Not Your Ordinary Collections Case

Below is a trial story from Larry Leff, senior partner here at WLPP:

Not Your Ordinary Collection Case

In the not too distant past our firm took on a collection case for one of our associations that took an interesting twist. We filed a lawsuit in our county court, jurisdiction under $15,000.00, against a homeowner for the non-payment of assessments. The debtor homeowner filed a counterclaim against the Association, asserting claims that the association breached its contract with him – failing to maintain the property – and   that it breached its fiduciary duty to him, among other claims. He also requested exemplary damages. During the course of litigation, the homeowner brought his account current, minus the attorney fees and costs. At trial, the Association was granted an award for its attorney fees and costs, and the court dismissed all the homeowner’s counterclaims.

The homeowner refused to satisfy the judgment, so garnishment proceedings were initiated.   The garnishment was successful and the Association collected the full amount.

Subsequent to the satisfaction, the homeowner decided he wanted to do landscaping work to enhance his property. He put up a retaining wall of concrete, railroad ties, gravel and

landscape timbers. Unfortunately he did not receive permission to do the work, and as important, the work was installed on the common area adjacent to his home. The Association removed the work and restored the area to its past condition.

The Association As a Municipality?

The homeowner, angered over what he considered an intrusion on his rights, retained an attorney who took the homeowner and himself on a quixotic path to the United States Supreme Court.

The attorney filed a lawsuit in the United States District Court for the District of Colorado, and alleged among other things, that the Association violated the Equal Protection and Due Process Clauses of the United States Constitution, and 42 U.S.C. §1983.

The homeowner asserted that because the Association was created and authorized pursuant to the Colorado Common Interest Ownership Act, C.R.S. § 38-33.3–101, et seq., (‘CCIOA”), that it is the functional equivalent of a municipality, and as such, it is a state actor acting under color of state law. Therefore, he claimed that the Association can be found to be liable for constitutional violations of equal protection and due process rights pursuant to the Fourteenth Amendment of the United States Constitution. 

After written discovery and depositions were completed, the law firm filed a motion for summary judgment on behalf of the Association against the homeowner and requested attorney fees based on the frivolous nature of the claims.  

The brief in support of the motion presented two Colorado cases, as well as cases from other jurisdiction, that the countered the homeowner’s federal issues.   The Colorado Court of Appeals had already decided that associations were not governmental entities in rulings  prior to the filing of the homeowner’s lawsuit. In ­Woodmar Improvement Association v. Brenner, 919 P.2d 928 at 932 (Colo. App. 1996), the Colorado Court of Appeals stated:

"[CCIOA] establishes a comprehensive and uniform framework for the operation and creation of homeowner associations. Nevertheless… we are  aware of [no authority] that supports the proposition that enactment of a legislative scheme governing the operation of homeowners’ associations thereby transforms such homeowners’ associations into cities or other governmental entities."

This holding was confirmed by another Colorado Court of Appeals decision, which expressly recognized that, “a unit owner’s association is not converted into a governmental entity by [“CCIOA”]. Pagosa Lakes Property Owners Association v. Caywood,, 973 P.2d 698 (Colo. App. 1996), cert. denied April 1999.

After full briefing of the pleadings, the United States District Court granted the motion for summary judgment and entered orders for the homeowner to pay attorney fees totaling more than $40,000.00. [The homeowner also sued the manager of the Association and her motion to dismiss was granted. The homeowner was ordered to pay her attorney fees as well, which is part of the above amount.] The trial court found that the action on behalf of the homeowner was frivolous, and it was on that basis that the association and its manager were awarded their fees.

A Trip to the United States Supreme Court?

Not content with the trial court ruling, the homeowner proceeded to appeal the matter to the United States Court of Appeals for the Tenth Circuit. The Appellate Court made short shrift of the matter and affirmed the trial court’s granting of the Association’s motion for summary judgment and the manager’s motion to dismiss and its award of  attorney fees to the Association and manager.

The story should have ended here. It was obvious from the rulings in the District court and the Court of Appeals that the homeowner’s claims were completely without merit. Without merit, based on the fact that the attorney presented little or no evidence that the Association “acted like a municipality.”  And even if the attorney was more diligent in ferreting out a factual basis for the claims he asserted, he would not have found any case law that would support the constitutional claims. 

Instead of ending this empty journey the pair filed a Petition for Writ of Certiorari to the United States Supreme Court to see if the Supreme Court would deem the appeal meritorious. While an appeal to the Court of Appeals is a right, the petition to the Supreme Court is discretionary, so discretionary that less than 10% of the filings are rejected out of hand. And the Supreme Court denied the petition prior to the filing of a response.

End of story.

Epilogue

The epilogue is that the attorney fees were never paid. The homeowner eventually lost his home through bankruptcy or a bank foreclosure. He is no longer in the community and while peace and harmony does not reign over the community, it is quieter. After 25 years of litigation in the state and federal courts, I obtained my license to practice in the Supreme Court, applied for prior but received after the Supreme Court denied the Petition. It is still in the mailing tube in which it was sent to me.