Pacific v. First

• Court: Colorado Court of Appeals
• Decided: August 1, 2024
• Docket: 23CA1276
• Status: Unknown

Opinion

23CA1276 Pacific v First 08-01-2024

COLORADO COURT OF APPEALS

Court of Appeals No. 23CA1276

Arapahoe County District Court No. 22CV31657

Honorable Ben L. Leutwyler III, Judge

Pacific Express Stables, LLC, a Colorado limited liability company, and Susan

Burns,

Plaintiffs-Appellants,

v.

First American State Bank, a Colorado corporation,

Defendant-Appellee.

JUDGMENT AFFIRMED

Division V

Opinion by JUDGE HARRIS

Brown and Lum, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)

Announced August 1, 2024

Robinson & Henry, P.C., Victoria E. Edwards, Kiron K. Kothari, Highlands

Ranch, Colorado, for Plaintiffs-Appellants

Lewis Roca Rothgerber Christie LLP, Trevor G. Bartel, Frances Scioscia Staadt,

Denver, Colorado, for Defendant-Appellee

1

¶ 1 Plaintiffs, Pacific Express Stables, LLC and Susan Burns

(collectively, Pacific Express), appeal the dismissal of their

complaint against defendant, First American State Bank (the bank),

and the court’s denial of their motion for reconsideration. We

affirm.

I. Background

¶ 2 Pacific Express’s amended complaint alleged the following

facts.

A. Events Leading to the Lawsuit

¶ 3 In June 2015, Pacific Express borrowed about two million

dollars from the bank. The promissory note had a maturity date of

June 17, 2020, and was secured by a deed of trust on commercial

property (the property) owned by Pacific Express.

¶ 4 In February 2020, Pacific Express received the 2019 tax

assessment for the property, which was significantly higher than

the previous year’s assessment. Pacific Express filed a tax protest.

It attempted to pay the undisputed portion of the tax, but the

assessor’s website would not accept payment.

¶ 5 In the meantime, as the promissory note’s maturity date

approached, Pacific Express sought replacement financing to pay

2

back the bank. But the COVID-19 pandemic stalled those efforts,

so in June, Pacific Express and the bank executed a change in

terms agreement,

1

which extended the loan’s maturity date to

September 17, 2020, and changed the monthly payment schedule.

¶ 6 In early August, Pacific Express notified the bank that it had

found a new lender and would close on a replacement loan within

ninety days. The bank assured Pacific Express that, until the

replacement financing came through, it would authorize continued

deferments or extensions as necessary.

¶ 7 Unbeknownst to Pacific Express, though, the bank had

discovered Pacific Express’s tax liability back in June and had

begun negotiations to sell the loan to a third party.

¶ 8 In mid-August, the taxing authority notified Pacific Express

that the property subject to the deed of trust “was to be sold” to pay

the tax lien. The tax sale was later “suspended” on Pacific

Express’s “promise of payment.”

¶ 9 On August 31, 2020, the bank notified Pacific Express that it

had sold the loan to 2363BSNP LLC (BSNP). Pacific Express

1

The promissory note, deed of trust, and change in terms

agreement together comprise the “loan” or “loan agreement.”

3

immediately contacted BSNP “to attempt to pay off the loan”

(though it had not yet closed on its replacement loan) and to

determine whether the loan was in default. On September 10,

BSNP provided Pacific Express with a payoff statement that

included default interest and fees. BSNP explained that the loan

was “in default due to [Pacific Express’s] failure to pay the property

taxes when due.” A few days later, Pacific Express paid its tax bill.

¶ 10 Pacific Express closed on its replacement loan on October 17,

then paid BSNP the remaining balance of the loan, which by that

time had accrued over $225,000 in default interest and fees.

B. Procedural History

¶ 11 Pacific Express sued the bank and BSNP. It asserted a claim

for breach of the duty of good faith and fair dealing (breach of

contract claim) against both the bank and BSNP, and it asserted an

additional claim for negligent misrepresentation against the bank.

About a month later, before either party had been served, Pacific

Express filed an amended complaint.

