Free Report and Recommendations - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Magistrate Judge David L. West Civil Action No. 04-CV-01099-JLK-DLW WOLF CREEK SKI CORPORATION, INC., Plaintiff, vs. LEAVELL-McCOMBS JOINT VENTURE, d/b/a THE VILLAGE AT WOLF CREEK, Defendant.

RECOMMENDATION OF MAGISTRATE JUDGE ON PLAINTIFF WOLF CREEK SKI CORPORATION, INC.' S MOTION FOR SUMMARY JUDGMENT REGARDING FRAUDULENT INDUCEMENT AND NEGLIGENT MISREPRESENTATION CLAIMS

ENTERED BY MAGISTRATE JUDGE DAVID L. WEST Plaintiff, Wolf Creek Ski Corporation, Inc. (" Wolf Creek" filed a Complaint for Declaratory ) Judgment seeking a resolution of the dispute between Wolf Creek and Defendant, Leavell-McCombs Joint Venture, d/b/a Village at Wolf Creek (" Joint Venture" to determine the rights and duties of ) Wolf Creek and the Joint Venture under various provisions of the Ski, Utilities, Road and Parking Easements for the Village at Wolf Creek. The Joint Venture with its Answer filed a Counterclaim alleging Wolf Creek breached the SUA, breached its implied duty to perform its obligations under the SUA in good faith, and breached its fiduciary duty. Wolf Creek subsequently amended its Complaint and the Joint Venture filed a Second Amended Counterclaim, which included the claims 1

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of fraudulent inducement and negligent misrepresentation. Wolf Creek filed a Motion for Summary Judgment as to these claims which is the subject of this Recommendation. SUMMARY JUDGMENT BURDEN OF PROOF To obtain summary judgment, Wolf Creek must prove that " there is no genuine issue as to any material fact." Simms v. Oklahoma ex rel. Dep' of Mental Health and Substance Abuse t Servs., 165 F.3d 1321, 1326 (10th Cir. 1999). " issue is ` An genuine' there is sufficient evidence on if each side so that a rational trier of fact could resolve the issue either way." Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). " issue of fact is ` An material'if under the substantive law it is essential to the proper disposition of the claim." Id. In applying this standard, this Court must " view the factual record and draw all reasonable inferences therefrom most favorably to the Joint Venture. Id. A genuine issue of material fact exists if a rational juror could decide the disputed allegations in the non-movant' favor based on the evidence presented and the disputed fact s might affect the outcome of the suit under the governing law. See Schwarz v. Bhd. of Maint. of Way Employees, 264 F.3d 1181, 1183 (10th Cir. 2001). Summary judgment is proper when the record, viewed in the light most favorable to the non-movant, indicates there is no genuine dispute over a material fact and the moving party is entitled to judgment as a matter of law. See Deepwater Investments, Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir. 1991); Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir. 1991). The defendants, as the moving parties, have the burden of demonstrating beyond a reasonable doubt that they are entitled to summary judgment. Hicks v. City of Watonga, Okla., 942 F.2d 737, 743 (10th Cir. 1991). If they meet this burden then Seip must set forth specific facts showing a genuine issue for trial on a material matter. See Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991); Applied Genetics Int' Inc. v. First Affiliated Secs., l., th Inc., 912 F.2d 1238, 1241 (10 Cir. 1990). Seip v. D. G. Coleman, Inc., 796 F. Supp. 1398 (1992). 2

