Flanders Electric Motor Service, Inc. v. Davall Controls & Engineering

831 P.2d 492, 16 Brief Times Rptr. 577, 1992 Colo. App. LEXIS 128, 1992 WL 71122
CourtColorado Court of Appeals
DecidedApril 9, 1992
Docket91CA0060
StatusPublished
Cited by6 cases

This text of 831 P.2d 492 (Flanders Electric Motor Service, Inc. v. Davall Controls & Engineering) is published on Counsel Stack Legal Research, covering Colorado Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Flanders Electric Motor Service, Inc. v. Davall Controls & Engineering, 831 P.2d 492, 16 Brief Times Rptr. 577, 1992 Colo. App. LEXIS 128, 1992 WL 71122 (Colo. Ct. App. 1992).

Opinion

Opinion by

Chief Judge STERNBERG.

Flanders Electric Motor Service (Flanders) appeals from the discharge of its writ of garnishment against Gardner-Zemke Co. (G-Z) to recover funds allegedly owed to its judgment debtor, Davall Controls & Engineering (Davall). We affirm.

G-Z was an electrical subcontractor on several construction projects for the Bureau of Reclamation’s Central Arizona Irrigation Project. Davall was a supplier and subcontractor to G-Z, and Flanders was one of Davall’s suppliers.

Flanders obtained a default judgment for $198,888.12 against Davall, and thereafter, it served a writ of garnishment on G-Z. G-Z denied liability, and Flanders traversed the garnishee’s answer. Because they were attempting a settlement, both parties agreed to vacate a hearing on Flanders’ traverse. In an amended answer, responding to new evidentiary issues raised in the traverse, G-Z again denied liability on the grounds contending that all amounts owed to Davall were contingent. Additionally, it asserted set-off rights, but noted that the amounts could not be determined until it actually completed the work on the contracts breached by Davall.

Eight months later, G-Z filed a motion on procedural grounds to discharge the garnishment, which the trial court granted. However, on appeal, we vacated that order and remanded with directions to consider the merits of the motion. The trial court did so and entered judgment in favor of GZ discharging the garnishment on the grounds that Flanders had failed to prove the existence of a garnishable debt owed to Davall by G-Z. This appeal followed.

The trial court found that Davall failed to complete any of its six contracts with GZ, with the result that G-Z canceled one contract and performed that work itself and completed the work on the remaining five contracts, backcharging the costs to do so, plus related consequential damages, against Davall. It also found that all of Davall’s contractual breaches occurred pri- or to the date of Flanders’ garnishment of G-Z.

The court then concluded that G-Z had only a contingent, nongarnishable liability to Davall because: 1) Davall had not completed and was not performing under its contracts and therefore was not entitled to payment; 2) G-Z’s obligation to pay Davall did not arise until G-Z had been paid by the Bureau of Reclamation; and 3) G-Z had a right to set-off its completion costs although the exact amount could not be calculated until work on the contracts was completed.

Flanders contends that G-Z’s liabilities to Davall were not contingent, that G-Z failed to assert its alleged set-offs in a timely manner, and that the set-offs were neither necessary nor reasonable. It also asserts that it is inequitable to preclude Flanders from collecting from G-Z because l, -Z was responsible for Davall’s failure to complete its contracts. Finally, Flanders objects to the court’s refusal to admit certain deposition testimony. G-Z seeks costs for defending a frivolous appeal.

I.

Flanders first argues that G-Z’s obligations to Davall were not contingent. It claims that, based on certain documents in evidence, G-Z had admitted it owed money to Davall at the time the writ of garnishment was served. It further argues that because Davall had substantially performed its contractual duties under some of the contracts, it was entitled to recover on them. Flanders rejects G-Z’s contention that it was not obligated to pay Davall until it had been paid by the Bureau of Reclamation, claiming that the “pay when paid” clause was not contained in those contracts which Davall had substantially performed. We reject these contentions.

*495 Pursuant to C.R.C.P. 103 § 4(a), a judgment creditor may garnish any money owed a judgment debtor whether due at the time of service of the writ or to become due thereafter. If the debtor could bring an immediate action to recover the debt from the garnishee, then the debt is due within the meaning of the rule. Martinez v. Dixon, 710 P.2d 498 (Colo.App.1985). Contingent liabilities, however, are not gar-nishable. Haselden Langley Constructors, Inc. v. Graybar Electric Co., 662 P.2d 1064 (Colo.1983).

Here, Davall had not substantially performed under several of its contracts with G-Z. Additionally, G-Z’s alleged “admission” of debt was based on documents which showed only amounts G-Z would have owed Davall had it completed performance.

Furthermore, we find no merit in Flanders’ argument that in Baker v. Young, 798 P.2d 889 (Colo.1990), the supreme court narrowed the rule that contingent obligations are not subject to garnishment. That case dealt with whether an insurer’s obligation to indemnify and defend a nonresident insured was nonexempt property which could be attached to provide the basis for quasi in rem jurisdiction. Nowhere did the court suggest a narrowing of the contingent liability rule for garnishments.

Consequently, we agree with the trial court that, as to these contracts, G-Z’s obligation to Davall was contingent and therefore was not garnishable. However, a question remains as to the contracts which Davall had substantially performed.

If a subcontractor substantially performs its contractual duties, it may recover the contract price minus damages for its failure to perform fully. Denver Ventures, Inc. v. Arlington Lane Corp., 754 P.2d 785 (Colo.App.1988). However, under C.R.C.P. 103 § 10:

Every garnishee shall be allowed to claim as a set-off and retain or deduct all demands or claims on the part of the garnishee against any party to the garnishment proceedings, which the garnishee might have claimed if not summoned as a garnishee, whether such are payable or not at the time of service of any form of writ provided for by this rule.

Thus, even if we were to conclude that G-Z was liable to Davall on the substantially completed contracts, G-Z was entitled to assert its rights to set-off. Because these amounts were greater than what it arguably owed on the substantially completed contracts, it would have no liability to Davall.

Nevertheless, Flanders contends that GZ is not entitled to the set-offs because it was untimely in asserting them. We disagree.

In Colorado National Bank-Arvada v. Greaney, 720 P.2d 611 (Colo.App.1986), this court addressed the timeliness of a claim to set-off a customer’s bank account funds against a bank loan. We concluded that it was unreasonable to require a garnishee to claim a set-off immediately upon the service of the writ of garnishment and held that the more practical approach is to allow the same amount of time as was allowed for answering garnishment interrogatories.

In Greaney, there was no question as to the amount of set-off.

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831 P.2d 492, 16 Brief Times Rptr. 577, 1992 Colo. App. LEXIS 128, 1992 WL 71122, Counsel Stack Legal Research, https://law.counselstack.com/opinion/flanders-electric-motor-service-inc-v-davall-controls-engineering-coloctapp-1992.