Kaspryzk v. PNC Bank, National Association

Filing 24

ORDER: Magistrate Judge Tafoya's recommendation (# 18 ) is ADOPTED. Defendant's motion to dismiss (# 9 ) is GRANTED. Plaintiff's claims under C.R.S. § 38-40-103 are dismissed without prejudice. Plaintiff's claim for breach of the implied duty of good faith and fair dealing is dismissed with prejudice. Defendant's motion to stay discovery pending a ruling on report and recommendation (# 20 ) is denied as moot. Plaintiff's motion to compel discovery (# 22 ) is denied as moot. By Judge R. Brooke Jackson on 07/29/13. (alvsl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson
Civil Action No 13-cv-00247-RBJ-KMT
NANCY KASPRYZK,
Plaintiff,
v.
PNC BANK, NATIONAL ASSOCIATION,
Defendant.

ORDER

Plaintiff Nancy Kaspryzk entered into a loan agreement with the National City Mortgage
Company in June 2009. Ms. Kaspryzk signed a promissory note and, as security for the note, a
deed of trust covering her property at 6975 Dover Street, Arvada, Colorado. Ms. Kaspryzk
subsequently defaulted on the loan, and PNC Bank, N.A. began foreclosure proceedings. Ms.
Kaspryzk filed this lawsuit alleging two claims: (1) that PNC Bank violated Colorado Revised
Statute §38-40-103 and 104 by failing to respond to her requests for information, and (2) that
PNC Bank violated the implied duty of good faith and fair dealing when it chose to commence
foreclosure proceedings while Ms. Kasprzyk had a loan modification application pending.
PNC Bank filed a motion to dismiss [docket #9], and this Court referred that motion to
Magistrate Judge Tafoya. On June 13, 2013 Magistrate Judge Tafoya issued her report and
recommendations. [#18]. The magistrate judge recommended that Ms. Kaspryzk’s claim under
C.R.S. § 38-40-103 be dismissed because she failed to allege any facts to show that PNC Bank’s
failure to respond to her requests for information caused any actual damages, but that Ms.
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Kaspryzk should be allowed to file an amended complaint alleging facts to show actual
damages.1 The magistrate judge also recommended that Ms. Kaspryzk’s claim for breach of the
implied duty of good faith and fair dealing be dismissed.
Following the issuance of a magistrate judge’s recommendation on a dispositive matter, a
party may file “specific written objections to the proposed findings and recommendations.” Fed.
R. Civ. P. 72(b)(2). The district court judge must “determine de novo any part of the magistrate
judge’s disposition that has been properly objected to.” Fed. R. Civ. P. 72(b)(3). The district
judge is permitted to “accept, reject, or modify the recommended disposition; receive further
instruction; or return the matter to the magistrate with instructions.” Id.
Ms. Kaspryzk timely objected to the magistrate judge’s recommendation that her claim
for breach of the implied duty of good faith and fair dealing be dismissed. [#19]. Neither party
objected to the magistrate judge’s recommendation that Ms. Kaspryzk’s C.R.S. § 38-30-103
claim be dismissed with permission to file an amended complaint.
Standard
In reviewing a motion to dismiss, the Court views the motion in the light most favorable
to the nonmoving party and accepts all well-pleaded facts as true. Teigen v. Reffrow, 511 F.3d
1072, 1079 (10th Cir. 2007). However, the facts alleged must be enough to state a claim for
relief that is plausible, not merely speculative. Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
555, 570 (2007). A plausible claim is a claim that “allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). Pleadings that offer only “labels and conclusions or a formulaic recitation of
the elements of a cause of action will not do.” Id. at 678 (quoting Twombly, 550 U.S. at 555).

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At times in the recommendation, the magistrate judge refers to C.R.S. § 30-40-103. Based on the claims alleged
the Court understands these to actually be referring to C.R.S. § 38-40-103.