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BACKGROUND In 1976 the Pitcher family bought the Wolf Creek Ski Area located in the Rio Grande National Forest, in Southwest Colorado, and it has been operated predominantly by Kingsbury Pitcher, father, and Davey Pitcher, son. The Joint Venture consisted of Pete Leavell (" Leavell" and ) Red McCombs (" McCombs" with Bob Honts (" ) Honts" as the real estate listing agent and project ) manager. The purpose of the Joint Venture was to develop a resort (Village) adjacent to the Wolf Creek Ski Area. In 1984 the Joint Venture sought Wolf Creek support for a land exchange of approximately 300 acres in the Rio Grande National Forest adjacent to the ski area. In 1986 the Joint Venture acquired title to approximately 300 acres from the United States Forest Service (" USFS" ) which is within the area governed by Wolf Creek Special Use Permit. In 1987 Kingsbury Pitcher had an option to purchase a 10% interest in the 300 acres pursuant to an Option and Tenancy in Common Agreement (Exhibit A-10) dated January 22, 1985, which was subsequently sold back to the Joint Venture. A time line of events is as follows: December 1993: The Joint Venture obtained Mineral County approval of the sale of 12.5 acres of Village property to Wolf Creek for the construction of ski lifts. (Doc. No. 39, Exhibit A-16) July 8, 1997: Wolf Creek began the process of seeking USFS approval for new chairlift and parking lots. (Doc. No. 39, Exhibit A-17) October 1997: A draft Environmental Assessment was prepared by Wolf Creek for submission to the USFS which referred to a future ski lift and parking lot for Wolf Creek and an access road intended to be a future link to the Village. (Doc. No. 39, Exhibit A-18) 1997-1998: Wolf Creek sought USFS authorization for ski area facilities expansion in order that Wolf Creek could construct (a) two parking lots known as the " Tranquility"lots, (b) road 3

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access to the parking lots, also intended to be the future link to the Village and (c) the new Alberta Lift which was to be within the exterior boundaries of the Village. February 20, 1998: Kingsbury Pitcher wrote Pete Leavell that the road from Highway 160 to the Village property was surveyed and mapped. Hopefully USFS approval and start of construction early summer. We will carry engineering and construction at Wolf Creek' s expense. (Doc. No. 39, Exhibit A-19. July 25, 1998: The USFS Environmental Assessment showed the road to serve as access to private land (Village), but Wolf Creek was not basing its need for action on speculative interest, but on needs determined by existing growth patterns. (Doc. No. 39, Exhibit A-23) August 21, 1998: The Carson Forest Watch wrote the USFS and alerted the USFS that the access road would serve the Village, and thereby created standing to appeal the October 27, 1998 USFS Decision Notice. (Doc. No. 39, Exhibit A-34) October 27, 1998: The USFS issued a Decision Notice approving (a) parking lots and (b) access road to parking lots that would likely serve as the future link to the Village. (Doc. No. 39, Exhibit A-28) October 29, 1998: An Environmental Assessment was issued by the USFS concerning the parking lots and road. (Doc. No. 39, Exhibit A-29) November 6, 1998: Wolf Creek and the Joint Venture met to work out details of the contracts. (Doc. No. 39, Exhibit A-30) January 5, 1999: USFS withdrew Decision Notice of October 27, 1998 for further analysis of Carson Watch appeal. (Doc. No. 39, Exhibit A-36) February 3, 1999: Kingsbury Pitcher executed contract for purchase of ski lift for Alberta. (Doc. No. 39, Exhibit A-40) March 12, 1999: Carson Forest Watch letter to USFS which reviewed the Environmental Assessment and commented that the EA failed to show that road would be access for the Village. (Doc. No. 39, Exhibit A-37) March 24, 1999: Draft Access Road Agreement had changes not included in the final draft, that without USFS approval of access road, the corresponding easement grants for ski trails and lift easements need to be subject to review and/or renegotiation. (Doc. No. 39, Exhibit A-32) March 29, 1999: Kingsbury Pitcher wrote " Dear Venture Partners...we want to move forward with our construction of our next lift which will benefit all of us and to make 4

