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Broomfield Senior Living Owner, LLC v. R.G. Brinkmann Co.

Court of Appeals of Colorado, Fifth Division

March 9, 2017

Broomfield Senior Living Owner, LLC, a Delaware limited liability company; and Sunrise Development, Inc., LLC, a Virginia corporation, Plaintiffs-Appellants,
R.G. Brinkmann Company, d/b/a Brinkmann Constructors, a Missouri corporation, Defendant-Appellee.

         City and County of Broomfield District Court No. 14CV30139 Honorable C. Scott Crabtree, Judge.

          Fox Rothschild LLP, Patrick J. Casey, Spencer L. Sears, Risa B. Brown, Denver, Colorado, for Plaintiffs-Appellants

          Markusson, Green, and Jarvis, Gregg S. Rich, Daniel R. Coombe, Wyatt M. Cox, Denver, Colorado, for Defendant-Appellee


          FREYRE JUDGE

         ¶ 1 In this construction defect case involving a senior assisted and independent living facility (senior facility), we must decide whether the parties' contract or relevant Colorado statutes govern the accrual of defect claims. To do so, we must decide a matter of first impression - whether a senior facility constitutes "residential property" that is protected by a provision of the Construction Defect Action Reform Act (CDARA) entitled the "Homeowner Protection Act of 2007" (HPA).[1] The HPA renders a contract's limitation or waiver of CDARA's rights and remedies void as against public policy in cases involving claims arising from residential property.

         ¶ 2 Plaintiffs, Broomfield Senior Living Owner, LLC and Sunrise Development, Inc., LLC (collectively Broomfield), appeal the trial court's order granting summary judgment for defendant, R.G. Brinkmann Company d/b/a Brinkmann Constructors (Brinkmann). Broomfield brought claims against Brinkmann for breach of contract, negligence, negligence per se, negligent misrepresentation, [2] and breach of express warranties. Brinkmann raised both contractual limitations and statutory limitations defenses to all of Broomfield's claims. Because we conclude that the term "residential property" in the HPA unambiguously includes senior facilities, we find the contract's accrual provisions void as against public policy. Therefore, the relevant statutory accrual provisions apply here. We further conclude that genuine issues of material fact remain regarding (1) when the defects were discovered and any claims accrued; (2) whether Brinkmann engaged in impermissible design services outside of the contract; (3) whether Brinkmann was given an adequate opportunity to correct the defects; and (4) whether the defects alleged are latent or patent. Accordingly, we reverse and remand for further proceedings.

         I. Background

         ¶ 3 In 2007, Sunrise Development and a former owner entered into an American Institute of Architects Standard Form of Agreement contract (the contract) for the construction of a senior living community (the building) in Broomfield, Colorado.[3] The contract contains a general warranty provision, § 3.5, which guarantees that the materials and equipment used will "be of good quality" and that the work will be "free from defects not inherent in the quality required or permitted, and that the work will conform to the requirements of the Contract Documents." In addition to the general warranty provision, the contract includes an additional warranty (§ 12.2.2) for latent defects discovered after the date of final completion. See infra Appendix 1. In relevant part, this additional warranty extends the warranty period by one year following discovery of the latent defect. It requires the owner to promptly notify the contractor of any defect and provides that an owner who fails to provide prompt notice of a defect waives the right to require its correction or to make a claim for breach of warranty. A contractor's failure to correct the defect in a reasonable period of time permits the owner to make the correction.

         ¶ 4 The contract also includes a clause (§ 13.7) limiting Brinkmann's liability in the event the work was defective. See infra Appendix 2. This clause contains three separate accrual provisions. It provides that claims arising from acts or failures to act (1) occurring before substantial completion accrue no later than the date of substantial completion; (2) occurring between substantial completion and final payment certificate accrue no later than the final payment certificate issuance date; and (3) occurring after final payment accrue no later than the time provided in the warranty (§ 3.5) or the additional warranty (§ 12.2), whichever is later.

         ¶ 5 A certificate of substantial completion was issued on March 16, 2009. The project was completed on May 15, 2009, when a certificate of occupancy was issued. At that time, neither Broomfield nor Brinkmann noted any defects in the construction of the building.

