Felix A. DeJean III and Carolyne DeJean, Plaintiffs-Appellees,
Colleen A. Grosz, Defendant-Appellant.
Court of Appeals No. 14CA0549 Pitkin County District Court No. 13CV30088 Honorable Daniel B. Petre, Judge
Garfield & Hecht, P.C., E. Michael Hoffman, Christopher D. Bryan, Aspen, Colorado, for Plaintiff-Appellee
Klein, Cote, Edwards, Citron, L.L.C., Lance R. Cote, Kenneth E. Citron, Madhu B. Krishnamurti, Aspen, Colorado, for Defendant-Appellant
Ashby and Márquez [*] , JJ., concur
¶ 1 Can a property owner incorporate a homeowners' association after the initial developer filed a declaration expressing an intention to form an association but then failed to do so? We conclude that where the condominium declaration contemplates a homeowners' association, and especially where the covenant runs with the land, a property owner can incorporate a homeowners' association without further consent from the other unit owners. We thus vacate a preliminary injunction enjoining a property owner from acting on behalf of the homeowners' association.
¶ 2 The material facts in this case are not disputed. Felix A. DeJean III and Carolyne DeJean (DeJeans) and Colleen A. Grosz (Grosz) each own one unit in a two-unit condominium in Aspen. In the early 1980s, Teresa Schiff (Declarant) purchased the property. In the early 1990s, Schiff built the Lake View Townhomes Condominiums (LVTC). Before either the DeJeans or Grosz had purchased their units, Schiff filed and recorded a condominium declaration on March 7, 1994 (Declaration).
¶ 3 The Declaration states that the condominium project is subject to the Colorado Common Interest Ownership Act (CCIOA), and called for the existence of a unit owners' association (Association) to be formed to manage the LVTC's common areas. The Declaration further states that membership in the Association is automatic for both unit owners and belongs to the condominium unit, and that acceptance of any interest in either unit shall constitute appointment of the Association to manage and control the owners' interests in the common areas. The Declaration states, moreover, that the covenants shall run with the land.
¶ 4 The Association called for in the Declaration, however, was not incorporated before the DeJeans' or Grosz's purchase of their units.
¶ 5 In 1995, Colleen Grosz purchased Unit A of the condominium from the Declarant. In 2000, the DeJeans purchased Unit B. For several years, the two parties managed the common areas of the condominium by informal agreement. However, the relationship became acrimonious, making cooperation regarding management of the common areas difficult.
¶ 6 In March 2013, Grosz incorporated the Association. When the DeJeans learned that the Association had been incorporated, they demanded that Grosz terminate it. Grosz refused. After incorporating the Association, Grosz gave notice to the DeJeans that meetings would be held to draft, establish, and adopt bylaws, and that an annual Association meeting would be held. Grosz also sent a draft of the proposed bylaws to the DeJeans for review prior to adoption. The DeJeans did not respond to any notices or attend any of the meetings, nor did the DeJeans provide any feedback on the proposed bylaws. Grosz held the Association meetings without the DeJeans, and, because she constituted a quorum in their absence, adopted the bylaws on behalf of the Association.
B. Trial Court Disposition
¶ 7 The DeJeans sued Grosz and the Association, asserting seven claims, all of which are based on Grosz's unilateral incorporation of the Association. All of the DeJeans' claims rest on their alleged lack of notice and consent to the incorporation of the Association and their membership in it.
¶ 8 After filing their complaint, the DeJeans filed a motion for preliminary injunction seeking to enjoin the Association from transacting business during the pendency of this litigation and to enjoin Grosz from acting on the Association's behalf. Both Grosz and the Association filed responses in opposition, and a hearing was held. The trial court issued a preliminary injunction restraining the Association from transacting any business and Grosz from representing that she is authorized to speak and act on the Association's behalf.
¶ 9 Following the hearing, the trial court issued a preliminary injunction, finding, as pertinent here, that the Declaration provides that (1) owners shall be members of the Association, (2) such membership is appurtenant to ownership, (3) title to the property was subject to this provision when purchased, (4) the DeJeans had notice that they were to be members of the Association, (5) the DeJeans could not waive the requirement that there be an Association, and (6) the DeJeans constructively consented to LVTC being governed by an Association.
¶ 10 Nonetheless, the trial court found that because no Association existed when the DeJeans purchased Unit B, the DeJeans have a reasonable probability of success in contesting how the Association was created.
C. Colorado Common Interest Ownership Act
¶ 11 The General Assembly enacted CCIOA based on the Uniform Common Interest Ownership Act (1982) (Uniform Act). Platt v. Aspenwood Condo. Ass'n, Inc., 214 P.3d 1060, 1064 (Colo.App. 2009). The legislative purpose of CCIOA is to encourage the establishment of homeowners' associations. "[I]t is in the best interests of the state and its citizens to establish a clear, comprehensive, and uniform framework for the creation and operation of common interest communities." § 38.33.3-102(a), C.R.S. 2014. "[T]he continuation of the economic prosperity of Colorado is dependent upon the strengthening of homeowner associations in common interest communities . . . ." § 38-33.3-102(1)(b).
¶ 12 The General Assembly thus has made clear that "it is the policy of this state to promote effective and efficient property management through defined operational requirements that preserve flexibility ...