Source: https://cbaclelegalconnection.com/author/tgordon/
Timestamp: 2019-04-19 08:36:09+00:00

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Editor’s Note: The Colorado Court of Appeals’ opinion in Honnen Equipment Co. v. Never Summer Backhoe Service, Inc. can be read here.
In Honnen Equipment Company, Inc. v. Never Summer Backhoe Service, Inc. (Colo. App. July 7, 2011), a division of the Colorado Court of Appeals held that the inclusion of interest in a lien statement does not render the lien void as an excessive lien. In doing so, the Court had to distinguish prior Supreme Court precedent holding that a mechanics’ lien may not include late charges.
Generally, the Colorado mechanics’ lien statute provides that a lien claimant is entitled to a lien in the amount of the value of the services rendered or labor performed and materials furnished for the improvement of real property. C.R.S. § 38-22-101(1). When recording a mechanics’ lien, one must be careful not to overstate the amount. The reason is that anyone who knowingly records an overstated lien not only forfeits their lien rights but also can be liable to the owner for costs and fees. C.R.S. § 38-22-128.
In Honnen Equipment Co., the lien claimant included accrued interest in its mechanics’ lien. The owner argued that interest may not be included in a lien because interest does not represent the value of the work performed to benefit the property. Therefore, according to the owner, the inclusion of accrued interest in a lien statement renders it excessive and therefore invalid pursuant to C.R.S. § 38-22-128.
Timothy Gordon is a partner at Holland & Hart who focuses his practice on the construction and commercial real estate industries. He is the author of the firm’s Construction Law in Colorado blog, where this post originally appeared on August 9, 2011.He is also one of the managing editors for CBA-CLE’s Practitioner’s Guide to Colorado Construction Law.
In Sure-Shock Electric v. Diamond Lofts Venture (Colo. App. June 23, 2011), a division of the Court of Appeals held that, on confirmation of an arbitration award, the district court retains jurisdiction to decide the procedural validity of a mechanic’s lien even after the arbitration award confirms the claimant’s right to a lien under the mechanic’s lien statute.
The contract between Sure-Shock and Diamond Loft Venture (“DLV”) included an agreement to arbitrate any claim arising out of or related to the parties’ contract. After Sure-Shock filed a lawsuit for breach of contract, unjust enrichment, and foreclosure of its mechanic’s lien, DLV moved to stay the proceedings and to compel arbitration, which was granted.
The arbitrator found in Sure-Shock’s favor, and made detailed findings of fact regarding the recording of the lien, the amount, and the date that it was recorded, and awarded Sure-Shock the principal amount of its claim plus interest at 12% (the interest rate found in the mechanic’s lien statute). Upon motion, the district court confirmed the arbitration award, confirmed the amount of Sure-Shock’s lien, and ruled that Sure-Shock will be entitled to participate in the foreclosure of its lien.
DLV appealed, arguing that the district court did not have jurisdiction to determine the validity, amount, and enforceability of the lien. DLV further argued that Sure-Shock failed to “affirmatively raise the argument that the lien was procedurally valid in arbitration” and was therefore barred from raising the issue. The Court of Appeals did not agree.
The Court of Appeals then went on to address “whether the procedural validity issue may be properly decided by the court as part of the foreclosure proceedings, or whether either [the parties were] required to raise it in arbitration under their agreement requiring all claims and disputes to be submitted to arbitration.” The Court of Appeals ultimately held that the issue of procedural validity may be properly determined by the Court, but that it holds this power concurrently with the arbitrator.
We conclude that, here, the issue of procedural validity may be properly determined by the court. Given that only a court is vested with the authority to foreclose a mechanic’s lien, it may concurrently determine any procedural validity issues connected with that foreclosure even when the underlying contract includes a broad arbitration clause, at least where, as here, neither party raised the issue in arbitration.
Part of the Court’s reasoning is the fact that the in rem action to foreclose a mechanic’s lien will often involve additional parties beyond those involved in the arbitration. And in the case at issue, there were additional owners who would be defendants to the foreclosure action who were not parties to the arbitration, and who may challenge the validity of the notice and filing of the lien.
Ed. Note: The Colorado Court of Appeals’ opinion in Sure-Shock Electric, Inc. v. Diamond Lofts Venture, LLC can be read here.
Timothy Gordon blogs at Holland & Hart’s Construction Law in Colorado and this post originally appeared here on June 23, 2011. Gordon is one of the managing editors for CBA-CLE’s Practitioner’s Guide to Colorado Construction Law. Click hereto read all posts by this author.Click here for more Construction Law Updates.
