October 19, 2018

Colorado Court of Appeals: Restrictive Covenant Is Not Compensable Property Interest in Eminent Domain Case

The Colorado Court of Appeals issued its opinion in Town of Monument v. State of Colorado on Thursday, October 4, 2018.

Real Property—Eminent Domain—Restrictive Covenant—Compensable Property Interest.

The Town of Monument (the Town) bought a parcel of real property in a residential subdivision. The Town intended to construct a municipal water storage tank on the lot, but a restrictive covenant prohibiting such structures applied to all lots in the subdivision. The Town filed this case, seeking to use its power of eminent domain to have the court declare its property free of the restrictive covenant. Some lot owners in the subdivision intervened in the case and argued that because the restrictive covenant benefits all property in the subdivision, the Town cannot eliminate the restrictive covenant on its lot without paying every property owner in the subdivision an amount compensating each of them for the loss in value to their respective properties. The district court agreed with the landowners, and the parties stipulated to a dismissal of the case with prejudice.

On appeal, the Town argued that the district court erred in finding that the restrictive covenant was a compensable property interest to the surrounding landowners. The court of appeals determined that under Smith v. Clifton Sanitation District, 300 P.2d 548 (Colo. 1956), a restrictive covenant banning certain uses of property is not a compensable property interest in an eminent domain case.

The judgment was reversed and the case was remanded.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: City Improperly Imposed Use Tax on Purchases from Wholesalers that were Later Sold at Retail

The Colorado Court of Appeals issued its opinion in Big Sur Waterbeds, Inc. v. City of Lakewood on Thursday, October 4, 2018.

Sales and Use TaxDisplayed Furniture—Primary Purpose of Purchase.

The City of Lakewood (Lakewood) imposes use tax on tangible personal property purchased at retail and used in the city. The use tax does not apply to wholesale purchases (i.e., purchases for resale to others). Big Sur Waterbeds, Inc., Denver Mattress Co., LLC, and Sofa Mart, LLC (collectively, plaintiffs) purchase furniture tax-free from wholesalers worldwide and resell it in stores, including in Lakewood. At each Lakewood store, plaintiffs provide a showroom where they display furniture for customers to peruse and try out. Plaintiffs also maintain warehouses where they store the bulk of their inventory. Plaintiffs ultimately sell all the furniture, including the displayed furniture, and fill customer orders from either the warehouses or the showrooms. Plaintiffs’ customers pay Lakewood’s sales tax on each purchase.

Lakewood assessed use tax on plaintiffs’ purchases of displayed furniture from 2012 to 2015, on the theory that plaintiffs purchased the displayed furniture at retail for their own use in advertising their products. Plaintiffs challenged the assessments in the district court, which entered judgment in their favor.

On appeal, Lakewood contended that while plaintiffs’ inventory purchases were initially treated as exempt wholesale purchases, when a portion of this wholesale inventory was withdrawn for use as demonstration and promotion tools, the transactions were properly recharacterized as taxable retail transactions. Lakewood relied on its Initial Use Regulation and regulation 3.01.300(1)(b), pertaining to initial use of property, which focus on the primary purpose of the purchase. The court of appeals employed the “primary purpose” test from A.B. Hirschfeld Press, Inc. v. City and County of Denver, 806 P.2d 917, 918–26 (Colo. 1991), and determined that the totality of plaintiffs’ conduct indicates that they purchased the displayed furniture primarily for resale in an unaltered condition and basically unused. Because plaintiffs purchased the displayed furniture primarily for resale, not for their own use or consumption, the Initial Use Regulation does not apply. Similarly, regulation 3.01.300(1)(b), which pertains to tax-free purchases for resale that are later removed from inventory for the purchaser’s own use, does not apply because the displayed furniture was always available for resale and eventually sold. Therefore, Lakewood’s use tax does not apply to the retailers’ purchases and minor use of the furniture for display.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Entry of Charge Based on Jury’s Special Interrogatory Answers Violated Defendant’s Constitutional Right to Jury Trial

The Colorado Court of Appeals issued its opinion in People v. Oliver on Thursday, October 4, 2018.

