Sweetwater Station, LLC v. Pedri

Decision Date29 December 2022
Docket NumberS-22-0113
Parties SWEETWATER STATION, LLC, Appellant (Plaintiff), v. Daniel L. and Linda J. PEDRI; Daniel J. and Rori S. Pedri; Chelsea Egbert; Randy Fuja; Gabe E. Bustos; Cesar F. Diazvazquez; Aaron Wilcox ; Jannel Fossen; Brent and Kayla Lloyd; Jose A. Gonzalez; Allyson Cross; Kerry E. Osborne and Judith A. Osborne, as Trustees of the Kerry E. Osborn and Judith A. Osborne Trust dated December 11, 2007; Rory M. and Brianne M. Crofts; Fred and Susan Von Ahrens; Rick A. and Rhonda F. Greene; Daniel Madsen; James J. and Dorothy S. Schneiders; John E. Hay; Gary W. Elmore Jr., Trustee of the Gary W. Elmore Jr., Living Trust; Dirk L. and Melissa Anderson; Jason and Kara Grenier; Ryan B. Greene; and Sweetwater Station Homeowners Association, Appellees (Defendants).
CourtWyoming Supreme Court

Representing Appellant: Judith A. W. Studer, Schwartz, Bon, Walker & Studer, LLC, Casper, Wyoming.

Representing Appellees: Aaron John Lyttle, Long Reimer Winegar LLP, Cheyenne, Wyoming; Erika Marie Nash, Long Reimer Winegar LLP, Jackson, Wyoming. Argument by Mr. Lyttle.

Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.

FOX, Chief Justice.

[¶1] This is a dispute over the covenants, conditions, and restrictions (CCRs) applicable to the Sweetwater Station Addition, a subdivision in Rock Springs, Wyoming. In 2020, the Sweetwater Station Homeowners Association (HOA) unilaterally recorded an amendment to the CCRs that affected the declarant's rights under them. The declarant, Sweetwater Station, LLC (Sweetwater), sued the HOA and its members. It sought a declaration that the amendment was invalid and also asserted claims for quiet title, slander of title, and interference with a prospective contract.

[¶2] The HOA and its members moved to dismiss the complaint for failure to state a claim. The district court found the amendment to the CCRs was valid and granted the motion to dismiss all claims. We reverse.

ISSUES
[¶3] 1. Did the district court err in dismissing Sweetwater's request for declaratory relief and its related quiet title claim?
2. Did the district court err in dismissing Sweetwater's slander of title claim?
3. Did the district court err in dismissing Sweetwater's contract interference claim?
FACTS

[¶4] In 2005, Sweetwater recorded the Amended and Restated Declaration of Covenants, Conditions and Restrictions for the Sweetwater Station Addition (CCRs). Sweetwater intended to develop the subdivision in two phases, Phase I and Phase II. When the CCRs were recorded, Phase I had been platted. Phase II was planned, but its preliminary plat was not filed, and Phase II was not developed. The CCRs called for the organization of a homeowners’ association, with its membership consisting of every owner of a lot in Phase I. Pursuant to that requirement, Sweetwater organized the Sweetwater Station Homeowners Association (HOA), and its members are the individually named defendants.

[¶5] In 2019, Sweetwater entered into a contract for the sale of the lands encompassed by Phase II of the subdivision. It also sought the Rock Springs City Council's approval of an "application for major changes to the final development plan for the Sweetwater Station Phase II Planned Unit Development." Members of the HOA spoke in opposition to the development plan, objecting to the proposed increase in the density of lots for Phase II. In December 2019, the Rock Springs City Council approved the development plan for Phase II.

[¶6] In 2020, the HOA, by a vote of 81% of its members, adopted the first amendment to the CCRs and recorded it. Sweetwater was not notified of the vote and did not participate. The recorded amendment revised the definition of the term "Lot" to mean the platted lots shown on the plat for Phase I "as well as the final plat for one or more subsequent Phases of the Sweetwater Station Addition." The amendment also revised voting eligibility under the CCRs by limiting the votes of any given lot owner to three votes, regardless of the number of lots owned.1 Finally, the amendment restricted the declarant's right to vote by adding the following language to each of the voting provisions:

[A]fter the filing of a final plat for a subsequent Phase of the Sweetwater Station Addition lying within the boundaries of the Property, including Sweetwater Station Addition Phase II and any other Phases, no votes shall be attributed to a Lot within such subsequent Phase prior to the conveyance or assignment of the Lot to an Owner who is not the Declarant.

[¶7] When the HOA refused to withdraw the recorded amendment or limit its application to Phase I properties, Sweetwater sued the HOA and its individual members. It alleged that it had been unable to close on its contract to sell the Phase II property because the amendment to the CCRs clouded its title, and it requested the amendment be declared invalid and its recording void. It also sought to quiet title to the lands encompassed in Phase II with a recorded order declaring the amendment to the CCRs invalid, and it asserted claims for slander of title and interference with a prospective contract.

