Monday, July 16, 2012

Allowing the use of a general verdict form in a construction defect case could subject your client to prejudgment interest.


A recent opinion from the Colorado Court of Appeals is a cautionary tale concerning the calculation of pre-judgment interest.  See Hendricks v. Allied Waste Transportation, Inc., 2012 WL 1881004 (Colo. App. 2012).  The Hendricks sued Allied after one of its drivers backed into the corner of their home with an Allied garbage truck.  At trial, a jury awarded the Hendricks $160,100 in damages.  Although the jury was instructed on the cost of repairs, diminution in value, and non-economic damages, the parties agreed to a general verdict form that did not ask the jury to specify the types of damages awarded.  Id. at *1.  The Hendricks sought to amend the judgment to include prejudgment interest and costs, which the trial court granted.

Allied appealed, arguing that the trial court erred by awarding the Hendricks prejudgment interest from the date their property was damaged.  Id. at *7.  The Colorado Court of Appeals found no error, and affirmed.  In its opinion, the Court of Appeals acknowledged that the trial court’s award of prejudgment interest was pursuant to C.R.S. § 5-12-102.  The pertinent portion of this statute provides:

(1)   Except as provided in section 13-21-101, C.R.S., when there is no agreement as to the rate thereof, creditors shall receive interest as follows:
* * *

(b) Interest shall be at the rate of eight percent per annum compounded annually for all moneys or the value of all property after they are wrongfully withheld or after they become due to the date of payment or the date judgment is entered, whichever first occurs.              

C.R.S. § 5-12-102(1)(b). 
Allied argued that the trial court should have awarded interest from the date of the verdict pursuant to Goodyear Tire & Rubber Co. v. Holmes, 193 P.3d 821 (Colo. 2008), and Hildebrand v. New Vista Homes II, LLC, 252 P.3d 1159 (Colo. App. 2010).  The Court of Appeals found Allied’s reliance on these cases misplaced as these cases concern damages for the cost of repairs whereby interest accrues from the date repairs are made.  Importantly, the Court of Appeals pointed out that in Goodyear and Hildebrand, the juries returned special verdict forms, which allowed the courts to calculate interest based specifically on the cost of repairs.  Id

In the Hendricks case, the parties agreed to a general verdict form whereby the jury was instructed on the cost of repairs, as well as diminution of property value, and noneconomic damages.  As a result, the Court of Appeals could not determine which portion of the verdict, if any, was for the cost of repairs.  In its opinion, the Court of Appeals referred to a recent Colorado Supreme Court case, Ferrellgas, Inc. v. Yeiser, 247 P.3d 1022 (Colo. 2011), wherein the Supreme Court affirmed the trial court’s calculation of prejudgment interest from the date the plaintiff’s home was initially damaged since the jury’s general verdict form lacked any basis to distinguish between the amount of damages awarded for the reasonable cost of repair and diminution in value concerning the calculation of prejudgment interest.  In accordance with these recent Colorado opinions, those defending property damage claims should insist on the use of a special verdict from to limit the exposure to their clients stemming from prejudgment interest.  

For more information regarding the Allied case, or regarding construction litigation in Colorado, contact Heather Anderson at anderson@hhmrlaw.com or by telephone at (303) 653-0044.     

Monday, July 9, 2012

There is No Non-Delegable Duty on the Part of Residential Builders in Colorado


Recently, in the Arapahoe District Court, the Honorable Michael Spear, issued an order holding that builders do not owe a non-delegable duty to homeowners.  In Marx and Corken v. Alpert Custom Homes, Inc., et al., Judge Spear’s order came in response to plaintiffs’ motion for determination of question of law seeking a finding that the defendants owed a non-delegable duty to the plaintiffs and thus, to strike defendants’ designation of nonparties at fault.  After being fully briefed, Judge Spear, found that such a non-delegable duty does not exist.

