The summaries of the Colorado Court of Appeals published opinions constitute no part of the opinion of the division but have been prepared by the division for the convenience of the reader. The summaries may not be cited or relied upon as they are not the official language of the division. Any discrepancy between the language in the summary and in the opinion should be resolved in favor of the language in the opinion.

SUMMARY August 1, 2019

No.18CA1770, Ferraro v. Frias Drywall, LLC — Civil Procedure — Default; Torts — Negligence; Public Health and Environment — Air Quality Control — Asbestos Control; Administrative Law — Department of Health and Environment — Control of Hazardous Air Pollutants

A division of the court of appeals considers a novel procedural

issue and a novel substantive issue in this negligence action based

on a failure to inspect for asbestos. The division first holds that

under C.R.C.P. 55, a district court may sua sponte reconsider

liability to determine whether a viable cause of action exists after

the clerk’s entry of default but before the entry of a default

judgment. The division further holds that amendments to the

Department of Public Health and Environment Regulations do not

impose an asbestos inspection duty on the homeowner of a single-

family dwelling, contrary to the district court’s finding, or on the contractor. Because there was no asbestos inspection duty, we

affirm the district court’s judgment dismissing the case. COLORADO COURT OF APPEALS

Court of Appeals No. 18CA1770 Arapahoe County District Court No. 17CV32889 Honorable Elizabeth Beebe Volz, Judge

John Ferraro and Sandra Ferraro,

Plaintiffs-Appellants,

v.

Frias Drywall, LLC,

Defendant-Appellee.

JUDGMENT AFFIRMED

Division VI Opinion by JUDGE FREYRE Fox and Welling, JJ., concur

Announced August 1, 2019

Montgomery Little & Soran, P.C., John R. Riley, Greenwood Village, Colorado, for Plaintiffs-Appellants

No Appearance for Defendant-Appellee ¶1 In this negligence action between plaintiff homeowners, John

and Sandra Ferraro, and defendant contractor, Frias Drywall, LLC,

premised on Frias’s failure to test for asbestos before beginning

renovation, we must decide two issues that no Colorado court has

considered — one procedural and one substantive.

¶2 The procedural question asks: After an entry of default but

before entry of the default judgment, may a court sua sponte

reconsider liability at the damages hearing and dismiss the case for

failure to state a claim? We answer that question “yes,” and hold

that a court may reconsider whether the unchallenged facts set

forth in the complaint state a legitimate cause of action after default

is entered, because this holding furthers the goal of a just, speedy,

and inexpensive determination of civil actions. C.R.C.P. 1(a).

¶3 The substantive question asks: Did amendments to the

Department of Public Health and Environment Regulations, adding

“single-family residential dwellings” to the asbestos regulations,

create a duty to inspect for asbestos before beginning construction?

And, if so, who has the inspection duty — the contractor or the

homeowner? We answer the first substantive question “no,”

contrary to the district court, and hold that the plain language of

1 the regulatory amendments does not create an inspection duty for

single-family dwellings. Absent a duty, the holding in Corcoran v.

Sanner,

(Colo. App. 1993), that a contractor has no

duty to inspect for asbestos before beginning construction, applies

here and supports the court’s judgment dismissing the case on

alternative grounds. For these reasons, we affirm the court’s

judgment on different grounds and disapprove its conclusion that a

homeowner has the duty, under the regulations, to inspect for

asbestos.

I. Factual and Procedural Background

¶4 The Ferraros entered into an oral contract with Frias to

remove the popcorn ceiling from their home. After Frias completed

the work, the Ferraros became concerned by the significant amount

of residual dust and decided to test for asbestos. The samples

tested positive. The Ferraros then hired an asbestos abatement

company and spent $18,390 to remove the asbestos from their

home.

¶5 Alleging that Frias had negligently failed to test for asbestos

before beginning construction, the Ferraros filed their complaint

seeking reimbursement of more than $41,000 for asbestos

2 abatement, contaminated personal items, and replacement carpet.

