Dolton v. Capitol Federal Savings & Loan Ass'n
1981 Colo. App. LEXIS 940, 642 P.2d 21 (1981)
Rule of Law:
While tortious interference with a voidable contract is actionable, there can be no liability for inducing the breach of a contract that is void under the Statute of Frauds. A tort for interference with prospective business advantage exists in Colorado, but the competitor's privilege for this tort does not extend to a lending institution or its officers that are not direct competitors, even if a subsidiary is. Furthermore, a fiduciary duty can arise between a lending institution and a prospective borrower based on special circumstances of trust and acceptance, even without a formal loan application.
Facts:
- Plaintiff L. L. Dolton, a real estate developer, and defendant First Capitol Corporation, a real estate development subsidiary of defendant Capitol Federal Savings & Loan Association, independently sought to purchase the same parcel of land from Parker Farms.
- In September 1976, First Capitol informed Parker Farms’ broker of its intent to make a cash offer for the property.
- In early October 1976, Dolton submitted an offer to purchase the land for the asking price with installment payments, and he claimed the real estate broker told him the offer had been accepted by the owners, although the owners never signed a written acceptance.
- Dolton contacted Richard D. Heiserman, senior vice-president of Capitol Federal and president of First Capitol, to inquire about financing the purchase through Capitol Federal, with whom Dolton had a 20-year relationship.
- Dolton informed Heiserman that he had offered to purchase the land and that it had been accepted, disclosing the purchase price and terms, and Heiserman allegedly told Dolton that First Capitol was no longer interested in the property.
- Dolton did not submit a formal loan application to Capitol Federal.
- On October 11, 1976, First Capitol offered to purchase the property for a cash amount less than the listing price, which Parker Farms accepted.
- Had Parker Farms not accepted First Capitol’s offer, it would have accepted Dolton’s offer.
Procedural Posture:
- L. L. Dolton discovered that First Capitol had purchased the property and brought an action against Capitol Federal Savings & Loan Association, First Capitol Corporation, and Richard D. Heiserman.
- Dolton's claims included tortious interference with an alleged contract, tortious interference with a prospective business advantage, and breach of a fiduciary duty.
- The defendants moved for summary judgment in the trial court (court of first instance).
- The trial court granted the defendants' motion for summary judgment on all claims.
- Dolton (appellant) appealed the summary judgment to the Colorado Court of Appeals.
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Issue:
1) Does an underlying contract that is void pursuant to the Statute of Frauds provide a basis for a claim of tortious interference with a contractual relationship? 2) Does the competitor's privilege in a claim for tortious interference with a prospective business advantage extend to a lending institution and its officer when its subsidiary is the direct competitor? 3) Can a fiduciary duty arise between a lending institution and a prospective borrower, even without a formal loan application, based on special circumstances of trust and confidentiality?
Opinions:
Majority - STERNBERG, Judge
1) No, an underlying contract void pursuant to the Statute of Frauds does not provide a basis for a claim of tortious interference with a contractual relationship. The court found that even assuming an oral contract existed between Dolton and Parker Farms, it was rendered "void" by the specific language of the Statute of Frauds (§ 38-10-108, C.R.S. 1973), which requires contracts for the sale of land to be in writing. While intentional interference with a voidable contract is actionable, interference with a contract that is legally void pursuant to statute cannot give rise to liability for inducing its breach. Therefore, the trial court's summary judgment on this claim was affirmed. 2) No, the competitor's privilege in a claim for tortious interference with a prospective business advantage does not extend to a lending institution and its officer when its subsidiary is the direct competitor. The court formally adopted the tort of interference with prospective business advantage in Colorado, noting that it does not require an underlying contract, only intentional and improper interference. It also adopted the competitor's privilege as stated in Restatement (Second) of Torts § 768(1)(a), which protects a competitor who causes a third person not to enter into a prospective contractual relation if the matter concerns competition between them. The trial court correctly applied this privilege to First Capitol, as it was Dolton's direct competitor in real estate development. However, the court found it was error to extend this privilege to Capitol Federal (the lender) and Heiserman (acting as an officer of Capitol Federal) because they were not direct competitors of Dolton in the field of real estate development. Therefore, summary judgment for First Capitol was affirmed, but reversed for Capitol Federal and Heiserman on this claim. 3) Yes, a fiduciary duty can arise between a lending institution and a prospective borrower, even without a formal loan application, based on special circumstances of trust and confidentiality. While the general relationship between a lender and customer is debtor and creditor, a fiduciary duty may arise from a business or confidential relationship that induces one party to relax their usual care and vigilance. A confidential relationship is present when one party justifiably reposes confidence in another, and the other accepts or invites that trust. Dolton alleged a long-term business relationship with Capitol Federal and disclosed confidential information about his intended purchase. The court noted that banks implicitly invite intending borrowers. The specific conversation between Heiserman and Dolton, and whether a trust was reposed and accepted, is a disputed material issue of fact, making summary judgment improper. Therefore, the summary judgment granted to Capitol Federal and Heiserman on the breach of fiduciary duty claim was reversed.
Analysis:
This case significantly clarifies the scope of tortious interference claims in Colorado, particularly regarding the nuances of the competitor's privilege and the existence of fiduciary duties. It establishes that the competitor's privilege is narrowly applied to direct competitors and does not automatically extend to related entities like parent companies or their officers if they are not directly competing. Moreover, the decision broadens the potential for fiduciary relationships between lenders and prospective borrowers, emphasizing that a long-standing relationship and the sharing of confidential information can create such a duty, even in the absence of a formal loan application, requiring fact-finding to determine if trust was reposed and accepted.
