Club. at Fair. Pines v. Fair. Pines Estates, 07CA1368.

• Decision Date: 07 August 2008
• Docket Number: No. 07CA1368.,07CA1368.
• Citation: 214 P.3d 451
• Parties: CLUBHOUSE AT FAIRWAY PINES, L.L.C., Plaintiff-Appellee, v. FAIRWAY PINES ESTATES OWNERS ASSOCIATION, Defendant-Appellant.
• Court: Colorado Court of Appeals

214 P.3d 451

CLUBHOUSE AT FAIRWAY PINES, L.L.C., Plaintiff-Appellee, v. FAIRWAY PINES ESTATES OWNERS ASSOCIATION, Defendant-Appellant.

No. 07CA1368.

Colorado Court of Appeals, Div. A.

August 7, 2008.

Rehearing Denied December 4, 2008.

Certiorari Granted August 31, 2009.

Fleming & Stern, John J. Fleming, Jr., Susan C. Baker, Montrose, Colorado, for Plaintiff-Appellee.

Hoskin, Farina & Kampf, P.C., Michael J. Russell, David M. Dodero, Andrew H. Teske, Grand Junction, Colorado, for Defendant-Appellant.

Opinion by Judge WEBB.

In this dispute over the meaning of "club" in a declaration and restrictive covenants, defendant, Fairway Pines Estates Owners Association, Inc. (the Association), appeals the judgment entered following a bench trial in favor of plaintiff, Clubhouse at Fairway Pines, L.L.C. (Clubhouse), and the award of attorney fees to Clubhouse. We reverse the judgment for failure to join as indispensable parties the lot owners who belong to the Association (the Owners), vacate the attorney fees order, and remand for further proceedings.

I. Facts

The following facts are undisputed. The Association is the owners' association for Fairway Pines Estates, a residential golf community subject to the declaration of Covenants, Conditions, Restrictions and Easements for Fairway Pines Estates, a Planned Unit Development (the Declaration). Although the term "club" is not defined in the Declaration, it provides that the Owners, none of whom is a defendant in this action, are members of the golf course and club, for which they must pay dues to be assessed and collected by the Association.

Upon approval of the PUD, the original developer operated an existing building on Lot C 104 as a temporary pro shop and club, intending to construct a permanent club on Lot CV 103. Because of financial difficulties, that developer abandoned the project and transferred Lot C 104 to its lender. Clubhouse acquired this lot and it has continued to provide services to the Owners from the existing building. The current developer, Strategic Real Estate Group (SREG), owns Lot CV 103, which remains unimproved.

Clubhouse brought this action to resolve a dispute over the Association's failure to collect club dues from the Owners for its benefit, asserting claims for breach of the Declaration, breach of contract, and tortious interference with prospective business advantage. The Association counterclaimed for a declaration reforming the Declaration to provide that "club" referred to Lot CV 103 and not to Lot C 104.

In its bench ruling, the court observed that "both parties have asked for equitable relief. They have asked for, essentially, a declaratory judgment. . . . If you look at Rule 57, declaratory judgments, it specifically talks about further relief, based on a declaratory judgment or decree may be granted whenever necessary or proper."

In a subsequent written order, the trial court found, inter alia, that "the `Club' as described in the [Declaration] was clearly intended to be a clubhouse on Lot C 104;" that Clubhouse has provided club amenities, which it is obligated to do, "and has the corresponding right to the dues;" that "[t]here has been a breach of the covenants, and [Clubhouse] is entitled to relief;" and that "[t]he obligation to run the club and the right to collect the dues to support the club [are] covenants that run with the land."

Although the written order did not mention declaratory relief, the court held that: (1) Clubhouse is entitled to receive all club dues since June 1, 2005, for breach of the Declaration; (2) the Association must assess, collect, and pay to Clubhouse current and future dues; (3) Clubhouse must continue to provide a club facility to the Owners; and (4) once the permanent clubhouse is operational, the club dues will be split 50-50 between Clubhouse and the new facility.

The court denied the Association's C.R.C.P. 59 motion, which for the first time raised indispensability of the Owners, ruled that Clubhouse was entitled to recover attorney fees as "primarily the prevailing party in its claim for breach of the covenants," and directed the parties to set a hearing on reasonableness of fees. That hearing did not occur because of a stay pending appeal.

II. Indispensable Parties

The Association contends the judgment must be reversed because the Owners are indispensable parties under C.R.C.P. 19(a). We agree.

C.R.C.P. 19(a) requires joinder of a person subject to service of process if:

(1) In his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may: (A) As a practical matter impair or impede his ability to protect that interest or (B) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.