Criminal Law—Possession of a Weapon by a Previous Offender—Right to Jury Trial—Waiver.

Defendant was tried on two felony menacing charges. Before trial, the parties agreed to bifurcate a possession of a weapon by a previous offender (POWPO) count. However, near the end of the trial, defense counsel agreed with the court’s suggestion of using a special interrogatory on possession instead of having a separate trial on the POWPO count after the jury returned its verdict on the menacing counts. Counsel also stipulated that defendant was a previous offender. The jury was not instructed on the POWPO charge. The jury acquitted defendant on one count and hung on the other. Based on the stipulation and the jury’s “yes” answer to the special interrogatory that asked whether defendant had possessed a firearm, the trial court entered a judgment of conviction for POWPO.

On appeal, defendant argued that the trial court directed a verdict on the POWPO charge in violation of his federal and state constitutional rights to a jury trial, which he did not personally waive. To return a verdict, a jury must have been instructed on the offense. Here, even if counsel stipulated to the prior offender element, defendant did not personally waive his right to have the jury return a verdict on the POWPO charge, and the trial court never told the jury that it was deciding the POWPO charge. Therefore, the judgment of conviction on the POWPO charge violated defendant’s constitutional right to a jury trial.

The judgment was reversed and the case was remanded for a new trial on this charge.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Announcement Sheet, 10/4/2018

On Thursday, October 4, 2018, the Colorado Court of Appeals issued three published opinions and 15 unpublished opinions.

People v. Oliver

Big Sur Waterbeds, Inc. v. City of Lakewood

Town of Monument v. State of Colorado

Summaries of these cases are forthcoming.

Neither State Judicial nor the Colorado Bar Association provides case summaries for unpublished appellate opinions. The case announcement sheet is available here.

Colorado Court of Appeals: Satisfaction of Statutory Criteria Qualifies Acquiring Employer as “Successor” for Unemployment Purposes

The Colorado Court of Appeals issued its opinion in Dos Almas LLC v. Industrial Claim Appeals Office on Thursday, September 20, 2018.

Unemployment Tax—C.R.S. § 8-76-104(1)(a)Successor Employer.

Dos Almas LLC began operating a restaurant after it acquired nearly all of the assets of WooPig LLC, which had operated a different restaurant at the same location. After the acquisition, Dos Almas applied for an unemployment compensation insurance account and a determination of employer liability by submitting a form along with a copy of the asset purchase agreement to the Department of Labor and Employment (Department).

A deputy ruled that Dos Almas was a successor employer to WooPig for unemployment compensation tax rate liability purposes because it met the requirements of C.R.S. § 8-76-104(1)(a) due to the acquisition. Dos Almas appealed more than eight months after the applicable 21-day time limit. Nevertheless, a hearing officer ruled that good cause was shown for the delay, and following a hearing the officer found that Dos Almas was not a successor entity to WooPig under the statutory criteria largely because it did not retain the employees as part of the asset sale. A panel of the Industrial Claims Appeal Office (the Panel) reversed. The Panel upheld the factual findings, but based on Dos Almas having acquired 90% of WooPig’s physical and intangible assets, ruled that it had acquired substantially all of WooPig’s assets and thereby met the statutory criteria to be considered a successor employer for unemployment compensation tax rate liability purposes.

On appeal, Dos Almas contended that the Panel erred in ruling that it is a successor to WooPig for unemployment tax rate liability purposes. The hearing officer’s factual findings support the conclusion that Dos Almas is a successor employer to WooPig for unemployment compensation tax rate liability purposes under the applicable statutory criteria in C.R.S. § 8-76-104(1)(a). Further, the lack of employee retention in the asset purchase transaction is irrelevant to the successor issues in this case. The Panel did not err.