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arrangements for the easiest and most cost effective access to the Village. The EA also covers the entry road. ...what L-M (Joint Venture) gains from this easement is a dedicated entry to the Village without need for negotiations with the Colorado Department of Transportation, or necessity of filing a separate Environmental Assessment. (Doc. No. 39, Exhibit A-33) March 29, 1999: Colorado Wild letter to USFS describing the cumulative impact the Village would have on the environment. (Doc. No. 39, Exhibit A-38) June 14, 1999: USFS Revised Decision Notice approving Alberta Lift, parking lots and access road. (Doc. No. 24, Exhibit 4) July 16, 1999: Wolf Creek and Joint Venture execute four contracts, including Ski Utilities, Road and Parking Easements for the Village at Wolf Creek (" SUA" (Doc. No. 24, Exhibit ) 12) which is the document most pertinent to this discussion. August 3, 1999: Colorado Wild appealed June 14, 1999 Revised Decision Notice. (Doc No. 24, Exhibit 13) August 20, 1999: Phone call between Davey Pitcher, Jeff Berman of Colorado Wild and USFS where a compromise was reached that the access road would not go all the way to the Village, 250 ft. short. August 31, 1999: Settlement Letter from Joyner of USFS to Colorado Wild. (Doc. No. 24, Exhibit 14) September 15, 1999: Joint Venture received Settlement Letter (Doc. No. 24, Exhibit 14) from Wolf Creek. September 15, 1999: Kingsbury Pitcher to Bob Honts, we got you a partial road and we will get you the rest of it. (Doc. No. 39, Exhibit A-59, pg. 127 Hont' Deposition) s September 29, 1999: Bob Honts' letter to Red McCombs stating " Road approval within 250 ft. of Village property line is a major step forward. We will also need to seek a road access permit which will likely require EA." Joint Venture decided to delay USFS access approval until after Mineral County approved the Preliminary PUD. (Doc. No. 24, Exhibit 17) November 15, 1999: Bob Honts' letter to Joint Venture that the venture entered an area of the most intensive and sensitive environmental review on the face of the earth. (Doc. No. 24, Exhibit 18) December 16, 1999: Bob Honts' letter to attorney White that Honts may have found a way to get access road to Village without the lengthy, expensive and potentially dangerous (from 5

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a litigation point of view) environmental assessment or environmental impact statement process. (Doc. No. 39, Exhibit A-47) January 26, 2000: Bob Honts begins communicating directly with USFS. (Doc. No. 24, Exhibit 21) March 16, 2000: Bob Honts'letter to Davey Pitcher requesting a united front as to the USFS, we need your support with USFS. (Doc. No. 39, Exhibit A-48) March 28, 2000: Bob Honts met with USFS along with Tom Glass and attorney White. (Doc. No. 24, Exhibit 19) June 28, 2000: Davey Pitcher letter to Mineral County supporting Village Plan (Doc. No. 39, Exhibit A-49) August 11, 2000: Kingsbury Pitcher approved Village Plan and density of 2,172. (Doc. No. 39, Exhibit A-50) June, 2001: Joint Venture filed application for access to Village property. (Doc. No. 24, Exhibit 2, pg. 263) June 19, 2001: Davey Pitcher' and Kingsbury Pitcher' letter to USFS supporting Joint s s Venture' request to extend road 250 ft. to Village. (Doc. No. 39, Exhibit A-3) s September 7, 2001: Davey Pitcher provided Joint Venture with a map showing road that deviated from route USFS approved in June 1999. (Doc. No. 39, Exhibits 7 and A-53) October 8, 2001: Kingsbury Pitcher' letter to Joint Venture requesting Joint Venture s should not attempt to do parallel engineering...you can rely on Wolf Creek. (Doc. No. 39, Exhibit A-1) December 4, 2001: Joint Venture drafts default letter to Wolf Creek. (Temporarily under seal Docket Entry 66.) December 5, 2001: Kingsbury Pitcher letter to Congressman McInnis opposing Joint Venture' efforts (Congressional Pilot Energy Efficiency Project) to get access road without s environmental review. (Doc. No. 39, Exhibit A-54) January 2, 2002: Davey Pitcher letter to Village partners that he was hard pressed to support the Village as it was a political hot potato. (Doc. No. 39, Exhibit A-55) April 2, 2002: Bob Honts sends draft default letter to Tom Glass. (Wolf Creek' Exhibits s for Summary Judgment Argument, Exhibit 35) 6

