Colorado Court of Appeals Opinions
March 14, 2013
|The Court of Appeals summaries are written for the Colorado Bar Association by licensed attorneys Teresa Wilkins (Denver) and Paul Sachs (Steamboat Springs). Please note that the summaries of Opinions of the Colorado Court of Appeals are provided as a service by the Colorado Bar Association and are not the official language of the Court. The Colorado Bar Association cannot guarantee the accuracy or completeness of the summaries.|
2013 COA 27. No. 09CA1908. People v. Chase.
Felony Stalking—Subject Matter Jurisdiction—Sufficiency of Evidence a Question of Law.
Defendant Jerry Chase appealed the judgment of conviction entered on jury verdicts finding him guilty of three felony counts of stalking and three misdemeanor counts of harassment. He also appealed the sentences imposed. The judgment was affirmed.
From 2002 to 2008, Chase resided in Wapiti Meadows, a low-income housing complex in Grand County, where he met the three named victims: G.B., D.D., and M.G. M.G. and D.D. were husband and wife. D.D. was the former property manager and M.G. was the maintenance supervisor. During his tenancy, Chase frequently complained to all three about his neighbors, the B. family, whom he alleged made noises that disturbed him. In 2008, Mr. B. accused Chase of putting sugar in his gas tank. Chase was charged with criminal mischief, and a restraining order was entered against him. Chase violated the order by banging on the B. family’s well and yelling an ethnically charged threat at them.
The Wapiti management evicted Chase on October 1, 2008. On the evening of October 6, 2008, Chase (who was in Boston) sent an e-mail to twenty-three recipients, including G.B., M.G., and D.D. The e-mail was obscenity-laced and contained overt threats against the park residents. The following morning, Chase sent a second obscenity-laced e-mail to thirty-four recipients, including G.B., M.G., and D.D. The e-mail contained direct threats against G.B., M.G., D.D., and others. He then sent another threatening e-mail that contained a photo of a man pointing a gun at a judge, followed by three more e-mails containing similar vile language and violent threats. M.G. and D.D. were in Baltimore when they received the e-mails. They returned to Colorado a few days later and were under the impression that Chase was in Colorado, as well.
Chase was charged with three felony counts of stalking under former CRS § 18-9-111(4)(b)(II). The court also instructed the jury on the lesser non-included offense of misdemeanor harassment by computer. The jury convicted Chase of three counts of felony stalking—one for each victim. He also was convicted of three misdemeanor counts of harassment by computer. Chase was sentenced to four years on each of the felony counts, to run consecutively.
On appeal, Chase argued that his convictions of felony stalking of M.G. and D.D. must be vacated. He argued there was insufficient evidence to establish that Colorado had subject matter jurisdiction because no part of the offenses against them was committed in Colorado. The Court of Appeals disagreed.
The Court looked to CRS § 18-1-201 (state jurisdiction over criminal offenses) in relation to the felony stalking statute. The Court found that under the plain language of CRS § 18-9-111(4)(b)(II) and (c)(II), the elemental conduct of making a credible threat is defined by its result of causing a reasonable person to be in fear for his or her safety or the safety of his or her family or intimates. The question under CRS § 18-1-201 was whether Chase committed at least part of the conduct in Colorado.
Chase argued that because he wrote and sent the e-mails in Boston, and because M.G. and D.D. opened the e-mails in Baltimore, none of the conduct occurred in Colorado. The Court held that the proper question was whether the result of Chase’s conduct (causing a reasonable person to be in fear for his or her safety) occurred, at least in part, in Colorado. This was a question of fact for the jury, and the Court found sufficient evidence in the record to support the jury’s finding that the threats made by Chase in the e-mails would have caused a reasonable person to be in fear for his or her own safety and the safety of other persons in Colorado.
Chase made a related argument concerning whether, in response to a question from the jury, the trial court should have elaborated on the element of the offense regarding its occurrence in Colorado. The Court found no error in the trial court not elaborating on the elemental instruction, but found its response well within the trial court’s sound discretion. Specifically, the Court found that (1) the jury’s question did not reflect a fundamental misunderstanding of a legal element of the offense; (2) the original instructions properly stated the applicable law and adequately answered the question; and (3) the response of the trial court was essentially as defense counsel requested.
