FD Interests v. Fairways at Buffalo Run , 2019 COA 148 ( 2019 )

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
September 26, 2019
2019COA148
No. 18CA0977, FD Interests v Fairways at Buffalo Run — Real
Property — Colorado Common Interest Ownership Act —
Common Interest Communities — Creation, Alteration, and
Termination
A division of the court of appeals considers whether a
residential development’s common interest community declaration
excluded the undeveloped portions of the property from the
community until they were specifically annexed through recordation
of supplemental plats and declarations. The division also considers
whether errors in the chain of title for the property and the units
built on it warranted reformation of the declaration.
The division concludes that the declaration encumbered the
entire property, and that this interpretation renders inconsequential
any concerns created by discrepancies between the statements in
the declaration and the actual chain of title. Thus, although the
trial court erred by reforming the deed, the error was harmless, and
the division affirms.
COLORADO COURT OF APPEALS 2019COA148
Court of Appeals No. 18CA0977
Adams County District Court No. 16CV31316
Honorable Emily E. Anderson, Judge
FD Interests, LLC,
Plaintiff-Appellant,
and
Fairways Builders, Inc., Buffalo Run Fairways, LLC, and Fairways Homes, LLC,
Third-Party Defendants-Appellants,
v.
Fairways at Buffalo Run Homeowners Association, Inc.,
Defendant-Appellee,
and
William D. Monhollin Trust, the Nancy L. Monhollin Trust, Janice Van Gundy,
and Jennifer Van Gundy,
Third-Party Defendants-Appellees.
JUDGMENT AFFIRMED AND CASE
REMANDED WITH DIRECTIONS
Division I
Opinion by JUDGE GROVE
Taubman and Hawthorne, JJ., concur
Announced September 26, 2019
Hatch Ray Olsen Conant LLC, Robert W. Hatch, II, Christopher J. Conant,
Erica G. Behm, Denver, Colorado, for Plaintiff-Appellant and Third-Party
Defendants-Appellants
Altitude Community Law, P.C., William H. Short, Lakewood, Colorado; Fowler,
Schimberg, Flanagan & McLetchie, P.C., Andrew R. McLetchie, Eden R.
Rolland, Golden, Colorado, for Defendant-Appellee
The Sweetser Law Firm, P.C., Daniel A. Sweetser, Denver, Colorado, for Third-
Party Defendants-Appellees
¶1 In this dispute concerning the interpretation and reformation
of a residential development’s common interest community
declaration, appellants, FD Interests, LLC (FDI), Fairways Builders,
Inc. (Builders), Buffalo Run Fairways, LLC (BRF), and Fairways
Homes, LLC (Homes) (collectively, the Developer Entities), appeal
the trial court’s judgment in favor of appellees, Fairways at Buffalo
Run Homeowners Association, Inc. (the HOA), and unit owners the
William D. Monhollin Trust, the Nancy L. Monhollin Trust, Janice
Van Gundy, and Jennifer Van Gundy.
¶2 The trial court concluded that the entire property, including
both the developed and undeveloped portions of The Fairways at
Buffalo Run (the Property), was subject to the terms of the legal
document that created the HOA — the “Amended and Restated
Declaration of Covenants, Conditions and Restrictions for Fairways
at Buffalo Run Homeowners Association, Inc.” (the CCR). The trial
court found that the “parties d[id] not dispute the fact that the
[CCR] was intended to govern the common interest community now
known as The Fairways at Buffalo Run.” But after identifying
inconsistencies in the Property’s chain of title, the court reformed
1
the CCR by adding BRF to the CCR’s signature line, because
despite its sole ownership of the Property at the time, it had not
executed the CCR. The court reasoned that this reformation would
cure the title defects.
¶3 We conclude that the trial court accurately determined that
the CCR encompassed the entire Property when the community was
established. This resolved the title concerns that the HOA and unit
owners raised and made it unnecessary for the trial court to rule in
equity to reform the CCR. Nonetheless, because the trial court’s
erroneous exercise of its equitable powers did not affect any party’s
substantial rights, we conclude that this error was harmless and
therefore affirm.
I. Background
¶4 This case requires us to consider two main issues. First, did
the CCR encompass the entire Property from the outset or did it
exclude the undeveloped portions of the Property from the
community until they were specifically annexed into the
development through recordation of supplemental plats and
declarations? Second, do the errors in the chain of title for the
2
Property and the units built on it warrant reformation of the CCR?
We address those questions after outlining this matter’s complex
factual and procedural background.
