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Perfect Place v. Semler

Court of Appeals of Colorado, Fifth Division

October 20, 2016

Perfect Place, a Colorado limited liability company, Plaintiff-Appellant and Cross-Appellee,
R. Parker Semler, Defendant-Appellee and Cross-Appellant.

          Court of Appeals No. 15CA0918 City and County of Denver District Court No. 13CV32699 Honorable Catherine A. Lemon, Judge


          Podoll & Podoll, P.C., Richard B. Podoll, Robert C. Podoll, Robert A. Kitsmiller, Greenwood Village, Colorado, for Plaintiff-Appellant

          Semler & Associates, P.C., R. Parker Semler, Andrew Oh-Willeke, Jeremy Goldblatt, Denver, Colorado, for Defendant and Cross-Appellee


          FREYRE, JUDGE

          ¶ 1 In this case, we are asked to decide a matter of first impression - whether § 38-33.3-213, C.R.S. 2016, of the Colorado Common Interest Ownership Act (CCIOA), pertaining to the subdivision of units, requires strict or substantial compliance. We conclude, consistent with the statutory language and the purposes of CCIOA, that substantial compliance is required.

         ¶ 2 In this quiet title action, plaintiff, Perfect Place, LLC, (a member of the Blake Street homeowner's association) appeals the trial court's judgment finding that defendant, R. Parker Semler, owns parking spaces C and D in the 1940 Blake Street Condominium (Blake Street) property.[1] Semler cross-appeals the court's equitable enlargement of the historical dimensions of parking space E and its corresponding decrease in the size of parking space D. He also seeks an award of attorney fees under CCIOA. We affirm the trial courts finding that the parking spaces were properly subdivided and that Semler owns spaces C and D. However, because we conclude that the trial court erred when it adjusted the size of space E, and because we conclude the court erred when it denied Semler's motion for attorney fees, we reverse in part, and remand the case for further proceedings.

         I. Background

         ¶ 3 This case arises from a quiet title action in which Perfect Place asserted ownership of three parking spaces in the Blake Street property. In 2000, Blake Street bought a mixed use residential and commercial building and recorded a written declaration subjecting the property to the provisions of CCIOA. Thereafter, Blake Street sold a majority interest in the building to Quail Street Company, LLC (Quail Street). Quail Street's principal and sole shareholder was John Watson. Watson owned the majority of the building for several years and made multiple changes to it, 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 full-sized parking spaces and accommodated normal-sized vehicles. Space E was smaller and was only able to accommodate a motorcycle or a very small car.

         ¶ 4 Over time, Watson sold the individual parking spaces (as part of condominium units) to different buyers, who subsequently sold or mortgaged the spaces. Through the years, the City and County of Denver taxed each space individually, the Blake Street homeowners association separately assessed dues for each space, and title insurance companies separately insured the spaces during subsequent title transfers.

         ¶ 5 The subsequent title transfers are set forth in detail in Appendices 1 and 2. As relevant here, Semler claimed title to space C from a 2007 foreclosure proceeding in which he paid $641, 000[2]during the redemption period and obtained a deed in lieu of foreclosure. Semler claimed title to space D through a different foreclosure proceeding in which he obtained a deed in lieu of foreclosure from the record owner.

         ¶ 6 In 2010, the association's attorney notified Semler and Perfect Place of clouded title concerning spaces D and E. Thereafter, Semler paid more than $35, 000 for a quitclaim deed from the former record owner of space D and recorded that deed in 2012. He claimed title to space E from a different deed in lieu of foreclosure that stemmed from an unlawful conveyance and that became part of the same 2007 foreclosure proceeding. See infra Part IV.

          ¶ 7 Perfect Place claimed title to all three spaces from a 2011 quitclaim deed it received from Watson.[3] After receiving notice of title problems with spaces D and E, Perfect Place paid Watson ten dollars for the 2011 quitclaim deed and promptly recorded it.

         ¶ 8 Perfect Place also claimed title to spaces D and E from a series of conveyances originating from a wild deed, see infra Part IV. It paid ten dollars to Newtown Ten for a quitclaim deed purporting to convey spaces "D and/or E."

         ¶ 9 Perfect Place brought this quiet title action asserting superior title to all three spaces based on the 2011 quitclaim deed. It further alleged that all previous conveyances of the spaces were invalid because Watson had never properly subdivided the garage in accordance with the provisions of CCIOA.

         ¶ 10 Semler contended that Watson properly subdivided the garage, that Perfect Place obtained the 2011 quitclaim deed from Watson through fraudulent misrepresentations, and that Perfect Place was not a bona fide purchaser for value because it only paid ten dollars for the 2011 quitclaim deed.

