White River Village, LLP, et al., v. Fidelity and Deposit Company of Maryland, et al.,

Filing 629

ORDER Adopting 516 Recommendation of United States Magistrate Judge. Defendant/third Party Plaintiff, Fidelity and Deposit Company of Maryland's Motion to Dismiss Pursuant to FED. R. CIV. P. 12(b)(6) Cookey's Mechanical's Counterclaims Against Fidelity and Deposit Company of Maryland, Dkt. No. 162, Filed Nov. 10, 2008 [# 461 ] filed August 2, 2013, is DENIED. By Judge Robert E. Blackburn on 3/12/2014.(klyon, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Robert E. Blackburn
Civil Action No. 08-cv-00248-REB-MEH
(Consolidated with Civil Action No. 08-cv-00359-REB-MEH)
WHITE RIVER VILLAGE, LLP, and
WHITE RIVER TOWNHOMES, LLC
Plaintiff,
v.
FIDELITY AND DEPOSIT COMPANY OF MARYLAND, a Maryland corporation,
Defendant/Third-Party Plaintiff/Counter Defendant,
and
HEPWORTH-PAWLAK GEOTECHNICAL, INC., a Colorado Corporation,
Consolidated Defendant,
v.
COOKEY’S MECHANICAL, INC.,
Third-Party Defendant/Counter Claimant/Cross Claimant/ Counter Defendant,
S & S JOINT VENTURE,
Third-Party Defendant/Cross Defendant/Counter Claimant,
JONATHAN REED & ASSOCIATES, INC.,
CLASS CONSTRUCTION, INC.,
BELLAVISTA BUILDERS,
CRUZAN CONSTRUCTION COMPANY,
RENTERIA ROOFING,
EC CONTRACTORS, LLC,
M.M. SKYLINE CONTRACTING, INC., a/k/a Skyline Contracting,
DEKKER/PERICH/SABATINI, LTD.,
Third-Party Defendants.

ORDER ADOPTING RECOMMENDATION OF
UNITED STATES MAGISTRATE JUDGE
Blackburn, J.
This matter is before me on the following: (1) Defendant/third Party Plaintiff,
Fidelity and Deposit Company of Maryland’s Motion to Dismiss Pursuant to FED.
R. CIV. P. 12(b)(6) Cookey’s Mechanical’s Counterclaims Against Fidelity and
Deposit Company of Maryland, Dkt. No. 162, Filed Nov. 10, 2008 [#461]1 filed
August 2, 2013; and (2) the corresponding Recommendation of United States
Magistrate Judge [#516] filed October 7, 2013. Defendant and third-party plaintiff,
Fidelity and Deposit Company of Maryland (F&D), filed objections [#524] to the
recommendation.
As required by 28 U.S.C. § 636(b), I have reviewed de novo all portions of the
recommendation to which objections have been filed. I have considered carefully the
recommendation, objections, and applicable caselaw. I overrule the objections,
approve and adopt the recommendation, and deny the motion to dismiss.
The motion to dismiss concerns counterclaims asserted against F&D by thirdparty defendant Cookey’s Mechanical, Inc. F&D argues that a limitation provision in the
payment bond that is the basis of Cookey’s counterclaims constitutes an
insurmountable time bar to Cookey’s counterclaims. The magistrate judge concluded
that the limitation provision in the payment bond is ambiguous and can be read to have
at least two different meanings.

1

“[#461]” is an example of the convention I use to identify the docket number assigned to a
specific paper by the court’s case management and electronic case filing system (CM/ECF). I use this
convention throughout this order.

