BLOOMING TERRACE NO. 1, LLC, Petitioner
v.
KH BLAKE STREET, LLC, and Kresher Holdings, LLC, Respondents.
Rehearing Denied July 29, 2019
Certiorari to the Colorado Court of Appeals, Court of Appeals
Case No. 16CA1096
Attorneys
for Petitioner: Reilly Pozner LLP, John M. McHugh, Denver,
Colorado
Attorneys
for Respondents: Moye White LLP, David A. Laird, Denver,
Colorado
Attorneys
for Amici Curiae The Hispanic Chamber of Commerce of Metro
Denver and The Colorado LGBTQ Chamber of Commerce: Childs
McCune, LLC, Kyle W. Brenton, Denver, Colorado
OPINION
HART,
JUSTICE.
Page 750
[¶1]
We granted certiorari to clarify the proper method for
determining the effective rate of interest charged on a
nonconsumer loan to ascertain whether that rate is usurious
under Colorado law.[1] We hold that the effective interest
rate should be calculated by determining the total per annum
rate of interest that a borrower is subjected to during a
given extension of credit. Here, where a forbearance
agreement was entered into after an event of default, all
charges that accrued during the period of forbearance must be
totaled and then annualized using only that timeframe as the
annualization period. Such includable interest must then be
combined with any interest that continued to accrue pursuant
to the original loan terms to determine the effective rate of
interest subject to the 45% ceiling set by Colorados usury
statute, section 5-12-103, C.R.S. (2018).
I. Facts and Procedural History
[¶2]
On April 25, 2013, Blooming Terrace No. 1 ("Blooming
Terrace") obtained an $ 11 million loan from KH Blake
Street, LLC ("KH Blake Street"), a special purpose
entity organized by Kresher Holdings, LLC. The loan was
secured by a deed of trust and memorialized by promissory
note. Blooming Terrace paid a $ 220,000 origination fee upon
execution of that note. The note specified that interest
would accrue on the outstanding principal at a rate of 11%
per annum. In the event of default, the note provided for a
higher default interest rate of 21% per annum. The note
required monthly interest payments in the amount of 8% per
annum throughout the term of the loan, though these periodic
payments did not apply to reduce the principal balance of the
loan. In the event of any late monthly payment, a 5% late fee
was applicable to the overdue amount. The note was to mature
on May 1, 2014. However, KH Blake Street reserved the right
to accelerate Blooming Terraces full loan repayment
obligation upon an event of default.
[¶3]
Prior to paying down any portion of the principal, Blooming
Terrace defaulted on its monthly payment obligation. KH Blake
Street consequently issued notices of default on April 2,
2014, and April 17, 2014. The parties entered into a
forbearance agreement on April 22, 2014. At that time, the
parties stipulated that the accrued charges due and owing to
KH Blake Street under the original loan agreement were $
778,583.33. In exchange for KH Blake Streets agreement not
to pursue collection of that sum, or any other remedies,
until May 1, 2014, Blooming Terrace agreed to pay a $ 110,000
fee. Payment of this new fee did not substitute for any other
charges that continued to accrue during the forbearance
period, including, but not necessarily limited to, default
interest and late fees. Instead, a condition of the
forbearance was Blooming Terraces compliance with all of the
original loan terms.
[¶4]
On May 13, 2014, the parties executed a document titled
"First Amendment to Forbearance Agreement." This
amendment extended the original 9-day forbearance period by
an additional 15.5 days. The amended forbearance agreement
specified that all loan-related sums were due on or before 1
p.m. on May 16, 2014. As consideration for 15.5 more days of
forbearance, 12 of which had already passed, Blooming Terrace
agreed to pay KH Blake Street an additional $ 110,000.
Cumulatively, 24.5 days of forbearance
Page 751
cost Blooming Terrace a total fee of $ ...