Pulte Home Corp. v. Countryside Cmty. Ass'n, Inc.

• Decision Date: 26 September 2016
• Docket Number: Supreme Court Case No. 14SC77
• Citation: 2016 CO 64,382 P.3d 821
• Parties: PULTE HOME CORPORATION, INC., a Michigan corporation, Petitioner/Cross–Respondent, v. COUNTRYSIDE COMMUNITY ASSOCIATION, INC., a Colorado nonprofit corporation, Respondent/Cross–Petitioner.
• Court: Colorado Supreme Court

382 P.3d 821

2016 CO 64

PULTE HOME CORPORATION, INC., a Michigan corporation, Petitioner/Cross–Respondent,

v.COUNTRYSIDE COMMUNITY ASSOCIATION, INC., a Colorado nonprofit corporation, Respondent/Cross–Petitioner.

Supreme Court Case No. 14SC77

Supreme Court of Colorado.

September 26, 2016

Rehearing Denied October 24, 2016

Attorneys for Petitioner/Cross–Respondent: Fox Rothschild LLP, Christopher J. Dawes, Christopher T. Groen, Risa B. Brown, Dominic H. Rivers, Denver, Colorado

Attorneys for Respondent/Cross–Petitioner: The Witt Law Firm, Jesse Howard Witt, Boulder, Colorado, Miller Kabler P.C., Milo D. Miller, Denver, Colorado

Attorneys for Amicus Curiae The Community Associations Institute: Jerry Orten, Christopher M. Drake, Denver, Colorado

Attorneys for Amicus Curiae The Home Builders Association of Metropolitan Denver: Dufford & Brown, P.C., Randall J. Feuerstein, Christian D. Hammond, Denver, Colorado

En banc

JUSTICE HOOD delivered the Opinion of the Court.

¶1 In this case, we address when and how common interest communities are formed under the Colorado Common Interest Ownership Act (“CCIOA” or “the Act”), §§ 38–33.3–101 to –402, C.R.S. (2016).

¶2 The Countryside Townhome Subdivision is a residential common interest community located in Fountain, Colorado. In 2011, the homeowners association for the Countryside Subdivision filed a complaint against the Countryside Subdivision's developer seeking over $400,000 in past-due assessments for maintenance of the developer's unsold properties and related common elements. The developer's liability turns on when its properties became a part of the Countryside Subdivision under the community's governing instruments and CCIOA.

¶3 In a split decision, the court of appeals determined that the community was formed when the document containing the community's covenants and the plat for the community were recorded, and that the developer's properties were brought into the community at that time. As a result, the court concluded that the developer was liable for the assessments under both the community's covenants and CCIOA.

¶4 We disagree. On the facts of this case, we conclude that recordation of the covenants and plat did not create a common interest community. Rather, the community was created when the developer first subjected property to the covenants, and the remaining property could not become part of the community until the developer added it in accordance with certain prescribed steps. Because the developer's property could not become part of the community until it was added, and the developer was not otherwise liable for the assessments, we reverse the court of appeals' judgment deeming the developer contractually and statutorily liable to the homeowners association.

¶5 The court of appeals also held that, because the covenants fully allocate responsibility for assessment costs, the association has no remedy for unjust enrichment. We agree and therefore affirm that aspect of the court's decision.

I. Facts and Procedural History

¶6 Pulte Home Corporation, Inc. (“Pulte”) began creating the Countryside Subdivision as a statutory common interest community in March 2004, when it recorded the Declaration of Covenants, Conditions and Restrictions of Countryside Community Association (“CCR”). Pulte is the “Declarant” of the CCR. At that time, Pulte did not own any of the land that would eventually constitute the community, but it did have an option to purchase that land.

¶7 The CCR defines the “Community” as “real property described on Exhibit A or which becomes subject to this [CCR],” and encumbers “the real property described on ... Exhibit A” with various “covenants, conditions, restrictions, [and] obligations,” including a duty to pay assessments levied by the homeowners association, Countryside Community Association, Inc. (“the Association”). Exhibit A, however, lists no real property.

¶8 Exhibit D, on the other hand, contains a metes and bounds description of “Annexable Property,” and article XII, section 5 of the CCR—entitled “Annexation”—outlines procedures by which the property described in Exhibit D could be subjected to the CCR's terms and incorporated into the community. Exhibit D further provides that, upon recording of a plat, the annexable property “shall be known as ... Lots 1 through 186 inclusive, Tracts B and C, Countryside Townhome Subdivision, Filing No. 1, County of El Paso, State of Colorado.”

