Opinion
Case No: 16-CV-290-MLC
04-24-2017
KATHLEEN SULLIVAN, Plaintiff, v. EAGLESTONE RANCH HOMEOWNERS ASSOCIATION, CARLA ASH, TROY BAKER, MICHELLE HALSEIDE, DONALD STEFFANUS, WILLIAM GARLAND, THOMAS BOYLE III, ANNE VAUGHN, JAY NANCE, and LONNIE WRIGHT, Defendants.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
This matter is before the Court on Defendants' Motion to Dismiss. The Court has reviewed the motion, response, heard oral arguments, and is fully informed in the premises. For the following reasons, the Court grants Defendants' Motion to Dismiss.
BACKGROUND
This matter is before the Court on a Motion to Dismiss, as such, the Court takes the facts set out in Plaintiffs' Complaint as true and recites them here. --------
The Plaintiff purchased a tract of land in the Eaglestone Ranch development in Sheridan County, Wyoming in February of 2015. There were no structures on the tract when purchased by the Plaintiff. A "Declaration of Protective Covenants for Eaglestone Ranch" was file in the Sheridan County land records in 2004. ("2004 CC&R"). The 2004 CC&R provided for a committee to handle the administration of the Eaglestone Home Owners Association. ("HOA") In September of 2007 the HOA adopted rules which assigned duties to the Homeowners' Association Committee ("Committee"). The individually named Defendants are past or present members of that Committee.
The 2004 CC&R contained the following provision:
3.15 Hay Storage. Hay may not be stored on any Tract, except in a barn or storage building.
The Plaintiff concedes that the 2004 CC&R were properly filed and part of the chain of title for her tract of land and further that she relied upon them in regards to the use of her land. The Plaintiff intended to build a home and maintain horses on the tract. Based upon her understanding of the above section she undertook the design and initial construction of a barn in which to store hay.
Subsequently the Plaintiff learned that at the 2007 meeting of the HOA an oral resolution was approved to allow the outdoor storage of hay if it was covered by a brown tarp. This was apparently noted in meeting minutes. The 2004 CC&R were never amended as the amendment provisions were not complied with. Specifically the 2004 CC&R requires:
Amendments. The Covenants may be amended only with the written consent of the Owners of seventy-five (75%) of the Tracts duly recorded in the records of Sheridan County, Wyoming, provided that no amendment may be made without consent of the Declarant prior to the sale of all Tracts by the Declarant.The Plaintiff asserts that the HOA failed to properly amend the 2004 CC&R since written consent of 75% of the tract owners was not obtained and nothing was filed in the land records of Sheridan County. The Plaintiff asserts that she relied upon the 2004 CC&R as recorded in her design and initial construction of a barn.
The Plaintiff asserts four claims: (1) breach of contract; (2) negligence; (3) negligent misrepresentation; and (4) constructive fraud. All the claims are in some manner based upon the Plaintiff's assertion that the HOA failed to properly amend the 2004 CC&R. The breach of contract asserts that the HOA and its Committee members breached the 2004 CC&R by failing to follow the proper procedure to amend. The negligence claim asserts that Defendants breached their duty of care by negligently failing to follow proper procedures to amend. The negligent misrepresentation claim seems to assert that the 2004 CC&R misrepresented the restrictions in Eaglestone Ranch since their improper amendment was not recorded or communicated to Plaintiff. The constructive fraud claim mirrors that of the negligent misrepresentation claim.
The Defendants filed a timely Motion to Dismiss citing the non-liability provision in the 2004 CC&R. The section reads:
7.04 Non-Liability for Approval of Plans. Neither the Committee, its Members, the Homeowners' Association, nor the Declarant shall be liable to any Owner or other person for a damage or loss suffered or claimed on account of (a) the approval or disapproval of any Plans, whether or not defective, (b) the construction or performance of any work, whether or not pursuant to approved Plans, or (c) the development or manner of development within the Property. Approval of Plans by the Committee shall not be deemed to be a representation or warranty that the Plans comply with the applicable laws or regulations, including zoning ordinances and building codes.
The Plaintiff counters that Section 7.04 does not bar the suit in that it was only intended to apply to approval of plans as stated in the title assigned to this paragraph. She also notes that the term "development" is not specifically defined in the 2004 CC&R and does not relate to Plaintiff's situation. The failure to properly amend the 2004 CC&R is not covered by the release of liability and as such her claims should be allowed to proceed. In the alternative, Plaintiff asserts that the 2004 CC&R is ambiguous as evidenced by the parties' disagreement.
DISCUSSION
Standard of Review
"In reviewing a Fed. R. Civ. P. 12(b)(6) dismissal, a court must accept as true all well-pleaded facts, as distinguished from conclusory allegations, and those facts must be viewed in the light most favorable to the non-moving party." Moss v. Kopp, 559 F.3d 1155, 1159 (10th Cir. 2010). "To withstand a motion to dismiss, a complaint must contain enough allegations of fact 'to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Additionally, plausibility occurs when "[t]he allegations . . . if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief." Robbins v. Okla. ex. rel. Dep't of Human Servs., 519 F.3d 1242, 1247 (10th Cir. 2008).
