Court Opinion

ID: 9885707
Source: CourtListenerOpinion
Date Created: 2023-10-06 13:12:34.029823+00
Date Added: 2024-06-11T07:48:55.919265
License: Public Domain

Judge CARPARELLI
specially concurring.
I concur in the majority opinion except with regard to the conclusion that § 38-10-124(2), C.R.98.2006, bars a party from defending against enforcement of a credit agree*524ment on grounds of fraudulent inducement. My concern is that the majority's interpretation protects those who fraudulently induce another to sign a written credit agreement. Cf. Burnford v. Blanning, 189 Colo. 292, 540 P.2d 337 (1975). This is contrary to the words and the purpose of the statute. Nonetheless, I concur in the result because Premier was entitled to judgment as a matter of law regarding the defense of fraudulent inducement.
I. Pertinent Facts
Premier sued for breach of a promissory note and also stated a claim for replevin based on deeds of trust and security agreements. Defendants filed counterclaims, including one for fraud, alleging they would not have signed the deeds of trust and security agreements but for false representations by Premier. Defendants also listed affirmative defenses, including estoppel and fraud.
Defendant Ronny Wisdom testified that, seven months after defendants signed the promissory note, he met with Melvin Frit-zler, Premier's president, and discussed the discrepancy in the number of cattle. Wisdom testified that he and his son suggested giving Premier a deed of trust, and that he said, "I don't want a fight. Let's work this out." According to Wisdom, Fritzlee was angry and responded, "Well, if you don't, we're going to have a fight." Wisdom stated that he thought about the situation that night, thought he might be able to explain the cause of the discrepancy, called the pro-prictors of the lot at which some of the cattle were located, and arranged for them to accompany him to a meeting with Fritzler the next day. Wisdom said he went into the meeting with Fritzler with the intention of explaining the discrepancy, but that Fritzler said, "We're not going to worry about cattle. We're not going to worry about the past. We're going to go forward from here."
Based on this testimony, defendants asserted that they believed Premier was going to forbear from pursuing an action for breach of the note, and would continue the lending relationship. They contended that they executed the documents in reliance on that belief. However, Premier promptly initiated a foreclosure action.
Defendants argued that Premier fraudulently concealed the fact that it intended to foreclose immediately. They did not allege that Premier fraudulently induced them to sign the underlying promissory note.
In May 2004, the court concluded that the deeds of trust were properly granted. In its order, the court addressed Wisdom's testimony regarding Fritzler's alleged statement that Premier would not worry about what had happened in the past with the cattle and that the parties would move forward. The court found that the meaning of the comments was not clear and that it was not clear what remedy such comments would afford defendants.
In December 2004, the court granted Premier's motion for summary judgment as to its claim for breach of the promissory note. Among other things, the court concluded, as a matter of law, that Fritzler's statements to Wisdom were too vague to imply an agreement to forbear with regard to enforcement of the note.
Defendants now argue that Premier's alleged fraudulent inducement vitiates the deeds of trust and security agreements and makes them voidable. Defendants state that they are not seeking to enforce Premier's alleged promise to forbear from pursing an action for breach of the promissory note, but rather seek to void the deeds of trust and security agreements. Premier contends, and the majority concludes, that § 38-10-124, C.R.S.2006, bars defendants from asserting fraudulent inducement as a defense to the validity of the agreements.
I conclude that the district court correctly did not rescind the deeds of trust and security agreements based on the defense of fraudulent inducement.
II. Statutory Interpretation
We interpret statutes in a manner that gives effect to the General Assembly's intent. To do this, we begin with the language of the statute, giving words their plain and ordinary meaning. Carlson v. Ferris, 85 P.3d 504 (Colo.2003). When the plain language of a *525statute is free from ambiguity, other rules of statutory construction are unnecessary. Kinder v. Indus. Claim Appeals Office, 976 P.2d 295 (Colo.App.1998); Spanish Peaks Mental Health Ctr. v. Huffaker, 928 P.2d 741 (Colo.App.1996). The court should only resort to extraneous evidence for clarification when an uncertainty exists. McNichols v. City & County of Denver, 120 Colo. 380, 209 P.2d 910 (1949).