They also requested annoyance and inconvenience damages of

approximately $41,000. They claimed that Frias owed them a duty

to test for asbestos before beginning renovation. Frias never

responded to the complaint.

¶6 The Ferraros moved for entry of default, and the clerk entered

a default. They then moved for a default judgment. The district

court granted the motion in part and set a hearing to determine

damages. At the hearing, the court asked the Ferraros to address

whether Frias had a duty to inspect for asbestos and requested

briefing. The Ferraros responded with two arguments. First, they

asserted that the clerk’s entry of default rendered Frias liable as a

matter of law, so the court had no authority to reconsider, sua

sponte, whether they had a viable cause of action. Second, they

asserted that the amended asbestos regulations impose a duty on

contractors to inspect for asbestos in single-family residences.

Alternatively, they argued that because Occupational Safety and

Health Administration (OSHA) standards require contractors to

protect their employees, these same standards required contractors

3 to inspect single-family residences for asbestos before beginning

construction.

¶7 The court disagreed with their contentions. Because Colorado

had never decided the procedural issue, the court relied on federal

authorities interpreting Fed. R. Civ. P. 55, which is substantially

similar to C.R.C.P. 55. It found persuasive cases interpreting the

federal rule to permit a court to examine the sufficiency of a legal

claim after a default is entered.

¶8 As well, it agreed with the Ferraros that the amended

regulations created an inspection duty for single-family dwellings

and, thus, that Corcoran is no longer good law. See generally Dep’t

of Pub. Health & Env’t Reg. 8, 5 Code Colo. Regs. 1001-10. And it

found that the regulations do not specify who owes that duty.

Therefore, it applied common law negligence factors to the facts in

the complaint to find that the inspection duty rests with the

homeowner, not the contractor. It denied the motion to enter

default judgment and dismissed the case without prejudice. The

judgment is final for purposes of our review because the complaint

fails to allege a viable cause of action and cannot be refiled.

Therefore, the court’s dismissal effectively constitutes a dismissal

4 with prejudice. Wilbourn v. Hagan,

(Colo. App.

1986).

II. Dismissal After Entry of Default

¶9 The Ferraros contend that the clerk’s entry of default, after

Frias failed to respond, established liability as a matter of law and

precluded the court from further considering this issue. We are not

persuaded.

A. Standard of Review and Law

¶ 10 Whether to set aside a default judgment is a decision within

the court’s discretion that we review for an abuse of discretion.

Meyer v. Haskett,

(Colo. App. 2010).

Therefore, we similarly review its decision to set aside a clerk’s entry

of default for an abuse of discretion. A court abuses its discretion

when its decision is manifestly arbitrary, unreasonable, or unfair,

or misapplies the law. Sebastian v. Douglas Cty.,

, ¶ 18;

In re Estate of Runyon,

.

¶ 11 A default judgment comprises two steps: “entry of default” by

the clerk and “entry of default judgment” by the court. See C.R.C.P.

55(a); see also Singh v. Mortensun,

(Colo. App.

2001) (“[W]e note that the entry of default and the entry of a default

5 judgment are separate and distinct.”). When the party against

whom relief is sought fails to respond or otherwise defend the

action, the court clerk “shall enter [the party’s] default.” C.R.C.P.

55(a); see also Plaza del Lago Townhomes Ass’n v. Highwood

Builders, LLC,

(Colo. App. 2006). The “entry of

default” accepts the complaint’s allegations and establishes the

defendant’s liability, but it does not establish damages. Dickinson

v. Lincoln Bldg. Corp.,

, ¶¶ 22-23. Indeed, “[w]hen a

default has been entered, but damages have not been proven, there

is no final judgment. Thus, the entry of default is simply an

interlocutory order that, alone, determines no rights or remedies.”

Singh,

.

¶ 12 After the entry of default, the court then determines damages

and enters a default judgment. See C.R.C.P. 55(b); Pinkstaff v.

Black & Decker (U.S.) Inc.,

(Colo. 2009). Until

that occurs, the judgment is not final. See Singh,

.

