A Colorado judge has ruled in favor of minority shareholders, stripping Barry Freedman of controlling power of the Ute Lake Ranch Inc. and DVR LLC and appointing a receiver.
On Nov. 29, Arapahoe County District Court Judge J. Mark Hannen made a ruling stripping Freedman of controlling power of the subdivision and DVR LLC located at Ute Lake Reservoir near Logan.
Minority shareholders Bruce Hamon and W. Winston Wall filed suit against Freedman, the majority shareholder of ULR and DVR LLC, in district court at Centennial, Colo.
According to court documents:
• Freedman operated ULR as he saw fit without regard to the rights and interest of Hamon or Wall. In doing so, it has resulted in litigation and a stop in development at the subdivision. It is doubtful whether ULR will be able to operate in the future and produce a return on the investments of the shareholders.
• Hamon and wall argued as owners of a 42.5 percent interest in ULR they expected they would be kept informed of business operations, expenditures and business opportunities of ULR. They expected to participate in annual shareholders and directors meetings and to actively participate in corporate decisions and to make a reasonable return on their investment.
• Hamon and Hall claim they are shareholders of an insolvent corporation and Freedman increased his own salary, paid personal expenses with corporate money and did not keep the minority shareholders in the loop of important business matters.
Hannen ruled Freedman must reimburse ULR for the portion of his salary in 2009 and 2010 that exceeded $150,000 a year. Also that Freedman reimburse ULR $19,000 for money used to purchase membership in BLS,LLC and meet a capital call made by BLS, LLC.
Hannen reserved the ruling for the dissolution of ULR Inc. and DVR LLC. He said the court did not have sufficient information to determine whether ULR and DVR should be dissolved though the assets are in danger of being lost or materially injured or destroyed.
Hannen ruled the court would appoint a receiver, taking into consideration a recommendation of a person or company from both the plaintiffs and defendant to act as that receiver. The receiver will operate both businesses to determine the current financial condition of both companies and to make recommendations to the court as to whether ULR and or DVR should be dissolved, their business affairs wound up and their remaining assets liquidated and distributed.
The receiver will have a duty to act in the best interest of the minority stock holders and the resolving of litigation halting development at the subdivision and in Quay County, said Warren Frost, an attorney and county resident.
Quay County Attorney Donald Schutte said the ruling is good news because an independent party will be able to meet with County Commissioners and work to resolve the current litigation.
The commission was granted an injunction halting development at ULR, arguing Freedman had not issued a disclosure statement to property buyers about serious water issues at the subdivision. The case is still being heard in the Tenth Judicial District Court in Quay County.
Schutte said resolving the litigation means property can be sold and economic development can increase from additional sales and development at the subdivision.
Freedman's attorney Jim Kreutz was not available immediately for comment.