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Colorado Court of Appeals Opinions
June 21, 2012

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.

2012 COA 100. No.10CA1238. Gandy v. Colorado Department of Corrections.
Life Sentence—Transfer of Offenders Treaty Between the United States and Canada on the Execution of Penal Sentences—Regulation 550-05(IV)(C)(7)—Supremacy Clause of the U.S. Constitution.

Plaintiff Robert Gandy, a Canadian citizen serving a life sentence,appealed the district court’s dismissal of his suit against the Colorado Department of Corrections (DOC). The order was vacated and the case was remanded. 

Gandy applied to the DOC, pursuant to the Transfer of Offenders Treaty Between the United States and Canada on the Execution of Penal Sentences (Treaty), to be transferred to the Canadian penal system to serve the remainder of his sentence. The DOC denied the application on the basis that Gandy was serving a life sentence, which, it asserted, rendered him ineligible for transfer under Regulation 550-05(IV)(C)(7) (Regulation). Gandy sued, alleging, among other things, that the basis of the DOC’s denial was contrary to a federal treaty. Gandy’s suit was dismissed.

On appeal, Gandy argued that the trial court erred in dismissing his suit because the Regulation conflicts with the Treaty and thereby violates the Supremacy Clause of the U.S. Constitution. Under the Treaty, offenders serving life sentences are eligiblefor transfer. Thus, applying the Regulation to render Canadian offenders serving life sentences ineligible for transfer conflicts with the Treaty and is an obstacle to the accomplishment and execution of its full purposes. Therefore, the DOC impermissibly applied its administrative regulation in contravention of the applicable federal treaty. Accordingly, Gandy stated a claim for which relief can be granted, and the district court erred when it ruled otherwise and dismissed Gandy’s claim on that basis.

2012 COA 101. No.10CA2369. People v. Montanez.
Restitution Order—Sexual Assault Nurse Examiner Evaluation.

The prosecution appealed from the district court’s restitution order against defendant. The order was affirmed in part and reversed in part, and the case was remanded.

Defendant was discovered having sexual intercourse with a 14-year-old girl by the girl’s mother and brother; defendant was 19 years old at the time. The mother contacted the authorities, and defendant was arrested. The following day, the mother decided on her own to take the child to the hospital to be examined. A sexual assault nurse examiner (SANE) evaluated the child for any injuries, gave her antibiotics and a pregnancy test, and discussed safe sexual practices with her. Defendant pleaded guilty to sexual assault on a child in exchange for the dismissal of the more serious class 3 felony charge. The district court included the costs of the antibiotics and the pregnancy test in the restitution order but declined to include the cost of the SANE examination.

On appeal, the prosecution contended that the district court erred in denying its request to include the cost of the SANE examination in the restitution order. The statutes require full compensation of a “victim’s” pecuniary losses. Here, law enforcement did not request the SANE examination, so they are not responsible for payment to the hospital. The child and her mother are “victims” for restitution purposes. Additionally, the hospital is a victim, because it had a contractual relationship with the mother. Because the cost of the SANE examination was proximately caused by defendant’s conduct, the cost of the SANE examination should have been included in the restitution order.

2012 COA 102. Nos. 11CA0123 & 11CA0864. Melssen v. Auto-Owners Insurance Company.
Breach of Contract—Insurers Duty to Defend.

Defendant Auto-Owners Insurance Company (Auto-Owners) appealed the trial court’s judgment entered on a jury verdict in favor of plaintiffs Gene and Diane Melssen. The judgment was affirmed and the case was remanded for an award of reasonable appellate attorney fees and costs. 

The Melssens built the Holleys a custom home. During construction, the Melssens had comprehensive general liability (CGL) coverage with Auto-Owners. Their policy, effective through November 2004, obligated Auto-Owners to defend the Melssens with respect to any “suit” seeking damages for “property damage” occurring during the policy period.

Soon after the house was constructed, cracks developed in the drywall and, later, large cracks formed in the outside stucco and basement slab. In 2007, the Holleys contacted the Melssens, the engineer for the foundation, an attorney, and Auto-Owners. A claims adjuster investigated.

In April 2008, the Holleys sent the Melssens a notice of claim in accordance with the Colorado Defect Action Reform Act (CDARA), asserting approximately $300,000 in damages caused by engineering and construction defects. In June 2008, the Melssens demanded that Auto-Owners defend and indemnify the Melssens. In October 2008, Auto-Owners sent a “coverage position letter,” purportedly denying coverage of claimed damages, because they were sustained outside the policy period. The focus of this appeal is the extent to which Auto-Owners was obligated to defend the Melssens.

