Vallagio at Inverness Residential Condo. Ass'n, Inc. v. Metro. Homes, Inc.

412 P.3d 709
Colorado Court of Appeals·Decided May 7, 2015·No. Court of Appeals No. 14CA1154·Published·Cited by 9 cases

Opinion

Opinion by CHIEF JUDGE LOEB

*712¶ 1 Defendants, Metropolitan Homes, Inc., Metro Inverness, LLC, Greg Krause, and Peter Kudla, appeal the district court's order denying their motion to compel arbitration in this construction defect action filed by plaintiff, Vallagio at Inverness Residential Condominium Association, Inc. We affirm in part, reverse in part, and remand with directions.

I. Background

¶ 2 Vallagio at Inverness Residential Condominium Association, Inc. (Association) brought this action against defendants, alleging construction defects in the Vallagio at Inverness residential development project (Project). The Project was organized as a common interest community under the Colorado Common Interest Ownership Act (CCIOA). Metro Inverness was the Project's developer and declarant. According to the complaint, Metropolitan Homes was Metro Inverness' manager and the Project's general contractor. Krause and Kudla were declarant-appointed members of the Association's board before control of the Association was transferred to unit owners who bought homes in the Project.

¶ 3 Metro Inverness drafted and recorded the Project's original declaration in 2007. The declaration contained a general provision governing amendments. That provision, section 13.1, allowed the unit owners to amend the declaration by a 67% vote and also required a consenting vote of the declarant. In that regard, the provision gave the declarant, Metro Inverness, the right to consent (or withhold consent) to amendments, but stated that the right of consent would expire after the last unit was sold to an owner other than the declarant.

¶ 4 Section 16.6 of the declaration included a mandatory arbitration provision specifically for construction defect claims. That section stated that its provisions "shall not ever be amended without the written consent of Declarant and without regard to whether Declarant owns any portion of the Real Estate at the time of the amendment."

¶ 5 Metro Inverness turned control of the Association's board of directors over to the Project's unit owners in 2010. It sold the last unit to a non-declarant owner in 2012.

¶ 6 In September 2013, at least 67% of the Project's unit owners voted to amend the declaration to remove section 16.6 in its entirety, including the arbitration provision. The unit owners did not obtain Metro Inverness' consent to amend that section.

¶ 7 Soon after the declaration was amended, the Association filed this action against defendants in district court. The Association asserted a number of claims related to alleged construction defects, including negligence, negligence per se, negligent repair, breach of implied warranty, misrepresentation/non-disclosure, violations of the Colorado Consumer Protection Act (CCPA), and breach of fiduciary duty. The Association asserted these claims on its own behalf, seeking damages based on its responsibility to maintain and repair common areas of the Project. It did not bring any claims on behalf of individual unit owners, nor did any such owners join as plaintiffs in this action.

¶ 8 Defendants moved to compel arbitration, relying on the arbitration provision in section 16.6 of the original declaration. Defendants argued that the amendment purporting to remove that provision was invalid because Metro Inverness did not consent to it. Defendants also argued that the arbitration provisions in the individual unit owners' purchase agreements required arbitration of the Association's claims.

¶ 9 In its response, the Association argued that (1) the declaration was validly amended to remove the arbitration provision; (2) the declarant consent requirement in section 16.6 violated CCIOA; (3) Metropolitan Homes, Krause, and Kudla lacked standing to enforce the declaration's arbitration provision; (4) the Association was not bound by individual unit owners' purchase agreements; and (5) the CCPA claims were non-arbitrable.

¶ 10 The district court denied defendants' motion to compel arbitration in a written *713order. The court concluded that Metro Inverness' consent was not required to remove the arbitration provision for two reasons. First, the court determined that section 13.1 and section 16.6 contained conflicting requirements for amending the declaration, creating an ambiguity that must be construed against the drafter, Metro Inverness. Second, the court ruled that the declarant consent requirement in section 16.6 violated CCIOA and was, therefore, void and unenforceable. Based on these conclusions, the court ruled that the declaration was effectively amended to remove the arbitration provision. The court also ruled that the Association could not be bound by unit owners' purchase agreements because it was not a party to those agreements and because it asserted claims only on its own behalf, not on behalf of individual owners. Because it denied the motion to compel on those grounds, the court did not address the Association's arguments about defendants' standing or the arbitrability of the CCPA claims.

¶ 11 Defendants filed this interlocutory appeal of the district court's order pursuant to section 13-22-228(1)(a), C.R.S.2014.

II. Discussion

¶ 12 Defendants contend that the district court erred in denying their motion to compel arbitration. We agree in part. For the reasons set forth below, we conclude that the declaration requires arbitration of the claims against Metro Inverness. We remand to the district court for further proceedings to determine whether Metropolitan Homes, Krause, and Kudla have standing to compel arbitration under the declaration. We reject defendants' alternative argument they may compel arbitration of the Association's claims under the purchase agreements. We further reject the Association's contention that its CCPA claims are not arbitrable.

¶ 13 Arbitration is favored in Colorado as a convenient and efficient alternative to resolving disputes by litigation. City & Cnty. of Denver v. Dist. Court, 939 P.2d 1353, 1357, 1362 (Colo.1997). A valid and enforceable arbitration provision divests the court of jurisdiction over all arbitrable issues. Eychner v. Van Vleet, 870 P.2d 486, 489 (Colo.App.1993).

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Vallagio at Inverness Residential Condo. Ass'n, Inc. v. Metro. Homes, Inc., 412 P.3d 709 (Colo. Ct. App. 2015).

412 P.3d 709 (Vallagio at Inverness Residential Condo. Ass'n, Inc. v. Metro. Homes, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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