Chase also argued that there was insufficient evidence to prove he made a credible threat as defined in CRS § 18-9-111(4)(c)(II) and to prove he made repeated communications in connection with the threat as required under CRS § 18-9-111(4)(b)(II). The Court disagreed, finding the evidence more than sufficient to find the e-mails, with their implicit and explicit threats, to cause a reasonable person to be in fear for his or her safety or the safety of other persons. It also found that reading the six e-mails in one sitting does not mean they were not repeated communications.
Chase contended that the trial court gave an incorrect mens rea instruction to the jury. The Court disagreed. Because no contemporaneous objection to the instruction was made, it was reviewed for plain error. The instruction tracked the language of CRS § 18-9-111(4)(b)(II), and the Court perceived no error.
Chase argued that CRS § 18-9-111(4)(b)(II) was unconstitutional as applied to him because it violated his First Amendment and Equal Protection Clause rights. The Court disagreed. Speech that contains “true threats” may be regulated by the government. The jury found that Chase’s e-mails were true threats and, based on the Court’s independent review of the record, it agreed.
Finally, Chase argued that because his conduct fell within the ambit of the misdemeanor harassment statute, convicting him as a felon violated his equal protection rights. The Court disagreed. Different statutes proscribing the same criminal conduct with disparate criminal sanctions violate equal protection principles. The two statutes here, however, proscribe different criminal conduct. Specifically, the felony stalking statute requires repeated communications in connection with a credible threat, whereas the misdemeanor statute requires only one communication by use of a computer in a manner intended to harass or threaten bodily injury or property damage. The conduct is related, but not identical.
2013 COA 28. No. 10CA0417. People v. Bryant.
Unlawful Sexual Contact by Use of Force—Constitutionality of Sexually Violent Predator Designation—Effective Assistance of Counsel—Use of Force Evidence.
Defendant Joseph Bryant appealed the judgment of conviction entered on a jury verdict finding him guilty of two counts of unlawful sexual contact by use of force. He also appealed his designation as a sexually violent predator (SVP). The judgment was affirmed.
Evidence at trial showed that as 17-year-old A.M. and her friend were about to walk into a Starbucks, Bryant attacked A.M. by wrapping a hand around her neck and grabbing her vaginal area with his other hand. He held her for about eighteen seconds and tried to pull her away from the entrance. She screamed and struggled and then jammed her elbow into his stomach. He released her and ran away.
That evening, Bryant approached D.P. at a bus stop. He “bumped” into her, stared at her, asked her age, and then followed her onto the bus. When D.P. got off the bus, Bryant followed her off the bus. She decided to wait at the bus stop, because it was well-lit and there were stores nearby. Bryant waited with her for thirty minutes. He offered several times to pay her $300 if she would accompany him to a motel room, and she declined. He then grabbed her breasts four to six times and her vagina once. D.P. asked him to stop and tried pushing him away. He grabbed her hand and put it on his crotch.
Bryant followed her onto a second bus and off that bus. D.P. asked him to stop following her. He grabbed her breasts twice, and she pushed him away. Bryant walked away and was arrested later that evening.
Bryant was charged with two counts of unlawful sexual contact by force and was found guilty by a jury. The trial court made a preliminary finding that he was an SVP and sentenced him to five years to life in the Department of Corrections on each conviction, to run consecutively. The court, after a hearing, made a final determination that Bryant was an SVP.
On appeal, Bryant argued he was deprived of his right to effective assistance of counsel when the court denied his counsel’s motion to continue the trial two weeks beyond the Uniform Mandatory Disposition of Detainers Act (UMDDA). The Court of Appeals found he waived that right. On November 27, 2009, Bryant’s counsel learned his trial had been rescheduled from December 15 to December 1 to comply with Bryant’s speedy trial rights under the UMDDA. Counsel objected to the earlier trial date, but Bryant insisted on a speedy trial despite the judge’s warnings against proceeding pro se. Bryant decided to proceed pro se, and counsel assumed she had been removed from the case.