The Holleys agreed to an arbitration and mediation settlement with the Melssens and the foundation engineer. The Melssens paid $140,000 toward the cost of the settlement, but Auto-Owners did not receive advance copies of the settlement documents.

In 2009, the Melssens filed this action against Auto-Owners, asserting breach of contract, bad faith breach of contract, and violations of CRS §§ 10-3-1115 and -1116. A jury returned a verdict in favor of the Melssens on all claims and awarded damages. The trial court awarded costs and attorney fees.

On appeal, Auto-Owners argued it was error to submit to the jury the issue of whether the CDARA notice of claim process between the Melssens and the Holleys constituted a “suit,” thus triggering the duty to defend under the policy. The Court of Appeals found the trial court properly submitted to the jury the question of whether Auto-Owners consented to the submission of their dispute to “any other alternative dispute resolution proceeding” or whether they waived that policy provision. However, the Court found that it was error to submit the question as to whether the CDARA notice of claim process otherwise constituted a “suit” under the policy, because this was a legal matter, but that the error was harmless because the CDARA notice is a “suit” within the definition of the policy.

Auto-Owners argued the trial court’s error was not harmless for three reasons: (1) the CDARA notice of claim process was not a civil proceeding because the notice of claim was not a complaint nor was the claim process otherwise an alternative dispute resolution proceeding under the policy; (2) the CDARA notice of claim process failed to satisfy the policy’s definition of “suit” because there was no evidence to show that the Melssens submitted to and settled the Holleys’ claim against them with its express or implicit consent; and (3) the liberal interpretation of a CDARA notice of claim as set forth in CRS § 13-20-808(7) does not apply retroactively to this policy.

The Court rejected each of these. The Court first held that the notice of claim process was an alternative dispute resolution proceeding under the policy. Next, the Court determined that it was a question of fact that was presented to the jury and there was sufficient evidence in the record to support the jury’s decision. Finally, the Court had determined the CDARA notice constituted a “suit” under the policy and did not need to address the third argument.

The Court also took up numerous evidentiary and instruction arguments made by Auto-Owners and rejected them all. It affirmed the award of attorney fees and costs, and granted the Melssens’ request for their appellate attorney fees.

2012 COA 103. No. 11CA0683. Slater Numismatics, LLC v. Driving Force, LLC.
Summary Judgment—Intentional Interference With Contractual Relations—Unjust Enrichment.

The rulings in this case involved plaintiff’s claims for intentional interference with contractual relations and unjust enrichment. The trial court granted summary judgment on the claims and awarded defendants costs. The judgment was reversed and the case was remanded the case for further proceedings. 

Plaintiff was in the business of purchase and sale of rare and modern coins. It had an ongoing relationship with Black Diamond Holding Company, doing business as Independent Coin Grading Company (ICG). After buying coins, plaintiff sent them to ICG to be graded and packaged for sale. ICG forwarded the coins to plaintiff’s customer, Cable Shopping Network (Cable), which purchased the coins from plaintiff and then sold them through television infomercials and call centers.

Ultimately, plaintiff and ICG entered into a referral agreement under which plaintiff would refer to ICG all of the coin grading and valuing work for Cable. In exchange, ICG would pay plaintiff each month a referral fee equal to 25% of the net grading fees derived from sales of grading services to Cable.

James Taylor was a founding member of ICG and worked for them from 1998 to 2005. He then left to work as CEO for Driving Force, LLC, doing business as ANACS (ANACS), a different coin-grading company. He then returned to ICG as CEO in 2007.

Brett Williams was ICG’s chief financial officer (CFO) for nine years. While he and Taylor were employed by ICG, they signed employment agreements that prohibited the disclosure of confidential information obtained during the course of their employment at ICG. Both knew of the referral agreement. Taylor knew how critical Cable was to ICG and referred to it as ICG’s “golden goose.”

When Taylor left ICG, he hired Williams to be the CFO of ANACS. ANACS then hired all but two of ICG’s employees, rendering ICG unable to compete in the coin-grading business. ANACS’s offices also were moved from Texas to Colorado, two miles from ICG’s offices. Taylor and Williams approached Cable and, with their knowledge of the referral agreement, were able to get Cable to transfer its modern coin-grading business from ICG to ANACS.

