Court Opinion

ID: 5158985
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:30:54.450979+00
Date Added: 2024-06-11T08:25:32.210209
License: Public Domain

Judge HAWTHORNE
concurring in part and dissenting in part.
158 Because I believe that the employees' breach of fiduciary duty claim is barred by the CGIA, I respectfully dissent as to Part IILC.1.2a. 'of the majority's opinion. And be*209cause I do not believe that the employees' unilateral and mutual mistake claims are barred by the CGIA, I respectfully dissent as to Part II.C.3. of the majority's opinion. I also dissent as to the majority's conclusions concerning these issues in Part III. However, I concur with the remainder of the opinion.
I. Breach of Fiduciary Duty Claim
"[ 59 I would conclude that the CGIA bars the employees' breach of fiduciary duty claim because it could lie in tort. Unlike the majority, I am not persuaded that the economic loss rule has any bearing on whether the CGIA bars claims that could sound in tort.
T60 Relying on Article IV, Section 4.4 of the CHEIBA trust, the employees maintain that the fiduciary duties owed to them by defendant colleges and defendant trustees arose from the contract. That provision, titled "Fiduciary Duties," provides, in relevant part,
The Trust Committee shall act with the care, skill, prudence and diligence under the cireumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims....
1 61 A trustee-beneficiary relationship imposes a similar fiduciary duty on the trustee as a matter of law. See Bailey v. Allstate Ins. Co., 844 P.2d 1336, 1339 (Colo.App.1992) (the trustee-beneficiary relationship gives rise to fiduciary duties as a matter of law). "A fiduciary relation exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation." Moses v. Diocese of Colorado, 863 P.2d 310, 321 (Colo.1993) (quoting Restatement (Second) of Torts § 874 cmt. a (1979)). A fiduciary's obligations to the beneficiary include a duty to exercise reasonable care and skill. Destefono v. Grabrian, 763 P.2d 275, 284 (Colo.1988); Restatement (Second) of Trusts § 174 (1959) ("'The trustee is under a duty to the beneficiary in administering the trust to exercise such care and skill as a man of ordinary prudence would exercise in dealing with his own property...."). Thus, a trustee's duty to exercise reasonable care, skill, and prudence under the circumstances exists, as a matter of law, by nature of the trustee-beneficiary relationship.
"I 62 Breach of a fiduciary duty is an action that can lie in tort. See Restatement (Second) of Torts § 874 emt. b ("A fiduciary who commits a breach of his duty as a fiduciary is guilty of tortious conduct to the person for whom he should act."); Destefano, 763 P.2d at 284 ("[One] standing in a fiduciary relation with another is subject to liability to the other for harm resulting from a breach of the duty imposed by the relationship." (citing Restatement (Second) of Torts § 874)); Moses, 863 P.2d at 319 (First Amendment does not grant religious organizations immunity from tort liability for breach of a fiduciary duty); Western Fire Truck, Inc. v. Emergency One, Inc., 134 P.3d 570, 575 (Colo.App.2006) (if jury found that agent was acting for principal, it properly found that agent owed principal a fiduciary duty and was liable in tort for breach of that duty); Virdanco, Inc. v. MTS Int'l, 820 P.2d 352, 354 (Colo.App.1991) (breach of fiduciary duty claim was legal in nature and award of exemplary damages was appropriate because breach involved wanton and reckless conduct).
T 63 Here, the trustees owed the employees a fiduciary duty as a matter of law because of their trustee-beneficiary relationship. And they also had an explicit contractual duty to act as fiduciaries to the employees. Because the employees' fiduciary duty claim against the trustees could lie in tort or in contract, it is barred by the CGIA. Robinson v. Colo. State Lottery Div., 179 P.3d 998, 1004 (Colo.2008).
T 64 I do not believe that the economic loss rule has any bearing on whether the CGIA bars the employees' claims. Since adopting the economic loss rule, the Colorado Supreme Court has considered whether the CGIA bars claims that could arise in both contract and tort. In Robinson v. Colorado State Lottery, the court expressly acknowledged its seminal economic loss rule case, Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256 (Colo.2000), and nonetheless held that in areas where there is overlap, "claims that could arise in both tort and contract are barred by the CGIA." 179 P.3d at 1004 ("In*210deed, certain common law tort claims that are expressly intended to remedy economic loss such as fraud or negligent misrepresentation can exist independent of or in conjunction with a contractual claim. Yet, these economic-loss claims sound in tort." (citation omitted)). Thus, the relevant consideration is whether the claims are or could be tort claims, not whether the economic loss rule prevents a plaintiff from successfully asserting potential tort claims. See id.; City & County of Denver v. Desert Truck. Sales, Inc., 837 P.2d 759, 764 (Colo.1992) ("The dispositive question is whether the claim is a tort claim or could be a tort claim for purposes of analysis under the Governmental Immunity Act." (emphasis in original)).
