Weize Co. Llc v. Colo. Reg'l Constr. Inc.

Decision Date10 June 2010
Docket NumberNo. 09CA1369.,09CA1369.
Citation251 P.3d 489
PartiesWEIZE COMPANY, LLC, Plaintiff–Appellee and Cross–Appellant,andMartz Supply Co., Intervenor–Appellee and Cross–Appellant,v.COLORADO REGIONAL CONSTRUCTION, INC., Defendant–Appellant and Cross–Appellee.
CourtColorado Court of Appeals

OPINION TEXT STARTS HERE

Vernon A. Evans, Golden, Colorado, for PlaintiffAppellee and Cross–Appellant.DiGiacomo, Jaggers & Perko, LLP, Gerald H. Jaggers, Douglas J. Perko, Arvada, Colorado, for IntervenorAppellee and Cross–Appellant.Lansky, Weigler & Porter, P.C., Wendy E. Weigler, Denver, Colorado, for DefendantAppellant and Cross–Appellee.Opinion by Judge WEBB.

In this construction dispute, plaintiff, Weize Company, LLC, and plaintiff-intervenor, Martz Supply Company, raise claims for breach of contract, to foreclose a mechanics' lien, and under section 38–22–127, C.R.S.2009 (trust fund statute). Following a bench trial, the court dismissed the lien foreclosure claim for failure to record a lis pendens and awarded damages against defendant, Colorado Regional Construction, Inc. (CRC), on the other two claims. Both sides appealed. We affirm, reinstate the trial court's order awarding 12% prejudgment interest on treble damages awarded under the trust fund statute, and remand for further proceedings on attorney fees.

I. Facts

CRC, a general contractor, hired Weize as plumbing subcontractor. Martz provided plumbing materials to Weize. After Weize had completed all of the underground plumbing and some of the above-ground plumbing, CRC replaced it with a different plumbing subcontractor.

When CRC failed to pay Weize for the completed work, it recorded mechanics' liens against the project and commenced this action. Martz intervened, joining in the claims for breach of contract and lien foreclosure. It added a claim against CRC for treble damages and attorney fees under the trust fund statute. The trial court allowed CRC to substitute bonds for the liens, which were released.

II. Master Plumber Licensure

CRC first contends the trial court erred by precluding its defense that all claims were barred because Weize's principal, John Neiberger, was not licensed as a master plumber nor did Weize employ a master plumber on the project. We disagree.

CRC relies on section 12–58–105, C.R.S.2009, which provides, as relevant here:

(1) No person shall engage in or work at the business, trade, or calling of a residential, journeyman, or master plumber in this state until he has received a license from the division of registrations ....

(3) ... In order to act as a plumbing contractor, the person, firm, partnership, corporation, association, or other organization must either be, or employ full-time, a master plumber, who shall be in charge of the supervision of all plumbing work performed by such contractor.

See Carter v. Thompkins, 133 Colo. 279, 282, 294 P.2d 265, 266 (1956) (limiting recovery by a plumber to services and materials for which a license was not required; [c]ontracts for services by one who is required by statute to have a license ... and who does not have such a license are generally unenforceable”).

The trial court made no finding whether Weize violated this provision. For the following reasons, we conclude that CRC is not entitled to reversal, even if Weize failed to comply with section 12–58–105.

A. Standing

We first reject CRC's contention that because lack of licensure rendered the contract illegal, Weize did not have standing.

Standing is a jurisdictional limitation that can be raised for the first time on appeal. Anson v. Trujillo, 56 P.3d 114, 117 (Colo.App.2002). It requires that a claimant have suffered actual injury to a legally protected interest. Ainscough v. Owens, 90 P.3d 851, 856 (Colo.2004). Such an interest “may be tangible or economic such as ... one arising out of contract.” Id. (internal quotations omitted).

CRC's standing argument relies solely on Potter v. Swinehart, 117 Colo. 23, 184 P.2d 149 (1947) (action by wholesale purchaser should have been dismissed because defendant-seller not licensed to sell liquor at wholesale). The supreme court observed, [s]ince plaintiff seeks relief under the terms of an illegal contract, he has no standing in the courts of this state.” Id. at 28, 184 P.2d at 152.

Potter does not include any analysis of standing. The cases on illegal contracts cited in Potter do not refer to standing. Potter has never been cited for the proposition that illegal contracts implicate standing. Carter did not mention standing. More recent Colorado cases presented with such contracts do not refer to standing. See, e.g., Feiger, Collison & Killmer v. Jones, 926 P.2d 1244, 1251 (Colo.1996) (illegal contracts are void as against public policy); Equitex, Inc. v. Ungar, 60 P.3d 746, 750 (Colo.App.2002) (same). Thus, we conclude that the statement is dicta, “which is not binding on us.” See McCallum Family L.L.C. v. Winger, 221 P.3d 69, 73 (Colo.App.2009).

