v. Frias Drywall, LLC , 2019 COA 123 ( 2019 )

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
August 1, 2019
2019COA123
No.18CA1770, Ferraro v. Frias Drywall, LLC — Civil Procedure
— Default; Torts — Negligence; Public Health and Environment
— Air Quality Control — Asbestos Control; Administrative Law
— Department of Health and Environment — Control of
Hazardous Air Pollutants
A division of the court of appeals considers a novel procedural
issue and a novel substantive issue in this negligence action based
on a failure to inspect for asbestos. The division first holds that
under C.R.C.P. 55, a district court may sua sponte reconsider
liability to determine whether a viable cause of action exists after
the clerk’s entry of default but before the entry of a default
judgment. The division further holds that amendments to the
Department of Public Health and Environment Regulations do not
impose an asbestos inspection duty on the homeowner of a single-
family dwelling, contrary to the district court’s finding, or on the
contractor. Because there was no asbestos inspection duty, we
affirm the district court’s judgment dismissing the case.
COLORADO COURT OF APPEALS 2019COA123
Court of Appeals No. 18CA1770
Arapahoe County District Court No. 17CV32889
Honorable Elizabeth Beebe Volz, Judge
John Ferraro and Sandra Ferraro,
Plaintiffs-Appellants,
v.
Frias Drywall, LLC,
Defendant-Appellee.
JUDGMENT AFFIRMED
Division VI
Opinion by JUDGE FREYRE
Fox and Welling, JJ., concur
Announced August 1, 2019
Montgomery Little & Soran, P.C., John R. Riley, Greenwood Village, Colorado,
for Plaintiffs-Appellants
No Appearance for Defendant-Appellee
¶1 In this negligence action between plaintiff homeowners, John
and Sandra Ferraro, and defendant contractor, Frias Drywall, LLC,
premised on Frias’s failure to test for asbestos before beginning
renovation, we must decide two issues that no Colorado court has
considered — one procedural and one substantive.
¶2 The procedural question asks: After an entry of default but
before entry of the default judgment, may a court sua sponte
reconsider liability at the damages hearing and dismiss the case for
failure to state a claim? We answer that question “yes,” and hold
that a court may reconsider whether the unchallenged facts set
forth in the complaint state a legitimate cause of action after default
is entered, because this holding furthers the goal of a just, speedy,
and inexpensive determination of civil actions. C.R.C.P. 1(a).
¶3 The substantive question asks: Did amendments to the
Department of Public Health and Environment Regulations, adding
“single-family residential dwellings” to the asbestos regulations,
create a duty to inspect for asbestos before beginning construction?
And, if so, who has the inspection duty — the contractor or the
homeowner? We answer the first substantive question “no,”
contrary to the district court, and hold that the plain language of
1
the regulatory amendments does not create an inspection duty for
single-family dwellings. Absent a duty, the holding in Corcoran v.
Sanner, 854 P.2d 1376 (Colo. App. 1993), that a contractor has no
duty to inspect for asbestos before beginning construction, applies
here and supports the court’s judgment dismissing the case on
alternative grounds. For these reasons, we affirm the court’s
judgment on different grounds and disapprove its conclusion that a
homeowner has the duty, under the regulations, to inspect for
asbestos.
I. Factual and Procedural Background
¶4 The Ferraros entered into an oral contract with Frias to
remove the popcorn ceiling from their home. After Frias completed
the work, the Ferraros became concerned by the significant amount
of residual dust and decided to test for asbestos. The samples
tested positive. The Ferraros then hired an asbestos abatement
company and spent $18,390 to remove the asbestos from their
home.
¶5 Alleging that Frias had negligently failed to test for asbestos
before beginning construction, the Ferraros filed their complaint
seeking reimbursement of more than $41,000 for asbestos
2
abatement, contaminated personal items, and replacement carpet.
They also requested annoyance and inconvenience damages of
approximately $41,000. They claimed that Frias owed them a duty
to test for asbestos before beginning renovation. Frias never
responded to the complaint.
