Tad S. Rogers, Plaintiff-Appellant,
Forest City Stapleton, Inc., and FC Stapleton II, LLC, Defendants-Appellees.
City and County of Denver District Court No. 10CV6699 Honorable Herbert L. Stern, III, Judge
Hamilton Faatz, PC, Clyde A. Faatz, Jr., Andrew C. Iverson, Greenwood Village, Colorado, for Plaintiff-Appellant
Senter Goldfarb & Rice, L.L.C., John D. Hayes, Denver, Colorado, for Defendants-Appellees
¶ 1 Defendants, Forest City Stapleton, Inc., and FC Stapleton II, LLC (collectively Forest City), appeal the judgment of liability based on jury verdicts finding that they breached their implied warranty to, and created a nuisance against, plaintiff Tad S. Rogers. We conclude that an implied warranty of suitability can exist between a developer who sells a vacant lot and a homeowner who is not the first purchaser of that lot. However, because the trial court did not properly instruct the jury about the circumstances that give rise to such an implied warranty and the jury did not make factual findings related to those legal issues, we are unable to determine whether such an implied warranty exists here.
¶ 2 We also conclude that the evidence was insufficient to support the jury's verdict on the nuisance claim. Therefore, we reverse the implied warranty and nuisance judgments and remand for retrial on only the implied warranty claim.
¶ 3 Forest City is the master developer for the redevelopment of the old Stapleton International Airport into a mixed-use community that will include about 12, 000 residences. As master developer, Forest City subdivides the approximately 4700 acres into lots, some of which are for residential use. Forest City then sells the residential lots to homebuilders, who build homes on the lots and sell them to homeowners. Although Forest City does not itself build the homes, it does select the builders and styles of homes that can be built on each individual lot to maintain a desired architectural and design aesthetic for the Stapleton community.
¶ 4 Park Creek Metropolitan District (PCMD), a governmental subdivision of the state, was responsible for installing the public infrastructure in Stapleton, including the roads. To help it accomplish the infrastructure installation, PCMD hired Forest City as its development manager. As development manager, Forest City made recommendations to the PCMD board regarding which trade contractors it should hire to install the infrastructure. The PCMD board considered those recommendations and then entered into contracts with trade contractors of its choice to build the infrastructure.
¶ 5 Forest City sold the vacant residential lot at issue here to a homebuilder, with which Rogers contracted to build a home. Rogers paid the builder an extra fee to include a basement that could later be finished. The home also included a foundation drain system designed to collect ground water into a sump pit and be pumped out into the yard by a sump pump. After Rogers moved into the home, he noticed that the sump pump was operating more often than he expected and, after hiring engineers to investigate, discovered that the ground water level was higher than he had believed it to be.
¶ 6 Rogers filed suit against Forest City, asserting numerous claims. The only claims litigated at trial were those for breach of implied warranty, nuisance, and negligent misrepresentation. Rogers' breach of implied warranty claim alleged that Forest City impliedly warranted to him that his lot was suitable for a home with a basement that could be finished, when in fact it was not. His nuisance claim alleged that a mineral called calcite leached out of the recycled concrete aggregate base course (RABC) used to construct the roads in Stapleton and hardened in his foundation drain system, interfering with its function. He alleged that Forest City was liable for this "by having placed RABC in the roadbed adjacent to [his home]."
¶ 7 At trial, Forest City named the homebuilder and several others as nonparties at fault. Both sides presented a large amount of expert testimony from engineers about the nature of the subsurface on Rogers' lot, how suitable the lot was for a home with a basement, the condition and functionality of the foundation drain system, and the consequences of using RABC in building roads, among other topics. The jury found for Rogers on all three claims and awarded damages. Forest City appeals the judgment on the breach of implied warranty and nuisance claims.
II. Breach of Implied Warranty Instruction
¶ 8 Forest City argues that the trial court erred by instructing the jury that it could find that an implied warranty runs from a developer to a homeowner under the circumstances of this case. We review de novo whether the trial court's instruction properly stated the law. Day v. Johnson, 255 P.3d 1064, 1067 (Colo. 2011). We conclude that the trial court's instructions did not accurately inform the jury regarding when an implied warranty runs from a developer to a homeowner.
¶ 9 Several Colorado cases have addressed whether, and under what circumstances, an implied warranty runs from the seller of a vacant residential lot to the individual who eventually purchases a home built on that lot. Two of these cases, when considered together, help define the circumstances under which such an implied warranty exists.
¶ 10 In Rusch v. Lincoln-Devore Testing Laboratory, Inc., 698 P.2d 832 (Colo.App. 1984), the developers sold an undeveloped but improved lot to the homeowner, who then acted as his own contractor and built a home on the lot. Id. at 833. After the home was built, subsidence and lateral movement of the soil beneath the home caused extensive structural damage to the home. Id. The homeowner sued the developer for breach of implied warranty of suitability. Id. at 834. A division of this court was asked to decide whether the trial court erred by instructing the jury that a parcel of land purchased for the purpose of building a home on it carries with it an implied warranty that it was suitable for that purpose. Id.
¶ 11 The division noted that implied warranties of habitability and workmanlike construction are based on the fact that builder-vendors and purchasers from builder-vendors are rarely in equal bargaining positions. Id. Instead, the
builder-vendor expressly or impliedly holds himself out as having the expertise necessary to construct a livable dwelling, and the purchaser relies upon the representations that the new house will be suitable as a home. These expectations reflect the fact that an experienced builder is in a far better position to evaluate the structural condition of a house than most purchasers.
Id. (citation omitted). The division then distinguished the sale of an unimproved lot from that of a lot that had been extensively modified for sale as a site for a home. Id. at 835. Because the purchaser of an improved lot, like the purchaser of a new home, is not in as equal a position as the developer to appreciate the existence or quality of these improvements, the purchaser will generally rely on the developer's skill or expertise in making the improvements. Id.
Accordingly, the division held that
if land is improved and sold for a particular purpose, if vendor has reason to know that the purchaser is relying upon the skill or expertise of the vendor in improving the parcel for that particular purpose, and the purchaser does in fact so rely, there is an implied warranty that the parcel is suitable for the intended purpose.
¶ 12 From the second case, Beeftu v. Creekside Ventures LLC, 37 P.3d 526 (Colo.App. 2001), we see that the reasoning in Rusch may support the conclusion that an implied warranty may run to a purchaser of the lot who is not the first purchaser.
¶ 13 In Beeftu, a developer graded a lot for residential construction, sold the lot to a builder, the builder built a home on it, and sold the home and lot to a homeowner. Id. at 527. The grading plan the developer submitted to the city specified that any home built on the lot would not have a walkout basement because it would be incompatible with the grading and drainage plan for the lot. Id. Nevertheless, the builder built a home with a walkout basement and sold it to the homeowner. Id. The basement flooded repeatedly and the homeowner sued the developer for breach of implied warranty of ...