         ¶ 6 In the fall of 2012, Broomfield discovered sewer flies and hired a general contractor to investigate their cause. The contractor determined that the sewer flies resulted from broken sewer pipes. Because the pipes were located beneath concrete slabs, they could not be readily accessed or repaired. Thus, on November 27, 2012, Broomfield began excavation beneath the building to inspect and repair the broken pipes. The contractor eventually advised Broomfield that the breaks resulted from soil expansion and recommended further investigation of other potential pipe breaks.

         ¶ 7 On April 26, 2013, Broomfield hired SBSA, Inc. (SBSA) to conduct this further investigation. SBSA began its investigation on May 3, 2013, and continued investigating through March 2015. During that two-year period, SBSA identified numerous building defects that it attributed to improper construction. See infra Appendix 3.

         ¶ 8 On November 21, 2013, SBSA issued a notice of latent defects to Broomfield identifying the defects discovered. On January 28, 2014, Broomfield issued a notice of claim informing Brinkmann of the latent defects. On March 13, 2014, Brinkmann conducted a site visit. In a letter dated May 12, 2014, Brinkmann rejected the notice of claim, stating that the "primary problem affecting this site is the soils." It noted that the building itself had not moved and credited the proper design and construction of the void space to this non-movement. After comparing the list of defects provided by Broomfield to the construction documents, Brinkmann concluded that it had performed its work in accordance with the documents, that there was no defective construction, and that there was no "work requiring repair."

         ¶ 9 On July 21, 2014, Broomfield filed its complaint against Brinkmann. Brinkmann responded with a motion for summary judgment arguing that there were no issues of material fact because the statute of limitations - as established by the terms of the contract - had run. The trial court granted Brinkmann's motion for summary judgment, reasoning that because all claims accrued under the contract at final completion (May 15, 2009), the two-year statute of limitations applicable to civil claims under § 13-80-102(1)(a), C.R.S. 2016, expired on May 15, 2011, three years before Broomfield filed its complaint. As to latent defects, the court concluded that Broomfield had waived its right to assert claims for repairs under the contract by failing to give Brinkmann prompt notice of the defects or an adequate time to repair them before performing the repair work itself.

         II. Analysis

         ¶ 10 Broomfield contends the trial court erred in granting summary judgment and applying the accrual provisions of the contract rather than CDARA's accrual provision in § 13-80-104(1)(b)(I), C.R.S. 2016. It reasons that the contractual limitations contained in section of the contract are void as against public policy under the plain language of the HPA. Brinkmann responds that the contract modification was permissible and that all claims accrued on March 16, 2009, at substantial completion or at the latest on May 15, 2009, at final completion. While Brinkmann does not dispute that Broomfield is the property owner, it argues that the term "residential property" in the HPA is ambiguous and that the legislative history demonstrates that Broomfield is not the type of "residential property owner" the HPA was intended to protect because it is a commercial entity.

         A. Standard of Review

         ¶ 11 We review a trial court's order granting summary judgment de novo. Lewis v. Taylor, 2016 CO 48, ¶ 13; W. Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo. 2002). Summary judgment is a drastic remedy and is appropriate only when the pleadings and the supporting documentation show that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. W. Elk Ranch, L.L.C., 65 P.3d at 481. In determining whether a genuine issue of material fact exists, we look at the "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits." C.R.C.P. 56(c). Like the trial court, we may not assess witness credibility and the weight of evidence when determining a motion for summary judgment. Anderson v. Vail Corp., 251 P.3d 1125, 1127 (Colo.App. 2010). "The nonmoving party is entitled to the benefit of all favorable inferences from the undisputed facts, and all doubts as to the existence of a triable issue of fact must be resolved against the moving party." W. Elk Ranch, L.L.C., 65 P.3d at 481. A "material fact" is one that will affect the outcome of the case or claim. Thompson v. Md. Cas. Co., 84 P.3d 496, 501 (Colo. 2004).