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April 17, 2002: Chris Paul (Leavell attorney) letter to Rubin (Wolf Creek attorney) with warning. (Wolf Creek' Exhibits for Summary Judgment Argument, Exhibit L-M 00252) s January 10, 2003: Red McCombs'letter to Davey Pitcher putting him on notice of Wolf Creek obligations. (Wolf Creek' Exhibits for Summary Judgment Argument, Exhibit Ls M 00250) 2003: Pete Leavell sold interest in Joint Venture to Red McCombs. (Doc. No. 24, Plaintiff' s Statement Undisputed Facts #5, pg. 5) April 12, 2004: Termination Agreement, Mutual Release. (Doc. No. 80, Exhibit 33) April 23, 2004: Wolf Creek letter to USFS retracting June 19, 2001 letter supporting road as best alignment for access to the Village. (Doc. No. 39, Exhibit A-5) April 28, 2004: Joint Venture' Notice of Default Letter. (Doc. No. 39, Exhibit A-56) s May 5, 2004: Wolf Creek files Complaint in Mineral County District Court (Doc. No. 1) June 7, 2004: Joint Venture files Answer and Counterclaim. (Doc. No. 3) September 10, 2004: Wolf Creek amended complaint to include two claims for breach of contract. (Doc. No. 12) October, 2004: Depositions of Kingsbury Pitcher and Davey Pitcher. December 14, 2004: Joint Venture' Motion for Leave to File Second Amended s Counterclaim with Fraudulent Inducement and Negligent Misrepresentation. December 8, 2005: Joint Venture' Motion for Leave to File Second Amended Counterclaim s with Fraudulent Inducement and Negligent Misrepresentation granted. FRAUDULENT INDUCEMENT AND NEGLIGENT MISREPRESENTATION In its Second Amended Counterclaim, the Joint Venture claims that it was induced through fraudulent statements or negligent misrepresentations by Wolf Creek, to enter into the July 16, 1999 Agreement with Wolf Creek. The alleged statements are as follows: 1. Wolf Creek will represent the interests of the Joint Venture in the U.S. Forest Service approval process. 7

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2. Wolf Creek will get U. S. Forest Service approval for an access road to the Joint Venture' s proposed Village. 3. Wolf Creek will arrange that the Joint Venture will not have to get a Colorado Department of Transportation permit. 4. Wolf Creek will provide a dedicated access road from Highway 160 to the Village. 5. Wolf Creek will support the Joint Venture' preliminary development plan. s 6. Wolf Creek will carry the environmental assessment for the access road to the Village. 7. Wolf Creek will build the access road, and 8. Wolf Creek will present the Joint Venture' access road and the Wolf Creek ski facilities s expansion to the U. S. Forest Service as a package. (Doc. No. 127, Exhibit 2, Honts'Deposition pg. 459). Although eight in number, they really boil down to Wolf Creek getting an access road to the Village over U. S. Forest Service land, and supporting the Joint Venture in the Mineral County Planning process. Under Colorado law, the five elements of a fraud claim are: " false representation of a material fact or concealment of material existing fact; 2) (1) knowledge on the part of the one making the representation that it is false or knowledge that he is concealing a material fact that in equity or good conscience ought to be disclosed; 3) ignorance on the part of the one to whom the representation is made or from whom such fact is concealed of the falsity of the representation or of the existence of the fact concealed; 4) the representation or concealment is intended to be acted upon; 5) action is taken on the representation or concealment that causes damages." Chase v. Dow Chemical Corporation, 875 F. 2d 278, 281 (10 th Cir. 1989) (citing Morrison v. Goodspeed, 68 P. 2d 458 (Colo. 1937)). To prevail on a claim of fraud in the inducement, the Joint Venture must establish that the Ski Corporation knowingly made a false statement of material fact, and that the Joint Venture 8

