Evergreen Highlands Association v. West, 73 P.3d 1

SUPREME COURT OF COLORADO

2003

Chapter

27

Title

Common Interest Communities

Page

533

Topic

Adding a new covenant

Quick Notes

The Evergreen Highlands Association operated in a residential subdivision. West, the property owner, owned a lot bordering directly on a common park within the subdivision. When protective covenants were originally filed for the subdivision, lot owners were not required to be members of or pay dues to the association. Nine years after the property owner purchased his lot, at least 75 percent of the lot owners voted to add a new provision to the covenants which required all lot owners to be members of and pay assessments to the association, and permitted the association to impose liens on the property of owners who failed to pay their annual assessment.  West refused to pay dues, he was threatened, so he sued.

Court Holding

o         The amendment at issue in this case was changed according to the modification clause of the original Evergreen Highlands covenants,

o         It is undisputed that Respondent was on actual notice of that clause when he purchased his lot in 1986.

o         The $50 per year, the mandatory assessment imposed on Respondent is neither unreasonable nor burdensome.

o         The modification clause is expansive enough in its scope to allow for the adoption of a new covenant.

o         Valid and binding.

Book Name

Fundamentals of Modern Property Law: Rabin; Kwall, Kwall.  ISBN:  978-1-59941-053-1.

Issue

o         Whether the majority of lot owners may change or modify the existing covenants by the addition of a new covenant?  Yes.

o         Whether, in the absence of a covenant imposing mandatory dues, the homeowners association has the implied power to collect assessments from all lot owners to pay for the maintenance of common areas of the subdivision?  Yes.

Procedure

Trial

o         Amendment was valid and binding.

Appellant

o         Reversed.

The modification clause of Evergreen Highlands' covenants did not allow for the addition of a wholly new covenant.

o         Only allowed for the modification of existing covenants.

Supreme

o          

Facts

Discussion

Reasoning

Rules

Pl - Evergreen Highlands Association

Df - West

Evergreen  Homeowners Assn

o         Evergreen is a homeowners association.

o         Subdivision consists of 63 lots, associated roads, and a 22 acre park used by the residents.

o         Association holds title and maintains the park area.

Robert West

o         Owns one of the lots bordering directly on the park area.

Evergreen Subdivision

o         Created in 1972.

o         Park was conveyed to the homeowners association.

o         Covenants were filed in 1972.

o         Did not require lot owner to

o    Pay dues

o    Or to be members.

Incorporated in 1973

o         The purpose to enforce covenants, paying taxes on the common area, and determining annual fees.

Conveyed Park in 1976

Between 1976 and 1995

o         Modification of the covenants

District Court

o         Amendment was valid and binding.

Court of Appeals

o         Reversed.

The modification clause of Evergreen Highlands' covenants did not allow for the addition of a wholly new covenant.

o         Only allowed for the modification of existing covenants.

Supreme Court

o         The addition of a new covenant falls within the permissible scope of the modification clause of the Evergreen Highlands covenants.

Original Covenants

o         The owners of seventy-five percent of the lots which are subject to these covenants may release all or part of the land so restricted from any one or more of said restrictions, or may change or modify any one or more of said restrictions, by executing and acknowledging an appropriate agreement or agreements in writing for such purposes and filing the same in the Office of the County Clerk and Recorder of Jefferson County, Colorado.

Additional Covenants

(1)   requires all lot owners to be members of the homeowners association,

(2)   assesses mandatory dues on all lot owners in the subdivision to pay for the maintenance of common areas, and

(3)   imposes liens on those lots whose owners fail to pay the mandatory dues

1995 At Least 75% Voted to Approve Article 16

o         Required all lot owners to be members.

o         Pay assessments to the Association.

o         Permitted the Association to impose liens on the property of any owners who failed to pay their assessment.

o         Assessments were set at $50 per year per lot.

West Argument

o         He joined when membership and payment was voluntary.

o         This influenced his decision to purchase.

o         West did not approve the amendment.

o         He refused to pay his assessment.

o         File suit, when association threatened to record a lien against his property.

Section III Analysis

Rule Construe covenants as a whole

o         Courts must construe covenants as a whole based upon their underlying purpose, but will enforce a covenant as written if clear on its face.

 Rule Ambiguities favors unrestricted use

o         Ambiguities will be resolved in favor of the free and unrestricted use of property.

Determining

o         To determine if the covenants scope is broad enough to allow for the addition of a wholly new covenant by the requisite majority of property owners.