A. Factual Background
¶5 In October 2005, FDI and Fairways Land, LLC purchased the
Property, twelve and one-half acres of real property adjacent to the
Buffalo Run Golf Course in Commerce City. The Property’s legal
description was “Lot 1, Block 1, The Villages at Buffalo Run East,
Filing No. 3.” The purchase transaction culminated in the October
13, 2005, recordation of a special warranty deed that was dated
October 6, 2005.
1. Pre-Development and the Onset of Title Problems
¶6 Acquiring the land was the first step in developer Robin J.
Harding’s plan to create and operate the Property, a community
designed for construction of up to sixty-nine patio homes. Harding
formed several entities to carry out the project. He owned or
ultimately managed those entities — including FDI, Builders, BRF,
and Homes — and he signed documents on their behalf over the
course of the Property’s development.
3
¶7 On October 31, 2005, BRF recorded a final plat for the
Property, which encompassed all twelve and one-half acres and
stated that BRF was the owner. BRF, however, did not own the
Property at that time. FDI and Fairways Land did.
¶8 On November 2, 2005, FDI and Fairways Land conveyed the
Property to BRF by way of a special warranty deed.
¶9 On December 20, 2005, FDI, Fairways Land, and BRF
recorded a plat amendment stating that they were the owners of the
Property. The only difference between the final plat and the plat
amendment was that the plat amendment listed FDI and Fairways
Land as the Property owners along with the record owner, BRF.
But FDI and Fairways Land had transferred their ownership
interest in the Property to BRF on November 2, 2005.
¶ 10 On January 24, 2006, Builders, as the declarant, recorded the
CCR.1 Builders did not own the Property — BRF did — yet the first
sentence of Section 1.1 stated that “Declarant owns those certain
1 Although the CCR is titled the “Amended and Restated Declaration
of Covenants, Conditions and Restrictions for Fairways at Buffalo
Run Homeowners Association, Inc.,” nothing in the record shows
that any party identified a recorded declaration that was recorded
before this one.
4
parcels of land . . . more particularly described in Exhibit A . . . (the
‘Real Property’).” The property listed on Exhibit A was “The
Fairways at Buffalo Run,” which the parties agree covered the
entirety of the Property.
¶ 11 Section 1.1 also stated that the declarant “wishe[d] to create a
common interest community . . . for Fairways [a]t Buffalo Run
Homeowners Association, Inc.,” and that it would “develop the
Property . . . as a Planned Community . . . in accordance with the
terms and provisions of the Colorado Common Interest Ownership
Act.”
2. Construction Begins and Title Problems Continue
¶ 12 Development of the property began after Builders recorded the
CCR. From June 2006 through December 2009, Builders
constructed fifteen residential units situated in five buildings of
three units each, on parcels of approximately 12,000 square feet.
Before construction, BRF would convey the parcel to Builders. For
parcels developed after December 1, 2006, when BRF conveyed its
interest in the Property to FDI, FDI would convey the parcel to
Builders.
5
¶ 13 The pattern established for development and construction of
the five buildings was to (1) create a metes and bounds description
of each parcel slated for construction; (2) in accordance with the
CCR, on the completion of each parcel’s development, complete and
record a supplemental declaration; and (3) record a supplemental
plat depicting the three constructed units. Consistent with the
CCR, through these actions the Developer Entities annexed each
newly built unit into the community.
¶ 14 Builders sold the first unit on September 7, 2006. After that
sale, under the terms of the CCR, the HOA took sole responsibility
for and paid all costs associated with the upkeep and maintenance
of the entire Property. FDI continued to own the undeveloped
portions of the Property, however, so the Developer Entities paid the
real property taxes assessed against those portions.
3. Construction Pauses and the Development Deadline Expires
¶ 15 As required by section 38-33.3-205(1)(h), C.R.S. 2019, the
CCR set a deadline for development activity. In pertinent part,
Article 6 of the CCR, titled “Declarant’s Rights and Reservations,”
permitted the declarant to continue to develop the Property until
6
“the later of (i) the date which is seven (7) years following the
recordation of this CCR or (ii) the date which is five (5) years
following the recordation of the most recently recorded CCR[.]” In
essence, once two years had passed, the Developer Entities’
development rights would not expire unless there was a gap of more
than five years between construction projects.
¶ 16 That, however, is exactly what happened. Construction stalled
during the Great Recession, and on December 31, 2009, the
Developer Entities recorded their most recent supplemental
declaration, thereby starting the five-year clock on the development
deadline. By the time the Developer Entities were set to resume
construction, the time limit had expired. Thus, in January 2016,
after FDI conveyed a sixth 12,000-square-foot parcel to Homes, and
Homes attempted to develop that parcel, the HOA blocked it from
entering the Property.