The order was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Participation in Contractual Appraisal Does Not Preclude Insured’s Suit for Breach of Contract and Statutory Bad Faith

The Colorado Court of Appeals issued its opinion in Andres Trucking Co. v. United Fire and Casualty Co. on Thursday, September 20, 2018.

InsuranceBreach of ContractStatutory Bad Faith DelayAppraisal.

Andres Trucking Co. (Andres) operated a dump truck that caught fire while it was insured by United Fire and Casualty Co. (United). The parties agreed that the truck was a total loss but disagreed about its value. Ultimately, Andres filed an amended complaint alleging breach of contract and bad faith denial and delay of an insurance claim under C.R.S. §§ 10-3-1115 and -1116 and challenging the enforceability of the contractual appraisal provision. The district court struck the amended complaint on the ground that the insurance policy required an appraisal. Following an appraisal, United paid Andres the truck’s appraised value and moved for entry of judgment under C.R.C.P. 12(b)(5), contending that as a matter of law the appraisal process had resolved Andres’s claims. While this motion was pending, Andres moved to amend its complaint. The district court again denied the motion, reasoning that the appraisal process concluded the issues before the court, and entered judgment for United.

On appeal, Andres argued that the district court erred in dismissing its complaint because the appraisal process did not resolve whether United had breached the insurance policy or unreasonably denied or delayed payment of benefits. The court concluded that the appraisal process did not determine United’s liability for breach of contract or statutory bad faith delay. The district court erred in determining that the appraisal precluded Andres from pursuing these claims.

Andres also raised various challenges to the appraisal process itself. The court rejected the arguments that (1) the appraisal provisions are unconstitutional; (2) United did not properly invoke the appraisal because it never demanded it; and (3) the appraisal process did not result in a binding loss valuation. The appraisal award is a binding determination of the value of the insured property, and thus Andres may not further litigate that issue. The district court did not err in enforcing the appraisal provision.

The court also determined that the district court did not err in awarding United attorney fees, but it denied United’s request for appellate attorney fees.

The order approving the appraisal value was affirmed but the judgment was reversed and the case was remanded for reinstatement of the complaint. The order awarding United costs as the prevailing party was vacated but the order awarding United attorney fees for its response to Andres’ motion for clerk’s entry of default was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: C.R.C.P. 12(b)(5) and “Plausibility” Standard Do Not Apply to C.R.C.P. 16.2 Motions

The Colorado Court of Appeals issued its opinion in In re Marriage of Durie on Thursday, September 20, 2018.

Division of Marital Property—C.R.C.P. 16.2(e)(10)Post-Dissolution Proceeding—C.R.C.P. 12(b)(5).

Three years after a decree was entered incorporating a separation agreement dividing the parties’ marital property, wife moved under C.R.C.P. 16.2(e)(10) to reallocate proceeds from husband’s post-decree sale of business assets. She alleged that husband had failed to disclose facts that materially impacted the value of the parties’ business assets. In response, husband filed a motion to dismiss wife’s motion. The district court applied the plausibility standard in Warne and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554–56 (2007), and granted husband’s motion to dismiss. Wife moved for attorney fees, but the district court did not rule on her request.

On appeal, wife contended that the district court erred in dismissing her motion. After briefing, but before argument, a division of the court of appeals decided In re Marriage of Runge, 415 P.3d 884 (Colo.App. 2018), concluding that Rule 12(b)(5) and the Warne plausibility standard do not apply to a Rule 16.2(e)(10) motion. The court agreed with Runge and concluded that the district court erred in dismissing wife’s motion under that standard.

The court also rejected husband’s argument that C.R.C.P. 9(b), which requires that pleadings asserting fraud or mistake must allege the circumstances with particularity, applied in this context. Rule 16(e)(10) does not refer to fraud, but to misstatements or omissions. While some claims not denominated as fraud may be subject to the Rule 9(b) pleading requirements, the Rule 9(b) particularity requirement does not apply to Rule 16.2(e)(10) motions.