In its summary judgment order, the trial court stated: “[T]he Court assumes that a reasonable jury could find that Mr. Taylor and Mr. Williams intentionally set out to take away ICG’s business with [Cable] by hiring away ICG’s employees and selling coins to [Cable] for less by avoiding the 25% Referral Fee, all in violation of their contractual and fiduciary duties to ICG.” The Court of Appeals agreed that this assumption was supported by the evidence when viewed in the light most favorable to plaintiff but disagreed with the conclusion that, notwithstanding that evidence, ANACS was entitled to summary judgment.

Given the evidence presented, the Court found that a reasonable jury could conclude that ANACS purposefully depleted the ranks of ICG, significantly impairing its ability to fulfill Cable’s coin grading needs. Given that, combined with ANACS’s use of plaintiff’s confidential information to make a play for Cable’s business while undercutting ICG’s pricing, the Court determined that a reasonable jury could conclude that ANACS caused ICG “not to perform” its contract with plaintiff; thus a triable claim for intentional interference with contractual relations existed.

The Court also agreed with plaintiff’s contention that it was error to grant summary judgment for ANACS on plaintiff’s claim for unjust enrichment. On such a claim, a plaintiff must show that (1) the defendant received a benefit (2) at the plaintiff’s expense (3) under circumstances that would make it unjust for the defendant to retain the benefit without commensurate compensation. The Court ruled that simply without the contractual relationship, a reasonable jury could determine that ANACS received a benefit at plaintiff’s expense under circumstances that would make it unjust for ANACS to receive the benefit without compensating plaintiff.

2012 COA 104. No. 11CA1312. Andrew v. Teller County Board of Equalization.
Property Taxes—Nonagricultural Classification.

Respondent Teller County Board of Equalization (BOE) placed a nonagricultural classification on petitioner’s (taxpayer) land. Petitioner appealed the Board of Assessment Appeals’ (BAA) denial of her challenges. The Court of Appeals affirmed the BAA’s ruling.

The subject property is a thirty-five-acre parcel that taxpayer purchased in 1998. It is in a subdivision containing other thirty-five- and twenty-acre parcels. By 2010, nineteen of the parcels had improvements and seventeen were vacant. All the parcels are subject to a conservation easement established in 1990 for the preservation of wildlife habitat. The easement permits building areas of up to two acres on each parcel for residential purposes.

Taxpayer constructed a residence and received a certificate of occupancy in August 2009. Through the 2009 tax year, based on the conservation easement, the parcel was classified as agricultural land. Based on the completion of the residence, the county assessor changed the classification for the 2010 tax year to residential land.

Taxpayer challenged the reclassification before the BAA. She relied on the conservation easement, as well as farming and forestry uses on the land. The BOE asserted that the parcel is less than eighty acres and contains a residence, and that the other bases for agricultural classification had not been established. The BAA denied the petition and upheld the BOE’s classification.

Taxpayer had the burden of proof in the BAA proceedings to show any qualifying basis for classifying the subject parcel as agricultural. The Court looked to CRS § 39-1-102(1. 6)(a)(III),which governs the classification of land as agricultural for property tax purposes based on a perpetual conservation easement. Under this section, the parcel clearly does not qualify, because it is too small and has a residential improvement.

2012 COA 105. No. 11CA1726. Schlapp v. Colorado Department of Health Care Policy and Financing.
Medicaid Home and Community-Based Services Children’s Waiver—Eligibility.

Defendants Colorado Department of Health Care Policy and Financing (Department) and Mesa Developmental Services (Mesa) determined that plaintiff, a child, was ineligible for a Medicaid Home and Community Community-Based Services Children’s Waiver (Home Services Waiver). Plaintiff appealed and the Court of Appeals affirmed. 

The Colorado Medical Assistance Act provides home and community-based long-term care services (services) to certain groups that otherwise would not qualify for federal- and state-funded Medicaid under traditional income guidelines. For each services group, the state must request a waiver from the Centers for Medicare and Medicaid Services to receive federal funds. As relevant, the General Assembly requested waiver programs for Home Services Waiver, Children With Autism Waiver, and Children’s Extensive Support Waiver.

The Department deemed plaintiff eligible for a Home Services Waiver in 2006, when he was 3 or 4 years old.When he was 4 years old, he obtained a Children With Autism Waiver under which he received occupation, speech, physical, and behavioral therapy services through Medicaid. He became ineligible when he turned 6 in 2009. He then applied for a Home Services Waiver. Mesa used a standard long-term care assessment tool (ULTC 100.2) to evaluate his eligibility. It showed he could require “hospital or nursing home level of care.” The Department reviewed the application, along with two Professional Medical Information Pages (physician pages). Based on the physician pages, the Department found plaintiff ineligible for a Home Services Waiver. An administrative law judge affirmed. Plaintiff appealed to the district court. The lower court initially reversed the Department’s decision but, on reconsideration, affirmed.

