Taylor Morrison of Colo., Inc. v. Terracon Consultants, Inc.

410 P.3d 767

TAYLOR MORRISON OF COLORADO, INC., f/k/a Morrison Homes of Colorado, Inc., Plaintiff-Appellant and Cross-Appellee,

v.TERRACON CONSULTANTS, INC., Defendant-Appellee and Cross-Appellant.

Court of Appeals No. 15CA1030

Colorado Court of Appeals, Div. V.

Announced May 18, 2017

Snell & Wilmer L.L.P., Michael E. Lindsay, Jessica E. Yates, Bethany Gorlin, Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee

McDowell, Rice, Smith, & Buchanan, P.C., Thomas R. Buchanan, Jason L. Buchanan, Linda C. McFee, Kansas City, Missouri, for Defendant-Appellee and Cross-Appellant

Opinion by JUDGE LICHTENSTEIN

¶ 1 This case requires us to address for the first time how a trial court should adjust a jury verdict awarding damages for breach of contract when there is both a setoff for the amount recovered from other liable parties and a contractual limitation on a defendant's liability.¹ We conclude the correct approach is to first apply the setoff against the jury verdict and then apply the contractual limitation against this reduced amount.

¶ 2 We therefore reverse the judgment as to the final award, and remand with directions. In all other respects the judgment and orders of the trial court are affirmed.

I. Background

¶ 3 Plaintiff, Taylor Morrison of Colorado, Inc. (Taylor), appeals the judgment entered following a jury trial on a breach of contract theory against defendant Terracon Consultants, Inc. (Terracon).

¶ 4 Taylor was the developer of a residential subdivision known as Homestead Hills. In 2004, Taylor contracted with Terracon to provide geotechnical engineering and construction materials testing services for the development of the subdivision. Through two contracts, Taylor and Terracon agreed that Terracon was responsible for testing the soil for compliance with project specifications and building codes. Taylor and Terracon further agreed to a contractual limitation on liability (Limitation). The Limitation capped Terracon's total aggregate liability to Taylor at $550,000 for any and all damages or expenses arising out of its services or the contract.

¶ 5 By 2010, many of the homeowners notified Taylor about cracks in the drywall of their houses. Taylor investigated the complaints and then sued Terracon and other contractors for damages relating to those defects.

¶ 6 The court rejected Taylor's pretrial arguments that the $550,000 Limitation was either invalid or inapplicable to the action.² The court then granted Terracon's motion to dismiss it as a defendant after authorizing Terracon to deposit $550,000 into the court's registry, rendering Taylor's claims moot.

¶ 7 Taylor proceeded to trial against the other contractors. One of these other contractors was Bemas Construction, which performed site grading, including overlot and subexcavation work. The jury returned a verdict in Bemas' favor.

¶ 8 Taylor ultimately recovered $592,500 through a settlement with the remaining contractors.

¶ 9 Taylor appealed the trial court's dismissal of Terracon as a defendant. In Taylor Morrison of Colo., Inc. v. Bemas Constr., Inc. , 2014 COA 10, 411 P.3d 72 ( Taylor I ), a division of this court remanded the case to the trial court to determine if Taylor should have been permitted to introduce evidence of Terracon's willful and wanton conduct to overcome the contract's Limitation clause, and, if so, to order a new trial against Terracon.³

¶ 10 On remand, the trial court considered the issue and ordered a new trial on Taylor's breach of contract claim against Terracon. Although the court allowed evidence of willful and wanton conduct, it excluded opinion testimony from Taylor's experts that characterized Terracon's conduct as "willful and wanton." The jury awarded Taylor $9,586,056 in damages, but also found that Terracon's conduct was not willful and wanton.

¶ 11 After the court subsequently reviewed the parties' extensive post-trial briefing on damages, it entered a final judgment of zero dollars. It arrived at this figure by first concluding that the $550,000 Limitation includes costs and prejudgment interest. It then concluded that the Limitation must be applied to reduce the jury's $9,586,056 damages award to $550,000. Finally, it deducted the $592,500 settlement (received from the other liable parties) to arrive at zero dollars.

¶ 12 The court found that neither party prevailed for the purposes of awarding statutory costs. It also concluded that neither Terracon's deposit of the $550,000 into the court registry nor its e-mail to Taylor addressing a mutual dismissal constituted a statutory "offer of settlement" that would have allowed Terracon an award of actual costs and fees under section 13-17-202(1)(a)(II), C.R.S. 2016.

¶ 13 Taylor now appeals and Terracon cross-appeals.

II. Taylor's Appeal

A. Prior Challenges to the $550,000 Limitation

¶ 14 As an initial matter, Taylor reasserts arguments it made in the 2012 litigation that challenged the validity of the Limitation under the Homeowner's Protection Act of 2007 (HPA) as well as its applicability to any payments Terracon received from its Commercial General Liability (CGL) insurer. For the reasons stated below, we decline to address them.

