picture1

The Hall & Evans Rocky Mountain Litigation Reporter is a periodic online newsletter directed to a select group of individuals and organizations. In this edition, we summarize two recent decisions from the Colorado Supreme Court and two from the Colorado Court of Appeals.

Topics In This Issue


Constructive Notice Sufficient Under Foreclosure Statute
Attorney May Pay Fees for Second Counsel to Represent Client on Appeal
Contractor Performing Repair Services for Insured Constitutes “First Party Claimant”
Faulty Work That Causes Damage to Non-Defective Elements of Property is Covered Under CGL Policy

Constructive Notice Sufficient Under Foreclosure Statute

Rule 120, C.R.C.P., governs the process whereby an interested person may request a court to enter an order authorizing the sale of real property when the power of sale is contained in a deed of trust given to a public trustee. To request an order authorizing sale, the interested person files a verified motion with the court. Rule 120 requires that the motion state the name and last known address of the grantor of the deed of trust and that the motion be mailed to each person named in the motion at their last known address.

Betty Amos and her late husband, Theo Righetti, owned a condominium unit in Aspen. To obtain a loan, Amos and Righetti gave Equitable Bank a trust deed to the condominium. After Righetti died, Amos was named co-personal representative of Righetti’s estate. After Amos fell into default on the loan, Equitable Bank sought foreclosure on the condominium. As part of that effort, Equitable Bank filed a Rule 120 motion to authorize sale and sent notice of the proceedings to Amos in her individual capacity. Neither Amos nor the Righetti estate objected to the sale. After the foreclosure sale was completed, however, Amos objected and sought to have the sale set aside, arguing that Equitable Bank did not fulfill the notice requirements of Rule 120.

The trial court found that Equitable Bank sent Righetti’s notice to the wrong address and thus did not strictly comply with Rule 120. Nonetheless, the trial court also found that this error was a mere technicality and did not justify setting aside the sale, since plaintiffs received actual notice and could not show any prejudice. The Court of Appeals agreed with these findings, reasoning that actual notice to Amos in her individual capacity constituted constructive notice to the Righetti estate, through Amos in her representative capacity. The Supreme Court then affirmed the decision of the Court of Appeals. The Supreme Court concluded that a completed foreclosure sale need not be set aside for failure to comply strictly with the notice requirements of Rule 120, when actual notice has been received. The Righetti estate received constructive notice through the actual notice given to Amos in her individual capacity. Full text of opinion . . . Amos v. Aspen Alps, 2012 Colo. LEXIS 428 (Colo. 2012).

Attorney May Pay Fees for Second Counsel to Represent Client on Appeal

Elizabeth Flood sued the Mercantile Adjustment Bureau (“MAB”) under Colorado’s Fair Debt Collection Act. This statute allows the prevailing party to recover attorney’s fees. Flood was represented in the trial court by attorney Gary Merenstein. After Flood lost in county court, she elected to appeal to district court. Because Merenstein did not have appellate experience, he retained other attorneys to represent Flood on the appeal to district court. Through the appellate process and after remand, Flood ultimately prevailed.

As the prevailing party, Flood sought an award of attorney’s fees under the debt collection statute. These fees included the fees paid by Merenstein for the appellate portion of the case. MAB objected to the payment of these fees under Rule 1.8 of the Rules of Professional Conduct. The district court rejected that argument and allowed Flood to recover the attorney’s fees incurred on appeal and paid by Merenstein. On appeal to the Supreme Court, the Supreme Court affirmed this portion of the district court’s ruling.

Rule 1.8 of the Colorado Rules of Professional Conduct provides that a lawyer “shall not provide financial assistance to a client in connection with pending or contemplated litigation. However, an exception to this rule states that “A lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client.” The Supreme Court reasoned that an “expense of litigation” is an “expenditure of money, time, labor or resources to accomplish the process of carrying on a lawsuit.” Because the expense of appellate counsel is related to conducting litigation and not to non-litigation-related living expenses, payment of the fees for Flood’s appellate counsel was within the ambit of the exception to Rule 1.8 for litigation expenses. Full text of opinion . . . Mercantile Adjustment Bureau v. Flood, 2012 Colo. LEXIS 389 (Colo. 2012).

Contractor Performing Repair Services for Insured Constitutes “First Party Claimant”

Larson Enterprises performed repair work on the roof of homes insured by Allstate. The contract for repair work gave Larson the right to deal directly with Allstate on behalf of the insured. After repairing a roof, Larson sent a bill for its services to Allstate for payment under the insurance policy issued to the insured. When Allstate denied a portion of the claim, Larson sued Allstate for bad faith under a Colorado insurance statute, C.R.S. §§ 10-3-115 and 10-3-116.