          A. Trial Court's Order

         ¶ 11 After a three-day hearing, the trial court found that Watson subdivided the garage unit into three separate parking spaces. It also found that Perfect Place procured the 2011 quitclaim deed by fraud, concealment, and unclean hands. The court therefore concluded that Semler was the rightful owner of spaces C and D.

         ¶ 12 Title to space E was resolved in favor of Perfect Place by agreement of the parties after Perfect Place reached a pretrial settlement with defendants Kari and Nathan Peters. Finding that the equities weighed in favor of Semler, the court ordered him to draft a proposed amendment to the Blake Street declaration, including a new map depicting the boundaries of the three spaces. It intended for Semler to record the amended map and to submit it to the homeowners association for inclusion in the Blake Street declaration.

         B. Post-Trial Orders

         ¶ 13 Pursuant to the trial court's order, Semler submitted a proposed map allotting space C 132 square feet, space D 132 square feet, and space E 90 square feet. In computing these dimensions, Semler relied on the historical boundaries of spaces C and D and the dimensions of space E set forth in a recorded Parking Space Licensing Agreement negotiated between Perfect Place and Nathan and Kari Peters as a part of their pretrial settlement.

         ¶ 14 Perfect Place objected to Semler's proposal and argued that "everyone understood that there were to be 3 parking spaces in the Parking Space Unit, " and that "[t]he map proposed by Semler would effectively prevent [it] from using parking space E as a parking space." Perfect Place submitted its own proposed map that would "accommodate three cars" and that "properly indicated a large brick pillar between spaces C and D." It also requested an evidentiary hearing.

         ¶ 15 The trial court began the hearing by noting that the weight of the trial evidence suggested that space E was a usable parking space for a small car, and that it intended, as an equitable matter, to create three usable parking spaces in order to avoid future litigation. After the hearing, the court found that space E had always been smaller than spaces C and D, and it again acknowledged that the balance of the equities weighed in favor of Semler. In its final order, however, the court adopted a map that allotted space C 129 square feet, space D 114 square feet, and space E 122 square feet.

         II. Propriety of Subdivision Under CCIOA

         ¶ 16 Perfect Place contends that the absence of a formal application to the association's board describing a reapportionment of the common elements, as well as the absence of an amended declaration or condominium map that strictly complies with CCIOA, violates § 38-33.3-213. Perfect Place asserts that because CCIOA was violated, spaces C, D, and E were never properly subdivided and, instead, constitute a single unit as a matter of law. Semler contends that the trial court's subdivision findings are factual findings that are supported by the record. We agree with Semler and conclude that Watson substantially complied with CCIOA when he subdivided the garage into three parking spaces.

         ¶ 17 After trial, the court found that one of two events occurred to subdivide the garage: (1) either the original declarant subdivided the garage when it filed the original declaration or (2) the first purchaser and majority unit holder, Watson, subdivided the garage into three spaces ─ C, D, and E ─ when he placed physical demarcation lines on the garage wall separately identifying each space. It concluded that if Watson subdivided the units, his failure to comply with the technical requirements of § 38-33.3-213 did not "materially violate CCIOA, " because he substantially complied with the spirit and purpose of the law. The trial court reasoned that any other reading of the statute would elevate "form over substance."

         ¶ 18 We conclude the record supports the trial court's finding that Watson subdivided the garage into three separate parking spaces and that Watson substantially complied with the provisions of CCIOA when doing so. Because minor deficiencies should not render otherwise marketable title unmarketable, we further conclude that substantial compliance with the requirements of § 38-33.3-213 is sufficient to satisfy the application procedures for subdividing a unit. Finally, because we may affirm a trial court's ruling on any grounds that are supported by the record, we need not address the trial court's alternative finding that the original declarant subdivided the garage. See Rush Creek Sols., Inc. v. Ute Mountain Ute Tribe, 107 P.3d 402, 406 (Colo.App. 2004).

         A. Statutory Interpretation

         ¶ 19 We review issues of statutory construction de novo. See Gagne v. Gagne, 2014 COA 127, ¶ 25. We review a court's factual findings for clear error and defer to those findings unless they are not supported by the record. E-470 Pub. Highway Auth. v. 455 Co., 3 P.3d 18, 22 (Colo. 2000).

         ¶ 20 In interpreting a statute, our primary objective is to ascertain and effectuate the intent of the General Assembly. Specialty Rests. Corp. v. Nelson, 231 P.3d 393, 397 (Colo. 2010). "If the statutory language is clear, we interpret the statute according to its plain and ordinary meaning." Id. We read words and phrases in context and construe them according to their common usages. Gagne, ¶ 25. We also interpret a statute in a way that best effectuates the purpose of the legislative scheme. Id. at ¶ 26. When construing a statute, we read and consider the statute as a whole and interpret it in a manner that gives consistent, harmonious, and sensible effect to all of its parts. Id.

