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Vallagio at Inverness Residential Condominium Association, Inc. v. Metropolitan Homes, Inc.

Court of Appeals of Colorado

June 5, 2017

Vallagio at Inverness Residential Condominium Association, Inc. Petitioner
v.
Metropolitan Homes, Inc., a Colorado corporation; Metro Inverness, LLC, a Colorado limited liability company; Greg Krause, individually; and Peter Kudla, individually. Respondents

         Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 14CA1154

          Attorneys for Petitioner: Burg Simpson Eldredge Hersh Jardine P.C. Ronald M. Sandgrund Scott F. Sullan Mari K. Perczak Leslie A. Tuft Brian Matise Nelson Boyle Englewood, Colorado

          Attorneys for Respondents: Palumbo Lawyers LLP Marisa C. Ala Mary Ritchie Greenwood Village, Colorado

          Attorneys for Amicus Curiae Build Our Homes Right: Orten Cavanagh & Holmes, LLC Candyce D. Cavanagh Denver, Colorado

          Attorneys for Amici Curiae City and County of Denver, Colorado; Board of County Commissioners for Douglas County, Colorado; City of Aurora, Colorado; City of Northglenn, Colorado; Denver Metro Chamber of Commerce; Metro Denver Economic Development Corporation; Downtown Denver Partnership; Colorado BUILDS; Associated General Contractors of Colorado; Colorado Contractors Association, Inc.; Housing Colorado; Colorado Competitive Council; Colorado Mortgage Lenders Association; Colorado Bankers Association; Colorado Business Roundtable; NAIOP Colorado Chapter; Associated Landscape Contractors of Colorado; Colorado Association of Mechanical & Plumbing Contractors; Mechanical Contractors Association of Colorado; Mechanical Service Contractors Association of Colorado; National Certified Pipe Welding Bureau, Colorado Chapter; Colorado Association of Plumbing-Heating-Cooling Contractors; American Council of Engineering Companies of Colorado; American Subcontractors Association of Colorado; Rocky Mountain Chapter, National Electrical Contracting Association; Independent Electrical Contractors Rocky Mountain; D.R. Horton; Hyder Construction, Inc.; Palisade Partners, LLC; and Front Range Land and Development Co.: Polsinelli PC Richard M. Murray Amy K. Hansen Ryan E. Warren Denver, Colorado

          Attorneys for Amicus Curiae Community Associations Institute: Benson, Kerrane, Storz & Nelson, P.C. Jeffrey P. Kerrane Golden, Colorado

          Attorneys for Amici Curiae National Association of Home Builders; Colorado Association of Home Builders; Home Builders Association of Metro Denver; Summit County Builders Association; Housing & Building Association of Northwestern Colorado; Home Builders Association of Northern Colorado d/b/a NOCO HBA; Housing & Building Association of Colorado Springs and Pikes Peak Region; Pueblo Association of Home Builders, Inc.; Grand County Builders Association; and NAIOP Colorado, the Commercial Real Estate Development Association: Bryan Cave LLP Stephen D. Gurr Denver, Colorado

         EN BANC

          OPINION

          GABRIEL JUSTICE.

          ¶1 This case principally requires us to determine whether the Colorado Common Interest Ownership Act ("CCIOA"), §§ 38-33.3-101 to -402, C.R.S. (2016), permits a developer-declarant to retain a right of consent to certain proposed amendments to a common interest community's declaration. The petitioner, Vallagio at Inverness Residential Condominium Association, Inc. (the "Association"), seeks to recover damages for alleged construction defects in the Vallagio at Inverness residential development project (the "Project"), a common interest community organized under CCIOA. The Project's developer and declarant, respondent Metro Inverness, LLC (the "Declarant"), drafted and recorded the Project's original declaration, which set forth specific dispute resolution procedures for construction defect claims. Specifically, and as pertinent here, certain provisions of the original declaration (1) required that all construction defect claims be resolved through binding arbitration and (2) provided that the provisions governing such claims "shall not ever be amended" without the Declarant's written consent.

         ¶2 Shortly before the Association filed the present action, and without obtaining the Declarant's consent, the requisite number of the Project's unit owners voted to amend the declaration to delete the foregoing dispute resolution provisions. The Association then proceeded to file a complaint in district court, naming as defendants the Declarant and three related parties, respondents Metropolitan Homes, Inc., Greg Krause, and Peter Kudla.[1] The Declarant moved to compel arbitration, arguing that the attempted declaration amendment was ineffective absent its written consent and, thus, the Association was bound by the arbitration provision contained in the original declaration. The district court denied the Declarant's motion, reasoning in pertinent part that the consent-to-amend provision violated and was therefore void under CCIOA. The Declarant brought an interlocutory appeal in the court of appeals, and a division of that court reversed the district court's denial of the motion to compel arbitration. Vallagio at Inverness Residential Condo. Ass'n v. Metro. Homes, Inc., 2015 COA 65, ¶¶ 1, 72, __P.3d__ .

