Kroesen v. Shenandoah Homeowners Ass'n, Inc.

461 P.3d 672

Ronald J. KROESEN and Patricia L. Kroesen, Plaintiffs-Appellees and Cross-Appellants,

v.SHENANDOAH HOMEOWNERS ASSOCIATION, INC., a Colorado nonprofit corporation, and Ronald Burris, in his official capacity as Director of the Shenandoah Homeowners Association, Inc., Defendants-Appellants and Cross-Appellees.

Court of Appeals No. 18CA1592

Colorado Court of Appeals, Division VII.

Announced February 20, 2020

Goldman, Nicholson & Mack, P.C., Lindsey K.S. Nicholson, Josh W. Mack, Durango, Colorado, for Plaintiffs-Appellees and Cross-Appellants

Campbell, Wagner, Frazier & Dvorchak, LLC, Colin C. Campbell, Greenwood Village, Colorado, for Defendants-Appellants and Cross-Appellees

Opinion by JUDGE LIPINSKY

¶1 Plaintiffs, Ronald J. and Patricia L. Kroesen, owners of land in the Shenandoah Highlands Subdivision (Highlands Subdivision) in La Plata County, seek to access their property over two roads in the adjoining Shenandoah Subdivision. The Kroesens argue they have an easement over the roads based on language in plats that the developer of both subdivisions recorded as amendments to each subdivision’s declarations.

¶2 Defendants, Shenandoah Homeowners Association, Inc. and Ronald Burris, the president of the Association (jointly, Shenandoah Association), respond that the developer failed to comply with the statutory requirements for creating an easement in a common interest community. Shenandoah Association specifically argues that the developer failed to provide future owners of lots in Shenandoah Subdivision the required record notice of the easement.

¶3 The Kroesens also assert an intentional interference with contract claim against Shenandoah Association. They allege that Shenandoah Association’s refusal to recognize the easement caused the Kroesens to lose a contract to sell their property to a third party. The Kroesens seek lost profits and other damages on that claim.

¶4 Following a bench trial, the district court entered judgment in favor of the Kroesens on their claims for declaratory judgment and intentional interference with contract. The court found that the developer complied with the requirements for creating an easement and that Shenandoah Association intentionally interfered with the Kroesens’ contract to sell their property. It awarded the Kroesens damages for intentional interference with contract, including the cost of holding and maintaining the property from the date of the interference until two years following the judgment. But the court did not award the Kroesens lost profits.

¶5 Shenandoah Association appeals the judgment entered in favor of the Kroesens.

The Kroesens appeal the district court’s denial of their request for lost profits.

¶6 The appeals raise an issue of first impression in this state — the amount of specificity necessary in a recorded document to establish an enforceable easement within a common interest community.

¶7 We affirm.

I. The Two Subdivisions

¶8 In 1984, Shenandoah Limited (the developer) began developing a 993-acre parcel (original property) in La Plata County. As relevant to this appeal, the developer divided the original property into two subdivisions — Shenandoah Subdivision, created in 1989, and Highlands Subdivision, created in 1994 — by recording declarations for each. (A "declaration" is a "recorded instrument[ ] ... that create[s] a common interest community ... including ... plats and maps." § 38-33.3-103(13), C.R.S. 2019. A "plat" is the "part of a declaration that ... depicts all or any portion of a common interest community in two dimensions ...." § 38-33.3-103(22.5).) The developer established a homeowner’s association for each subdivision.

¶9 The developer also recorded plats that depicted the two roads at issue, known as Colonial Drive (or Colonial Road) and Blue Ridge Road. Portions of the roads follow the boundary between the two subdivisions. The plats also created an easement (the Subject Easement) that arguably allowed the owners of lots in Highlands Subdivision to access their properties over the roads.

¶10 The pre-1994 plats amending the declaration for Shenandoah Subdivision referenced the Subject Easement, albeit in general terms, as they pre-dated the creation of Highlands Subdivision. Those plats described the Subject Easement as:

• an access road easement "dedicated to [the developer and] the Shenandoah Homeowners Association";

• consisting of "General Common Elements ... for the use and benefit of [the developer], the owners of the lots within [Shenandoah Subdivision and] adjacent subdivisions";

• "for the use of [the developer]" and the owners of each lot created by the plat for the original property; and

• dedicated to the developer and "the present and future owners of [Shenandoah Subdivision]."

None of the pre-1994 plats described "adjacent subdivisions" with greater specificity.

