Denny Const. v. City and County of Denver

• Decision Date: 22 February 2007
• Docket Number: No. 05CA1535.,05CA1535.
• Citation: 170 P.3d 733
• Parties: DENNY CONSTRUCTION, INC., a Colorado corporation, Plaintiff-Appellee and Cross-Appellant, v. CITY AND COUNTY OF DENVER, Colorado, acting by and through its BOARD OF WATER COMMISSIONERS, a municipal corporation of the State of Colorado, Defendant-Appellant and Cross-Appellee.
• Court: Colorado Court of Appeals

170 P.3d 733

DENNY CONSTRUCTION, INC., a Colorado corporation, Plaintiff-Appellee and Cross-Appellant, v. CITY AND COUNTY OF DENVER, Colorado, acting by and through its BOARD OF WATER COMMISSIONERS, a municipal corporation of the State of Colorado, Defendant-Appellant and Cross-Appellee.

No. 05CA1535.

Colorado Court of Appeals, Div. V.

February 22, 2007.

Certiorari Granted November 26, 2007.

Peterson Dymond Reagor, LLP, David D. Schlachter, Douglas W. Colville, Ashley R. Chagnon, Greenwood Village, Colorado, for Plaintiff-Appellee and Cross-Appellant.

Board of Water Commissioners, Patricia L. Wells, Gail J. Rosenschein, Kristi K. Riegle, Daniel J. Arnold, Denver, Colorado, for Defendant-Appellant and Cross-Appellee.

Opinion by Judge J. JONES.

The City and County of Denver, acting through its Board of Water Commissioners (Denver Water), appeals a judgment entered on a jury verdict awarding damages in favor of Denny Construction, Inc. (Denny) on Denny's claim for breach of contract. Denny cross-appeals the trial court's order denying its request for costs. We reverse the award of damages for lost profits, but otherwise affirm the judgment. We further affirm the trial court's order denying Denny's request for costs.

I. Background

On June 5, 2002, as a result of a public bidding process in which Denny was the low bidder, Denver Water and Denny entered into a written contract whereby Denny agreed to build an office facility for $3.5 million. The contract required Denny to complete construction of the facility by July 7, 2003. However, due to a series of weather incidents and design changes, construction of the facility was delayed. Denny submitted several requests to extend the completion date for the project. Denver Water ultimately granted extensions to October 3, 2003; however, Denver Water did not grant several of the extensions requested by Denny.

Denver Water began occupying the facility in November 2003, a few days after a certificate of occupancy for the facility was issued. At that time, the project was largely, although not entirely, completed. The project remained uncompleted in the spring of 2004, and Denver Water declared Denny in default on April 23, 2004. At that point, Denny's surety, Insurance Company of the West (ICW), which issued the performance bond for the project, took over the project and completed the remainder of the construction. According to Denny, if all of its requests for extension of the completion date had been allowed, the date of completion would have been after the certificate of occupancy was issued, and therefore Denver Water would not have declared Denny in default.

Denver Water withheld over $260,000 of the contract amount, representing a five-percent retainage allegedly permitted by the contract and $84,000 for the cost to complete the remaining work. Denny alleged that this withholding rendered it unable to pay its subcontractors. Several subcontractors subsequently brought lawsuits against Denny seeking payment.

This case began when M.C.R. Construction (MCR), one of Denny's subcontractors, filed suit against Denny, Denver Water, and others (including ICW) to obtain funds withheld by Denver Water for work allegedly performed by MCR. Denny filed cross-claims against Denver Water for breach of contract and declaratory judgment. Denny alleged, among other things, that Denver Water wrongfully withheld amounts payable under the contract, modified the scope of the work without following contractually required procedures, wrongfully asserted a claim against the performance bond, and failed to grant requested extensions of the completion date. Denny requested damages for payments due under the contract, loss of business reputation, diminution of its "credit status," and costs relating to Denver Water's claim against ICW on the performance bond.

Denver Water filed cross-claims against Denny for, among other things, breach of contract for Denny's failure to complete construction by the contractual completion date and its failure generally to perform all the work required by the contract. Denver Water sought damages, including liquidated damages as set forth in the contract.

Prior to trial, all claims were settled except for Denny's and Denver Water's cross-claims against each other. A jury trial was held on the cross-claims for breach of contract. At trial, Denny asserted breaches of express provisions of the contract and the implied covenant of good faith and fair dealing.

The jury found in favor of Denny on its claim and awarded it $1,063,000 in damages, broken down as follows: $25,000 for payment owed under the contract for work performed; $152,000 for costs, expenses, and unreimbursed payments by ICW as a result of Denver Water's claim on the performance bond; $41,000 for attorney fees incurred by Denny in defending against claims brought against it by its unpaid subcontractors; $380,000 for lost profits through the date of trial attributable to contracts Denny could not bid on due to impairment of its bonding capacity; and $465,000 for such lost profits after the date of trial. The jury also found in Denny's favor on Denver Water's cross-claims.

