Triple Crown at Observatory Village Ass'n v. Village Homes of Colorado, Inc.

2013 COA 144, 389 P.3d 888, 2013 WL 5761028, 2013 Colo. App. LEXIS 1669

• Court: Colorado Court of Appeals
• Decided: October 24, 2013
• Docket: Court of Appeals No. 13CA1390
• Status: Published

Opinions

Opinion by

JUDGE GABRIEL

¶ 1 In this construction-defect action, plaintiff, Triple Crown at Observatory Village Association, Inc. (the Association), petitioned this court, pursuant to C.A.R. 4.2, for interlocutory review of the district court’s order granting the motion of defendants, Village Homes of Colorado, Inc., Peter Benson, Brian Graves, Mark McCallum, Rudy Hanseh, Kelly Martinez, Ronald Hettinger, and Elys-sa Blazier (collectively, the Village Defendants), to enforce an arbitration provision in the Association’s declaration. We conclude that the order appealed involves controlling and unresolved questions of law and that our immediate review may promote a more orderly disposition of this litigation. Accordingly, we grant the petition for interlocutory review, setting forth our reasoning below. A later opinion will address the merits of this interlocutory appeal.

I. Background

¶2 The Village Defendants created the Association, a Colorado nonprofit corporation, under section 7-122-102, C.R.S.2013, of the Colorado Revised Nonprofit Corporation Act (CRNCA) to manage, maintain, and repair the properties comprising the Triple Crown at Observatory Village condominium community (the Project). Under the Colorado Common Interest Ownership Act (CCIOA), §§ 38-S3.3-101 to -402, C.R.S. 2013, defendant, Village Homes of Colorado, Inc., as the Project’s Declarant, recorded the Declaration of Covenants, Conditions and Restrictions of Triple Crown Homes at Observatory Village Association, Inc, (the Declaration).

¶3 As pertinent here, Article 14 of the Declaration established a dispute resolution procedure for claims arising from, among other things, the design or construction of the improvements and structures on the Project. Article 14 required that the parties arbitrate such claims if good faith negotiation and mediation efforts were unsuccessful. In addition, it appears undisputed that Article 14 could be amended only if the amendment were approved by Association members to which at least sixty-seven percent of the votes in the Association had been allocated, and any such amendment had to be done in compliance with CCIOA.

¶ 4 After disputes arose regarding the Village Defendants’ responsibility for alleged construction defects in the Project, the Association sought to revoke Article 14.- The Association appears to have obtained the votes to do so from forty-eight percent of the allocated interests within sixty days and sixty-seven percent of the allocated interests within 120 days. The Association then recorded an Amendment to the Declaration and filed this action, asserting claims for negligence and negligent repair, breach of implied warranty, misrepresentation and nondisclosure, violations of the Colorado Consumer Protection Act (CCPA), §§ 6-1-101 to -1121, C.R.S.2013, and breach of fiduciary duty.

¶5 The Village Defendants moved to enforce the arbitration provision of Article 14. In this motion, they argued that the Association’s revocation of Article 14 was ineffective because the Association had failed to obtain written consent forms from sixty-seven percent of its members within the sixty-day time period set forth in section 7-127-107(2), C.R.S.2013, of the CRNCA. That section provides that no action of a nonprofit corporation taken without a meeting is effective unless the corporation receives the requisite number of member consent forms within sixty days after the earliest dated consent form is received by the corporation. Id.

' ¶ 6 The Association responded that its action was not subject to the CRNCA’s time limit. It contended that CCIOA, and not the CRNCA, was applicable here and that CCIOA contains no sixty-day time limit to obtain the requisite consent forms; Alternatively, it disputed the enforceability of Article 14 on other statutory grounds. The Association further argued that its CCPA claims were not subject to arbitration.

¶ 7 By order dated June 20, 2013, the district court granted the Village Defendants’ motion to enforce Article 14. The court reasoned that under section 38-33.3-301, C.R.S. 2013, of CCIOA, a unit owners’ association like the Association here “shall be organized as a nonprofit, not-for-profit, or for-profit corporation or as a limited liability company in accordance with the laws of the state of Colorado.” The court further observed that section 38-33.3-108, C.R.S.2013, of CCIOA provides that the law of corporations, among other laws, “supplement[s]- the provisions of this article....”