This Court is exercising its jurisdiction pursuant to diversity of citizenship of the parties under 28 U.S.C. §1332. In such cases this Court applies the law of the forum state, in this matter Wyoming. Kovnat v. Xanterra Parks and Resorts, 770 F.3d 949 (10th Cir. 2014).
DISCUSSION
Restrictive covenants, such as 2004 CC&R, are contractual in nature and will be interpreted by the courts pursuant to the rules of contract interpretation. Anderson v. Bommer, 926 P.2d 959, 961 (Wyo. 1996).
We seek to determine and effectuate the intention of the parties, especially the grantor(s), as it may appear or be implied from the instrument itself. Intention of the parties is to be determined from the entire context of the instrument, and not from a single clause. Where the language imposing the restriction(s) is clear and unambiguous, we construe it according to its plain and ordinary meaning without reference to attendant facts and circumstances or extrinsic evidence, and the rule of strict construction does not apply."Restrictive covenants are contractual in nature, and are interpreted in accordance with the principles of contract law." Star Valley Ranch Ass'n v. Daley, 334 P.3d 1207, ¶12 (Wyo . 2014). See also Bedessem v. Cunningham, 272 P.3d 310, 313 (Wyo. 2012) and Omohndro v. Sullivan, 202 P.3d 1077, ¶19 (Wyo. 2009).
Anderson, 926 P.2d at 961-62. (citations omitted)
The first step is to determine the controlling restriction regarding the storage of hay within the ranch. The 2004 CC&R explicitly requires that hay be stored within a building. The pleadings establish that the restrictive covenants have not been amended or replaced. At the time the Plaintiff purchased the land the only restrictive covenant recorded in her chain of title was the 2004 CC&R. [Doc 1, page 4]. The Plaintiff further alleges that at a homeowners' meeting in September of 2007, prior to the Plaintiff's purchase of the property, an "oral resolution" was passed to allow outdoor storage of hay if stored under a "brown tarp". [Doc 1 page 4-5] This oral resolution did not comply with the required procedure to amend the 2004 CC&R. The 2004 CC&R, as attached to the Plaintiff's complaint, requires the "written consent of the Owners of seventy-five percent (75%) of the Tracts, duly recorded in the records of Sheridan County, Wyoming" to approve any amendments to the covenants. [Doc 1. Page 19]. The parties' pleadings are in agreement that no such event ever took place.
Amendments of restrictive covenants require compliance with the contractual language of the covenants. The Wyoming Supreme Court has addressed failed attempts to amend restrictive covenants. In Riverview Heights Homeowners' Ass. v. Rislov, 205 P.3d 1035 (Wyo. 2009) the court considered a challenge to amended restrictive covenant in which the signatures of the property owners were not notarized as required by the language of the covenant. The result was that the amended covenant was "invalid". The same result was reached in Star Valley Ranch Ass'n v. Daley, 334 P.3d 1207, ¶24 (Wyo. 2014) where the amendment was not in conformance with the requirements of the covenants. In the matter under consideration there was no attempt to perform an amendment of the 2004 CC&R in accordance with the required amendment procedures. If the "oral resolution" was an attempt to amend the covenants, it is invalid and of no force or effect. The 2004 CC&R establishes the hay storage requirements within the subdivision at the time of the Plaintiff's purchase of the property. The 2004 CC&R required the Plaintiff to store hay within a building.
The Plaintiff asserts four claims arising from the failure of the Homeowner's Association to amend the covenants as noted above. Rather than address the merits and viability of the Plaintiff's individual claims, the Defendants seek dismissal based upon the non-liability clause in the 2004 CC&R. Defendants contend that all of Plaintiff's claim fall with the liability exclusion clause. The Plaintiff responds that paragraph 7.04 is entitled "Non-Liability for Approval of Plans" and Plaintiff's claims do not arise from approval of plans. Plaintiff also notes that the term "development" as used in 7.04 is not defined in the contract and Plaintiff's claims do not arise from development. Plaintiff proposes that the intent of the 7.04 was to address lawsuits by property owners as to other property owners or the development of the subdivision as a whole. Finally the Plaintiff notes that the parties' disagreement in interpretation of section 7.04 indicates an ambiguity.
Restrictive covenants are contractual in nature and will be reviewed by the Court pursuant to the standards of contract interpretation. The court seeks to discern the intention of the parties. Mullinnix, LLC v. HKB Royalty Trust, 126 P.3d 909, 919 (Wyo.2006). The specific terms of the contract will be assigned their plain and ordinary meaning. Wolter v. Equitable Res. Energy Co., 979 P.2d 948, 951 (Wyo. 1999). To the extent possible, every part and word of the contract is given effect. Sunburst Exploration, Inc. v. Jensen, 635 P.2d 822, 825 (Wyo. 1981). The Court may consider circumstances surrounding execution of a contract in determining the parties' intent, even for unambiguous contacts. Ultra Resources, Inc. v. Hartman, 226 P.3d 889, 905 (Wyo.2010). The interpretation of unambiguous contacts is a matter of law for the court. Thorkildsen v. Belden, 2011 WY 26, ¶ 8, 247 P.3d 60, 62 (Wyo.2011) and Hunter v. Rice, 253 P.3d 497, 502 (Wyo. 2011).
