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Mehaffy1/30/1995
EN BANC
We granted certiorari to review Central Bank Denver, N.A. v. Mehaffy, Rider, Windholz & Wilson, 865 P.2d 862 (Colo. App. 1993). We affirm the court of appeals. Petitioners represented the town of Winter Park (Town) and the Winter Park Development Authority (Authority) in connection with notes and bonds issued by the Authority in 1984 and 1985. Central Bank Denver, N.A. (respondent), purchased the notes and bonds. Respondent's claims against petitioners are predicated on opinion letters that petitioners prepared at the request of their clients in connection with the offering and sale of the notes and bonds of the Authority. The court of appeals held that an attorney who issues an opinion letter for the purpose of inducing a non-client to purchase municipal notes or bonds can be liable for negligent misrepresentation when the opinion letter contains material misstatements of fact. We agree with the court of appeals and the remand of respondent's negligent misrepresentation claim against petitioners to the district court for trial.
I
In January 1983, the Winter Park Town Council (Town Council) created the Authority to improve certain blighted areas within the Town's limits. The Authority adopted an urban renewal plan (Plan) to construct projects paid for by property tax increment financing. The Town Council set a public hearing on the proposed Plan as required by section 31-25-107(3), 12B C.R.S. (1986). Instead of holding a public hearing or making the factual findings required under section 31-25-107(4), 12B C.R.S. (1986), the Town Council submitted the Plan to the electorate for approval at a special election. After the voters approved the Plan and the Town Council adopted the Plan, the Authority issued $4 million in Notes (1984 Notes) to finance the construction of a parking garage. Hanifen Imhoff, Inc. (Hanifen) was the underwriter for the 1984 Notes. Respondent expressed interest in purchasing the 1984 Notes and began negotiating the terms and conditions of the purchase.
Before respondent purchased the 1984 Notes, East Grand County School District and other governmental entities (school district) filed a lawsuit against the Town, the Town Council, and the Authority in the district court, claiming that the Town Council had failed to make certain findings of fact required by section 31-25-107(4). Respondent informed Hanifen that it would not purchase the 1984 Notes if there was any risk that the lawsuit would succeed and cause a default on the 1984 Notes.
Hanifen assured respondent that the lawsuit had no merit, and that bond counsel, O'Connor & Hannan, would certify that all necessary steps to secure the tax revenue required to finance the 1984 Notes had been taken. Respondent contacted Arnold Kaplan of O'Connor & Hannan. Kaplan assured respondent that an opinion letter, stating that the lawsuit had no merit, would be issued by Mehaffy, Rider, Windholz & Wilson, counsel for the Town and the Authority. O'Connor and Hannan, and Mehaffy, Rider, Windholz & Wilson, issued opinion letters on September 24, 1984, stating that the lawsuit did not have merit. These opinion letters were provided to respondent, and respondent purchased the 1984 Notes from Hanifen for $4 million in reliance on counsels' representations.
In February 1985, the Authority issued $4.5 million in Notes (1985 Notes), in order to retire the 1984 Notes. Mehaffy and Kaplan issued opinion letters that the 1985 Notes were valid, and that the lawsuit had no merit. These opinion letters were provided to respondent. Windholz, who had been retained to defend the Authority
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