CRC cites no other case from any jurisdiction, nor have we found one, rejecting a claim based on an illegal contract for lack of standing. Other jurisdictions treat an illegal contract as an affirmative defense, not a lack of standing.1 We discern no reason to hold otherwise, and thus turn to CRC's arguments concerning illegality as an affirmative defense.

B. Illegality as an Affirmative Defense

We need not address CRC's alternative contention that the trial court erred in holding illegality was insufficiently pled as an affirmative defense, because in the next subsection we conclude that the trial court properly struck all of CRC's affirmative defenses as a discovery sanction.2

C. Sanctions

Weize moved to compel CRC to make initial disclosures three months after Weize and Martz had made their disclosures. When CRC did not respond, the trial court ordered it to submit initial disclosures by September 4, 2008.

On October 24, Weize requested the trial court to enter a default judgment because CRC had not yet made its disclosures. The court found that CRC was “in violation both of the Colorado Rules of Civil Procedure, and the Order of this Court issued on August 25, 2008,” but declined to enter default judgment because:

The Court finds the sanction advocated by Plaintiff to be exceptionally harsh for a pro se Defendant who now has counsel. The Court is happy to consider an intermediate sanction, if Plaintiff can suggest one which the Court finds reasonable.

CRC did not submit its disclosures until November 12. Weize and Martz then moved for limited sanctions. Again, CRC did not respond. The court struck all of CRC's counterclaims and affirmative defenses.

We review discovery sanctions for an abuse of discretion and will uphold the decision unless it is manifestly arbitrary, unreasonable, or unfair. Pinkstaff v. Black & Decker (U.S.) Inc., 211 P.3d 698, 702 (Colo.2009). [T]he courts are given flexibility in choosing the appropriate sanction.” Nagy v. District Court, 762 P.2d 158, 160 (Colo.1988). C.R.C.P. 37(c) permits striking affirmative defenses. The most extreme sanction is default judgment. Trattler v. Citron, 182 P.3d 674, 680 (Colo.2008); see C.R.C.P. 37(c).

This case is distinguishable from Pinkstaff, on which CRC relies, where the supreme court concluded that striking the answer and affirmative defenses was “tantamount to an entry of default judgment” because the sanction “effectively denie[d] [defendants] the opportunity to litigate the merits of the dispute.” Pinkstaff, 211 P.3d at 703–04; see also Nagy, 762 P.2d 158, 162 (“it was a clear abuse of discretion for the trial court to impose a sanction equivalent to dismissal”). Here, CRC was able to challenge the value of labor and materials that Weize claimed to have furnished despite its affirmative defenses having been stricken.

CRC's argument that this sanction was disproportionate to its conduct because the trial court did not find prejudice is insufficient to show an abuse of the trial court's considerable “discretion in imposing sanctions for non-compliance with rules.” Pinkstaff, 211 P.3d at 702–03. CRC cites no case, nor have we found one in Colorado, finding an abuse of discretion for striking affirmative defenses.

Unlike in Trattler, 182 P.3d at 679, on which CRC also relies, CRC violated a court order. Contrary to CRC's assertion, Pinkstaff does not diminish the significance of such a violation because the supreme court explained that although the trial court had found a violation of its order, “the court did not point to specific discoverable items that had not been disclosed or any particular portions of the court's September 10 order which had not been complied with.” Pinkstaff, 211 P.3d at 701. And because violating a court order constitutes “a sufficient level of culpability for default,” Kwik Way Stores, Inc. v. Caldwell, 745 P.2d 672, 677 (Colo.1987), it also adequately supports the lesser sanction imposed here.

Where a party fails to meet disclosure deadlines, the burden is on the nondisclosing party to show that the failure was harmless. Todd v. Bear Valley Village Apartments, 980 P.2d 973, 978 (Colo.1999). But CRC failed to respond to the motion for limited sanctions. See C.R.C.P. 121 § 1–15(3) (“Failure of a responding party to file a responsive brief may be considered a confession of the motion.”). Under these circumstances, we cannot hold that the court abused its discretion because it made no finding of prejudice to Weize or Martz.

Accordingly, we conclude that the trial court did not err in striking affirmative defenses.

III. Trust Fund

CRC next contends the trial court erred in finding that it violated the trust fund statute, for two reasons. First, the record does not support rejecting CRC's good faith defense under subsection 2 of the trust fund statute; and second, substituting bonds for the liens released CRC from the requirement to hold funds in trust under subsection 3 of the trust fund statute. We reject both arguments.

The trust fund statute provides a framework for...

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