259 P.3d 546
Colo. Ct. App.2011Background
- DLV owned property and Diamond Lofts Venture, LLC contracted Sure-Shock as electrical subcontractor.
- Contract required arbitration for any claim arising from or related to the subcontract.
- Sure-Shock recorded a mechanic's lien and sued for breach, unjust enrichment, and lien foreclosure.
- Arbitration proceeded after a stay of court proceedings; arbitrator found for Sure-Shock on contract/unjust enrichment claims, with an interim award omitting foreclosure.
- Arbitrator noted the lien filing, amount, and recording date, and awarded interest from recordation; district court confirmed the lien amount and Sure-Shock’s right to participate in foreclosure.
- DLV argues arbitration barred court foreclosure and procedural validity challenges; the court held otherwise and affirmed foreclosure procedure in court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether lien amount was properly arbitrable. | Sure-Shock: lien amount arises from contract; arbitrable. | DLV: lien issues are distinct or not properly arbitrated. | Lien amount properly decided via arbitration. |
| Whether procedural validity of the lien can be decided by the court. | Sure-Shock met initial burden; procedural validity not raised in arbitration should be considered. | DLV: procedural validity must be arbitrated under broad arbitration clause. | Procedural validity may be determined by the court during foreclosure. |
| Whether arbitration clause divested the court of jurisdiction to foreclose. | Foreclosure can proceed in court despite arbitration clause. | Arbitration covers all disputes, including foreclosure. | Court retains jurisdiction to adjudicate foreclosure and lien validity. |
| Whether non-arbitrated, collateral parties’ interests affect foreclosure proceeding. | Lien foreclosure proceeds fairly with all interested parties. | Non-parties should not be bound by arbitration results. | Courts may adjudicate in rem lien issues without binding non-party interests to arbitration. |
Key Cases Cited
- Mountain Ranch Corp. v. Amalgam Enterprises, Inc., 143 P.3d 1065 (Colo.App.2005) (distinguishes in rem lien foreclosure from in personam contract claims)
- Cottage City Mennonite Church, Inc. v. JAS Trucking, Inc., 167 Md. App. 694, 894 A.2d 609 (Md. 2006) (allows foreclosure action pending arbitration when landlord/owner not party to arbitration)
- Royal Palm Collection, Inc. v. Lewis, 36 So.3d 168 (Fla.Dist.Ct.App.2010) (foreclosure of mechanic’s lien permissible under arbitration context)
- Koors v. Steffen, 916 N.E.2d 212 (Ind.Ct.App.2009) (parties may arbitrate lien-related issues; court should stay or decide depending on context)
- Sentry Eng’g & Constr., Inc. v. Mariner’s Cay Dev. Corp., 338 S.E.2d 631 (S.C.1985) (arbitration award can support lien foreclosure under certain circumstances)