Hildebrand v. New Vista Homes Ii Llc

• Decision Date: 10 November 2010
• Docket Number: 09CA0695.,Nos. 08CA2645,s. 08CA2645
• Citation: 252 P.3d 1159
• Parties: Mark A. HILDEBRAND and Mark L. Hildebrand, Plaintiffs–Appellants and Cross–Appellees,v.NEW VISTA HOMES II, LLC, Defendant–Appellee and Cross–Appellant,andRichard M. Reeves, Defendant–Appellee.
• Court: Colorado Court of Appeals

252 P.3d 1159

Mark A. HILDEBRAND and Mark L. Hildebrand, Plaintiffs–Appellants and Cross–Appellees,

v.NEW VISTA HOMES II, LLC, Defendant–Appellee and Cross–Appellant,andRichard M. Reeves, Defendant–Appellee.

Nos. 08CA2645

09CA0695.

Colorado Court of Appeals, Div. IV.

Nov. 10, 2010.

Sullan², Sandgrund, Smith & Perczak, P.C., Scott F. Sullan, Curt T. Sullan, Leslie A. Tuft, Denver, Colorado, for Plaintiffs–Appellants and Cross–Appellees.Fowler, Schimberg & Flanagan, P.C., Katherine Taylor Eubank, Jeffrey B. Stalder, Adam B. Linton, Denver, Colorado, for Defendants–Appellees and Cross–Appellant.Opinion by Judge WEBB.

Plaintiffs, Mark A. (son) and Mark L. Hildebrand (father), purchased a new home being built by defendant, New Vista Homes II, LLC. After movement of the basement floor slab damaged the home, they sued both New Vista and co-defendant, Richard M. Reeves, its manager, under the Construction Defect Action Reform Act, sections 13–20–801 to –807, C.R.S.2010 (CDARA). They pleaded negligence, negligent misrepresentation, violation of the Colorado Consumer Protection Act, sections 6–1–101 to –1120, C.R.S.2010 (CCPA), and lack of statutory disclosure concerning expansive soils. They also pleaded breach of implied warranty against New Vista.

The court entered a directed verdict for Reeves. The jury returned a $540,754 verdict on all of plaintiffs' claims against New Vista. The court denied its motion for judgment notwithstanding the verdict (JNOV) and entered judgment. Plaintiffs moved for prejudgment interest, which the court granted in part and denied in part. Plaintiffs appeal and New Vista cross-appeals. We affirm in part, reverse in part, and remand for further proceedings against Reeves.

I. Directed Verdict and JNOV

Plaintiffs contend the trial court erred by directing a verdict for Reeves. New Vista contends the trial court erred by denying its motions for directed verdict and JNOV on all claims. We agree with plaintiffs as to the negligence and negligent misrepresentation claims against Reeves, agree with New Vista as to the CCPA claim, and otherwise uphold the trial court's rulings.

We review de novo rulings on motions for directed verdict and JNOV. Farmland Mut. Ins. Cos. v. Chief Indus., Inc., 170 P.3d 832, 838 (Colo.App.2007). A directed verdict is appropriate only where “the evidence compels the conclusion that reasonable jurors could not disagree and that no evidence or inference has been received at trial upon which a verdict against the moving party could be sustained.” Brossia v. Rick Constr., L.T.D. Liability Co., 81 P.3d 1126, 1131 (Colo.App.2003). A JNOV can be entered “only if the evidence, viewed in the light most favorable to the nonmoving party, is such that no reasonable person could reach the same conclusion as that reached by the jury.” Archer v. Farmer Bros. Co., 70 P.3d 495, 499 (Colo.App.2002), aff'd, 90 P.3d 228 (Colo.2004).

The CDARA applies to all civil actions “claiming damages, indemnity, or contribution in connection with alleged construction defects.” § 13–20–802; see, e.g., Land–Wells v. Rain Way Sprinkler & Landscape, LLC, 187 P.3d 1152, 1154 (Colo.App.2008). The statute was designed to regulate and streamline litigation against construction professionals. Land–Wells, 187 P.3d at 1154; see §§ 13–20–801 to –807, 13–80–104, C.R.S.2010. It does not alter the substantive elements of any common law claims. Land–Wells, 187 P.3d at 1154. But as relevant here, it limits a negligence claim based on noncompliance with industry standards to recovery of “actual damages.” See § 13–20–806(1).

A. Negligence

A builder has a duty to use reasonable care and skill in constructing a home, and the failure to do so constitutes negligence. Hoang v. Arbess, 80 P.3d 863, 867 (Colo.App.2003).

1. Plaintiffs' Evidence

Reeves and a financial partner owned New Vista. Reeves testified that he was its sole employee and was “responsible for running the company.”

Reeves selected Terracon, a geotechnical engineering firm, to perform the soil investigations. Terracon prepared four reports on the subdivision and an individual report on each lot. The subdivision reports provided in relevant part:

• “[S]tructural basement floor systems are recommended.”