¶ 8 Because the Association was established as a nonprofit corporation under CCIOA, the court concluded that it was subject both to CCIOA and to the structural and procedural provisions applicable to the chosen entity. In particular, the court determined that the Association was subject to section 7-127-107 of the CRNCA when it sought to amend the Declaration without holding a meeting. Because the Association failed to comply with that statute’s sixty-day time limitation, the’ court concluded that the Association’s purported revocation of Article 14 was invalid.

¶ 9 The court further rejected the Association’s alternative argument that even if Article 14 survived and required that the Association submit its other claims to arbitration, its CCPA claims were not arbitrable. In holding that the CCPA claims, too, were arbitrable, the court distinguished Ingold v. AIMCO/Bluffs, L.L.C. Apartments, 159 P.3d 116 (Colo.2007), and Lambdin v. District Court, 903 P.2d 1126 (Colo.1995), on which the Association relied.

¶ 10 The Association then filed an unopposed motion for certification of the order pursuant to C.A.R. 4.2. The court granted that motion and certified the following three issues:

1. Whether C.R.S. § 38-33.3-217, the Colorado Common Interest Ownership Act’s (“CCIOA’s”) procedure for amending a common interest community’s Declaration by written consent, which imposes no time limit on obtaining such consent, supersedes C.R.S. § 7-127-107, the Colorado Revised Nonprofit Corporation Act (“CRNCA”), which imposes a 60-day time limit for the approval of certain “actions” taken without meetings, such as Declaration amendments.

2. Whether CCIOA’s (C.R.S.38-33.3-302(2)’s) prohibition against a Declaration placing restrictions on the “power of the association to deal with the de-clarant that are more restrictive than the limitations imposed on the power of the association to deal with other persons,” renders the Declaration’s arbitration provision applicable only to the Declarant void and unenforceable.

3. Whether, as a matter of law, the Association’s Colorado Consumer Protection Act (“CCPA”) claim is subject to a predispute arbitration requirement inserted in the Declaration by the De-clarant.

¶ 11 The Association then filed the present C.A.R. 4.2 petition in this court.

II. Discussion

¶ 12 Section 13-4-102.1(1), C.R.S.2013, provides:

The court of appeals, under rules promulgated by the Colorado supreme court, may permit an interlocutory appeal of a certified question of law in a civil matter from a district court or the probate court of the city and county of Denver if:

(a) The trial court certifies that immediate review may promote a more orderly disposition or establish a final disposition of the litigation; and

(b) The order involves a controlling and unresolved question of law.

¶ 13 C.A.R. 4.2, in turn, provides, in pertinent part:

(a) Discretionary Interlocutory Appeals. Upon certification by the trial court, or stipulation of all parties, the court of appeals may, in its discretion, allow an interlocutory appeal of an order in a civil action....

(b) Grounds for Granting Interlocutory Appeal. Grounds for certifying and allowing an interlocutory appeal are:

(1) Where immediate review may promote a more orderly disposition or establish a final disposition of the litigation; and

(2) The order involves a controlling and unresolved question of law. For purposes of this rule, an “unresolved question of law” is a question that has not been resolved by the Colorado Supreme Court or determined in a published decision of the Colorado Court of Appeals, or a question of federal law that has not been resolved by the United States Supreme Court.

¶ 14 Accordingly, in our discretion, we may grant an interlocutory appeal when (1) immediate review may promote a more orderly disposition or establish a final disposition of the litigation; (2) the order from which an appeal is sought involves a controlling question of law; and (3) that question of law is unresolved. Kowalchik v. Brohl, 2012 COA 25, ¶ 13, 277 P.3d 885, 888.

¶ 15 Here, we conclude that immediate review may well promote a more orderly disposition of the litigation. Were we not to grant immediate review, the parties could potentially arbitrate all of the claims in this case and then the Association could appeal the order compelling arbitration. Were a division of this court to conclude that the district court had erred in enforcing the arbitration provision, the parties would have needlessly expended substantial amounts of time and money. In these circumstances, we conclude that accepting this appeal now would promote a more orderly disposition of the litigation.