The parties also disagreed as to whether a movant under Rule 16.2(e)(10) can make allegations based on information and belief. The court concluded that Rule 8(e)(1) allows allegations based on information and belief in the context of a Rule 16.2(e)(10) motion, and wife properly included allegations based on information and belief in her motion.

However, wife’s allegations here did not enable the district court to conclude that her motion was sufficient on its face. The court instructed that (1) given Rule 16.2(e)(10)’s lack of applicable standard for determining a motion under the rule, a preponderance of the evidence standard should apply and the moving party bears the burden of proof; and (2) wife is entitled to undertake discovery in support of her motion.

The court further concluded that wife is entitled to seek attorney fees under C.R.S. § 14-10-119 on remand, but is not entitled to attorney fees under C.R.S. § 13-17-102. The district court may also award wife appellate attorney fees in its discretion under C.R.S. § 14-10-119.

The order was reversed and the case was remanded.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Phrase “Arising Under” in Arbitration Clause Should Be Interpreted Broadly

The Colorado Court of Appeals issued its opinion in Digital Landscape Inc. v. Media Kings LLC on Thursday, September 20, 2018.

Arbitration Clause “Arising Under”Broad DefinitionAttorney Fees.

Media Kings LLC (Media) entered into a contract to provide marketing services to Transcendent Marketing, LLC (Transcendent). Media then contracted with Digital Landscape Inc. (Digital) to provide advertising services to Transcendent. The contract between Media and Digital had an arbitration clause providing that any disputes arising under the agreement would be resolved by binding arbitration. Per the contract, Media agreed to pay Digital a portion of its earnings from Transcendent in exchange for Digital’s work on the project. Media failed to pay Digital, and Transcendent proposed that Digital take over the project. Digital’s principal officer agreed, but had one of his other companies take over the work. Thus, Media was effectively cut out of its agreement with Transcendent.

Digital sued Media for breach of contract, and as relevant here, Media filed a counterclaim alleging that Digital had breached the implied covenant of good faith and fair dealing. The district court ordered the parties to arbitrate the dispute. The arbitrator awarded Digital $68,197.41. While discussing the counterclaim, the arbitrator also referred to it as addressing a breach of Digital’s duty of loyalty to Media. The arbitrator decided that Digital still owed a duty of loyalty to Media that it had breached, and she awarded Media damages on the counterclaim. Lastly, finding that there was no prevailing party, she declined to award either party attorney fees. The district court confirmed the order.

On appeal, Digital contended that the arbitrator lacked jurisdiction to consider whether Digital had breached a duty of loyalty to Media because this claim did not “arise under” the arbitration clause. The court of appeals analyzed the phrase “arising under” and concluded that it was sufficiently broad to include the duty-of-loyalty counterclaim. Further, the arbitration clause was unrestricted.

Digital further contended that the arbitrator improperly converted the counterclaim alleging breach of implied covenant of good faith and fair dealing to a different one, breach of loyalty, which Media had not raised. It alleged that the ruling on this different claim was unfair and the award to Media was therefore void. The court found as an initial matter that the arbitrator did not intend to rule on a facially different counterclaim. But even assuming that she had, the different claim was within the issues that the parties had agreed to submit. The arbitrator did not exceed her powers because the substituted counterclaim “arose under” the contract between Digital and Media. Further, the evidence and arguments were encompassed in the breach-of-the-duty-of-good-faith-and-fair-dealing claim. The district court did not err when it confirmed the arbitrator’s award.

Finally, Digital argued that the arbitrator exceeded her authority by refusing to award attorney fees because neither party had prevailed. The court concluded there was clearly no prevailing party, so the arbitrator did not have to award attorney fees.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Whole Person Impairment Rating Relevant in Non-Workers’ Comp Personal Injury Case

The Colorado Court of Appeals issued its opinion in Herrera v. Lerma on Thursday, September 20, 2018.