B. Procedural History
¶ 17 After being denied access to the Property for further
development, the Developer Entities sued the HOA in August 2016.
7
Numerous counterclaims, third-party complaints, and cross-claims
followed. In brief, the Developer Entities’ complaint sought:
• a finding of private nuisance, an injunction ensuring
access to the Property, and ejectment against the HOA;
• a declaratory judgment that FDI and Homes owned the
undeveloped portion of the Property; and
• in the event that the request for declaratory judgment
failed, the imposition of an equitable lien and recovery for
unjust enrichment in the form of real property taxes paid
for the Property by FDI.
¶ 18 Counterclaims by the HOA and the unit owners, who were all
members of the HOA and appeared to be aligned, requested:
• a declaratory judgment seeking a determination of the
ownership of the undeveloped portion of the Property by
the HOA against FDI, Fairways Land, BRF, Homes, FDI’s
lenders, and the unit owners; and
• reformation of the CCR and other governing documents
for the common interest community to cure the problems
outlined above.
8
¶ 19 In a written order issued after a five-day bench trial, the trial
court ruled that
• the entirety of the Property was encumbered by and
subject to the provisions of the CCR;
• because the Developer Entities’ development rights to the
Property had expired, they could not develop the Property
further except on terms, conditions, and limitations
imposed by the HOA;
• the CCR should be reformed to add BRF, the Property
owner when the CCR was recorded, as declarant; and
• the Property’s roads were to be conveyed by FDI to the
HOA.
¶ 20 The portion of the trial court’s order conveying the roads to the
HOA was entered together with a finding that the land beneath the
units and surrounding the buildings, including the driveways and
walkways leading up to the homes, was not properly designated on
the supplemental plats as “General Common Elements” and
“Limited Common Elements.” The court concluded that, without
such designations, the unit owners had no easement for the land
9
underneath and surrounding their units, effectively making them
trespassers each time they entered or exited their homes. This
created problems for the unit owners and ran counter to the CCR’s
intent.
II. Interpretation of the CCR
¶ 21 The Developer Entities argue that the undeveloped portions of
the Property were never annexed into the common interest
community and are therefore not subject to the CCR. Thus, they
contend the trial court incorrectly interpreted the CCR. We
disagree.
A. Preservation and Standard of Review
¶ 22 The parties agree that the Developer Entities’ contentions were
preserved.
¶ 23 We review de novo the interpretation of covenants and other
recorded instruments. Ryan Ranch Cmty. Ass’n v. Kelley, 2016 CO
65, ¶ 24. “In doing so, we give words and phrases their common
meanings and will enforce such documents as written if their
meaning is clear.” Pulte Home Corp. v. Countryside Cmty. Ass’n,
2016 CO 64, ¶ 23. Like contracts, we construe covenants and other
recorded instruments “in [their] entirety . . . [,] seeking to harmonize
10
and to give effect to all provisions so that none will be rendered
meaningless.” Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d
1310, 1313 (Colo. 1984). To that end, we remain wary of “viewing
clauses or phrases in isolation.” U.S. Fid. & Guar. Co. v. Budget
Rent-A-Car Sys., Inc., 842 P.2d 208, 213 (Colo. 1992). And where
the terms are ambiguous, they must be strictly construed against
the drafter. Id. at 211.
B. Applicable Law
¶ 24 The Colorado Common Interest Ownership Act (CCIOA)
establishes a uniform framework for the creation and operation of
common interest communities. §§ 38-33.3-101 to -402, C.R.S.
2019. A “common interest community” is “real estate described in a
declaration with respect to which a person, by virtue of such
person’s ownership of a unit, is obligated to pay for real estate
taxes, insurance premiums, maintenance, or improvement of other
real estate described in a declaration.” § 38-33.3-103(8), C.R.S.
2019. A common interest community is created “only by recording
a declaration executed in the same manner as a deed . . . . No
common interest community is created until the plat or map for the
11
common interest community is recorded.” § 38-33.3-201(1), C.R.S.
2019.
¶ 25 A declaration is defined as “any recorded instruments however
denominated, that create a common interest community.” § 38-
33.3-103(13). Declarations must contain, at a minimum, the
components listed in section 38-33.3-205(1), one of which is a
“legally sufficient description of the real estate included in the
common interest community.” § 38-33.3-205(1)(c); see also
Douglas Scott MacGregor, Colorado Community Association Law:
Condominiums, Cooperatives, and Homeowners Associations § 3.3,
at 160 (2d ed. 2019).