On December 1, counsel appeared with Bryant and explained that Bryant did not want to proceed pro se. She requested a two-week continuance because she was not prepared for trial. The court found the request reasonable, but then engaged in a colloquy with Bryant wherein Bryant ultimately chose to proceed with unprepared counsel rather than waive his UMDDA rights. The Court found the record reflected that Bryant made a voluntary, knowing, and intelligent waiver of better-prepared counsel in favor of his right to a speedy trial under the UMDDA. Therefore, there was no error.
Bryant also argued there was insufficient evidence to show he caused each victim’s submission by force because there was no evidence that he used force apart from the unlawful contact, and the victims were able to escape. The Court disagreed. The statute requires evidence of physical force, which is “force applied to the body.” The fact that the victims were able to escape does not render insufficient the evidence that showed Bryant used physical force.
Bryant further contended that SVP evaluation procedures violate one’s right to remain silent, because offenders who do not participate in the SVP assessment interview are evaluated using an alternative scale that increases the likelihood they will be designated SVPs. This argument presumes the Fifth Amendment applies to the SVP evaluation procedures, but it does not. The Fifth Amendment privileges apply during sentencing, but the SVP designation is not part of a defendant’s sentence. Its purpose is not to punish the defendant, but to protect the public and aid law enforcement.
The Court also rejected Bryant’s equal protection argument. Equal protection challenges require that the people allegedly subject to disparate treatment be similarly situated. Bryant’s argument didn’t meet this threshold test because offenders who participate in the interview are not similarly situated to offenders who do not participate.
2013 COA 29. No. 10CA0418. People v. Apodaca-Zambori.
Assault in the First Degree—Reckless Endangerment—Sentencing.
Defendant appealed the judgment of conviction entered on a jury verdict finding her guilty of assault in the first degree and reckless endangerment. She also appealed her sentence. The judgment was affirmed.
On May 26, 2008, the victim, her husband, and their children were driving through an alley that ran behind a store owned by defendant’s boyfriend. The victim was forced to stop her car because defendant’s car was blocking the alley. The husband got out of the car, and there was a verbal altercation between him and several men, including defendant’s boyfriend.
Defendant entered the store from the alley, returned with a dog, and as the victim opened her car door, told the dog to “get her.” The dog bit the victim’s leg, defendant tried to pull the dog off, and the victim hit the dog on the snout. The bite caused permanent nerve damage.
Defendant immediately drove the dog to her father’s house. When confronted by police, defendant denied knowing anything about an attack or the dog’s location. Eventually, she told police the dog’s location and helped them retrieve it.
Defendant was initially issued a summons for an animal control violation, but the police cancelled the summons and booked her on felony charges and advised her of her Miranda rights. She was convicted of assault in the first degree, a class 3 felony, and reckless endangerment, a class 3 misdemeanor. On January 15, 2010, the trial court sentenced her to ten years in the custody of the Department of Corrections and five years' mandatory parole.
On appeal, defendant argued it was error for the trial court to admit testimony and not strike references in the prosecutions’ closing argument to defendant’s silence before and after receiving a Miranda advisement. The Court of Appeals disagreed. A defendant is constitutionally protected against self-incrimination and has the right to remain silent. A prosecutor is to avoid making comments regarding a defendant’s pre- or post-arrest silence. Such error is reversible only when the prosecutor uses the defendant’s silence as a means of implying guilt. Here, the statements at issue were not made for the “purpose of suggesting the jury infer guilt” from defendant’s silence, but to address defendant’s contention that she was attempting to pull the dog off the victim and help. There were no objections to the statements made during closing argument by the prosecutor; therefore, they were reviewed for plain error. The statements referred to defendant’s acts, not to her silence, and were appropriate responses to defense counsel’s closing argument that defendant’s acts were proof of her innocence.
Defendant also argued that it was error for the trial court not to consider during sentencing Colorado’s young adult offender sentencing statute, CRS § 18-1.3-407.5, which took effect October 1, 2009. Specifically, defendant argued that it was error to conclude that the effective date of the statute referred to the date of the offense, rather than the date of sentencing. She argued it applied to her because she was sentenced after October 1, 2009, even though she committed the offenses before that date. The session law, though not the text of the statute, stated that the act “shall take effect October 1, 2009” and that “[t]he provisions of this act shall apply to offenses committed on or after the applicable effective date of this act.” The Court concluded that the plain language of the statute and the session law adopting it made clear that the effective date was October 1, 2009, and it applies to offenses committed on or after that date. The judgment and sentence were affirmed.