¶11 After the developer created Highlands Subdivision, the developer and the then owner of the Kroesens’ lot (the former owner) each independently recorded a plat relevant to our analysis. The developer recorded a plat entitled "Shenandoah Highlands Subdivision No. 2 Project 95-88" (Highlands Plat) that created new tracts, including Tracts A and B, within Highlands Subdivision; asserted that the developer owned Colonial Drive and Blue Ridge Road; and expressly stated that "[n]ormal access for Tract A will be via Blue Ridge and Colonial Drive to County Road 141."

¶12 The former owner recorded a plat consolidating Tracts A and B into Tract AB (Tract AB Plat). Residential construction on Tract AB was limited to the portion that was formerly Tract A.

¶13 According to the Highlands and Tract AB Plats, not only is Tract AB adjacent to Shenandoah Subdivision, but it abuts Blue Ridge Road:

Blue Ridge Road merges into Colonial Drive north of Tract AB.

¶14 Before the former owner consolidated Tracts A and B, the Board of Directors of Shenandoah Homeowners Association approved an easement over Blue Ridge Road to benefit Tract A. (The record does not specify whether the Board approved a similar easement over Colonial Drive.) Although the Board’s action appears in its meeting minutes, no recorded document reflects the Board’s approval of the Subject Easement. The members of Shenandoah Homeowners Association did not ratify the Board’s approval of the Subject Easement or otherwise authorize an easement to benefit Tract AB.

¶15 In 1999, the Kroesens purchased Tract AB from the former owner for $160,000. In 2015, the Kroesens signed a contract to sell Tract AB for $188,500. Before the closing on the sale, however, Burris, in his capacity as president of the Board of Directors of Shenandoah Homeowners Association, told the Kroesens’ real estate agent that the owners of Tract AB had no right to use either road.

¶16 The prospective purchaser refused to close on the purchase of the Kroesens’ property after learning that the owners of Tract AB may not have an easement over the roads. The Kroesens claim that, after the sale fell through, they were unable to find a purchaser willing to buy Tract AB without access to the roads.

II. Procedural History

¶17 The Kroesens sued to obtain, among other relief, (1) a declaratory judgment that the owners of Tract AB have an easement over the roads; (2) a permanent injunction enjoining Shenandoah Association from interfering with their access to Tract AB over the roads; (3) an award of their expenses associated with the failed sale of their property and lost profits for Shenandoah Association’s intentional interference with their purchase contract; and (4) damages for slander of title arising from Shenandoah Association’s assertion, through Burris, that the owners of Tract AB did not have an easement over the roads.

¶18 The district court granted summary judgment to the Kroesens on their declaratory judgment claim. (The parties expressly agreed there were no disputed issues of material fact.) In a well-reasoned order, the court ruled that the plats for Shenandoah Subdivision were sufficient to establish an easement over the roads benefitting Tract AB. However, the court’s order did not expressly resolve whether the Kroesens were entitled to a permanent injunction.

¶19 The court resolved the Kroesens’ claims for intentional interference with contract and slander of title following a bench trial. The court awarded the Kroesens damages on the intentional interference with contract claim to compensate them for their inability to sell the property. The damages took the form of approximately five years of maintenance expenses. The court declined to award lost profits, however, because it concluded that the Kroesens would eventually be able to sell the property at or above the $188,500 purchase price specified in the terminated contract.

¶20 The court resolved the slander of title claim in favor of Shenandoah Association because the Kroesens had not proved the element of malice.

¶21 Following the bench trial, Shenandoah Association appealed the district court’s declaratory judgment holding, and the Kroesens cross-appealed the court’s denial of their request for lost profits.

¶22 After discovering that the district court may not have resolved the Kroesens’ second claim, thus depriving this court of jurisdiction, see Richmond Am. Homes of Colo., Inc. v. Steel Floors, LLC , 187 P.3d 1199, 1202 (Colo. App. 2008) (noting that as a general rule, "an entire case must be resolved by a final judgment before an appeal is brought"), a division of this court remanded the case to the district court. The division instructed the district court to ensure that a final judgment entered on all of the Kroesens’ claims. The district court then entered an order dismissing the Kroesens’ second claim and noting that a final judgment had been entered on all of their claims.

III. The District Court Correctly Determined that Tract AB Was the Beneficiary of an Easement to Use the Roads

¶23 Shenandoah Association’s appeal raises three principal issues.

¶24 First, we consider and reject the...