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justifiably relied on the statement to its detriment. See Chase v. Dow Chemical Corporation, 875 F. 2d 278, 281 (10th Cir. 1989); see also Coors v. Sec. Life of Denver Ins. Co., 112 P. 3d 59, 66 (Colo. 2005); Nelson v. Gas Research Institute, 121 P. 3d 340, 343, (Colo. App. 2005) (" Common elements of all fraud actions are that the plaintiff justifiably relied upon the representation or the nondisclosure and that this reliance resulted in damages." ) To be actionable, the misrepresentation must concern a material fact that " either exists in the present or has existed in the past." Leece v. Griffin, 371 P. 2d 264, 265 (Colo. 1962) (quoting Bell Press, Inc. v. Phillips, 364 P.2d 398 (Colo. 1961)) An expression of opinion or a guess or prophecy about the concurrence of a future event is not a statement of material fact, and is therefore not actionable. Id. However, " promise concerning a future act, when coupled with a present intention a not to fulfill the promise, can be a misrepresentation which is actionable as fraud." Nelson v. Gas Research Institute, 121 P. 3d 340, 343 (Colo. App. 2005) citing Kinsey v. Preeson, 746 P.2d 542, 551 (Colo. 1987). Intent may be inferred from the totality of the circumstances for the purposes of a fraud claim. Frontier Exploration, Inc. v. American Nat. Fire Ins. Co., 849 P.2d 887, 891 (Colo. App. 1992), Kopeikin v. Merchants Mortg. And Trust Corp., 679 P.2d 599, 602 (Colo. 1984). An individual may not justifiably rely on a statement of legal opinion. See Two, Inc. v. Gilmore, 679 P.2d 116, 117 (Colo. App. 1984) (reliance on legal opinion is not justified as a matter of law); Chacon v. Scavo, 358 P. 2d 614, 165 (Colo. 1960). Nor may an individual rely on a false representation where access to information that would lead to the true facts is equally available to all parties. M.D.C./Wood, Inc. v. Mortimer, 866 P.2d 1380, 1382 (Colo. 1994). To prevail on a claim of negligent misrepresentation, the Joint Venture must establish that the Ski Corporation, in the course of its business, failed to exercise reasonable care or competence 9

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in obtaining or communicating information to the Joint Venture, and that the Ski Corporation supplied such information for the guidance of the Joint Venture in its business transactions. See Fluid Technology, Inc. v. CVJ Axles, Inc., 964 P.2d 614, 616 (Colo. App. 1998) (citing Restatement (Second) of Torts § 552(1) (1976); Keller v. A.O. Smith Harvestore Productions, Inc., 819 P.2d 69 (Colo. 1991)). Moreover, as with a fraud claim, the statement underlying a negligent misrepresentation claim " must be of a material fact which either exists in the present or has existed in the past." Van Leeuwan v. Nuzzi, 810 F. Supp. 1120, 1122 (D. Colo. 1993). " promise as to A future events without present intent not to fulfill promises is not actionable, and mere expressions of opinions likewise cannot support a misrepresentation claim." Id. ANALYSIS Prior to the execution of the July 16, 1999 Agreement, Kingsbury Pitcher wrote to the Joint Venture on February 20, 1998 (Doc. No. 39, Exhibit A-19) that the road from Highway 160 to the Village property was surveyed and mapped and that hopefully with the U.S.F.S. approval construction would start in early summer. And again on March 29, 1999 (Doc. No. 39, Exhibit A33) Pitcher wrote the Joint Venture that " want to move forward with the construction of our next we lift which will benefit all of us and to make arrangements for the easiest and most cost effective access to the Village. The (Environmental Assessment) EA also covers the entry road. . . .What L-M (Joint Venture) gains from this easement is a dedicated entry to the Village without need for negotiations with the Colorado Department of Transportation, or necessity of filing a separate Environmental Assessment." Drawing all reasonable inferences most favorable to the Joint Venture this Court finds that Kingsbury Pitcher made a false statement of material fact in that the statement that the Village would 10

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not need to negotiate with C.D.O.T. and not need to file a separate Environmental Assessment, and that the Joint Venture reasonably relied on the statement to its detriment. Pitcher' statement appears s not to be about a present or past fact, but more of a prediction about the requirements for getting access to the Village. At the time Pitcher made these statements, did he have a present intent to not fulfill the commitment? Subsequent to the statements by Pitcher, but before the July 16, 1999 Agreement, the U.S.F.S. approved the access road to the Village only to have a third party (Colorado Wild) intervene and appeal the decision after the July 16, 1999 Agreement. On the other hand, Davey Pitcher entered into a compromise with the U.S.F.S. and Colorado Wild less than one month after the July 16, 1999 Agreement that left the access 250 feet short of the Village and required a new Environmental Assessment. Again drawing all reasonable inferences in favor of the Joint Venture, by the slimmest of margins, the Court finds that Pitcher' intent at the time of the statements is a genuine issue of a s material fact, and therefore, this Court recommends that the Motion for Summary Judgment as to the fraudulent inducement claim should be denied, unless it was brought outside the statute of limitations. There is a genuine issue of fact as to whether or not the Pitchers were in a position of superior knowledge as to dealing with access over U.S.F.S. land and intersecting with Highway 160. Honts and McCombs have superior development backgrounds, but the Pitchers appear to have had more contact with the U.S.F.S. and C.D.O.T. There is also a genuine issue of fact as to whether the parties had equal access to information. The U.S.F.S. and C.D.O.T. being governmental agencies, provide the opportunity for equal access, but it appears that the Pitchers negotiations with Colorado Wild and the U.S.F.S. occurred in private and the results were communicated to the Joint Venture two weeks after the compromise. 11