2013 COA 30. No. 12CA0677. CTS Investments, LLC v. Garfield County Board of Equalization.
Property Tax Valuation—Evidentiary Issues Before the Board of Assessment Appeals.
In this property tax case, petitioner CTS Investments, LLC (CTS) appealed the order of the Board of Assessment Appeals (BAA) denying its petition challenging the valuation placed on its property by respondent Garfield County Board of Equalization (BOE) for the 2011 tax year. The order was affirmed.
CTS owns two parcels of vacant land in Garfield County. One comprises 10.766 acres, and the other comprises 61.26 acres. Both are located within the 640-acre Castle Valley Ranch Planned Unit Development in the town of New Castle.
For the 2011 tax year, the BOE valued the 10.766 acre property at $307,800 (or roughly $28,500 per acre), and the 61.26 acre property at $1,836,480 (or roughly $30,000 per acre). CTS asserted to the BAA that the property should be valued at approximately $2,200 per acre. Its argument was based in part on the sale of an adjoining property in April 2010. In that transaction, GMAC ResCap sold to CVR Investors, Inc. approximately 120 acres of vacant land and thirteen finished townhome lots for $700,000 (CVR sale). The property had been acquired by GMAC through foreclosure of a loan to Village Homes. Village Homes had purchased the property from CTS in 2007 and 2008 for approximately $8.9 million. The loan to Village Homes at the time of the foreclosure had an outstanding principal balance of more than $10 million.
CTS asserted that the CVR sale was the most comparable sale. The county assessor excluded the sale from her appraisal because it was not an “arm’s length transaction,” due to her opinion that GMAC was under duress when it sold the property. The assessor testified that she looked at four comparable sales and adjusted them as required by statute for time, size, and location. Her comparable sales were completed before the applicable one-and-a-half-year base period. She did this because she concluded there were no comparable sales during the base period. CTS presented its tax consultant, whose valuation included the CVR sale.
The BAA denied CTS’s petition. Its order stated that it found the assessor’s valuation more persuasive and that it agreed with the exclusion of the CVR sale because it did not meet the definition of an arm’s length transaction. However, the order did not include the BAA’s reasoning for that ruling.
On appeal, the Court of Appeals considered CTS’s objection to the introduction of various articles attached to the assessor’s appraisal discussing the financial status of GMAC. The assessor’s decision not to consider the CVR sale an arm’s-length transaction was based partially on these articles, which came from general and financial news outlets. All but one of the articles included the author’s name, none referenced the CVR sale, and some of the articles made the same or similar assertions. Therefore, the Court inferred that the authors were not biased concerning the parties to the transaction. In addition, CTS had sufficient access to the statements before the BAA hearing, because it had been included in the assessors’ report, which had been issued at least eight months before the BAA hearing began. Furthermore, much of the information contained in the articles already had been admitted without objection through the assessor’s testimony.Given these facts, the Court concluded that the BAA did not abuse its discretion in admitting the articles.
CTS then argued that by not considering the CVR sale, the BAA refused to compile a representative body of comparable sales and therefore erred as a matter of law. The Court first stated that whether the CVR sale was not an arm’s length transaction and therefore appropriately excluded was a matter of fact, not law. Although the record presented conflicting evidence on this issue, there was enough support for the BAA’s finding that the Court would not reverse it on appeal.
CTS asserted that reversal was appropriate because the BAA order did not specify why it credited the assessor’s conclusion that the CVR sale was not an arm’s length transaction. The Court stated that although the better practice is for the BAA to make findings and provide its reasoning for its ruling, its findings may be express or implied and its decision need only be supported by the record.
Finally, CTS asserted there was no competent evidence in the record to support the BAA’s valuation of the property. A reviewing court may set aside a decision of the BAA only if there is no supporting competent evidence or the decision reflects a failure to abide by the statutory scheme for calculating property tax assessments. Here, there was ample competent evidence in the record to support the BAA’s decision.