• On some of the lots, “claystone bedrock was found to be moderately to highly expansive. We anticipate that the claystone bedrock will be encountered at or near basement floor slab bearing elevation.... If little or no movement can be tolerated, the use of a structural floor system ... is recommended as a positive means of eliminating the potentially detrimental effects of floor slab movement.”

• “The use of structural floor systems ... is recommended for basement construction on the majority of the lots.... The use of a slab-on-grade floor system is generally considered acceptable for basement construction on Lots 39 though 41.”

None of these reports recommended a slab-on-grade floor for Lots 1–38.

When plaintiffs purchased the home on lot 24, it already had a slab-on-grade basement floor, which, as defendants' counsel conceded at oral argument, Reeves had selected. New Vista built all homes in the subdivision on lots 1 to 38 with this type of floor.

Terracon's engineer testified that “slab-on-grade basement floor systems were not considered acceptable ... on lots other than 39 though 41 in Block 1.” He added:

Q: Okay. And [Reeves] had asked you whether or not he could use slab on grade on lots—in the subdivision, correct?

A: Yes.

Q: Within [lots] 1 through 38, right?

A: Right.

Q: And you had told him no. You were recommending structural floors?

A: Yes.

The structural engineer selected by Reeves testified:

Q: Okay. Do you remember ever having had any discussions after having read the soils report with Mr. Reeves about, you know, slab on grade as risky or could be problems with it or anything—anything like that?

A: Well, I'm sure we had conversations to that effect. I'm not sure that—I think the consensus was the soils were somewhat expansive but not horribly expansive. So at any rate, he wasn't going to build them with structural floors as I recall.

(Emphasis added.)

Terracon's July 3, 2001 report on Lot 24 provided:

To reduce the potential for perched groundwater to enter the basement of the residence and affect the foundation soils, exterior drain systems should be provided around the perimeter of the basement. The drainage system should be constructed around the exterior perimeter of each basement foundation, and sloped ... to a suitable outlet, such as a sump and pump system.

Reeves testified that he received this report, but decided not to install sump-pumps on some lots, including Lot 24:

Q: All right. You knew as the manager of New Vista, LLC that you weren't paying for pumps; right?

A: We did not.

Q: And you set the policy not to put pumps in the sump pits?

A: That's not true. If there was no water present, we didn't put a sump pump in. If there was water present, you put a pump in.

Q: That was your decision?

A: Yes, that was my decision.

Q: The soils report doesn't say if you [don't] see water the first day that you put the drain in, then you don't have to put a pump in; does it?

A: It does not.

2. New Vista

Notwithstanding this testimony, New Vista presents three reasons why the trial court should have directed a verdict in its favor on plaintiffs' negligence claim. We reject each reason in turn.

First, New Vista argues that because the purchase agreements allowed buyers either to assume the risks of a slab-on-grade floor or to choose a structural floor, the disclaimers in plaintiffs' purchase agreement barred their negligence claim.

Paragraph 13.a. of the purchase agreement provides:

[T]here is a potential of expansive soils on the property which would cause cracking, heaving, breaking, vertical displacement, moisture and other adverse effects on the basement floor in the residence.

This paragraph describes two basement floor options—slab-on-grade or structural floor—and explains that “if [a structural floor basement] is selected, the additional cost of the basement floor system will be added to the purchase price ....” It warns:

By making his selection of the type of construction for the basement floor, Purchaser has agreed to assume all liability for any cracking, heaving, breaking, vertical displacement, moisture, or other adverse effects on the Residence resulting from the type of basement floor construction selected by Purchaser in light of the soils conditions on the property.

Similarly, paragraph 13.b.(iii) provides:

Purchaser acknowledges that Purchaser's choice has been made with full awareness of the risks attendant to such selection and the potential problems and damage which may occur to the Residence because of the Basement Floor System selected. Purchaser acknowledges that the Soils Report recommends a structural basement floor for any finished or habitable space in the basement ....

(Emphasis added.)

The jury was instructed:

As an affirmative defense to [plaintiffs'] negligence claims, [New Vista] claims it disclaimed liability for any such negligence ... [in plaintiffs'] purchase contract ....

Even if the wording of these disclaimers might preclude a negligence claim, plaintiffs presented evidence from which the jury could have determined that these disclaimers did not apply to them.¹

Under Paragraph 13.b.(iii), “Purchaser acknowledges that Seller has provided Exhibit F [DESCRIPTION OF BASEMENT FLOOR CONSTRUCTION ALTERNATIVES] to Purchaser.” Exhibit F described “ALTERNATIVE I” as “a floating concrete slab-on-grade floor in the basement,” which “is not to be selected for an area intended to be finished, and “ALTERNATIVE II” as a structural floor system, which “is the only alternative allowing for future finished or habitable space.” However, the purchase agreement signed by plaintiffs had a line through Exhibit F and the notation “N/A.”

In this regard, son testified:

Q: Did [the sales agent] show you Exhibit F...