K9shrink, LLC v. Ridgewood Meadows Water & Homeowners Ass'n

• Decision Date: 09 June 2011
• Docket Number: No. 10CA0640.,10CA0640.
• Citation: 278 P.3d 372
• Parties: K9SHRINK, LLC, a Colorado limited liability company, and Gail Clark, Plaintiffs–Appellants, v. RIDGEWOOD MEADOWS WATER AND HOMEOWNERS ASSOCIATION, Defendant–Appellee.
• Court: Colorado Court of Appeals

278 P.3d 372

K9SHRINK, LLC, a Colorado limited liability company, and Gail Clark, Plaintiffs–Appellants,

v.RIDGEWOOD MEADOWS WATER AND HOMEOWNERS ASSOCIATION, Defendant–Appellee.

No. 10CA0640.

Colorado Court of Appeals,

Div. VII.

June 9, 2011.

March, Olive & Pharris, LLC, Stewart W. Olive, Fort Collins, Colorado, for Plaintiffs–Appellants.

Montgomery, Kolodny, Amatuzio & Dusbabek, LLP, Peter S. Dusbabek, Kimberly A. Burnham, Fort Collins, Colorado, for Defendant–Appellee.

Opinion by Judge TERRY.

Plaintiffs, K9Shrink, LLC (K9Shrink) and Gail Clark, appeal the trial court's summary judgment in favor of defendant, Ridgewood Meadows Water and Homeowners Association (Ridgewood), as well as the court's January 11, 2010 order (January order) denying declaratory and injunctive relief to plaintiffs and granting an injunction and attorney fees to Ridgewood. We affirm the judgment and order.

I. Background

Clark is a canine behavioral psychologist who operates K9Shrink on her property. Clients of K9Shrink bring their dogs to Clark's home, where she counsels the owners to help them communicate with and train their dogs. Clark's home is subject to Ridgewood's covenants (Covenants), which were originally adopted by declarations in 1973 and 1977 and amended by a petition to the district court in 2007 (Amendments).

Plaintiffs filed this action after Ridgewood required them to cease K9Shrink's activities on Clark's property. Ridgewood had determined that K9Shrink's activities constituted commercial pet-related activity, prohibited by Part II, paragraph 5(c) of the Covenants, as amended in 2007. Plaintiffs sought a declaratory judgment that the Amendments are unenforceable, and an injunction prohibiting Ridgewood from enforcing the Amendments against plaintiffs. Ridgewood counterclaimed, seeking an injunction to prevent plaintiffs from conducting commercial pet-related activity on Clark's property.

The trial court granted partial summary judgment to Ridgewood with respect to plaintiffs' claim for declaratory judgment regarding the enforceability of the Covenants. Following trial, the trial court issued its January order, in which it determined that K9Shrink's activities violated the Covenants, and denied relief to plaintiffs. The court enjoined Clark “from operating any commercial pet-related activity,” including K9Shrink, on her property. Plaintiffs appeal these rulings.

II. Validity of Amendments to Covenants

The Amendments became effective in 2007 after the district court entered an order amending the 1973 and 1977 declarations under section 38–33.3–217(7), C.R.S.2010, of the Colorado Common Interest Ownership Act.

Plaintiffs contend the trial court erred in granting summary judgment against them on their claim for declaratory judgment. Specifically, they argue it was error for the trial court to rule that their challenge to the Amendments was barred by issue preclusion. They also argue that the district court lacked jurisdiction in 2007 to approve the Amendments. We disagree with these contentions.

We note that, because the parties have not raised or briefed the potential applicability of section 38–33.3–217(2), C.R.S.2010, which bars “action[s] to challenge the validity of an amendment” to declarations when brought more than a year after such an amendment is recorded, we do not address that statute.

A. Issue Preclusion

We review the trial court's summary judgment ruling de novo. West Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo.2002).

Issue preclusion bars the relitigation of an issue when (1) the same issue was actually litigated in a prior proceeding, (2) the party against whom preclusion is asserted was a party to, or in privity with a party to, the prior proceeding, (3) that proceeding resulted in a final judgment on the merits, and (4) the party against whom preclusion is asserted had a full and fair opportunity to litigate the issue in the prior proceeding. Lazy Dog Ranch v. Telluray Ranch Corp., 965 P.2d 1229, 1238 (Colo.1998).

Because plaintiffs challenge only the trial court's application of the second and fourth Lazy Dog factors, and only as applied to Clark, we confine our discussion accordingly.