C. Discussion
¶ 26 The Developer Entities maintain that the CCR “is valid and
has created a Community,” but contend that Section 1.1
establishes that the undeveloped portions of the Property were not
included in the community until they were affirmatively annexed.
Thus, the Developer Entities argue, the vast majority of the Property
is not subject to the CCR, including the time limit that it
12
established for development. 2 As the Developer Entities’ expert
asserted, “[t]he project was formulated such that property would
not be part of the Fairways Buffalo Run Common Interest
Community until annexed into the Community.”
¶ 27 The HOA disagrees, arguing instead that once the first unit
was sold and contemporaneously annexed, the community included
the Property in its entirety. And because construction paused for
more than five years, the HOA contends, the CCR’s deadline for
development expired before the Developer Entities attempted to
begin building again.
¶ 28 The Developer Entities’ argument relies primarily on Section
1.1 of the CCR, which states: “When annexed into the Common
Interest Community pursuant to the terms herein, the Real
Property, the Annexable Units, along with the Association Property
shall be collectively referred to in this [CCR] as the ‘Property.’” The
2 The parties did not dispute in the trial court that under the CCR,
the development rights for whatever real property is subject to it
had expired. Although our holding that the entirety of the Property
is subject to the CCR necessarily means that the development
rights that have expired include those for the undeveloped portions
of the Property, the parties do not dispute that those undeveloped
portions are still owned by FDI. See § 38-33.3-210(5), C.R.S. 2019.
13
Developer Entities argue that the phrase “when annexed”
establishes that the CCR “contemplates the annexation of land into
the Community over time,” rather than designating the entire
Property as the community all at once.
¶ 29 This argument, however, is undermined by Section 2.16 of the
CCR, which defines “Common Interest Community” as “the Real
Property which is described on Exhibit A attached hereto, the Units
and the Buildings and all other real property which is made subject
to the terms and provisions of this CCR,” and Section 2.42, which
defines “Property” as “the real property more particularly described
on Exhibit A attached hereto.” Designated on Exhibit A, titled
“Legal Description of Property,” is “The Fairways at Buffalo Run” —
i.e., all the real property at issue in this case. In other words,
Exhibit A, which delineates the boundaries of the community,
states that the community, once created, includes the entire
Property.
¶ 30 We are not persuaded that this interpretation renders
meaningless the phrase “when annexed” in Section 1.1. The
sentence in which that phrase appears refers not only to “the Real
14
Property” (defined in Exhibit A as the entire Property), but also to
“Annexable Units” and “the Association Property.” Section 6.8,
titled “Annexation of Additional Properties,” establishes the
procedures for annexation of buildings and units, which the
Developer Entities followed in connection with the construction on
each parcel. Yet that same section provides no mechanism for the
annexation of land.
¶ 31 Instead, Section 6.8 provides that annexation of “Annexable
Units” and “Annexable Buildings” requires the recording of a
supplemental declaration and a supplemental plat. The
supplemental declaration, “generally in the form attached [to the
CCR] . . . as Exhibit D,” appears as a model form with the stated
purpose to “annex certain New Buildings and New Units into the
[CCR] and to include certain New Buildings and New Units within
the Common Interest Community, as defined in the [CCR].”
Similarly, in the definitions section, “supplemental plat” is
described as “any land survey plat . . . recorded . . . for the purpose
of annexing the real property described thereon to the Common
Interest Community.” That definition is then refined in Section 6.8
15
to mean any plat or map that depicts “the Annexable Building and
the Annexable Units therein to be annexed to the Common Interest
Community.” In short, these annexation procedures and recorded
supplements address only the annexation of buildings and units —
not land.
¶ 32 In light of these provisions, the procedures followed by the
Developer Entities in connection with each construction project
make sense. In contrast to the Property, which Exhibit A makes
clear was included in the community at its inception, the Developer
Entities were required to take affirmative action to incorporate
subsequent construction — the buildings and units — into the
community. That is precisely what they did when they prepared
and recorded supplemental plats and supplemental declarations in
connection with each parcel of three constructed units. But when
the Developer Entities did so, by virtue of the CCR’s prescription,
they annexed only the buildings and units, and not the land
16
underlying those projects — an expected result if that land was
already part of the community. 3
¶ 33 Interpreting the CCR as encompassing the entire Property
from the outset supports and harmonizes the remaining provisions
of the CCR concerning annexation of buildings and units and helps
ensure secure, marketable title to the unit owners, free from
technical defects and “clerical errors.”
¶ 34 In any event, even if the terms of Section 1.1 and the
provisions above conflict, we resolve that conflict by interpreting
those terms against the drafter, the Developer Entities. See U.S.
