k v. Esperanza Architecture

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.

SUMMARY
September 2, 2021

2021COA119

No. 20CA0919, CadleRock v Esperanza Architecture — Uniform
Commercial Code — Negotiable Instruments

A division of the court of appeals considers whether a line of

credit is a negotiable instrument under section 4-3-104(a), C.R.S.

2020. The division concludes that a line of credit is not a

negotiable instrument because it fails the “fixed amount of money”

requirement. Id. The division further concludes that, because

article 3 of the Colorado Uniform Commercial Code applies only to

negotiable instruments, article 3 does not bar a plaintiff from

enforcing a defaulted line of credit. Accordingly, the division

reverses the district court’s grant of summary judgment on

plaintiff’s claim of past due and unpaid installments.

The division also (1) reverses the portion of the summary

judgment dismissing plaintiff’s quantum meruit and unjust
enrichment claims because plaintiff sufficiently established a

genuine issue of material fact; (2) affirms the unchallenged portions

of the summary judgment; and (3) declines to consider plaintiff’s

breach of contract claim because it is not before the division.
COLORADO COURT OF APPEALS 2021COA119

Court of Appeals No. 20CA0919
Garfield County District Court No. 19CV30022
Honorable Denise K. Lynch, Judge

CadleRock Joint Venture LP,

Plaintiff-Appellant,

v.

Esperanza Architecture & Consulting, Inc.; Curtis G. Odom; and Angela D.
Odom, n/k/a Angela D. McDermott,

Defendants-Appellees.

JUDGMENT AFFIRMED IN PART
AND REVERSED IN PART

Division VII
Opinion by JUSTICE MARTINEZ*
Fox and Pawar, JJ., concur

Announced September 2, 2021

RoweLaw, LLC, R. William Rowe, Denver, Colorado, for Plaintiff-Appellant

Coan, Payton, & Payne LLC, Brett Payton, Donovan P. Gibbons, Greeley,
Colorado, for Defendants-Appellees Esperanza Architecture & Consulting, Inc.
and Curtis G. Odom

Clay, Dodson, & Huffman, P.C., Julie Joanne Huffman, Delta, Colorado, for
Defendant-Appellee Angela D. McDermott

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2020.
¶1 CadleRock Joint Venture, LP, sued Esperanza Architecture &

Consulting, Inc.; Curtis G. Odom; and Angela D. Odom, now known

as Angela D. McDermott (collectively, the borrowers) alleging that

the borrowers owed it $870,361.21, plus interest and attorney fees

and costs, pursuant to a line of credit on which the borrowers had

defaulted. The borrowers moved for summary judgment. The

district court granted the motion as to all but one of CadleRock’s

claims. CadleRock appeals the grant of summary judgment. We

reverse in part and affirm in part.

I. Background

¶2 In 2005, WestStart Bank, a nonparty, issued the borrowers a

$500,000 “revolving line of credit” (the Credit Agreement). The

following year, the same parties signed a Change of Terms

Agreement, which modified the repayment terms in the Credit

Agreement and “increase[d] the revolving line of credit from

$500,000.00 to $750,000.00.” The parties also signed a related

Business Loan Agreement.

¶3 The borrowers stopped making payments and defaulted in

January 2012.

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¶4 CadleRock asserts that, “[b]y endorsements and allonge(s),” it

is the successor in interest to the defaulted line of credit.1 But it

admits that a prior holder of the loan lost the original Credit

Agreement.

¶5 In 2018, CadleRock sued the borrowers, raising the following

claims: “debt due, including for past due and unpaid

installment[s]”; breach of contract; quantum mer[u]it; unjust

enrichment; promissory estoppel; and “account stated, after

October 2, 2017 . . . .”

¶6 In moving for summary judgment, the borrowers asserted that

the Credit Agreement was a negotiable instrument governed by

article 3 of the Colorado Uniform Commercial Code (UCC). See

§ 4-3-104(a), C.R.S. 2020 (defining “negotiable instrument”); see

also § 4-3-102(a), C.R.S. 2020 (limiting the provisions of UCC article

3 to negotiable instruments). The borrowers therefore alleged that

CadleRock was barred from enforcing the defaulted line of credit

under several UCC provisions. The borrowers also contended that

1 According to CadleRock, U.S. Bank National Association (US
Bank) acquired WestStar and gained possession of the defaulted
line of credit. US Bank then assigned the debt to Acquired Capital
who subsequently assigned it to CadleRock.

2
CadleRock failed to “establish a chain of ownership” showing it

“actually bought” the debt. The district court granted the motion

for summary judgment in part and denied it in part, dismissing all

but CadleRock’s breach of contract claim.