¶ 16 We further conclude that each of the certified questions presents an unresolved question of law. Each question involves statutory interpretation, which is a question of law. Clyncke v. Waneka, 157 P.3d 1072, 1076 (Colo.2007). Moreover, none of the certified questions has been addressed either by our supreme court or in a published decision of a division of this court. C.A.R. 4.2(b)(2).

¶ 17 The question thus becomes whether the district court’s order involves controlling questions of law. For the following reasons, we conclude that it does,

¶ 18 Neither divisions of this court nor jurisdictions with statutes or rules that are similar to C.A.R. 4.2 have developed a single definition of “controlling” to be applied in all cases when deciding whether to entertain an interlocutory appeal certified by the district court. Adams v. Corr. Corp. of Am., 264 P.3d 640, 645-46 & n. 8 (Colo.App.2011). Rather, appellate courts, including divisions of this court, have determined what constitutes a controlling question of law based on the nature and circumstances of the order being appealed. Id. We take the same approach here.

¶ 19 Although no published decision of a Colorado appellate court has addressed whether a motion to enforce an arbitration agreement covering all claims in a case is a controlling question of law, the majority of federal courts addressing this issue in the analogous context of interlocutory appeals under 28 U.S.C. § 1292(b) appears to have concluded that the question is controlling. (Section 1292(b) allows a district court to certify an order not otherwise appealable if the order “involves a controlling question of law as to which there is substantial ground for difference of opinion and ... an immediate appeal from the order may materially advance the ultimate termination of the litigation.”)

¶ 20 For example, in Kuehner v. Dickinson & Go., 84 F.3d 316, 318 (9th Cir.1996), the district court had entered an order staying the proceedings pending arbitration and then certified the order to the Ninth Circuit, concluding, among other things, that the order presented controlling questions of law. The Ninth Circuit affirmed. Id. at 319. In so holding, that court rejected the defendant’s argument that no question of law can be controlling unless it determines who will win on the merits. Id. Instead, the court noted that issues collateral to the merits may be the proper subject of an interlocutory appeal and agreed with the district court that “an order may involve a controlling question of law if it could cause the needless expense and delay of litigating an entire case in a forum that has no power to decide the matter.” Id.; see also Vernon v. Qwest Commc’ns Int'l, Inc., 925 F.Supp.2d 1185, 1195 (D.Colo. 2013) (certifying an order compelling arbitration, finding, among other things, that the issue turned on a controlling question of law); Delock v. Securitas Sec. Servs. USA, Inc., 883 F.Supp.2d 784, 791 (E.D.Ark.2012) (concluding that an order compelling arbitration presented a controlling question of law when, among other things, no danger existed for an advisory opinion on a question that could not yet be asked with clarity, and the question presented could head off protracted and costly litigation about where the parties’ dispute belonged and how it would be resolved); Eisenberger v. Chesapeake Appalachia, LLC, No. 3:09-CV-1415, 2010 WL 1816646, at *3 (M.D.Pa. May 5, 2010) (unpublished memorandum) (concluding that an order compelling arbitration was a controlling question because, among other things, an incorrect disposition of the issue would constitute reversible error and, from a practical standpoint, the conduct of the litigation would be significantly different were the case before an arbitrator rather than subject to the long and costly process of civil litigation in a federal district court); S.A. Mineracao Da Trindade-Samitri v. Utah Int'l Inc., 579 F.Supp. 1049, 1050-51 (S.D.N.Y.) (concluding that an order compelling arbitration present ed controlling questions of law when (1) the court’s decision to compel arbitration and to stay the litigation for as long as two years was a procedural determination that was certain to affect the conduct of the action, and (2) the construction of the agreements at issue was a question of law that had arisen repeatedly, with courts construing the agreements inconsistently), aff'd, 745 F.2d 190 (2d Cir.1984). But cf. Ryan, Beck & Co. v. Fakih, 275 F.Supp.2d 393, 396 (E.D.N.Y.2003) (holding that a decision referring the issue of arbitrability to the arbitrators was not controlling when the petitioner failed to show that reversal of the court’s “limited ruling” would either result in dismissal, significantly affect the conduct of the case, or have prece-dential value for a large number of cases; reversal of the order at issue would merely have required the court to determine the issue of arbitrability and would not have resolved or materially advanced the litigation); Maye v. Smith Barney Inc., 903 F.Supp. 570, 574 (S.D.N.Y.1995) (holding that an order compelling arbitration involved no controlling question of law, and observing that allowing an interlocutory appeal would have frustrated the pro-arbitration policy of the Federal Arbitration Act and would not have materially advanced the ultimate termination of the litigation when the parties had not yet arbitrated their claims, “a process which could narrow the issues in dispute”).

