2018 COA 107
Colo. Ct. App.2018Background
- Prospect Development sold undeveloped lots and hired Holland & Knight (H&K) to prepare federally required property reports that omitted disclosure that a special district would use property taxes to pay for infrastructure, effectively passing costs to lot owners.
- Lot owners complained in 2010; Prospect told H&K, which assured Prospect the reports were legally sufficient; Prospect entered a tolling agreement with the lot owners in 2010.
- H&K withdrew in 2011. Lot owners sued Prospect in 2013; Prospect settled with them in 2015. Prospect then tolled claims against H&K in January 2015 and sued H&K in October 2016 for professional negligence and breach of fiduciary duty.
- H&K did not answer but moved to dismiss under C.R.C.P. 12(b)(5), asserting statutes of limitations barred Prospect’s claims and attaching litigation documents from the underlying lot-owner suit.
- The district court granted dismissal, having considered several attachments to H&K’s motion and declined to convert the motion to summary judgment; Prospect appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court properly considered materials outside the complaint on a C.R.C.P. 12(b)(5) motion asserting an affirmative defense | Prospect: Court erred by considering attachments not referenced in the complaint and failing to convert to summary judgment | H&K: Documents were judicially noticeable and properly considered | Reversed: Court erred to consider documents outside the complaint when ruling on an affirmative‑defense 12(b)(5) motion without conversion to summary judgment |
| Whether statute-of-limitations affirmative defense could be resolved on the face of the complaint | Prospect: Complaint and documents it referenced show claims accrued in or after March 2013, so tolling made them timely | H&K: Claims accrued by 2011 at latest, so limitations barred them before tolling in 2015 | Held for Prospect: Complaint (and two documents it referenced) plausibly show later accrual (March 2013), making claims timely under tolling agreement |
| Whether judicial notice of attached litigation materials permitted resolving the affirmative defense without conversion | Prospect: Judicial notice of extra-pleading materials is improper where affirmative defense is asserted | H&K: Judicial notice of court records/exhibits is permissible | Court: Judicial notice has limits; taking nonreferenced materials when an affirmative defense is asserted requires conversion to summary judgment |
| Whether the district court’s error was harmless | Prospect: Error not harmless because, on proper record, claims were timely | H&K: (implicit) Any error was harmless because documents established accrual in 2011 | Held: Error was not harmless; reversal required and case remanded for further proceedings |
Key Cases Cited
- Walker v. Van Laningham, 148 P.3d 391 (Colo. App. 2006) (standards for reviewing a 12(b)(5) dismissal)
- Yadon v. Lowry, 126 P.3d 332 (Colo. App. 2005) (documents referenced in complaint may be considered on a motion to dismiss)
- Bristol Bay Prods., LLC v. Lampack, 312 P.3d 1155 (Colo. 2013) (affirmative defenses generally must be in an answer; narrow exception and limits on judicial notice when resolving such defenses on a motion to dismiss)
- U.S. Gypsum Co. v. Ind. Gas Co., Inc., 350 F.3d 623 (7th Cir. 2003) (pleading‑itself‑out doctrine allowing dismissal when complaint admits all elements of an affirmative defense)
- Weise v. Casper, 507 F.3d 1260 (10th Cir. 2007) (consideration of affirmative defenses on a motion to dismiss may necessitate conversion to summary judgment)
- Rantz v. Kaufman, 109 P.3d 132 (Colo. 2005) (use of the discovery rule to determine accrual of claims)
- Colburn v. Kopit, 59 P.3d 295 (Colo. App. 2002) (accrual requires knowledge of facts that would put a reasonable person on notice of wrongful conduct)
- Palisades Nat'l Bank v. Williams, 816 P.2d 961 (Colo. App. 1991) (full extent of damages need not be known for accrual; plaintiff must know a claim exists)