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Print Page Developer Tripped Up in Ownership Shuffle
by Ron Davis

A convoluted plan to transfer ownership of a Colorado shopping center was nothing more than a ploy to avoid paying the builder of the facility. That’s the ruling of the Colorado courts in a recent case in which a Denver-area developer had to defend against conspiracy and fraud charges.

The developer—Cornerstone Development International, L.L.C.—had hired the builder to construct the shopping center for $710,202 in a sequence of payments. The builder received some of those payments during construction, but soon they trickled to a near stop. The builder nevertheless continued with the project, and the payment deficit eventually grew to $47,000.

The efforts of the builder to obtain the amount owing were unsuccessful, resulting in arbitration. And an arbitrator subsequently ordered the developer to pay the amount owed.

Meanwhile, the developer sold the shopping center for $1.4 million to a California company with ties to the developer. Next, the developer transferred the funds he received to a closely allied individual in Hong Kong. Shortly after that, the developer conveyed the shopping center to that individual in exchange for a promissory note amounting to $1,389,000. Then for $10, he executed a document promising not to sue for nonpayment of the note. The individual finally conveyed the property for $10 to an entity controlled by the developer.

The builder was apparently not impressed by the series of financial maneuvers by the builder. He sued, claiming that the developer had committed conspiracy and fraudulent conveyance of property.

In response, the developer explained that he made the property transfers merely to avoid losing the property and to frustrate creditors. The developer denied charges of fraudulent misrepresentation, however.

A Colorado court ruled in favor of the builder on the conspiracy claim and found that the developer and his associates were jointly liable for actual damages incurred by the builder. As a result, the court added, they must pay the builder $125,000. The developer appealed that ruling.

A Colorado appellate court also found in favor of the builder, explaining, “The developer’s arguments…do not challenge the findings that he engaged in a conspiracy to defeat, hinder, and delay the builder’s rights as a creditor by fraudulently transferring property. There is abundant evidence to support those findings and other special circumstances…that were employed to frustrate the builder’s attempts to satisfy the judgment. (Double Oak Construction, L.L.C. v. Cornerstone Development International, L.L.C., No. 02CA1162)

Decision: October 2003
Published: November 2003

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