Fid. & Guar. Co., 842 P.2d at 213. Taking this approach also
3 In contrast, if the land underneath and immediately surrounding
each construction project had to be annexed in order to become
part of the community, then the Developer Entities’ failure to do so
rendered the unit owners trespassers anytime they accessed their
units. This is precisely the sort of absurd result that we strive to
avoid. See Atmel Corp. v. Vitesse Semiconductor Corp., 30 P.3d 789,
793 (Colo. App. 2001) (“[A] contract should never be interpreted to
yield an absurd result.”), abrogated on other grounds by Ingold v.
AIMCO/Bluffs, L.L.C. Apartments, 159 P.3d 116 (Colo. 2007); see
also Douglas Scott MacGregor, Colorado Community Association
Law: Condominiums, Cooperatives, and Homeowners Associations
§ 2.10, at 106 (2d ed. 2019).
17
generally 4 comports with the expectations and conduct of the
parties over time. For example, Harding (the Developer Entities’
principal), who ran the HOA for several years as the project got up
and running, acknowledged that dues paid by the HOA members
were not devoted only to those areas that the Developer Entities had
affirmatively annexed. Instead, they went to maintenance of the
“common area of the entire project.” In another instance, Harding,
acting on behalf of the Developer Entities-controlled HOA, executed
an easement and maintenance agreement stating that the HOA
owned “the roads, walkways, open space, and other common areas”
shown on the December 20, 2005, plat amendment.
4 We acknowledge the Developer Entities paid property taxes on the
undeveloped portions of the Property. When weighing those
payments against the parties’ conduct and the trial court’s
conclusion that FDI owns the undeveloped portions of the Property,
however, the court must only have concluded that the Developer
Entities’ assumption of that tax burden was not dispositive. We will
not substitute our judgment for that of the trial court. Accordingly,
we do not disturb its consideration and resolution of the conflicting
evidence presented on this point. See Rocky Mountain Metro.
Recreation Dist. v. Hix, 136 Colo. 316, 319, 316 P.2d 1041, 1043
(1957).
18
¶ 35 Because they are distinguishable, we likewise find
unconvincing the Developer Entities’ reliance on Pulte and Ryan
Ranch, which they contend compel the conclusion that the
undeveloped portions of the Property remained outside the common
interest community until annexed, and thus were not subject to the
CCR. In Pulte, the developer, Pulte Home Corporation, sought to
develop a residential common interest community on land that it
did not own but that it had an option to purchase. Pulte, ¶ 6. The
declaration prepared and recorded by Pulte defined the
“community” created by the declaration as the “real property
described on Exhibit A or which becomes subject to [the
declaration].” Id. at ¶ 7. Exhibit A to the declaration, however,
listed no real property. Rather, it stated “NONE AT THE TIME OF
RECORDING THIS [DECLARATION].” Id. at ¶ 29. Exhibit D to the
declaration “contain[ed] a metes and bounds description of
‘Annexable Property,’” and other parts of the declaration outlined
procedures by which Pulte could annex and incorporate it into the
community. Id. at ¶ 8. Under these circumstances, the supreme
court held that the undeveloped portions of Pulte’s property were
19
incorporated into the community only after they were formally
annexed (thereby making the developer responsible for monetary
assessments). Id. at ¶ 37.
¶ 36 The declaration in Ryan Ranch, ¶ 10, worked the same general
way. It “defined the ‘Community’ as ‘real property described in
Exhibit A . . . or which becomes subject to’” the declaration. Id. In
contrast to the Exhibit A in Pulte, however, Ryan Ranch’s Exhibit A
identified some real property while excluding the land that was at
issue in the lawsuit — the parcel that the plaintiff community
argued was subject to the declaration and therefore encumbered
with assessments imposed by the homeowners association. Id. As
in Pulte, Exhibit D in Ryan Ranch included a “metes and bounds
description” of annexable property. Id. at ¶ 11.
¶ 37 The Developer Entities assert that because they used the
“same development scheme” as the developers in Pulte and Ryan
Ranch, this case is “materially indistinguishable” from the
precedent set by those cases. But this argument overlooks the
critical difference in the exhibits that the developers in Pulte, Ryan
Ranch, and this case attached to their respective declarations. In
20
each case, Exhibit A described the extent of the community at its
inception. As we have already noted, in Pulte that description
included no land at all. Put another way, when it was recorded, the
developer’s declaration attached no obligations to any real property.
In Ryan Ranch, the Exhibit A identified some real property, but not
the parcel that prompted the lawsuit. In contrast, in this case,
Exhibit A identified the entire Property as belonging to the
community from the beginning. 5
¶ 38 Exhibit D to the declarations in Pulte and Ryan Ranch was
likewise a virtual mirror image of Exhibit D to the CCR in this case.