¶ 13 C.R.C.P. 55(c) provides that “[f]or good cause shown the court

may set aside an entry of default and, if a judgment by default has

been entered, may likewise set it aside in accordance with Rule

60(b).” A court may also examine a cause of action sua sponte to

6 determine the existence of a duty, before the clerk enters default.

Schenck v. Van Ningen,

(Colo. App. 1986)

(explaining that although “the trial court should not go beyond the

pleadings presented” without a hearing on a motion for default

judgment, the trial court properly denied the motion where “the

pleadings on their face reveal that no cause of action” was stated).

B. Analysis

¶ 14 While Schenck authorizes a court to examine the sufficiency of

a complaint sua sponte before the entry of default, no case in

Colorado has considered whether that authority exists after the

clerk enters default. The Ferraros urge us to find that the entry of

default “establishes a defaulting party’s liability” as a matter of law

and that it cannot be disturbed. Dickinson, ¶ 28. We reject their

interpretation and conclude, consistent with federal precedent, that

a complaint’s legal insufficiency constitutes “good cause,” under

C.R.C.P. 55(c), to set aside the entry of default and dismiss the

case.

¶ 15 C.R.C.P. 55 is substantially similar to Fed. R. Civ. P. 55. See

Plaza del Lago Townhomes Ass’n,

. Therefore, we

may rely on federal cases interpreting Fed. R. Civ. P. 55 for

7 guidance when interpreting C.R.C.P. 55. See Warne v. Hall,

, ¶ 12.

¶ 16 Numerous federal courts that have considered the question

presented here have held that “a defendant’s default does not in

itself warrant the court in entering a default judgment.” Nishimatsu

Constr. Co. v. Hous. Nat’l Bank,

(5th Cir.

1975). Instead, they reason that “[t]here must be a sufficient basis

in the pleadings for the judgment entered,” because “[t]he defendant

is not held to admit facts that are not well-pleaded or to admit

conclusions of law.” Id.; see also Surtain v. Hamlin Terrace Found.,

(11th Cir. 2015) (holding that the district

court did not err in sua sponte dismissing a claim after entry of

default because the plaintiff failed to provide a sufficient basis for

the judgment); Marshall v. Baggett,

(8th Cir.

2010) (concluding that although a court cannot disturb facts after

entry of default, “it is incumbent upon the district court to ensure

that ‘the unchallenged facts constitute a legitimate cause of action’

prior to entering final judgment” because a defaulting party does

not admit conclusions of law (quoting Murray v. Lene,

(8th Cir. 2010))); Bixler v. Foster,

(10th Cir.

8 2010) (holding that even if an entry of default was appropriate, a

claim can be dismissed on the merits and that the district court

properly denied the motion for default judgment).

¶ 17 The Ferraros do not cite, nor have we found, any authority

that precludes a court from considering the sufficiency of a

complaint sua sponte after entry of default, and we note that at

least one court has recognized such authority. See Surtain,

. Moreover, Colorado permits such sua sponte

consideration before the entry of default. Schenck,

. To conclude otherwise would allow baseless claims to

proceed to final judgment. See Marshall,

(explaining that although facts are taken as true, “it is incumbent

upon the district court to ensure that ‘the unchallenged facts

constitute a legitimate cause of action’ prior to entering final

judgement” (quoting Murray,

)).

¶ 18 As well, the Ferraros do not cite any authority holding that an

entry of default can never be altered. To the contrary, the plain

language of C.R.C.P. 55 authorizes a court to set aside an entry of

default for good cause.

9 ¶ 19 We agree with the reasoning of these federal authorities and

discern no error by the district court in sua sponte considering the

legal sufficiency of the Ferraros’ complaint after the entry of default.

And because an entry of default is not a final order, we conclude

that a complaint’s legal insufficiency constitutes good cause, under

C.R.C.P. 55(c), to set aside the default. Accordingly, we affirm the

court’s ruling denying the motion for default judgment and

dismissing the case for failure to state a claim.