In addition, "[s]tatutes in derogation of the common law must be strictly construed, so that if the legislature wishes to abrogate rights that would otherwise be available under the common law, it must manifest its intent either expressly or by clear implication." Vigil v. Franklin, 103 P.3d 322, 327 (Colo.2004) (quoting Vaughan v. McMinn, 945 P.2d 404, 408 (Colo.1997), and Van Waters & Rogers, Inc. v. Keelan, 840 P.2d 1070, 1076 (Colo.1992)). "[When the legislature speaks with exactitude, we must construe the statute to mean that the inclusion or specification of a particular set of conditions necessarily excludes others." Vigil v. Franklin, supra, 103 P.3d at 327 (quoting Lunsford v. W. States Life Ins., 908 P.2d 79, 84 (Colo.1995)).
III. Fraudulent Inducement as a Common Law Defense
"Fraudulent inducement is an elementary concept in the law of contracts, and is intended to shield a party from liability in a contract action only when another party has procured the alleged contract wrongfully." Lyn-Lea Travel Corp. v. Am. Airlines, Inc., 283 F.3d 282, 289-90 (5th Cir.2002).
When one pleads that he or she entered into a contract as a result of the fraud of another, the plea goes to the fundamental issue in contract actions, whether there is an enforceable agreement. One who has been fraudulently induced to enter into a contract has not assented to the agreement since the fraudulent conduct precludes the requisite mutual assent.
Samuel Williston, A Treatise on the Law of Contracts § 69:1, at 486 (4th ed.2003).
A defendant may be granted rescission of a contract if (1) the plaintiff concealed a past or present fact, failed to disclose a past or present fact that the plaintiff had a duty to disclose, or made a false representation of a past or present fact; (2) the fact was material; (8) the defendant entered into the alleged contract relying on the assumption that the concealed or undisclosed fact did not exist or was different from what it actually was, or that the falsely stated fact was true; (4) the defendant's reliance was justified; and (5) the defendant has returned or offered to return to the plaintiff anything the retention of which would unjustly enrich the defendant. See Stoner v. Marshall, 145 Colo. 352, 355, 358 P.2d 1021, 1022-23 (1961); Aaberg v. H.A. Harman Co., 144 Colo. 579, 358 P.2d 601 (1961) (plaintiff who is fraudulently induced may affirm the contract and sue for damages in tort, or to rescind the contract and sue in contract under theory of assump-sit); Tisdel v. Cent. Sav. Bank & Trust Co., 90 Colo. 114, 130, 6 P.2d 912, 917 (1931); CJI-Civ. 30:18.
IV. Statute of Frauds
The Colorado's statute of frauds requires certain agreements to be in writing and, in general, states that, absent a writing, such agreements are void. Seq, eg., §§ 38-10-101, 38-10-1083, 38-10-108, 38-10-111 to - 112, 38-10-114, 38-10-117 to -121, C.R.S. 2006. Thus, the statute of frauds does not provide the basis for a claim, but a defense against a claim seeking enforcement of an oral agreement. In addition, the statute does not state that all writings that purport to be contracts are, in fact, valid and binding contracts. "A contract may contain all of the essential elements required for enforceability, and, if within the Statute of Frauds, may be in the form that the law requires, but may nonetheless be unenforceable as a result of the imposition of an affirmative defense." Williston, supra, § 69:1, at 485.
V. Section 88-10-124(2)
Section 38-10-124(2) provides as follows:
Notwithstanding any statutory or case law to the contrary, including but not limited to section 38-10-112, no debtor or ereditor may file or maintain an action or a claim relating to a credit agreement involving a *526principal 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.
Under the definition of eredit agreement in § 88-10-124(1)(a), a party may bind another based on one of the following circumstances only if it is in writing: (1) a promise or offer to forbear repayment of money; (2) an agreement to amend, cancel, waive, or substitute terms or provisions of any credit agreement; and (8) any representation or omission made in connection with the negotiation of any credit agreement.
A. Provision Bars Claims, Not Defenses
Section 38-10-124(2) explicitly prohibits enforcement of credit agreements that are not in writing. Webster's Third New International Dictionary 751 (1986) defines "enforcement" as the act of enforcing, as compulsion, and as compelling fulfillment. Similarly, Black's Law Dictionary 549 (7th ed.1999) defines "enforcement" to mean "the act or process of compelling compliance with a law, mandate, or command."
Thus, the statute's use of the word enforcement and the phrase "the party sought to be held liable under the agreement" unambiguously refer to actions and claims seeking to hold another liable, and not to the application of legal or equitable principles negating the existence of a binding contract. This conclusion is further supported by the statute's requirement that the writing be signed by the party against whom enforcement is sought.
