Ryan Ranch Cmty. Ass'n, Inc. v. Kelley

• Decision Date: 27 March 2014
• Docket Number: Court of Appeals No. 12CA2312,Court of Appeals No. 12CA2316
• Citation: 2014 COA 37
• Parties: Ryan Ranch Community Association, Inc., Plaintiff-Appellee, v. John E. Kelley, Kelly D. Kelley, Rick Zimmerman, and Lora Zimmerman, Defendants-Appellants.
• Court: Colorado Court of Appeals

2014 COA 37

Ryan Ranch Community Association, Inc., Plaintiff-Appellee, v. John E. Kelley, Kelly D. Kelley, Rick Zimmerman, and Lora Zimmerman, Defendants-Appellants.

Court of Appeals No. 12CA2312

Court of Appeals No. 12CA2316

COLORADO COURT OF APPEALS

Announced March 27, 2014

Jefferson County District Court No. 11CV3207

Honorable Margie L. Enquist, Judge

JUDGMENT REVERSED AND CASE

REMANDED WITH DIRECTIONS

Division II

Opinion by JUDGE CASEBOLT

Ashby, J., concurs

Terry, J., dissents

Austin, Pierce & Smith, P.C., Daniel J. Sullivan, Aspen, Colorado; The Witt Law Firm, Jesse Howard Witt, Denver, Colorado, for Plaintiff-Appellees

Kennedy Group, P.C., Charles R. Ledbetter, Denver, Colorado; Gordon & Rees LLP, John R. Mann, Denver, Colorado, for Defendants-Appellants John E. Kelley and Kelly D. Kelley Frie, Arndt & Danborn, P.C., Paul R. Danborn, Arvada, Colorado, for Defendants-Appellants Rick Zimmerman and Lora Zimmerman

¶1 In this action by plaintiff, Ryan Ranch Community Association, Inc., a homeowners association (the HOA), to recover disputed assessments from defendants, John E. and Kelly D. Kelley (the Kelleys), and Rick and Lora Zimmerman (the Zimmermans), defendants appeal the summary judgment in favor of the HOA on its claim that they owed more than $75,000 for monthly assessments and related penalties and fees on their lots. The issue is whether the lots owned by defendants are subject to the servitudes set forth in the Declaration of Covenants, Conditions, and Restrictions (Declaration) of Ryan Ranch, particularly the obligation to pay assessments to the HOA. Contrary to the trial court's ruling, we conclude that the lots are not subject to the Declaration, and therefore reverse the judgment and remand for further proceedings.

I. Background

¶2 The parties agree the following facts are undisputed.

¶3 In 2001, the Ryan Ranch, a large parcel of property located in Jefferson County, began to be developed. At that time, an Official Development Plan (ODP) listed John Kelley and the estate of Robert Ryan as owners, and Ryan Ranch, LLC, an entity owned by Charles Ochsner, as the developer. Ochsner's entity (Ochsner) later purchased most of the land that would become Ryan Ranch Filings 1 and 2.

¶4 As pertinent here, in early 2003, Ochsner verbally agreed to sell Kelley seven lots to be developed, later known as Lots 1-7, Block 13, Ryan Ranch Filing 2 (the Kelley Lots), which are the subject of this action.

¶5 In summer 2003, Kelley learned that Ochsner was going to sell the majority of the Ryan Ranch property to The Ryland Group, Inc. (Ryland), the entity that would eventually create the HOA and record the Declaration. Kelley confirmed with Ochsner and Ryland the prior verbal agreement to purchase the Kelley Lots from Ochsner and received assurances that Ryland was not going to purchase them. Moreover, although Ryland intended to form the HOA for the development of the land, Ryland, Ochsner, and Kelley agreed that the Kelley Lots would not be included in the homeowners association to be formed by Ryland.

¶6 In September 2003, Ryland and Ochsner signed a contract for the sale of parcels in Ryan Ranch to Ryland in two phases, whichspecifically excluded the Kelley Lots, referring to them as "Seller's Lots."

¶7 In October 2003, consistent with their prior agreement, Ochsner and the Kelleys signed a written contract for the Kelleys to purchase the Kelley Lots. The Kelleys understood that those lots would be conveyed after the Ryan Ranch Filing 2 plat map was recorded. Ryland and Kelley also signed an agreement on October 15, 2003, providing that the Kelley Lots would not be subject to the maintenance obligations of the HOA to be formed by Ryland, and that Ryland would record covenants to exclude them from the HOA. Ryland, however, never recorded any such covenants.

¶8 The first phase of the Ochsner-Ryland transaction was completed on October 29, 2003, and the Ryan Ranch Filing 1 plat map was recorded on November 13, 2003. Ochsner, however, did not timely obtain approval of the Filing 2 plat map for recording, and the sale of the Kelley Lots to the Kelleys did not occur at the time specified in that contract.

