In an earlier blog post, we discussed the case of Triple Crown Observatory Village Assn., Inc. v. Village Homes of Colorado, Inc., et al(2013 WL 5761028) because it presented the rare case where the Colorado Court of Appeals accepted an interlocutory appeal. Notably, the interlocutory appeal resulted from dismissal of the HOA case in which the trial judge directed the parties to arbitrate in lieu of a jury trial, under the declaration of covenants, conditions, and restrictions that governed the community. The Court of Appeals decided the case on its merits on November 7, 2013, and its decision can be found at 2013 WL 6502659. (Note: this presently unpublished opinion may be subject to further appeal to the Colorado Supreme Court.)
The case resulted from an attempt by the HOA’s counsel to amend the mandatory arbitration provisions of the declarations before it filed suit. This amendment process took the form of soliciting signature votes of homeowners on a revocation resolution to repeal the specific provisions of the declarations that provided mandatory, binding arbitration as the sole remedy for disputes between the HOA and the developer and/or general contractor. The declarations required that 67% of homeowners vote in favor of amendment in order to modify the declarations.
After 60 days of soliciting such written signatures, the HOA was only able to get 48% of homeowners to vote for the modifications, which was not enough to pass the amendment. However, within another 60 days (120 days after beginning to obtain signatures), the HOA had the required 67% of signatures on the amendment resolution.
The questions on appeal were whether, as argued by the declarant developer and general contractor, the HOA was governed by the time limits for such a process under the procedures of the Colorado Revised Non-Profit Corporation Act (CRNCA). Declarant argued that those procedures only allowed the HOA 60 days to gather all of the required homeowner signatures, after which time the amendment would fail if there were insufficient signatures.
In contrast, the HOA argued that the Colorado Common Interest Ownership Act (CCIOA) was the relevant governing authority, and that the lack of any stated time limits for gathering such homeowner signatures for modification of the declarations meant that the HOA had successfully amended the declarations using a period of more than 60 days. Accordingly, the HOA argued that through its actions over 120 days, the arbitration provisions of the declarations had been repealed. The HOA then argued that it had a right to a jury trial on its claims against the declarant developer and general contractor, as well as other related parties.
In a lengthy and analytical opinion, the Colorado Court of Appeals held that both statutory authorities were potentially applicable. However, it determined that there is a provision in CCIOA which makes that statute the greater and final authority where the two statutes may be in conflict. However, the appellate court found that the time limit issues raised by the parties were not addressed to any degree by CCIOA, and instead that such time limits were addressed by the provisions of CRNCA.
Because there were no timing-related conflicts found between the statutes, the court determined that it had a duty to harmonize the statutes if possible. Since the time limits for such actions were found in CRNCA, and these requirements were not expressly or impliedly contradicted by the terms of CCIOA, the Court determined that the governing authority was the CRNCA. Since that statute provided time limits that were not met by the HOA, the Court determined that the HOA failed to amend the declarations. Accordingly, the HOA was required to submit to binding arbitration in lieu of a jury trial, as ordered by the trial court. Significantly, the Court also held that the HOA’s Colorado Consumer Protection Act (CCPA) claims were subject to the same arbitration process, and could not be separately asserted in a jury trial.
The lesson to be taken from this case is obvious, regardless of whether it is further appealed to the Colorado Supreme Court. The application of technical procedures under the CRNCA and CCOIA must be part of overall case evaluation, and early in the case. If there are arbitration provisions which arguably govern the dispute, they must be followed. If those provisions have been amended, the amendment requirements must also be strictly followed, or the amendments may not be successful. In the end, that analysis will decide whether the case proceeds to jury trial or mandatory binding arbitration.
For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at firstname.lastname@example.org.