5 While the issue of when the common interest community was
formed is not decisive here as it was in Pulte, we note the trial
court’s finding that it “[came] into existence” when the first unit was
sold. None of the parties challenge that finding. And because we
conclude and the parties do not dispute that the community was
formed in accordance with CCIOA’s section 38-33.3-201, C.R.S.
2019, the precise moment when that occurred is not of
consequence to our determination that the CCR encumbered all of
the Property described in Exhibit A. Nevertheless, we agree with
the trial court that the common interest community was created
when the first unit was sold. The sale subordinated that unit to the
CCR and obligated its owner “to pay for real estate taxes, insurance
premiums, maintenance, or improvement of other real estate
described in a declaration.” § 38-33.3-103(8), C.R.S. 2019; see also
Pulte Home Corp. v. Countryside Cmty. Ass’n, 2016 CO 64, ¶¶ 44,
48.
21
Pulte and Ryan Ranch precisely described annexable real property,
and the declarations in those cases “outline[d] procedures by which
the property described in Exhibit D could be subjected to the
[declaration’s] terms and incorporated into the community.” Pulte,
¶ 8; see also Ryan Ranch, ¶ 11. But in this case, Exhibit D (which
served the same purpose) contained no metes and bounds
description of annexable real property. It was left blank except for
reference to an attached model supplemental declaration form. And
the CCR itself did not outline any procedures for annexing any
additional real property into the community.
¶ 39 Put simply, in Pulte and Ryan Ranch, the declarations
excluded either all or some of the property under development from
the community until the developer specifically annexed it. Here, by
listing the entire Property on Exhibit A, the CCR did just the
opposite. We therefore conclude that Pulte and Ryan Ranch are not
controlling in this case and, as a result, we agree with the trial
court’s finding that the entirety of the Property was encumbered by
the CCR at the time the community was formed. See Buick v.
Highland Meadow Estates at Castle Peak Ranch, Inc., 21 P.3d 860,
22
862 (Colo. 2011) (“[We] will enforce a covenant as written that is
clear on its face.”). 6
¶ 40 We also conclude, as stated above, that this result comports
with CCIOA’s requirements for the creation of a common interest
community. Here, the CCR set forth the HOA members’ “obligation
to pay for various expenses associated with common property,” and
it “attach[ed] that obligation to individually owned property.” Pulte,
¶ 44. By its terms, therefore, the CCR encumbered the real
property listed in Exhibit A, i.e., the entire Property, including both
the developed and undeveloped portions, and the Developer
Entities’ implementation of the CCR does not suggest otherwise. Cf.
id. at ¶¶ 70-71 (Coats, J., concurring in part and concurring in the
judgment).
6 We note that this conclusion also renders the entirety of the
Property — other than the units — “Common Elements,” defined in
part in Sections 2.14 and 1.4(b) of the CCR as “all of the Common
Interest Community” including “all of the land, landscaping,
driveways, sidewalks, walkways, parking areas, and easements
which are a part of the Common Interest Community.” This
therefore resolves the concern that the unit owners commit trespass
each time they access their units.
23
III. Reformation of the CCR
¶ 41 The Developer Entities contend that the trial court “was not
empowered” to reform the CCR by adding BRF as a signatory.
Because our interpretation of the CCR resolves any concerns
created by the discrepancies between the statements in the CCR
and the actual chain of title, we hold reformation was unnecessary.
A. Preservation and Standard of Review
¶ 42 The parties agree that the Developer Entities’ contentions were
preserved.
¶ 43 Whether the district court has applied the correct legal
standard in determining the availability of a particular equitable
remedy is reviewed de novo. See Redd Iron, Inc. v. Int’l Sales &
Servs. Corp., 200 P.3d 1133, 1136 (Colo. App. 2008). But the power
to determine the components of such a remedy is within the court’s
discretion. Beren v. Beren, 2015 CO 29, ¶ 12.
¶ 44 To justify reformation, there must be clear and unequivocal
evidence showing that it is the appropriate remedy under the
circumstances. Md. Cas. Co. v. Buckeye Gas Prods. Co., 797 P.2d
11 (Colo. 1990). If the evidence meets this standard of proof,
24
reformation may, and should be, ordered. Hooper v. Capitol Life Ins.
Co., 92 Colo. 376, 20 P.2d 1011 (1933). CCIOA directs courts to
administer remedies “liberally,” § 38-33.3-114(1), C.R.S. 2019, and
permits them to apply the principles of both law and equity to
achieve a just and conscionable result. §§ 38-33.3-108, -112(1),
C.R.S. 2019; see also Arrabelle at Vail Square Residential Condo.