2013 COA 31. No. 10CA0962. People v. Pollard.
Possession of More Than One Gram of Cocaine—Habitual Offender for Sentencing—Other Bad Acts Evidence—Fourth Amendment Refusal to Consent to Search.
Defendant appealed the judgment of conviction entered on a jury verdict finding him guilty of possession of more than one gram of cocaine. He also appealed his adjudication as a habitual offender, for sentencing purposes. The judgment was reversed and the case was remanded for a new trial.
The police spotted defendant’s unoccupied car at 3:00 a.m. in an otherwise vacant parking lot in a park. An officer, looking inside the car, noticed on the center console a plastic bag he believed to be crack cocaine. When defendant returned to his vehicle with a female friend, he told the police that the car was his and the substance was probably bubble gum.
Defendant refused to give the police consent to search his car. He was arrested, and the bag—containing 2.66 grams of cocaine—was seized from the vehicle. Drug paraphernalia (a crack pipe, a glass vial, and two re-sealable cloth bags) were found only in his female friend’s purse.
At trial, defendant asserted the cocaine belonged to his friend and that he did not know it was in his car. The friend testified that the cocaine belonged to her, she had brought it with her in her purse, defendant didn’t know she had it, and she had put it on the car console only after defendant had gotten out of the car. Defendant argued he was charged and prosecuted due to racial stereotyping—that because he is black and his friend is a white woman, he was using the cocaine to obtain sex from her.
For purposes of showing motive, knowledge, identity and absence of mistake or accident, the prosecution presented evidence of a drug transaction that occurred fourteen months after the charges arose in this case. In that case, defendant sold crack cocaine to a woman in a grocery store parking lot. He was apprehended shortly thereafter and crack cocaine was recovered from the center console of his car.
The jury convicted defendant as charged. The trial court adjudicated him as a habitual offender and sentenced him to twenty-four years’ incarceration.
On appeal, defendant argued it was error to admit evidence of his subsequent drug transaction with the woman in the grocery store parking lot. The Court of Appeals disagreed. Defendant objected that the evidence was inadmissible under CRE 404(b). An abuse of discretion by a trial court will be found only on a showing that the court misconstrued or misapplied the law or otherwise reached a manifestly arbitrary, unreasonable, or unfair result. Evidence of other bad acts is inadmissible if its relevance depends only on an inference that the person has a bad character and acted in conformity therewith. Under CRE 410, 403, and 404(b), a trial court may admit evidence of a defendant’s other bad acts if (1) the evidence is offered for a proper purpose; (2) the evidence is logically relevant to a material issue in the case; (3) its relevance is independent of the intermediate inference that the defendant has a bad character; and (4) its probative value is not substantially outweighed by the danger of unfair prejudice. The Court concluded that the trial court acted within the scope of its discretion in admitting evidence of defendant’s subsequent possession and distribution of crack cocaine, particularly for the purpose of establishing his knowing possession in this case.
Defendant also argued that reversal was required because the prosecution improperly elicited evidence of, and commented on, his refusal to consent to a search of his car. The Court agreed. The prosecution repeatedly elicited evidence from the officer on the scene that when asked to consent to search of his car, defendant responded by saying, “Nobody searches my car.” Because defendant did not object to this and related statements, reversal was warranted only if it constituted plain error. The Court found it did. The Fourth Amendment gives a defendant a constitutional right to refuse to consent to entry and search. Evidence of a person’s refusal to consent to a warrantless search may not be used to support an inference of guilt. It is even more egregious to argue to the jury that such evidence is probative of guilt. The error in admitting this type of evidence in this case was so clear cut that the trial judge should have been able to avoid it without benefit of objection. Moreover, this was a substantial error because it was seriously prejudicial. Accordingly, the Court reversed defendant’s conviction and the case was remanded for a new trial.
2013 COA 32. No. 12CA0226. Krol v. CF&I Steel.
Summary Judgment—Workers’ Compensation—CRS §§ 8-41-401 and -402—Statutory Employer—“On and To”—Summary Judgment Sua Sponte.