         ¶3 We granted certiorari and now affirm.[2] We conclude that the consent-to-amend provision contained in the Project's original declaration is consistent with CCIOA and is therefore valid and enforceable. We further conclude that because the unit owners did not obtain the Declarant's consent to remove the arbitration provision, the attempted removal was ineffective, and the declaration's arbitration agreement remains in force. Finally, we conclude that nothing in the Colorado Consumer Protection Act ("CCPA"), §§ 6-1-101 to -1121, C.R.S. (2016), precludes arbitration of the Association's CCPA claims.

         I. Facts and Procedural History

         ¶4 The Declarant drafted, and in 2007 recorded, the Project's original declaration.

         ¶5 Section 13.1 of the declaration established the general procedures for amending the declaration. As pertinent here, it allowed the unit owners to amend the declaration but required a vote or agreement of unit owners holding at least 67% of the votes in the Association to do so. In addition, until a certain point in time, the Declarant also had to consent to any proposed amendment. The parties do not appear to dispute that the Declarant's right of consent under Section 13.1 expired in 2012.

         ¶6 Section 16.6 of the declaration, in turn, established comprehensive dispute resolution procedures for construction defect claims, including a requirement that all such claims be submitted to binding arbitration (the "arbitration provision"). Additionally, Section 16.6(h) (the "consent-to-amend provision") provided in pertinent part:

The terms and provisions of this Section 16.6 inure to the benefit of Declarant, are enforceable by Declarant, and 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 such amendment.

(Emphasis added.)

         ¶7 The Declarant turned over control of the Association's board of directors to the Project's unit owners in 2010.

          ¶8 Thereafter, a construction defect dispute arose, and in December 2012 and January 2013, pursuant to the Construction Defect Action Reform Act ("CDARA"), §§ 13-20-801 to -808, C.R.S. (2016), the Association sent the Declarant a written notice and then a supplemental notice of its purported claims. The parties proceeded under CDARA's pre-litigation notice and offer of settlement provision, see § 13-20-803.5, C.R.S. (2016), but they did not reach agreement.

         ¶9 Then, in September 2013, at least 67% of the Project's unit owners voted to amend the declaration to remove, among other provisions, Section 16.6 in its entirety. The unit owners did not seek or obtain the Declarant's consent to this amendment.

         ¶10 In December 2013, the Association filed the present action in district court, asserting a number of claims arising from alleged construction defects, including claims under the CCPA. The Association asserted these claims solely on its own behalf, based on its obligation to maintain and repair all common elements in the Project.

         ¶11 Relying on Section 16.6 of the declaration, the Declarant moved to compel arbitration, arguing that the arbitration clause in the declaration divested the district court of jurisdiction. Specifically, the Declarant contended that because the unit owners had not obtained its consent to amend the declaration as required by Section 16.6(h), the parties remained bound by Section 16.6's dispute resolution procedures, including mandatory arbitration.

         ¶12 The Association responded that (1) the declaration was validly amended because Section 16.6(h)'s consent-to-amend requirement violated-and was therefore void under-CCIOA and (2) even if the Association remained bound by the declaration's arbitration agreement, its claims under the CCPA were not arbitrable because the CCPA expressly provides for a "civil action, " which the Association interpreted to mean a court proceeding.

         ¶13 In a written order, the district court denied the Declarant's motion to compel arbitration. The court concluded that the Declarant's consent was not required to remove the arbitration provision because, as pertinent here, the consent-to-amend requirement in Section 16.6(h) conflicted with several provisions of CCIOA and was therefore void and unenforceable. In light of this determination, the court declined to address the Association's argument that the CCPA claims were non-arbitrable.

         ¶14 The Declarant then filed an interlocutory appeal pursuant to section 13-22-228(1)(a), C.R.S. (2016). Vallagio, ¶ 11. As pertinent here, a unanimous division of the court of appeals reversed in part, concluding that the declaration required the Association to arbitrate its claims against the Declarant. Id. at ¶ 12. Specifically, the division perceived no conflict between CCIOA and Section 16.6(h)'s consent-to-amend requirement. Id. at ¶¶ 25-47. Accordingly, the division concluded that the unit owners' attempt to remove Section 16.6 without obtaining the Declarant's consent was ineffective, and, as a result, the declaration still contained a valid and enforceable arbitration agreement. Id. at ¶ 47.[3] The division further concluded that the Association's claims under the CCPA were subject to arbitration because the right to a "civil action" under section 6-1-113, C.R.S. (2016), is waivable. Id. at ¶ 71.

          ¶15 The Association then sought, and we granted, certiorari.

         II. Standard of Review

         ¶16 We review questions of statutory interpretation de novo. Pulte Home Corp. v. Countryside Cmty. Ass'n, 2016 CO 64, ¶ 24, 382 P.3d 821, 826. In doing so, "we look to 'the entire statutory scheme to give consistent, harmonious, and sensible effect to all parts' and apply 'words and phrases according to their plain and ordinary meaning.'" Id. (quoting Denver Post Corp. v. Ritter, 255 P.3d 1083, 1089 (Colo. 2011)). When the statutory language is clear, we apply it as written and need not resort to other rules of statutory construction. See id.; Denver Post, 255 P.3d at 1089.

         III. Analysis

         ¶17 We begin by addressing whether the consent-to-amend provision is consistent with CCIOA. We then consider the Association's contention that its CCPA claims are non-arbitrable under the CCPA's express terms.

         A. ...


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