III. No Asbestos Inspection Duty

¶ 20 The Ferraros next contend that the district court erroneously

found that homeowners of single-family dwellings have a duty to

inspect for asbestos and that contractors do not. They assert that

the court was bound by their expert, who opined that a contractor’s

standard of care requires asbestos inspection. We conclude that

the 2001 amendments to the asbestos statutes and accompanying

2003 changes to the regulations did not create an inspection duty

for single-family residences and, thus, neither homeowners nor

contractors owe such a duty under the regulations. Next, we are

not persuaded that the court was bound by the Ferraros’ expert’s

opinion that the OSHA standards apply. Finally, because we see no

10 reason to depart from the holding in Corcoran, we reject the

Ferraros’ assertion that contractors have an inspection duty and

affirm the court’s dismissal of the case, albeit on different grounds.

A. Standard of Review and Law

¶ 21 “To establish a claim of negligence, a plaintiff must show that

the defendant owed him or her a legal duty of care, that the

defendant breached that duty, and that the breach was the

proximate cause of the plaintiff’s injury.” Collard v. Vista Paving

Corp.,

. “If a negligence action is based on facts

that do not impose a duty of care upon a defendant for a plaintiff’s

benefit, the claim will fail.” Ryder v. Mitchell,

(Colo. 2002).

¶ 22 Whether a common law tort duty exists is a question of law we

review de novo. Westin Operator, LLC v. Groh,

, ¶¶ 18-

19. A duty is “an expression of the sum total of those

considerations of policy which lead the law to say that the plaintiff

is [or is not] entitled to protection.” Univ. of Denver v. Whitlock,

(Colo. 1987) (quoting W. Keeton, D. Dobbs, R. Keeton &

D. Owen, Prosser and Keeton on the Law of Torts § 53, at 358 (5th

ed. 1984)).

11 ¶ 23 Because “it is in the interest of the general public to control

the exposure of the general public to friable asbestos,” § 25-7-501,

C.R.S. 2018, Colorado has adopted comprehensive asbestos control

statutes. §§ 25-7-501 to -511.6, C.R.S. 2018. Their purpose is to

ensure the public’s health, safety, and welfare by regulating

asbestos abatement procedures in areas of public access. § 25-7-

501(1). The statute permits the air quality control commission to

adopt regulations that enforce compliance with the national

emission standards for hazardous air pollutants. Id.

¶ 24 We review statutes and rules de novo. Smith v. Exec. Custom

Homes, Inc.,

, 1189 (Colo. 2010). We apply the same

rules of construction when interpreting regulations and statutes.

Woolsey v. Colo. Dep’t of Corr.,

, 153 (Colo. App. 2002).

We look to the language of the regulation and analyze it according

to its plain and ordinary meaning. Williams v. Colo. Dep’t of Corr.,

(Colo. App. 1996). If that language is clear and

unambiguous, we need not resort to other rules of construction.

See Slack v. Farmers Ins. Exch.,

(Colo. 2000)

(statutory interpretation).

12 B. Analysis

1. Asbestos Regulations

¶ 25 In 2003, the Department of Public Health and Environment

Regulations were amended to comply with a 2001 statutory change

to include single-family residential dwellings. Ch. 225, sec. 4, § 25-

7-502,

(adding “single-family residential

dwelling” to “area of public access”); Dep’t of Pub. Health & Env’t

Reg. 8, pt. B, § VII.C, 5 Code Colo. Regs. 1001-10 (explaining

revision based on 2001 statutory change). A single-family

residential dwelling is

any structure or portion of a structure whose primary use is for housing of one family. Residential portions of multi-unit dwellings such as apartment buildings, condominiums, duplexes and triplexes are also considered to be, for the purposes of this Regulation No. 8, single-family residential dwellings; common areas such as hallways, entryways, and boiler rooms are not single-family residential dwellings.

Dep’t of Pub. Health & Env’t Reg. 8, pt. B, § I.B.96, 5 Code Colo.