¶ 15 Taylor first requests that we revisit Taylor I , which held that the HPA could not be retroactively applied to invalidate the Limitation because such application would be unconstitutionally retrospective.⁴

¶ 16 True, a division of this court may review another division's ruling in the same case where "the previous decision is no longer sound because of changed conditions or law, or legal or factual error, or if the prior decision would result in manifest injustice." Core-Mark Midcontinent, Inc. v. Sonitrol Corp. , 2012 COA 120, ¶ 10, 300 P.3d 963 (quoting Vashone-Caruso v. Suthers , 29 P.3d 339, 342 (Colo.App.2001) ).

¶ 17 After considering Taylor's arguments, however, we conclude that none of these extraordinary circumstances exist here. Indeed, the division in Taylor I considered, and ultimately rejected, the arguments that Taylor repeats in this appeal. We are persuaded that the ruling in Taylor I correctly stated the law, thus we decline to revisit it.

¶ 18 Taylor next argues that the Limitation is not applicable to the extent damages are paid under Terracon's CGL policy. Thus, Taylor contends that the trial court erred when it rejected Taylor's request to enter a judgment allowing it to pursue Terracon's CGL insurer.

¶ 19 But, as the trial court observed, it had already ruled on the CGL insurance issue in the 2012 litigation.⁵ Taylor did not then request the court to reconsider its ruling, and Taylor did not appeal it. We agree with the trial court that Taylor had abandoned the issue.

¶ 20 In the 2012 litigation, Taylor raised the CGL insurance issue as one of two bases for objecting to Terracon's dismissal as a defendant upon its $550,000 deposit into the court registry.⁶ Taylor appealed the court's dismissal of Terracon, but only pursued one of its two objections to the dismissal: that the $550,000 Limitation would not apply to Terracon's alleged willful and wanton conduct. See Taylor I , ¶¶ 8, 35-38.

¶ 21 Taylor could have appealed the CGL insurance ruling in Taylor I , but did not do so. Thus, Taylor abandoned it. See Giampapa v. Am. Family Mut. Ins. Co. , 64 P.3d 230, 245-46 (Colo.2003) (finding appellant waived a damages cap issue in part because the appellant did not raise the issue in its previous appeal); Fed. Lumber Co. v. Hanley , 33 Colo.App. 18, 21, 515 P.2d 480, 482 (1973) (declining to consider an appellate challenge to the denial of a motion when an appeal had previously been taken from the same denial of that motion); In re Marriage of Tognoni , 313 P.3d 655, 658 (Colo.App.2011) (finding no error where court declined to revisit issue when husband had failed to appeal the previous order addressing the same issue); see also Crocker v. Piedmont Aviation, Inc. , 49 F.3d 735, 739 (D.C. Cir.1995) ("We have several times said that appellate courts are precluded from revisiting ... those prior rulings of the trial court that could have been but were not challenged on an earlier appeal.").

B. Contractual Limitation and Setoff

¶ 22 Taylor contends that the trial court erroneously deducted the $592,500 setoff from Terracon's contractual $550,000 limit on liability instead of deducting it from the $9,586,056 jury damages verdict. We agree.

¶ 23 The proper measure of damages presents a question of law subject to de novo review. Colo. Ins. Guar. Ass'n v. Sunstate Equip. Co., LLC , 2016 COA 64, ¶ 128, 405 P.3d 320 ; see Ferrellgas, Inc. v. Yeiser , 247 P.3d 1022, 1026-27 (Colo.2011) (considering the propriety of a setoff under de novo standard of review).

¶ 24 No case in Colorado has addressed how a trial court should adjust a jury verdict awarding damages for breach of contract when there is both a setoff for the amount recovered from other liable parties and a contractual limitation on a defendant's liability.

¶ 25 We conclude that a court must first apply the setoff against the jury verdict to ascertain the allowable amount of recovery, and then apply any contractual limitation against this reduced amount. This approach prevents double recovery by the plaintiff, preserves the parties' right to have the terms of a contract enforced, and best gives effect to the jury verdict.

¶ 26 We begin by acknowledging that a jury verdict must be given effect if possible. See Tyler v. Dist. Court , 200 Colo. 254, 256, 613 P.2d 899, 901 (1980). Nonetheless, a court must adjust a jury's damages verdict to ensure that a plaintiff's recovery does not exceed the amount of recovery permitted under the law.

¶ 27 As pertinent here, a plaintiff may not receive double recovery for the same losses arising from the same injury. Lexton-Ancira Real Estate Fund, 1972 v. Heller , 826 P.2d 819, 823 (Colo.1992) ; Quist v. Specialties Supply Co., Inc. , 12 P.3d 863, 866 (Colo.App.2000). Thus, in order to prevent double recovery, a court must set off a loss by the...