. § 38-38-104(1), C.R.S. 2017. The public trustee must promptly contact the lender's attorney to request a written "cure statement" itemizing all sums necessary to cure the default, including missed payments, accrued interest, late fees, penalties, and the fees and costs associated with the foreclosure. § 38-38-104(2)(a)(I). The lender's attorney may include good faith estimates with respect to interest, fees, and costs. § 38-38-104(5).
¶ 9 If a foreclosure action is not withdrawn, the property that serves as collateral for the borrower's loan proceeds to sale. Before the scheduled sale date, the holder of the evidence of debt, or the holder's attorney, submits a bid to the public trustee. § 38-38-106(2), (6), C.R.S. 2017. The holder's bid sets the minimum price for bidding on the property and that bid must be at least the lender's good faith estimate of the fair market value of the property, less certain sums identified in section 38-38-106(6). The bid includes the attorney fees and costs.
¶ 10 If the property is purchased at sale for less than the borrower's total indebtedness to the lender, the lender may pursue the collection of the deficiency from the borrower through other avenues. If the property is purchased for more than the total amount of indebtedness to the lender, any overbid may be claimed by others with interests in the property, and then, upon payment of those claims, by the borrower.
¶ 11 At the beginning of a nonjudicial foreclosure action, the lender's attorney orders a title product for the subject property. A foreclosure commitment is a title insurance product used to ensure that insurable and marketable title is delivered to the lender at the end of a foreclosure. It is a commitment to issue a title insurance policy upon the satisfaction of certain conditions. A foreclosure commitment often contains a hold-open provision so it does not expire until twenty-four months after it is issued, in contrast to non-foreclosure title commitments, which usually expire six months after issuance.
¶ 12 The title agent's underwriter sets the cost of title products such as a foreclosure commitment. The underwriter sets forth costs in the title company's rate manual and submits the manual to the Division of Insurance (DOI) for approval. The DOI reviews the rates as part of its regulation of the insurance industry. See § 10-4-401, C.R.S. 2017. A title agent is bound by the rate filed with the DOI and may not charge more or less than that rate. Div. of Ins. Reg. 8-1-1, § 6(F)-(G), 3 Code Colo. Regs. 702-8.
¶ 13 In the event that a foreclosure action is not completed because the homeowner cures the deficiency by paying the asserted amount due in the foreclosure action, or the foreclosure action is otherwise cancelled or withdrawn, the foreclosure sale does not occur and the title company cannot issue a title insurance policy.
¶ 14 Hopp is an attorney. His law firms provided legal services for mortgage defaults, including residential foreclosures, in Colorado.
¶ 15 Through the law firms, Hopp represented loan servicers, such as the Colorado Housing and Finance Authority, JPMorgan Chase, and Bank of America in foreclosure proceedings. The servicers-clients are not parties to this action.
¶ 16 Hopp owned several businesses which supported the law firms' foreclosure services. Together with his wife, Hopp owned a holding group, SafeHaus Holdings Group, LLC (SafeHaus). Safehaus owned a subsidiary which performed accounting and bookkeeping services for the law firms. Safehaus also owned a title company, National Title, LLC, which provided foreclosure commitments for the law firms. Hopp was a partial owner of another title company, First National Title Residential, LLC, which also provided foreclosure commitments to the law firms in 2008 and 2009.
This section applies to a title commitment issued to facilitate the foreclosure of a deed of trust, including a policy to be issuable, within a 24-month period after the commitment date, naming as proposed insured the grantee of a Confirmation Deed following the foreclosure, the holder of a certificate of redemption or the grantee upon the consummation of a resale between the holder of a Confirmation Deed and a bona fide third party purchaser within the 24-month hold open period. . . .
The charge will be 110% of the applicable Schedule of Basic Rates based on the unpaid balance of the deed of trust being foreclosed.
In the event of a cancellation prior to the public trustee's sale there shall be a charge of $300.00 to $750.00, based on the amount of work performed. Cancellations following the public trustee's sale shall be subject to the full charges set forth in the second paragraph.
¶ 18 While representing the servicers, the law firms typically ordered foreclosure commitments from Hopp's title companies. National Title invoiced the law firms a charge of 110% of the schedule of basic rates upon the delivery of a foreclosure commitment. As a routine practice, within ten days of filing a foreclosure action, the law firms passed this cost on to the servicers by billing and seeking reimbursement from them for the charge of 110% of the schedule of basic rates. This is the same amount that Fidelity's manual listed as the charge for a completed title insurance policy, even though a policy had not yet been issued, and in many cases, never would be issued if a foreclosure was cured or cancelled.