The trial court granted Allstate’s motion for summary judgment, finding that Larson did not meet the statute’s definition of “first party claimant.” Larson appealed, and the Court of Appeals reversed, finding that the language of the statute unambiguously encompassed someone like Larson who submits a claim on behalf of the insured. Under the statute, the term “first party claimant” includes a company “asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy.” The Court of Appeals found that this is exactly what Larson was doing: asserting an entitlement to benefits (payment for repair of property damage) on behalf of the insured homeowner. Full text of opinion . . . Larson Enterprises v. Allstate Insurance, 2012 Colo. App. LEXIS 1863 (Colo. App. 2012).

Faulty Work That Causes Damage to Non-Defective Elements of Property is Covered Under CGL Policy

In 2005, Colorado Pool Systems, Inc. (“Colorado Pool”) agreed to build a swimming pool at Founders Village Pool and Community Center. To build the shell for the pool, workers poured concrete around a rebar frame that was located inside an excavation. After the concrete shell was poured, an inspector noticed that some rebar was too close to the surface. Colorado Pool proposed various remedial measures, but Founders rejected those. Demolition then began. Colorado Pool paid for the work, expecting to be reimbursed. When Colorado Pool ran out of money, the general contractor completed the demolition work and billed its costs to Colorado Pool. During this time, Colorado Pool held a comprehensive general liability insurance policy with Scottsdale Insurance Company. Almost six weeks after being notified of Colorado Pool’s claim, Scottsdale denied coverage. Colorado Pool then sued Scottsdale for breach of the duty to defend and indemnify under the CGL policy, bad faith and other claims.

The trial court granted Scottsdale’s motion for summary judgment. It ruled that the Construction Professionals Commercial Liability Insurance Act, C.R.S. § 13-20-808 (the “Builder’s Insurance Act”) does not apply retroactively and that Scottsdale’s policy did not cover the claimed damages. After appeal to the Colorado Court of Appeals, the Court of Appeals reversed in a 30 page opinion. The Court of Appeals first determined that although the General Assembly intended the Builders Insurance Act to apply retroactively, to do so would violate the constitutional prohibition against retroactive legislation. Having held that the Builders Insurance Act did not apply, the Court of Appeals then turned to the common law to interpret the Scottsdale policy. The Court determined that the word “accident,” which was not defined in the policy, was ambiguous because it could be read either narrowly, to include only events that occur by chance, or broadly to include any unintended event. The Court reasoned that because the term “accident” is ambiguous, it must be construed broadly in favor of the insured. Nonetheless, the Court of Appeals rejected the interpretations of the policy offered by both parties to the case, finding that the parties’ interpretations failed to account for other terms in the policy. The Court then adopted the reasoning of the Tenth Circuit Court of Appeals in Greystone Construction v. National Fire and Marine Ins. Co., 661 F.3d 1272 (10th Cir. 2011).

In Greystone, the Tenth Circuit held that “injuries flowing from improper or faulty workmanship constitute an occurrence so long as the resulting damage is to non-defective property that is caused without expectation or foresight.” The Colorado Court of Appeals elected to apply the Greystone test because it gives effect both to a broad interpretation of the word “accident” and to the policy’s other provisions. Applying the Greystone test to the facts before it, the Colorado Court of Appeals held that the Scottsdale policy does not cover the cost of demolishing and replacing the defective pool because an insured should expect to incur the cost of replacing faulty workmanship, but that the policy does cover consequential damage, including the cost to repair non-defective elements of the property damaged by the defective work (such as the cost of ripping out and replacing the surrounding sidewalk, deck, retaining wall and electrical conduits). The Court of Appeals then remanded the matter to the trial court for resolution of other issues. Full text of opinion . . .Colorado Pool Systems v. Scottsdale Ins. Co., 2012 Colo. App. LEXIS 1732 (Colo. App. 2012).


Contributing Authors and Editors

Andrew D. Ringel, Esq. at (303) 628-3453 or by e-mail at ringela@hallevans.com

Robert M. Ferm, Esq. at (303) 628-3380 or by email at fermr@hallevans.com

Malcolm Mead, Esq. at (303) 628-3301 or by email at meadm@hallevans.com

Inquires or Comments

If you have inquiries or comments, please contact Robert Ferm, Tel: (303) 628-3380; or Malcolm Mead, Tel: (303) 628-3301

Disclaimer

The Hall & Evans Rocky Mountain Litigation Reporter is for informational purposes only and not for the purpose of offering legal advice or a legal opinion on any matter. No reader should act or refrain from acting on the basis of any statement in the Hall & Evans Rocky Mountain Litigation Reporter without seeking advice from qualified legal counsel on the particular facts and circumstances involved. Links to full text of opinions are provided by the Colorado Bar Association (http://www.cobar.org).

If you wished to be removed from our mailing list, please send us an email to newsletter@hallevans.com.

© Hall & Evans, L.L.C. 1125 17th Street, Suite 600 Denver, CO 80202-2052 Main Line: (303) 628-3300