The cases cited by the majority do not hold otherwise because they all address whether § 38-10-124(2) bars claims for relief that sought to make lenders liable either in contract, quasi contract, or tort. They do not address whether the statute bars defenses to the existence of a contract or the enforceability of a written agreement. See Schoen v. Morris, 15 P.3d 1094 (Colo.2000); Lang v. Bank of Durango, 78 P.3d 1121 (Colo.App.2003); Hewitt v. Pitkin County Bank & Trust Co., 931 P.2d 456 (Colo.App.1995); Norwest Bank Lakewood v. GCC P'ship, 886 P.2d 299 (Colo.App.1994); Pima Fin. Serv. Corp. v. Selby, 820 P.2d 1124 (Colo.App.1991).
Consequently, unlike the majority, I cannot conclude that the plain and ordinary meaning of the phrase "may file or maintain an action or a claim," is that, when there is a writing, a defendant against whom enforcement is sought may not present defenses to the validity of the alleged contract, including those based on oral fraudulent inducement.
Giving the words of the statute their plain and ordinary meaning, this provision only prohibits the enforcement of an oral credit agreement involving a principal amount in excess of $25,000, and prohibits the enforcement of a written credit agreement unless it is signed by the party sought to be held liable under the agreement.
B. Common Law Defenses Not Abrogated
Because the provision only prohibits the enforcement of oral credit agreements involving a principal amount in excess of $25,000, and written agreements not signed by the party to be held liable, the phrase, "[nlot-withstanding any statutory or case law to the contrary," means only that any other statutory or case law that would permit the enforcement of oral or unsigned agreements is without force or effect. The phrase does not clearly or explicitly abrogate common law defenses to the validity of contracts.
Section 38-10-124(8), C.R.S.2006, is consistent with this conclusion. It states that the existence of an agreement may not be implied from, among other things, the relationship of the parties, fiduciary or otherwise, from performance or partial performance, or by a quasi contract claim of promissory es-toppel. It does not say that all written agreements are presumed valid, or that all written agreements may be enforced notwithstanding fraudulent cireumstances attending their execution.
C. Purpose-Based Interpretation
Because the plain language of the statute is free from ambiguity, other rules of statutory construction are unnecessary, and resort to extraneous evidence for clarification is inappropriate. Nonetheless, a purpose-based, *527rather than a text-based, application of the statute also supports the conclusion that defendants are entitled to assert their defense to the validity of the written agreement.
Section 38-10-124 was not intended to enable lenders to enforce fraudulently obtained written agreements. The General Assembly added § 38-10-124 to the statute of frauds in 1989. The section was a result of lobbying by the Colorado Bankers Association, which sought protection against suits alleging oral commitments to lend. Stephanie J. Shafter, Limiting Lender Liability Through the Statute of Frauds, 18 Colo. Law. 31, 1725 (1989) (citing Landes Constr. v. Royal Bank, 833 F.2d 1365 (9th Cir.1987) (upholding $18.5 million judgment against bank for breach of oral promise to lend)); cf. Penthouse Int'l, Ltd. v. Dominion Fed. Sav. & Loan Ass'n, 665 F.Supp. 301 (S.D.N.Y.1987) (reversing $129 million judgment against bank and its counsel for breach of $35 million participation commitment), aff'd in part and rev'd in part, 855 F.2d 963 (2d Cir.1988).
Thus, when a lender seeks to enforce a written agreement, permitting the defendant to assert defenses to the validity of the agreement is not contrary to the purpose of § 38-10-124.
VI. Conclusion
Notwithstanding my disagreement with the majority's conclusion that § 38-10-1124 prevents a debtor from presenting a defense of fraudulent inducement, I coneur in the result because defendants did not allege that Premier had concealed, failed to disclose, or falsely represented a past or present fact, but rather alleged that Premier had falsely represented its future plans. In addition, the district court's conclusion that Fritzler's statements were too vague to imply an agreement to forbear with regard to enforcement of the note is supported by the record and dispositive of the question of whether defendants' alleged reliance on Fritzler's statements as representations of an intention to forbear were justified.
Hence, I conclude, as does the majority, that the district court properly did not re-seind the deeds of trust and security agreements based on the defense of fraudulent inducement.