1. Party or Party in Privity

The trial court found that Clark was a party to the 2007 proceeding because she was a member of Ridgewood and had an opportunity to object to the Amendments when they were initially proposed; she voted in favor of the Amendments; and she had a fair opportunity to litigate the issue in the 2007 district court proceeding, where she received notice and chose not to object to the court's approval of the Amendments. While we disagree that Clark's vote in favor of the Amendments is a valid factor to be considered in determining whether she was a party, we conclude that, because Clark had notice, standing, and an opportunity to be heard, the trial court did not err in ruling that she was a party to the prior proceeding.

Clark contends that under section 38–33.3–217(7), the only mechanism she had to participate in the 2007 proceeding was to file an objection with the court as one of the notified property owners. She further argues that because a district court must approve an amendment petition unless more than thirty-three percent of the property owners object, an objection from Clark alone would have been futile. We conclude that neither of these circumstances precludes Clark from having been a party for purposes of issue preclusion analysis.

Under section 38–33.3–217(7)(d), C.R.S.2010, Clark received notice of the trial court's hearing on the petition, and was entitled to file an objection and appear at the hearing. Regardless of the number of objecting owners, the court would have been required to reject the Amendments if it was demonstrated that the statutory prerequisites under section 38–33.3–217(7) had not been met. See§ 38–33.3–217(7)(e)(I), C.R.S.2010 (court shall grant amendment if it finds that the association has complied with all requirements of § 38–33.3–217(7), and other requirements of subsection (e) are satisfied); see also§ 38–33.3–217(7)(a) (homeowners association's ability to petition for amendment is limited to situations where it has complied with requirements of that subsection).

As a property owner who received notice under the statute, Clark had standing to file, and could have filed, an objection in that earlier proceeding, raising the same defects she now contends should have precluded the district court from approving the Amendments. Under these circumstances, because Clark had notice, standing, and an opportunity to be heard, she was a party to the proceeding in which the court approved the Amendments. See People in Interest of C.P. v. F.P., 34 Colo.App. 54, 58–59, 524 P.2d 316, 319 (Colo.App.1974) (grandmother who alleged that she was appointed children's guardian was treated as a “party” in proceedings for termination of parental rights where she had made a timely application for custody of the children; although she had no preferred status or “right” to custody, she had standing to challenge the court's custody order and was entitled to participate in the proceeding as an “interested party”); see generally§ 19–1–117, C.R.S.2010 (although grandparents are not named parties to a dissolution of marriage or dependency and neglect action, they may have a limited right to appear and be heard in such actions under certain circumstances, and court orders in such actions may have a preclusive effect on their rights); see also Mullane v. Central Hanover Bank & Trust Company, 339 U.S. 306, 313, 318, 70 S.Ct. 652, 94 L.Ed. 865 (1950) (Due Process Clause requires notice and opportunity to be heard “appropriate to the nature of the case” before a person may be deprived of life, liberty or property by adjudication; service by publication was sufficient to satisfy due process as to beneficiaries of common trust fund whose addresses were unknown).

We are not persuaded to the contrary by Clark's citation to S.O.V. v. People in Interest of M.C., 914 P.2d 355, 360 (Colo.1996), and People in Interest of E.E.A. v. J.M., 854 P.2d 1346, 1348 (Colo.App.1992). Both of those cases were contested paternity actions.

In S.O.V., the minor child contended she was not bound by the jury's finding of non-paternity in the earlier paternity action, because she was not a party to that action. Addressing that contention, the supreme court relied on section 13–22–101, C.R.S.2010, which mandates that a person be eighteen years of age or older to be competent to sue unless a guardian ad litem has been appointed to represent him or her. S.O.V., 914 P.2d at 360. The court held that the child was not a party to the paternity action, and thus was not bound by the finding of non-paternity, because she had not been competent to sue in that action in the absence of appointment of a guardian ad litem.

In E.E.A., the respondent moved to set aside a judgment declaring him the father of a minor child. He contended he was not bound by the judgment because the child had not been made a party to the action, and the trial court therefore lacked subject matter jurisdiction over the action. Although a division of this court agreed that the child was not a party to the action, it concluded the respondent could not collaterally attack the judgment. 854 P.2d at 1347.

Clark relies on the E.E.A. division's statement that, “to be a true party, [a] person must be competent to sue and have the right to control the proceedings, to defend, to present and cross-examine witnesses, and to appeal in his own right.” Id. at 1348 (citing People in Interest of R.D.S., 183 Colo. 89, 91, 514 P.2d 772, 773–74 (1973) (paternity statute did not recognize minor child as a party)).

Clark argues that she was not a “true party” as described in E.E.A., and that issue preclusion therefore cannot bar her suit. However, the quoted language of that case has no applicability here. The decisions in S.O.V., R.D.S., and E.E.A....