         ¶ 12 Additionally, both contractual interpretation and statutory interpretation present questions of law that we review de novo. Lewis, ¶ 14 (statutory interpretation reviewed de novo); Union Ins. Co. v. Houtz, 883 P.2d 1057, 1061 (Colo. 1994) (interpretation of contracts reviewed de novo); Douglas v. City & Cty. of Denver, 203 P.3d 615, 618 (Colo.App. 2008) (statutory interpretation reviewed de novo).

         B. Accrual Dates Comparison

         ¶ 13 Under sections 13.7.1 and 13.7.2 of the contract, all of Brinkmann's "acts or failures to act" accrued at the earliest at substantial completion (March 16, 2009) and at the latest at final completion (May 15, 2009). Thus, under § 13-80-102(1), the contractual limitations period expired on either March 16, 2011, or May 15, 2011, irrespective of when the acts or failures to act were discovered.

         ¶ 14 In contrast, CDARA links the accrual of construction defect claims to their discovery. Under § 13-80-104(1)(b)(I), Brinkmann's acts or failures to act accrued on the date that the "physical manifestations of a defect" were discovered or in the exercise of reasonable diligence should have been discovered. It is undisputed that the first physical manifestations of a defect in the building were the sewer flies that appeared sometime in the fall of 2012. Thus, under CDARA, the claims accrued in the fall of 2012, and under § 13-80-102(1), the statute of limitations expired in the fall of 2014. Additionally, § 13-80-104(1)(a) contains a statute of repose which expires six years "after the substantial completion of the improvement to the real property, " unless it is extended two years because the underlying cause of action arose "during the fifth or sixth year after substantial completion of the improvement to real property." See also In Re Goodman v. Heritage Builders, 2017CO 13 ¶¶ 8, 11. Key to both the limitations period and the repose period is the claim accrual date.

         C. Homeowner Protection Act

         ¶ 15 The HPA represents that portion of CDARA that is intended to preserve adequate rights and remedies for residential property owners who bring construction defect actions. § 13-20-802, C.R.S. 2016. It provides in relevant part:

In order to preserve Colorado residential property owners' legal rights and remedies, in any civil action or arbitration proceeding described in section 13-20-802.5(1), any express waiver of, or limitation on, the legal rights, remedies, or damages provided by the "Construction Defect Action Reform Act" . . . or on the ability to enforce such legal rights, remedies, or damages within the time provided by applicable statutes of limitation or repose are void as against public policy.

§ 13-20-806(7)(a), C.R.S. 2016.

         ¶ 16 Thus, if Broomfield is a "residential property owner, " then section 13.7 of the contract - which shortens the period in which claims accrue by eliminating the time for discovery of the defect provided in § 13-80-104(1)(b)(I) - constitutes a limitation on the ability to enforce rights, remedies, and damages under CDARA and is void as against public policy under the HPA.

         ¶ 17 To determine whether Broomfield is a "residential property owner" we employ the tenets of statutory construction. In interpreting a statute, our primary objective is to ascertain and give effect to the intent of the legislature. Specialty Rests. Corp. v. Nelson, 231 P.3d 393, 397 (Colo. 2010). We look first to the statutory language, giving words and phrases their plain and ordinary meanings. Doubleday v. People, 2016 CO 3, ¶ 19. We read words and phrases in context and construe them according to the rules of grammar and common usage. Id.; Gagne v. Gagne, 2014 COA 127, ¶ 25. In doing so, we read the statutory scheme as a whole, and we give consistent, harmonious, and sensible effect to all of its parts. Doubleday, ¶ 19. "If the statutory language is clear, we interpret the statute according to its plain and ordinary meaning, " Nelson, 231 P.3d at 397, and we need not conduct any further statutory analysis. Gagne, ¶ 27. If, however, the words are ambiguous or unclear such that they "do not inexorably lead to a single result, " we may employ other interpretive aids, including consideration of the legislative history or the title of the statute, to determine the object sought to be attained by the statute and the consequences of a particular construction. State v. Nieto, 993 P.2d 493, 501 (Colo. 2000); see also Concerned Parents of Pueblo, Inc. v. Gilmore, 47 P.3d 311, 313 (Colo. 2002) (stating that if the language is ambiguous we can look to the title of the statute to determine the General Assembly's intent).