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Analysis
“In Colorado, every contract contains an implied duty of good faith and fair dealing.”
Transamerica Premier Ins. Co. v. Brighton Sch. Dist. 27J, 940 P.2d 348, 351 (Colo. 1997). The
good faith doctrine is necessary to effectuate the intentions of the parties and to honor their
reasonable expectations. Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995). “Good faith
performance of a contract involves ‘faithfulness to an agreed common purpose and consistency
with the justified expectations of the other party.’” ADT Sec. Servs., Inc. v. Premier Home Prot.,
Inc., 181 P.3d 288, 293 (Colo. App. 2007) (quoting Amoco Oil Co., 908 P.2d at 498). For that
reason, the doctrine “may be relied upon only when the manner of performance under a specific
contract term allows for discretion on the part of either party.” Amoco Oil Co., 908 P.2d at 498.
“Discretion in performance occurs ‘when the parties, at formation, defer a decision regarding
performance terms of the contract’ leaving one party with the power to set or control the terms of
performance after formation.” City of Golden v. Parker, 138 P.3d 285, 292 (Colo. 2006)
(quoting Amoco Oil Co., 908 P.2d at 498).
The good faith doctrine cannot be used to contradict terms or conditions for which the
parties have bargained. Amoco Oil Co., 908 P.2d at 498. “The doctrine does not obligate a party
to accept a material change in the terms of the contract, or to assume obligations that vary or
contradict the contract's express provisions, nor does it permit a party to inject substantive terms
into the contract.” ADT Sec. Servs., Inc., 181 P.3d at 293.
In her complaint, Ms. Kaspryzk alleged that PNC Bank had discretionary authority over
whether to foreclose on her property. By choosing to foreclose while a loan modification
application was pending, Ms. Kaspryzk argues that it violated the duty of good faith and fair
dealing. In her recommendation, the Magistrate Judge found that PNC Bank’s power to

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foreclose on the property was not discretion in the performance of the contract. Instead, she
determined that the power to foreclose was a remedy provided by the deed of trust in the event
that Ms. Kaspryzk defaulted. Ms. Kaspryzk argues in her objection that it does not matter
whether foreclosure was part of performance of the contract or a remedy because PNC Bank also
had a duty to act in good faith in the enforcement of a remedy.
Assuming without deciding that Colorado law recognizes the implied duty of good faith
and fair dealing in enforcing a contractual remedy, that does not cure the deficiencies in Ms.
Kaspryzk’s complaint. The law is clear that the implied duty of good faith and fair dealing only
applies if either party has discretion under the contract. See Amoco Oil Co., 908 P.2d at 498. To
say that a party has discretion because it can choose whether or not to enforce a remedy would
make the Colorado courts’ requirement of discretion almost meaningless. After a contract is
breached, the non-breaching party always has to consider whether or not to enforce its remedies.
This is not the same as deferring a decision regarding performance of the contract thereby
allowing one party to decide a contract term at a later date. See City of Golden, 138 P.3d at 292.
Thus, the fact that PNC Bank could decide whether or not to enforce its remedy by foreclosing
on Ms. Kaspryzk’s house does not mean that it had discretion in the sense relevant to the implied
duty of good faith and fair dealing. I agree with the magistrate judge that Ms. Kaspryzk has
failed to identify a relevant discretionary term regarding the performance of her contract.
Further, in alleging a breach of the implied duty of good faith and fair dealing, Ms.
Kaspryzk asks this Court to find that PNC Bank could not foreclose on Ms. Kaspryzk’s property
after she defaulted while a loan modification application was pending. This would be a material
change to the contract terms. “[T]he duty of good faith and fair dealing does not obligate a party
to accept a material change in the terms of the contract or to assume obligations that vary or

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contradict the contract's express provisions.” Wells Fargo Realty Advisors Funding, Inc. v.
Uioli, Inc., 872 P.2d 1359, 1363 (Colo. App. 1994). Requiring PNC Bank to follow additional
conditions to foreclose that were not bargained for by the parties would not effectuate the
intentions of the parties. See Amoco Oil Co. 908 P.2d at 498. Thus, this additional limitation on
PNC Bank’s ability to foreclose is not compelled by the implied duty of good faith and fair
dealing.
Order
Magistrate Judge Tafoya’s recommendation [#18] is ADOPTED. Defendant’s motion to
dismiss [#9] is GRANTED. Plaintiff’s claims under C.R.S. § 38-40-103 are dismissed without
prejudice. Plaintiff’s claim for breach of the implied duty of good faith and fair dealing is
dismissed with prejudice. Defendant’s motion to stay discovery pending a ruling on report and
recommendation [#20] is denied as moot. Plaintiff’s motion to compel discovery [#22] is denied
as moot.
DATED this 29th day of July, 2013.
BY THE COURT:

___________________________________
R. Brooke Jackson
United States District Judge

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