The case arises from the construction of a single-family residence in Aurora, Colorado.  Through the construction and interaction with Alpert Custom Homes, Inc. and Scott and Sally Alpert, the defendants, Paul Marx and Kay Corken, the plaintiffs claimed they suffered various damages and losses, and brought claims for breach of contract-warranty, breach of contract, violation of the Colorado Consumer Protection Act, breaches of the implied covenant of good faith, promissory estoppel, willful breach of contract, and quantum meruit.  During litigation, the defendants filed a designation of nonparties at fault, which named several parties which were at fault for the alleged construction defects at issue in the case.  The pertinent nonparties named were subcontractors of defendant Alpert Custom Homes, Inc. during the construction of the residence.

Plaintiffs filed the motion for determination of law discussed earlier seeking to strike defendants’ designation of nonparties on the basis that the defendants owed them a non-delegable duty to construct the home in a good and workmanlike manner.  Plaintiffs’ main argument stemmed from Cosmopolitan Homes v. Weller, 663 P.2d 1041, (Colo. 1983), in which the court found that a builder owes the homeowner an independent tort duty of reasonable care in constructing the residence.  Plaintiffs supported their claim by citing two district court cases which allegedly agree with the legal principle that the duty is non-delegable.

Defendants’ response argued that a non-delegable duty, such as plaintiffs claim, is a tort-based concept limited to inherently dangerous activities, which building a home is not.  Defendants also argued that a general contractor is not liable for the negligence of subcontractors, which follows a long line of cases.  Defendants’ final argument rests on Loughridge v. Goodyear Tire & Rubber Co., 207 F.Supp.2d 1187 (D.Colo. 2002), which relates to the discussion of proportionate liability and how it applies to claims for breach of warranty as well as tort claims.  Thus, defendants asked the court to issue an order (1) that the construction of a residence does not give rise to a non-delegable duty; (2) that defendants are not vicariously liable for the acts of the independent subcontractors; and, (3) that designation of nonparties is proper.

As mentioned above, Judge Spear found in favor of the defendants and held that the designation of nonparties was valid and should be allowed to stand.  In his order, Judge Spear found that while Cosmopolitan Homes stands for the idea that a builder owes an independent tort duty of reasonable care in construction of a residence, there is no Colorado Case law to support the proposition that a builder’s duty is “non-delegable.” [Emphasis added].  Judge Spear stated that such a term relates to a common law doctrine developed from Garden of the Gods Village v. Hellman, 294 P.2d 597 (Colo. 1956), to the present day, “does not support a conclusion that it should be created by the courts in the context of this case.”  Judge Spear further found that the law is clear that a person hiring an independent contractor is ordinarily not liable for negligence of the independent contract and that Cosmopolitan Homes does not stand for the proposition that a builder is vicariously liable for the torts of its subcontractors.

Judge Spear also addressed A.C. Excavating v. Yacht Club II Homeowners Ass’n, 114 P.3d 862 (Colo. 2005), which holds that a subcontractor owes a duty of care directly to the homeowner.  Discussing Yacht Club II, and supporting his finding that a non-delegable duty does not exist, Judge Spear stated that if a builder were to have a non-delegable duty, there would be no need for the holding of Yacht Club II.

When Judge Spear discussed defendants’ argument regarding proportionate liability, he walked through many different cases.  However, Judge Spear found the Loughridge Court’s reasoning persuasive.  Judge Spear found that the statute’s “language contains no limitation to tortious acts and when, as in this case, a plaintiff in reality plead alleged contract and warranty claims as tort claims based on a duty implied by law § 13-21-111.5, C.R.S., applies and the Designation of Non-Parties is proper.”

Thus, the court in Marx and Corken v. Alpert Homes, Inc., et al., found that a builder’s duty of reasonable care in construction of a residence owed to a homeowner is just that.  It does not rise to the level of non-delegable duty and does not interfere with a builder’s ability to apportion blame to its independent subcontractors who may be liable.

The attorney who drafted this entry is no longer with the firm. For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com



Disclaimer

The information contained in this blog is provided for informational purposes only. It is not legal advice and should not be construed as providing legal advice on any subject matter.