McShane v. Stirling Ranch Property Owners Association, Inc
2017 CO 38
| Colo. | 2017Background
- McShane and Calvin (Owners) bought a lot in Stirling Ranch and submitted plans for a multistory home to the Design Review Board (DRB); the DRB approved the plans but Garfield County later issued a stop-work order because the design exceeded county height limits.
- Owners redesigned the home repeatedly; DRB/Executive Board denied some revised plans and ultimately approved a single-story design with a pod; Owners attribute more than $260,000 in conversion costs to the DRB/POA approval/denial process.
- The Stirling Ranch Declaration and the Design Guidelines included exculpatory clauses that explicitly release the DRB and Executive Board (and their members) from liability for approval/disapproval of plans; the documents do not explicitly name the POA for release.
- Owners sued the Stirling Ranch Property Owners Association (POA) for declaratory relief/equitable estoppel and negligence; trial court and court of appeals held the exculpatory clauses barred the claims and effectively protected the POA.
- The Colorado Supreme Court granted certiorari to decide whether the exculpatory language extended to the POA and whether the corporate entity is distinct from its boards for purposes of those releases.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether exculpatory clauses in the Declaration and Design Guidelines bar Owners’ claims against the POA | Owners: clauses release the DRB/boards but do not name or release the POA, so POA remains liable | POA: releases of the DRB/boards should protect the POA because the POA acts through those boards | Held: Clauses do not name or release the POA; plain language controls, so POA not exculpated |
| Whether exculpatory language that releases boards also releases the corporate POA because the boards act for the POA | Owners: corporate entity is distinct; silence about POA means no release | POA: boards are part of the same legal entity and release of boards should extend to POA | Held: Corporation and its agents are separate; documents treat POA distinctly (e.g., indemnification), so release of boards does not automatically release POA |
| Whether common-law respondeat superior means releasing an agent bars suit against the principal | Owners: Dworak precedent allows suing principal even if agent was released | POA: respondeat superior should prevent suit against principal when agent is exculpated | Held: Court declines to overrule Dworak; under precedent, release of agent does not automatically bar suit against principal; even if overruled it would not change the documents’ meaning at formation time |
| Whether the exculpatory clauses are valid and enforceable under Jones v. Dressel factors | Owners: even if valid as to boards, they don’t extend to POA | POA: clauses are valid and should be strictly enforced to bar claims | Held: Court need not resolve full Jones analysis for enforceability because plain language excludes the POA; but exculpatory clauses are strictly construed against party seeking immunity |
Key Cases Cited
- Jones v. Dressel, 623 P.2d 370 (Colo. 1981) (sets four-factor test for validity of exculpatory agreements)
- Dworak v. Olson Constr. Co., 551 P.2d 198 (Colo. 1976) (holding release of agent does not necessarily bar suit against principal)
- Heil Valley Ranch, Inc. v. Simkin, 784 P.2d 781 (Colo. 1989) (exculpatory clauses disfavored and strictly construed)
- Pulte Home Corp. v. Countryside Cmty. Ass’n, 382 P.3d 821 (Colo. 2016) (contract/declaration interpretation governed by plain language; reviewed de novo)
- Leonard v. McMorris, 63 P.3d 323 (Colo. 2003) (corporation acts through agents but remains a separate legal entity)