T65 The fact that the economic loss rule prevents the employees from successfully asserting a tort claim does not change the claim's fundamental nature. A fiduciary duty arises from the contract and an independent general duty of care. See Colorado Dep't of Transp. v. Brown Group Retail, Inc., 182 P.3d 687, 690-91 (Colo.2008) ("lies in tort or could lie in tort" refers to the breach of a general duty of care, as distinguished from a breach of a contract or other agreement). Any claim that could lie in tort is barred by the CGIA, notwithstanding the economic loss rule's effect. See Robinson, 179 P.3d at 1004 (common law tort claims that can exist independent of or in conjunction with a contract claim sound in tort and are therefore barred by the CGIA); see also Brown Group Retail, 182 P.3d at 690-91 ("[ WJe have never suggested that coverage of the [CGIA] is limited to claims that are capable of being recast as common-law torts by the party bringing the claim."). I would therefore conclude that the employees' breach of fiduciary duty claim is barred by the CGIA.
1 66 I recognize that, under my interpretation, when a public entity's fiduciary relationship with a contracting party exists as a matter of law, that party has no tort or contract remedy for any claim that could be recast as a breach of a legally implied fidu-clary duty. This result is troubling. In addition to leaving a party who contracts with the government without a remedy in certain instances, such a result does not further the Act's purpose of limiting governmental liability for compensatory money damages in tort cases.1 See § 24-10-102, C.R.S.2011 ("the state and its political subdivisions provide essential public services and functions and . unlimited liability could disrupt or make prohibitively expensive the provision of such essential public services and functions"); see also City of Colorado Springs v. Conners, 993 P.2d 1167, 1172 (Colo.2000). In cases such as this one, the government's liability would not be any greater than that which would arise in contract because the economic loss rule would prevent the employees from recovering in tort. Nonetheless, in my view, the CGIA and Colorado case law compel this result. See Robinson, 179 P.3d at 1004 (claims that could arise in both tort and contract are barred by the CGIA); Brown Group Retail, 182 P.3d at 690-91 (characterizing "lies in tort or could lie in tort" as an "expansive statutory phrase"); see also § 24-10-102 (General Assembly recognizes that "the doctrine of sovereign immunity ... is, in some instances, an inequitable doctrine").
II. Unilateral and Mutual Mistake Claims
T67 I would conclude that because the employees' unilateral and mutual mistake claims lie solely in contract, they are not barred by the CGIA.
T68 The doctrine of mistake allows the mistaken party to avoid the contract. Sumerel v. Goodyear Tire & Rubber Co., 232 P.3d 128, 135 (Colo.App.2009); see also Poly Trucking, Inc. v. Concentra Health Services, Inc., 93 P.3d 561, 563 (Colo.App.2004) (reformation is generally permitted when the parties made a mutual mistake or one party made a unilateral mistake and the other en*211gaged in fraud or inequitable conduct). Mistake remedies, such as contract reformation and rescission, are equitable in nature. Morris v. Belfor USA Group, Inc., 201 P.3d 1253, 1260 (Colo.App.2008) (reformation is an equitable remedy); CAMAS Colorado, Inc. v. Board of County Com'rs, 36 P.3d 135, 139 (Colo.App.2001) (rescission is an equitable remedy afforded upon a showing of mistake); see also Maryland Cas. Co. v. Buckeye Gas Products Co., 797 P.2d 11, 13 (Colo.1990) (prerequisite to court's reformation power based on mutual mistake is a prior agreement representing the parties' actual agreement).
169 Unilateral mistake applies where one party is mistaken about a basic contractual assumption. Sumerel, 232 P.3d at 135.
T70 Restatement (Second) of Contracts § 153 (1981) provides:
Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake ... and
(a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or
(b) the other party had reason to know of the mistake or his fault caused the mistake.
T71 A mutual mistake claim requires a showing that both parties were laboring under the same erroneous conception of the contract's terms and conditions. Maryland Cas. Co., 797 P.2d at 13.
