Briargate at Seventeenth Ave. Owners Ass'n v. Nelson

Decision Date03 June 2021
Docket NumberCourt of Appeals No. 19CA2052
Citation2021 COA 78 M,494 P.3d 1149
CourtColorado Court of Appeals
Parties BRIARGATE AT SEVENTEENTH AVENUE OWNERS ASSOCIATION, a Colorado non-profit corporation, Plaintiff-Appellee, v. John G. NELSON, Defendant-Appellant.

Winzenburg, Leff, Purvis & Payne, LLP, Wendy E. Weigler, Littleton, Colorado, for Plaintiff-Appellee

Law Office of John G. Nelson, John G. Nelson, Denver, Colorado, for Defendant-Appellant

Opinion by JUDGE DAILEY

¶ 1 In this action to collect unpaid homeowners’ association (HOA) assessments, defendant, John G. Nelson, appeals the trial court's entry of judgment in favor of, and award of attorney fees and costs to, plaintiff, Briargate at Seventeenth Avenue Owners Association (Briargate). We affirm in part, reverse in part, and remand with directions.

I. Background

¶ 2 Briargate is the HOA for certain condominiums in Denver. Nelson has been one of the condominium owners since 2002.

¶ 3 The parties previously engaged in litigation, resulting in money judgments in favor of Nelson.

¶ 4 Briargate brought the present action in July 2018 to recover alleged unpaid assessments, interest, collection costs, and attorney fees.

¶ 5 Three years earlier, Briargate had adopted a resolution (February 2015 Resolution) providing that (1) balances left unpaid for ten days would accrue a monthly late fee of $50, an 8% per annum interest rate, and service fees; (2) it could collect attorney fees for legal actions to recover unpaid balances; and (3) owners’ payments to Briargate would be allocated in the following order: legal fees and costs, enforcement and collection expenses, late fees, returned check charges, lien fees, any costs and fees pursuant to the "Declaration [of the HOA]," and lastly regular or special assessments.

¶ 6 In January 2016, Nelson began paying Briargate his monthly HOA assessments with checks containing a handwritten notation in the memo line saying either "HOA Account — Payment in Full" or "HOA Account + Payment in Full." He did this, he said, because Briargate (1) had used "concerning" accounting practices in the past and (2) changed management companies, making it no longer feasible for him to pay his bills in person and obtain paper receipts in return.

¶ 7 Nelson's account with Briargate had a zero balance as of June 30, 2016. But earlier, in February 2016, Briargate had notified its members in a letter that (1) a special assessment for an insurance deductible on a new roof was necessary and (2) "[e]ach owner is responsible for their portion of the deductible according to your ownership percentage. Your percentage, and the amount due, is listed on the enclosed statement."1

¶ 8 When Nelson had not paid the special assessment by September 21, 2016, Briargate (1) notified him in a letter that his account was "delinquent" in the amount of $984.99; and (2) attached to the letter a page from a ledger showing Nelson owed $905, plus a late fee and interest, in connection with the "Insurance Deductible." Thereafter, Briargate again notified Nelson via letter (this time through certified mail) of the delinquency and twice in the form of a debt collection notice pursuant to section 38-33.3-316.3, C.R.S. 2020.

¶ 9 Between June 2016 and March 2017, Nelson sent Briargate nine handwritten checks, all for his regular monthly assessments and each containing a restrictive endorsement of the type mentioned above. (During this time, the only payments Nelson did not make to Briargate were for the $905 special assessment and late fees and interest attached to it.) Briargate deposited all nine of these checks.

¶ 10 Nelson sent two more checks, just like the previous nine, in April and May 2017. However, Briargate returned these checks to Nelson. In a letter dated June 5, 2017, Briargate notified Nelson that it rejected, and consequently was returning, his April and May 2017 checks "due to the[ir] restrictive endorsement[s]."

¶ 11 Nelson responded on June 10, 2017, in a letter informing Briargate that, rather than continuing to pay his account by check, he would (1) "start setting off monthly payments against the various judgments [he] hold[s] against the HOA" and (2) resume making payments by check when the balance of those judgments had been satisfied.

¶ 12 Between June 2017 and July 2018, Briargate continued to assess late fees and interest on Nelson's account. It also added a second special assessment (totaling $10,860) to Nelson's account. Nelson attempted to pay that special assessment with two checks, one in October 2018 and one in November 2018.2 Briargate returned his checks because (1) the October 2018 check bore a "Oct. HOA + Sp. Assessment" notation; and (2) the November 2018 check was accompanied by a letter that said, "This check is intended to cover my Nov. HOA fees plus the final eighteen installments on the special assessment." Briargate rejected those checks because Nelson had directed that they be applied in a manner contrary to the allocation specified in the February 2015 Resolution.

