United States District Court, D. Colorado
OPINION AND ORDER ON DEFENDANT CHERYL ANN
WOLLERT'S MOTION TO DISMISS (ECF NO. 8)
L. KANE SENIOR U.S. DISTRICT JUDGE
matter is before me on Defendant Cheryl Ann Wollert's
(“Ms. Wollert”) Motion to Dismiss (ECF No. 8).
Ms. Wollert argues that her Motion should be granted pursuant
to Federal Rule of Civil Procedure 12(b)(6) because (1)
Plaintiff the Western State Bank (“Western
State”) has failed to adequately plead its claims for
fraud and civil theft with respect to Ms. Wollert, and (2)
Western State's fraud claim is barred by the economic
State has not adequately pleaded its fraud claim against Ms.
Wollert under Federal Rule of Civil Procedure 9(b). And it
has not satisfied the requirements of Rule 8(a) with respect
to its civil theft claim, as it has failed to plead one of
the elements of that claim. Consequently, I grant Ms.
Western State and Defendants Cosey, L.L.C. d/b/a Wollert
Automotive (“Cosey”), Kent Ray Wollert
(“Mr. Wollert”) and Ms. Wollert (collectively
“Borrowers”) entered into a banking relationship
beginning in 2001. Compl. ¶ 11, ECF No. 1. During their
relationship, Western State made a series of loans to
Borrowers to finance Cosey's operations as a car
dealership. Id. at ¶¶ 11-13. The financing
was given and continued based upon representations and
certifications provided to Western State by Borrowers
concerning the value of the collateral securing the loans.
Id. at ¶¶ 12-13. Western State alleges
that throughout the relationship, Borrowers misrepresented
the value of the collateral securing the loans, leading
Western State to believe that this “Borrowing
Base” was sufficient to finance Borrowers and to fully
secure the loans. Id. at ¶ 13. In reality,
according to Western State, the Borrowing Base was far less
than represented, leaving it significantly under-secured.
banking relationship between Western State and Borrowers
culminated in two October 2018 loans in the principal amounts
of $1, 500, 000 and $150, 000. The loans were issued to
finance Cosey's acquisition of automobiles and provide
general operating capital for Cosey. Id. at
¶¶ 14-17. Borrowers made and delivered promissory
notes for the respective amounts on October 30, 2018.
Id. at ¶ 14-15. A June 14, 2017 Security
Agreement, signed by Borrowers in favor of Western State,
sets forth the collateral securing the promissory notes.
Id. at ¶ 16.
State alleges that “in a prolonged pattern of
representations to Western State concerning the Borrowing
Base, Borrowers misrepresented the Borrowing Base to induce
Western State to finance them.” Id. at ¶
18. Western State alleges that Borrowers'
misrepresentations began at an unknown date, “but it
may have started in 2014 and was discovered in 2019.”
Id. Western State offers an example of these
misrepresentations, alleging that Borrowers issued monthly
“Borrowing Base Certificates” to Western State
which identified the value of certain collateral in relation
to the balance owed by Borrowers to Western State.
Id. Western State alleges that the Borrowing Base
Certificates misrepresented that Western State was or would
be sufficiently secured, while the Borrowing Base was
actually significantly less than represented. The Borrowing
Base Certificates were typically signed by Mr. Wollert and
another instance of misrepresentation, Western State alleges
that on September 27, 2018, shortly before the promissory
notes were executed and in order to induce the loans
evidenced by the promissory notes, Mr. Wollert sent an email
to Western State wherein Borrowers misrepresented the
Borrowing Base and that Western State was or would be
over-secured by the collateral. Id. In fact, the
Borrowing Base was “vastly overstated” and
Western State was left “grossly under-secured.”
Id. Additionally, Western State contends that when
it routinely inspected the collateral, Borrowers
misrepresented the Borrowing Base and failed to disclose that
one or more of them had granted a security interest in the
same collateral to another party. Id.
Complaint claims Borrowers defaulted on the promissory notes
on or about January 24, 2019. Id. at ¶ 19.
Shortly thereafter, Mr. Wollert purportedly admitted to
engaging in the scheme described above. Id. After
defaulting on the promissory notes, Borrowers also sold
certain automobile inventory “out of trust” and
retained the proceeds for their own use. Id. at
State filed this action on April 19, 2019, asserting five
claims for relief. It's first two claims are for breach
of the October 2018 promissory notes. The other claims are
for fraud, conversion, and civil theft.
10, 2019, Ms. Wollert moved to dismiss the third,
fourth, and fifth claims for failure to state a
claim upon which relief can be granted. Ms. Wollert alleges
that the claims for fraud and civil theft are inadequately
pled and that the fraud claim is barred by the economic loss
rule in any event.
Rule of Civil Procedure 8(a) requires that a claim for relief
contain “a short and plain statement of the claim
showing that the [plaintiff] is entitled to relief.”
Fed.R.Civ.P. 8(a). “To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Burnett v. Mortg. Elec.
Registration Sys., Inc., 706 F.3d 1231, 1235 (10th Cir.
2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). Under Rule 12(b)(6), a court must “assume the
truth of the plaintiff's well-pleaded factual allegations
and view them in the light most favorable to the
plaintiff.” Ridge at Red Hawk, LLC v.
Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007)
is plausible on its face “when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678 (citing
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556
(2007)). “Mere ‘labels and conclusions,' and
‘a formulaic recitation of the elements of a cause of
action' will not suffice; a plaintiff must offer specific
factual allegations to ...