Hoang v. Arbess, No. 02CA0417.

Citation80 P.3d 863
Decision Date10 April 2003
Docket NumberNo. 02CA0417.
PartiesDoug T. HOANG, Hieu T. Van, Gregory Storbakken, Joan Storbakken, Allan Walts, and Marsha Walts, Plaintiffs-Appellants, v. Jack D. ARBESS, Defendant-Appellee.
CourtCourt of Appeals of Colorado

Certiorari Denied December 1, 2003.1

Vanatta, Sullan, Sandgrund & Sullan, P.C., Scott F. Sullan, Ronald M. Sandgrund, Joseph F. Smith, Greenwood Village, CO, for Plaintiffs-Appellants.

White & Steele, P.C., Glendon Laird, John M. Lebsack, Denver, CO, for Defendant-Appellee.

Opinion by Judge DAVIDSON.

In this residential construction defect case, plaintiffs, Doug T. Hoang, Hieu T. Van, Gregory Storbakken, Joan Storbakken, Allan Walts, and Marsha Walts, appeal from the trial court's judgment entered on a directed verdict dismissing their claims against defendant, Jack D. Arbess. We reverse and remand.

Plaintiffs purchased homes built by Monterra Homes (Powderhorn), LLC, whose members consisted of defendant and other LLC's. Defendant also was Monterra's manager. He hired a construction superintendent and some sales and support staff, but used subcontractors to do all the construction.

Plaintiffs' homes were built on a geological formation known as the Deeply Dipping Bedrock Area. The building sites contain angled layers of Pierre Shale and other soils that, when exposed to water, expand and exert pressure on surface structures. These expansive soils and the upturned bedrock require special construction techniques to lessen the risk of the soils damaging homes built on the land.

Defendant had not previously built homes in Colorado and was unfamiliar with the risks of expansive soils. He hired a soils engineer to provide engineering recommendations and a structural engineer to implement those recommendations. The soils engineer advised defendant in person and in a written report of the dangers of building in the area and recommended specific construction and landscaping techniques to mitigate those risks.

The homes were not constructed in accordance with these engineering and landscape recommendations and, as a result, suffered serious damage. Plaintiffs presented evidence that although they were told that their homes were built on expansive soils, they were not told of the specific geological conditions of their land and were told that Monterra constructed the homes to avoid damage from the expansive soils.

Plaintiffs brought suit against Monterra and defendant for negligence, negligent misrepresentation, negligent nondisclosure or concealment, and violation of the disclosure requirements of § 6-6.5-101, C.R.S.2002, and of the Colorado Consumer Protection Act. Monterra and defendant brought a third-party claim against the structural engineer.

After presentation of all the evidence, the court directed a verdict in favor of defendant on all claims, finding that the evidence revealed no circumstances which would deny defendant the protection of the corporate structure. The court found that defendant acted only as a corporate employee and that the facts did not create a legal duty with regard to defendant individually.

The jury found in favor of plaintiffs and against Monterra and awarded significant damages to each homeowner. The jury also found the structural engineer negligent, but found Monterra completely liable for the damages.

Plaintiffs appeal from the directed verdict in favor of defendant, arguing that, contrary to the trial court's ruling, defendant can be held individually liable for his negligent conduct and for statutory violations. We agree with plaintiffs.

I.

As a threshold matter, we deny defendant's motion to dismiss this appeal and reject defendant's contention that plaintiffs waived their right to appeal by relying on the court's directed verdict during a subsequent garnishment proceeding.

Plaintiffs have pursued their judgment against Monterra through a garnishment proceeding against Monterra's insurer. In the garnishment proceeding, the insurer contended that because Monterra "expected or intended" the damages to occur, its policy provided no coverage. As part of their argument for coverage, plaintiffs suggested to the trial court that, because the court had directed a verdict in favor of defendant on plaintiffs' negligence claim, the court necessarily found that defendant did not act intentionally or, in the words of the insurance policy, did not "expect or intend" damages to occur. And, as plaintiffs' reasoning went, if defendant, Monterra's sole actor, did not expect or intend damages to occur, neither did Monterra.