¶6 The Ferraros moved for entry of default, and the clerk entered
a default. They then moved for a default judgment. The district
court granted the motion in part and set a hearing to determine
damages. At the hearing, the court asked the Ferraros to address
whether Frias had a duty to inspect for asbestos and requested
briefing. The Ferraros responded with two arguments. First, they
asserted that the clerk’s entry of default rendered Frias liable as a
matter of law, so the court had no authority to reconsider, sua
sponte, whether they had a viable cause of action. Second, they
asserted that the amended asbestos regulations impose a duty on
contractors to inspect for asbestos in single-family residences.
Alternatively, they argued that because Occupational Safety and
Health Administration (OSHA) standards require contractors to
protect their employees, these same standards required contractors
3
to inspect single-family residences for asbestos before beginning
construction.
¶7 The court disagreed with their contentions. Because Colorado
had never decided the procedural issue, the court relied on federal
authorities interpreting Fed. R. Civ. P. 55, which is substantially
similar to C.R.C.P. 55. It found persuasive cases interpreting the
federal rule to permit a court to examine the sufficiency of a legal
claim after a default is entered.
¶8 As well, it agreed with the Ferraros that the amended
regulations created an inspection duty for single-family dwellings
and, thus, that Corcoran is no longer good law. See generally Dep’t
of Pub. Health & Env’t Reg. 8, 5 Code Colo. Regs. 1001-10. And it
found that the regulations do not specify who owes that duty.
Therefore, it applied common law negligence factors to the facts in
the complaint to find that the inspection duty rests with the
homeowner, not the contractor. It denied the motion to enter
default judgment and dismissed the case without prejudice. The
judgment is final for purposes of our review because the complaint
fails to allege a viable cause of action and cannot be refiled.
Therefore, the court’s dismissal effectively constitutes a dismissal
4
with prejudice. Wilbourn v. Hagan, 716 P.2d 485, 485 (Colo. App.
1986).
II. Dismissal After Entry of Default
¶9 The Ferraros contend that the clerk’s entry of default, after
Frias failed to respond, established liability as a matter of law and
precluded the court from further considering this issue. We are not
persuaded.
A. Standard of Review and Law
¶ 10 Whether to set aside a default judgment is a decision within
the court’s discretion that we review for an abuse of discretion.
Meyer v. Haskett, 251 P.3d 1287, 1293-94 (Colo. App. 2010).
Therefore, we similarly review its decision to set aside a clerk’s entry
of default for an abuse of discretion. A court abuses its discretion
when its decision is manifestly arbitrary, unreasonable, or unfair,
or misapplies the law. Sebastian v. Douglas Cty., 2016 CO 13, ¶ 18;
In re Estate of Runyon, 2014 COA 181, ¶ 9.
¶ 11 A default judgment comprises two steps: “entry of default” by
the clerk and “entry of default judgment” by the court. See C.R.C.P.
55(a); see also Singh v. Mortensun, 30 P.3d 853, 855 (Colo. App.
2001) (“[W]e note that the entry of default and the entry of a default
5
judgment are separate and distinct.”). When the party against
whom relief is sought fails to respond or otherwise defend the
action, the court clerk “shall enter [the party’s] default.” C.R.C.P.
55(a); see also Plaza del Lago Townhomes Ass’n v. Highwood
Builders, LLC, 148 P.3d 367, 372 (Colo. App. 2006). The “entry of
default” accepts the complaint’s allegations and establishes the
defendant’s liability, but it does not establish damages. Dickinson
v. Lincoln Bldg. Corp., 2015 COA 170M, ¶¶ 22-23. Indeed, “[w]hen a
default has been entered, but damages have not been proven, there
is no final judgment. Thus, the entry of default is simply an
interlocutory order that, alone, determines no rights or remedies.”
Singh, 30 P.3d at 855.
¶ 12 After the entry of default, the court then determines damages
and enters a default judgment. See C.R.C.P. 55(b); Pinkstaff v.
Black & Decker (U.S.) Inc., 211 P.3d 698, 703 (Colo. 2009). Until
that occurs, the judgment is not final. See Singh, 30 P.3d at 855.
¶ 13 C.R.C.P. 55(c) provides that “[f]or good cause shown the court
may set aside an entry of default and, if a judgment by default has
been entered, may likewise set it aside in accordance with Rule
60(b).” A court may also examine a cause of action sua sponte to
6
determine the existence of a duty, before the clerk enters default.
