MidCities Metro. Dist. No. 1 v. U.S. Bank Nat'l Ass'n
| Decision Date | 24 June 2013 |
| Docket Number | Civil Case No. 12-cv-03322-LTB |
| Parties | MIDCITIES METROPOLITAN DISTRICT NO. 1, a Quasi-Municipal Corporation and Political Subdivision of the State of Colorado, Plaintiff, v. U.S. BANK NATIONAL ASSOCIATION, a National Banking Association, Defendant. |
| Court | U.S. District Court — District of Colorado |
ORDER
This matter is before me on a Motion to Dismiss filed by Defendant, U.S. Bank National Association ("US Bank"), seeking dismissal of the claims asserted against it by Plaintiff, MidCities Metropolitan District No. 1 ("MidCities"), for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6). [Doc # 9] Oral arguments would not materially aid in my determination of this motion. After consideration of the parties briefs and arguments, I GRANT IN PART and DENY IN PART the motion as follows.
In its complaint, MidCities alleges that it is a special district (a quasi-municipal corporation and political subdivision of the State of Colorado) organized under Colo. Rev. Stat. §32-1-101, et seq., which provides services - such as sewer and water systems - to real property owners within its boundaries. The MidCities district consists of property adjacent to the Flatirons Mall located in Broomfield, Colorado.
At issue in this case is a Special Warranty Deed (the "Deed") dated August 21, 2001, related to 8.1 acres of real property located within the district boundaries. In the Deed, the original developer and Grantor, Coalton Acres, LLC, granted the property at issue to the original Grantee, Heritage Bank. Section 2.1 of the Deed - entitled Grantee's Covenant as to Sales Tax Revenue: - requires the following:
(a) Grantee covenants and agrees that Grantee shall pay to MidCities . . . for every calendar year, during the term of this covenant, commencing with the calendar year 2003, . . . the remainder of (i) $350,000 minus (ii) one-half (½) of a three and one-half percent (3.5%) sales tax collected by the City from the Property for the year (the "Shortfall Amount").
Section 2.1(b) provides that the Shortfall Amount shall be paid to MidCities on or before March 31st of each calendar year, and Section 2.1(c) provides that the obligation to pay the Shortfall Amount shall continue until the bond obligations and amounts due in repayment of developer guarantees are made. MidCities alleges that in November 2004, the original Grantor (Coalton Acres) assigned its rights under the Deed to MidCities.
In 2007, First Community Bank acquired Heritage Bank. Thereafter, in January 2011, First Community Bank was placed into receivership by the Federal Deposit Insurance Corporation (the "FDIC"). And, although it appears to be disputed, MidCities alleges that U.S. Bank then acquired the property at issue from the FDIC upon execution of a Purchase and Assumption Agreement, dated January 28, 2011. MidCities refers to Section 3.1 of that Purchase Agreement, which states that US Bank "hereby purchases from the Receiver, and Receiver hereby sells, assigns, transfers and delivers to [US Bank], all right, title and interest of the Receiver in and to all of the assets (real, personal and mixed, wherever located and however acquired) . . . of the Failed Bank." As such, MidCities asserts that US Bank - as HeritageBank's successor and current owner of the property, and by virtue of the express terms of the Purchase Agreement - is obligated to pay the Shortfall Amount set forth in Section 2.1(a) of the Deed. Despite numerous demands, US Bank has failed to pay MidCities in 2011 and 2012.
As a result, MidCities filed this lawsuit in November 2012, in the District Court for the City and County of Broomfield, seeking payment of the Shortfall Amount due, and a declaration that US Bank is liable to pay it in the future. MidCities asserts four claims for relief: (1) Breach of Contract; (2) Unjust Enrichment; (3) Declaratory Judgment; and (4) Injunctive Relief. US Bank subsequently removed the case from state court to this court, by filing a Notice of Removal on December 21, 2012, on the basis of diversity jurisdiction of this action pursuant to 28 U.S.C. §1332(a). [Doc #1] US Bank then filed this motion seeking dismissal of MidCities' claims against it for failure to state a claim.
Fed. R. Civ. P. 12(b)(6) states that a court may dismiss a complaint for "failure to state a claim upon which relief can be granted." To withstand a motion to dismiss, a complaint must contain enough allegations of fact "to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). "While a [pleading] attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, . . . a [party's] obligation to provide the 'grounds' of his 'entitlement to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. 550 U.S. at 556 (citations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level." Id.; see also Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007).