¶ 12 With respect to the breach of contract claim against the bank,

the amended complaint alleged that

4

• the bank had broad discretion in exercising its right to

sell the loan;

• Pacific Express reasonably expected that the bank would

not “surreptitiously sell [the] loan” while simultaneously

assuring Pacific Express that it would continue to extend

the maturity date and reinstitute a monthly payment

schedule until the replacement loan closed; and

• the bank breached its duty of good faith and fair dealing

by selling the loan while making representations to

Pacific Express “that it would assist in transitioning the

loan to a take-out lender.”

¶ 13 With respect to the negligent misrepresentation claim, the

amended complaint alleged that

• in spring and summer of 2020, the bank made

misrepresentations of material fact to Pacific Express,

including that it would extend the loan’s maturity date

past September and allow Pacific Express to resume

making monthly payments until the replacement loan

closed;

5

• the bank knew or should have known that Pacific

Express would rely on the bank’s representations; and

• Pacific Express justifiably relied on the bank’s

representations to its detriment.

¶ 14 The bank moved to dismiss the claims against it, arguing that

the breach of contract claim failed because the bank had a right to

sell the loan without notice, and the negligent misrepresentation

claim was barred by the economic loss rule.

¶ 15 In response, Pacific Express expanded the breadth of its

breach of contract claim. It now contended that the bank had

breached its duty of good faith and fair dealing not only by selling

the loan but also by determining that it was in default while

purposefully “not ‘declaring’ a formal default” or providing notice.

According to Pacific Express, the bank’s conduct allowed BSNP,

after purchasing the loan, to immediately formally declare a default

and to charge default interest and fees.

¶ 16 The nature of the negligent misrepresentation claim changed,

too. Pacific Express argued that the economic loss rule did not bar

its claim because the bank’s representations were actually

intentional, not negligent.

6

¶ 17 Finally, Pacific Express requested that the court, in the event

it found “any deficiency” in the amended complaint, allow Pacific

Express “the opportunity to amend [its] claims to remedy any such

defects.”

¶ 18 The court granted the bank’s motion to dismiss. It found that

the breach of contract claim was “dependent upon” the bank’s sale

of the loan to BSNP, and because the bank had an unrestricted

right to sell the loan without notice, the allegations failed to state a

claim for breach of contract. The court also concluded that the

economic loss rule barred the negligent misrepresentation claim.

The court’s order did not indicate whether the claims were

dismissed with or without prejudice.

¶ 19 Pacific Express did not move for leave to amend. Instead, it

filed a motion for reconsideration under C.R.C.P. 121, section 1-15,

which applies to motions to reconsider interlocutory orders. It

asked the court to reconsider the narrow question of whether it had

stated a breach of contract claim based on the amended complaint’s

allegation that the bank “determine[ed] in June 2020” that the loan

was in default but failed to notify Pacific Express.

7

¶ 20 In its order denying the motion for reconsideration, the court

reiterated that the amended complaint did not state a claim for

breach of contract. It did not mention the negligent

misrepresentation claim. The court then determined that “the

defect in the Complaint c[ould] not be cured by pleading additional

facts,” and, therefore, Pacific Express’s claims against the bank

were dismissed with prejudice. From there, the court concluded

that the motion for reconsideration had to be construed as a

C.R.C.P. 59 motion to amend a final judgment. And because the

motion failed to satisfy that standard, the court denied it.

¶ 21 The claim against BSNP was still proceeding, however, so

Pacific Express moved under C.R.C.P. 54(b) to certify as a final

judgment the orders dismissing its claims and denying its motion

for reconsideration. The trial court obliged, and Pacific Express

now appeals.

II. Discussion

¶ 22 Pacific Express challenges the court’s orders on two grounds.

First, it contends that the trial court erred by dismissing its claims

against the bank, because the amended complaint plausibly stated

claims for breach of contract and negligent misrepresentation.

8

Second, it contends that, even if dismissal was proper, the court

erred by determining that further amendment would be futile and

dismissing the claims with prejudice.

2

A. The Court Did Not Err by Dismissing the Claims

¶ 23 Pacific Express says that in dismissing the claims, the trial

court “overlooked key facts” alleged in the amended complaint. We

disagree.

1. Standard of Review

¶ 24 Under the plausibility standard adopted in Warne v. Hall,

2016 CO 50, ¶ 24, a claim is subject to dismissal unless the

complaint’s factual allegations are sufficient to “raise a right to relief

‘above the speculative level,’ and provide ‘plausible grounds’ to

create an inference that the allegations are true.” Walker v.