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The claim of negligent misrepresentation requires proof that Wolf Creek failed to exercise reasonable care in obtaining or communicating information to the Joint Venture of a material fact. Based on the above analysis, the Court also finds that there is a genuine issue of a material fact and therefore recommends the Motion for Summary Judgment as to negligent misrepresentation should be denied, unless, it was brought outside the statute of limitations. STATUTE OF LIMITATIONS Colorado' statute of limitations for a claim of negligent misrepresentation is two years. s C.R.S. §13-80-102(1)(a). A negligent misrepresentation claim accrues " the date such . . . on misrepresentation . . . is discovered or should have been discovered by the exercise of reasonable diligence." C.R.S. §13-80-108(3). The statute begins to run once " some injury has occurred . . . notwithstanding that further injury continues to occur." Duell v. United Bank of Pueblo, 892 P.2d 336, 340 (Colo. App. 1994). The statute of limitations for fraud in the inducement is three years. C.R.S. §13-80102(1)(c). A fraud in the inducement action accrues " the date such fraud, misrepresentation, on concealment, or deceit is discovered or should have been discovered by the exercise of reasonable diligence." C.R.S. §13-80-108(3). The question before the court is whether or not there are undisputed facts that clearly show when the Joint Venture discovered, or reasonably should have discovered the injury. Bad Boys of Cripple Creek Mining Co. v. City of Cripple Creek, 996 P.2d 792 (Colo. App. 2000). The Joyner letter dated August 31, 1999 to Colorado Wild received by the Joint Venture September 15, 1999 (Doc. No. 24, Exhibit 14, L-M00128) which states that " private land owners the are not currently authorized to use this road (FDR 391) for commercial purposes except for those 12

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falling within the scope of the current ski operations."Future requests to use the road for commercial purposes would require " the road use proposal will be evaluated in terms of the effects on the (a) environment from such use under NEPA; . . . ." The letter goes on to state, " Also in reference to our phone conference meeting, Davey Pitcher, president of Wolf Creek Ski Corporation and acting as an interested party to the appeal, has agreed to design and construct both the access road turn-around and the easternmost parking lot such that neither facility reaches the actual private land boundary immediately to the east. Per agreement between Dave Pitcher and representatives of Colorado Wild, Inc., a 100-foot buffer will be retained between the new parking lots and the private land boundary; a 250-foot buffer will be retained between the access road turn-around and the private land boundary." On September 15, 1999 the Joint Venture was aware that Davey Pitcher had compromised the access road to the Village leaving a buffer, and the Joint Venture without access to its property and requiring a new Environmental Assessment. The draft default letter prepared by Holland & Hart, the Joint Venture' attorneys, dated s December 4, 2001 to Kingsbury Pitcher which states as follows: " Dear Mr. Pitcher: On behalf of the Leavell-McCombs Joint Venture, I am writing in connection with the conduct of the Wolf Creek Ski Corporation under the Agreement for Ski Utilities, Road and Parking Easements for The Village At Wolf Creek (the " Agreement" made and entered into on ), July 13, 1999 by and between Wolf Creek Ski Corporation (" Wolf Creek" and Leavell) McCombs Joint Venture (the " Venture" ). Under Article II, Section 2.03 of the Agreement, Wolf Creek agreed " use best efforts to to cause the USFS to permit a portion of the road to run to the boundary of the USFS Permit Land adjacent to the visitors'center site." In June of 1999, the USFS issued a Decision Notice and Finding of No Significant Impact for the Wolf Creek Ski Area Facilities Expansion. Colorado Wild, Inc. Appealed the decision on August 3, 1999. Several weeks later, a telephone conference 13

