Shaw Constr., LLC v. United Builder Servs., Inc.

• Decision Date: 02 February 2012
• Docket Number: No. 11CA2351.,11CA2351.
• Citation: 296 P.3d 145
• Parties: SHAW CONSTRUCTION, LLC, Third–Party Plaintiff–Petitioner, v. UNITED BUILDER SERVICES, INC.; and MB Roofing, Inc., Third–Party Defendants–Respondents.
• Court: Colorado Court of Appeals

296 P.3d 145

SHAW CONSTRUCTION, LLC, Third–Party Plaintiff–Petitioner,

v.UNITED BUILDER SERVICES, INC.; and MB Roofing, Inc., Third–Party Defendants–Respondents.

No. 11CA2351.

Colorado Court of Appeals, Div. A.

Feb. 2, 2012.

Murphy Decker Hensen & Cook–Olson, P.C., C. Todd Drake, Michael J. Decker, Eric M. Kirby, Littleton, Colorado, for Third–Party Plaintiff–Petitioner.

Gifford Stevens, LLC, John H. Stevens, Amanda L. Tobey, Denver, Colorado, for Third–Party Defendant–Respondent United Builder Services, Inc.

Lasater & Martin, P.C., Janet B. Martin, Melissa Ogburn, Highlands Ranch, Colorado, for Third–Party Defendant–Respondent MB Roofing, Inc.

Opinion by Judge WEBB.

¶ 1 In this interlocutory appeal, we decide two questions of first impression under the Construction Defect Action Reform Act, sections 13–20–801, et seq., C.R.S.2011 (“CDARA”). First, section 13–20–805, C.R.S.2011 (“section 805”), tolls construction defect claims against only parties who receive actual notice of a claim. Second, in applying the statute of repose, section 13–80–104, C.R.S.2011 (“section 104”), to a multi-phase construction project, an improvement may be a discrete component of the larger project, which can be substantially completed before the entire project is finished. Therefore, we affirm the trial court's summary judgments for third-party defendants, United Builder Services, Inc. and MB Roofing, Inc. (“subcontractors”), and against third-party plaintiff-petitioner, Shaw Construction, LLC, on the basis that its claims were barred by the statute of repose.

I. Facts and Procedural Background

¶ 2 Plaintiff, Roslyn Court at Stapleton Homeowners Association (“HOA”), which is not a party to this appeal, alleged construction defects in the Roslyn Court condominium complex, on which Shaw had been the general contractor. The project had been built in three phases. It included eighty residential units in thirty-three separate buildings, fifteen garage structures, and additional elements such as sidewalks, alleys, benches, courtyards, and landscaping.

¶ 3 Shaw hired United Builder Services to hang drywall and MB Roofing to install roofs, gutters, and downspouts. The City and County of Denver issued certificates of occupancy (“COs”) for each residential building (between Sept. 24, 2003 and Oct. 28, 2003 for phase I; Oct. 31, 2003 and Jan. 29, 2004 for phase II; and Jan. 22, 2004 and March 10, 2004 for phase III). The CO for the last building in the project was issued on March 10, 2004. Subcontractors worked on this building. However, the project's architect did not certify completion of all known remaining architectural items in the project until June 8, 2004.

¶ 4 On May 15, 2007, Shaw received a notice of claim letter from the HOA under the CDARA. Following the statutory requirements, Shaw and the HOA attempted to resolve the claim without litigation. On January 21, 2009, the HOA filed this action against the developers of the property, but did not add Shaw as a defendant until January 28, 2010, when it amended its complaint to allege negligence, negligence per se, and breach of implied warranty of habitability against Shaw. On March 29, 2010, Shaw filed its answer and third-party complaint, naming subcontractors, among others, as third-party defendants. Shaw sent its only notice of claim under the CDARA to subcontractors the following day.

¶ 5 Subcontractors moved for summary judgment on the basis that the six-year statuteof repose had run.¹ They argued that because substantial completion had occurred not later than the date the final CO was issued, March 10, 2004, the statute of repose barred Shaw's March 29, 2010, third-party complaint. Shaw responded that because substantial completion had not occurred until the architect certified completion on June 8, 2004, its third-party complaint was timely. However, Shaw failed to include in the summary judgment record any evidence that subcontractors' work continued after the date of the CO on the last building. Alternatively, Shaw argued that under section 805, the HOA's notice of claim had tolled all claims associated with the project, including those against subcontractors, although they had not received actual notice of the claim.