Plaintiff Stanislaw Krow appealed the trial court’s motion of summary judgment in favor of defendant CF&I Steel. The judgment was reversed and the case was remanded with directions.
CF&I owns a rail mill in Pueblo. It has several industrial cranes on the property, many of them inside buildings. In July 2002, CF&I and Alpine Crane entered into a contract obligating Alpine to maintain and inspect CF&I’s cranes. In January 2007, CF&I and SK’s Industrial Management, LLC (SKIM) entered into a contract obligating SKIM to train CF&I’s employees to maintain and inspect the cranes. That month, Krol, an employee of SKIM, went to the mill to provide inspection training. While he was standing on top of one of the cranes training a CF&I employee how to inspect a crane, the crane moved and Krol was injured.
Krol received workers’ compensation benefits through SKIM’s workers’ compensation insurance. He sued CF&I, asserting several tort claims. CF&I moved for summary judgment pursuant to CRS § 8-41-402, contending that the undisputed facts established that Krol was on its property when he was injured. Therefore, CF&I argued, it was Krol’s “statutory employer” and he could not seek additional compensation from CF&I as a matter of law. Krol argued that CRS § 8-41-402 applies only when the injured person was doing work both “on and to” another’s property, and there was at least a genuine issue of fact as to whether he was doing work to CF&I’s property when he was injured.
The district court granted summary judgment in favor of CF&I, agreeing with its argument. It also found that summary judgment was appropriate under CRS § 8-41-401, because if CF&I did not contract out the training work, it would do the work itself, and because SKIM carried adequate workers’ compensation insurance.
CRS § 8-41-402 states that if a landowner is a statutory employer, and the contractor, subcontractor, or person hired to do the work carries workers’ compensation insurance covering the injured party’s injuries, the injured party is deemed an employee of that statutory employer, and the injured party may not seek damages from the statutory employer. The Court of Appeals found that, contrary to the district court’s finding and CF&I’s argument, an injured party does not only have to have been “on” the landowner’s property when performing work for the statute to apply, but the injured party also must have been doing work “to” the property for it to apply. This determination was based on the plain language of the statute. The Court further held that there was a factual question as to whether the work Krol was performing was to CF&I’s property. Therefore, the grant of summary judgment was in error.
The district court also erred in alternatively granting summary judgment under CRS § 8-41-401, which provides immunity when the work contracted out by the entity sought to be held liable is part of that entity’s regular business, as defined by its total business operation. The Court held that although summary judgment may be granted for a reason not raised by a moving party, the court should not do so without first giving the parties notice and reasonable opportunity to argue the issue and present evidence. Thus, it was error for the district court to grant summary judgment on grounds not raised by CF&I and of which Krol had no notice to argue.
2013 COA 33. No. 12CA0368. People v. Sheth.
Declaratory Judgment—Sex Offender Registration—CRS § 16-22-113.
In this declaratory judgment action, petitioner Parag Sheth appealed the district court’s judgment denying his request for equitable relief to discontinue the requirement that he register as a sex offender. The judgment was affirmed.
In 2008, petitioner pleaded guilty to criminal attempt to commit Internet sexual exploitation of a child, a class 5 felony. He was sentenced to thirty-six months’ probation, which included a number of conditions, such as undergoing sex offender treatment and refraining from all contact with minors. He also was required to register as a sex offender under the Colorado Sex Offender Registration Act (Act). In 2011, the district court reduced petitioner’s probationary sentence to two years, and his probation ended as a matter of law on that date.
Petitioner filed a CRCP 57 action seeking a declaratory judgment determining that his registration duties terminated when his probation terminated. The district court concluded that CRS § 16-22-113 was the relevant statutory section and that it requires a person to wait ten years after final release from the jurisdiction of the court for the offense triggering the registration duties before petitioning the court for termination of those duties.
On appeal, petitioner argued that the sentencing court has discretion to set the length of time that the petitioner is required to register, pursuant to its sentencing authority. The Court of Appeals disagreed, finding that the language of CRS § 16-22-113 is unambiguous and there are no exceptions to the waiting period.
2013 COA 34. No. 12CA0450. Engeman Enterprises, LLC v. Tolin Mechanical Systems Company.
Economic Loss Rule—Summary Judgment.
