Fraud suit filed against Musick |

Fraud suit filed against Musick

Jeremy Heiman

Former W/J Ranch manager John Musick may have left Aspen, but he didn’t leave his legal problems behind.

Lowe W/J, the new owner of the controversial property in Woody Creek, has filed a lawsuit against Musick for fraud.

The suit, filed in Pitkin County District Court Friday, alleges that Musick fraudulently transferred shares in the Salvation Ditch Co. while those shares were actually held as security by Lehman Bros., the company that financed the ranch for Musick. Ownership of the shares passed from Musick to Lowe when it bought the ranch from Musick early this year, the suit claims.

Lehman also financed Lowe’s purchase of the ranch, and continues to hold the original certificate for 1,426 shares of the ditch company stock. The certificate represents ownership of perhaps 10 to 12 percent of the water rights in the Salvation Ditch, said Lowe W/J president Jim DeFrancia.

DeFrancia said the existence of duplicate certificates came to light earlier this month, when Aspen realtor Peter Fornell tried to sell Lowe the ditch stock the company already owned.

Lowe is asking the court for judgments of fraud and breach of contract against Musick. It wants the court to confirm that Lowe is the sole owner of the stock, and is asking for a monetary settlement if the stock mess can’t be straightened out.

A certificate for the shares of ditch stock was issued by the Salvation Ditch Co. in 1968, to Wilton Linder “Wink” Jaffee, who owned the ranch at that time. The certificate Lowe owns is the original certificate for the 1,426 shares of stock issued to Jaffee, the suit claims.

Jaffee told the ditch company in 1988 that the certificate was lost. He deeded 71.3 shares of the stock to his parents, Wilton Jaffee Sr. and Jeanne Jaffee. Jaffee asked the company to issue new certificates, one for 71.3 shares to his parents and one for 1,354.7 shares to his own company.

Jaffee sold the ranch and water rights to three corporations owned by Musick in 1995. He allegedly signed over the original certificate for 1,426 shares, which was apparently no longer lost, to Musick.

A company called United Financial Mortgage Corporation financed the ranch for Musick and held the certificate for the ditch stock, the suit says. In November 1997, Musick refinanced the ranch with Lehman and United was paid off.

In 1998, 10 years after Jaffee’s claim that the certificate was lost, the Salvation Ditch Co. reissued the certificates that Jaffee had requested, apparently not knowing the original was by then owned by Musick and held by Lehman, according to the suit.

A certificate for 71.3 shares was issued to Jeanne Jaffee. Wilton Jaffee, Sr. had, by then, died. And a certificate for the 1,354.7 remaining shares was issued to W/J Ranch, by that time owned by Musick. Musick did not tell Lehman Bros. that the new certificates had been issued, the suit alleges.

On April 30, 1999, Musick refinanced his house, on a two-acre parcel adjacent to W/J, through United Financial, and assigned the 1,354.7 shares to that company, claims the suit. That transfer of stock was not approved by the ditch company as required, but the suit claims that United Financial knew of “the defective nature of the Musick Corporations’ title” to the certificate.

Musick sold the house in August 1999, to Laurence Woznicki. He assumed Musick’s loan with United and received the certificate for 1,354.7 shares. On June 5, 2000, the ditch company issued Woznicki a replacement certificate in his name, according to the lawsuit.

DeFrancia said he believes Woznicki is connected with United Financial, perhaps as an officer or an owner. Woznicki has now placed the house on the market, and is trying to sell the ditch stock with it, DeFrancia said.

The most important problem, DeFrancia said, is that Musick had the 1,426 shares, which he transferred to Lehman, and then got the replacement certificate, which he transferred to United Financial.

“That’s where the fraud comes in,” DeFrancia said. “These are the same shares. That’s what this suit is all about.”

As codefendants in the suit, Lowe W/J named Musick’s three corporations, Woznicki, the Salvation Ditch Co., an unknown person who may have a contract to buy Woznicki’s certificate for 1,354.7 shares, and Jeanne Jaffee.

“She’s sort of an innocent bystander,” DeFrancia said. “We didn’t want to have to include her, but unfortunately we have no choice.”

DeFrancia said Lowe ultimately wants a judgment from the court that confirms that Lowe owns all the shares.

“At the end of the day, I’m probably going to be happy just to get these shares of water stock,” DeFrancia said. “That’s really what I’m trying to get to.”

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