Regs. 1001-10.

¶ 26 Other definitions relevant to our analysis are those for

“facility” and “facility component.” A facility is “any institutional,

13 commercial, public, industrial, or residential structure, installation,

or building (including any structure installation, or building

containing condominiums or individual dwelling units operated as a

residential cooperative, but excluding residential buildings having

four or fewer dwelling units) . . . .” Id. at Reg. 8, pt. B, § I.B.45

(emphasis added). A facility component is “any part of a facility,

including equipment.” Id. at Reg. 8, pt. B, § I.B.46.

¶ 27 Part B, section III of the regulations, entitled “Abatement,

Renovation and Demolition Projects,” contains a subsection, III.A,

concerning inspections. The district court relied on subsection

III.A.1 to find the existence of a duty to inspect single-family

residential dwellings. The regulation provides that

[p]rior to any renovation or demolition which may disturb greater than the trigger levels 1 of material identified as a suspect asbestos- containing material pursuant to the EPA “Green Book”, Managing Asbestos in Place, Appendix G (1990), the facility component(s) to be affected by the renovation or demolition shall be inspected to determine if abatement is required.

1 With regard to single-family residential dwellings, trigger levels “are 50 linear feet on pipes, 32 square feet on other surfaces, or the volume equivalent of a 55-gallon drum.” Dep’t of Pub. Health & Env’t Reg. 8, pt. B, § I.B.107.a, 5 Code Colo. Regs. 1001-10.

14 Id. at Reg. 8, pt. B, § III.A.1 (emphasis added).

¶ 28 Because a “facility component” excludes residential buildings

having four or fewer dwelling units, we conclude that this regulation

does not create an inspection duty for single-family residential

dwellings. Thus, while the regulation creates an inspection duty for

facility components, its plain language excludes single-family

residences like the Ferraros’ home, contrary to the district court’s

ruling.

¶ 29 This conclusion is consistent with the statutory scheme, which

is designed to protect the general public from friable asbestos in

public areas. § 25-7-501(1). While the General Assembly and the

commission added single-family residential dwellings to the statute

and regulations, they did so to provide homeowners with the same

abatement protections provided to other residential and commercial

property owners when the presence of asbestos is known. Dep’t of

Pub. Health & Env’t Reg. 8, pt. D, § VII.C.1.a, 5 Code Colo. Regs.

1001-10. Importantly, once a single-family dwelling’s homeowner

knows of asbestos in the home, the regulations provide that owner

with the ability to opt-out of the asbestos abatement requirements

entirely. Id. at Reg. 8, pt. B, § III.E.2 (“An owner of a single-family

15 residential dwelling may opt-out of the area of public access

requirements of this regulation for the abatement of asbestos-

containing material in excess of trigger levels in that owner’s

primary residence by completing the opt-out form.”).

¶ 30 Finally, we presume that the General Assembly and the

commission were aware of Corcoran’s holding that contractors have

no inspection duty when they passed the 2001 and 2003

amendments and, thus, we presume that their failure to specify

such a duty for contractors was intentional. See Colo. Ethics Watch

v. Senate Majority Fund, LLC,

(Colo. App. 2010)

(explaining that the legislature “must be presumed to know the

existing law at the time it amends or clarifies that law” (quoting

Alliance for Colorado’s Families v. Gilbert,

(Colo.

App. 2007))), aff’d,

. Accordingly, we conclude that the

district court erred in ruling that the amended regulations create an

inspection duty for single-family residences. Absent the existence

of a duty, there was no need for the court to decide who owed the

duty, so we do not further consider that portion of the court’s

analysis.

16 2. Expert Opinion

¶ 31 Alternatively, the Ferraros ask us to find a duty based on their

expert’s report and assert that the district court should have

adopted their expert’s opinion that the “standard of care is that

contractors are to investigate for asbestos.” We reject this

alternative argument because this precise issue was considered and

rejected by the division in Corcoran, and the amendments to the

regulations do not change the vitality of Corcoran in this regard.