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took place between the USFS, Colorado Wild, and Davey Pitcher, President of Wolf Creek, to discuss the appeal. In exchange for Colorado Wild' withdrawal of its appeal, Mr. Pitcher agreed s to (1) design and construct both the access road turn-around and the easternmost parking lot such that neither facility would reach the Venture' actual private land boundary immediately to the s east and (2) retain a 100-foot buffer between the new parking lots and the Venture' private land s boundary and a 250-foot buffer between the access road turn-around and the private land boundary. Please see the enclosed letter from Calvin N. Joyner of the USFS to Marie Jordan of Colorado Wilds, dated August 31, 1999, stating that Wolf Creek' agreements concerning the s access road would be binding upon Colorado Wild' withdrawal of its appeal. s Effectively, in exchange for withdrawal of an appeal that would stall Wolf Creek' s facilities expansion, Mr. Pitcher agreed to cut short the extension of the access road so that it would not reach the Venture' private property. Clearly, this is not " s best efforts" on the part of Wolf Creek to cause the USFS to permit the extension of the road to the Venture' private land s boundary and is contrary to the express contractual obligations of Wolf Creek. It is, therefore, a substantial breach of the contract.(Emphasis added.) This course of conduct is clearly contrary to the express intentions and provisions of the Agreement regarding the development of the private property. Accordingly, if the meeting with the Board of County Commissioners takes place and Wolf Creek proposes, formally or informally, a development plan that is different or modified from the currently approved plan, the Venture will have no choice but to seriously consider Wolf Creek' actions as defaults under the Default s provision of the Agreement, Article VII, Section 7.09. The concerted and consistent efforts to delay, compromise, and undermine the proposed project of the Venture after Wolf Creek has received the benefits of the Agreement is absolutely contrary to the spirit and letter of the Agreement. In the event Mr. Davey Pitcher proceeds, the Venture will have no choice but to pursuant all of its available legal remedies under the Agreement. The Venture sees no alternative to protecting its interests in spite of its efforts to work with Wolf Creek to implement the Agreement to the mutual benefit of the parties. (Emphasis added.) Sincerely," March 28, 2000, Honts took control of the Joint Venture' representation with the USFS. s Davey Pitcher letter to Village Partners (including the Joint Venture) dated January 2, 2002, wherein Mr. Pitcher informs the Joint Venture that Wolf Creek is " hard pressed to defend the deviation"from the proposed 210 units to 2,100 units in the present Village Plan as it does not match the Wolf Creek Master Development Plan approved by the USFS. Additionally Davey states that the " proposed Village as it stands is a political hot potato." (Doc. No. 39, Exhibit A-55 L-M00249) 14

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In looking at the actions of the Joint Venture, it appears they also initiated lobbying efforts with the United States Congress and U. S. Department of Agriculture in December 2001 to obtain an easement over USFS land to the Village property, through legislation, rather than USFS local review. On or before December 4, 2001, the Joint Venture knew that Wolf Creek had made a compromise with Colorado Wild and USFS leaving the access road to the Village 250 feet short, and requiring the NEPA evaluation before it could be used for commercial purposes. The Joint Venture' s attorneys had prepared a draft default letter stating that Wolf Creek was in violation of the 1999 Agreement and had not used its best efforts to cause the USFS to permit the extension of the road to the Venture' property contrary to the contractual obligations of Wolf Creek, and this course of s conduct was clearly contrary to the express intentions and provisions of the Agreement. The Joint Venture and its attorneys stated that " concerted and consistent efforts to delay, compromise, the and undermine the proposed project of the Venture after Wolf Creek has received the benefits of the Agreement is absolutely contrary to the spirit and letter of the Agreement."(Emphasis added.) The Joint Venture claims that it first became aware that the Pitchers did not intend to live up to their statements at the time the statements were made in 1998 and 1999, when the Pitchers' depositions were taken in October of 2004. This contention is totally inconsistent with the draft default letter. If you think (rightly or wrongly) that the Pitchers used " concerted and consistent efforts to. . . undermine the proposed project" you knew that the Pitchers'statements in 1998 and , 1999 were false at the time they were made. Drawing all reasonable inferences most favorably to the Joint Venture, it is clear that the Joint Venture had discovered the alleged injury and that the Joint Venture was aware that Wolf Creek was 15