¶7 CadleRock appealed, and a division of this court issued an

order to show cause why the appeal should not be dismissed for

lack of a final appealable order. CadleRock then provided an order

certifying the partial summary judgment as final pursuant to

C.R.C.P. 54(b), and this court allowed the appeal to proceed.

¶8 CadleRock now argues the district court erred in (1) finding

the Credit Agreement was a negotiable instrument and therefore

dismissing CadleRock’s past due and unpaid installments claim; (2)

concluding the Change of Terms and Business Agreements were

“part of” the Credit Agreement; (3) dismissing CadleRock’s quantum

meruit and unjust enrichment claims; and (4) “decid[ing] that

Cadle[Rock] could proceed on a breach of contract claim, after

determining that the subsequent agreements were part of the

[Credit Agreement] that Cadle[Rock] cannot enforce.” CadleRock

does not challenge the district court’s grant of summary judgment

as to its promissory estoppel or account stated claims.

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II. Summary Judgment

¶9 We review a district court’s grant of summary judgment de

novo. W. Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo.

2002). Summary judgment is appropriate when the pleadings and

supporting documentation demonstrate that no genuine issue of

material fact exists and that the moving party is entitled to

summary judgment as a matter of law. Martini v. Smith, 42 P.3d

629, 632 (Colo. 2002); accord Ryser v. Shelter Mut. Ins. Co., 2019

COA 88, ¶ 10, aff’d on other grounds, 2021 CO 11, ¶¶ 10-11;

C.R.C.P. 56(c). The nonmoving party is entitled to the benefit of all

favorable inferences reasonably drawn from the undisputed facts,

and all doubts as to the existence of a triable issue of fact must be

resolved against the moving party. Martini, 42 P.3d at 632.

III. Past Due and Unpaid Installments Claim

¶ 10 CadleRock first contends that the district court erred in

concluding the Credit Agreement is governed by the UCC and

thereby dismissing CadleRock’s past due and unpaid installments

claim. CadleRock specifically argues that the UCC does not apply

because the Credit Agreement is not a negotiable instrument. We

agree.

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A. Applicable Law and Standard of Review

¶ 11 “Article 3 of the UCC governs the issuance, transfer,

enforcement, and discharge of negotiable instruments.” Gunderson

v. Weidner Holdings, LLC, 2019 COA 186, ¶ 15; accord Liberty

Mortg. Corp. v. Fiscus, 2016 CO 31, ¶ 13. But, if a written

“agreement is not a negotiable instrument, . . . the statutory

provisions relating to negotiable instruments are inapplicable to the

transaction.” Reid v. Pyle, 51 P.3d 1064, 1067 (Colo. App. 2002).

¶ 12 A negotiable instrument is (1) “an unconditional promise or

order” (2) “to pay a fixed amount of money, with or without interest

or other charges described in the promise or order.” § 4-3-104(a).

To enforce a negotiable instrument, one must be “(i) the holder of

the instrument, (ii) a nonholder in possession of the instrument

who has the rights of a holder, or (iii) a person not in possession of

the instrument who is entitled to enforce the instrument pursuant

to section 4-3-309 or [section] 4-3-418(d)[, C.R.S. 2020].”

§ 4-3-301, C.R.S. 2020.

¶ 13 We review de novo whether a loan document is a negotiable

instrument. Gunderson, ¶ 15. We also review de novo the district

court’s interpretation of contracts and statutes. See Ryser, ¶ 11;

5
Ad Two, Inc. v. City & Cnty. of Denver ex rel. Manager of Aviation, 9

P.3d 373, 376 (Colo. 2000).

B. The Credit Agreement is Not a Negotiable Instrument

¶ 14 CadleRock contends the Credit Agreement was not a

negotiable instrument because it does not meet the “fixed amount

of money” requirement.2 See § 4-3-104(a). We agree.

¶ 15 The Credit Agreement specifies that it “covers a revolving line

of credit for the principal amount of [$500,000], which will be [the

borrowers’] ‘Credit Limit,’” and that the borrowers may borrow

against the line of credit, “repay any portion of the amount

borrowed, and re-borrow up to the amount of the Credit Limit.” It

also states that the borrowers promise to pay “the total of all credit

advances and FINANCE CHARGES, together with all costs and for

which [the borrowers are] responsible under this Agreement or

under the ‘Deed of Trust’ . . . .”