T72 To support their unilateral and mutual mistake claims, the employees allege the following underlying facts. The attorney general, who is not a party to this appeal, purported to represent all the participating colleges in creating the CHEIBA trust, resulting in a conflict of interest. The participating colleges were entitled to independent counsel, a fact that the attorney general failed to disclose to the trust committee. Employees who had been required to contribute to the trust before June 80, 2008 were not represented during the actions leading to the trust committee approving the CHEIBA trust. The trust committee was not advised that the CHEIBA trust could foreseeably cause the trustees to discriminate among the beneficiaries and violate their contractual duty to treat all trust beneficiaries equally. According to the employees, the attorney general inserted a waiver provision without the trust beneficiaries' and the trust committee's informed consent. The employees further allege that defendants, through their attorney, knew of Mesa State's mistake.
T73 The employees maintain that the effect of the attorney general's conduct renders the CHEIBA trust provision authorizing a waiver and forfeiture of rights and trust contributions void for unilateral or mutual mistake. They seek a declaratory judgment voiding that provision, in Article X, section 10.1 of the CHEIBA trust, titled "Rights," which provides:
Neither any Employee or Participant, his family or dependents, any beneficiary, or any other person or group, nor their respective successors, assigns, or legal representatives, shall have any right, title or interest, vested or otherwise, in or to any assets of the Trust, whatsoever, or in or to the eligibility requirements for any Benefit Plan as changed or altered, except to the extent otherwise specifically provided for in this Agreement. Any participating Employee who withdraws or ceases to participate in the program does hereby and shall immediately and expressly waive and forfeit any right, title or interest in or to any assets of the Trust. Any benefits such Participant may have shall be forever terminated and discharged when this Agreement is terminated, the Trust dissolved or a Participant ceases to be eligible under the terms of any Benefit Plan, provided that Participant may extend benefits pursuant to benefit continuation laws (COBRA), insurance contract conversion rights and the terms and provisions of a Benefit Plan. No benefit right or interest of any such person shall be transferable or assignable by any Participant or other person to any other person or entity.
*212T74 The employees also request an accounting to determine their reserve fund share and a declaratory judgment disbursing that share to a successor trustee.
175 In my view, the CGIA does not bar the employees' claims because the claims and requested relief are based in contract. See CAMAS Colorado, 86 P.8d at 189 (CGIA did not bar mutual mistake claim because the relief and the claim were based in contract).
T 76 Unlike the majority, I do not view the source of the duty owed by the attorney general to the trustees, or, by implication to the employees, as the relevant inquiry in determining whether the CGIA bars the employees' mistake claims against defendants. The employees do not allege that the trustees engaged in fraudulent concealment or negligently misrepresented a material fact, both of which are claims that are barred by the CGIA because they lie in tort. Id. at 138. Nor do they base their claims on the attorney general's possible legal malpractice or misrepresentation, as the majority perceives. Significantly, the attorney general is not a party, and proving legal malpractice is not required to support the mistake claims. The employees' complaint alleges that the attorney general misinformed Mesa State and defendants about their rights to counsel and failed to tell them that a waiver provision had been inserted in the CHEIBA trust agreement. Therefore, according to the complaint, such conduct "negated any valid consent to the amendment."
T77 Thus, the claim asserts that because the attorney general misinformed, or did not inform, Mesa State or defendants about the waiver provision, one or more of them was laboring under an erroneous conception of the contract's terms. In my view, this is a claim that arises solely in contract.
178 The employees seek a declaratory Judgment that the CHEIBA trust's provision authorizing a forfeiture of their contributions is null and void because of either unilateral or mutual mistake. These claims, if successful, could entitle them to rescission or reformation of the CHEIBA trust agreement to restore them to the position they would have been in under the disability trust agreement. See Sumerel, 282 P.8d at 135; Poly Trucking, 98 P.3d at 563. Those remedies are equitable in nature. Morris 201 P.3d at 1260; CAMAS Colorado, 36 P.3d at 189.
179 Because the mistake claims arise out of contract, not an alleged tortious act by defendants, and the relief is equitable in nature, I believe the CGIA does not bar either the employees' mutual or unilateral mistake claim. See CAMAS Colorado, 36 P.3d at 139.
TIL Conclusion
1 80 I would conclude that the CGIA bars the employees' fiduciary duty claims and would therefore reverse that portion of the district court's order. I would further conclude that the CGIA does not bar the employees' mistake claims and would affirm that portion of the order. In all other respects, I coneur with the majority's conclusions.

. The CGIA became effective July 1, 1972, well before Colorado adopted the economic loss rule in Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256 (Colo.2000). However, the General Assembly has not legislatively addressed the economic loss rule's effect on the CGIA even though it has amended other CGIA provisions. See Vigil v. Franklin, 103 P.3d 322, 327 (Colo.2004) ("when it chooses to legislate in a particular area, the General Assembly is presumed to be aware of existing case law precedent.").