Morris v. Schoen

• Decision Date: 10 June 1999
• Docket Number: No. 98CA0489.,98CA0489.
• Citation: 998 P.2d 38
• Parties: Bill MORRIS, Plaintiff-Appellant, v. Jim SCHOEN, Ed McMillan and Bank of Durango, Defendants-Appellees.
• Court: Colorado Court of Appeals

998 P.2d 38

Bill MORRIS, Plaintiff-Appellant, v. Jim SCHOEN, Ed McMillan and Bank of Durango, Defendants-Appellees.

No. 98CA0489.

Colorado Court of Appeals, Div. III.

June 10, 1999.

As Modified on Denial of Rehearing August 20, 1999.

Certiorari Granted May 1, 2000.

Titus & Murphy, Victor A. Titus, Farmington, New Mexico, for Plaintiff-Appellant.

Crane, Leake, Casey, Ehlers & Eggleston, Robert E. Crane, Durango, Colorado, for Defendants-Appellees.

Opinion by Judge MARQUEZ.

Plaintiff, Bill Morris, appeals the trial court's dismissal of his claims against defendants, Jim Schoen, Ed McMillan, and the Bank of Durango (Bank). He also appeals the order awarding defendants attorney fees and costs. We reverse both the judgment of dismissal and the order and remand for further proceedings.

In September 1995, certain parties approached the Bank to discuss financing the construction of a saloon. Defendant Schoen, an employee of the Bank, helped these parties acquire two Small Business Administration (SBA) loans. However, these parties needed additional capital and started the application process for a Farmers Home Administration loan (FmHA loan).

In July 1996, the parties constructing the saloon contacted plaintiff concerning a bridge loan to pay certain vendors. According to the complaint, on July 17, 1996, defendant Schoen assured plaintiff the Bank was in the process of refinancing the saloon and that it would likely be funded within the next thirty to sixty days.

Schoen, on July 18, 1996, allegedly stated that the Farmers Home Loan Bank was in the process of funding the saloon and that it would be no longer than thirty to sixty days that this bridge loan would be paid off. The complaint alleges he made similar assurances at the end of July 1996, and again on August 9, 1996, the date plaintiff gave defendant Schoen a check. On this date, defendant Schoen is alleged to have stated, "As we speak, this loan is being funded." Later, defendant Schoen also wrote a subordination agreement for some separate collateral. The complaint further alleges that defendant Schoen again assured plaintiff in November 1996 there was no problem and that the loan was going through.

Additional loans, now assigned to plaintiff, were made by other individuals to the parties constructing the saloon. The loans made totaled $331,000.

In December 1996, defendants informed plaintiff that the FmHA loan would not be submitted. Thereafter, the borrowing parties filed for bankruptcy protection and defaulted on all loans owed to plaintiff.

Plaintiff brought this suit against defendants, claiming, among other things, deceit based on fraud, intentional interference with contractual obligations, and outrageous conduct. Defendants, without filing an answer, moved to dismiss plaintiff's claims pursuant to C.R.C.P. 12(b)(5), asserting that § 38-10-124, C.R.S.1998, barred plaintiff's claims because they related to a credit agreement that was not in writing and not signed by defendants.

In granting the motion, the trial court determined that there was no dispute as to whether this case involved a credit agreement and concluded that the definition of "debtor" in the statute included plaintiff. This appeal followed.

I.

Plaintiff contends that the trial court erred by applying § 38-10-124 to dismiss all of his claims. We agree.

Motions to dismiss under C.R.C.P. 12(b)(5) are viewed with disfavor. Rosenthal v. Dean Witter Reynolds, Inc., 908 P.2d 1095 (Colo.1995).

We review a trial court's determination on a motion to dismiss using the same standards as the trial court and accept all averments of material fact contained in the complaint as true. Shapiro & Meinhold v. Zartman, 823 P.2d 120 (Colo.1992). On the basis of such facts, we must then decide whether, under any theory of law, a plaintiff is entitled to relief. If relief can be granted under such circumstances, then the motion to dismiss must be denied. Doe v. High-Tech Institute, Inc., 972 P.2d 1060 (Colo.App. 1998).

