Court Opinion

ID: 615615
Source: CourtListenerOpinion
Date Created: 2011-10-19 18:13:27+00
Date Added: 2024-06-11T17:50:34.331852
License: Public Domain

FILED
                                                            United States Court of Appeals
                                                                    Tenth Circuit

                                                                  October 19, 2011
                   UNITED STATES COURT OF APPEALSElisabeth A. Shumaker
                                                                    Clerk of Court
                            FOR THE TENTH CIRCUIT

    GRANITE SOUTHLANDS TOWN
    CENTER, LLC,

              Plaintiff-Appellant,

    v.                                                  No. 10-1453
                                           (D.C. No. 1:09-CV-00799-ZLW-KLM)
    DONALD G. PROVOST; PETER M.                          (D. Colo.)
    CUDLIP,

              Defendants-Appellees,

    and

    ALBERTA TOWN CENTER, LLC;
    LAND TITLE GUARANTEE
    COMPANY; ALLAN G. PROVOST,

              Defendants.

                            ORDER AND JUDGMENT *

Before MURPHY, ANDERSON, and HARTZ, Circuit Judges.

*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
      Plaintiff Granite Southlands Town Center, LLC (Granite) appeals the

district court’s order dismissing with prejudice under Fed. R. Civ. P. 12(b)(6) its

fraud claim against defendants Peter M. Cudlip and Donald G. Provost (the

Principals), who were principals of codefendant Alberta Town Center, LLC

(Alberta). The court certified the order as final under Fed. R. Civ. P. 54(b). 1 We

have jurisdiction under 28 U.S.C. § 1291 and reverse.

                                          I.

      Because we are reviewing a dismissal for failure to state a claim, we accept

as true the well-pleaded factual allegations of Granite’s first amended complaint.

Ashcroft v. Iqbal, – U.S. –, 129 S. Ct. 1937, 1949 (2009). We also consider the

documents referenced in that complaint because no question has been raised as to

their authenticity. See Jacobsen v. Deseret Book Co., 287 F.3d 936, 941

(10th Cir. 2002) (“the district court may consider documents referred to in the

1
       Granite also appeals the district court’s order that denied its motion for
reconsideration and for leave to file a second amended complaint. Because we
reverse the dismissal of the complaint, we need not address the denial of the
motion for reconsideration. As for the denial of the motion to amend, ordinarily
we would affirm the denial because postjudgment motions to amend are
disfavored. See generally Tool Box, Inc. v. Ogden City Corp., 419 F.3d 1084,
1087 (10th Cir. 2005) (recognizing that when a plaintiff seeks to amend after
judgment has entered, the liberal test of Fed. R. Civ. P. 15(a) no longer applies).
But because we are reversing the order dismissing the Principals, the factors
relevant to granting or denying the motion have been substantially altered, and the
district court should reconsider the motion on remand. See Cannon v. City and
County of Denver, 998 F.2d 867, 879 (10th Cir. 1993) (denial of motion to amend
pleadings after final judgment had been entered was not abuse of discretion, but
in light of reversal of summary judgment, motion to amend could be raised on
remand.)

                                         -2-
complaint if the documents are central to the plaintiff’s claim and the parties do

not dispute the documents’ authenticity”).

      In 2005, Granite and Alberta entered into a purchase-and-sale agreement

for what is known as the Southlands Town Center (Town Center), a commercial

property in Aurora, Colorado, which consists of retail stores, restaurants, a movie

theater, and office space. Alberta, which owned the real estate, was responsible

for the development of the Town Center, and Granite agreed to purchase it, upon

satisfaction of certain conditions, when it was built. The purchase-and-sale

agreement enabled Alberta to obtain a $160 million construction loan, personally

guaranteed by the Principals. 2

      Among the preconditions in the purchase-and-sale agreement was the

requirement that Alberta deliver satisfactory tenant estoppel certificates in which

tenants certified that there were no issues or disputes with the landlord. Several

months before the closing on December 12, 2008, the Principals became aware of

serious construction defects in the Town Center. Several tenants, including the

Town Center’s largest tenant (the movie theater), began making oral and written

complaints about problems with the foundations (as revealed in cracked walls and

floors) and demanded that the defects be corrected. In November 2008, Alberta

sought a proposal from an engineering firm to investigate the defects, and just a

2
      Allan G. Provost was also a principal of Alberta. According to Granite, he
died during the course of these proceedings, and Granite is not pursuing its claims
against him.

                                         -3-
few days before the December closing, Alberta’s lawyers wrote the cinema’s

lawyers regarding the on-going problems.

      Granite did not learn of the structural problems until after the closing, not

only because the Principals never told them, but also because the Principals

actively concealed the defects by submitting, shortly before the closing, estoppel

certificates from May 2008 (before the defects became evident) and making

cosmetic repairs to the property when Granite was scheduled to visit.

      On December 8, 2008, four days before the closing, the parties executed the

“Fifteenth Amendment to Amendment and Agreement and Termination

Agreement” (Fifteenth Amendment), Aplt. App. Vol. 1 at 205, that served as the

framework for the closing and resolved some outstanding issues. Among the

provisions of the Fifteenth Amendment was Granite’s agreement to allow Alberta

to deliver updated tenant estoppel certificates after the closing. The Amendment

also required the parties to execute before closing a release (the Release), which,

among other things, released Granite from any joint-venture agreement with

Alberta or the Principals. As consideration for the Release, Granite paid Alberta

an additional $2.15 million (the excess payment) at the closing. And as an

incentive for Alberta to deliver the estoppel certificates, the parties agreed that

$650,000 of the excess payment was to be held in escrow until Alberta complied

with its obligation. If Alberta provided the new certificates by March 1, 2009, the

                                          -4-
escrow agent was to release the funds to Alberta; if not, the funds were to be paid

to Granite.