In deciding a Rule 12(b)(6) motion to dismiss, I am to assume as true all well-pleaded factual allegations and view them in the light most favorable to the nonmoving party. Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); Schwartz v. Booker, 702 F.3d 573, 579 (10th Cir. 2012). However, "when legal conclusions are involved in the complaint 'the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to [those] conclusions.'" Khalik v. United Airlines, 671 F.3d 1188, 1190 (10th Cir. 2012)(quoting Ashcroft v. Iqbal, supra, 556 U.S. at 677). "Accordingly, in examining a complaint under Rule 12(b)(6), [the court] will disregard conclusory statements [of law] and look only to whether the remaining, factual allegations plausibly suggest the defendant is liable." Id.
MidCities claims that Section 2.1 of the Deed is a real covenant that runs with the property at issue and therefore binds the owner thereof, US Bank, to pay the Shortfall Amount. US Bank, in response, argues that Section 2.1 is not a real covenant that runs with the land, but rather is a personal covenant that does not run with the property and, as such, does not obligate it to pay.
As an initial matter, I note that because this Court is sitting in diversity-based jurisdiction, I apply the substantive law of Colorado as the forum state. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Essex Ins. Co. v. Vincent, 52 F.3d 894, 896 (10th Cir. 1995). I further note that Section 4.6 of the Deed provides that it "shall be interpreted and enforced according to the laws of the State of Colorado."
Personal covenants operate like general contract provisions that obligate only the contracting parties. Cloud v. Ass'n of Owners, Satellite Apt. Bldg., Inc., 857 P.2d 435, 440 (Colo. App. 1992). Unlike personal covenants, which bind only the actual parties to the covenant, real covenants "run with the land" and burden or benefit successors in interest. Lookout Mountain Paradise Hills Homeowners' Ass'n v. Viewpoint Associates, 867 P.2d 70, 74 (Colo. App. 1993)(citing Cloud v. Ass'n of Owners, supra, 857 P.2d at 440). In order for a covenant to run with the land, the parties to the covenant must intend that it do so. Lookout Mountain v. Viewpoint, supra, 867 P.2d at 74 (citing Brown v. McDavid, 676 P.2d 714 (Colo. App. 1983)). In addition, the covenant must "touch and concern" the land. Id. (citing Bigelow v. Nottingham, 833 P.2d 764 (Colo. App. 1991)). That is, it must closely relate to the land, its use, or its enjoyment. Cloud v. Ass'n of Owners, supra, 857 P.2d at 440. Whether a covenant runs with the land turns on the construction of relevant documents. Lookout Mountain v. Viewpoint, supra, 867 P.2d at 74.
The "dictates of plain English" must guide the interpretation of a restrictive covenant. B. B. & C. Partnership v. Edelweiss Condominium Ass'n, 218 P.3d 310, 315 (Colo. 2009)(citing Buick v. Highland Meadow Estates, 21 P.3d 860, 862 (Colo. 2001)). If it is clear on its face, courts will enforce a covenant as written. Id. "We construe covenants as a whole, keeping in mind their underlying purpose." Id. Only when the language of a covenant is unclear will the court resort to rules of interpretation and, in that event, "courts resolve all doubts against the restriction and in favor of free and unrestricted use of property." K9Shrink, LLC v. Ridgewood Meadows Water and Homeowners Ass'n, 278 P.3d 372, 377 (Colo. App. 2011)(quoting B.B. & C. P'ship v. Edelweiss, supra, 218 P.3d at 315). If a document such as a deed is unambiguouson its face, the nature and extent of the interest contained in it must be determined without regard to extrinsic evidence. O'Brien v. Village Land Co., 794 P.2d 246 (Colo. 1990).
US Bank argues that MidCities has failed to state claim upon which relief can be granted because all of its asserted claims - for breach of contract and declaratory/injunctive relief or, alternatively, unjust enrichment - are premised on the faulty legal conclusion that Section 2.1 is a real covenant that runs with the land which, in turn, obligates future property owners. US Bank asserts that the plain and unambiguous language of the Deed shows that Section 2.1 is merely a personal covenant that served only to bind the original Grantee, and it not a real covenant that runs with the land.
Article 1 of the Deed is entitled "RESTRICTIONS," and Section 1.1 provides as follows:
Intent as to Restrictions. The Property is conveyed and this conveyance is accepted subject to and upon the following express terms, covenants, conditions and restrictions (collectively, the Restrictions), which Restrictions...
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