¶ 32 In Corcoran, the plaintiffs argued that because two experts

opined that the asbestos regulations required abatement

procedures to be followed, the district court was “bound by that

evidence and required to rule” that the regulation applied.

. However, the division recognized that “[i]t is the trial

court’s responsibility to determine the law to be applied in any case,

and the court is not bound by ‘expert testimony’ on the applicability

of the law.” Id.; see Neher v. Neher,

(noting

that even if expert testimony is undisputed, the trial court is not

bound to accept it); see also Hines v. Denver & Rio Grande W. R.R.

Co.,

(Colo. App. 1991) (“The question whether a

defendant owes a plaintiff a duty to act to avoid injury is a question

17 of law to be determined by the court.”). It held that the asbestos

regulations did not establish a standard of care and, therefore, did

not “govern[] the [duty] owed by these defendants to plaintiff.”

Corcoran,

.

¶ 33 We agree with this reasoning and conclude that although the

Ferraros’ expert opined that the standard of care for a drywall

contractor includes a duty to test for asbestos, the district court

was not bound by that conclusion. See

(“It is irrelevant

whether that expert testimony regarding the legal question is

uncontradicted.”).

3. Corcoran

¶ 34 Also alternatively, the Ferraros assert that the district court

should have found a common law duty for contractors to inspect for

asbestos, and they urge us to ignore the holding in Corcoran. We

decline to do so.

¶ 35 In Corcoran, the plaintiff homeowner hired an architect to

remodel his home and hired a general contractor to scrape off a

popcorn ceiling and replace it with a smooth-textured one.

. During the work, a subcontractor said the ceiling

might contain asbestos, and subsequent testing was positive for

18 asbestos.

The plaintiff stopped work, hired an asbestos

abatement company, and hired a different general contractor to

complete the work.

The plaintiff sued the architect and the

original general contractors for negligence, breach of the agreement

to do work in a workmanlike manner, and outrageous conduct.

The trial court dismissed the plaintiff’s claims after trial, concluding

that “no standards or guidelines existed requiring defendants to

inspect or investigate for asbestos and that, therefore, defendants

did not owe a duty to plaintiff.”

. A division of this court

affirmed the dismissal.

. It held, based on statewide

standards, that Colorado does not require contractors to inspect for

asbestos before beginning work on a single-family home.

.

¶ 36 At the time of this decision in 1993, the asbestos regulations

did not include single-family dwellings. Despite the General

Assembly’s addition of “single-family residential dwellings” to the

definition of “area of public access” in 2001 and the commission’s

amendments to the regulations shortly thereafter, these changes

did not contradict Corcoran’s holding or create an inspection duty

for contractors. Ch. 225, sec. 4, § 25-7-502,

772; Dep’t of Pub. Health & Env’t Reg. 8, pt. D, § VII.C.1.a, 5 Code

Colo. Regs. 1001-10 (discussing addition of single-family residential

dwellings to the statute and regulations); Dep’t of Pub. Health &

Env’t Reg. 8, pt. B, § III.A.1, 5 Code Colo. Regs. 1001-10 (excluding

single-family dwellings from the inspection requirement). Thus,

Corcoran’s holding — that there is no basis to impose a duty on

contractors to inspect a single-family residence for asbestos — has

been the law for more than twenty-six years. We discern no reason

to depart from Corcoran and impose an inspection duty on either

contractors or homeowners for single-family dwellings.

¶ 37 Finally, we reject the Ferraros’ contention that the OSHA

standards require asbestos testing; those standards govern the duty

an employer owes to its employees, not the duty an independent

contractor owes a homeowner. See

(k)(2)(i),

(k)(2)(ii) (2018) (requiring building and facility owners to determine

whether asbestos-containing material exists and notify employers,

employees, and tenants of asbestos-containing material).

IV. Conclusion

¶ 38 The judgment is affirmed.

JUDGE FOX and JUDGE WELLING concur.

20