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no longer assisting the Joint Venture in getting access to its property nor supporting the Joint Venture in the County Planning process before December 5, 2001. The Joint Venture argues that further assurances by Davey Pitcher and Kingsbury Pitcher tolled the Statute of Limitations. The Court has reviewed many assurances by the Pitchers: 1. Davey Pitcher letter June 28, 2000 to Mineral County supporting the Village Plan. (Doc. No. 39, Exhibit A-49) 2. The Joint Venture with the approval of Wolf Creek on June 12, 2001 applies with USFS for access to Village land, 3. June 19, 2001, Wolf Creek writes to USFS supporting the extension of the road 250 feet to the Village land, 4. October 8, 2001, Kingsbury Pitcher letter to Joint Venture that you can rely on Wolf Creek to comply with the Agreement and get the access road, 5. September 15, 1999 when Honts contacted Kingsbury Pitcher about the compromise with Colorado Wild, and Pitcher told Honts to " keep on trusting us." (STATEMENT DISPUTED FACTS ¶ 43 of Defendant' Response to Plaintiff' Motion for Summary Judgment Regarding s s Fraudulent Inducement and Negligent Misrepresentation Claims). (Doc. No. 156, Exhibit A-19, pg. 127) In reviewing the above plus other alleged assurances in the above time-line, all alleged assurances occurred before the Draft Default letter of December 4, 2001, or at the latest January 2, 2002 when Davey Pitcher told the Joint Venture that he was hard pressed to defend the Village plan. Drawing all reasonable inferences most favorably to the Joint Venture, there were no assurances after December 4, 2001 that would toll the Statute of Limitations. The Joint Venture was 16

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aware of the alleged injury that Wolf Creek was undermining the Joint Venture' project, no later s than December 4, 2001 and filed for leave to file its claim of fraudulent inducement and negligent misrepresentation December 14, 2004. The Joint Venture' Answer and Counterclaim were filed June 7, 2004. Rule 15(c) of the s Federal Rules of Civil Procedure states, " amendment of a pleading relates back to the date of the an original pleading when. . .(2) the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading." Therefore, again drawing all reasonable inferences most favorable to the Joint Venture, this Court finds that the Joint Venture was aware of the alleged fraudulent inducement and negligent misrepresentation December 4, 2001 and filed its Answer and Counterclaim June 7, 2004 which results in the Court' recommendation that the Joint Venture' negligent misrepresentation claim be s s dismissed as being beyond the two (2) year statute of limitation, C.R.S. §13-80-102(1)(a) and the Joint Venture' fraudulent inducement claim be allowed to proceed as it was brought within the three s (3) year statute of limitation, C.R.S. §13-80-102(1)(c). CONCLUSION For the reasons stated above, the Court RECOMMENDS: 1. Plaintiff' Motion for Summary Judgment be DENIED as to Defendant' Counterclaim s s of Fraudulent Inducement, and 2. Plaintiff' Motion for Summary Judgment be DENIED as to Defendant' Counterclaim s s of Negligent Misrepresentation, and 3. Plaintiff' Motion for Summary Judgment claiming that the Defendant' Counterclaim of s s Fraudulent Inducement is barred by the statute of limitations is DENIED, and 17

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3. Plaintiff' Motion for Summary Judgment claiming that Defendant' Counterclaim of s s Negligent Misrepresentation is barred by the statute of limitations is GRANTED.

NOTICE: Pursuant to 28 U.S.C. § 636(b)(1)© and Fed. R. Civ. P. 72(b), the parties have ten (10) days after service of this recommendation to serve and file written, specific objections to the above recommendation with the District Judge assigned to the case. The District Judge need not consider frivolous, conclusive, or general objections. A party' failure to file and serve such written, specific s objections waives de novo review of the recommendation by the District Judge, Fed. R. Civ. P. 72(b), Thomas v. Arn, 474 U.S. 140, 148-53 (1985), and also waives appellate review of both factual and legal questions. Makin v. Colorado Dep' of t Corrections, 183 F.3d 1205, 1210 (10th Cir. 1999); Talley v. Hesse, 91 F.3d 1411, 141213 (10th Cir. 1996). DATED: November 15, 2006. BY THE COURT:

s/David L. West United States Magistrate Judge

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