On appeal, plaintiff argued the Department erred because (1) it improperly considered criteria other than his score on the “Activities of Daily Living” section of the ULTC 100.2; (2) it violated the Administrative Procedure Act (APA) by applying a new and unpublished “medically fragile” eligibility requirement; (3) the new requirement is unlawful because it (a) creates a distinction between “medical” and “cognitive/behavioral” needs, and (b) categorically excludes children with autism from eligibility; and (4) he met all listed eligibility criteria. The Court rejected all of these arguments and affirmed the district court’s judgment.

The Court noted that, consistent with federal Medicaid law, the Colorado Medical Assistance Act requires an applicant to have medical needs and would qualify plaintiff for institutionalization. The Act governs the Home Services Waiver program and does not encompass persons who are only mentally retarded or only have developmental disabilities. The Court agreed with the Department that the “Activities of Daily Living” scores on the ULTC 100.2 are not necessarily determinative of eligibility for a waiver and that this interpretation is consistent with the federal and state statutes it administers.

The Court also rejected plaintiff's contention that the medical need requirement was “new” and that the Department did not comply with APA rulemaking requirements before applying it. The Court held that the requirement is clearly not new; it is a fundamental requirement of both federal and state enabling statutes and is clearly set forth in the Colorado regulations.

Plaintiff argued the distinction the Department made between “medical” and “cognitive/behavioral” needs is arbitrary and contrary to law. The Court again stated that the Department’s application of the medical need requirement is consistent with the applicable statutes and regulations. The use of this definition does not categorically exclude those with autism, because a child with autism might have medical needs that would qualify him for the waiver. Finally, the Court found substantial evidence in the record to support the Department’s decision and therefore affirmed the judgment.

2012 COA 97. No.09CA1747. People v. Dean.
Second-Degree Murder—Habitual Offender—Equal Protection—Evidence.

Defendant appealed the judgment of conviction entered and the sentence imposed on a jury verdict finding him guilty of second-degree murder. The judgment was affirmed and the case was remanded for correction of the mittimus.

After beating his friend to death and disposing of the body, defendant was charged with first-degree murder and six habitual criminal counts. Defendant was convicted of second-degree murder, a class 2 felony, which carries a presumptive maximum sentence of twenty-four years.

On appeal, defendant contended that the trial court erred by ruling that he could be sentenced as a habitual offender under CRS § 18-1.3-801, because that statute, as applied to him, denied him equal protection of the laws as to his parole eligibility. Because none of defendant’s prior felony convictions were for class 1 or class 2 felonies, or class 3 felonies that were crimes of violence, defendant was ineligible for sentencing under CRS § 18-1.3-801(1), for which he would have received a mandatory sentence of life imprisonment and been eligible for parole after serving “at least forty calendar years.” Instead, defendant was adjudicated a habitual offender under CRS § 18-1.3-801(2) for having sustained three prior convictions for any felony. Accordingly, the court sentenced defendant to four times the presumptive maximum sentence for second-degree murder, or ninety-six years. He will be eligible for parole after completing 75% of his sentence, which equates to seventy-two years. Defendant’s equal protection claim failed because the two statutory subsections at issue do not apply to identical conduct, and the habitual offender act, as applied to defendant, has a rational basis.

Defendant also contended that the trial court abused its discretion and committed reversible error by admitting evidence of his prior drug use. Evidence of defendant’s prior crack cocaine use, as well as defendant’s 2001 beating of the victim over the perceived theft of a small amount of crack, was admissible under CRE 404(b) to show defendant’s motive and identity.

2012 COA 98. No.09CA2554. Brown v. Jefferson County School District No. R-1.
Breach of Contract—Wrongful Termination—Doctrine of Exhaustion of Administrative Remedies—Collective Bargaining Agreement.

Plaintiff Steve Brown appealed the trial court’s order dismissing his breach of contract claim against defendant Jefferson County School District No. R-1 (District). The order was affirmed.

