Woodward v. Board of Directors of Taco

• Decision Date: 08 February 2007
• Citation: Woodward v. Board of Directors of Taco, 155 P.3d 621 (Colo. App. 2007)
• Docket Number: 05CA0457
• Parties: David A. WOODWARD and Mary Ann Woodward, Plaintiffs-Appellants, v. BOARD OF DIRECTORS OF TAMARRON ASSOCIATION OF CONDOMINIUM OWNERS, INC., Edward J. Louden, Jr., and Louise Louden, Defendants-Appellees.
• Court: Colorado Court of Appeals

155 P.3d 621

David A. WOODWARD and Mary Ann Woodward, Plaintiffs-Appellants, v. BOARD OF DIRECTORS OF TAMARRON ASSOCIATION OF CONDOMINIUM OWNERS, INC., Edward J. Louden, Jr., and Louise Louden, Defendants-Appellees.

No. 05CA0457.

Colorado Court of Appeals, Div. II.

February 8, 2007.

Rasure & Associates, C. William Rasure, Jr., Durango, Colorado, for Plaintiffs-Appellants.

Casey & Seibert, LLC, John C. Seibert, Durango, Colorado, for Defendant-Appellee Board of Directors of Tamarron Association of Condominium Owners, Inc.

McLachlan & Whitley, LLC, Michael E. McLachlan, Marla C. Underell, Durango, Colorado, for Defendants-Appellees Edward J. Louden, Jr. and Louise Louden.

Opinion by Judge LOEB.

Plaintiffs, David A. Woodward and Mary Ann Woodward, appeal the summary judgment in favor of defendants, the Board of Directors of the Tamarron Association of Condominium Owners, Inc. (TACO), Edward J. Louden, Jr., and Louise Louden. The Woodwards also appeal the orders awarding defendants attorney fees. We reverse and remand for further proceedings.

The Tamarron condominium complex is subject to recorded covenants set forth in the Amended Consolidated Declaration of Condominiums and Covenants, Conditions and Restrictions for the Condominiums at Tamarron. TACO is a nonprofit corporation that operates the condominium complex and enforces the covenants, including the approval of all architectural modifications to the interior and exterior of each condominium unit.

In February 2002, pursuant to the covenants, the Loudens submitted an application to TACO for approval of modifications to their condominium unit, # 853. The modifications were to open the blind wall that was adjacent to and in front of unit # 852, the unit owned by the Woodwards, by opening the side end of their deck and installing windows. The two units were offset so that the windows and deck opening would face the Woodwards' condominium at an angle.

On February 11, 2002, TACO approved the proposed modifications to the Loudens' condominium unit. It is undisputed that TACO's expressed basis for this approval was that, under TACO's policy, substantially similar modifications to other units in the complex had been approved in the past.

The Loudens proceeded to complete the modifications to the exterior of their condominium. After the Woodwards became aware of the modifications to the Loudens' unit, they wrote a letter to the Board. When they were unable to resolve their dispute with the Board and the Loudens, the Woodwards filed this action in district court, seeking damages and equitable relief. As pertinent to this appeal, the Woodwards' amended complaint alleged claims for breach of the TACO covenants and fiduciary duty against the Board, and a claim for nuisance against the Loudens and the Board. Specifically, they alleged that, as a result of the modifications, they had suffered an increase in light and noise entering into their unit and a loss of privacy.

The Board filed a motion to dismiss and for summary judgment, requesting that all the Woodwards' claims for relief be dismissed. The Loudens joined in that motion.

The district court granted defendants' motion for summary judgment and dismissed the Woodwards' complaint. Subsequently, the Board and the Loudens moved for an award of attorney fees and costs, and the district court granted the motions.

The Woodwards appeal the summary judgment as to their claims alleging breach of covenants and fiduciary duty against the Board, and as to the nuisance claims against all defendants. They also appeal the orders granting defendants' attorney fees.

I. Standard of Review

Summary judgment is appropriate when the pleadings and supporting documentation demonstrate that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. We review the grant of a summary judgment motion de novo. W. Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo.2002).

The moving party has the initial burden to show that there is no genuine issue of material fact. Greenwood Trust Co. v. Conley, 938 P.2d 1141, 1149 (Colo.1997). This burden has two distinct components: an initial burden of production on the moving party, which burden when satisfied then shifts to the nonmoving party, and an ultimate burden of persuasion, which always remains on the moving party. Cont'l Air Lines, Inc. v. Keenan, 731 P.2d 708, 712 (Colo.1987). When a party moves for summary judgment on an issue upon which the party would not bear the burden of persuasion at trial, the moving party's initial burden of production may be satisfied by showing an absence of evidence in the record to support the nonmoving party's case. Casey v. Christie Lodge Owners Ass'n, 923 P.2d 365, 366 (Colo. App.1996). "[O]nce the moving party has met its initial burden of production, the burden shifts to the nonmoving party to establish that there is a triable issue of fact." Greenwood Trust Co. v. Conley, supra, 938 P.2d at 1149. Failure to meet that burden will result in summary judgment in favor of the moving party. Casey v. Christie Lodge Owners Ass'n, supra.