¶9 After Ryland filed articles of incorporation for the HOA, in March 2005 it recorded the Declaration of Ryan Ranch Community Association, encumbering Filing 1. Specifically, the Declarationstated that Ryland "desires to subject and place upon the real property described on the attached Exhibit A certain covenants, conditions, restrictions . . . obligations, liabilities and other charges." The Declaration further declared "that all of the real property described on the attached Exhibit A shall be held, sold and conveyed subject to the following covenants, conditions, restrictions, . . . obligations, liabilities, charges and other provisions set forth herein." The obligations included the duty to pay assessment fees. Exhibit A did not contain the Kelley lots.

¶10 The Declaration also provided that other property could be annexed into the community pursuant to Article XII, section 5. The Declaration described the property that was "annexable property" as all individual lots within Filing 1 and other land "to the extent it is owned at the time of annexation by Declarant, or if not owned by Declarant[,] with the written consent of the owner thereof," and provided a metes and bounds description of the entirety of Ryan Ranch Filing 2, which included the Kelley Lots.

¶11 Because of delays in obtaining Jefferson County's approval for the Ryan Ranch Filing 2 plat map, Ochsner's sale to Ryland of the land comprising Filing 2 was delayed. In agreements to extendclosing, Ochsner and Ryland agreed that closing would occur after the recording of the Filing 2 plat map, but not later than June 16, 2005.

¶12 In May 2005, with the Filing 2 plat map supposedly nearing approval, the Kelleys and Ochsner reaffirmed their 2003 contract by signing a second contract for the sale of the Kelley Lots, which called for closing on June 10, 2005.

¶13 For various reasons, the Filing 2 plat map was not recorded as expected. On June 15, 2005, Ryland agreed to waive its right to condition closing on the final approval of the Filing 2 plat map so it could proceed with closing. That same day, Ryland recorded a Memorandum of Contract giving notice of its intent to purchase all of Filing 2 except the Kelley Lots. However, Ochsner and Ryland then changed their agreement (apparently for tax reasons) to provide that Ochsner would convey all Filing 2 property, including the Kelley Lots, to Ryland at closing the next day, and Ryland would then sign a deed reconveying the Kelley Lots back to Ochsner.

¶14 Although the Ochsner-Kelley contract called for closing on June 10, those parties agreed to postpone closing. The Kelleys, however, did not know of or agree to the conveyance by Ochsner of the Kelley Lots to Ryland, or the agreement for reconveyance.

¶15 On June 16, 2005, Ochsner completed the sale to Ryland and recorded a deed that included the Kelley Lots. The same day, Ryland signed a deed reconveying the Kelley Lots to Ochsner, but did not record it. On June 22, 2005, Ochsner signed a warranty deed conveying the Kelley Lots to the Kelleys, but did not record it.

¶16 Ryland recorded the Ryan Ranch Filing 2 plat map on November 17, 2005. The plat map included the Kelley Lots. Pursuant to Ryland's arrangement with Ochsner, the reconveyance deed, which conveyed the Kelley Lots from Ryland back to Ochsner, was recorded on December 20, 2005. That same day, Ochsner recorded the deed conveying the Kelley Lots to the Kelleys.

¶17 Ryland never intended the recording of either the Filing 2 plat map or the Ryland-Ochsner reconveyance deed to result in the annexation of the Kelley Lots into the Ryan Ranch community. Instead, Ryland understood and agreed that they would be excluded.

¶18 Although the evidence established that Ryland's consistent procedure to annex property required recording a separateinstrument entitled "Annexation of Additional Land to Declaration of Covenants, Conditions and Restrictions of Ryan Ranch Community Association," no such instrument was recorded to annex the Kelley Lots. Although the Declaration recites a formula to calculate the reallocation of allocated interests upon annexation, none of the recorded instruments, including the Filing 2 plat map and the June 16, 2005, special warranty deed, states any resulting reallocation of the allocated interests or describes the common elements and the limited common elements created by annexation, or designates the unit to which each limited common element is allocated.

¶19 In June 2006, the Kelleys sold one of the Kelley Lots to a contractor who, after constructing a home on the property, sold that lot to the Zimmermans.

¶20 In September 2010, the HOA asserted, for the first time, that the Kelley Lots had been "automatically annexed" to the Ryan Ranch Community because of Ochsner's conveyance to Ryland of all Filing 2 property, including the Kelley Lots, and Ryland's subsequent reconveyance of them to Ochsner. It therefore sought to recover past assessments, penalties, and fees from defendants. ¶21 The HOA's complaint asserted claims for unpaid assessments, breach of contract, unjust enrichment, and foreclosure of liens it had recorded on the Kelley Lots. The Kelleys and the Zimmermans counterclaimed for a declaratory judgment that Ryland did not annex the Kelley Lots in compliance with the Colorado Common Interest Ownership Act (CCIOA), sections 38-33.3-101 to -401, C.R.S. 2013, or the Declaration, and asserted that principles of equitable conversion operated to preclude the transfer of the Kelley lots from Ochsner to Ryland.

¶22 Following discovery, the HOA moved for summary judgment, contending that annexation of the Lots had occurred, rendering them subject to the HOA's assessments. Defendants requested the court to determine as a matter of law that the Declaration did not apply to their...