The Colorado Court of Appeals issued its opinion in McShane v. Stirling Ranch Property Owners Association, Inc. on Thursday, April 27, 2015.
Real Property—Declaration of Covenants—Property Owners Association—Exculpatory Clause—Breach of Fiduciary Duty.
Plaintiffs purchased a lot in Stirling Ranch on which to construct a residential home. The lot was subject to the Second Amended and Restated Declaration of Covenants, Conditions, Restrictions and Easements for Stirling Ranch, P.U.D. (Declaration). Under the Declaration, each lot owner in the Stirling Ranch community is a member of the Stirling Ranch Property Owners Association, Inc. (POA). The POA is governed by an Executive Board, and the Board appoints and removes members of the POA’s Design Review Board (DRB). Although the DRB approved plaintiffs’ initial designs, it did so mistakenly based on representations by plaintiffs’ architect. After plaintiffs began construction on the initial designs, they were ordered to stop work and submit redesigned plans to conform to the Design Guidelines. Plaintiff later filed this action against the POA, claiming damages for the redesign of their home. The trial court found in favor of the POA.
On appeal, plaintiffs asserted that the court erred in concluding that the exculpatory clauses barred their claims against the POA for declaratory judgment/equitable estoppel and negligence. The Court of Appeals disagreed. The Declaration and the Design Guidelines include provisions limiting the DRB’s liability, one of which states that the DRB and the Board are components of the POA and have no separate identity. Therefore, the exculpatory clauses are applicable even though plaintiffs only named the POA as a defendant. Additionally, the exculpatory clauses are valid because they do not implicate a public duty, do not involve an essential service, were fairly entered into, and plainly express the intent to release the DRB from liability.
The Court also rejected plaintiffs’ argument that the trial court erred in concluding that the POA did not breach its fiduciary duty. The record contains sufficient evidence as to why the POA and the DRB rejected plaintiffs’ redesign plans. The record also supports the court’s conclusion that these reasons for rejecting the redesign plans were consistent with the Design Guidelines’ goals. The judgment was affirmed.
Summary and full case available here, courtesy of The Colorado Lawyer.