The nonmoving party is entitled to any favorable inferences that may reasonably be drawn from the facts, and all doubts must be resolved against the moving party. Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223, 225-26 (Colo.2001). Even if it is extremely doubtful that a genuine issue of fact exists, summary judgment is not appropriate. Greenwood Trust Co. v. Conley, supra. When neither party disputes the competence or admissibility of evidence offered in support of and in opposition to the summary judgment motion, we may consider all this record evidence in our analysis. Greenwood Trust Co. v. Conley, supra. When the record is not adequate to permit a conclusion that no material fact dispute exists, the entry of summary judgment is inappropriate. Kral v. Am. Hardware Mut. Ins. Co., 784 P.2d 759, 766 (Colo.1989). "[I]n considering the motion for summary judgment, the trial court must accept the plaintiffs' pleadings as true unless the depositions and admissions on file, together with the affidavits, clearly disclose there is no genuine issue as to any material fact, with any doubts being resolved in plaintiffs' favor." Norton v. Leadville Corp., 43 Colo.App. 527, 530, 610 P.2d 1348, 1350 (1979). Moreover, while a party against whom a summary judgment is sought may take some risk by not submitting controverting affidavits or other evidence, nevertheless, if the moving party's proof does not itself demonstrate the lack of a genuine factual issue, summary judgment is inappropriate. Wolther v. Schaarschmidt, 738 P.2d 25, 28 (Colo.App.1986).

II. Breach of Covenants and Fiduciary Duty

The Woodwards contend that the district court erred in granting summary judgment on their claims for breach of covenants and fiduciary duty against the Board. We agree.

A homeowners' association must use its authority to enforce protective covenants in good faith and in a reasonable manner. Wilson v. Goldman, 699 P.2d 420, 424 (Colo.App.1985). A homeowners' association has a fiduciary duty to homeowners to enforce restrictive covenants. "This duty has been imposed in recognition of the power held by homeowner[s'] associations, the quasi-governmental functions they serve, and the impact on value and enjoyment that can result from the failure to enforce covenants." Colo. Homes, Ltd. v. Loerch-Wilson, 43 P.3d 718, 722 (Colo.App.2001); see Woodmoor Imp. Ass'n v. Brenner, 919 P.2d 928, 933 (Colo.App.1996)(directors of homeowners' association had fiduciary duty to deal with utmost good faith, and duty to deal impartially with beneficiaries).

A decision by a homeowners' association, for example, through its architectural control committee, approving or disapproving plans "must be reasonable and made in good faith and must not be arbitrary or capricious." Rhue v. Cheyenne Homes, Inc., 168 Colo. 6, 9, 449 P.2d 361, 363 (1969); see Norris v. Phillips, 626 P.2d 717, 719 (Colo. App.1980); Rywalt v. Writer Corp., 34 Colo. App. 334, 526 P.2d 316 (1974). The parties agree that the legal test applicable here is whether the Board, in approving the Loudens' modifications, acted reasonably and in good faith and without being arbitrary and capricious.

The determination of whether the exercise of power by a homeowners' association has been reasonable or arbitrary is a factual question. See La Vielle v. Seay, 412 S.W.2d 587, 593 (Ky.1966). Moreover, issues of reasonableness and good faith are particularly unsuitable for summary judgment. See Wheeler v. Eagle County, 666 P.2d 559 (Colo. 1983); Montoya v. Bebensee, 761 P.2d 285 (Colo.App.1988).

The Woodwards contend that the Board breached the TACO covenants and its fiduciary duties in three respects: (1) by allowing the Loudens' modifications to be made without prior written approval of the Board; (2) by not giving the Woodwards prior notice of the Loudens' request for approval of the modifications; and (3) by allowing the Loudens to install a deck opening and windows different both from the design submitted in the plans and from other modifications previously approved by the Board. We disagree as to the first two contentions but agree that summary judgment was inappropriate as to the third.

A. Prior Written Approval

The Woodwards first contend that the Board breached the covenants and its fiduciary duties by failing to issue prior written approval of the Loudens' plans before the modifications were made.

Article 11.6 of the covenants provides, in pertinent part:

Additions, Alterations or Decorations. No exterior additions, alterations or decorations to any Building, walls or other structures may be made without prior written approval of the Board.

The bylaws of TACO provide in Article 4:

All of the powers and duties of the Association existing under the Condominium Ownership Act, the several Declarations of Condominium, Articles of...