Women’s Pro. Rodeo Ass’n, 2021 COA 105M, ¶ 37 (quoting Warne,

2

Pacific Express also argues that even if the court properly

dismissed the claims with prejudice, reversal is nonetheless

required because the ruling is attributable to its former counsel’s

gross negligence. That argument was not raised below, so we need

not address it. See Melat, Pressman & Higbie, L.L.P. v. Hannon Law

Firm, L.L.C., 2012 CO 61, ¶ 18. At any rate, the argument is moot

in light of our analysis, because we ultimately consider the factual

allegations Pacific Express contends its former counsel should have

included in the amended complaint or in a proposed second

amended complaint.

9

¶ 9). Thus, the plausibility standard requires that the complaint

“contain either direct or inferential allegations respecting all the

material elements [of the particular cause of action] necessary to

sustain a recovery under some viable legal theory.” Adams Cnty.

Hous. Auth. v. Panzlau, 2022 COA 148, ¶ 51 (quoting Bryson v.

Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008)).

¶ 25 We review de novo the trial court’s dismissal of a complaint

under C.R.C.P. 12(b)(5). Norton v. Rocky Mountain Planned

Parenthood, Inc., 2016 COA 3, ¶ 10, aff’d, 2018 CO 3. In doing so,

we accept all factual allegations in the complaint as true and view

them in the light most favorable to the plaintiff. Id.

¶ 26 Here, the trial court’s ruling turned in part on the

interpretation of the loan agreement. Interpretation of a contract is

a question of law that we likewise review de novo. Fed. Deposit Ins.

Corp. v. Fisher, 2013 CO 5, ¶ 9.

2. Breach of Contract Claim

¶ 27 In Colorado, every contract contains an implied duty of good

faith and fair dealing. Univ. of Denver v. Doe, 2024 CO 27, ¶ 51.

The duty arises “only when the manner of performance under a

specific contract term allows for discretion on the part of either

10

party.” Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995).

Discretion in performance occurs where the parties “defer a

decision regarding performance terms of the contract,” leaving one

party with the power “to set or control the terms of performance.”

Id. (citation omitted).

¶ 28 This implied covenant does not, however, operate to contradict

any terms or conditions for which a party has bargained. Doe,

¶ 51. Rather, it prevents one party from using discretion conferred

by the contract to act dishonestly or otherwise outside of accepted

commercial practices to deprive the other party of the benefit of the

contract. Dream Finders Homes LLC v. Weyerhaeuser NR Co., 2021

COA 143, ¶ 66.

¶ 29 Pacific Express contends that the court erred by overlooking

one of its theories of the breach of contract claim. It says that the

amended complaint “set forth in detail how [the bank] abused its

discretion in defaulting [Pacific Express’s loan] without notice for

failure to pay the property taxes.” According to Pacific Express, the

terms of the parties’ loan agreement did not allow the bank to “call

a default” on the loan for failure to pay taxes if Pacific Express was

disputing the tax assessment in good faith.

11

¶ 30 The primary problem with Pacific Express’s argument is that

the amended complaint did not, in fact, allege that the bank had

declared the loan in default for failure to pay taxes. The amended

complaint alleged only that (1) the bank discovered Pacific Express’s

tax liability in June 2020; (2) it did not notify Pacific Express of the

discovery; and (3) two months later, it sold the loan to BSNP.

¶ 31 Indeed, the amended complaint alleged that BSNP, not the

bank, declared a default. Pacific Express’s theory was that BSNP

had breached its duty of good faith and fair dealing by waiting until

September to advise Pacific Express that the loan was in default

and, as a result, caused Pacific Express to incur damages. The trial

court denied BSNP’s motion to dismiss and allowed that claim to

proceed.

¶ 32 Because the amended complaint did not allege that the bank

declared a default, the court did not err by failing to consider that

allegation.

3. Negligent Misrepresentation

¶ 33 To state a claim for negligent misrepresentation, the plaintiff

must allege facts showing that (1) the defendant, in the course of its

business; (2) made a misrepresentation of a material fact in the

12

context of a business transaction, without exercising reasonable

care; (3) with knowledge that the plaintiff would rely on its

representation; and (4) the plaintiff justifiably relied on the

misrepresentation to its detriment. Allen v. Steele, 252 P.3d 476,

482 (Colo. 2011).

