Schoen v. Morris, No. 99SC588.

• Decision Date: 18 December 2000
• Docket Number: No. 99SC588.
• Citation: 15 P.3d 1094
• Parties: Jim SCHOEN, Ed McMillan and Bank of Durango, Petitioners, v. Bill MORRIS, Respondent.
• Court: Colorado Supreme Court

15 P.3d 1094

Jim SCHOEN, Ed McMillan and Bank of Durango, Petitioners, v. Bill MORRIS, Respondent.

No. 99SC588.

Supreme Court of Colorado, En Banc.

December 18, 2000.

Crane, Leake, Casey, Ehlers & Eggleston, P.C., Robert E. Crane, Duke Eggleston, Durango, CO, Attorneys for Petitioners.

Titus & Murphy, Victor A. Titus, Farmington, NM, Attorneys for Respondent.

Abadie & Zimsky, LLC, William E. Zimsky, Durango, CO, Attorneys for Amicus Curiae Jack Lang, Kenneth Ellis and George Red Pennington, ("The Lang Group").

McKenna & Cuneo, L.L.P., John E. Burrus, Denver, CO, Attorneys for Amicus Curiae Independent Bankers of Colorado.

Hogan & Hartson, L.L.P., David L. London, Denver, CO, Attorneys for Amicus Curiae Colorado Bankers Association.

Justice RICE delivered the Opinion of the Court.

We issued a writ of certiorari to review the court of appeals' judgment in Morris v. Schoen, 998 P.2d 38 (Colo.Ct.App.1999). Respondent, Bill Morris ("Morris"), brought suit against Petitioners, the Bank of Durango and its representatives, (collectively, the "Bank"), claiming deceit based on fraud, intentional interference with contractual obligations, outrageous conduct and prima facie tort. The trial court dismissed Morris's claims under C.R.C.P. 12(b)(5), finding that the credit agreement statute of frauds, section 38-10-124, 10 C.R.S.2000, barred Morris's claims. The court of appeals reversed the trial court's judgment on the grounds that the credit agreement statute of frauds does not apply because no borrower-lender relationship existed between Morris and the Bank. We granted certiorari to determine whether the credit agreement statute of frauds applies to the oral representations made in this case between the Bank and Morris, both of whom are lenders to the same borrower. We now reverse the judgment of the court of appeals and hold that the credit agreement statute of frauds bars the oral representations made between the parties in this case, notwithstanding the absence of a direct borrower-lender relationship between them.

I. FACTS AND PROCEDURAL HISTORY

In 1996, the Bank made two Small Business Administration ("SBA") loans in the amount of $750,000 to Mi-Dee Patterson, Inc. ("Mi-Dee") to finance the construction of a dance hall and saloon. Later, when Mi-Dee's needs exceeded the amount of the SBA loans, it applied for a Farmer's Home ("FmHA") loan. While the permanent FmHA loan was pending, Mi-Dee applied for several bridge loans from Morris to pay its construction vendors. Morris alleges that he made the loans based, in part, on the Bank's assurances that the permanent FmHA loan had been approved and was to be funded within thirty to sixty days, at which time the bridge loans would be paid off. Additional loans to Mi-Dee, now assigned to Morris, were made by other parties. However, the FmHA loans were never made, and Mi-Dee defaulted on all the loans owed to Morris after filing for bankruptcy.

Morris brought suit against the Bank, claiming deceit based on fraud, intentional interference with contractual obligations, outrageous conduct and prima facie tort. The Bank moved to dismiss the claims under C.R.C.P. 12(b)(5), asserting that the credit agreement statute of frauds, section 38-10-124, 10 C.R.S. (2000), barred the action because it involved an oral credit agreement. The trial court granted the motion. In doing so, the court determined that there was no dispute as to whether the case involved a "credit agreement," as defined under the statute, and that so long as Morris was within the scope of the statute, all of his claims would be barred. The court noted that by enacting the credit agreement statute of frauds, the legislature intended to discourage lender liability litigation and to promote certainty in credit agreements. The court concluded that Morris was within the scope of the term "debtor" as defined by statute, because it determined that the legislature did not intend to limit actions brought by a borrower, but not those brought by a third-party on the same transaction. Thus, the court granted the Bank's motion to dismiss.

The court of appeals held that the trial court erred in dismissing Morris's claims because it found that Morris was not a "debtor" within the meaning of the credit agreement statute of frauds. Morris, 998 P.2d at 42. The court held that under the statute's definition of "debtor," a borrower-lender relationship was required. Id. Since no such relationship existed here, the court held that Morris's claims were improperly dismissed. Id. The court noted that the credit agreement statute of frauds has only been applied to situations involving direct borrower-lender relationships or guarantors of debtors. Id. The court also noted that the legislative history of the credit agreement statute indicates that the General Assembly sought to create a "narrow exception" to the statute of frauds involving loan activity between borrowers and lenders. Id. Accordingly, the court reversed the trial court's judgment dismissing Morris's claims. Id. The court of appeals later denied the Bank's petition for rehearing.

