Bewley v. Semler

• Decision Date: 24 September 2018
• Docket Number: Supreme Court Case No. 16SC849
• Citation: 432 P.3d 582
• Parties: Charles BEWLEY and Berenbaum Weinshienk P.C., Petitioners, v. R. Parker SEMLER, Respondent.
• Court: Colorado Supreme Court

432 P.3d 582

Charles BEWLEY and Berenbaum Weinshienk P.C., Petitioners,

v.R. Parker SEMLER, Respondent.

Supreme Court Case No. 16SC849

Supreme Court of Colorado.

September 24, 2018

Attorneys for Petitioners: Wheeler Trigg O'Donnell LLP, Carolyn J. Fairless, Rebecca Graves Payne, Denver, Colorado

Attorneys for Respondent: Semler & Associates P.C., R. Parker Semler, Andrew Oh-Willeke, Jeremy Goldblatt, Denver, Colorado

Attorneys for Amicus Curiae Colorado Bar Association: Montgomery Little & Soran, P.C., Christopher B. Little, Erin C. Nave, Christopher T. Carry, Greenwood Village, Colorado

Attorneys for Amicus Curiae Colorado Civil Justice League: Taylor Anderson LLP, Lee Mickus, Denver, Colorado

En Banc

JUSTICE BOATRIGHT delivered the Opinion of the Court.

¶ 1 R. Parker Semler, a member of a condominium association, filed a breach-of-contract claim against the law firm that employed the association's attorney. In support of that claim, he alleged that the attorney had a contract with the association's president not to represent one association member against another. He also alleged that the attorney had, on behalf of other association members he was representing, acquired a deed conveying ownership of parking spaces over which Semler also claimed ownership, thereby breaching the contract and damaging Semler.

¶ 2 The trial court dismissed the claim for lack of standing. A division of the court of appeals reversed, concluding that Semler had sufficiently alleged a breach-of-contract claim as a third-party beneficiary. In doing so, the division concluded that the strict privity rule, which "precludes attorney liability to non-clients absent fraud, malicious conduct, or negligent misrepresentation," Baker v. Wood, Ris & Hames, P.C., 2016 CO 5, ¶ 1, 364 P.3d 872, 874, did not bar Semler's claim.

¶ 3 We granted certiorari and now reverse. We conclude that the strict privity rule bars Semler's breach-of-contract claim, meaning he lacks standing to assert it.

I. Facts and Procedural History¹

¶ 4 This litigation began as a dispute over the ownership of three parking spaces at a condominium in downtown Denver. Semler, a member of the 1940 Blake Street Condominium Association ("the Association"), acquired an ownership interest in two of those parking spaces years ago. More recently, Perfect Place LLC, also an Association member, claimed that it had acquired a quitclaim deed that conveyed an ownership interest in those same two parking spaces, as well as a third.

¶ 5 To settle the competing claims to ownership, Perfect Place filed a quiet-title action, asking the trial court to declare it the rightful owner of the parking spaces.² Semler countered that he is the rightful owner of the parking spaces and that Perfect Place had wrongfully acquired the quitclaim deed.

¶ 6 While that litigation was ongoing, Semler initiated a second action asserting various claims against (as relevant here) the following four defendants: (1) Perfect Place; (2) Bruce S. Hellerstein, Perfect Place's principal and the Association's treasurer; (3) Bruce S. Hellerstein CPA, P.C., Hellerstein's accounting firm; and (4) Charles Bewley, an attorney who served as counsel to the Association and helped Perfect Place acquire the quitclaim deed at Hellerstein's direction (but did not represent Perfect Place in the quiet-title action). Semler alleged that those defendants had conspired to "seize" all rights in the parking spaces, that in doing so Hellerstein had breached his fiduciary duty to the Association's members, and that the other three defendants had aided and abetted Hellerstein's breach. Semler later amended his complaint to add as a defendant the law firm Berenbaum Weinshienk P.C., which was Bewley's employer at all relevant times.

¶ 7 Facing motions to dismiss for failure to state a claim under C.R.C.P. 12(b)(5), Semler moved for leave to file a second amended complaint. His proposed second amended complaint alleged that Bewley had fraudulently acquired the quitclaim deed on Hellerstein and Perfect Place's behalf, and it added fraud-based claims against Bewley and Hellerstein. It also asserted a number of claims against Berenbaum Weinshienk, including one for breach of contract, the claim at issue here. In support of that claim, the proposed second amended complaint alleged that the Association's president had "instructed" Bewley that neither he nor Berenbaum Weinshienk was to represent the Association against any of its members or to represent one member against another. Moreover, it alleged that (1) Bewley agreed to those terms on behalf of himself and Berenbaum Weinshienk; (2) Semler, as a member of the Association, was an intended third-party beneficiary of that agreement; and (3) Berenbaum Weinshienk breached the agreement by representing Perfect Place in its acquisition of the quitclaim deed, thereby "forc[ing Semler] to litigate his rightful claim to ownership of [the parking spaces]" and causing him to "suffer[ ] a tangible economic loss to his legally protected interests, including lost opportunity damages."

