Heights Healthcare Co. v. BCER Engineering, Inc.
2023 COA 44. No. 21CA0906. Construction Defect Action Reform Act—Homeowner Protection Act of 2007—Limitation of Damages—Breach of Contract—Negligence.
May 25, 2023
Heights Healthcare Company, LLC (Heights Healthcare) owns a senior living community (the care center). Heights Healthcare contracted with BCER Engineering, Inc. (BCER) for BCER to provide consulting services for the installation of air conditioner units in 84 residential rooms at the care center. The contract contained a limitation on BCER’s liability equivalent to the “total fee for services rendered,” which was $22,500. Following installation, Heights Healthcare discovered that the units didn’t operate as expected, and it sued BCER for breach of contract under the Construction Defect Action Reform Act (CDARA). BCER moved pretrial to determine a question of law pursuant to CRCP 56(h), seeking a determination that its contractual limitation of liability was enforceable. The court granted BCER’s motion. Following a bench trial, the trial court found that BCER had breached its contract with Heights Healthcare by failing to design a proper electrical system to support the full heating functionality of the air conditioner units. Based on the court’s pretrial ruling that the limitation of liability was enforceable, Heights Healthcare was awarded $17,500 in damages (the amount stipulated to by the parties) subject to their respective appellate rights.
On appeal, Heights Healthcare contended that the trial court’s determination of law that the parties’ liability limitation was enforceable was erroneous. Heights Healthcare asserted that the care center property is residential rather than commercial and therefore the limitation on liability provision is void under CRS § 13-20-806(7)(a). The Homeowner Protection Act of 2007 (HPA) provides that express waivers of or limitations on the legal rights, remedies, or damages that CDARA affords to claimants who assert claims arising out of residential property are void as against public policy. The trial court determined that the limitation of liability clause in the parties’ contract was enforceable because the care center property was zoned commercial when the parties entered into the contract. However, regardless of the zoning on the parcel where the care center is located, the HPA was designed to protect actual use, not zoning designations. Here, the care center is used as a home for its residents, so it is a “residential property” and Heights Healthcare is a “residential property” owner, and § 13-20-806(7)(a) voids the limitation of liability clause. Therefore, the trial court erred by enforcing the limitation of liability.
BCER argued that the trial court erred by finding that Heights Healthcare didn’t materially breach the contract first, thus justifying BCER’s breach. However, the record supports the trial court’s finding that Heights Healthcare didn’t materially breach its obligation to provide final formal submittals because it wasn’t obligated under the contract to provide such submittals.
BCER also contended that even if the trial court properly determined that it breached the contract, the trial court’s order should have determined Heights Healthcare’s percentage of fault in causing the claimed damages and reduced the judgment accordingly. Here, while Heights Healthcare initially asserted a negligence claim in addition to breach of contract, it only moved forward on the breach of contract claim. BCER maintained that these claims were effectively the same because each turned on whether BCER breached the applicable standard of care when it performed its services for Heights Healthcare and, therefore, the apportionment of fault provision under CRS § 13-21-111.5(1) applies to the breach of contract claim. However, as stated above, Heights Healthcare didn’t pursue the negligence claim, and BCER cited no case law that has ever applied CRS § 13-21-111.5(1) to reduce actual damages awarded for breach of contract rather than for negligence. Accordingly, the trial court did not err by finding that BCER’s liability for breach of contract shouldn’t be reduced by apportioning fault to Heights Healthcare.
The judgment was reversed in part and affirmed in part, and the case was remanded for further proceedings on damages.