In Hildebrand v. New Visa Homes II, LLC (Colo. App. Nov. 11, 2010), a division of the Colorado Court of Appeals addressed, among other things, what the proper measure of damages is for a construction defects claim under the Construction Defect Action Reform Act (“CDARA”). In doing so, the Court of Appeals clarified that the plaintiffs need not present alternative methods of computation of damages. Additionally, the Court of Appeals held that “inconvenience damages” were recoverable under CDARA. Finally, the Court held that the plaintiffs were not entitled to prejudgment interest for its damages based on cost to repair.
After the movement of their basement floor slab caused damage to their new home, the Hildebrands sued the home builder, New Vista Homes and its manager, Richard Reeves, for negligence, negligent misrepresentation, violation of the Colorado Consumer Protection Act (“CCPA”), lack of proper soils disclosure, and breach of warranty. The trial court entered a directed verdict in favor of Reeves, and the jury returned a verdict in favor of the Hilderbrands against New Vista Homes. Both parties appealed.
Since the matter involved the construction of a home, the plaintiffs could maintain negligence claims against the home builder. And in Colorado, “[c]orporate agents are liable for torts of the corporation if they approved of, sanctioned, directed, actively participated in, or cooperated in such conduct.” “Such an agent may ‘be held personally liable for his or her individual acts . . . even though committed on behalf of the corporation, which is also held liable.'” Because the question of whether an individual’s conduct is sufficient for liability to attach is a question of fact for the jury to decide, and because the plaintiffs presented sufficient evidence, the Court of Appeals held that the plaintiffs’ negligence and negligent misrepresentation claims against Reeves should have gone to the jury.
The Court of Appeals also held that the disclaimer in the purchase agreement did not bar plaintiffs’ claim for breach of the implied warranty of habitability. According to the Court of Appeals, the warranty of habitability “has been likened to strict liability for construction defects, and proof of a defect due to improper construction, design, or preparations is sufficient to establish liability in the builder-vendor.” Plaintiffs presented evidence that the defects in their home were caused by installing a slab-on-grade basement floor rather than a structural floor and failing to install a sump pump, which might have limited slab movement by dewatering the soil below the slab. As such, the disclaimers in the purchase agreement did not bar the warranty claim.
The Court of Appeals held that plaintiffs failed to present sufficient evidence to support their claim for violation of the CCPA. Basically, plaintiffs failed to prove that defendants’ conduct significantly impacts the public as actual or potential consumers. “Although 38 of the homes were constructed with slab-on-grade basement floors, this fact does not alone show public impact arising from defendants’ alleged misrepresentations concerning soils and flooring.” And there was no evidence that the other homes had any problems with respect to the slab-on-grade basement floors.
New Vista Homes attacked the damage award, arguing that the trial court erred (1) in not capping plaintiffs’ repair-cost damages at the fair market value of the home, and (2) in awarding inconvenience damages to plaintiffs. The Court of Appeals rejected both arguments.
“Actual damages” means  the fair market value of the real property without the alleged construction defect,  the replacement cost of the real property, or  the reasonable cost to repair the alleged construction defect, whichever is less . . . .
Section 13-20-802.5(2), C.R.S. 2010 (bracketed numbers added).
The Court of Appeals rejected New Vista Homes’ argument that the court should have capped plaintiffs’ repair-cost damages at the fair market value of the home. According to the Court, plaintiffs do not have to present evidence on all three measures of damages. Instead, New Vista Homes bore the burden of proof if it wished to argue that the cost to repair were more than the fair market value of the home.
relocation costs, and, with respect to residential property, other direct economic costs related to loss of use, if any, interest as provided by law, and such costs of suit and reasonable attorney fees as may be awardable pursuant to contract or applicable law. “Actual damages” as to personal injury means those damages recoverable by law, except as limited by the provisions of section 13-20-806 (4).
For claims for noneconomic loss or injury caused by a construction defect, “‘noneconomic loss or injury’ has the same meaning as set forth in section 13-21-102.5 (2) (b) . . . .” Section 13-20-806(4)(a), C.R.S. 2010. And “‘[n]oneconomic loss on injury’ means nonpecuniary harm for which damages are recoverable by the person suffering the direct or primary loss or injury, including pain and suffering, inconvenience, emotional stress, and impairment of the quality of life.” Section 13-21-102.5(2)(b), C.R.S. 2010.
Based on the plain language of CDARA, the Court of Appeals upheld the award of “inconvenience damages” to plaintiffs, which included compensation for plaintiff’s anger, sleeplessness, and loss of use.
Finally, the Court of Appeals affirmed the trial court’s refusal to award prejudgment interest on plaintiffs’ repair cost damages. In short, because plaintiffs had not yet spent the money to repair the defects, it would not be proper to award damages on such costs that had not yet been incurred.
Timothy Gordon blogs at Holland & Hart’s Construction Law in Colorado and this post originally appeared here on November 19, 2010. Gordon is one of the managing editors for CBA-CLE’s Practitioner’s Guide to Colorado Construction Law. Click here to read all posts by this author.

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