June 17, 2019

Archives for March 21, 2013

Governor Hickenlooper Signs Three Firearms Bills

At a press conference on Wednesday, March 20, 2013, Governor Hickenlooper solemnly signed three bills designed to help control gun violence in Colorado. The bills prohibit large-capacity ammunition magazines, require criminal background checks for all transfers of firearms (including private transfers), and allow the CBI to recoup the cost of the background checks. The bills are:

  • HB 13-1224 – Concerning Prohibiting Large-Capacity Ammunition Magazines, by Rep. Rhonda Fields and Sen. Mary Hodge. Effective July 1, 2013, the bill prohibits manufacture or purchase of any magazine capable of accepting more than 15 rounds of ammunition. 
  • HB 13-1228 – Concerning Requiring the Colorado Bureau of Investigation to Recoup the Cost of Performing an Instant Background Check Prior to the Transfer of a Firearm, and, in Connection Therewith, Making and Reducing an Appropriation, by Rep. Lois Court and Sen. Rollie Heath. The bill allows the CBI to assess a charge for performing instant background checks.
  • HB 13-1229 – Concerning Criminal Background Checks Performed Pursuant to the Transfer of a Firearm, and in Connection Therewith, Making an Appropriation, by Reps. Rhonda Fields and Beth McCann and Sen. Morgan Carroll. The bill mandates criminal background checks for all transfers of firearms, including those between private parties.

Governor Hickenlooper issued a statement about the most controversial of the bills, HB 13-1224, noting that he acknowledges the concerns about the bill and stating

In considering the language of HB13-1224, we have consulted with the Office of the Attorney General and we concur with its advice that the large-capacity magazine ban should be construed narrowly to ensure compliance with the requirements of the Second Amendment and the Due Process Clause of the 14th Amendment. We have signed HB13-1224 into law based on the understanding that it will be interpreted and applied narrowly and consistently with these important constitutional provisions.

For a complete list of Governor Hickenlooper’s 2013 legislative decisions, click here.

SB 13-195: Requiring Applicants for Concealed Handgun Permits to Complete Training Course at Location Where Certified Instructor Offers the Course

On Wednesday, February 27, 2013, Sen. Lois Tochtrop introduced SB 13-195 – Concerning Requiring Certain Applicants for Concealed Handgun Permits to Complete a Handgun Training Class on the Physical Grounds Where the Certified Instructor of the Course Offers the Course. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Under current law, an applicant for a concealed handgun permit is required to demonstrate competence with a handgun. An applicant may demonstrate such competence through various means, including the submission of a training certificate showing that the applicant has completed a handgun training class.

The bill provides that, for the purpose of the concealed handgun application process, a “handgun training class” does not include any firearms safety course that allows a person to complete the entire course:

  • Via the internet or an electronic device; or
  • In any location other than the physical location where the certified instructor offers the course.

The bill passed out of the Senate on March 11; it is assigned to the Judiciary Committee in the House.

SB 13-192: Extending the Time Period for Regulatory Agencies to Perform Criminal History Checks Under Exigent Circumstances

On Friday, February 22, 2013, Sen. Rollie Heath introduced SB 13-192 – Concerning the Ability of Government Agencies to Extend the Time Permitted for Action Based on the Results of Fingerprint-Based Criminal History Record Checks. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

In statutes relating to licensing of taxicab drivers and other regulated professions, as well as other statutes, the regulatory agency is given a period of time to issue or deny an operating permit or take other action on the basis of a fingerprint-based criminal history record check through the Colorado bureau of investigation. A recent backlog in processing these record checks has made it difficult for agencies to meet the statutory deadline. The bill allows an agency to extend the statutory time period for action in these situations upon finding that exigent circumstances exist. The bill passed out of the Senate on March 11; it is assigned to the State, Veterans, & Military Affairs Committee in the House.

Since this summary, the State, Veterans, & Military Affairs Committee referred the bill, unamended, to the House Committee of the Whole.

SB 13-183: Prohibiting Common Interest Communities from Restricting Xeriscape or Other Drought-Tolerant Landscapes

On Tuesday, February 19, 2013, Sen. Morgan Carroll introduced SB 13-183 – Concerning Water Conservation Measures in Common Interest Communities. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill amends current law to specify that restrictive covenants or declarations, bylaws, and rules and regulations of common interest communities that prohibit or limit xeriscape or drought-tolerant vegetation or require ground covering vegetation to consist of any amount of turf grass are contrary to public policy and unenforceable. The bill also adds a definition of “xeriscape” to the “Colorado Common Interest Ownership Act” and says that a unit owners’ association (association) may not prohibit the use of xeriscape or other drought-tolerant vegetative landscapes to provide ground covering and may not levy fines against unit owners for violations of declarations, bylaws, or rules and regulations of the association for failure to adequately water when water restrictions are in place and the unit owner waters in compliance with those restrictions. On March 5, the bill passed out of the Senate; it has been assigned to the Local Government Committee in the House.

Colorado Court of Appeals: Mechanics’ Lien Had Priority Over Bank Lien But Lien Cannot Be Filed in Excess of Contract Price

The Colorado Court of Appeals issued its opinion in Byerly v. Bank of Colorado on Thursday, March 14, 2013.

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.

Summary and full case available here.

Colorado Court of Appeals: Contractual Provisions Barred Tort Claims Under Economic Loss Rule

The Colorado Court of Appeals issued its opinion in Engemen Enterprises, LLC v. Tolin Mechanical Systems Co. on Thursday, March 14, 2013.

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.

Summary and full case available here.