Mountain Ranch Corp. v. Amalgam Enterprises, Inc.

143 P.3d 1065, 2005 Colo. App. LEXIS 2041, 2005 WL 3434629
CourtColorado Court of Appeals
DecidedDecember 15, 2005
DocketNo. 04CA0931
StatusPublished
Cited by3 cases

This text of 143 P.3d 1065 (Mountain Ranch Corp. v. Amalgam Enterprises, Inc.) 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
Mountain Ranch Corp. v. Amalgam Enterprises, Inc., 143 P.3d 1065, 2005 Colo. App. LEXIS 2041, 2005 WL 3434629 (Colo. Ct. App. 2005).

Opinion

DAILEY, J.

Intervenor and third-party defendant, Granite State Insurance Company, appeals the judgment entered in favor of defendant, eounterelaimant, and third-party plaintiff, Amalgam Enterprises, Inc., on a hen substitution bond. We vacate the judgment.

This appeal arises from a dispute among Amalgam, Mountain Ranch Corporation (MR), and Indian River Bend Construction Company (IRBCC) concerning a construction project in which IRBCC acted as general contractor and Amalgam as a subcontractor.

Pursuant to its contract with IRBCC, Amalgam supplied specialty stone for use in apartments located on MR’s property. In March 2000, IRBCC cancelled Amalgam’s contract, and on June 21, 2000, Amalgam recorded a mechanic’s lien of $250,000 on MR’s property. Pursuant to §§ 38-22-131 and 38-22-132, C.R.S.2005, MR obtained a release and discharge of the lien against the property by filing a $375,000 lien substitution bond issued by Granite.

On July 28, 2000, MR sued Amalgam, alleging that by asserting a lien when nothing was owed to it, Amalgam had slandered MR’s title to the property and recorded an excessive lien. In its responsive pleading, Amalgam denied liability, asserted various affirmative defenses, and filed a counterclaim against MR and third-party claims against IRBCC and two individuals (Lester B. Colod-ny and Russell Colodny) associated with both IRBCC and MR. More specifically, Amalgam asserted (1) a breach of contract claim against IRBCC; (2) a fraud claim against IRBCC and the Colodnys; and (3) a racketeering claim against IRBCC, the Colodnys, and MR. However, Amalgam did not seek foreclosure of its hen against the bond issued by Granite.

Subsequently, MR withdrew its claims because its property had been foreclosed upon and title had been transferred to another. Following a bench trial in December 2003, the court found for Amalgam on its breach of contract claim against IRBCC. In its January 2004 written order, however, the trial court entered judgment on that claim against both IRBCC and MR. The court also referred to the hen substitution bond issued by Granite on behalf of MR.

At that point, Granite was granted leave to intervene as a third-party defendant. It filed an answer and a motion for summary judgment, arguing that, as a matter of law, Amalgam was not entitled to use the bond to collect on the judgment in this case. The trial court denied Granite’s motion for summary judgment and, after a hearing, entered judgment for Amalgam and against Granite on the bond for $287,501.01 plus interest.

I.

Granite contends that it cannot be held liable to Amalgam because Amalgam did not timely pursue a hen foreclosure action on the bond. We agree.

Section 38-22-133, C.R.S.2005, requires that an action to enforce the bond “shall be commenced within the time allowed for the commencement of an action upon foreclosure of the lien, and the statute of limitations applicable to a hen foreclosure shall apply to the action upon the bond ... as it would had no bond ... been filed.”

Section 38-22-110, C.R.S.2005, sets forth the limitations period applicable to a hen foreclosure. Under that provision, “a hen claimant must bring a foreclosure action within six months after one of the following dates, whichever occurs last: (1) the date of [the] last work performed; (2) the date of [the] last materials furnished; or (3) the date of completion of the building or improvement” on the property. Merrick & Co. v. Estate of Verzuh, 987 P.2d 950, 953 (Colo.App.1999).

Here, Amalgam asserts that a timely action to foreclose the hen was brought because within the time allowed in §§ 38-22-110 and 38-22-133:(l) MR had, in its complaint, challenged the vahdity of the lien and (2) Amalgam, in its responsive pleading, had defended it. We disagree.

The key to this case lies in realizing that there are alternative remedies available to mechanic’s hen claimants.

[I]n order to understand mechanic’s hens, one must understand the distinction be[1068]*1068tween the debt and the security for the debt. The debt, or the in personam claim, consists of the action on the contract .... The lien is security for the debt, and the action to claim and foreclose a mechanic’s lien is an in rem action, equitable in nature.

Stephen W. Seifert et al., 9 Colo. Practice Series, Creditors’ Remedies—Debtors’ Relief § 4.30 (2005).

“[The mechanic’s lien] statute affords additional security to protect persons whose labor or materials enhance the value of real property. By granting to persons who fall within its provisions an in rem recovery against the land, the statute creates an alternative remedy which is broader than an in personam contract action.” C & W Elec., Inc. v. Casa Dorado Corp., 34 Colo.App. 117, 119, 523 P.2d 137, 138 (1974)(emphasis added; citation omitted).

This alternative, in rem remedy encompasses foreclosure actions on bonds when bonds have been substituted for property as the security for debt. See §§ 38-22-131 to 38-22-133, C.R.S.2005; see also Dennis Elec., Inc. v. United States Fid. & Guar. Co., 219 Cal.App.3d 1228, 269 Cal.Rptr. 26, 29 (1990); Gil Ruehl Mech., Inc. v. Hartford Fire Ins. Co., 164 S.W.3d 512, 514-15 (Ky.Ct.App.2004); Tualatin Valley Builders Supply, Inc. v. TMT Homes, Inc., 179 Or.App. 575, 41 P.3d 429, 432 (2002); George W. Kane, Inc. v. Nuscope, Inc., 243 Va. 503, 416 S.E.2d 701, 705 (1992); Gerald B. Treacy, Comment, The Release Bond Statutes: Achieving Balance in the Mechanics’ Lien Laws, 28 U.C.L.A. L.Rev. 95 (1980).

“Because recovery on the bond is a part of the process for enforcing the mechanic’s lien, authorities from other jurisdictions have concluded that a cause of action to foreclose a mechanic’s lien is substantially the same whether relief is sought against the liened property or against a bond which has been substituted for the property.” Hutnick v. United States Fid. & Guar. Co., 47 Cal.3d 456, 253 Cal.Rptr. 236, 763 P.2d 1326, 1330 (1988).

A “cause of action” for a lien foreclosure should be set forth either in a complaint, or, where the mechanic’s lien claimant is a defendant, in a counterclaim or cross-claim. See Seifert, supra, at § 4.47.

Here, the lien claimant, Amalgam, was a defendant in this case. It asserted counterclaims and cross-claims for breach of contract, fraud, and racketeering activity, but it did not assert a counterclaim or cross-claim for foreclosure on the bond.

We reject Amalgam’s assertion that a claim to foreclose on the bond is adequately set forth when the allegations in its own and MR’s pleadings are considered together. As the principal on the bond, MR would (and ultimately did) resist a foreclosure remedy.

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Bluebook (online)
143 P.3d 1065, 2005 Colo. App. LEXIS 2041, 2005 WL 3434629, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mountain-ranch-corp-v-amalgam-enterprises-inc-coloctapp-2005.