         ¶ 21 "Not all directives and requirements declared in statute law should be understood to have equal force[;]" therefore, "[w]hether less than full compliance with particular provisions is permitted is an issue of statutory construction." Wainscott v. Centura Health Corp., 2014 COA 105, ¶ 24 (quoting 3 Norman J. Singer & J.D. Shambie Singer, Sutherland Statutory Construction § 57:1, at 6 (7th ed. 2012)) (alteration omitted). Where the purposes of a statutory requirement are satisfied, substantial, rather than strict or absolute, compliance may be sufficient. See Finnie v. Jefferson Cty. Sch. Dist. R-1, 79 P.3d 1253, 1257-58 (Colo. 2003); Meyer v. Lamm, 846 P.2d 862, 876 (Colo. 1993); Woodsmall v. Reg'l Transp. Dist., 800 P.2d 63, 67-68 (Colo. 1990); Denver Classroom Teachers Ass'n v. City & Cty. of Denver Sch. Dist. No. 1, 2015 COA 71, ¶ 46.

         ¶ 22 In determining whether a particular statutory requirement has been satisfied, courts have imposed a degree of compliance consistent with the objective sought to be achieved by the legislation under consideration. Woodsmall, 800 P.2d at 67; see, e.g., People v. Stanley, 169 P.3d 258, 261 (Colo.App. 2007) (holding that substantial compliance is "actual compliance [with] respect to the substance essential to every reasonable objective of the statute, as distinguished from mere technical imperfections of form" (quoting People v. Jacobs, 729 P.2d 757, 763-64 (Cal. 1987))). If the statute requires only substantial compliance, a court must then consider whether "the allegedly complying acts fulfilled the statute's purpose." Grandote Golf & Country Club, LLC v. Town of La Veta, 252 P.3d 1196, 1203 (Colo.App. 2011); see also Bd. of Cty. Comm'rs v. City & Cty. of Denver, 193 Colo. 325, 327-30, 566 P.2d 335, 337-38 (1977) (finding a statutory requirement that a map and a school board resolution accompany an annexation petition was substantially complied with where the map and resolution were available to the city council when it considered the petition).

         B. Substantial or Strict Compliance

         ¶ 23 In enacting CCIOA, the General Assembly intended a "clear, comprehensive, and uniform framework for the creation and operation of common interest communities." § 38-33.3-102(1)(a), C.R.S. 2016. One of the principal purposes of CCIOA is to "promote effective and efficient property management through defined operational requirements that preserve flexibility for such homeowner associations." § 38-33.3-102(1)(d) (emphasis added). The General Assembly intended most common interest communities to be bound by CCIOA and that developers have "¶exible development rights with specific obligations within a uniform structure of development of a common interest community." § 38-33.3-102(1)(c) (emphasis added).

         ¶ 24 While one goal of CCIOA is uniformity, the General Assembly has balanced that goal against the goal of flexibility, indicating that a rigid or strict interpretation is not favored. For example, § 38-33.3-203(4), C.R.S. 2016, states: "Title to a unit and common elements is not rendered unmarketable or otherwise affected by reason of an insubstantial failure of the declaration to comply with this article. Whether a substantial failure impairs marketability is not affected by this article." (Emphasis added.) Keeping these purposes in mind, we examine the plain language of § 38-33.3-213, which concerns subdividing units.

         ¶ 25 Section 38-33.3-213(1) provides that "[i]f the declaration expressly so permits, a unit may be subdivided into two or more units."[4] The remainder of § 38-33.3-213 sets forth the procedures a unit owner must follow to subdivide property:

(2) In order to subdivide a unit, the unit owner of such unit, as the applicant, must submit an application to the executive board, which application shall be executed by such owner and shall include:
(a) Evidence that the applicant of the proposed subdivision shall have complied with all building codes, fire codes, zoning codes, planned unit development requirements, master plans, and other applicable ordinances or resolutions adopted and enforced by the local governing body and that the proposed subdivision does not violate the terms of any document evidencing a security interest encumbering the unit;
(b)The proposed reallocation of interests, if any;
(c)The proposed form for amendments to the declaration, including the plats or maps, as may be necessary to show the units which are created by the subdivision and their dimensions, and identifying numbers;
(d)A deposit against attorney fees and costs which the association will incur in reviewing and effectuating the application, in an amount reasonably ...

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