Plaintiff Engeman Enterprises, LLC appealed the trial court’s entry of summary judgment in favor of defendant Tolin Mechanical Systems Company. The judgment was affirmed.
Plaintiff operates a cold storage facility that is cooled by an ammonia-charged cooling system. Defendant designs, installs, maintains, and repairs cooling systems. On June 27, 2008, high oil temperatures compromised plaintiff’s cooling system. Defendant inspected the system and recommended adding ammonia to lower the temperature. While defendant began this work,plaintiff’s representatives signed a Service Report and a Refrigeration Report, which stated defendant would perform its work in a “prudent and workmanlike manner” and disclaimed defendant’s liability beyond repairing issues caused by defective workmanship.
Instead of transferring ammonia from a tank into the cooling system, defendant’s employee mistakenly caused ammonia from the cooling system to flow out into the tank. The tank overfilled and exploded, permeating the facility with ammonia and resulting in cleanup costs, repair costs, and lost profits totaling hundreds of thousands of dollars.
Plaintiff alleged claims for negligence, vicarious liability, and negligent supervision, but not breach of contract. Defendant moved for summary judgment, and the district court concluded that the parties were bound by the contracts and the duty of care agreed to therein. Consequently, the court entered summary judgment on plaintiff’s tort claims because they were barred by the economic loss rule. In addition, the trial court found that the willful and wanton conduct of defendant did not affect the application of the economic loss rule, because plaintiff did not assert a claim for willful and wanton breach of contract. Summary judgment was entered in favor of defendant on all of plaintiff’s claims.
On appeal, plaintiff argued its tort claims were not barred by the economic loss rule because: (1) defendant owed it an independent duty of care to safely handle ammonia; (2) the damage that its facility sustained was physical harm to property and not “economic loss”; (3) defendant owed it an independent duty of care to supervise and train the employees handling ammonia; (4) the economic loss rule should not apply to service contracts; and (5) defendant’s allegedly willful and wanton tortuous conduct precludes application of the economic loss rule. The Court of Appeals rejected all these arguments.
A party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law. The Court stated that the inquiry is to be focused on the “duty” issue.
The Court first found that contrary to plaintiff’s argument, defendant did not owe plaintiff an independent duty of care beyond its contractual duty to safely handle the ammonia. The Court came to this conclusion after analyzing three factors, (1) whether the relief sought in negligence is the same as the contractual relief; (2) whether there is a recognized common law duty of care in negligence; and (3) whether the negligence duty differs in any way from the contractual duty.
The Court found that the damages that could have been recovered under a tort claim of negligence and a breach of contract claim were identical. The limitation of liability clause did not alter the Court’s analysis because it could apply equally to contract and tort actions. If plaintiff had alleged willful and wanton breach of contract, it might have defeated the limitation of liability clause. Most important in finding the application of the economic loss rule appropriate was the fact of the limitation of liability clause was contractually agreed to by the parties. This demonstrated that the parties could have had a remedy in contract for such damages if they had not chosen to limit it.
Thus, the first factor weighed in favor of finding no independent duty of care. The Court found that because there was a duty of reasonable care in handling a hazardous substance, the second factor weighed in favor of finding an independent duty of care. The Court found the third factor weighed against finding an independent duty of care, because the common law duty of care was the same as the contractual duty and, contrary to plaintiff’s argument, there was no higher tort duty imposed on the handling of a hazardous substance. In essence, the highest standard of care in handling ammonia is precisely the type of care a reasonable person would exercise. In sum, the Court found that defendant owed plaintiff a common law duty of care in negligence, that the duty did not differ from the duty defendant owed plaintiff under the contract, and a breach of that duty would allow the same recovery under both tort and contract law.
Plaintiff argued that the economic loss rule was inapplicable because the damage was to plaintiff’s property. Because the Court had concluded there was no independent duty here, it made no difference whether the damages sought were for property damage.
Plaintiff contended that its claim for negligent supervision was not barred by the economic loss rule because defendant’s common law duty to properly supervise its employees is separate from its contractual obligations to plaintiff. Again, the Court found no difference between the duty of reasonable care defendant owed plaintiff under the contract and defendant’s common law duty of reasonable care to prevent an unreasonable risk of harm to plaintiff from its employees’ conduct.