¶ 34 But even when the plaintiff sufficiently pleads a negligent

misrepresentation claim, the economic loss rule may bar it. Under

the economic loss rule, the same economic injury cannot give rise to

both contract and tort liability. Bermel v. BlueRadios, Inc., 2019 CO

31, ¶ 20. Thus, “a party suffering only economic loss from the

breach of an express or implied contractual duty may not assert a

tort claim for such a breach absent an independent duty of care

under tort law.” Id. at ¶ 15 (quoting Town of Alma v. AZCO Constr.,

Inc., 10 P.3d 1256, 1264 (Colo. 2000)). The economic loss rule does

not bar claims arising from a defendant’s precontractual conduct,

however, “because, at that time, there was no contract that could

have subsumed identical tort duties.” Dream Finders, ¶ 49.

¶ 35 The trial court reasoned that Pacific Express’s negligent

misrepresentation claim was just a variation on its breach of

contract claim: both claims were premised on the bank’s sale of the

13

loan to BSNP and alleged the same economic loss; therefore, the

tort duty that the bank allegedly breached was subsumed by the

bank’s express or implied contractual duty. See id. at ¶ 66

(explaining that to the extent the defendant owed the plaintiff a

duty to not make misrepresentations during the contract period,

“such duty was subsumed within the contract through the implied

duty of good faith and fair dealing”). Thus, the court determined

that the economic loss rule barred the negligent misrepresentation

claim.

¶ 36 On appeal, Pacific Express does not challenge the court’s

application of the economic loss rule to alleged misrepresentations

concerning the sale of the loan. Instead, it says that the court

overlooked the amended complaint’s allegations of precontractual

misrepresentations, to which the economic loss rule does not apply.

According to Pacific Express, paragraph 23 of the amended

complaint alleged that the bank made misrepresentations about the

change in terms agreement just before the parties signed it in June

2020.

¶ 37 But paragraph 23 contains no such allegation. There, Pacific

Express alleged that just before the parties executed the change in

14

terms agreement, which extended the promissory note’s maturity

date to September 17, 2020, the bank assured Pacific Express that

if replacement financing did not materialize before September 17,

the maturity date could once again be extended. There was no

allegation that the bank misrepresented any term or condition of

the change in terms agreement.

¶ 38 Because the amended complaint did not allege that the bank

made precontractual misrepresentations that induced Pacific

Express to enter into the change in terms agreement, the court did

not err by failing to consider such allegations.

B. The Court Did Not Err by Dismissing the Claims With

Prejudice on Futility Grounds

¶ 39 Next, Pacific Express argues that the trial court erred by

dismissing the claims with prejudice on futility grounds. Even

assuming an error, Pacific Express has failed to demonstrate

prejudice; therefore, we discern no basis to reverse the judgment.

1. Legal Principles and Standard of Review

¶ 40 C.R.C.P. 15(a) permits a party to amend its complaint “once as

a matter of course at any time before a responsive pleading is filed.”

15

Otherwise, a party may amend the complaint “only by leave of court

or by written consent of the adverse party.” Id.

¶ 41 A motion to dismiss is not considered a responsive pleading

for purposes of Rule 15. Gandy v. Williams, 2019 COA 118, ¶ 10.

Thus, in granting a motion to dismiss, the trial court generally

should not dismiss the claims with prejudice to avoid depriving a

plaintiff of its right to amend as a matter of course unless the

plaintiff has waived its right to file an amended complaint. See,

e.g., Passe v. Mitchell, 161 Colo. 501, 502, 423 P.2d 17, 17-18

(1967).

¶ 42 Still, even when a plaintiff has not previously amended its

complaint, “once a judgment enters and becomes final, a plaintiff no

longer has the right to file an amended complaint as a matter of

course under C.R.C.P. 15(a).” Schaden v. DIA Brewing Co., 2021

CO 4M, ¶ 39. Under those circumstances, the plaintiff must (1)

seek relief from judgment under C.R.C.P. 59 or C.R.C.P. 60 and (2)

obtain leave to amend from the court or written consent to amend

from the defendant. Id.; see also Est. of Hays v. Mid-Century Ins.