Ass’n v. Arrabelle at Vail Square LLC, 2016 COA 123, ¶¶ 55-56.
¶ 45 Because the Developer Entities challenge the propriety of
reformation as the appropriate equitable remedy for Builders’
incorrect representation that it was the owner of the Property when
it executed the CCR, we review de novo the trial court’s
determination that reformation was necessary.
B. Discussion
¶ 46 The Developer Entities argue that equity may not be employed
to cure defects in a declaration so as to conform with the parties’
intent. They also contend the trial court’s premise for reformation
25
— that the CCR was a “wild deed” — was erroneous. We need only
reach the first of these contentions. 7
¶ 47 As we have already noted, Section 1.1 of the CCR affirmatively
stated that Builders, the declarant, owned the Property, despite the
fact that BRF did. This discrepancy and BRF’s absence from the
CCR’s signature line, the trial court found, “created a significant
title problem,” which required a remedy to comport with Colorado’s
declared policy regarding titles:
It is the purpose and intention of this article
. . . to render titles to real property and every
interest therein more secure and marketable,
and it is declared to be the policy in this state
that this article . . . shall be liberally construed
with the end in view of rendering such titles
absolute and free from technical defects so
that subsequent purchasers and
encumbrancers by way of mortgage, judgment,
or otherwise may rely on the record title . . . so
that the record title of the party in possession
is sustained and not defeated by technical or
strict constructions.
7 The Developer Entities also argue that “it was error for the [court]
to use ‘equity’ to ‘fix’ the [CCR] to make it encumber all of the
Property.” As we discussed in Part II.C, however, the CCR, by its
own terms, “encumbers all of the Property.” Accurate interpretation
of the CCR renders it unnecessary to reform the CCR to reflect the
intent of the parties.
26
§ 38-34-101, C.R.S. 2019.
¶ 48 An insubstantial failure of a declaration to comply with
CCIOA, however, does not render title unmarketable or otherwise
affect it. § 38-33.3-203(1), C.R.S. 2019. Given our conclusion that
the CCR’s Exhibit A encumbers the entire Property, along with the
parties’ general historical compliance with the CCR’s requirements,
we conclude that the inaccuracy in Section 1.1 of the CCR amounts
to an insubstantial failure, and thus does not affect the
marketability and security of the titles of the individual unit owners
or the Property as a whole. This result aligns with our
determination that the community was created when the first unit
was sold, by which time the inaccuracies in the final plat had been
remedied by recording the plat amendment, along with the CCIOA-
compliant CCR. Nor does BRF’s absence from the signature line of
the CCR affect the access rights of individual unit owners. Indeed,
once the CCR is properly understood as encumbering the entirety of
the Property, that makes the land underneath and surrounding
individual units “Common Elements.” And this dispels any concern
that a unit owner would be trespassing by stepping outside the
27
house because, under Section 4.1 of the CCR, “all Members may
use Common Elements.”
¶ 49 Because the trial court’s interpretation of the CCR obviated
the need for an equitable remedy, the trial court erred by acting in
equity and adding BRF to the signature line of the CCR. See Smith
v. Exec. Custom Homes, Inc., 230 P.3d 1186, 1193 (Colo. 2010)
(holding that court should not resort to equity when there is a plain,
speedy, and adequate remedy at law); In re Marriage of Hall, 971
P.2d 677, 679 (Colo. App. 1998) (“Equitable relief is available only
when the law affords none.”). This error, however, was harmless
because it did not affect the substantial rights of the parties. See
C.A.R. 35(c); see Laura A. Newman, LLC v. Roberts, 2016 CO 9, ¶ 24
(“[A]n error affects a substantial right only if ‘it can be said with fair
assurance that the error substantially influenced the outcome of
the case or impaired the basic fairness of the trial itself.’” (quoting
Bly v. Story, 241 P.3d 529, 535 (Colo. 2010))) (emphasis omitted).
¶ 50 Accordingly, because the trial court’s accurate interpretation
of the CCR resolved any concerns created by the absence of BRF’s
28
signature, reformation of the CCR was unnecessary, but a harmless
error. 8
IV. Conveyance of the Roads to the HOA
¶ 51 Next, the Developer Entities argue that the trial court erred by
ordering FDI to convey the Property’s roads to the HOA.
Specifically, they contend that the Property’s roads are public roads
under the CCR. We disagree.
A. Preservation and Standard of Review
¶ 52 The parties agree, as do we, that the Developer Entities
preserved this argument. Again, we review the interpretation of
covenants and other recorded instruments de novo. Ryan Ranch,
¶ 24.