2The district court largely limited its analysis to the Credit
Agreement but applied the UCC to all three agreements after
concluding the Credit Agreement “[wa]s modified but not
superseded by” the Change in Terms and Business Loan
Agreements.

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¶ 16 Relying on this language, the district court found that, while

the borrowers could have taken out “any amount up to

$500,000.00, the amount they promised to pay was ‘fixed’ or

determinable in the sense that it could be easily calculated based

on the above language.” We don’t read the agreement that way.

¶ 17 While we aren’t aware of any Colorado decision addressing

whether a line of credit may be considered a “fixed amount of

money” and neither party points us to any binding authority, other

courts have addressed this issue and we find their reasoning

persuasive. In Heritage Bank v. Bruha, 812 N.W.2d 260, 266 (Neb.

2012), for example, the Nebraska Supreme Court held that a

promissory note failed the “fixed amount of money” requirement

because the note stated that it “evidence[d] a revolving line of credit”

and that the borrower “promise[d] to pay ‘the principal

amount . . . or so much as may be outstanding . . . .’” The court

reasoned that, given this language, “one looking at the instrument

itself cannot tell how much [the borrower] has been advanced at

any given time.” Id. at 268; accord Yin v. Soc’y Nat’l Bank Ind., 665

N.E.2d 58, 62 (Ind. Ct. App. 1996) (concluding an agreement for

“$2,000,000 . . . or so much thereof as may be advanced” was not a

7
negotiable instrument because “the amount advanced to the parties

could not be determined with certainty absent an inquiry to other

documents”); Cadle Co. v. Allshouse, No. 2023OF2006, 2007 WL

5472749 (Pa. Ct. Com. Pl. Mar. 16, 2006) (finding an agreement

was “not for a fixed amount, but rather is a line of credit that

permitted [the borrower] to draw advances”), aff’d, 959 A.2d 455

(Pa. Super. Ct. 2008) (unpublished table decision); see OneWest

Bank, N.A. v. FMCDH Realty, Inc., 83 N.Y.S.3d 612, 616-17 (App.

Div. 2018) (noting that, in multiple jurisdictions, “line of credit

agreements have been held to be distinct from an agreement to pay

a sum certain”); see also Farmers Prod. Credit Ass’n v. Arena, 481

A.2d 1064, 1065 (Vt. 1984) (holding an agreement allowing “future

advances” was not a negotiable instrument).

¶ 18 When a bank advances the borrower the principal at the start

of the loan period, and the borrower promises to repay that amount

with interest and other costs at intervals outlined in the loan

agreement, the loan instrument reveals the amount advanced. But

here, the Credit Agreement allows the borrowers to draw on the line

of credit, repay the loan, and then re-borrow up to the credit limit.

Thus, like in Bruha, instead of promising to repay the principal, the

8
borrowers here promised to pay the “the total of all credit

advances.” While the Credit Agreement specifies an upper limit to

the total amount advanced, it allowed the borrowers to draw less

than the limit or to draw more than the limit over the course of the

loan by repaying and re-borrowing. As a result, the amount the

borrowers promised to pay could fluctuate significantly over the

course of the loan. This means that, without knowing the total

advanced, the amount the borrowers promised to pay cannot be

determined from the Credit Agreement. Thus, the Credit Agreement

does not reflect a promise or order to pay a “fixed amount” and is

not a negotiable instrument.

¶ 19 Because UCC article 3 only governs negotiable instruments,

see Reid, 51 P.3d at 1067, CadleRock is not barred from enforcing

the Credit Agreement under any article 3 provisions. For this

reason, we reverse the district court’s grant of summary judgment

as to CadleRock’s past due and unpaid installments claim.

IV. Interpreting Together the Credit, Change of Terms, and
Business Loan Agreements

¶ 20 Next, CadleRock argues the district court erred in finding that

the Credit Agreement was “modified but not superseded by” the

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Change of Terms and Business Loan Agreements. Interpreting the

court’s language as integrating the three agreements, CadleRock

states “the major import” of this ruling is that CadleRock is

“forestalled” from enforcing the defaulted line of credit under

section 4-3-309 because the original Credit Agreement “was lost by

its predecessor-in-interest.”

¶ 21 To the extent CadleRock raises this issue as a means of

challenging the district court’s determination that it was barred

from enforcing the defaulted line of credit under article 3, we need

not address it in light of our determination that UCC article 3

doesn’t govern the enforcement of the Credit Agreement. See

Valentine v. Mountain States Mut. Cas. Co., 252 P.3d 1182, 1193

(Colo. App. 2011). Put another way, CadleRock isn’t barred from

enforcing the defaulted line of credit because it lacks the original

document for the Credit Agreement, so irrespective of whether the

three agreements are integrated or not, CadleRock may move

forward with its claim.

