June 20, 2019

Colorado Court of Appeals: Weize Company, LLC v. Colorado Regional Construction, Inc.

on June 10, 2010.

Construction Dispute—Mechanics’ Lien Foreclosure—Trust Fund Statute—Lis Pendens.

In this construction dispute, the Court of Appeals affirmed the trial court’s dismissal of a lien foreclosure claim and the award of damages. The case was remanded.

Colorado Regional Construction, Inc. (CRC) hired Weize Company, LLC (Weize) as a plumbing subcontractor. Plaintiff-intervenor, Martz Supply Company (Martz) provided plumbing materials to Weize. After Weize had completed all of the underground plumbing and some of the above-ground plumbing, CRC replaced it with a different subcontractor.

When CRC failed to pay Weize for the completed work, Weize recorded mechanics’ liens against the project and commenced this action. Martz intervened, joining in the claims for breach of contract and lien foreclosure. It added a claim against CRC for treble damages and attorney fees under the trust fund statute.

CRC argued the trial court erred by precluding its defense that all claims were barred because Weize’s principal, John Neiberger, was not licensed as a master plumber and Weize did not employ a master plumber on the project. The Court disagreed.

CRC relied on CRS § 12-58-105. The Court rejected CRC’s argument that, because lack of licensure rendered the contract illegal, Weize did not have standing. Standing is a jurisdictional limitation. The Court rejected the one case relied on by Weize in this regard and found that all other cases and jurisdictions treat an illegal contract as an affirmative defense, not a basis for lack of standing.

Weize moved to compel CRC to make initial disclosures three months after Weize and Martz had made their disclosures. When CRC did not respond, the trial court ordered it to submit initial disclosures by September 4, 2008. On October 24, Weize requested that the court enter a default judgment because CRC still had not made its disclosures. The Court declined to enter default judgment, but after CRC finally submitted its disclosures on November 12, the court struck all of CRC’s counterclaims and affirmative defenses as a sanction for the discovery abuse. The Court found no abuse of discretion in the sanction.

CRC then argued it was error to find that it violated the trust fund statute because the record did not support rejecting CRC’s good faith defense under subsection 2 of the trust fund statute, and because substituting bonds for liens released CRC from the requirement to hold funds in trust under subsection 3. The Court rejected both arguments, finding that the evidence in the record supported the trial court’s findings rejecting the good faith defense and that CRC’s lien release bonds did not support exemption from the trust fund statute. The Court also affirmed the trial court’s treble damages and attorney fees award as supported by the evidence.

On cross-appeal, Weize and Martz argued the trial court erred in directing a verdict on Weizes’s lien foreclosure claim for failure to have recorded a lis pendens as required by CRS § 38-22-110. The Court found no error.

This summary is published here courtesy of The Colorado Lawyer. Other summaries by the Colorado Court of Appeals on June 10, 2010, can be found here.

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