Co., 902 P.2d 956, 959 (Colo. App. 1995) (“Once final judgment has

16

entered, an amendment to a pleading under C.R.C.P. 15(a) should

not be allowed unless the judgment is set aside or vacated.”).

¶ 43 But when amendment would be futile, the court may dismiss

claims with prejudice and indicate that a motion for leave to amend

would not be granted. Brereton v. Bountiful City Corp., 434 F.3d

1213, 1219 (10th Cir. 2006); see also Benton v. Adams, 56 P.3d 81,

86 (Colo. 2002) (“The doctrine of futility authorizes a trial court to

deny leave to amend pleadings if doing so would be futile.”).

¶ 44 Whether amendment would be futile is a legal question that

we review de novo. Schaden, ¶ 34.

2. Futility of Amendment

¶ 45 The trial court dismissed Pacific Express’s claims against the

bank with prejudice because it determined that amendment could

not cure the complaint’s defects. As a result, it concluded that the

order of dismissal was a final order, construed the motion for

reconsideration as a Rule 59 motion, and denied the motion.

¶ 46 Pacific Express says that the court’s process was

fundamentally flawed: even assuming the claims were properly

dismissed with prejudice, the dismissal order was not a final

judgment, and, therefore, the court should not have sua sponte

17

applied Rule 59’s standard to the motion for reconsideration. Once

the court did so, Pacific Express says it lost its ability to seek leave

to amend the complaint because amending the complaint after final

judgment had entered would first require Pacific Express to obtain

an order setting aside the judgment of dismissal under Rule 59 or

Rule 60, a tack the court’s order necessarily foreclosed.

¶ 47 We agree with Pacific Express that the trial court’s order of

dismissal was not a final judgment. A final judgment is one that

ends the action and leaves nothing more for the trial court to do to

completely determine the rights of all the parties. E. Cherry Creek

Valley Water & Sanitation Dist. v. Greeley Irrigation Co., 2015 CO

30M, ¶ 11. When an order adjudicates the rights of fewer than all

the parties, the order is not a final appealable judgment until

properly certified as such under C.R.C.P. 54(b). See Lytle v. Kite,

728 P.2d 305, 308-09 (Colo. 1986) (explaining that C.R.C.P. 54(b)

creates an exception to the general requirement that an entire case

be resolved by a final judgment before an appeal is brought).

¶ 48 But even assuming the court erred by treating its dismissal

order as a final judgment and applying Rule 59 to the motion for

reconsideration, we cannot reverse the judgment unless the error

18

substantially prejudiced Pacific Express. See C.R.C.P. 61

(explaining that the reviewing court must “disregard any error or

defect in the proceeding which does not affect the substantial rights

of the parties”). Pacific Express contends that the court’s error

deprived it of an opportunity to seek leave to amend the complaint.

That is not entirely accurate. The ruling that precluded Pacific

Express from amending its complaint was not the court’s decision

to treat its order as final and then apply Rule 59 but rather its

determination that amendment would be futile. Therefore, to

establish prejudice, Pacific Express must demonstrate that

amendment would not be futile.

¶ 49 The bank argues that Pacific Express failed to preserve any

claim related to the court’s futility determination by not moving to

amend and filing a proposed second amended complaint. But we

are not aware of any authority (and the bank cites none) requiring a

party to request leave to amend after the trial court has ruled that

amendment would be futile. See Schaden, ¶ 52 (declining to

remand to trial court so that plaintiff could file an amended

complaint where trial court had concluded that amendment would

be futile). Still, where a party forgoes filing a proposed amended

19

complaint in the trial court, it can only establish prejudice by

identifying on appeal the factual allegations that it claims would

cure any defects in the complaint.

