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Forest View Acres Water District v. Colorado State Board of Land Commissioners
Citations: 968 P.2d 168; 1998 Colo. J. C.A.R. 5579; 1998 Colo. App. LEXIS 264Docket: No. 95CA1518
Court: Colorado Court of Appeals; October 28, 1998; Colorado; State Appellate Court
Judge Marquez's opinion addresses an appeal by the Forest View Acres Water District and its directors against a trial court order that denied their motions to dismiss tort counterclaims and a third-party complaint from Forest View Company. The court affirms some aspects of the trial court's decision, reverses others, and remands for further proceedings. The Water District sought declaratory relief regarding agreements to supply water for a new development, claiming these agreements were void due to constitutional and statutory violations. It also requested that all development costs be borne by the developer and sought reimbursement for its own costs related to the agreement and this action. In response, Forest View filed counterclaims asserting the contracts' validity and seeking damages for abuse of process, breach of contract, and negligent misrepresentation, with certain claims directed at the individual directors of the Water District. The plaintiffs attempted to dismiss specific counterclaims, arguing the trial court lacked jurisdiction due to Forest View's failure to comply with notice of claim requirements under the governmental immunity act. Although Forest View admitted to not providing notice initially, the trial court ruled that such notice was not necessary and denied the motions. Subsequently, Forest View filed a notice of claim, but the trial court later determined that this notice was untimely for claims of negligent misrepresentation and tortious interference, as Forest View was aware of its injury by June 1994, while the notice was filed in April 1995. However, the court found that the notice for the abuse of process claim was timely since the injury was discovered only when the plaintiffs filed their declaratory action. The trial court maintained its ruling that notice of claim was unnecessary for any of Forest View's claims. The Water District and third-party defendants argue that the trial court incorrectly denied their motions to dismiss Forest View's claims for tortious interference with contract and negligent misrepresentation due to non-compliance with the notice requirements of the Colorado Governmental Immunity Act (CGIA), specifically § 24-10-109. Although the court acknowledges the potential validity of the tortious interference claim, it determines that the required notice was not provided, necessitating dismissal of that claim. Additionally, while notice is required for Forest View's claim for negligent misrepresentation if it seeks affirmative relief, it is not needed if the claim is interpreted solely as a request to return to the prior status. The CGIA states that public entities are not liable for tort actions unless specified by the Act, with § 24-10-109 mandating a written notice of injury within 180 days of its discovery. This requirement is considered a jurisdictional prerequisite for initiating a suit. The court dismisses Forest View's claim that compliance with both the Colorado Rules of Civil Procedure and § 24-10-109 is impossible. Specifically, while the Rules allow a defendant 20 days to respond to a complaint, the CGIA stipulates that no action can commence until after a claimant receives a denial from the public entity or 90 days have elapsed post-notice. The trial court found that Forest View was aware of its alleged injury by June 1994, confirming that the notice requirement stands regardless of the claims' nature. In the inducing breach of contract claim, Forest View accuses third-party defendants of intentionally interfering with the Water District's contract for personal gain, seeking damages that include anticipated profits and expenses. Despite the possibility of this claim being valid, it is treated as a claim for affirmative relief, thus requiring compliance with the CGIA notice provisions. Other jurisdictions have upheld similar conclusions, barring counterclaims without prior notice of claim compliance. The third-party complainant must adhere to notice of claim provisions due to governmental immunity statutes, which only allow claims in specific areas. These statutes permit certain claims, including original claims, counterclaims, or third-party complaints, but do not exempt third-party complaints from notice requirements. Forest View contended that the 'setoff or recoupment exception' of § 24-10-109 did not apply, a position the trial court supported. However, it was determined that such an exception does not apply here, as recognized by courts in other jurisdictions. When a government initiates a lawsuit, it waives immunity for claims from the defendant that arise from the same transaction, but not for claims that differ in nature or exceed the government's claim amount. In this case, Forest View's claim for inducing breach of contract is an affirmative tort claim, not defensive, thus requiring compliance with notice provisions. Similarly, while a claim for negligent misrepresentation could potentially be brought, if it seeks affirmative relief different in kind from the Water District's claim, it is also subject to notice requirements. However, if Forest View's counterclaim for negligent misrepresentation is viewed as a request to restore its prior position in the event the contract is voided, notice may not be necessary. Additionally, the court may treat misdesignated pleadings appropriately based on their substance, as per C.R.C.P. 8(c). The Water District seeks a declaration that specific agreements and a clarification letter are void and unenforceable, or alternatively, an interpretation of those agreements, effectively aiming for rescission of the contract. In its fourth counterclaim, Forest View, while labeled as a negligent misrepresentation claim, contends that if the court finds the contract void, the Water District's assertions of having the legal capacity to enter into the contract are false. Forest View claims entitlement to all incidental and consequential damages resulting from the Water District's actions that placed it in a position as if the contract had never existed. This claim is characterized as a request for restoration to the status quo ante, negating the need for notice under the Colorado Governmental Immunity Act (CGIA). Rescission typically involves mutual restitution, requiring the party seeking rescission to return the other party to their pre-contract position. This equitable principle emphasizes practical adjustments of rights. Judicial precedents affirm that when a contract is declared void, rescission must follow, with remedies including the return of any payments made. Consequently, Forest View's counterclaim for restoration to the status quo ante does not necessitate CGIA notice. The court denies Forest View’s request for attorney fees, reverses the order denying the motion to dismiss the third-party complaint for inducing breach of contract, and also reverses the order where the counterclaim for negligent misrepresentation seeks affirmative relief. However, the order is affirmed regarding Forest View's claim to be restored to the status quo ante if the contract is rescinded, and the case is remanded for further proceedings. Judges Metzger and Criswell provide their respective opinions, with Criswell concurring in part and dissenting in part.