Schenck v. Van Ningen, 719 P.2d 1100, 1101-02 (Colo. App. 1986)
(explaining that although “the trial court should not go beyond the
pleadings presented” without a hearing on a motion for default
judgment, the trial court properly denied the motion where “the
pleadings on their face reveal that no cause of action” was stated).
B. Analysis
¶ 14 While Schenck authorizes a court to examine the sufficiency of
a complaint sua sponte before the entry of default, no case in
Colorado has considered whether that authority exists after the
clerk enters default. The Ferraros urge us to find that the entry of
default “establishes a defaulting party’s liability” as a matter of law
and that it cannot be disturbed. Dickinson, ¶ 28. We reject their
interpretation and conclude, consistent with federal precedent, that
a complaint’s legal insufficiency constitutes “good cause,” under
C.R.C.P. 55(c), to set aside the entry of default and dismiss the
case.
¶ 15 C.R.C.P. 55 is substantially similar to Fed. R. Civ. P. 55. See
Plaza del Lago Townhomes Ass’n, 148 P.3d at 371. Therefore, we
may rely on federal cases interpreting Fed. R. Civ. P. 55 for
7
guidance when interpreting C.R.C.P. 55. See Warne v. Hall, 2016
CO 50, ¶ 12.
¶ 16 Numerous federal courts that have considered the question
presented here have held that “a defendant’s default does not in
itself warrant the court in entering a default judgment.” Nishimatsu
Constr. Co. v. Hous. Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir.
1975). Instead, they reason that “[t]here must be a sufficient basis
in the pleadings for the judgment entered,” because “[t]he defendant
is not held to admit facts that are not well-pleaded or to admit
conclusions of law.” Id.; see also Surtain v. Hamlin Terrace Found.,
789 F.3d 1239, 1244-45 (11th Cir. 2015) (holding that the district
court did not err in sua sponte dismissing a claim after entry of
default because the plaintiff failed to provide a sufficient basis for
the judgment); Marshall v. Baggett, 616 F.3d 849, 852-53 (8th Cir.
2010) (concluding that although a court cannot disturb facts after
entry of default, “it is incumbent upon the district court to ensure
that ‘the unchallenged facts constitute a legitimate cause of action’
prior to entering final judgment” because a defaulting party does
not admit conclusions of law (quoting Murray v. Lene, 595 F.3d 868,
871 (8th Cir. 2010))); Bixler v. Foster, 596 F.3d 751, 762 (10th Cir.
8
2010) (holding that even if an entry of default was appropriate, a
claim can be dismissed on the merits and that the district court
properly denied the motion for default judgment).
¶ 17 The Ferraros do not cite, nor have we found, any authority
that precludes a court from considering the sufficiency of a
complaint sua sponte after entry of default, and we note that at
least one court has recognized such authority. See Surtain, 789
F.3d at 1244-45. Moreover, Colorado permits such sua sponte
consideration before the entry of default. Schenck, 719 P.2d at
1101-02. To conclude otherwise would allow baseless claims to
proceed to final judgment. See Marshall, 616 F.3d at 852-53
(explaining that although facts are taken as true, “it is incumbent
upon the district court to ensure that ‘the unchallenged facts
constitute a legitimate cause of action’ prior to entering final
judgement” (quoting Murray, 595 F.3d at 871)).
¶ 18 As well, the Ferraros do not cite any authority holding that an
entry of default can never be altered. To the contrary, the plain
language of C.R.C.P. 55 authorizes a court to set aside an entry of
default for good cause.
9
¶ 19 We agree with the reasoning of these federal authorities and
discern no error by the district court in sua sponte considering the
legal sufficiency of the Ferraros’ complaint after the entry of default.
And because an entry of default is not a final order, we conclude
that a complaint’s legal insufficiency constitutes good cause, under
C.R.C.P. 55(c), to set aside the default. Accordingly, we affirm the
court’s ruling denying the motion for default judgment and
dismissing the case for failure to state a claim.