¶ 50 Pacific Express urges us to “consider de novo whether based

on the record [its] claims against [the bank] could be saved by

amendment.” We accept that invitation and now turn to a review of

the additional factual allegations Pacific Express has identified on

appeal to determine whether, if pleaded along with the original

allegations, they would state claims on which relief could be

granted. See id.

a. Amendment of the Breach of Contract Claim Would be Futile

¶ 51 Pacific Express says that but for the trial court’s error, it

would have pleaded the following allegations to support its breach

of contract claim:

3

3

Some of Pacific Express’s allegations are conclusory: that the bank

“committed deceptive business practices and likely fraud in setting

up [Pacific Express’s] loan for failure” and that the bank “committed

acts of deception and concealment that caused [Pacific Express] to

relax [its] guard and prevented [it] from protecting [its] rights in [its]

property.” We do not accept these allegations as true for purposes

of our analysis. See Warne v. Hall, 2016 CO 50, ¶ 27.

20

• The 2015 promissory note was due and payable on June 17,

2020.

• In June 2020, while Pacific Express was seeking replacement

financing, it entered into the change in terms agreement

which, among other things, extended the loan’s maturity date

to September 17, 2020.

• The change in terms agreement included an “unnecessary

forbearance” provision that “t[ook] [the loan] out of the

autopay program” for three months beginning in June 2020.

As a result, the bank did not provide Pacific Express with

billing statements for June, July, and August.

• The change in terms agreement also allowed the bank to “find

a default” if a tax sale was initiated against the property, but

not if Pacific Express had initiated a dispute, in good faith,

with the taxing authority concerning the tax assessment.

• In June 2020, the bank discovered that Pacific Express had

failed to pay property taxes. The bank did not inform Pacific

Express that “it had an issue with nonpayment of the taxes,”

because the bank did not ultimately “call[] the [promissory]

note” or “tak[e] [any other] action.”

21

• Although the bank did not “declar[e] a formal default,” it

“mark[ed] the loan as defaulted.”

• In June and August 2020, the bank “refused to answer [Pacific

Express’s] direct question” regarding whether the loan was “in

default.” This “obfuscation” caused Pacific Express to incur

damages because BSNP charged default interest and fees

“going back to the date of [the bank’s] determination in June

2020 of a purported default.” In effect, then, the bank

increased the loan’s interest rate from five percent to thirty-six

percent beginning in June 2020 without informing Pacific

Express.

• During the summer of 2020, the bank assured Pacific Express

that it would grant further modifications and extensions to the

loan agreement as necessary, including allowing Pacific

Express to resume its regular monthly payments in

September.

• All the while, the bank was “taking surreptitious steps” to sell

the loan to BSNP. The bank “received more money” from

BSNP than it otherwise would have because it did not tell

Pacific Express about the “putative default.”

22

• In mid-August, the taxing authority initiated a tax sale of the

property, but the sale did not occur because Pacific Express

paid the taxes in mid-September.

• On August 31, the bank told Pacific Express that it had sold

the loan to BSNP.

• On September 10, BSNP provided Pacific Express with a payoff

statement that included default interest and fees. BSNP told

Pacific Express that the loan was in default due to its failure to

“pay the property taxes when due.”

• Pacific Express “would have paid the property tax bill earlier” if

the bank or BSNP had “responded to [its] inquiries.”

¶ 52 At bottom, Pacific Express alleges that the bank had a duty to

tell Pacific Express that the failure to pay its taxes constituted an

event of default, even though the bank, after learning of Pacific

Express’s tax liability, decided not to formally declare a default or

take any other action against Pacific Express. According to Pacific

Express, unless the bank advised it that an event of default had

occurred, it would not have known that failing to pay its taxes,

especially while engaged in a good faith dispute with the taxing

authority, would qualify as an event of default that could then be

23

formally declared an actual default resulting in the imposition of

default interest and fees.

¶ 53 As an initial matter, on our de novo review, we may consider,

in addition to the facts alleged in the complaint, any “documents

attached as exhibits or incorporated by reference.” Denver Post

Corp. v. Ritter, 255 P.3d 1083, 1088 (Colo. 2011). The promissory

note, the deed of trust, and the change in terms agreement were all

incorporated by reference in the complaint.

¶ 54 Under the deed of trust, Pacific Express’s failure to “pay all

taxes . . . related to the [p]roperty when due” constituted an “event

of default.” As a matter of law, “one who signs or accepts a written

contract, in the absence of fraud, is conclusively presumed to know

its contents and to assent to them.” Bell v. Land Title Guarantee

Co., 2018 COA 70, ¶ 14. Thus, the bank gave Pacific Express

notice, through the deed of trust, that a failure to pay its property

taxes constituted an event of default.

