April 17, 2019

Colorado Court of Appeals: CCIOA Requires Substantial, not Strict, Compliance when Subdividing Units

The Colorado Court of Appeals issued its opinion in Perfect Place v. Semler on Thursday, October 20, 2016.

Colorado Common Interest Ownership Act—Strict or Substantial Compliance—Quiet Title—Unclean Hands—Fraudulent Conveyance—Attorney Fees.

This action concerns title to three parking spaces. In 2000, Blake Street Condominium (Blake Street) bought a mixed use residential and commercial building and recorded a written declaration subjecting the property to the provisions of the Colorado Common Interest Ownership Act (CCIOA). A majority interest in the building was sold to Quail Street Company, LLC (Quail Street). Quail Street’s sole shareholder was Watson. Watson made multiple changes to the building, including subdividing the garage into three individual parking spaces (C, D, and E) by painting yellow dividing lines on the garage wall. Spaces C and D were normal sized, and E was able to accommodate only a motorcycle or very small car.

Watson sold the individual parking spaces, as part of condominium units, to different buyers who subsequently sold or mortgaged them. The City and County of Denver taxed each space individually, the Blake Street homeowners association (association) separately assessed dues for each space, and title insurance separately insured the spaces.

Semler claimed title to space C from a 2007 foreclosure proceeding and space D through a different foreclosure proceeding. In 2010, the association’s attorney notified Semler and Perfect Place, LLC (Perfect Place) of clouded title concerning spaces D and E. Semler paid for a quitclaim deed from the former record owner of space D and recorded that in 2012. He claimed title to space E from a different deed in lieu of foreclosure.

Perfect Place is a member of the association. Perfect Place claimed title to all three spaces from a 2011 quitclaim deed it received and recorded from Watson. Watson issued a correction deed in 2013 (correction deed). It also claimed title to spaces D and E from a series of conveyances originating from a wild deed.

Perfect Place sued to quiet title to the three parking spaces in the Blake Street property. The trial court found that Watson subdivided the garage into three parking spaces and that Perfect Place procured the 2011 deed by fraud, concealment, and unclean hands. The court concluded that Semler owned spaces C and D. Title to space E was resolved in favor of Perfect Place by agreement of the parties. The court ordered Semler to draft a proposed amendment to the Blake Street declaration memorializing the decision.

Semler submitted a proposed map allotting space C 132 square feet, space D 132 square feet, and space E 90 feet. Semler relied on the historical boundaries of spaces C and D and the dimensions of space E set forth in a recorded parking space agreement. Perfect Place objected, a hearing was held, and the court allotted space C 129 square feet, space D 114 square feet, and space E 122 square feet. Perfect Place appealed the trial court’s finding that Semler owned parking spaces C and D. Perfect Place argued that the absence of a formal application to the association’s board describing reapportionment of the common elements, as well as the absence of an amended declaration or condominium map that strictly complies with CCIOA, violates C.R.S. § 38-33.3-213. Semler argued that Watson substantially complied with CCIOA when he subdivided the garage into three spaces.

The Colorado Court of Appeals looked at the plain language of C.R.S. § 38-33.3-213 and the purposes of CCIOA as a whole to find that substantial rather than strict compliance with the provision was required. In particular, it noted that statutory interpretation of CCIOA should give way to flexibility where strict adherence to provisions that create uniformity would render title unmarketable. Here, because Watson was the majority owner and board member of the homeowners association, any application that he would have submitted would have been submitted to himself. The declaration also gave him the authority, as the first purchaser from the grantor, to subdivide the garage. Moreover, a map identifying the spaces (though not their dimensions) was recorded. All of this amounted to substantial compliance.

Both parties asserted that the trial court abused its discretion in crafting equitable relief. Perfect Place contended that the court abused its discretion in (1) reforming the deeds of Watson and Quail Street to validly convey property and (2) voiding the 2011 quitclaim deed from Watson to Perfect Place by declaring it a fraudulent conveyance. Semler argued that it was an abuse of discretion for the trial court to increase the size of space E at the expense of space D, thereby benefitting Perfect Place, a party it had found to have unclean hands. The trial court’s reformation of deeds from Quail Street to grantees (that should originally have been from Watson to grantees) was not an abuse of discretion based on the finding that any conveyance errors by the grantors was inadvertent. The trial court also did not abuse its discretion in finding the 2011 quitclaim deed from Watson to Perfect Place was a fraudulent conveyance. Watson believed he was merely correcting a technical defect in title and Perfect Place’s attorney fostered that belief (which was false). Thus the record supported the finding that the quitclaim deed was obtained by “fraud in the factum” and was therefore void. But the court of appeals held that the award of additional area to space E and Perfect Place was an abuse of discretion because this equitable remedy benefitted a party with unclean hands.

Semler also sought attorney fees under the CCIOA. The court found the trial court erred in denying Semler’s request for attorney fees because he was required to defend his title under the provisions of CCIOA.

The judgment quieting title to spaces C and D in Semler was affirmed. The judgment adjusting the boundaries of spaces D and E was reversed. The case was remanded for the trial court to return the boundaries of spaces D and E to their historical dimensions and to determine and award Semler attorney fees.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Arbitration Agreement Must Strictly Comply with Statute

The Colorado Court of Appeals issued its opinion in Fischer v. Colorow Health Care, LLC on Thursday, September 8, 2016.

Arbitration Agreement—Motion to Compel—C.R.S. § 13-64-403—Strict Compliance.

Colorow Health Care, LLC, and its management company, QP Health Care Services, LLC, operate a long-term healthcare facility. When Fischer (the decedent) was admitted to the facility, her daughter, acting under a power of attorney, signed an arbitration agreement. The decedent passed away while a resident of the facility. Plaintiffs Amy and Roger Fischer pleaded tort claims arising from the decedent’s death. Defendants appealed the trial court’s order denying their motions to compel arbitration.

Defendants then filed this interlocutory appeal as of right under C.R.S. § 13-22-228(1)(a), contesting the trial court’s order denying their motions to compel arbitration. C.R.S. § 13-64-403 sets out specific language that an arbitration agreement must include to comply with the Health Care Availability Act. Defendants contended that the statute requires only substantial compliance with its provisions; plaintiffs argued that the arbitration agreement had to strictly comply, and because it admittedly did not, it was invalid. The court of appeals concluded that C.R.S. § 13-64-403 calls for strict compliance, and based on the complete lack of bold-faced type in the agreement, the court agreed that the agreement was invalid.  The court further concluded that this neither creates an absurd result nor violates Colorado’s public policy favoring arbitration.

The order was affirmed.

Summary provided courtesy of The Colorado Lawyer.