III. No Asbestos Inspection Duty
¶ 20 The Ferraros next contend that the district court erroneously
found that homeowners of single-family dwellings have a duty to
inspect for asbestos and that contractors do not. They assert that
the court was bound by their expert, who opined that a contractor’s
standard of care requires asbestos inspection. We conclude that
the 2001 amendments to the asbestos statutes and accompanying
2003 changes to the regulations did not create an inspection duty
for single-family residences and, thus, neither homeowners nor
contractors owe such a duty under the regulations. Next, we are
not persuaded that the court was bound by the Ferraros’ expert’s
opinion that the OSHA standards apply. Finally, because we see no
10
reason to depart from the holding in Corcoran, we reject the
Ferraros’ assertion that contractors have an inspection duty and
affirm the court’s dismissal of the case, albeit on different grounds.
A. Standard of Review and Law
¶ 21 “To establish a claim of negligence, a plaintiff must show that
the defendant owed him or her a legal duty of care, that the
defendant breached that duty, and that the breach was the
proximate cause of the plaintiff’s injury.” Collard v. Vista Paving
Corp., 2012 COA 208, ¶ 29. “If a negligence action is based on facts
that do not impose a duty of care upon a defendant for a plaintiff’s
benefit, the claim will fail.” Ryder v. Mitchell, 54 P.3d 885, 889
(Colo. 2002).
¶ 22 Whether a common law tort duty exists is a question of law we
review de novo. Westin Operator, LLC v. Groh, 2015 CO 25, ¶¶ 18-
19. A duty is “an expression of the sum total of those
considerations of policy which lead the law to say that the plaintiff
is [or is not] entitled to protection.” Univ. of Denver v. Whitlock, 744
P.2d 54, 57 (Colo. 1987) (quoting W. Keeton, D. Dobbs, R. Keeton &
D. Owen, Prosser and Keeton on the Law of Torts § 53, at 358 (5th
ed. 1984)).
11
¶ 23 Because “it is in the interest of the general public to control
the exposure of the general public to friable asbestos,” § 25-7-501,
C.R.S. 2018, Colorado has adopted comprehensive asbestos control
statutes. §§ 25-7-501 to -511.6, C.R.S. 2018. Their purpose is to
ensure the public’s health, safety, and welfare by regulating
asbestos abatement procedures in areas of public access. § 25-7-
501(1). The statute permits the air quality control commission to
adopt regulations that enforce compliance with the national
emission standards for hazardous air pollutants. Id.
¶ 24 We review statutes and rules de novo. Smith v. Exec. Custom
Homes, Inc., 230 P.3d 1186, 1189 (Colo. 2010). We apply the same
rules of construction when interpreting regulations and statutes.
Woolsey v. Colo. Dep’t of Corr., 66 P.3d 151, 153 (Colo. App. 2002).
We look to the language of the regulation and analyze it according
to its plain and ordinary meaning. Williams v. Colo. Dep’t of Corr.,
926 P.2d 110, 112 (Colo. App. 1996). If that language is clear and
unambiguous, we need not resort to other rules of construction.
See Slack v. Farmers Ins. Exch., 5 P.3d 280, 284 (Colo. 2000)
(statutory interpretation).
12
B. Analysis
1. Asbestos Regulations
¶ 25 In 2003, the Department of Public Health and Environment
Regulations were amended to comply with a 2001 statutory change
to include single-family residential dwellings. Ch. 225, sec. 4, § 25-
7-502, 2001 Colo. Sess. Laws 772 (adding “single-family residential
dwelling” to “area of public access”); Dep’t of Pub. Health & Env’t
Reg. 8, pt. B, § VII.C, 5 Code Colo. Regs. 1001-10 (explaining
revision based on 2001 statutory change). A single-family
residential dwelling is
any structure or portion of a structure whose
primary use is for housing of one family.
Residential portions of multi-unit dwellings
such as apartment buildings, condominiums,
duplexes and triplexes are also considered to
be, for the purposes of this Regulation No. 8,
single-family residential dwellings; common
areas such as hallways, entryways, and boiler
rooms are not single-family residential
dwellings.
Dep’t of Pub. Health & Env’t Reg. 8, pt. B, § I.B.96, 5 Code Colo.