The trial court granted Denny's request for prejudgment interest on damages for amounts unpaid under the contract, but denied Denny's request for prejudgment interest on the remaining categories of damages, as well as its request for costs.

II. Denver Water's Appeal

A. Implied Covenant of Good Faith and Fair Dealing

Denver Water contends that the trial court erred in allowing Denny's claim for breach of the implied covenant of good faith and fair dealing to go to trial because Denny failed to properly plead such a breach and because Denny's claim invoked express terms of the contract. We disagree with both contentions.

1. Adequate Notice of Claim

One month before the scheduled trial date, Denver Water filed a motion in limine, asking the trial court to bar evidence and argument at trial on Denny's claim for breach of the implied covenant of good faith and fair dealing because Denny did not expressly and separately allege this claim in its cross-claim. Denver Water asserted that it was not aware of any such claim until Denny's counsel included it within the proposed trial management order, and thus its ability to defend against the claim was substantially prejudiced. The trial court denied Denver Water's motion in limine on the first day of trial, ruling that Denny's claim for breach of the implied covenant of good faith and fair dealing was subsumed in its breach of contract claim.

We review a trial court's ruling on a motion in limine for an abuse of discretion. See Ehrlich Feedlot, Inc. v. Oldenburg, 140 P.3d 265, 272 (Colo.App.2006). A trial court's ruling is an abuse of discretion if it is manifestly arbitrary, unreasonable, or unfair. Beauprez v. Avalos, 42 P.3d 642, 652 (Colo. 2002); Lakeside Ventures, LLC v. Lakeside Dev. Co., 68 P.3d 516, 518 (Colo.App.2002).

In order to sufficiently state a claim for relief, a claim must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." C.R.C.P. 8(a)(2). The primary purpose of this requirement is to give fair notice of the claims asserted to the adverse party, thereby allowing the adverse party to answer those claims and prepare for trial. Smith v. Mills, 123 Colo. 11, 13, 225 P.2d 483, 484 (1950). Accordingly, "[i]f sufficient notice concerning the transaction involved is afforded the adverse party, the theory of the pleader is not important." Bridges v. Ingram, 122 Colo. 501, 506, 223 P.2d 1051, 1054 (1950) (emphasis added); see also Hutchinson v. Hutchinson, 149 Colo. 38, 41, 367 P.2d 594, 596 (1961); City of Boulder v. Pub. Serv. Co., 996 P.2d 198, 203 (Colo.App.1999) (we are "not bound by the form in which [a party] asserts its claim, but rather it is the facts alleged and the relief requested that decide the substance of a claim"). Moreover, we must construe pleadings liberally and resolve all doubts in favor of the pleader. Lyons v. Hoffman, 31 Colo.App. 306, 308, 502 P.2d 980, 982 (1972); Denver & Rio Grande Western R.R. Co. v. Wood, 28 Colo.App. 534, 538, 476 P.2d 299, 301 (1970).

Here, Denny's cross-claim alleged, among other things, that Denver Water "wrongfully withheld contract funds, modified the project specifications and scope of work without authorizing change orders, refused to pay for work completed, [and] wrongfully suspended work," and that Denver Water had "refuse[d] to grant extensions" of the contract completion date. These allegations put Denver Water on notice of the transactions as to which Denny sought to impose liability under its legal theory of breach of the implied covenant of good faith and fair dealing. Cf. Hinsey v. Jones, 159 Colo. 326, 329-30, 411 P.2d 242, 244 (1966) (allegation of breach of written contract did not preclude recovery on another theory where complaint gave notice of transaction).

Further, though the cross-claim did not use the words "implied covenant of good faith and fair dealing," it plainly stated a claim for breach of contract. Because the implied covenant of good faith and fair dealing is a contractual covenant, a breach of that covenant is a breach of contract. Wheeler v. Reese, 835 P.2d 572, 578 (Colo.App.1992). Thus, we agree with the trial court that the theory of breach of the implied covenant of good faith and fair dealing was subsumed within the breach of contract claim and did not have to be pled separately. See RoTec Servs., Inc. v. Encompass Servs., Inc., 359 S.C. 467, 597 S.E.2d 881, 883-84 (Ct.App. 2004) (breach of implied covenant of good faith and fair dealing is subsumed within a breach of contract claim; listing cases).

Denver Water's contention it lacked notice of this claim is belied by the record. In addition to the cross-claim itself, the theory was asserted in Denny's responses to interrogatories, submitted to Denver Water several months...