¶ 55 The loan agreement did not otherwise obligate the bank to give

Pacific Express notice of an event of default where the bank elected

not to exercise any remedy. Nor did it give the bank discretionary

authority to determine the manner of providing such notice. See

24

Amoco Oil, 908 P.2d at 498 (The duty of good faith and fair dealing

only applies when “one party has discretionary authority to

determine certain terms of the contract, such as quantity, price, or

time.”).

¶ 56 In Amoco Oil, for example, Amoco leased service station

facilities to independent dealers pursuant to written contracts that

expressly gave Amoco the discretion to modify the monthly rental

amount. Id. at 498-99. The “open rental terms” required the

dealers to depend on Amoco’s good faith and “created a duty of good

faith and fair dealing for Amoco.” Id. at 499.

¶ 57 Pacific Express does not point to any equivalent provision in

the loan agreement — i.e., a term that conferred discretion on the

bank regarding whether or when to provide notice of an event of

default. Thus, to find any duty to provide notice, we would have to

add terms to the loan agreement. And we cannot apply the duty of

good faith and fair dealing to “inject substantive terms into the

parties’ contract.” McDonald v. Zions First Nat’l Bank, N.A., 2015

COA 29, ¶ 70 (citation omitted); see also Miller v. Bank of N.Y.

Mellon, 2016 COA 95, ¶ 46 (borrowers’ breach of the duty of good

faith and fair dealing claim against lenders failed where the claim

25

was not based on “any terms of performance that were left to the

[lenders’] discretion under the loan documents”).

¶ 58 Contrary to Pacific Express’s argument, it did not have to

depend on the bank’s good faith to learn that its tax liability had

caused an event of default. Pacific Express suggests that it could

not have known that its failure to pay taxes would lead to a default

when it was engaged in a good faith dispute with the taxing

authority because disputed tax liability was expressly excepted as

an event of default under the change in terms agreement.

¶ 59 The change in terms agreement refutes that allegation. See

Peña v. Am. Fam. Mut. Ins. Co., 2018 COA 56, ¶ 15 (“[W]hen

documents are properly before the court [on a C.R.C.P. 12(b) motion

to dismiss], their legal effect is determined by their contents rather

than by allegations in the complaint.”); Hoefling v. City of Miami,

811 F.3d 1271, 1277 (11th Cir. 2016) (“[I]f the allegations of the

complaint about a particular exhibit conflict with the contents of

the exhibit itself, the exhibit controls.”). Under the change in terms

agreement, a failure to pay taxes resulting in a tax lien or initiation

of a tax sale would not constitute an event of default only if there

was a good faith dispute by Pacific Express as to the validity of the

26

assessment, and Pacific Express gave the bank notice of the tax

proceeding, and Pacific Express deposited with the bank “monies or

a surety bond” for the proceeding in an amount to be determined by

the bank. Because Pacific Express did not allege that it complied

with this provision, the complaint failed to allege facts

demonstrating that the exception applied.

¶ 60 To the extent the allegations relate to the bank’s sale of the

loan to BSNP, the trial court found, and we agree, that the bank

had a right to sell the loan without notice at any time. Thus, the

bank did not breach any duty to Pacific Express by selling the loan

to BSNP without notice. See Miller, ¶¶ 42-43 (borrowers could not

state claim for breach of the duty of good faith and fair dealing

because they had no reasonable expectation that their loan would

be modified where the loan agreement did not require the lender to

consider or agree to a modification).

¶ 61 And to the extent the allegations relate to the bank’s

representations and assurances that it would continue to grant

modifications and extensions to the loan agreement, Pacific Express

does not explain, and we do not see, how those allegations give rise

to a breach of contract claim.

27

¶ 62 In sum, we conclude that the breach of contract claim fails as

a matter of law. Thus, the trial court properly determined that

amendment would be futile.

b. Amendment of the Negligent Misrepresentation Claim Would

be Futile

¶ 63 Pacific Express says that but for the trial court’s error, it

would have pleaded the following allegations to support its negligent

misrepresentation claim:

• In June 2020, Pacific Express entered into the change in

terms agreement that extended the loan’s maturity date from

June 17 to September 17, 2020. The bank represented to

Pacific Express that the change in terms agreement “would not

adversely affect their current loan terms.”