Regs. 1001-10.
¶ 26 Other definitions relevant to our analysis are those for
“facility” and “facility component.” A facility is “any institutional,
13
commercial, public, industrial, or residential structure, installation,
or building (including any structure installation, or building
containing condominiums or individual dwelling units operated as a
residential cooperative, but excluding residential buildings having
four or fewer dwelling units) . . . .” Id. at Reg. 8, pt. B, § I.B.45
(emphasis added). A facility component is “any part of a facility,
including equipment.” Id. at Reg. 8, pt. B, § I.B.46.
¶ 27 Part B, section III of the regulations, entitled “Abatement,
Renovation and Demolition Projects,” contains a subsection, III.A,
concerning inspections. The district court relied on subsection
III.A.1 to find the existence of a duty to inspect single-family
residential dwellings. The regulation provides that
[p]rior to any renovation or demolition which
may disturb greater than the trigger levels 1 of
material identified as a suspect asbestos-
containing material pursuant to the EPA
“Green Book”, Managing Asbestos in Place,
Appendix G (1990), the facility component(s) to
be affected by the renovation or demolition
shall be inspected to determine if abatement is
required.
1 With regard to single-family residential dwellings, trigger levels
“are 50 linear feet on pipes, 32 square feet on other surfaces, or the
volume equivalent of a 55-gallon drum.” Dep’t of Pub. Health &
Env’t Reg. 8, pt. B, § I.B.107.a, 5 Code Colo. Regs. 1001-10.
14
Id. at Reg. 8, pt. B, § III.A.1 (emphasis added).
¶ 28 Because a “facility component” excludes residential buildings
having four or fewer dwelling units, we conclude that this regulation
does not create an inspection duty for single-family residential
dwellings. Thus, while the regulation creates an inspection duty for
facility components, its plain language excludes single-family
residences like the Ferraros’ home, contrary to the district court’s
ruling.
¶ 29 This conclusion is consistent with the statutory scheme, which
is designed to protect the general public from friable asbestos in
public areas. § 25-7-501(1). While the General Assembly and the
commission added single-family residential dwellings to the statute
and regulations, they did so to provide homeowners with the same
abatement protections provided to other residential and commercial
property owners when the presence of asbestos is known. Dep’t of
Pub. Health & Env’t Reg. 8, pt. D, § VII.C.1.a, 5 Code Colo. Regs.
1001-10. Importantly, once a single-family dwelling’s homeowner
knows of asbestos in the home, the regulations provide that owner
with the ability to opt-out of the asbestos abatement requirements
entirely. Id. at Reg. 8, pt. B, § III.E.2 (“An owner of a single-family
15
residential dwelling may opt-out of the area of public access
requirements of this regulation for the abatement of asbestos-
containing material in excess of trigger levels in that owner’s
primary residence by completing the opt-out form.”).
¶ 30 Finally, we presume that the General Assembly and the
commission were aware of Corcoran’s holding that contractors have
no inspection duty when they passed the 2001 and 2003
amendments and, thus, we presume that their failure to specify
such a duty for contractors was intentional. See Colo. Ethics Watch
v. Senate Majority Fund, LLC, 275 P.3d 674, 683 (Colo. App. 2010)
(explaining that the legislature “must be presumed to know the
existing law at the time it amends or clarifies that law” (quoting
Alliance for Colorado’s Families v. Gilbert, 172 P.3d 964, 968 (Colo.
App. 2007))), aff’d, 2012 CO 12. Accordingly, we conclude that the
district court erred in ruling that the amended regulations create an
inspection duty for single-family residences. Absent the existence
of a duty, there was no need for the court to decide who owed the
duty, so we do not further consider that portion of the court’s
analysis.
16
2. Expert Opinion
¶ 31 Alternatively, the Ferraros ask us to find a duty based on their
expert’s report and assert that the district court should have
adopted their expert’s opinion that the “standard of care is that
contractors are to investigate for asbestos.” We reject this
alternative argument because this precise issue was considered and
rejected by the division in Corcoran, and the amendments to the
regulations do not change the vitality of Corcoran in this regard.
