Blooming Terrace No. 1, LLC, Plaintiff-Appellant,
KH Blake Street, LLC; and Kresher Holdings, LLC, Defendants-Appellees.
and County of Denver District Court No. 16CV31461 Honorable
J. Eric Elliff, Judge
Pozner LLP, John M. McHugh, Denver, Colorado, for
White LLP, David A. Laird, Jason D. Hermele, Denver,
Colorado, for Defendants-Appellees
Taubman, J., concurs.
1 When a borrower obtained a large bridge loan to purchase
commercial real estate and defaulted, it agreed to pay
forbearance fees and related charges. It paid off the loan in
full and then sued the lender for usury. Blooming Terrace No.
1 LLC (Borrower) now appeals from the district court's
order granting the motion to dismiss filed by KH Blake
Street, LLC and Kresher Holdings, LLC (referred to
collectively as Lender). Borrower also appeals the district
court's award of attorney fees to Lender. We affirm.
2 The bridge financing took place in April 2013. As set forth
in Borrower's complaint, Lender loaned $11, 000, 000 for
an origination fee of $220, 000. The loan was secured by a
deed of trust and memorialized by a promissory note (Note)
that contained an accrual interest rate of eleven percent per
annum, a default interest rate of twenty-one percent per
annum, a five percent late charge on any late monthly
payments, and a $110, 000 exit fee. Under the Note, Borrower
was required to pay a monthly interest payment calculated at
the rate of eight percent per annum (based on a 360- day
year),  but none of the monthly payments applied
to the principal. The Note matured on May 1, 2014.
3 Borrower defaulted on the Note in April 2014. Lender sent
Borrower notices of default on April 2 and again on April 17,
2014. On April 22, 2014, the parties executed a forbearance
agreement whereby Lender agreed to forbear until May 1, 2014,
from foreclosing on the deed of trust in exchange for a $110,
000 forbearance fee plus continued accruing default interest,
late charges, and certain additional fees. At the time the
parties executed the forbearance agreement, the amount of
interest (including default interest), late charges, exit
fee, and estimated legal fees then outstanding was $778,
4 The loan was not paid by May 1, 2014. The parties then
amended the forbearance agreement on May 13, 2014, whereby
Borrower agreed to pay Lender a total forbearance fee of
$220, 000 to extend its obligation to repay the loan until 1
p.m. on May 16, 2014. On May 15, Borrower paid off the loan
including all outstanding interest, fees, and costs. Borrower
does not identify the exact amount of payoff in its
5 Borrower sued Lender claiming the fees, interest, costs,
and expenses payable "for the forbearance period and the
amended forbearance period" exceeded the forty-five
percent per annum interest allowable under Colorado's
usury law, section 5-12-103, C.R.S. 2016. However,
Borrower's first claim for relief incorporates all prior
allegations in the complaint and those allegations include
the entirety of the loan transaction, not just the
forbearance period. Borrower also brought a claim for unjust
enrichment based on the usury allegation.
6 Lender filed a C.R.C.P. 12(b)(5) motion to dismiss, arguing
that the loan fees charged did not constitute interest above
the maximum allowable rate. The district court agreed,
concluding that the effective rate of interest for the loan
was 12.924 percent based on the total amount of interest
charged during the life of the loan. Because the interest was not
usurious, the court dismissed the complaint in its entirety.
7 Lender then sought attorney fees pursuant to Section 14.c
of the Note, which required Borrower to reimburse Lender
"for any costs, including but not limited to, reasonable
attorneys' fees . . . incurred in . . . pursuing or
defending any litigation based on, arising from, or related
to any Loan Document." The district court awarded
attorney fees to Lender in the amount of $15,
Standard of Review
8 We review de novo a district court's grant of a motion
to dismiss. Miller v. Bank of N.Y. Mellon, 2016 COA
95, ¶ 15.
9 A motion to dismiss under C.R.C.P. 12(b)(5) for failure to
state a claim tests the formal sufficiency of a
plaintiff's complaint. Dwyer v. State, 2015 CO
58, ¶ 43. To survive summary dismissal for failure to
state a claim under C.R.C.P. 12(b)(5), a party must plead
sufficient facts that, if taken as true, suggest plausible
grounds to support a claim for relief. Warne v.
Hall, 2016 CO 50, ¶ 24 (adopting a heightened
standard of pleading in Colorado that requires a complaint to
allege plausible grounds for relief, not merely speculative
grounds). In reviewing a trial court's ruling on a
C.R.C.P. 12(b)(5) motion, we accept the material factual
allegations in the complaint as true and view them in the
light most favorable to the nonmoving party. Id.
10 Interest is compensation for the use, detention, or
forbearance of money or its equivalent. Stone v.
Currigan, 138 Colo. 442, 445, 334 P.2d 740, 741 (1959).
"If there is no agreement or provision of law for a
different rate, the interest on money shall be at the rate of
eight percent per annum, compounded annually." §
5-12-101, C.R.S. 2016.
11 Under section 5-12-103(1), "[t]he parties to any . .
. promissory note . . . may stipulate therein for the payment
of a greater or higher rate of interest than eight percent
per annum, but not exceeding forty-five percent per annum,
and any such stipulation may be enforced in any court of
competent jurisdiction in the state."
The rate of interest shall be deemed to be excessive of the
limit under this section only if it could have been
determined at the time of the stipulation by mathematical
computation that such rate would exceed an annual rate of
forty-five percent when the rate of interest was calculated
on the unpaid balances of the debt on the assumption that the
debt is to be paid according to its terms and will not be
paid before the end of the agreed term.
Dikeou v. Dikeou
12 In 1996, the Colorado Supreme Court decided Dikeou v.
Dikeou, 928 P.2d 1286 (Colo. 1996). Dikeou
addressed whether a late payment charge in a nonconsumer loan
was interest or an unenforceable penalty under Perino v.
Jarvis, 135 Colo. 393, 312 P.2d 108 (1957).
13 In Dikeou, a creditor loaned $900, 000 secured by
a promissory note in which the debtor agreed to pay interest
of $9, 750 per month, or 13% per annum, with the entire
principal due and payable in a balloon payment on the
note's maturity date. 928 P.2d at 1287. The note provided
that late payment charges in the amount of $700 per day would
accrue on payments more than one day late. Id. The
debtor failed to make numerous payments, and ultimately the
creditor demanded payment of both the note in full and the
late charges, calculated at a rate of $413.33 per day.
Id. The creditor filed suit to enforce the note, and
while the district court entered judgment in the
creditor's favor on the principal amount of the note, the
district court "refused to enforce the daily late charge
provision based on its conclusion that the late charges bore
'no relationship . . . to any possible damage' that
the creditor might have suffered due to the ...