¶ 21 Various commentators have construed “controlling” consistently with what appears to be the majority view of the federal courts. For example, Wright, Miller & Cooper, state, “There is no doubt that a question is ‘controlling’ if its incorrect disposition would require reversal of a final judgment, either for further proceedings or for a dismissal that might have been ordered without the ensuing district court proceedings.” 16 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure (Wright, Miller & Cooper) § 3930, at 496 (2012).

¶ 22 Similarly, the treatise Federal Procedure states:

A legal issue is “controlling,” for purposes of determining the appropriateness of an interlocutory appeal, if it could materially affect the outcome of the case. In order to satisfy the “controlling question of law” requirement, the appeal must raise some question of law which governs at least a claim, if not the whole case or defense.... [T]he question need not be dispositive .of the lawsuit in order to be regarded as controlling. For example, a question which has a decisive effect on the amount of recovery may be certified. Alternatively, a determination of liability, namely reserving the question of damages, may be a controlling question of law under certain circumstances. The fact that the question is procedural rather than substantive is not a bar to certification. While a reversal as to the issue presented need not automatically end the action, the decision regarding the question of law must at least constitute reversible error.■

2 Federal Procedure § 3:209 (L.Ed.2013) (footnotes omitted). .

¶ 23 Applying these principles here, we conclude that the district court’s June 20, 2013 order involves controlling questions of law. The order referred the entire case to arbitration. Thus, as in Kuehner, 84 F.3d at 319, the order could cause the needless expense and delay of litigating an entire case in a forum that had no power to decide it. Moreover, were the parties to arbitrate and were the Association to lose and then appeal the order compelling arbitration, a decision that the order was incorrect would require a reversal of a final judgment, either for further proceedings or for a dismissal that might have been ordered without the ensuing district court proceedings. 16 Wright, Miller & Cooper, at § 3930, at 496.

¶ 24 For these reasons, we grant Triple Crown’s petition for interlocutory review pursuant to C.A.R. 4.2.

¶ 25 In so ruling, we are not persuaded by the dissent’s position that acceptance of this petition contravenes the Uniform Arbitration Act (UAA), §§ 13-22-201 to -230, C.R.S. 2013, an argument that no party has advanced here. We respectfully disagree with our colleague for the following reasons.

¶ 26 First, section 13-22-228(1), C.R.S. 2013, provides that an appeal “may” be taken from, among other orders, an order denying a motion to compel arbitration. This provision is silent, however, regarding motions to compel arbitration, and it does not preclude the appeal of an order compelling arbitration under a different applicable statutory provision. Nor does any language in section 13-22-228(1) suggest that .it was intended to be the exclusive source of appellate jurisdiction over arbitration-related interlocutory appeals.

¶ 27 County of Hawaii v. UNIDEV, LLC, 301 P.3d 588 (Haw.2013), is substantially on point. In that case, a county brought claims against several developers arising from an affordable housing project. Id. at 590-91. The trial court granted the developers’ motion to compel arbitration, the county appealed that order, and the question of the propriety of the appeal ultimately reached the Hawaii Supreme Court. Id. at 592-95.. .