Subsequent Accident Jury InstructionPersonal InjuryNegligenceEvidence RelevancyVoir Dire.

Defendant’s truck hit plaintiff’s car from behind as she slowed for traffic. A week later plaintiff was diagnosed with neck strain. The following year, plaintiff was involved in a second car accident in which she hit a car from behind. She testified that the second accident did not injure her.

A year later, plaintiff sought additional medical treatment for her neck and lower back. She sued defendant for negligence, claiming damages of $38,356.46. She was awarded $1,980.81 by a jury in economic damages and zero on her claims of physical impairment and noneconomic damages.

On appeal, plaintiff argued it was error to instruct the jury to consider whether the second accident worsened any injuries, damages, or losses caused by the first accident because defendant hadn’t presented any evidence supporting such an instruction. Here, neither party presented evidence that plaintiff suffered any injury or aggravation of an existing injury because of the second accident, so the evidence was insufficient to justify instructing the jury about the second accident and the trial court abused its discretion. Further, but for the trial court’s improper instruction, the jury might have reached a different verdict.

Plaintiff also argued that the trial court erred by excluding her expert’s testimony about her 15% permanent whole body impairment rating. Before trial, defendant requested that the court exclude testimony about plaintiff’s impairment rating. While it allowed testimony that plaintiff suffered an impairment, the court excluded testimony about the impairment rating as irrelevant under CRE 401 and prejudicial under CRE 403. The court of appeals could not discern any reason that the percentage rating of the impairment would not be relevant, and found reasons why it would be relevant. The court similarly found no support for the trial court’s belief that such testimony would be unfairly prejudicial, confusing, or misleading. The trial court abused its discretion by excluding the testimony.

Plaintiff finally contended that it was error for the trial court to prevent her counsel from asking prospective jurors during voir dire whether they had an interest in defendant’s insurance carrier. Counsel was entitled to ask the insurance question during voir dire to determine the biases and prejudices of the prospective jurors, so the trial court abused its discretion.

The judgment was reversed and the case was remanded.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Four-part Gallion Test Properly Applied in Determining Driver’s Attempt to Retract Refusal Untimely

The Colorado Court of Appeals issued its opinion in Schulte v. Colorado Department of Revenue on Thursday, September 20, 2018.

Criminal Law—Motor Vehicle—Express Consent—Blood or Breath Test—Refusal Untimely as a Matter of Law.

Police responded to a report of a car parked in the middle of a field. When an officer arrived, he found Schulte asleep in the car with the engine running. A deputy sheriff contacted Schulte and had him perform voluntary roadside maneuvers. Schulte did not perform the tests like a sober person, so the deputy asked him to submit to a chemical test under Colorado’s express consent law. Schulte refused. The deputy later arrested him, drove him to jail, turned him over to booking officers, and drove back to the scene. When the deputy returned to the jail, he completed the license revocation paperwork and began to serve Schulte with the notice of revocation. Before he could do so, Schulte asked to take a blood test. The deputy told him that it was too late. Schulte requested a Division of Motor Vehicles hearing to contest his license revocation. The hearing officer revoked his driving privileges, and the district court upheld the revocation.

On appeal, Schulte contended that the hearing officer and the district court erred when they decided, as a matter of law, that his retraction of his refusal was untimely. Colorado’s express consent law requires a driver to cooperate with law enforcement’s request to take a blood or breath test. If a licensee refuses to submit to a test, law enforcement must serve a notice of revocation on him or her and then take possession of the driver’s license. If a licensee does not offer to retract an initial refusal while the officer remains engaged in requesting or directing the completion of the test, the attempted retraction is untimely as a matter of law. Here, substantial evidence supports the hearing officer’s determination that Schulte did not cooperate with the deputy while the deputy was engaged in requesting or directing the test. The retraction of the refusal was untimely as a matter of law.

