Ingold v. Aimco/Bluffs, L.L.C. Apartments

• Decision Date: 29 May 2007
• Docket Number: No. 06SA240.,06SA240.
• Citation: 159 P.3d 116
• Parties: Chris and Cindy INGOLD, Plaintiffs v. AIMCO/BLUFFS, L.L.C. APARTMENTS, a/k/a AIMCO/Bluffs, L.L.C.; AIMCO Properties, L.P., d/b/a Boulder Creek Apartments; and James R. Macias, Defendants.
• Court: Colorado Supreme Court

159 P.3d 116

Chris and Cindy INGOLD, Plaintiffs v. AIMCO/BLUFFS, L.L.C. APARTMENTS, a/k/a AIMCO/Bluffs, L.L.C.; AIMCO Properties, L.P., d/b/a Boulder Creek Apartments; and James R. Macias, Defendants.

No. 06SA240.

Supreme Court of Colorado, En Banc.

May 29, 2007.

Irwin & Boesen, P.C., Chris L. Ingold, Denver, Colorado, Pro Se and Attorney for Plaintiff Cindy Ingold.

Fisher, Sweetbaum, Levin & Sands, P.C., Jon F. Sands, Brad Ramming, Denver, Colorado, Attorneys for Defendants.

Justice EID delivered the Opinion of the Court.

This case concerns an arbitration clause in an apartment lease entered into between Plaintiffs Chris and Cindy Ingold and one of the Defendants, Boulder Creek Apartments. We issued a rule to show cause to review the trial court's order compelling the Ingolds to arbitrate their claims against Boulder Creek Apartments as well as its parent company, Defendant AIMCO/Bluffs LLC, and its employee, Defendant James R. Macias (collectively, the "Defendants"). We make the rule absolute in part, discharge it in part, and remand with directions.

I.

For purposes of this proceeding the factual allegations set forth in the Ingolds' complaint are accepted as true. See Rosenthal v. Dean Witter Reynolds, Inc., 908 P.2d 1095, 1099 (Colo.1995).

The Ingolds entered into a one-year apartment lease with Boulder Creek Apartments in July 2001 (the "Lease"). Section 30 of the Lease provides: "All disputes between the parties concerning the provisions of this Lease shall be submitted to arbitration. . . ." Only the Ingolds and Boulder Creek Apartments are identified as parties to the Lease.

After taking possession of their apartment in August, the Ingolds smelled a foul odor in the unit. The Ingolds were advised that the odor resulted from a ruptured sewer pipe underneath the apartment building, and that the pipe would be repaired. When they returned to the unit in September, the foul odor was gone.

Problems with the apartment unit persisted, either because the sewer pipe was inadequately repaired or because sewage from the initial rupture was not removed from underneath the apartment building. The Ingolds again were told that the Defendants were addressing the problem. The Ingolds claim that they relied on these representations when agreeing to renew their Lease in August 2002 for another one-year term.

Shortly after renewing the Lease, the Ingolds began to suffer health problems associated with mold and bacteria, problems that they attribute to the sewage left under their apartment. A microbiologist hired by the Ingolds analyzed samples from the apartment and concluded that the unit contained a serious mold and bacteria problem. Based on these findings, the Ingolds' physician advised them to leave the apartment.

When the Ingolds reported the microbiologist's findings to Boulder Creek Apartments, the apartment manager, James Macias, inspected the crawl space and attic of the apartment building. Macias advised that he detected no problem with mold or bacteria. An industrial hygienist hired by the Ingolds to inspect the apartment reached a different conclusion; he determined that both the crawl space and attic contained toxic levels of mold and bacteria.

The Ingolds abandoned the apartment unit in November 2002, leaving behind their possessions —and refusing to pay their November rent. Later that month, a representative of the Defendants contacted the Ingolds and denied any environmental problem with the apartment unit and informed them that they continued to be responsible for complying with the terms of the Lease, including their monthly rental payments. The Ingolds still refused to pay their rent.

In December 2002, Boulder Creek Apartments notified the Ingolds that their failure to pay rent resulted in a breach of the Lease, and demanded the payment of $6,095.55 as a termination fee. Boulder Creek Apartments also withheld the Ingolds' security deposit.

In October 2004, the Ingolds filed suit against the Defendants, advancing ten claims for relief: eight tort claims, a claim for violation of the Colorado Consumer Protection Act, sections 6-1-101 to -115, C.R.S. (2006), and a claim for violation of the Wrongful Withholding of Security Deposits Act, sections 38-12-101 to -104, C.R.S. (2006).¹

The Defendants moved to dismiss the Ingolds' Complaint for lack of subject matter jurisdiction on grounds that the Lease required the Ingolds to arbitrate their claims. The Ingolds opposed arbitration, claiming that they had been fraudulently induced into entering the Lease based on the Defendants' representations that the apartment was habitable.