         ¶ 18 We begin with the plain language of § 13-20-806(7)(a) and note that it applies only to "claimants asserting claims arising out of residential property." § 13-20-806(7)(c). Because the statute does not define "residential property, "[4] we consider its common usage. Griego v. People, 19 P.3d 1, 9 (Colo. 2001) ("We consult definitions contained in recognized dictionaries to determine the ordinary meaning of words.").

         ¶ 19 "Residential" plainly means using or designed for use as a residence. See Webster's Third New International Dictionary 1931 (2002) (defining residential as "used, serving, or designed as a residence or for occupation by residents"). "Residence, " in turn, plainly means a structure where people live. See Black's Law Dictionary 1502 (10th ed. 2014) (defining residence as "[t]he place where one actually lives, " a "dwelling, " and a "house or other fixed abode"); see also The American Heritage Dictionary of the English Language 1483 (4th ed. 2000) (defining residential as "[o]f, relating to, or having residence, " or "[o]f, suitable for, or limited to residences, " and defining residence as "[t]he place in which one lives; a dwelling, " or "[t]he act or a period of residing in a place").

         ¶ 20 Additionally, although CDARA does not define "residential property, " it defines "commercial property" as "property that is zoned to permit commercial, industrial, or office types of use." § 13-20-802.5(4), C.R.S. 2016. We glean from this definition that the legislature considers a property's zoning relevant to its intended purpose. Anderson v. Longmont Toyota, Inc., 102 P.3d 323, 327 (Colo. 2004) ("[W]e read the statute as a whole and, if possible, construe its terms harmoniously . . . ."). Here, it is undisputed that the building project was part of the fourth amendment to the MidCities Planned Unit Development (P.U.D.) Plan and Preliminary Plat and that the building was specifically designed for multi-family residential use, including senior assisted and independent living residences. Moreover, the seventh amendment to the MidCities P.U.D. confirmed that the property was zoned for residential uses only, including senior housing.

         ¶ 21 Further, in the context of property tax law, the legislature and the Colorado Constitution define "residential real property" as all residential dwelling units and the land they are situated upon, excluding hotels and motels. § 39-1-102(14.5), C.R.S. 2016; see also Colo. Const. art. X, § 3(1)(b). Indeed, this court has consistently interpreted "residential" to mean for the purposes of living or dwelling. Houston v. Wilson Mesa Ranch Homeowners Ass'n, 2015 COA 113, ¶ 16; see also Jensen v. City & Cty. of Denver, 806 P.2d 381, 385 (Colo. 1991) ("Apartments and boarding/rooming houses used on a long term basis . . . properly are included within the definition of residential property."); Double D Manor, Inc. v. Evergreen Meadows Homeowners' Ass'n, 773 P.2d 1046, 1051 (Colo. 1989) (facility caring for disabled children is considered residential property).

         ¶ 22 We conclude, therefore, from the consistent dictionary definitions, the building's zoning, other statutory definitions, and decisions from this court, that the term "residential" is unambiguous and means an improvement on a parcel that is used as a dwelling or for living purposes. In reaching this conclusion, we necessarily reject Brinkmann's argument that the legislature's failure to define "residential property" renders that term ambiguous. See Wisdom Works Counseling Servs., P.C. v. Colo. Dep't of Corr., 2015 COA 118, ¶ 38 ("But legislative failure to define a statutory term does not necessarily make the statute ambiguous. This is especially true where . . . the undefined term has a commonly understood meaning.") (citation omitted); Dillabaugh v. Ellerton, 259 P.3d 550, 552 (Colo.App. 2011) (stating that absence of statutory definition does not create ambiguity if court can discern term's ordinary and common meaning).

         ¶ 23 Moreover, we are not persuaded by Brinkmann's argument that Phillips v. Monarch Recreation Corp., 668 P.2d 982 (Colo.App. 1983), or public policy requires a different result. To the contrary, Phillips reinforces our conclusion that "[s]tatutory provisions may not be modified by private agreement if doing so would violate the public policy expressed in the statute." Id. at 987.