B. Discussion
¶ 53 The Developer Entities contend that the Property’s roads “are
to be owned by FDI and dedicated to the public for use,” and that
the CCR granted the HOA an easement over the roads. To support
8 We acknowledge the trial court resolved other issues through
reformation that are not contested on appeal. While we hold that
adding BRF as signatory to the CCR was unnecessary, we do not
question the court’s use of reformation to remedy those separate
issues.
29
their argument, the Developer Entities point to a dedication on the
final plat recorded October 31, 2005, which contains language
granting Commerce City easements for public use. On the second
page of the plat, the roads within the subdivision are depicted, and
at least one of the roads is labeled a “Public Access Easement.”
¶ 54 To create public rights in a road, however, the governing body
must accept the dedication. § 43-2-201(1)(a), C.R.S. 2019; see also
Burlington & C. R. Co. v. Schweikart, 10 Colo. 178, 14 P. 329 (1887).
The Developer Entities identify no evidence in the record, nor could
we locate any, that Commerce City was ever offered or accepted this
public dedication. Accordingly, no public right was created in the
Property’s roads.9
¶ 55 Article 5 of the CCR, titled “Easements,” describes the
easements that are “General Common Elements,” and it does not
change this analysis. Section 5.1(a) and (b) reference easements for
the purpose of gaining access between the units or buildings and
the “public streets adjoining the Property.”
9As a practical matter, the Property is a gated development, which
casts doubt on the extent to which the public could access its roads
at all.
30
¶ 56 Section 2.14 of the CCR, on the other hand, defines “Common
Elements” as “all of the Common Interest Community except the
portions thereof which constitute Units.” Excepting only the units,
this definition necessarily includes the roads. Accordingly, because
the Property’s roads are not public roads and the CCR designated
them as “Common Elements” in the common interest community,
the trial court did not err in conveying the roads to the HOA.
V. Attorney Fees
¶ 57 The Developer Entities request attorney fees pursuant to
section 38-33.3-123(1)(c), C.R.S. 2019, which provides that “[i]n any
civil action to enforce or defend the provisions of this article or of
the declaration, bylaws, articles, or rules and regulations, the court
shall award reasonable attorney fees, costs, and costs of collection
to the prevailing party.” 10 Thus, “a prevailing party in a CCIOA
dispute is entitled to attorney fees.” Perfect Place v. Semler, 2016
COA 152M, ¶ 80, rev’d on other grounds, 2018 CO 74.
10 The unit owners oppose awarding the Developer Entities attorney
fees; they do not request their own attorney fees.
31
¶ 58 The HOA requests attorney fees and costs under the same
provision, as well as costs under C.A.R. 39.
¶ 59 Section 38-33.3-123(1)(c) mandates an attorney fees award “to
the prevailing party.” CCIOA does not define “prevailing party.”
Under Colorado law,
[t]o be a prevailing party for the purpose of an
award of attorney fees pursuant to a statute or
contract, the applicant must have succeeded
upon a significant issue presented by the
litigation and must have achieved some of the
benefits that he sought in the lawsuit. But a
party need not prevail upon the “central” issue,
only upon a significant one.
In re Marriage of Sanchez-Vigil, 151 P.3d 621, 625 (Colo. App. 2006)
(quoting In re Marriage of Watters, 782 P.2d 1220, 1221 (Colo. App.
1989)).
¶ 60 The Developer Entities argued that the trial court erred in its
interpretation of the CCR, but we hold otherwise. And while the
trial court erred in reforming the CCR, we hold the error was
harmless. Additionally, we affirmed the trial court’s order that FDI
convey the Property’s roads to the HOA. Accordingly, the HOA is
the prevailing party under CCIOA, and the case is remanded to the
32
trial court to determine and award to the HOA its reasonable
attorney fees and costs.
¶ 61 As for the HOA’s request for costs under both 38-33.3-
123(1)(c) and C.A.R. 39, having concluded that the HOA prevailed
on the significant claim against it, the remand must afford the trial
court an opportunity to exercise its discretion as to awarding the
HOA its costs. See Coldwell Banker Commercial Grp., Inc. v. Hegge,
770 P.2d 1297, 1300 (Colo. App. 1988).
VI. Conclusion
¶ 62 The judgment is affirmed. On remand, the trial court must
determine the amount of the HOA’s reasonable attorney fees, and
award that amount to it against the Developer Entities. The court
shall also, in its discretion, address the HOA’s request for costs.
JUDGE TAUBMAN and JUDGE HAWTHORNE concur.
33