Associates of San Lazaro v. San Lazaro Park Properties

Citations: 864 P.2d 111; 17 Brief Times Rptr. 1967; 1993 Colo. LEXIS 980; 1993 WL 513514Docket: 92SC144

Court: Supreme Court of Colorado; December 13, 1993; Colorado; State Supreme Court

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The Supreme Court of Colorado addressed the case of Associates of San Lazaro v. San Lazaro Park Properties, where the court of appeals had previously reversed a trial court's dismissal of a breach of warranty claim by San Lazaro against the Associates related to their purchase of the San Lazaro Mobile Home Park. The appeals court found errors in the trial court's conclusions regarding the waiver of express warranties, the ambiguity of those warranties, and the admissibility of parol evidence regarding the parties' intent. The Supreme Court granted certiorari, ultimately reversing the appellate decision and remanding the case for further proceedings. 

The background includes the conditional approval of a special use permit in 1966 for the construction of 194 mobile home pads, with subsequent complaints about unauthorized construction on the site. After the Associates purchased the park in 1981, they discovered that some mobile homes were not approved. In March 1983, the Associates entered into a purchase agreement for the park, which included warranty provisions asserting that the park comprised 216 properly connected pads and was in compliance with applicable regulations. At closing, rights under the agreement were assigned to San Lazaro, which included key individuals involved in the transaction.

No governmental actions or investigations are pending regarding the ownership, maintenance, and operation of the park. Subject to [San Lazaro]'s performance, the [Associates] will provide a warranty deed for a marketable title with specific exceptions: compliance with building and zoning laws, restrictions on property use without effective forfeiture, reservation of mineral rights to local governmental entities, utility and drainage easements not affecting current park improvements, tenant rights concerning 216 mobile home pad leases, and an existing first mortgage lien on the premises. All warranties and representations in this Purchase Agreement will survive closing and the agreement is binding on all parties and their successors. Modifications require written consent from all parties. Notably, two mobile home pads (76 and 78) are currently non-rentable; the seller will cover rent at the prevailing rate until they are made habitable, or pay the buyers $28,600 if not rented within six months after closing. There is an agreement among San Lazaro, the Associates, and three realtors to equally split a cash amount of $14,350 at closing. Communication from March 1983 reveals zoning issues with unauthorized mobile home pads, with the county seeking compliance with the original site plan, although no timeline was provided for potential county action. A follow-up letter noted that while the property is platted for 195 spaces, all 216 are within its boundaries, and administrative changes might be manageable without significant scrutiny.

On March 29, 1983, Levine advised Simon to maintain a low profile regarding inquiries at the Boulder County zoning office, suggesting that raising concerns would be unproductive. On April 19, 1983, Ziebarth informed Simon about his research on a mobile home park, noting discrepancies in the approved site plan, ongoing problems since approval, and a policy requiring that building permits for mobile homes be aligned with the site plan, confirmed by Gary Goodell of Boulder County. The property closing occurred on June 2, 1983. In 1987, two potential tenants were denied building permits due to noncompliance with a 1966 special use permit. In October 1988, San Lazaro filed a civil action against the Associates, claiming breaches of warranty and misrepresentation regarding mobile home pad availability. San Lazaro sought $14,300 for each unrentable pad due to permit issues. The Associates denied the claims, asserting that San Lazaro's purchase was contingent on its own inspections and that it waived any warranty claims. After a bench trial, the court ruled in favor of the Associates, finding the agreement ambiguous regarding pad availability and compliance warranties, and concluded that San Lazaro had waived enforcement rights due to its independent investigation. On appeal, the court reversed the decision, stating that San Lazaro relied on the Associates' warranties and that these warranties were clear, finding a breach regarding compliance with zoning regulations.

San Lazaro was aware of discrepancies between authorized and constructed sites and potential zoning issues through its own investigation, as well as information provided by the Associates. Despite this knowledge, San Lazaro chose to proceed with the agreement, indicating a waiver of its right to rely on the warranties in the contract. The trial court concluded that by not relying on the express warranties, and instead relying on its independent investigation, San Lazaro intentionally relinquished its rights. The court emphasized that a buyer's reliance on warranties is crucial; if a buyer does not rely on them, enforcing the warranty could unfairly benefit the buyer. The court noted that San Lazaro’s decision to enter the transaction, despite its findings, contradicted the appellate court's view that it would not have done so had it relied solely on its investigations. The evidence supported the trial court’s factual findings, which are typically upheld on appeal. San Lazaro received information indicating that the constructed sites exceeded the authorized number under zoning laws and was advised to avoid raising concerns about zoning. However, San Lazaro conducted its own inquiry and discovered that the Department would enforce a policy denying new building permits until zoning requirements were met, a fact it did not disclose to the Associates prior to closing.

San Lazaro conducted an independent investigation that yielded information differing from the warranties provided by the Associates. The trial focused on whether San Lazaro relied on its own findings or the Associates' written representations when completing the transaction. The trial court determined that San Lazaro did not depend on the Associates' representations, a conclusion supported by evidence indicating that San Lazaro relied solely on information obtained from Boulder County officials, which contradicted the Associates' claims. Consequently, it was concluded that San Lazaro waived its right to depend on the express warranties in the agreement. As a result, the court reversed the court of appeals' judgment and directed the reinstatement of the trial court's judgment. Additionally, issues related to the Associates' third-party complaint against the County and the County's defenses and claims are not addressed in this ruling. Prior cases cited establish that a buyer's inspection does not invalidate warranties unless the buyer clearly relies solely on their own investigation and waives the warranty, a standard met by San Lazaro's actions.