U.S. District Court holds that CDARA’s “actual damages” provision is a cap on damages, but not the only available measure of damages

In Hubbell v. Carney Bros. Const., the Hubbells sought to build a home on land they had previously purchased. 05-CV-00026-CMA-KLM, 2010 WL 5147567 (D. Colo. Dec. 13, 2010). In order to finance the construction of the home, the Hubbells borrowed from Alpine Bank. Unsatisfied with the builders and design professionals midway through construction, the Hubbells fired the builders and design professionals and sued them for negligent construction and design. However, after filing suit and before the case was decided, Alpine Bank foreclosed on the property. Therefore, the Hubbells did not own or possess the property at the time defendants moved for summary judgment. Subsequently, the Hubbells settled with Alpine Bank and Carney Brothers settled with the Hubbells. The remaining defendants (“Defendants”) were Teamcorp, Inc., T.J. Concrete Construction, Inc., and Kerry Karnan.
The Defendants moved to limit the Hubbells’ damages to the amount the builders’ alleged negligence diminished the property value. At the same time, Defendants moved to cap damages to CDARA actual damages and vacate any claims to loss of use of the property. After the issue was fully briefed, the court identified four issues that it determined needed to be answered:
(1) whether the CDARA permits damages measured by the diminution in value of the property, (2) if so, whether such damages are the proper measurement of damages in this case, (3) whether loss of use damages are appropriate in this case, and (4) whether the Hubbells have already been fully compensated by their settlements with the other parties.
1. CDARA’s “actual damages” are merely a cap on relief
The court relied on the language of C.R.S. § 13-20-806(1) and several pre-CDARA and non-construction cases to hold that CDARA is merely a cap of “actual damages.”[1] The court relied on Bd. of County Com’rs of Weld County v. Slovek 723 P.2d 1309, 1316 (Colo. 1986), to hold that the proper measure of damages in real property torts are at the discretion of the trial court and should be undertaken on a case-by-case basis. Hubbell at *4. The goal of the trial court should be reimbursement for the actual loss suffered, not to inflict punishment on defendants or encourage wasteful expenditures by plaintiffs. Slovek at 1316. (relying on Zwick v. Simspon 572 P.2d at 134 (Colo. 1977)).
2. Diminution in market value damages is the appropriate relief when Plaintiffs no longer own or possess the property
First, relying again on Zwick and Slovek, the court showed why diminution in market value damages (“DMV”) is appropriate. Those cases held that DMV is the default measure of damages with several factors to determine if an exception exists to use another damage method. Without getting too bogged down in these pre-CDARA cases in this blog,[2] the Hubbell court determined that the desire or ability to repair the subject property (i.e., ownership of the property) is necessary to deviate from DMV. Hence, if a plaintiff no longer owns the property, DMV is the appropriate measure of damages.
The court also recognized it would be giving plaintiffs a windfall if it awards repair costs and plaintiffs do not repair the property. As a result, an award of repair costs would impermissibly go further than “reimbursement of the plaintiff for the actual loss suffered” and “inflict punishment on defendant.” Slovek at 1316.
3. Defendants did not dispute loss of use damages
The court held that Defendants did not meet their burden of proof on this issue and that a jury will decide the loss of use damages.
4. Prior settlements are not relevant to show that the Hubbells were fully compensated
Finally, under C.R.S. § 13-21-111.5, the Hubbells’ prior settlements are not relevant to damages in this action. That section only requires that the jury make a special finding of pro-rata liability for each defendant. Settlement amounts are not admissible to prove liability in Colorado. Greenemeier by Redington v. Spencer, 719 P.2d 710, 714-15 (Colo. 1986).
Furthermore, the court also noted that Defendants merely assumed the foreclosure amount was the DMV. However, because the Hubbells purchased the 14-acre land without the loan, and Alpine Bank foreclosed on both the land and the home, the evidence indicated that the foreclosure amount was less than the DMV. Because the defendants did not present evidence to dispute this fact, and the aforementioned settlement evidence discussion, the court denied summary judgment on this issue.

For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.

[1] Actual damages is defined in C.R.S. § 13-20-802.5(2) as the lesser of: 1) the fair market value of the property without the construction defect, 2) the replacement cost of the property, or 3) the reasonable cost of repair of the construction defect. Also included in actual damages are several incidental costs, including loss of use.
[2] For a more in-depth analysis, the Hubbell Court listed and applied the factors used to determine both Slovek and Zwick at *5-6.


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