Plaintiff requested that the Court abolish the economic loss rule as it pertains to service contracts. The Court refused to depart from binding Colorado precedent to the contrary.
Finally, the Court rejected plaintiff’s argument that the economic loss rule should not bar recovery in tort when a defendant commits willful and wanton conduct. Because proof of such conduct is sufficient to defeat a limitation-of-liability clause in both contract and tort, the Court saw no reason that it should prevent application of the economic loss rule. The judgment was affirmed.
2013 COA 35. No. 12CA0721. Byerly v. Bank of Colorado.
Excessive Mechanic’s Lien—CRS § 38-22-101(3).
Defendants Bank of Colorado and Delta Properties II, LLC (collectively, Bank) appealed the trial court’s judgment in favor of Daniel Byerly (Contractor). The judgment was reversed and the case was remanded with directions.
In 2006, Widwing Development, LLC (Developer) hired Contractor to help develop a residential subdivision in Timnath. It was a four-phase project with an extensive contract, including a compensation scheme that involved both cash payments and “Lot Compensation.” By late 2009, Developer had sold only half of the thirty-two villa home lots (valued at $110,000 each) and four of the seventy-six single family home lots (valued between $294,500 and $350,000). It had not paid Contractor’s monthly fee for several months. The Bank, which had issued construction loans to Developer, declared a default. Though Developer was in no position to do so, it sent Contractor a letter stating that as of January 5, 2010, Contractor had “earned” Lot Compensation for the first phase. The Bank later foreclosed and acquired the unsold land parcels. Neither Developer nor the Bank ever tendered Lot Compensation to Contractor.
In March 2010, shortly before the Bank’s foreclosure, Contractor recorded a mechanic’s lien on one of the parcels of land for $824,000 (later amended to $641,000) and filed a complaint in foreclosure, naming the Bank as an interested party. The amended lien included $84,000 of unpaid monthly fees and $557,000 in Lot Compensation. At trial, Contractor admitted that the conditions precedent to Developer’s duty to pay the Earned Cash Value portion of the Lot Compensation had not been met. Contractor also asserted a breach of contract claim against Developer and was awarded a default judgment based on eighteen months of unpaid monthly fees ($126,000), plus interest and costs.
Following a bench trial, the trial court made findings regarding the value of Contractor’s lien and concluded that the “full and accurate value” of Contractor’s services totaled $346,000, to which 12% interest was added, for a total of $417,095. The trial court also made findings regarding whether Contractor had knowingly filed an excessive lien under CRS § 38-22-128, and concluded he did not. The court found in favor of Contractor on his mechanic’s lien claim and ruled that Contractor’s lien was prior to the Bank’s lien.
On appeal, the Bank argued that the trial court erred in determining that Contractor’s lien was measured by the “value” of his services, rather than by the contract terms, and that it was unlawful to file a lien that exceeded the contract price. The trial court interpreted CRS § 38-22-101(3) to mean that when a contract is not recorded, a contractor may file a mechanic’s lien for the “value” of his or her services. The Court of Appeals found that interpretation to disregard the plain language of subsection 3 when read in the context of the entire subsection. Subsection 3 applies only to subcontractors and material providers, not to the direct contractor. Subcontractors are the only ones who would have occasion to do work that must be “deemed” to have been done for the owner, given that the direct contractor already has a contract with the owner. Thus, where a direct contractor performs services, the value of which is alleged to have exceeded the contract price, the contract price is the maximum amount for which a lien can be filed. Accordingly, it was error to find that subsection 3 allowed Contractor to file a lien in excess of the contract price.
The Bank also argued that it was error to determine that Contractor did not violate CRS § 38-22-128 by filing an excessive lien. The trial court found that Contractor could have reasonably anticipated receiving Lot Compensation after Developer informed him that he had “earned” it and, from Contractor’s perspective, it was not obvious that the conditions precedent for Lot Compensation could not occur and would never occur. The Court rejected these findings because there was no evidence in the record to support them. The judgment was reversed and the case was remanded for entry of judgment in favor of defendants.
Colorado Court of Appeals Opinions