The title assigned to paragraph 7.04 is "Non-Liability for Approval of Plans". The Plaintiff wishes to limit the meaning of the entire paragraph by the language in the title. In reviewing 7.04 there are actually three separate limitations of liability and only one of them specifically addresses approval of plans. The three sections are:
a) The approval or disapproval of any Plans, whether defective or not defective;In reviewing paragraph 7.04 the court is required to consider the entire paragraph. In doing so it is clear that the non-liability extends beyond the approval of plans. To construe 7.04 as only pertaining to approval of plans would be to disregard the language in items b and c of paragraph 7.04. This Court is required to give effect to the entire paragraph, not just the title. The non-liability provision, by its plain language, applies to more than the approval of plans.
b) The construction or performance of any work, whether or not pursuant to approved Plans; or
c) The development or manner of development within the Property.
In determining if the Plaintiff's claims fall within the exclusion of liability the Court will consider 7.04 in its entirety. The three provisions for non-liability are alternative, so that if the claims fall within any of the three provisions, there is no liability. The second and third provisions will be reviewed in this regard. Item (b) of paragraph 7.04 reads in context:
Neither the Committee, its Members, the Homeowners' Association, nor the Declarant shall be liable to any Owner or other person for any damage or loss suffered or claimed on account of the construction or performance of any work, whether or not pursuant to approved Plans.The released parties include all of the Defendants sued by Plaintiff. The named individuals are sued in relationship to their duties and actions on behalf of the Committee and the HOA. [Doc 1 ¶¶ 3, 14, 15, & 32]. The Plaintiff is an Owner and thus falls within the scope of the non-liability clause. The Plaintiff is seeking damages for the partial construction of a barn upon her property which she commenced building to comply with the hay storage requirements in the 2004 CC&R. She seeks money damages to complete the construction of the barn or to deconstruct and remove the partially completed barn. [Doc 1 ¶¶ 40, 49, 54, 60 & 65]. It is clear and unequivocal that Plaintiff seeks damages claimed on the account of the construction or performance of work. It falls within the clear language of 7.04(b).
The third category of non-liability reads in context:
Neither the Committee, its Members, the Homeowners' Association, nor the Declarant shall be liable to any Owner or other person for any damage or loss suffered or claimed on account of the development or manner of development within the Property.The Plaintiff correctly notes that the term "development" is not defined in the 2004 CC&R. The Plaintiff then asserts that development should not be read to include Plaintiff's situation. The word is to be given its plain and ordinary meaning. Merriam-Webster defines "development" as:
1 a developing or being developed 2 a step or state in growth, advancement, etc. 3 an event or happening 4 a thing that is developed; specif., a number of structures on a large tract of land built by a real-estate developer.
Webster's New College Dictionary, 2007
In the context of the 2004 CC&R the term is clearly related to the conversion of a bare tract of land into a community of tracts with similar characteristics mutually acceptable to the tract owners. The term "development" would appear to broadly encompass the entire property and those activities which are involved in the transformation of the open land to a community. The non-liability extends to the "manner of development" which indicates that the parties intended the broadest possible grant of non-liability. This provision is not ambiguous when the plain meaning of the words are considered. Just because 7.04 provides a broad scope of non-liability does not equate with it being ambiguous. The matter of hay storage is part of the process of converting this bare land into a residential community. It was of sufficient importance that it was included in the 2004 CC&R and has apparently been a topic of discussion at meetings of the HOA. It is clearly a topic of some importance to the community in the growth and establishment of Eaglestone Ranch. As such it is included within the manner of development of this community and falls within the non-liability provision of 7.04(c).
The Plaintiff's contention that differing interpretations is evidence of ambiguity also fails. The fact that the parties come to differing conclusions as to the meaning of contract language does not in of itself constitute an ambiguity. Moncreif v. Louisiana Land and Exploration Co., 861 P.2d 516, 524 (Wyo. 1993) and Caballo Coal Co. v. Fidelity Exploration & Production Co., 84 P.3d 311, ¶11 (Wyo. 2004).
CONCLUSION
Paragraph 7.04 of the 2004 CC&R bars Plaintiff's claims. Therefore Plaintiff's Complaint fails to set forth a claim upon which relief can be granted and dismissal pursuant to Federal Rules of Civil Procedure 12(b)(6) is appropriate. The Plaintiff has requested leave to amend her complaint and the Court will grant her time to do so.
The Defendants' Motion to Dismiss Plaintiff's Complaint Pursuant to Rule 12(b)(6) is GRANTED. The Plaintiff is granted leave until May 15, 2017 to file an amended complaint. Absent the filing of an amended complaint the Plaintiff's complaint is dismissed with prejudice effective May 15, 2017.
Dated this 24th day of April, 2017.
/s/_________
MARK L. CARMAN
UNITED STATES MAGISTRATE JUDGE