• Just before Pacific Express signed the change in terms

agreement, the bank represented that “it would provide an

extension on the [promissory] note past the maturity date of

September 17, 2020,” so that Pacific Express could obtain a

replacement loan. The bank also represented that, “in the

worst-case scenario,” it would allow Pacific Express to “return

to making monthly payments.”

28

• The bank knew that Pacific Express’s principal was visually

impaired. It provided Pacific Express with the “electronic

version” of the change in terms agreement, which was

“illegible.”

• Pacific Express’s principal asked the bank if the change in

terms agreement “contained the terms as [the bank had]

represented to her” during an earlier phone conversation.

• Pacific Express’s principal offered to review and sign the

change in terms agreement at the bank, but the bank

“demanded that [Pacific Express] sign the [change in terms

agreement] immediately,” or the bank would “withdraw the

extension after the [June 17, 2020] maturity date had

expired.”

• Pacific Express signed the change in terms agreement on July

10, 2020, but “back-dated [it] to June 17, 2020.”

• The bank “fraudulently induced” Pacific Express to “enter into

a new, less favorable loan,” then “secretly call[ed] the note for

[Pacific Express’s] failure to pay taxes.”

¶ 64 Mostly, these allegations are not materially different from

those pleaded in the amended complaint. To get around the

29

economic loss rule, however, Pacific Express now maintains that

the bank made misrepresentations that induced it to enter into the

change in terms agreement.

¶ 65 Even assuming the change in terms agreement qualifies as a

new contract such that the bank’s statements would constitute

“pre-contractual” representations, Dream Finders, ¶ 49, the

allegations do not state a plausible claim for negligent

misrepresentation.

¶ 66 The only misrepresentation Pacific Express alleges the bank

made about the change in terms agreement was that it would not

“adversely affect [the] current loan terms.”

4

As we understand it,

Pacific Express alleges that the change in terms agreement added

an event of default — the initiation of forfeiture proceedings by any

governmental agency (like a taxing authority) against the property

subject to the deed of trust — thereby adversely affecting its rights

under the loan agreement.

4

Pacific Express alleges that its principal asked the bank whether

the terms and conditions of the change in terms agreement lined up

with the representations the bank had made during an earlier

phone call. But the allegations do not mention what the bank said

in response.

30

¶ 67 But that allegation is contradicted by the deed of trust. As

noted, the deed of trust, executed in June 2015, made Pacific

Express’s failure to pay taxes (regardless of whether a taxing

authority initiated forfeiture proceedings) an event of default. So a

provision in the 2020 change in terms agreement making forfeiture

proceedings based on a failure to pay taxes an event of default did

not, in fact, “adversely affect [the] current loan terms.”

¶ 68 As for the allegations that the bank misrepresented its

intention to provide additional modifications and extensions to the

loan agreement, if necessary, Pacific Express does not explain,

through any factual allegation, how it justifiably relied on those

misrepresentations to its detriment. To recover for negligent

misrepresentation, the plaintiff must suffer a pecuniary loss caused

by its justifiable reliance on false information supplied by the

defendant. See Colo. Pool Sys., Inc. v. Scottsdale Ins. Co., 2012 COA

178, ¶ 58. Thus, Pacific Express had to allege facts plausibly

demonstrating justifiable and detrimental reliance.

¶ 69 But it is not clear from the allegations what action Pacific

Express took in justifiable reliance on the bank’s statements that, if

replacement financing did not come through by September 2020, it

31

would further extend the loan’s maturity date and allow Pacific

Express to resume monthly payments. The action could not

plausibly have been entering into the change in terms agreement

because the bank’s statements related to circumstances that would

arise only after the new maturity date expired. And in any case,

based on our conclusion above, Pacific Express failed to plausibly

allege any pecuniary loss resulting from its execution of the change

in terms agreement.

¶ 70 Accordingly, even accepting the allegations as true, unless

refuted by the loan agreement, we conclude that Pacific Express has

failed to state a plausible negligent misrepresentation claim.

III. Disposition

¶ 71 The judgment is affirmed.

JUDGE BROWN and JUDGE LUM concur.