¶ 22 Assuming instead that CadleRock argues the district court

erred in concluding the Credit Agreement incorporates the Change

of Terms and Business Loan Agreements, we can’t review that claim

10
because the court did not make specific findings about whether the

three agreements are integrated. Thus, should the district court

determine on remand that it must address whether the three

agreements are integrated, the court should make additional

findings on this matter.

V. Quantum Meruit and Unjust Enrichment Claims

¶ 23 CadleRock next argues that the district court erred in granting

summary judgment on its quantum meruit and unjust enrichment

claims. We agree.

¶ 24 Quantum meruit, also termed quasi-contract or unjust

enrichment, is an equitable doctrine that “seeks to restore fairness

when a contract fails.” Dudding v. Norton Frickey & Assocs., 11

P.3d 441, 444-45 (Colo. 2000). The doctrine serves to “gaug[e] the

equities and ensur[e] that the party receiving the benefit of the

bargain pays a reasonable sum for that benefit.” Id. at 445. To

recover under a claim of quantum meruit or unjust enrichment,

a plaintiff must show (1) that a benefit was
conferred on the defendant by the plaintiff, (2)
that the benefit was appreciated by the
defendant, and (3) that the benefit was
accepted by the defendant under such
circumstances that it would be inequitable for
it to be retained without payment of its value.

11
Cablevision of Breckenridge, Inc. v. Tannhauser Condo. Ass’n, 649

P.2d 1093, 1096-97 (Colo. 1982).

¶ 25 In dismissing CadleRock’s quantum meruit and unjust

enrichment claims on summary judgment, the district court found

that CadleRock “failed to demonstrate that [the borrowers] received

a benefit at [CadleRock’s] expense” and offered no response to the

borrowers’ contention that CadleRock “had an opportunity to

conduct due diligence prior to purchasing the loans from Acquired

Capital, and therefore knew or should have known the risk

associated with the debt.”

¶ 26 But at the summary judgment stage, the burden was on the

borrowers, not CadleRock, to demonstrate that there was no

disputed issue of fact, and CadleRock was entitled to the benefit of

all favorable inferences. See Martini, 42 P.3d at 632. The

determination of whether CadleRock conferred a benefit on the

borrowers hinges on whether CadleRock is properly the

successor-in-interest to WestStar. As the district court otherwise

found in denying summary judgment as to CadleRock’s breach of

contract claim, “giving [CadleRock] the benefit of all favorable

inferences, . . . [CadleRock] has presented sufficient evidence to

12
establish a genuine issue of material fact as to whether the debt at

issue in this case was assigned to [it].”

¶ 27 Thus, because we agree that CadleRock has established a

genuine issue of material fact as to whether it was assigned the

defaulted line of credit, we conclude there was likewise a genuine

issue of material fact as to whether CadleRock conferred a benefit

on the borrowers. For this reason, we reverse the district court’s

grant of summary judgment as to CadleRock’s quantum meruit and

unjust enrichment claims.

VI. Breach of Contract Claim

¶ 28 Finally, CadleRock appears to argue that the district court

erred in denying the borrowers’ summary judgment motion as to

CadleRock’s breach of contract claim. CadleRock’s point may be

that the district court, in ruling CadleRock was barred from

enforcing the three agreements under section 4-3-309, stripped

CadleRock’s breach of contract claim of any hope of success and

effectively granted summary judgment on this claim. Regardless,

the court’s denial of summary judgment is not reviewable as it is

not a final order. Thus, we do not address it, other than to the

extent it is affected by our conclusion that section 4-3-309 does not

13
apply. Bd. of Cnty. Comm’rs v. BDS Int’l, LLC., 159 P.3d 773, 783

(Colo. App. 2006) (declining to review the district court’s summary

judgment denial and noting that, while a court may certify a partial

grant of summary judgment as a final appealable order, the district

court retains jurisdiction to rule on those claims not certified as

final appealable orders).

VII. Conclusion

¶ 29 We reverse the district court’s award of summary judgment to

the borrowers on CadleRock’s claims for past due and unpaid

installments on a promissory note, quantum meruit, and unjust

enrichment. Because CadleRock does not appeal the district

court’s award of summary judgment on its promissory estoppel and

account stated claims, we do not disturb the district court’s ruling

on those claims. Finally, we do not reach CadleRock’s breach of

contract claim because it is not properly before us.

JUDGE FOX and JUDGE PAWAR concur.

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