         ¶ 24 Here, the building is used to house senior residents. Neither Brinkmann nor the plaintiffs contest that the senior residents live in the building or use it for any purpose other than ordinary living. Instead, all parties agree that the building is used as a home for senior residents. Moreover, the term "residential" in § 13-20-806(7) is used to describe the property owned, not to limit its applicability to any specific type of owner, whether an entity or a natural person.

         ¶ 25 Finally, we are not persuaded that Broomfield's receipt of rental income from the senior residents makes the building "commercial property" because the "receipt of income does not transform residential use of property into commercial use." Houston, ¶ 24. Accordingly, we conclude that the senior facility is "residential property, " that Broomfield is a "residential property owner, " and that the HPA applies.[5]

         III. Application

         ¶ 26 Because the HPA applies, the limitation on the accrual of claims contained in section 13.7 of the contract is void as a matter of public policy, and the relevant statutory accrual of claims periods apply. A claim in a civil action accrues "on the date both the injury and its cause are known or should have been known by the exercise of reasonable diligence." § 13-80-108(1), C.R.S. 2016 (emphasis added); see also Morrison v. Goff, 91 P.3d 1050, 1053 (Colo. 2004) (applying § 13-80-108(1) to negligence claims). In contrast, under CDARA, claims for construction defects generally accrue on the date "the claimant or the claimant's predecessor in interest discovers or in the exercise of reasonable diligence should have discovered the physical manifestations of a defect in the improvement which ultimately causes the injury." § 13-80-104(1)(b)(I) (emphasis added). Accrual under CDARA, therefore, depends on the discovery of the manifestation of the defect and not its cause. See United Fire Grp. ex rel. Metamorphosis Salon v. Powers Elec., Inc., 240 P.3d 569, 573 (Colo.App. 2010) (holding that the building fire itself, not the discovery of the cause of the building fire - defective construction - began the running of the statute of limitations). Once a CDARA claim accrues, any action must be brought within two years under § 13-80-102(1). See § 13-80-104(1)(a).

         ¶ 27 However, CDARA does not govern all claims brought against construction professionals. Indeed, the accrual language of § 13-80-104(1)(b) "was never intended to limit claims for breach of warranties to repair and replace." Hersh Cos. v. Highline Vill. Assocs., 30 P.3d 221, 225 (Colo. 2001). Instead, breach of warranty claims accrue when the breach is discovered or in the exercise of reasonable diligence should have been discovered under § 13-80-108(6). Once a breach of warranty claim accrues, any action must be brought within three years under § 13-80-101, C.R.S. 2016. Hersh Cos., 30 P.3d at 225

         ¶ 28 Moreover, the scope of CDARA is limited to actions seeking the recovery of damages for "'[a]ny deficiency in the design, planning, supervision, inspection, construction, or observation of construction of any improvement to real property, ' or injury to property or person caused by such deficiency." Id. (quoting § 13-80-104(1)(c)(I)-(III)). Thus, whether Broomfield's breach of contract claim falls within CDARA and accrues upon the discovery of the physical manifestation of a defect under § 13-80-104(1)(b)(I) or outside of CDARA and accrues upon the discovery of the defect itself under § 13-80-108(6) depends on the nature of the allegations in the complaint. See Hersh Cos., 30 P.3d at 224-25; see also § 13-80-108(6) ("A cause of action for breach of any express or implied contract, agreement, warranty, or trust shall be considered to accrue on the date the breach is discovered or should have been discovered by the exercise of reasonable diligence.").

         A. Breach of Contract

         ¶ 29 Broomfield's amended complaint alleged that Brinkmann failed "to perform the services for the Residential Project that were the subject of the agreements." Assuming, without deciding, that the more restrictive accrual period of CDARA applies, we conclude that Broomfield's breach of contract claim accrued upon the "physical manifestation of a defect." The parties agree that the first manifestation of a defect was the sewer flies that appeared in the fall of 2012. Because Broomfield filed this action in July 2014 (summer of ...

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