The District terminated Brown’s employment. As a member of the Classified School Employee’s Association (CSEA), Brown was subject to the Collective Bargaining Agreement (Agreement) between the CSEA and the District, which provided a four-step grievance process. The hearing officer in step 3 of the grievance process found that Brown was wrongfully terminated, and stated that the District and the CSEA needed to reach an agreement regarding Brown’s reinstatement. The District rejected the hearing officer’s recommendations, and Brown filed a complaint against the District without completing step 4 of the grievance process. The complaint was dismissed by the trial court.

Brown contended that the court erred in dismissing his complaint, and the Court of Appeals disagreed. The doctrine of exhaustion of administrative remedies applies to the Agreement, and Brown failed to exhaust his administrative remedies by not completing step 4 of the grievance process before filing his complaint. Therefore, the trial court did not have subject matter jurisdiction over Brown’s claim. The order was affirmed.

2012 COA 99. No.10CA0651. People v. Arzabala.
Vehicular Assault—Leaving the Scene of an Accident—Evidence—Double Jeopardy—Unit of Prosecution—Jury Instructions—Prosecutorial Misconduct—Testimony.

Defendant appealed the judgment of conviction entered on jury verdicts finding him guilty of two counts of vehicular assault (reckless); two counts of leaving the scene of an accident; two counts of providing alcohol to a minor; and one count of aggravated driving after revocation prohibited (ADARP)—leaving the scene of an accident. The judgment was affirmed, the sentence was vacated, and the case was remanded. 

Defendant was driving with two female passengers, K.E. and O.C., both of whom were 18 years old at the time. All three were drinking alcohol, which defendant had bought earlier that night. Defendant struck a car driven by K.P., who had been parked on the right side of the road and was attempting to make a U-turn at the time of the collision. K.P. and her passenger, E.P., were seriously injured. K.E. also hit her head and suffered minor injuries, but neither defendant nor O.C. was injured.

On appeal, defendant contended that the evidence was insufficient to sustain his convictions for leaving the scene of an accident and for ADARP—leaving the scene of an accident. Although there was conflicting testimony at trial, the prosecution presented sufficient evidence that defendant left the scene after failing to provide his driver’s license and registration to the officers at the scene.

Defendant also contended that his two convictions for leaving the scene of an accident violated constitutional protections against double jeopardy. Here, defendant was charged with two counts of leaving the scene of an accident with serious bodily injury. One count corresponded to defendant’s leaving the scene of the accident resulting in serious bodily injury to K.P.; the other count corresponded to his leaving the scene of the same accident resulting in serious bodily injury to E.P. Thereafter, the trial court imposed two sentences of three years each corresponding to defendant’s two convictions for leaving the scene of an accident, to be served concurrently and concurrently with defendant’s five-year sentence for vehicular assault (reckless) against K.P. The unit of prosecution for the offense of leaving the scene of an accident, however, is the number of accident scenes, not the number of victims involved in any one accident. Therefore, defendant’s two convictions for leaving the scene of an accident violated his right to be free from double jeopardy. The case was remanded to the trial court with directions to merge defendant’s two convictions for leaving the scene of an accident into one; to vacate the sentence imposed as to one of the convictions; and to correct the mittimus accordingly.

Defendant also contended that the trial court reversibly erred by giving the jury two instructions that allegedly lessened the prosecution’s burden of proof and misled the jury in violation of his constitutional rights. The Court of Appeals disagreed. The jury instructions correctly instructed the jury on the elements of vehicular assault (reckless) and vehicular assault (DUI) and the proper culpable mental state necessary for a conviction for these charges.

Defendant contended that the prosecution twice committed misconduct during closing and rebuttal closing argument by misstating the law and the evidence. The prosecutor’s arguments, however, did not misstate the law and any references to incorrect facts were harmless.

The Court also rejected defendant’s contention that the trial court erred by admitting the testimony of K.P.’s mother. The trial court did not abuse its discretion in admitting this testimony to show K.P.’s lack of injuries before the accident.

Defendant also argued that the trial court committed plain error by admitting his unredacted driving record into evidence. The driving record was relevant to show defendant had knowledge of his license revocation as a habitual offender under ADARP. Therefore, the trial court did not err by admitting the driving record.

Defendant further argued that the court erred by permitting the prosecution to elicit testimony from K.E. that she, defendant, and O.C. were en route to smoke marijuana at the time of the accident. K.E.’s testimony was relevant and admissible as res gestae evidence because it provided the fact finder with a fuller and more complete understanding of the surrounding events and context on the night of the accident. Therefore, there was no error in the admission of K.E.’s testimony.

Colorado Court of Appeals Opinions