¶ 8 The trial court issued an order addressing both the defendants' motions to dismiss and Semler's motion to file a second amended complaint. The court reasoned that the person whom Perfect Place acquired the quitclaim deed from—not Semler—was "the victim of [any] fraud" that occurred, and Semler therefore lacked standing to sue. The court thus denied Semler's motion for leave to file a second amended complaint and granted the motions to dismiss. The court also ordered that Semler pay the defendants' attorney's fees and costs.

¶ 9 Semler appealed. Before the court of appeals division heard oral arguments, however, this court issued two opinions that bear on the case. In Baker, we reaffirmed the "strict privity rule," i.e., that an attorney's liability to a non-client "is generally limited to the narrow set of circumstances in which the attorney has committed fraud or a malicious or tortious act, including negligent misrepresentation." ¶ 2, 364 P.3d at 874. And in Warne v. Hall, 2016 CO 50, ¶ 24, 373 P.3d 588, 595, we adopted the "plausible on its face" pleading standard, as articulated by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The division directed the parties to address at oral arguments whether the holding in Warne applies retroactively.

¶ 10 The division ultimately did not decide that question. Instead, it affirmed the dismissal of all but one of Semler's claims. Semler's fraud-based claims, the division concluded, were properly dismissed for failure to state a claim under C.R.C.P. 12(b)(5) because Semler's connection to any fraudulent conduct was too attenuated. Semler v. Hellerstein, 2016 COA 143, ¶¶ 18–22, 428 P.3d 555. But the division reasoned that because "Semler's remaining claims assert conduct against him directly, the trial court's reasoning for dismissal based on lack of standing does not apply." Id. at ¶ 23. So the division reviewed those claims under C.R.C.P. 12(b)(5). Id. It concluded that, under either Warne's"plausible on its face" pleading standard or the more lenient, pre- Warne"no set of facts" pleading standard, all but one of those claims failed to state a claim. Id. at ¶ 26. When the division analyzed Semler's sole surviving claim—his claim for breach of contract against Berenbaum Weinshienk—it did not specify which standard of review it was applying.³ Rather, it recounted the allegations from Semler's second amended complaint and then declared that the Association president's "instruction" to Berenbaum Weinshienk created "a contract of which Semler was an intended beneficiary." Id. at ¶ 51.

¶ 11 The division then concluded that Baker does not bar Semler's contract claim against Berenbaum Weinshienk. Id. at ¶ 54–55. In Baker, we rejected as inconsistent with the strict privity rule the argument that beneficiaries of a testator's estate had standing to assert legal-malpractice or breach-of-contract claims against the attorneys who drafted the testator's estate-planning documents. ¶¶ 1–2, 364 P.3d at 874. The division here reasoned that Semler had not alleged that the breach of contract resulted from the quality of Bewley's legal representation; he had instead alleged that Bewley's representation of Perfect Place in its acquisition of title to the parking spaces breached Bewley's contract with the Association not to represent one member against another. Semler, ¶ 55. The division found that difference to "undercut[ ] the policy considerations identified in Baker as supporting the strict privity rule." Id. Thus, the division concluded that Semler had sufficiently pleaded a breach-of-contract claim under a third-party beneficiary theory of liability. Id. at ¶ 56.

¶ 12 The division therefore reversed the trial court's order awarding attorney's fees to Berenbaum Weinshienk and Bewley,⁴ id. at ¶ 59, and remanded the case to the trial court for further proceedings on the sole surviving claim for breach of contract against Berenbaum Weinshienk, id. at ¶ 63.

¶ 13 We granted certiorari to determine whether the division (1) erred in concluding that Baker did not deprive Semler of standing to assert his breach-of-contract claim, and (2) failed to properly apply Warne.⁵

II. Standard of Review

¶ 14 We review a trial court's ruling on a motion to dismiss for failure to state a claim under C.R.C.P. 12(b)(5) de novo. Norton v. Rocky Mountain Planned Parenthood, Inc., 2018 CO 3, ¶ 7, 409 P.3d 331, 334. In doing so, we accept all factual allegations in the complaint as true, viewing them in a light most favorable to the plaintiff. Id. Dismissal under C.R.C.P. 12(b)(5) is proper only "where the factual allegations in the complaint cannot, as a matter of law, support the claim for relief." Colo. Ethics Watch v. Senate Majority Fund, LLC, 2012 CO 12, ¶ 16, 269 P.3d 1248, 1253.

III. Analysi...