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Marso v. Homeowners Realty, Inc.

Court of Appeals of Colorado, Seventh Division

February 8, 2018

Samuel A. Marso and Audrey S. Marso, Plaintiffs-Appellants,
Homeowners Realty, Inc., d/b/a Coldwell Banker Home Owners Realty, Inc., Defendant-Appellee.

         Mesa County District Court No. 11CV4626 Honorable Thomas M. Deister, Judge

          Announced February 8, 2018 Earl G. Rhodes, LLC, Earl G. Rhodes, Grand Junction, Colorado for Plaintiffs-Appellants

          Davlin & Davlin, LLC, Shawn M. Davlin, Durango, Colorado for Defendant-Appellee Homeowners Realty, Inc.


          BERGER, JUDGE

          ¶ 1 This case requires us to decide whether a monetary settlement made with an agent must be set off against a jury verdict returned against the principal when the principal's liability is entirely dependent on the doctrine of respondeat superior. And, if such a setoff is required, is the setoff made before or after statutory prejudgment interest accrues on the jury verdict?

         ¶ 2 We hold that Colorado law requires a setoff and that the setoff is made after statutory prejudgment interest accrues on the jury verdict. While the trial court correctly ruled that a setoff was required, it erroneously concluded that statutory interest did not accrue until after the setoff was made. Accordingly, we reverse the judgment and remand the case for further proceedings.

         I. Relevant Facts and Procedure

         ¶ 3 Elly Dilbeck, who was employed by or associated with Homeowners Realty, Inc., d/b/a/ Coldwell Banker Home Owners Realty, Inc. (Coldwell), [1] acted as Sam and Audrey Marso's agent in their purchase of a house. At the time of purchase, the Marsos did not know that the builder used radioactive uranium mill tailings as fill material.

         ¶ 4 Two years after the purchase, the Marsos discovered that uranium tailings had been used, creating a potential health hazard. The Marsos filed a complaint against Dilbeck and Coldwell alleging negligence against Dilbeck and respondeat superior liability against Coldwell.[2]

         ¶ 5 Sometime before the scheduled trial date, the Marsos settled with Dilbeck for $150, 000, inclusive of interest. In connection with the settlement, Dilbeck filed a written admission that her failure to disclose that uranium mill tailings may have been used in the Marsos' house fell below the standard of care for a real estate agent. The settlement expressly preserved all claims against Coldwell, and a jury trial was then held only between the Marsos and Coldwell.[3]

         ¶ 6 The jury was instructed to determine the total amount of damages sustained by the Marsos and was not informed of the amount of the settlement with Dilbeck. The jury returned a verdict of $120, 000 against Coldwell.

         ¶ 7 In post-trial proceedings, the trial court set off the settlement payment of $150, 000 against the $120, 000 jury verdict, resulting in a zero recovery for the Marsos. The court rejected the Marsos' argument that statutory prejudgment interest accrues on the jury verdict before the setoff. Because the settlement payment exceeded the jury verdict, the court entered judgment in favor of Coldwell and later entered a cost award against the Marsos of approximately $30, 000.

          II. The Trial Court Did Not Abuse Its Discretion in Allowing Coldwell to Amend Its Answer and Assert the Affirmative Defense of Setoff

         ¶ 8 Shortly after learning of the settlement between Dilbeck and the Marsos, Coldwell moved to amend its answer to assert the affirmative defense of setoff. See C.R.C.P. 8(b)-(c); Ochoa v. Vered, 212 P.3d 963, 972 (Colo.App. 2009) (Setoff "must be pled as an affirmative defense or [it] is waived.").[4] The court granted the motion over the Marsos' timeliness objection. The Marsos contend the court abused its discretion in allowing this late amendment.

         ¶ 9 "Under well-established law, leave to amend is a discretionary matter which is left to the trial court to determine." Polk v. Denver Dist. Court, 849 P.2d 23, 25 (Colo. 1993). Thus, we review the court's determination for an abuse of discretion. Id. "A court abuses its discretion when its ruling is (1) based on an erroneous understanding or application of the law; or (2) manifestly arbitrary, unreasonable, or unfair." Francis v. Aspen Mountain Condo. Ass'n, Inc., 2017 COA 19, ¶ 25.

         ¶ 10 "Trial courts may permit amendments to pleadings at any stage of the litigation process so long as undue delay does not result and other parties are not prejudiced by such amendments." Nelson v. Elway, 971 P.2d 245, 249 (Colo.App. 1998).

         ¶ 11 The Marsos do not contend that Coldwell's amendment caused an undue delay, but they do claim prejudice resulting from its timing. Although Coldwell's pleading of the affirmative defense of setoff ultimately reduced the final judgment entered in the Marsos' favor, for two reasons the amendment did not result in legal prejudice to the Marsos.

         ¶ 12 First, Coldwell did not obtain the settlement agreement until shortly before trial and so could not have properly raised the defense previously.[5] Second, while the setoff obviously detrimentally affected the Marsos, they had no right to rely on the absence of a setoff given the uncertainties in the substantive law regarding such setoffs. Nor have they explained how, if at all, the possibility of a setoff would have affected their litigation strategy or settlement posture.

         ¶ 13 Under these circumstances, we discern no abuse of the court's discretion in allowing Coldwell to pursue its setoff defense.

          III. The Trial Court Correctly Set Off Dilbeck's Settlement Payment Against the Jury's Verdict

         ¶ 14 The Marsos next argue that the trial court erred when it set off the settlement payment against the jury verdict. We reject this contention.

         ¶ 15 Two Colorado statutes arguably address when a trial court must set off "compensation paid to avoid the risk of being held liable in tort" from a jury verdict against any nonsettling defendants. Smith v. Zufelt, 880 P.2d 1178, 1183 (Colo. 1994).

         ¶ 16 The first of these statutes is the "percentage statute, " § 13-50.5-105, C.R.S. 2017. Zufelt, 880 P.2d at 1181. This statute implements, in part, the General Assembly's 1986 abrogation (with exceptions) of the doctrine of joint and several liability among tortfeasors and replaces that regime with one of proportionate fault. See id. The ...

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