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Midcities Metropolitan District No. 1 v. U.S. Bank National Association

United States District Court, D. Colorado

May 15, 2014

MIDCITIES METROPOLITAN DISTRICT NO. 1, a Quasi-Municipal Corporation and Political Subdivision of the State of Colorado, Plaintiff,
v.
U.S. BANK NATIONAL ASSOCIATION, a National Banking Association, Defendant.

MEMORANDUM OPINION AND ORDER

LEWIS T. BABCOCK, District Judge.

This matter is before me on a Motion for Leave to File Amended Complaint filed by Plaintiff, MidCities Metropolitan District No. 1 ("MidCities"), seeking leave to amend its complaint to add a breach of contract claim against Defendant, U.S. Bank National Association ("USBank"), who opposes this request. [Doc #29] Oral arguments would not materially aid in my determination of this motion. After consideration of the parties briefs and arguments, I DENY the motion as follows.

I. FACTS

MidCities is a special district (a quasi-municipal corporation and political subdivision of the State of Colorado) organized under Colo. Rev. Stat. §32-1-101, et seq., which provides services - such as sewer and water systems - to owners of real property located within its boundaries. The MidCities district consists of property adjacent to the Flatirons Mall located in Broomfield, Colorado.

On August 21, 2001, Coalton Acres, LLC (the original developer and Grantor) granted 8.1 acres of real property located within the district boundaries to the original Grantee, Heritage Bank, via a Special Warranty Deed. Section 2.1 of the Deed - entitled Grantee's Covenant as to Sales Tax Revenue: - requires the following:

(a) Grantee covenants and agrees that Grantee shall pay to MidCities... for every calendar year, during the term of this covenant, commencing with the calendar year 2003, ... the remainder of (i) $350, 000 minus (ii) one-half (½) of a three and one-half percent (3.5%) sales tax collected by the City from the Property for the year (the "Shortfall Amount").

Section 2.1(b) provides that the Shortfall Amount shall be paid to MidCities on or before March 31st of each calendar year, and Section 2.1(c) provides that the obligation to pay the Shortfall Amount shall continue until the bond obligations and amounts due in repayment of developer guarantees are made. MidCities alleges that in November 2004, the original Grantor (Coalton Acres) assigned its rights under the Deed to MidCities.

Heritage Bank paid the Shortfall Amount set forth in Section 2.1(a) of the Deed until 2007, when First Community Bank acquired Heritage Bank. Thereafter, First Community Bank paid the Shortfall Amount until it was placed into receivership by the Federal Deposit Insurance Corporation (the "FDIC") in January 2011. MidCities alleges that USBank then acquired the property at issue from the FDIC upon execution of a Purchase and Assumption Agreement, dated January 28, 2011 (the "P&A Agreement").

MidCities' position is that USBank is now obligated to pay the Shortfall Amount and, despite numerous demands, USBank has failed to pay. As a result, MidCities filed this lawsuit in the District Court for the City and County of Broomfield, seeking payment of the Shortfall Amount due, and a declaration that USBank is liable to pay it in the future. USBank subsequently removed the case from state court to this court, by filing a Notice of Removal on December 21, 2012, on the basis of diversity jurisdiction under 28 U.S.C. §1332(a).

USBank then filed a motion seeking dismissal of MidCities' claims against it for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6). On June 24, 2013, I ruled in favor of USBank on MidCities' claims seeking relief for Breach of Contract, Declaratory Judgment, and Injunctive Relief, which were brought on the theory that Section 2.1 of the Deed is a real covenant that runs with the land. I rejected this theory, and instead ruled that Section 2.1 was a personal covenant that did not run with the land. As such, I determined that MidCities' contract-based claims, which sought to enforce the provisions contained in Section 2.1 of the Deed against USBank (as the current owner of the property), were not cognizable as predicated on a faulty legal theory. I further ruled, however, that MidCities stated a claim for Unjust Enrichment, precluding dismissal of the case. [Doc # 18]

Almost six months later, on December 6, 2013, MidCities filed the motion at issue here seeking leave to amend its complaint. Specifically, it seeks to add another breach of contract claim based on the new legal theory that USBank expressly assumed all duties and obligations related to the property - including paying the Shortfall Amount pursuant to Section 2.1 of the Deed - in its P&A Agreement with the FDIC. Because MidCities is both an express beneficiary under the Deed, and an assignee under the covenant, it argues that it is entitled to enforce the contractual obligations assumed by USBank in the P&A Agreement with the FDIC. MidCities contends that USBank's failure to pay the Shortfall Amount results in breach and damages. MidCities now seeks to amend its complaint to include this new breach of contract claim against USBank. [Doc # 29-1]

II. LAW

Pursuant to Fed.R.Civ.P. 15, a plaintiff may amend its complaint after the defendant has answered only with leave of court. See Fed.R.Civ.P. 15(a)(2)(after a responsive pleading has been served, "a party may amend its pleadings only with the opposing party's written consent or the court's leave"). The Court has the discretion whether to grant a motion seeking leave to amend, and leave should be freely granted where justice requires. Id. ; Anderson v. Merrill Lynch Pierce Fenner & Smith Inc., 521 F.3d 1278, 1288 (10th Cir. 2008). The Court may exercise its discretion to deny a motion to amend upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by previously allowed amendments, or futility of the amendment. Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993).

USBank argues that this motion to amend, under the circumstances, is untimely and creates undue prejudice. USBank also argues that I should not allow MidCities to allege the new breach of contract claim because such claim ...


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