¶ 13 Nelson did not attempt to make any other payments but continued to "offset" amounts Briargate claimed were owed to it against the amount of the judgments owed to him.

¶ 14 The parties went to trial in June 2019. Nelson, a licensed attorney, represented himself. At the conclusion of the trial, the parties submitted written closing arguments. As pertinent here, Nelson argued that (1) Briargate's acceptance of checks between June 2016 and March 2017, each with a restrictive endorsement, effected an accord and satisfaction of any prior debt; (2) Briargate's nonaction with respect to, and ultimate rejection of, two checks — each of which had similar restrictions attached to it — operated to suspend any ongoing obligation; and (3) in any and all events, he was entitled to offset amounts he owed Briargate against amounts Briargate owed him from prior judgments.

¶ 15 In a written "Findings of Fact, Conclusions of Law, and Order," the trial court rejected Nelson's arguments. After determining that Nelson had unjustifiably breached his contractual obligations under the Declaration, the court entered judgment for Briargate and against Nelson for $21,467.48, plus 8% per annum prejudgment interest. And, finding that Briargate was the prevailing party, the court ordered Nelson to pay Briargate $19,219.68 in attorney fees and costs.

¶ 16 Nelson now appeals the trial court's judgment and order.

II. Accord and Satisfaction

¶ 17 Nelson contends that the trial court erred by rejecting his defense of accord and satisfaction. We disagree.

¶ 18 Whether an accord and satisfaction exists presents a question of fact, R.A. Reither Constr., Inc. v. Wheatland Rural Elec. Ass'n , 680 P.2d 1342, 1344 (Colo. App. 1984), upon which a trial court's finding would ordinarily be subject to reversal only for clear error, see Indian Mountain Corp. v. Indian Mountain Metro. Dist. , 2016 COA 118M, ¶ 31, 412 P.3d 881.3 However, whether the court has applied the correct legal standard in making a finding of fact is a question of law that we review de novo. In Interest of C.T.G. , 179 P.3d 213, 221 (Colo. App. 2007).

¶ 19 "An accord is a contract under which an obligee promises to accept a stated performance in satisfaction of the obligor's existing duty. Performance of the accord discharges the original duty." R.A. Reither Constr. , 680 P.2d at 1344. To establish an accord and satisfaction,

it is necessary that the money should be offered in full satisfaction of the demand, and be accompanied by such acts and declarations as amount to a condition that the money, if accepted, is accepted in satisfaction; and it must be such that the party to whom it is offered is bound to understand therefrom that if he takes it, he takes it subject to such conditions.

Id. (quoting Hudson v. Am. Founders Life Ins. Co. , 151 Colo. 54, 63-64, 377 P.2d 391, 396 (1962) ); see Anderson v. Rosebrook , 737 P.2d 417, 419-20 (Colo. 1987) (same).

¶ 20 Under section 4-3-311(a) and (b), C.R.S. 2020, of the Colorado Uniform Commercial Code (CUCC), subject to exceptions not applicable here, a claim is discharged so long as (1) the person against whom the claim is asserted in good faith tendered an instrument to the claimant in full satisfaction of the claim; (2) the amount of the claim was unliquidated or subject to a bona fide dispute; (3) the claimant obtained payment of the instrument; and (4) the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.

¶ 21 The burden is on the debtor to prove that an accord and satisfaction was reached. See § 4-3-311 cmt. 4 ("The person seeking the accord and satisfaction must prove that the requirements of [the statute] are met."); McMahon Food Corp. v. Burger Dairy Co. , 103 F.3d 1307, 1313 (7th Cir. 1996) (same).

¶ 22 The trial court rejected Nelson's accord and satisfaction defense based on its conclusion that Nelson did not satisfy the first ("good faith") element of the defense.

¶ 23 For CUCC purposes, " [g]ood faith’ means honesty in fact and the observance of reasonable commercial standards of fair dealing." § 4-3-103(4), C.R.S. 2020. Official comment 4 to section 4-3-311 states, in relevant part,

[an] example of lack of good faith is found in the practice of some business debtors in routinely printing full satisfaction language on their check stocks so that all or a large part of the debts of the debtor are paid by checks bearing the full satisfaction language, whether or not there is any dispute with the creditor. Under such a practice the claimant cannot be sure whether a tender in full satisfaction is or is not being made. Use of a check on which full satisfaction language was affixed routinely pursuant to such a business practice may prevent an accord and satisfaction on the ground that the check was not tendered in good faith ....

(Emphasis added.)

¶ 24 Relying on this...

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