Civil trial involving Gypsum contractor over disagreements in Leadville development gets underway

Jan 25, 2024

News News | Feb 8, 2023

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On Monday, what is expected to be a weeklong jury trial got underway at the Eagle County Justice Center in Judge Paul Dunkleman's district courtroom. A six-person jury will hear the case in a civil disagreement between the prior partners of Affordable Mountain Homes LLC, the developer of the new Leadville affordable housing neighborhood called Railyard.

Landowner and developer John Lichtenegger is represented by Bloch and Chapleau Associate Attorney Matthew Dolan in his lawsuit against Steven Sandoval, a local contractor based in Gypsum and the president of BW-ANE Inc. Sandoval is being represented by attorney Andrew Miller of Sweetbaum Miller PC.

The case being presented before the jury concerns a joint venture and partnership between Lichtenegger and Sandoval to build 10 single-family homes at the Railyard location in Leadville.

"Each party has claimed that the other has breached the contract between the parties and each party has brought other related claims against the other party," Dunkleman said.

Dolan said that Lichtenegger was motivated to help alleviate housing pressures for hardworking community members and began looking for land to develop an affordable housing project, leading him to the Railyard in Leadville.

"Prior to Mr. Lichtenegger's involvement, the Railyard was, for lack of a better phrase, a waste of space," Dolan said. "It had been polluted from years of industrial use and few thought he’d be able to rehabilitate the land up to EPA standards to allow for the building of residential homes, but he made it happen."

After years of work on the land, Dolan said Lichtenegger and his team were ready to commence building efforts come 2020. On July 2 that year, Lichtenegger and Sandoval, with his company BW-ANE Inc., established a partnership called Affordable Mountain Homes LLC.

On July 17, 2020, the parties entered an offer grading agreement in which Lichtenegger provided land and capital to build the first 10 homes of the Railyard community. At the same time, BW-ANE Inc. and Sandoval would work as a general contractor to build the homes.

Within the agreement, Sandoval and BW-ANE Inc. were set to receive a 10% contractor fee for materials and labor. Additionally, the agreement also outlined that BW-ANE Inc. and Sandoval were entitled to a third of the profits when the homes sold. Respectively, Lichtenegger would receive two-thirds of the proceeds.

"Unfortunately, it soon became clear that Mr. Lichtenegger had put his faith in the wrong person," Dolan said.

Dolan said the partnership between Lichtenegger and Sandoval terminated on Jan. 1, 2021, due to dissatisfaction with the construction work as well as a lack of communication about making payments to subcontractors and materials suppliers.

The homes, which were partially completed by Sandoval and BW-ANE Inc. had alleged construction complications. Dolan said that most notably, the foundations of several units were improperly set, causing more complications in finishing the construction of the homes after Sandoval and BW-ANE Inc's termination.

"Needless to say, these issues needed to be remedied so that the homes were structurally sound and complied with the architectural plans approved by the county," Dolan said.

Dolan said it is critical to the case that Lichtenegger terminated Sandoval and BW-ANE Inc. prior to any of the homes receiving a certificate of occupancy or being sold.

After his early-year termination, Dolan said Sandoval sent Lichtenegger a letter in July of 2021 showing he withdrew $299,970 of anticipatory profits.

"Mr. Sandoval claims to (the jury) that he is still entitled to an additional $54,799.97 in compensation," Dolan said. "To be clear, no party was ever authorized to withdraw anticipatory funds prior to the homes actually being sold."

The claims brought against Sandoval are for breach of contract, breach of building contractors, breach of implied warranty, unjust enrichment, deceit-based fraud, negligent misrepresentation causing financial loss in a business transaction, civil theft and a breach of fiduciary duty.

Additionallly, Dolan said the allegations against Lichtenegger were only brought about in response to Lichtenegger's lawsuit against Sandoval.

Miller said that the agreement Sandoval was entering with Lichtenegger was unusual, as his typical contractor fee is around 18 to 22%. This fee covers overhead and expenses of a normally operating construction company: from gas to tools, lodging to machinery. However, the promise of a third of sale proceeds influenced Sandoval's decision to enter the Affordable Mountain Homes LLC partnership under its different-than-usual circumstances.

"This case is about someone trying to back out of a promise," Miller said.

Lichtenegger contributed $20,000 and Sandoval contributed $10,000 to Affordable Mountain Homes LLC's creation and Miller said Sandoval and his team began working on the Railyard project almost immediately.

Miller said that Sandoval and his crew worked at a "furious pace" to obtain building permits and ensure the homes had foundations built before winter freezes came.

To pay subcontractors, Sandoval used prior experience to estimate costs and complete construction draws "to make sure that he had enough money to keep the project moving at the pace it was moving," Miller said.

Miller said the evidence of the case will show that Sandoval and his subcontractors did nearly $1.5 million of work between August 2020 and January 2021. All 10 homes were in various stages of construction, he said, with two almost complete.

"Steve Sandoval has lived for this project over that time," Miller said. "Although his home is in Gypsum, he rented a house in Leadville and was on site nearly every single day, taking only an occasional Sunday off to spend time with his kids."

From Sandoval's point of view, everything was going as planned, Miller said. Then, Sandoval was "blindsided" by Lichtenegger with notice of his and BW-ANE Inc's termination.

"The evidence will show that they had not had prior meetings discussing complaints that Mr. Lichtenegger might have had over Steve Sandoval's work or anything else," Miller said. "Mr. Sandoval was not prepared. Mr. Lichtenegger, a trained attorney in Missouri had written up some documents and brought them with him in his car. He set those documents down on Mr. Sandoval's lap and he demanded that Mr. Sandoval signed those documents."

By signing the papers, Miller said Sandoval gave Lichtenegger back Sandoval's third of Affordable mountain homes. In doing so, Miller said the documents also required Lichtenegger to reimburse Sandoval the $10,000 he originally contributed to the company.

Miller said Lichtenegger hadn't ever paid Sandoval the $10,000 back. Sandoval claims he is owed the $10,000 as well as the one-third share of the profits for the sale of the homes.

"Lichtenegger saw the potential profit and tried to back out of the deal," Miller said. "The evidence will show BW-ANE Inc. was wrongfully terminated from the project and is entitled to its one-third share of the profits."

Various witnesses are testifying in the trial, including subcontractors, materials suppliers, bank managers and others close to the Railyard project.

After being presented the evidence, Dunkleman will instruct the jury on the applicable law. The jury alone will be responsible for determining the facts of the case.

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