In general, all parties having an interest in the property at issue must be joined. Weng v. Schleiger, 130 Colo. 90, 97, 273 P.2d 356, 359 (1954). Joinder is not required if the award will not affect property values of the absent owners. Seago v. Fellet, 676 P.2d 1224, 1227 (Colo.App.1983).

Here, the Association argues that the trial court's interpretation of "club" in the Declaration as requiring that dues be collected from the Owners for payment to Clubhouse, its determination that club dues would be split 50-50 upon completion of a permanent facility, and its holding that its interpretations run with the land, all affect the Owners, and particularly SREG, thus making them indispensable parties under C.R.C.P. 19(a). See Dunne v. Shenandoah Homeowners Ass'n, 12 P.3d 340, 345 (Colo.App.2000) (in action concerning declaration involving protective covenants, "the interests of all the individual landowners were affected"); accord Good v. Bear Canyon Ranch Ass'n, 160 P.3d 251, 257 (Colo.App.2007).

Clubhouse responds that the Association waived this issue by not raising it before judgment, that if this issue is properly before us the Owners are not indispensable parties, and that in any event the Association adequately represented their interests under the Colorado Common Interest Ownership Act, sections 38-33.3-101 to -319, C.R.S.2007 (CCIOA). We reject each of these assertions.

A. Absence of Indispensable Party Not Waived

Initially, we decline to address absence of an indispensable party as a lack of jurisdiction because precedent from our supreme court leaves that approach in doubt. Compare Centennial Cas. Co. v. Lacey, 133 Colo. 357, 363, 295 P.2d 690, 694 (1956)("even if indispensable parties are omitted it does not raise a question of jurisdiction"), with Weng, 130 Colo. at 97, 273 P.2d at 359 ("the husband was an indispensable party, without which the court could not properly proceed because of lack of jurisdiction"); see Current Development, Civil Procedure: Application of "Indispensable Party" Provision of Colo. R. Civ. P. 19 — the "Procedural Phantom" Still Stalks in Colorado, 46 U. Colo. L.Rev. 609 (1975).

Although another division has taken the jurisdictional approach, see, e.g., Seago, 676 P.2d at 1226, we are not bound to follow it. Ochoa v. Vered, 186 P.3d 107, 113 (Colo. App.2008).

Whether failure to raise the absence of an indispensable party before judgment waives this issue is unclear under Colorado law.

On the one hand, "[j]oinder has even been required under this rule after trial where the issue was first raised on appeal." Potts v. Gordon, 34 Colo.App. 128, 134, 525 P.2d 500, 503 (1974); see also In re Marriage of Helmich, 937 P.2d 897, 902 (Colo.App.1997) (Criswell, J., concurring in part and dissenting in part) ("[T]he question of indispensability can be raised for the first time on appeal."). However, in Potts the absence of an indispensable party had been raised mid-trial.

On the other hand, in Greco v. Pullara, 166 Colo. 465, 470, 444 P.2d 383, 385 (1968), the court found waiver when the issue was raised only after entry of judgment, preceded by six years of litigation. It explained that C.R.C.P. 12(h) does not mean that "a party with the necessary information to make a motion for joinder of an indispensable party at his disposal can sit back and raise it at any time in the proceedings, when the only effect . . . would be to protect himself." 166 Colo. at 470-71, 444 P.2d at 385 (quoting Benger Labs., Ltd. v. R.K. Laros Co., 24 F.R.D. 450, 452 (E.D.Pa.1959)).

In Karakehian v. Boyer, 900 P.2d 1273, 1280 (Colo.App.1994), aff'd in part and rev'd in part on other grounds, 915 P.2d 1295 (Colo.1996), a landlord's claim for damages against the tenant's damage deposit, the division refused to reduce the damages by one-half because the landlord's wife, a co-owner, was not a party but could have raised her own claim against the tenant. The division cited Potts for the principle that the absence of an indispensable party could be raised at any stage of the proceedings, but relied on Greco to reject the tenant's assertion, pointing out that the tenant had an opportunity "to insist upon joinder at trial," and was raising indispensability "for his own protection rather than that of the allegedly indispensable person." Id.

In reconciling these pronouncements, we are informed by the Supreme Court's explanation in Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 110, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968):

When a case has reached the appeal stage the matter is more complex. The judgment appealed from may not in fact affect the interest of any outsider even though there existed, before trial, a possibility that a judgment affecting his interest would be rendered. When necessary, however, a court of appeals should, on its own initiative, take steps to protect the absent party, who of course had no opportunity to plead and prove his interest below.

390 U.S. at 110-11, 88 S.Ct. 733 (footnote omitted)....