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CadleRock Joint Venture LP v. Esperanza Architecture & Consulting, Inc.

2021 COA 119. No. 20CA0919.  Negotiable Instruments—Uniform Commercial Code—Line of Credit.

September 2, 2021


WestStart Bank issued defendants a $500,000 “revolving line of credit” (the Credit Agreement). The parties later modified the Credit Agreement and increased the line of credit to $750,000. Defendants subsequently defaulted.

CadleRock Joint Venture LP (CadleRock) asserted it was the successor in interest to the defaulted line of credit but admitted that the original Credit Agreement had been lost. As relevant here, CadleRock sued defendants for debt due, breach of contract, quantum meruit, and unjust enrichment. Defendants moved for summary judgment, asserting that the Credit Agreement was a negotiable instrument governed by Colorado Uniform Commercial Code (UCC) article 3. The district court granted the motion to dismiss as to all claims except breach of contract.

On appeal, CadleRock argued that the district court erred in concluding that the Credit Agreement was governed by the UCC because it is not a negotiable instrument. CRS § 4-3-104(a) defines a negotiable instrument as requiring a promise to pay a “fixed amount.” Here, while the Credit Agreement specifies an upper limit to the total amount advanced, it allowed defendants to draw less or more than the limit over the course of the loan by repaying and re-borrowing. Accordingly, the amount defendants promised to pay could fluctuate significantly over the course of the loan, and without knowing the total advanced, the amount defendants promised to pay cannot be determined from the Credit Agreement. Therefore, the Credit Agreement does not reflect a promise to pay a fixed amount and is thus not a negotiable instrument. Because UCC article 3 only governs negotiable instruments, CadleRock is not barred from enforcing the past due and unpaid installments claim, and the district court erred. Further, because UCC article 3 doesn’t govern enforcement of the Credit Agreement, CadleRock is not barred from enforcing the defaulted line of credit because it lacked the original document for the Credit Agreement.

CadleRock also argued that the district court erred in granting summary judgment on its quantum meruit and unjust enrichment claims. Here, CadleRock established a genuine issue of material fact as to whether it was assigned the defaulted line of credit, so there was likewise a genuine issue of material fact as to whether CadleRock conferred a benefit on defendants. Therefore, the district court erred.

The award of summary judgment for defendants on CadleRock’s claims for past due and unpaid installments on a promissory note, quantum meruit, and unjust enrichment was reversed. The Court of Appeals did not reach CadleRock’s breach of contract claim because it was not properly before the Court.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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