2

As discussed in the recommendation, the word “or” as used in the limitation
provision creates confusion about how the limitation provision operates. The provision
reads as follows:
No suit or action shall be commenced by a Claimant under this Bond other
than in a court of competent jurisdiction in the location in which the work or
part of the work is located or after the expiration of one year from the date
(1) on which the Claimant gave the notice required by Subparagraph 4.1
or Clause 4.2.3, or (2) on which the last labor or service was performed by
anyone or the last materials or equipment were furnished by anyone under
the Construction Contract, whichever of (1) or (2) first occurs. If the
provisions of this Paragraph are void or prohibited by law, the minimum
period of limitation available to sureties as a defense in the jurisdiction of
the suit shall be applicable.
Payment Bond, ¶ 11, [93-1], p. at 3 (emphasis added). In its objections, F&D argues
that “or” should be read to mean “and” in the limitation provision. However, the
proposed substitution would create even greater confusion. If “and” is substituted for
“or,” then one reasonable reading of the provision would be that no suit could be
commenced under the bond other than (1) in a court of competent jurisdiction where the
work is located; and (2) after the expiration of one year from the specified events. This
is not the result sought by F&D.2
The magistrate judge found the provision to be ambiguous – susceptible to more
than one reasonable construction. I concur. As discussed by the magistrate judge,
applying the usual meaning of the word “or” in this provision leads to more than one
reasonable interpretation. One such interpretation reads the word “or” to mean that the
two specified conditions are alternative, not concurrent, conditions to filing a suit. Using
that reading, Cookey’s counterclaims were timely filed.
I note also an argument not addressed by the magistrate judge. In its response

2

Notably, the phrase “other than” also contributes to the confusion.

3

[#480] to the motion to dismiss, Cookey’s argues §13-80-109, C.R.S., alters any
otherwise applicable time bar in the context of this case. That statute provides:
Except for causes of action arising out of the transaction or occurrence
which is the subject matter of the opposing party's claim, the limitation
provisions of this article shall apply to the case of any debt, contract,
obligation, injury, or liability alleged by a defending party as a counterclaim
or setoff. A counterclaim or setoff arising out of the transaction or
occurrence which is the subject matter of the opposing party's claim shall
be commenced within one year after service of the complaint by the
opposing party and not thereafter.
§13-80-109, C.R.S. (emphasis added). Cookey’s counterclaims were filed less than
one year after F&D served Cookey’s with F&D’s third-party complaint.
F&D contends this statute is inapposite because its claims against Cookey’s and
Cookey’s counterclaims against F&D do not arise out of the same transaction or
occurrence. Reply [#487], p. 8-9. F&D says it is asserting claims under a performance
bond, while Cookey’s claims are based on a separate payment bond. Both of the bonds
concern the same construction project and contract for and under which Cookey’s was
hired to perform work. §13-80-109 applies only to a counterclaim that “arises out of the
same transaction or occurrence, or the same series thereof” that are the basis for a
claim asserted against the counterclaimant. Duell v. United Bank of Pueblo, N.A.,
892 P.2d 336, 341 (Colo. App. 1994). The third-party claims of F&D against Cookey’s
and the counterclaims of Cookey’s against F&D arise from the same series of closely
related transactions. Thus, I conclude that §13-80-109 is applicable to Cookey’s
counterclaims. Thus, even assuming arguendo that Cookey’s counterclaims are
untimely otherwise, they are timely under §13-80-109, C.R.S.
I conclude ultimately that the ambiguity analysis of the magistrate judge is
correct. Independently, and alternatively, I conclude that Cookey’s counterclaims are

4

timely under §13-80-109, C.R.S. Thus, the motion to dismiss must be denied.
THEREFORE, IT IS ORDERED as follows:
1. That the objections [#524] of F&D are OVERRULED;
2. That the Recommendation of United States Magistrate Judge [#516] filed
October 7, 2013, is APPROVED and ADOPTED as an order of this court and
3. That Defendant/third Party Plaintiff, Fidelity and Deposit Company of
Maryland’s Motion to Dismiss Pursuant to FED. R. CIV. P. 12(b)(6) Cookey’s
Mechanical’s Counterclaims Against Fidelity and Deposit Company of Maryland,
Dkt. No. 162, Filed Nov. 10, 2008 [#461] filed August 2, 2013, is DENIED.
Dated March 12, 2014, at Denver, Colorado.
BY THE COURT:

5