¶ 19 After a lengthy investigation into defendants' billing practices, plaintiffs filed a civil enforcement action. Their 2014 complaint cites to the former location of the CFDCPA, sections 12-14-101 to -137, C.R.S. 2014. The CFDCPA was repealed and replaced in 2017 by sections 5-16-101 to -135, C.R.S. 2017. In this opinion, we cite throughout to the current version of the CFDCPA which, as relevant here, is not materially different.
. All defendants violated section 6-1-105(1)(1), C.R.S. 2017, of the CCPA by making false or misleading statements concerning the price of services claimed for title search costs, title commitments, and court filing costs.
. The law firms and Hopp violated section 5-16-107(1)(b)(I), C.R.S. 2017, of the CFDCPA by using false, deceptive, or misleading representations in connection with the collection of foreclosure-related debt.
. The law firms and Hopp violated section 5-16-108(1)(a), C.R.S. 2017, of the CFDCPA by collecting amounts that were not expressly authorized by the agreements borrowers had signed creating their debt, or permitted by law, and using unfair and unconscionable means to collect that debt.
Plaintiffs sought a judgment against defendants for declaratory relief, injunctive relief, disgorgement of unjustly obtained proceeds, civil penalties, and attorney fees and costs. Defendants moved to dismiss the action as untimely.
¶ 21 The district court issued numerous, detailed written orders in this case. It denied defendants' motion to dismiss for untimeliness prior to trial. The court again addressed and rejected defendants' arguments that plaintiffs' claims were barred by the statute of limitations set forth in the CFDCPA in its detailed written judgment.
¶ 22 The district court concluded that defendants, with the exception of Lori Hopp, violated the CCPA in their invoicing for foreclosure commitments ordered from the affiliated title companies. It ruled that the law firms knowingly made "false and misleading statements of fact concerning the price of foreclosure commitments by charging for and collecting policy premium amounts shortly after the initiation of the foreclosure proceeding and by representing that these costs were actually incurred." In doing so, the court credited the testimony that emphasized that a title premium charge was not earned unless a policy was issued.
¶ 23 The trial court further concluded that Hopp and the law firms violated the CFDCPA by using "false, deceptive, and misleading representations in connection with the collection of homeowners' debt because they falsely represented the 110% policy premium amount as an actual, necessary, reasonable, and actually incurred cost, when that amount was not actually incurred by the Hopp law firms." Hopp directed the law firms to invoice these amounts to servicers, knowing they would be ultimately charged to homeowners.
¶ 24 However, the district court concluded that the State failed to prove its CCPA claim alleging Hopp and the law firms engaged in deceptive trade practices when they collected a full title policy premium from servicers, but paid nothing - neither a policy premium nor a cancellation fee - when it ordered title commitments through a nonaffiliated title agency.
¶ 25 The district court declined to exercise its discretion to order disgorgement, based on its finding that the State failed to present trustworthy and reliable evidence that its calculations reasonably approximated the amount of defendants' unjustly obtained gains.
¶ 26 The court entered a permanent injunction prohibiting Hopp, his law firms, or any other persons or entities acting under their control, or in concert with them, from engaging in any of the conduct that was the subject of the case, "including claiming against homeowners in foreclosure a policy premium for a foreclosure commitment before that cost is actually incurred." The district court imposed penalties on defendants under the CCPA, which were capped by statute at $500, 000. It further imposed penalties on Hopp and the law firms in the amount of $1, 374, 600 under the CFDCPA. Upon consideration of defendants' motion to amend its judgment pursuant to C.R.C.P. 59, the district court reduced the penalties imposed under the CFDCPA to a total of $124, 200. Because the statutory amendment allowing penalties was not effective until July 1, 2011, the district court recalculated the total penalty amount to include only transactions occurring after the effective date. Ch. 121, sec. 5, § 12-14-135, 2011 Colo. Sess. Laws 382; sec. 7, 2011 Colo. Sess. Laws at 382. The district court further awarded the State its reasonable costs and attorney fees incurred in enforcing the CCPA and CFDCPA. Defendants appeal the district court's award of plaintiffs' attorney fees and costs in a separate case, State v. Hopp, 2018 COA 71, also announced today.
¶ 27 Defendants contend the trial court erred by imposing penalties under the CCPA and the CFDCPA because they were barred by the one-year limitation period set forth in section 13-80-103(1)(d), C.R.S. 2017, as well as section 5-16-113(5), C.R.S. 2017 (CFDCPA claims), and section 6-1-115, C.R.S. 2017 (CCPA claims). We disagree.

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