Section 38-10-124 provides:

(1) As used in this section unless the context otherwise requires:

(a) `Credit agreement' means:

(1) A contract, promise, undertaking, offer, or commitment to lend, borrow, repay, or forbear repayment of money, to otherwise extend or receive credit, or to make any other financial accommodation;

....

(b) `Creditor' means a financial institution which offers to extend, is asked to extend, or extends credit under a credit agreement with a debtor.

(c) `Debtor' means a person who or entity which obtains credit or seeks a credit agreement with a creditor or who owes money to a creditor.

(d) `Financial institution' means a bank, savings and loan association, savings bank, industrial bank, credit union, or mortgage or finance company.

(2) Notwithstanding any statutory or case law to the contrary, including but not limited to section 38-10-112, no debtor or creditor may file or maintain an action or claim related to a credit agreement involving a principal amount in excess of twenty-five thousand dollars unless the credit agreement is in writing and is signed by the party against whom enforcement is sought.

(3) A credit agreement may not be implied under any circumstances, including, without limitation, from the relationship, fiduciary or otherwise, of the creditor and the debtor or from performance or partial performance by or on behalf of the creditor or debtor, or by promissory estoppel.

The statute was enacted in an effort to discourage lender liability litigation and to promote certainty in credit agreements involving a principal amount of more than $25,000 in which the creditor is a financial institution. Norwest Bank Lakewood v. GCC Partnership, 886 P.2d 299 (Colo.App.1994).

Here, the trial court viewed plaintiff as a "debtor" as defined by statute. Describing plaintiff as a third party to the building parties' attempt to acquire a FmHA loan, the trial court saw no reason to limit the definition of debtor to the person to whom the money would be handed in the first instance. Additionally, the court reasoned that the definition explicitly includes those who seek a credit agreement and there is no limitation contained in the definition that excludes those seeking money for a third party. It stated:

It is doubtful that the legislature intended to limit actions on a credit agreement brought by a borrower, but to allow any and all actions brought by a third-party on the same transaction. That would defeat the intention of `discouraging lender liability litigation' and would lead to the absurd result of third-parties having more rights than the actual parties to the contract.

It therefore concluded that the definition of debtor included plaintiff.

Plaintiff, however, asserts that the trial court erred in finding that he was a debtor under § 38-10-124 and in applying this statute to bar his claims. Defendants in turn rely on the existence of a credit agreement between plaintiff and the Bank to argue that the statute applies. We agree with plaintiff.

In interpreting a statute, we must give effect to the intent of the lawmaking body, and there is a presumption that the General Assembly intends a just and reasonable result. Thus, a statutory interpretation that defeats the legislative intent or leads to an absurd result will not be followed. A statute must be read and considered as a whole and should be construed to give consistent, harmonious, and sensible effect to all of its parts. Finally, although we must give effect to the statute's plain and ordinary meaning, the intention of the General Assembly will prevail over a literal interpretation of the statute that leads to an absurd result. AviComm, Inc. v. Colorado Public Utilities Commission, 955 P.2d 1023 (Colo.1998).

Considering the statute as a whole, we conclude that plaintiff is not a debtor within the meaning of the statute and that the Bank's interpretation leads to absurd results. Under § 38-10-124(1)(b), C.R.S. 1998, as quoted above, a "creditor" is a financial institution involved in the actual or proposed extension of credit to a debtor, as that term is defined in § 38-10-124(1)(c), C.R.S. 1998.

Two of the definitions of a debtor— one who obtains credit and one who owes money to a creditor—necessitate a borrower-lender relationship. Read in that context, we view the intent of the General Assembly to mean that one who "seeks a credit agreement" is a person or entity in a similar type of relationship. Thus, for the statute to apply here, plaintiff and the Bank must also be similarly situated.

This is consistent with the requirement of the statutory definition of "creditor" requiring a credit agreement "with a debtor."

Here, no credit was offered to, requested by, or extended to plaintiff. Under the circumstances at issue here, plaintiff owed no debt to anyone, the Bank or the builders of the saloon.

Defendants, however, contend that, once it is determined that there is a credit agreement between plaintiff and the Bank, it follows that plaintiff is a debtor and the Bank is a creditor...