Defendant argues here that plaintiffs received a benefit from the directed verdict by relying on it in making this argument and have therefore waived their appeal of that verdict. We are not persuaded. Accepting an award or legal advantage under a judgment generally waives a party's right to appeal that judgment when the appeal may result in a determination that the party is not entitled to what has been accepted. The doctrine precludes a party who accepts a legal advantage under a judgment from seeking review "which may again put in issue his right to the benefit which he has accepted." HealthONE v. Rodriguez, 50 P.3d 879, 886-87 (Colo.2002)(quoting Farmers Elevator Co. v. First Nat'l Bank, 181 Colo. 231, 234, 508 P.2d 1261, 1263 (1973)); see DiFrancesco v. Particle Interconnect Corp., 39 P.3d 1243 (Colo.App.2001)

.

However, plaintiffs' reliance on the court's directed verdict as a basis for a legal argument in the garnishment proceeding is not an "award or legal advantage" under the judgment.

Formulating a legal argument from a court's ruling, without more, is not a tangible benefit and is not the kind of legal advantage contemplated by the waiver principle. See DiFrancesco v. Particle Interconnect Corp., supra; First Nat'l Bank v. Theos, 794 P.2d 1055 (Colo.App.1990)

. Here, defendant does not contend that the garnishment court relied on plaintiffs' argument in deciding that Monterra did not expect or intend damages to occur. Indeed, the court's ruling does not include any such reasoning.

Moreover, plaintiffs' successful appeal will have no effect on either the verdict against Monterra or plaintiffs' ability to collect from the insurer through the garnishment proceeding. Plaintiffs raise no argument in this appeal that defendant expected or intended damages to occur; all of plaintiffs' claims against defendant sound in negligence. See Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083 (Colo.1991)

(recovery will be barred only if the insured intended the damages, or if it can be said that the damages were, in a broader sense, "intended" by the insured because the insured knew that the damages would flow directly and immediately from its intentional act).

II.

Plaintiffs contend that the trial court erred by directing a verdict in favor of defendant on their claims for negligence, negligent misrepresentation, and negligent nondisclosure. Specifically, plaintiffs argue that, contrary to the trial court's ruling, it was for the jury to determine whether defendant is liable for his own individual torts. Defendant argues that, as a matter of law, only Monterra, and not defendant acting in his capacity as a corporate manager or officer, had a duty to the home purchasers. We agree with plaintiffs.

A builder has a duty to use reasonable care and skill in construction of a home, and the failure to do so constitutes negligence. See Cosmopolitan Homes Inc. v. Weller, 663 P.2d 1041, 1042, 1043 (Colo. 1983)

("An obligation to act without negligence in the construction of a home is independent of contractual obligations such as an implied warranty of habitability." "A contractual obligation gives rise to a common law duty to perform the work subject to the contract with reasonable care and skill.").

The issue here is whether such a duty applies to defendant. While an officer of a corporation cannot be held personally liable for a corporation's tort solely by reason of his or her official capacity, an officer may be held personally liable for his or her individual acts of negligence even though committed on behalf of the corporation, which is also held liable. Snowden v. Taggart, 91 Colo. 525, 531, 17 P.2d 305, 307 (1932)("To permit an agent of a corporation, in carrying on its business, to inflict wrong and injuries upon others, and then shield himself from liability behind his vicarious character, would often both sanction and encourage the perpetration of flagrant and wanton injuries by agents of insolvent and irresponsible corporations."); see Sanford v. Kobey Bros. Constr. Corp., 689 P.2d 724 (Colo.App.1984)

(corporate representative found jointly and severally liable for construction defects he authorized). The parties do not dispute that this principle applies equally to a manager of a limited liability company. See generally § 7-80-101, et seq., C.R.S.2002; Thompson, The Limits of Liability in the New Limited Liability Entities, 32 Wake Forest L.Rev. 1, 21 (1997).

Moreover, that a defendant is at all times acting on behalf of the corporation does not relieve the defendant of liability. See Galie v. RAM Assocs. Mgmt. Servs., Inc., 757 P.2d 176 (Colo.App.1988)

; Sanford v. Kobey Bros. Constr. Corp., supra. And the corporate veil need not be pierced where a tort action is brought against an officer or director and the elements of the tort are proved. See Sanford v. Kobey Bros. Constr. Corp., supra; Huffman v. Poore, 6 Neb.App. 43, 569 N.W.2d 549 (1997).

Defendant nonetheless contends that, even if under some circumstances a corporate officer can be held personally liable for his or her torts, here, the court correctly found insufficient evidence that he, as an individual, participated in the torts alleged. We disagree.

To be found personally liable to third persons for a tort, the officer of a corporation must have participated in the tort. See Snowden v. Taggart, supra (defendant was chief tortfeasor; he personally conceived the...

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