Gunnison County District Court No. 16CV30071 Honorable James
S. Patrick, Judge
Diamond McCarthy LLP, Stephen T. Loden, Denver, Colorado, J.
Gregory Taylor, Rebecca A. Muff, Houston, Texas, for
McConnell Fleischner Houghtaling, LLC, Michael T. McConnell,
Cecelia A. Fleischner, Denver, Colorado, for
1 Plaintiff, Prospect Development Company, Inc. (Prospect),
appeals the district court's dismissal of its claims
against its former counsel, defendant, Holland & Knight,
LLP (H&K), under C.R.C.P. 12(b)(5). We reverse and
2 Prospect owned and sold undeveloped lots near Crested
Butte, Colorado. It relied on H&K, its counsel, to
prepare federally mandated property reports for prospective
buyers of the lots. These property reports stated that
Prospect was responsible for the costs of constructing roads,
sewage systems, and other infrastructure for the lots. They
also stated that individual lot purchasers would not be
responsible for these costs. The property reports neglected
to disclose that the special district in which the lots were
located would purchase the infrastructure from Prospect using
property tax revenue collected from the lots, effectively
passing the cost of the infrastructure on to the lot owners.
3 In 2010, several lot owners who had purchased lots from
Prospect complained that they were not notified before they
purchased their lots that they would ultimately pay for the
cost of the infrastructure through property taxes. According
to Prospect, when it told H&K about the lot owners'
complaints, H&K assured Prospect that the property
reports complied with the applicable law. Nevertheless,
Prospect entered into a tolling agreement with the lot owners
in 2010, agreeing to stay the running of any limitations
period applicable to any claims that the lot owners might
have against Prospect.
4 In 2011, H&K withdrew from representing Prospect. In
2013, the lot owners filed suit against Prospect based on its
failure to disclose that the cost of the infrastructure would
eventually be borne by the lot owners through property taxes.
Prospect settled with the lot owners in 2015.
5 Also in 2015, Prospect entered into a tolling agreement
with H&K agreeing to toll any claims that Prospect might
have against H&K. Prospect sued H&K in October 2016,
alleging that H&K was professionally negligent and
breached its fiduciary duty by (1) failing to disclose in the
property reports that the cost of the infrastructure would be
passed on to the lot owners; (2) incorrectly advising
Prospect that the property reports were legally sufficient;
and (3) failing to correct this erroneous advice before
withdrawing from representing Prospect.
6 H&K did not answer the complaint. Instead, H&K
moved to dismiss the complaint under C.R.C.P. 12(b)(5),
arguing that Prospect's claims were barred by the
statutes of limitations applicable to each claim. H&K
argued that Prospect's claims accrued in 2011 at the
latest, and therefore the two-year statute of limitations for
negligence and three-year statute of limitations for breach
of fiduciary duty expired before the tolling agreement took
effect in 2015. H&K also attached to its motion several
exhibits from the underlying litigation between the lot
owners and Prospect to support its assertion that
Prospect's claims accrued in 2011. Prospect opposed
H&K's motion to dismiss and argued in its response
that the trial court should disregard the exhibits attached
to H&K's motion. Alternatively, Prospect argued that
if the court considered the exhibits, it should convert
H&K's motion to one for summary judgment and allow
Prospect to present its own evidence.
7 The district court granted the motion to dismiss, ruling
that Prospect's claims were time barred. In doing so, the
court denied Prospect's request to convert H&K's
motion into one for summary judgment and also considered two
of the exhibits attached to H&K's motion.
8 Prospect appeals.
Dismissal was Error
9 Prospect argues that the district court erred by
considering matters outside the complaint in granting
H&K's C.R.C.P. 12(b)(5) motion to dismiss. H&K
responds that any matters outside the complaint that the
district court considered were properly the subject of
judicial notice, and were therefore appropriate to consider.
We agree with Prospect that the district court erred.
10 We review a district court's ruling on a motion to
dismiss under C.R.C.P. 12(b)(5) de novo. See Walker v.
Van Laningham, 148 P.3d 391, 394 (Colo.App. 2006). We
apply the same standards as the district court, accepting all
of the factual allegations in the complaint as true ...