[¶8] The HOA and its members moved to dismiss Sweetwater's complaint for failure to state a claim. They argued the amendment was adopted in compliance with the CCRs and Sweetwater therefore had no claim for declaratory relief or to quiet title. They further argued that even if the amendment was not valid, Sweetwater had no claim for slander of title because the recorded amendment contained no false statements. Last, they argued that Sweetwater did not have a claim for interference with a prospective contract because it did not and could not allege that the HOA or its members acted in bad faith in recording the amendment to the CCRs or that the amendment contained a false statement.

[¶9] The district court granted the motion to dismiss. It concluded that under the plain language of the CCRs, the amendment to the CCRs was valid. It also agreed that because the recorded amendment contained no false statements, Sweetwater could not maintain a claim for slander of title. It concluded that Sweetwater could not maintain a claim for interference with a prospective contract because the HOA and its members acted in good faith to protect their own economic interests, which it ruled precluded an interference claim. It further reasoned that because the recorded amendment contained no false statements, it could not provide a basis for an interference claim. Sweetwater timely appealed.

STANDARD OF REVIEW

[¶10] The CCRs were attached as an exhibit to Sweetwater's complaint. In support of their motion to dismiss, the HOA and its members asked the district court to take judicial notice of the recorded plat for Phase I, the minutes from a Rock Springs City Council meeting, and the recorded amendment to the CCRs. Sweetwater also asked the court to take judicial notice of the minutes from a separate Rock Springs City Council meeting. The district court did not rule on either request, but its order referenced information from the materials.

[¶11] Because the court considered materials outside the complaint in ruling on its motion to dismiss, it should have converted the motion to one for summary judgment. See W.R.C.P. 12(d) ("If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56."). Nonetheless, the questions presented for our review are purely questions of law that may be answered based on the allegations in the complaint. We will therefore review the court's ruling as a Rule 12(b)(6) dismissal. See James v. James , 2021 WY 96, ¶ 24, 493 P.3d 1258, 1265 (Wyo. 2021) (summary judgment motion is functional equivalent of a Rule 12(b)(6) motion if it is "based solely on a question of law which is set out exclusively in the pleadings") (quoting Motzko Co. USA, LLC v. A & D Oilfield Dozers, Inc. , 2014 WY 5, ¶ 16, 316 P.3d 1177, 1181 (Wyo. 2014) ).

[¶12] Our review of a W.R.C.P. 12(b)(6) dismissal is de novo.2

We review orders granting a motion to dismiss under Rule 12(b)(6) de novo. Craft v. State ex rel. Wyo. Dep't of Health , 2020 WY 70, ¶ 9, 465 P.3d 395, 399 (Wyo. 2020). "We employ the same standards and examine the same materials as the district court: we accept the facts alleged in the complaint as true and view them in the light most favorable to the non-moving party." Id. (quoting Moose Hollow Holdings, LLC v. Teton Cty. Bd. of Cty. Comm'rs , 2017 WY 74, ¶ 20, 396 P.3d 1027, 1033 (Wyo. 2017) ). Dismissal is appropriate where it is certain from the face of the complaint that the plaintiff cannot assert any fact that would entitle him to relief. Craft , 2020 WY 70, ¶ 9, 465 P.3d at 399 (citing Dowlin v. Dowlin , 2007 WY 114, ¶ 6, 162 P.3d 1202, 1204 (Wyo. 2007) ; W.R.C.P. 12(b)(6) ).

Moses Inc. v. Moses , 2022 WY 57, ¶ 8, 509 P.3d 345, 349 (Wyo. 2022) (quoting Dockter v. Lozano , 2020 WY 119, ¶ 6, 472 P.3d 362, 364 (Wyo. 2020) ).

I. The provisions of the CCRs governing their amendment are ambiguous, and the district court therefore erred in dismissing Sweetwater's claims for declaratory relief and quiet title.

[¶13] "Covenants are contractual in nature and we therefore interpret them as we would a contract." Winney v. Hoback Ranches Prop. Owners Improvement & Serv. Dist. , 2021 WY 128, ¶ 46, 499 P.3d 254, 266 (Wyo. 2021) (quoting Gumpel v. Copperleaf Homeowners Ass'n, Inc. , 2017 WY 46, ¶ 29, 393 P.3d 1279, 1290 (Wyo. 2017) ). "Our goal is ‘to determine and effectuate the intention of the parties, especially the grantor or declarant.’ " Reichert v. Daugherty , 2018 WY 103, ¶ 15, 425 P.3d 990, 995 (Wyo. 2018) (quoting Wimer v. Cook , 2016 WY 29, ¶ 22, 369 P.3d 210, 218 (Wyo. 2016) ).

[¶14] "In the absence of an ambiguity, we adhere to the covenant's plain and ordinary meaning without reference to attendant facts and circumstances or extrinsic evidence.’ " Winney , 2021 WY 128, ¶ 48, 499...

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    ...WY 128, ¶ 46, 499 P.3d at 266). "Our goal is 'to determine and effectuate the intention of the parties, especially the grantor or declarant.'" Id. (quoting Reichert v. Daugherty, 2018 WY 103, 15, 425 P.3d 990, 995 (Wyo. 2018)). "The words used in the covenant are afforded the plain meaning ......

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