¶9 Tracts B and C are identified in Exhibit B as common elements. The CCR defines common elements as “any real property ... owned or leased by the Association, other than a Lot ..., for the benefit, use or enjoyment of the Owners.” Common elements generally include roads, paths, and common spaces, such as a clubhouse. The 186 lots represent the maximum number of lots that may be included in the community, but the CCR makes clear that the actual number of lots included might be less.

¶10 In addition, the CCR states that Pulte, as the declarant, would pay all “Common Expenses” until the Association began annual assessments. The CCR defines common expenses as “expenditures made or liabilities incurred by or on behalf of the Association, together with any allocations to reserves.” Once the Association made its first annual assessment, the Association would assume the responsibility to pay for common expenses and maintenance costs, but it could bill lot owners for their respective shares of those expenditures.

¶11 When Pulte created the Association, it appointed its own employees to serve as the Association's board of directors. Pulte's employees filled the board until June 2008, when homeowners replaced them.

¶12 In April 2004, one month after recording the CCR, the plat for the Countryside Subdivision, titled “Countryside Townhome Subdivision, Filing No. 1” (“the Plat”), was recorded. The Plat designated and numbered 186 lots, and identified Tracts B and C as common areas. Together, the 186 lots and common areas comprise the same property as the annexable property described in Exhibit D.

¶13 In four separate transactions spanning from June 2004 to March 2006, Pulte exercised its option to purchase the land described in Exhibit D. In August 2004, Pulte conveyed Tracts B and C—the common elements—to the Association but retained easements over this land to maintain a sales office and access to other properties. Shortly thereafter, the Association began paying for services related to the common elements, such as irrigation, grounds maintenance, and snow removal. From 2005 to 2011, Pulte gradually constructed homes on the 186 lots and deeded the lots to various buyers. During this six-year period, the Association paid for maintenance of the structures built on the lots.

¶14 As of December 2010, Pulte still owned two of the 186 lots. The Association invoiced Pulte for its share of maintenance costs for these two properties, which amounted to $200. Pulte refused to pay.

¶15 In June 2011, the Association filed a complaint against Pulte seeking payment for this invoice and for Pulte's past-due share of assessments covering maintenance costs that the Association paid while Pulte still owned and was developing the lots described in Exhibit D. The Association alleged that Pulte owed over $400,000. The Association pleaded three claims: (1) breach of contract, arguing that the CCR required Pulte to pay assessments; (2) unjust enrichment, on the ground that Pulte would be unjustly enriched if allowed to retain the benefit of the Association's expenditures without cost; and (3) breach of fiduciary duty, alleging that Pulte's employees had misappropriated funds while serving as the Association's board of directors.

¶16 After discovery, Pulte moved for summary judgment on all claims. Pulte argued that its properties were not annexed into the Countryside Subdivision until Pulte deeded them to third-party homebuyers and that, accordingly, the properties were not subject to assessments under the CCR while Pulte owned them. In opposition, the Association maintained that Pulte's properties were a part of the community and that the CCR required Pulte to pay assessments. The Association further asserted that, even if the CCR did not impose this payment obligation, CCIOA did.

¶17 After hearing arguments, the trial court granted Pulte's motion in full. In the process, the trial court considered the Association's CCIOA-violation claim—despite Pulte's objection that the claim was inadequately pleaded—but ultimately rejected it. The Association appealed on all grounds.

¶18 In a divided decision, the court of appeals affirmed in part and reversed in part. Countryside Cmty. Ass'n, Inc. v. Pulte Home Corp., Inc., No. 12CA1568, slip op. at 1, 2013 WL 6511687 (Colo. App. Dec. 12, 2013). The court first determined that, under the CCR and CCIOA, recordation of the CCR and the Plat created the common interest community and that all of Pulte's property was included in the community at that time, not when Pulte deeded it piecemeal to third parties. See id. at 8–15. Based on this decision, the court further concluded that Pulte was liable for assessments under the CCR and the Act. Id. at 15–18. It therefore reversed the trial court's rulings on the breach of contract claim and the alleged statutory violation.

¶19 The court also reversed the grant of summary judgment on the breach of fiduciary duty claim, finding, under the doctrine of respondeat superior, that Pulte could be liable for its employees' breaches of their fiduciary duties. Id. at 20–23. However, the court affirmed the grant of summary judgment on the unjust enrichment claim, finding that the CCR covered the parties' responsibilities for maintenance costs. Id. at 23–25.

¶20 Judge Carparelli concurred in part and dissented in part. Although he agreed with the majority's resolution of the fiduciary duty and unjust enrichment claims, see id. at 27(Carparelli, J., concurring in part and dissenting in part), he thought neither the CCR nor CCIOA required Pulte to pay...