      Based on the above alleged facts, Granite asserted a fraud claim against the

Principals for fraudulently inducing Granite to pay $2.15 million for Alberta and

related parties to release their joint-venture claims. In December 2009 the district

court granted the Principals’ motion to dismiss under Fed. R. Civ. P. 12(b)(6)

because Granite “fail[ed] to plausibly plead that its execution of the Release . . .

has caused it any damage.” Aplt. App. Vol. 1 at 163-64. 3

      In a pleading entitled “Plaintiff’s Motion For Reconsideration And For

Leave To Amend Complaint,” id. at 166, Granite asked the district court to vacate

its order or to allow Granite to file a second amended complaint. Granite argued

not only that new evidence uncovered in discovery had established the plausibility

of its claim, but also that an amendment was necessary to allow it to plead an

additional fraud claim. The court denied the motion. Several months later the

court, at the request of the Principals, certified its December 2009 dismissal of

Granite’s fraud claim as a final judgment under Rule 54(b).

                                          II.

      We review de novo an order dismissing a complaint under Rule 12(b)(6) for

failure to state a claim. See Gee v. Pacheco, 627 F.3d 1178, 1183 (10th Cir.

3
      The Principals also moved to dismiss on the ground that the first amended
complaint failed to plead fraud with the particularity required by Fed. R. Civ. P.
9(b). The court did not address the particularity issue.

                                          -5-
2010). “To survive a motion to dismiss, a complaint must contain sufficient

factual matter, accepted as true, to state a claim to relief that is plausible on its

face.” Iqbal, 129 S. Ct. at 1949 (internal quotation marks omitted). For a claim

to have facial plausibility, “the plaintiff [must] plead[] factual content that allows

the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Id. “Determining whether a complaint states a plausible

claim for relief [is] a context-specific task that requires the reviewing court to

draw on its judicial experience and common sense.” Id. at 1950.

      Under Iqbal’s plausibility standard, Granite was required to plead facts that

created a reasonable inference of a claim of fraudulent inducement under

Colorado law. See Haberman v. Hartford Ins. Grp., 443 F.3d 1257, 1264

(10th Cir. 2006) (“In diversity cases, the substantive law of the forum state

governs the analysis of the underlying claims.”). The elements of fraudulent

inducement are: (1) the defendant made a fraudulent misrepresentation of fact or

knowingly failed to disclose a fact that defendant had a duty to disclose;

(2) the fact was material; (3) the plaintiff relied on the misrepresentation or

failure to disclose; (4) the plaintiff’s reliance was justified; and (5) the reliance

resulted in damage to the plaintiff. See M.D.C./Wood, Inc. v. Mortimer, 866 P.2d
1380, 1382 (Colo. 1994) (misrepresentation); Nielson v. Scott, 53 P.3d 777, 779

(Colo. App. 2002) (nondisclosure or concealment).

                                           -6-
      Granite’s claim is straightforward: It paid an additional $2.15 million for

the Town Center to obtain a release of any claim by Alberta or related parties that

they were in a joint venture with Granite, and it would not have done so if the

Principals had not concealed the construction defects. The Principals’ challenges

to this theory are, at least at the pleading stage of the litigation, flawed.

      First, the Principals contend that “Granite paid $2,150,000 as part of the

purchase price [for the Town Center] – not as consideration for the Release [of

the joint venture claims].” Aplee. Br. at 15. They point to the Fifteenth

Amendment, which states: “[Granite] agrees to pay, and [Alberta] agrees to

accept, as consideration for the conveyance of the [Town Center] to [Granite],

[$2.15 million] plus [the closing price].” Aplt. App. Vol. 1 at 207. Thus, the

document characterizes the $2.15 million as part of the price of the property, not

as a specific payment for the Release. But that characterization does not

contradict Granite’s claim. Execution of the joint-venture release was one of the

requirements of the Fifteenth Amendment. There can be no doubt that a benefit

obtained by Granite in return for paying an additional $2.15 million for the

property was that ownership of the Town Center would now be free and clear of

joint-venture claims by Alberta and related parties. Granite is entitled to try to

prove (at trial or in response to a summary-judgment motion) that it would not

have paid that additional sum if its interest in the Town Center would have been

burdened by joint-venture claims. Even if the joint-venture release was worth

                                           -7-
less than $2.15 million to Granite, it may be entitled to part of the sum. Granite’s

claim would not fail just because it cannot establish its full alleged damages.

      The Principals also argue that “Granite’s alleged reliance was implausible

because the [Fifteenth Amendment] made the [Town Center’s] condition

immaterial.” Aplee. Br. at 17. They rely on the language in the purchase-and-

sale agreement that “the [Town Center] is being sold to [Granite] on the Closing

Date in its then ‘AS IS, WHERE IS’ condition, with all faults.” Aplt. App.

Vol. 2 at 488. But even if Granite would have had to pay the $160 million

closing price for the Town Center regardless of construction defects (an issue we

need not resolve), it may well have refused to pay an additional $2.15 million if it

had known of the defects.

      In district court the Principals also argued that Alberta had no duty to

disclose construction defects to Granite and that they could not be personally

liable even if Alberta violated a disclosure duty. But those arguments have not

been pursued on appeal, and we do not address them.

      The order of the district court is REVERSED, and the case is REMANDED

for further proceedings consistent with this order and judgment.

                                                    Entered for the Court

                                                    Harris L Hartz
                                                    Circuit Judge

                                         -8-