¶ 6 The trial court granted subcontractors' motions. Finding no disputed issues of material facts, the court concluded that substantial completion occurs “when an improvement to real property achieves a degree of completion at which the owner can conveniently utilize the improvement for the purpose it was intended.” It further concluded that because the purpose of the project was “to provide a residence for occupants,” the last CO indicated substantial completion of the project. The court rejected Shaw's argument that substantial completion occurred only once “all known remaining architectural items [had] been completed,” noting that “completion of all known remaining architectural items goes beyond substantial completion.” The court also rejected Shaw's tolling argument, holding that the plain language of the statute required actual notice to a party to toll a claim as to that party.

¶ 7 The trial court granted Shaw's motion for certification of the summary judgment orders under C.A.R. 4.2. We accepted the interlocutory appeal.

II. Accepting the Petition

¶ 8 “[T]his court, in its discretion, ‘may’ order that an interlocutory appeal be heard.” Adams v. Corrections Corp. of America, 264 P.3d 640, 643 (Colo.App.2011). No published decision under C.A.R. 4.2 and section 13–4–102.1, C.R.S.2011, has addressed the interlocutory appeal of an order dismissing a third-party complaint for indemnity, such as Shaw filed here.

¶ 9 The statute requires that the order involve “a controlling and unresolved question of law.” Here, the questions of tolling and substantial completion, as discussed in sections V and VII below, are unresolved in Colorado. Shaw's view of either would require that the third-party claims be reinstated.

¶ 10 The statute also requires that appellate review “may promote a more orderly disposition or establish a final disposition of the litigation.” ² Because some of this language is similar to the federal interlocutory appeal statute, 28 U.S.C. § 1292(b) (“may materially advance the ultimate termination of the litigation”), federal authority can be informative. Adams, 264 P.3d at 643. However, use of the disjunctive “or” in our statute connotes an alternative. See, e.g., Quintano v. People, 105 P.3d 585, 591 (Colo.2005). Hence, because our statute is broader than its federal counterpart, we decline to follow cases such as Allegheny Airlines, Inc. v. LeMay, 448 F.2d 1341 (7th Cir.1971) (rejecting interlocutory appeal of third-party indemnity claim because success by primary defendant would moot those issues), cited in the dissent. Instead, we conclude that granting the petition here “may promote a more orderly disposition” of the litigation, for two reasons.

¶ 11 First, because potential liability of the third-party defendants would incent them to contribute to an overall settlement, appellate reinstatement of the third-party claims would increase the likelihood of a settlement. See Joe Grasso & Son, Inc. v. United States, 42 F.R.D. 329, 334 (S.D.Tex.1966) (immediate appellate resolution of third-party claim “could well result in settlement thereby easingthe Court's crowded docket”), aff'd,380 F.2d 749 (5th Cir.1967).

¶ 12 Second, were Shaw to be found liable, later obtain reversal of the summary judgment for the subcontractors, and then try its indemnity claims against them, Shaw would have to present evidence of the alleged construction defects. However, Shaw could recover less than its liability established in the principal action if a second jury came to a different conclusion on the nature and extent of those defects, even though Shaw presented evidence similar to that in the first trial. Appellate reinstatement of the third-party claims precludes the risk of inconsistent verdicts. See, e.g., Green v. Duke Power Co., 305 N.C. 603, 608, 290 S.E.2d 593, 596 (1982) (allowing an interlocutory appeal due to “the possibility that a party will be prejudiced by different juries in separate trials rendering inconsistent verdicts on the same factual issue”).

III. Standard of Review

¶ 13 We review de novo the trial court's summary judgment ruling. Brodeur v. Am. Home Assurance Co., 169 P.3d 139, 146 (Colo.2007). Summary judgment is appropriate only where the pleadings and supporting documents reveal no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. In re Tonko, 154 P.3d 397, 402 (Colo.2007). The nonmoving party is entitled to the benefit of all favorable inferences reasonably drawn from the undisputed facts, and all doubts must be resolved against the moving party. Martini v. Smith, 42 P.3d 629, 632 (Colo.2002).

IV. “Substantial Completion”—Question of Fact or Law

¶ 14 Shaw's Petition for Interlocutory Appeal identifies as the first issue presented “Whether the determination of when substantial completion occurs [under the CDARA] is a question of fact for the trier of fact or a question of law for the court?” According to the trial court, “Whether an improvement to real property is ‘substantially complete’ is a question of law because it involves the interpretation of the terms of § 13–80–104(1)(a) and the application of this statute to undisputed facts.” We agree with the trial court, but for purposes of this opinion, amplify its statement as follows.

¶ 15 First, Shaw correctly points out that the CDARA does not define “substantial completion.” In 1986, an amendment removed the prior definition, “the degree of completion of an improvement to real property at which the owner can conveniently utilize the improvement for the purpose it was intended.” § 13–80–127, C.R.S.1973; Ch. 114, sec. 1, § 13–80–104, 1986 Colo. Sess. Laws 697 (repealing former § 13–80–127). The legislative history does not...