We granted certiorari to determine whether the credit agreement statute of frauds, section 38-10-124, 10 C.R.S. (2000), applies only to credit agreements between borrowers and lenders, or whether it applies also to the parties in this case.¹

II. ANALYSIS

A. Standard of Review

We are reviewing the trial court's dismissal of Morris's claims under C.R.C.P. 12(b)(5). In doing so, we apply the same standards as the trial court and accept all averments of material fact as true and in the light most favorable to the plaintiff. Coors Brewing Co. v. Floyd, 978 P.2d 663, 666 (Colo.1999). Rule 12(b)(5) motions are viewed with disfavor, and should not be granted unless it appears beyond doubt that the plaintiff cannot prove facts in support of the claim that would entitle the plaintiff to relief. Dunlap v. Colo. Springs Cablevision, 829 P.2d 1286, 1290 (Colo.1992).

B. Statutory Interpretation

In this case, we interpret the credit agreement statute of frauds at section 38-10-124, as applied to claims arising from oral representations made to an interim lender by a permanent lender. When interpreting any statute, we strive to effectuate the intent of the legislature. People v. McCullough, 6 P.3d 774, 778 (Colo.2000); Reg'l Transp. Dist. v. Lopez, 916 P.2d 1187, 1192 (Colo. 1996); Lakeview Assocs. v. Maes, 907 P.2d 580, 584 (Colo.1995). In doing so, we look first to the plain language of the statute. McCullough, 6 P.3d at 778; Lopez, 916 P.2d at 1192; Maes, 907 P.2d at 584. If the plain language is unambiguous, it is unnecessary to resort to rules of statutory construction. McCullough, 6 P.3d at 778; Lopez, 916 P.2d at 1192; Maes, 907 P.2d at 584.

C. The Credit Agreement Statute of Frauds

Under section 38-10-124, "no debtor or creditor may file or maintain an action or a claim relating 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." § 38-10-124(2), 10 C.R.S. (2000). The issue before us is whether the credit agreement statute of frauds bars Morris's claims, arising from assurances made to him by the Bank, another lender to the same borrower. In making this determination, we must establish (1) whether the Bank's oral representations upon which Morris's claims are based constitute a "credit agreement"; and (2) whether the parties in this case qualify as a "creditor" and a "debtor" under the statute.²

The Existence of a Credit Agreement

The Bank argues that its alleged commitment to provide a permanent loan to Mi-Dee constitutes an oral credit agreement under the plain meaning of the statute. We agree. Under the statute, a credit agreement is defined in relevant part as: "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." § 38-10-124(1)(a) (emphasis added).

Although we have not previously considered whether assurances between lenders to the same borrower constitute "credit agreements" under the credit agreement statute of frauds, Colorado cases applying the statute have adopted a broad definition of the term "credit agreements." In Univex Int'l., Inc. v. Orix Credit Alliance, Inc., we noted that the statute "does not apply only to claims involving transactions which are characterized exclusively as credit agreements, but also ... to claims which merely relate to credit agreements." 914 P.2d 1355, 1358 (Colo.1996). We then concluded that the statutory definition of a "credit agreement" was sufficiently broad to include a sales agreement containing financing terms for the proposed sale. Id. Similarly, in Pima Fin. Serv. Corp. v. Selby, the court of appeals held that a settlement agreement resolving a deficiency dispute constituted a "credit agreement" under the statute because it waived the terms of the original credit agreement based on which the deficiency claim was made 820 P.2d 1124, 1127 (Colo.Ct.App.1991); see § 38-10-124(1)(a)(II) (including in the definition of credit agreement "[a]ny amendment of, cancellation of, waiver of, or substitution for any or all of the terms or provisions of any . . . credit [agreement].").

Courts in other jurisdictions with similar statutes have also applied the definition of "credit agreement" broadly. See e.g., Schering-Plough Healthcare Prod., Inc. v. NBD Bank, N.A., 98 F.3d 904, 911 (6th Cir.1996) (holding that under the Michigan statute of frauds, a credit agreement included issuing a cashier's check in exchange for a check drawn on a sweep account, certifying a check drawn on a sweep account, and making funds represented by a check drawn on such an account available); Whirlpool Fin. Corp. v. Sevaux, 96 F.3d 216, 222-23 (7th Cir.1996) (holding that promises to...