¶ 32 In Corcoran, the plaintiffs argued that because two experts
opined that the asbestos regulations required abatement
procedures to be followed, the district court was “bound by that
evidence and required to rule” that the regulation applied. 854 P.2d
at 1380. However, the division recognized that “[i]t is the trial
court’s responsibility to determine the law to be applied in any case,
and the court is not bound by ‘expert testimony’ on the applicability
of the law.” Id.; see Neher v. Neher, 2015 COA 103, ¶ 61 (noting
that even if expert testimony is undisputed, the trial court is not
bound to accept it); see also Hines v. Denver & Rio Grande W. R.R.
Co., 829 P.2d 419, 421 (Colo. App. 1991) (“The question whether a
defendant owes a plaintiff a duty to act to avoid injury is a question
17
of law to be determined by the court.”). It held that the asbestos
regulations did not establish a standard of care and, therefore, did
not “govern[] the [duty] owed by these defendants to plaintiff.”
Corcoran, 854 P.2d at 1381.
¶ 33 We agree with this reasoning and conclude that although the
Ferraros’ expert opined that the standard of care for a drywall
contractor includes a duty to test for asbestos, the district court
was not bound by that conclusion. See id. at 1380 (“It is irrelevant
whether that expert testimony regarding the legal question is
uncontradicted.”).
3. Corcoran
¶ 34 Also alternatively, the Ferraros assert that the district court
should have found a common law duty for contractors to inspect for
asbestos, and they urge us to ignore the holding in Corcoran. We
decline to do so.
¶ 35 In Corcoran, the plaintiff homeowner hired an architect to
remodel his home and hired a general contractor to scrape off a
popcorn ceiling and replace it with a smooth-textured one. 854
P.2d at 1378. During the work, a subcontractor said the ceiling
might contain asbestos, and subsequent testing was positive for
18
asbestos. Id. The plaintiff stopped work, hired an asbestos
abatement company, and hired a different general contractor to
complete the work. Id. The plaintiff sued the architect and the
original general contractors for negligence, breach of the agreement
to do work in a workmanlike manner, and outrageous conduct. Id.
The trial court dismissed the plaintiff’s claims after trial, concluding
that “no standards or guidelines existed requiring defendants to
inspect or investigate for asbestos and that, therefore, defendants
did not owe a duty to plaintiff.” Id. at 1379. A division of this court
affirmed the dismissal. Id. at 1379-80. It held, based on statewide
standards, that Colorado does not require contractors to inspect for
asbestos before beginning work on a single-family home. Id. at
1380.
¶ 36 At the time of this decision in 1993, the asbestos regulations
did not include single-family dwellings. Despite the General
Assembly’s addition of “single-family residential dwellings” to the
definition of “area of public access” in 2001 and the commission’s
amendments to the regulations shortly thereafter, these changes
did not contradict Corcoran’s holding or create an inspection duty
for contractors. Ch. 225, sec. 4, § 25-7-502, 2001 Colo. Sess. Laws
19
772; Dep’t of Pub. Health & Env’t Reg. 8, pt. D, § VII.C.1.a, 5 Code
Colo. Regs. 1001-10 (discussing addition of single-family residential
dwellings to the statute and regulations); Dep’t of Pub. Health &
Env’t Reg. 8, pt. B, § III.A.1, 5 Code Colo. Regs. 1001-10 (excluding
single-family dwellings from the inspection requirement). Thus,
Corcoran’s holding — that there is no basis to impose a duty on
contractors to inspect a single-family residence for asbestos — has
been the law for more than twenty-six years. We discern no reason
to depart from Corcoran and impose an inspection duty on either
contractors or homeowners for single-family dwellings.
¶ 37 Finally, we reject the Ferraros’ contention that the OSHA
standards require asbestos testing; those standards govern the duty
an employer owes to its employees, not the duty an independent
contractor owes a homeowner. See 29 C.F.R. § 1926.1101(k)(2)(i),
(k)(2)(ii) (2018) (requiring building and facility owners to determine
whether asbestos-containing material exists and notify employers,
employees, and tenants of asbestos-containing material).
IV. Conclusion
¶ 38 The judgment is affirmed.
JUDGE FOX and JUDGE WELLING concur.
20