Court - expansive enough to allow for the addition of a new covenant

o         We conclude that the terms "change" and "modify," as used in the Evergreen Highlands covenants, are expansive enough to allow for the addition of a new covenant.

Valid and binding

o         We hold that the 1995 amendment to the Evergreen Highlands covenants, approved by the requisite majority of lot owners, is valid and binding on all lot owners in Evergreen Highlands.

o         We therefore reverse the court of appeals

Modification Clause of the Evergreen Highlands Covenants

Association Argues Change is broad enough

o         Broad enough to encompass not only the modification but the addition of new covenants as well.

Court of Appeals Used Lakeland Line of Cases for its decision

Lakeland

o         Similar case. Majority voted to add new covenant creating mandatory assessment, membership and power to impose liens.

o         Language:  to change the said covenants in whole or in part.

Court disallowed adoption

o         It held that "the provision clearly directs itself to changes of existing covenants, not the adding of new covenants which have no relation to existing ones.

Caughlin Ranch

o         Imposed assessment only on residential parcels.

o         Modification clause provided for amendment of rates.

o         6 years later the HOA amended the covenants to levy assessment against commercial parcels.

Court disallowed adoption

o         Holding that the covenant modification clause allowing "amendments" referred only to "amendments of existing covenants as opposed to the creation of new covenants unrelated to the original covenants.

Boyles v. Hausmann

o         Language:  the modification clause allowed the majority of the homeowners to "change [the covenants] in whole or in part."

Court disallowed adoption

o         Although the restriction was appended onto an existing covenant, it was "new and different."

Meresse v. Stelma,

o         Language:  the covenants for a six-lot subdivision allowed a majority of the lot owners "to change or alter them [the covenants] in full or in part."

Court disallowed adoption

o         The court disallowed the amendment, holding that the amendatory language of the covenants "does not place a purchaser or owner on notice that he or she might be burdened, without assent, by road relocation at the majority's whim.

Court of Appeals The Zito Line of Cases

o         The same court issued contrary opinion in 1992 with little explanation

Zito

o         Language:  Granted the HOA the arthority to modify the coventnats.

Sunday Canyon

o         Language:  upon a majority vote of the lot owners, to be "waived, abandoned, terminated, modified, altered or changed."

Windermere Homeowners

o         Language:  authorized to levy the costs of road maintenance against property owners

Courts Holding

o         Courts held that this amendatory language was broad enough to justify the amendment.

Application to the Evergreen Highlands Covenants

West Argues Narrow Interpretation

o         The Evergreen covenant is more akin to the narrow language found in the Lakeland line of cases.

Court Little distinction between the narrow Lakeland and broad Vito cases.

o         Distinguishing these cases from one another based on the breadth of the language used is an artificial, and ultimately unpersuasive, distinction.

Court to change (addition, subtraction, or modification)

o         Webster defines "change" as "to make different."

o         Applying this definition to the language at issue, covenants could certainly be changed or made different either by the addition, subtraction, or modification of a term.

o         Confining the meaning of the term "change" only to the modification of existing covenants, then, seems illogically narrow.

Court Differing factual scenarios and severity of consequences

o         The impact upon the objecting lot owner was generally far more substantial and unforeseeable than the amendment at issue here.

Where courts disallowed the amendment of covenants

Caughlin Ranch

o         Covenants previously imposing assessments only on private lots amended to assess the sole commercial parcel in the subdivision at a substantially higher rate

Boyles

o         Changed setback requirement rendered plaintiff's lot unbuildable;

Meresse

o         Increased access road easement deprived plaintiff of a portion of his private lot.

IN CONTRAST

Zito, Windemere, and Sunday Canyon

o         Allowed the amendment of covenants in order to impose mandatory assessments on lot owners for the purpose of maintaining common elements of a subdivision.

Court The Zito line of cases more applicable to the situation here.

o         This interpretation also avoids the absurd result that could follow from application of the Lakeland reasoning; Evergreen Highlands would be unable to adopt a mandatory-assessment covenant when its original covenants were silent on the subject, yet could adopt such a covenant if its original covenants had expressly prohibited a mandatory-assessment covenant.

Court Holding

o         The amendment at issue in this case was changed according to the modification clause of the original Evergreen Highlands covenants,

o         It is undisputed that Respondent was on actual notice of that clause when he purchased his lot in 1986.

o         The $50 per year, the mandatory assessment imposed on Respondent is neither unreasonable nor burdensome.

o         The modification clause is expansive enough in its scope to allow for the adoption of a new covenant.

o         Valid and binding.

Rules

Class Notes