The order was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Imposition of Valid Sentence Ends Criminal Court’s Subject Matter Jurisdiction

The Colorado Court of Appeals issued its opinion in People v. Chavez on Thursday, September 20, 2018.

Criminal Procedure—Post-Conviction Remedies—Search Warrant—Crim. P. 35—Return of Property—Sentencing—Jurisdiction.

In 2004, the police obtained a warrant to search Chavez’s house as part of an investigation and seized evidence they used to charge Chavez in five separate criminal cases, none of which underlie this appeal. In the case underlying this appeal, Chavez pleaded guilty to both sexual assault and kidnapping and was sentenced for those crimes. Three years later, Chavez moved the criminal court for the return of the items seized during the search of his house. The district court denied the motion on the merits.

On appeal, Chavez contended that the district court erred in denying his motion for return of property. The imposition of sentence ends a criminal court’s subject matter jurisdiction, with the sole exception of motions brought under Crim. P. 35. Because a motion for return of property is not authorized by Crim. P. 35, criminal courts do not have jurisdiction over such motions made after sentencing. Thus, the criminal court lacked jurisdiction to address the merits of Chavez’s motion.

The order denying Chavez’s motion was vacated for lack of jurisdiction.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Court Need Not Make Findings Regarding Whether Restitution Would Cause “Serious Hardship or Injustice” to Juvenile

The Colorado Court of Appeals issued its opinion in People in Interest of A.V. on Thursday, September 20, 2018.

Juvenile Delinquency—Sentencing—Restitution—Waiver—Evidence—Reasonableness.

A.V. was arrested in connection with a series of home and business burglaries. The victim businesses included Animal Attractions Pet Store (Animal Attractions) and the Country Inn Restaurant (Country Inn). Country Inn sustained extensive fire damage in the burglary, and the fire destroyed most of the business. As part of a global case disposition, A.V. pleaded guilty to some counts in exchange for dismissal of other counts, stipulating to a factual basis and agreeing to pay restitution to all victims, including those in the dismissed cases. The juvenile court ordered restitution of $1,000 to Country Inn’s owner for the deductible and $681,600 to Country Inn’s insurer for the repair work. The juvenile court further found that the loss amounts submitted by Animal Attractions and its insurer in the victim impact statements sufficiently established the victims’ losses to order restitution in the amount requested.

On appeal, A.V. contended that no facts exist to show that he caused the Country Inn fire and that the prosecution failed to meet its burden of proving proximate cause for these claimed losses. Here, A.V. waived his challenge to proximate cause by (1) stipulating to a factual basis in the plea agreement and at the providency hearing; (2) stipulating to pay restitution to the victims of the dismissed counts (in this case the arson count) in the plea agreement; (3) agreeing with the prosecutor before the restitution hearing that A.V.’s stipulated factual bases in all cases included a stipulation to causation; and (4) asking the court to order $470,874.47 for losses related to the dismissed arson count.

A.V. next contended that the juvenile court erroneously ordered him to pay the estimated repair costs to Country Inn’s insurer, rather than actual costs incurred to date. Here, the prosecution presented competent evidence of the estimated expenses, which A.V. did not rebut. Therefore, the juvenile court did not err.

A.V. also contended that the invoices submitted with Animal Attractions’ victim impact statement were insufficient to establish restitution and that the prosecution was required to present witness testimony to satisfy its burden. The restitution statute does not require the prosecution to present evidence in the form of testimony. Here, because the documents support the court’s order and A.V. offered no rebuttal evidence, the juvenile court’s order was not an abuse of discretion.

A.V. last contended that the juvenile court was required to make specific reasonableness findings before ordering restitution and that $692,806.20 was not a reasonable amount of restitution to be awarded against an incarcerated juvenile. However, the statute’s plain language mandates that the juvenile court order full restitution for the victims’ losses, and the juvenile court is not required to make specific reasonableness findings before imposing restitution.

The restitution orders were affirmed.

Summary provided courtesy of Colorado Lawyer.