¶ 28 Construing section 658A-28 of the Hawaii Revised Statutes, which is identical to Colorado’s section 13-22-228(1), the Hawaii high court held that section 658A-28 did not represent an exclusive list of appealable orders and that, therefore, the order compelling arbitration could proceed under another statute affording appellate jurisdiction. Id. at 590. In so holding, the court noted that although section 658A-28 specifically allowed for appeals from orders denying motions to compel arbitration, it was silent as to the appealability of orders granting motions to compel arbitration. Id. at 599. The court went on to state that there was no indication in the statutoiy language that the permission to appeal certain orders pursuant to section 658A-28 precluded the appeal of an order denying a motion to compel arbitration under another potentially applicable statute. Id. at 600. Accordingly, the court opined that effect could be given to both statutes at issue and that section 658A-28 posed no hurdle to an appeal under the other statute. Id. Finally, the court observed that the UAA laid ‘“no textual pretense to exclusivity in [its] application to arbitration related appeals.’” Id. at 601 (quoting Gilliland v. Chronic Pain Assocs., Inc., 904 P.2d 73, 77-78 (Okla.1995)).

¶29 This reasoning is equally applicable here and shows that section 13-22-228(1) does not preclude an, interlocutory appeal under section 13-4-102.1(1) and O.AR. 4.2.

¶ 30 Second, as the dissent observes, section 13^4-102.1(1) was adopted after section 13-22-228(1) and the cases construing section 13-22-228(1) on which the dissent relies. The latter enactment, however, made no exception for appeals from orders compelling arbitration. “We presume the legislature is aware of existing case law precedent when it enacts or amends statutes.” See People v. Laeke, 2012 GO 13, ¶ 15, 271 P.3d 1111, 1115. Had the General Assembly intended to exclude motions to compel arbitration from the interlocutory appeal statute, it could easily have done so. See, e.g., Concerned Parents of Pueblo, Inc. v. Gilmore, 47 P.3d 311, 316 (Colo.2002) (“If the General Assembly wished to insulate organizations that serve young people from liability, it could have easily done so.”).

¶ 31 Third, the dissent’s reading of section 13-22-228(1) creates an irreconcilable conflict between that provision and section 13-4-102.1(1). Our view, in contrast, harmonizes the two statutes and avoids a conflict, consistent with settled rules of statutory construction. See People v. Sexton, 2012 COA 26, ¶ 17, 296 P.3d 157, 161; see also § 2-4-206, C.R.S.201S (“If statutes enacted at the same or different sessions of the general assembly are irreconcilable, the statute prevails which is latest in its effective date.”).

¶ 32 Fourth, the dissent’s view would arguably call into question the validity of the appeals of orders compelling arbitration that our supreme court has heard pursuant to C.A.R. 21. See, e.g., Radil v. Nat’l Union Fire Ins. Co., 233 P.3d 688 (Colo.2010). Our supreme court, however, has never suggested that section 13-22-228(1) limited review in such cases.

¶ 33 Finally, J.P. Meyer Trucking & Constr., Inc. v. Colorado Sch. Dists. Self Ins. Pool, 18 P.3d 198 (Colo.2001), on which the dissent relies, supports our position here. In J.P. Meyer, our supreme court observed that the entry of a final judgment is ordinarily the prerequisite for an appeal but that “where specifically authorized by statute or rule, an appellate court may review interlocutory orders.” Id. at 201. Here, for the reasons set forth above, section 13-4-102.1(1) and C.A.R. 4.2 specifically authorize appellate review of certain interlocutory orders, and the order at issue here satisfies the requirements of those provisions. Moreover, although the court in J.P. Meyer, 18 P.3d at 202, stated that what is now section 13-22-228(l)(a), C.R.S.2013, was limited to appeals from orders denying motions to compel arbitration, the court was interpreting the statute before it. Nothing in J.P. Meyer suggested the court’s view that section 13-22-228(l)(a) is the exclusive source of appellate jurisdiction over arbitration-related interlocutory appeals, an issue that was not before the court. Moreover, when J.P. Meyer was decided, no other statutes provided a basis for interlocutory appellate jurisdiction in arbitration-related cases.

Ill, Conclusion

¶34 For these reasons, we exercise our discretion and grant Triple Crown’s petition for interlocutory review pursuant to C.A.R. 4.2.

JUDGE WEBB concurs. JUDGE TERRY dissents.