The trial court granted the Defendants' motion and held that all of the Ingolds' claims fell within the scope of the Lease's clause requiring the arbitration of "[a]ll disputes between the parties concerning the provisions of this Lease . . . ." The trial court further found that the "parties" to the Lease included AIMCO/Bluffs and James Macias, and ordered the Ingolds to arbitrate their claims against these Defendants as well as the signatory to the Lease, Boulder Creek Apartments.

We issued a rule to show cause to consider whether the trial court erred by compelling the parties to arbitrate. At oral argument, the Defendants acknowledged that the trial court should not have ordered the Ingolds to arbitrate their claims against AIMCO/Bluffs and James Macias, because these Defendants are not parties to the Lease.² We therefore only consider the trial court's arbitration order as it applies to Boulder Creek Apartments.

The Ingolds present three principal issues for our consideration:

First, the Ingolds allege that they were fraudulently induced into entering the Lease, and therefore that they cannot be bound by the Lease's arbitration clause. We disagree. As explained in section II of this opinion, the Ingolds must arbitrate their claim of fraudulent inducement because it is directed to the enforceability of the Lease as a whole, not specifically to the Lease's arbitration provision.

Second, the Ingolds contend that their claims for relief fall outside the scope of the arbitration clause. In section III below, we find that all of the Ingolds' claims against Boulder Creek Apartments are arbitrable with the exception of their statutory claim for the wrongful withholding of their security deposit. This statutory claim cannot be arbitrated and must be resolved by the trial court.

Third, the Ingolds argue that the existence of multiple claims against multiple parties, less than all of which are arbitrable, precludes the arbitration of any of their claims against Boulder Creek Apartments, including those that fall within the scope of the parties' arbitration agreement. To support this argument, the Ingolds rely on the "intertwining doctrine" recognized in Sandefer v. District Court, 635 P.2d 547 (Colo.1981), overruled in part on other grounds by Sager v. District Court, 698 P.2d 250 (Colo.1985). Sandefer held that courts should not compel arbitration if the legal and factual issues raised by the arbitrable claims are "inextricably intertwined" with issues raised by non-arbitrable claims.

For the reasons explained in section IV below, we no longer believe that Colorado law supports the "intertwining doctrine," and we reject it by overruling Sandefer to the extent that it recognizes the doctrine. The Ingolds' arbitrable claims against Boulder Creek Apartments should proceed to arbitration, and on remand the trial court should consider whether to stay the Ingolds' non-arbitrable claims pending the outcome of arbitration or, alternatively, to allow the Ingolds to separately litigate some or all of their non-arbitrable claims.

II.

Our analysis begins by addressing the Ingolds' claim that arbitration is inappropriate in this case because they were fraudulently induced by Boulder Creek Apartments into entering the Lease. According to the Ingolds, an allegation of fraudulent inducement is to be determined by the trial court— not the arbitrator—under the former version of the Colorado Uniform Arbitration Act, sections 13-22-201 to -223, C.R.S. (2003) (the "CUAA"). The former version of the CUAA is applicable to arbitration agreements, like the arbitration provision of the Lease, entered into before August 4, 2004. See § 13-22-203(1), C.R.S. (2006). Importantly, the Ingolds do not allege that Boulder Creek Apartments fraudulently induced them into agreeing to arbitrate. Rather, they claim that they were fraudulently induced into entering the Lease in its entirety. We hold that the Ingolds must arbitrate their fraudulent inducement allegations.

We begin by analyzing the text of the CUAA, giving its words their ordinary and commonly-understood meanings. See Reutter v. Weber, ___ P.3d ___, ___, 2007 WL 1240199, at *3 (Colo. Apr. 30, 2007). Section 13-22-203 of the former CUAA governs "provision[s] in a written contract to submit to arbitration any controversy thereafter arising between the parties. . . ." Section 30 of the Lease clearly is such a provision. Arbitration provisions like section 30 are "valid, enforceable, and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract." § 13-22-203, C.R.S. (2003). The Ingolds contend that the Lease—including its arbitration provision—is invalid and unenforceable ab initio because it is the result of fraudulent inducement.

We have not directly considered this issue under the former version of the CUAA. However, the answer can be found in section 13-22-204(1), which provides that "the court shall order the parties to proceed with arbitration, but, if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue. . . ." The scope of the trial court's authority under section 13-22-204(1) is manifestly narrow. The statute contemplates that the trial court will have the authority to consider one issue: "the existence...