Alpine Haven Prop. Owners' Ass'n, Inc. v. Brewin

• Citation: 198 A.3d 533
• Decision Date: 17 August 2018
• Docket Number: No. 17-381,17-381
• Court: United States State Supreme Court of Vermont
• Parties: ALPINE HAVEN PROPERTY OWNERS' ASSOCIATION, INC. v. Harry BREWIN and Lynette Brewin

198 A.3d 533

ALPINE HAVEN PROPERTY OWNERS' ASSOCIATION, INC.
v.
Harry BREWIN and Lynette Brewin

No. 17-381

Supreme Court of Vermont.

May Term, 2018
August 17, 2018
Reargument Denied October 9, 2018

Robert W. Scharf of Kohn Rath Danon Lynch & Scharf, LLP, Hinesburg, for Plaintiff-Appellant.

Charles S. Martin and Thomas M. Kester of Charles S. Martin & Associates, P.C., Barre, for Defendants-Appellees.

PRESENT: Reiber, C.J., Skoglund, Robinson, Eaton and Carroll, JJ.

ROBINSON, J.

¶ 1. Plaintiff Alpine Haven Property Owners' Association, Inc. (AHPOA) appeals from the trial court's decision in its collection action against defendant-homeowners Harry and Lynette Brewin. In awarding judgment to AHPOA, the court calculated what it considered a reasonable annual fee that AHPOA could charge defendants for services it provides, including garbage pickup and road maintenance. As set forth below, we conclude that the court erred in replacing AHPOA's fee with its own given the absence of any evidence to show that AHPOA acted in bad faith or that its fee was unreasonable. We reverse the court's decision and remand for entry of a final judgment order consistent with this opinion.

¶ 2. Defendants live in Alpine Haven, "a sprawling subdivision located along Vermont Route 242 in the Towns of Montgomery and Westfield." Khan v. Alpine Haven Prop. Owners' Ass’n, 2016 VT 101, ¶ 1, 203 Vt. 251, 153 A.3d 1218 (recounting development of Alpine Haven in detail); see also Alpine Haven Prop. Owners Ass’n v. Deptula, 2003 VT 51, ¶¶ 2-3, 175 Vt. 559, 830 A.2d 78 (mem.) (same). Development of Alpine Haven began in the 1960s and it now contains about ninety-two units, including "more than eighty-five lots with homes, several undeveloped or ‘large lots,’ several lots with some commercial activity, and three lots that AHPOA owns and maintains as common land for various purposes." Khan, 2016 VT 101, ¶ 10, 203 Vt. 251, 153 A.3d 1218. There are "4.5 miles of roads within the development," and "[a]lmost all of the lot[ ] owners depend on the private roads to access their property." Id.

¶ 3. AHPOA is a Vermont nonprofit corporation run by volunteers. In 1998, the original developers of Alpine Haven conveyed to AHPOA "ownership of, and all of the maintenance and service-provision responsibilities for, the road network, snowplowing, street lights and garbage disposal." Id. ¶ 22. Several years later, AHPOA sought to take advantage of the newly

198 A.3d 535

enacted Vermont Common Interest Ownership Act (VCIOA), 27A V.S.A. §§ 1-101 – 4-120. AHPOA declared Alpine Haven to be a common interest community (CIC) subject to, and capable of, invoking the provisions of the Act. See Khan, 2016 VT 101, ¶ 23, 203 Vt. 251, 153 A.3d 1218. This led to litigation, discussed in more detail below.

¶ 4. This case began in June 2012. AHPOA sued defendants, alleging that they had not paid their annual assessments for common expenses since September 2009.¹ In particular, AHPOA claimed that defendants owed it $14,688 for assessments between 2010 and 2016.² Defendants represented themselves in the trial court. The court tried the case in two parts. It first considered if Alpine Haven was a CIC under VCIOA and if AHPOA's governance documents were properly adopted. Following a one-day bench trial in November 2014, the court concluded that Alpine Haven was a preexisting CIC that fell within the VCIOA but that certain amendments to Alpine Haven's declaration and bylaws were procedurally defective and void. The court stayed its ruling on the reasonableness of AHPOA's fees pending a status conference. The court explained that there was a case awaiting trial ( Khan ) that involved a similar question and it did not want to interfere with those parties' efforts to settle their dispute.

¶ 5. Meanwhile, the trial court in Khan issued an interlocutory ruling similarly concluding that Alpine Haven was a preexisting CIC for purposes of VCIOA. The plaintiffs in that case appealed to this Court and we reversed in September 2016. We held that "[w]hile it might seem apparent in hindsight that Alpine Haven ‘has become’ a CIC, we cannot see how it would have been apparent to certain early buyers, at the time of their purchase, that their lots were part of a CIC." Id. ¶ 37. We directed the trial court, on remand, to address the basis on which AHPOA could "calculate the fees for deeded services it has provided to each of the plaintiffs' properties." Id. ¶ 40. The Khan proceedings are ongoing.

¶ 6. Given our ruling in Khan, the trial court in this case no longer relied on the VCIOA and instead focused on the terms of defendants' deed. Following a second evidentiary hearing in November 2016, the court made the following findings. Defendants' lot was created in 1963. Defendants purchased their lot in May 1994. Defendants' deed provides:

There is also hereby conveyed a right-of-way leading from the main highway along the road as now traveled to the above described premises.

There is also granted the right to take water as now piped to the above premises.

The grantor hereby agrees to keep and maintain said right-of-way in a good reasonable state of repair and agrees to supply water to said premises as now piped and it agrees to supply garbage removal for said premises and to maintain the streetlights in the area of said premises as now in existence. These services to be at a fee to be determined by the grantor.

Defendants were members of AHPOA until November 2011 when they withdrew.

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Defendants refused driveway plowing, which is not mentioned in their deed, beginning in 2016.

¶ 7. The court found that defendants' deed created a limited contract that required AHPOA to provide certain services and allowed AHPOA to charge a fee for these services as it might determine. Citing Duchaine v. Zaetz, the court reasoned that because the deed did not identify a specific fee, the law implied that the fee must be "reasonable." See 114 Vt. 274, 276, 44 A.2d 165, 167 (1945) ("When labor and materials are furnished under a contract silent as to the amount to be paid therefor, the law implies that they are to be settled for at a reasonable rate. The prevailing charges for such work tend to show what the reasonable rate is." (citation omitted) ). The court concluded that a reasonable charge could include overhead but not "extraordinary" overhead.

¶ 8. The court also rested its analysis in part on the common-law obligation of those sharing a common right-of-way to contribute to road-maintenance costs. See Hubbard v. Bolieau, 144 Vt. 373, 375, 477 A.2d 972, 973 (1984) (recognizing longstanding "equitable principle that when several persons enjoy a common benefit, all must contribute rateably to the discharge of the burdens incident to the existence of the benefit" (quotation omitted) ); see also 19 V.S.A. § 2702 ("In the absence of an express agreement or requirement governing maintenance of a private road, when more than one person enjoys a common benefit from a private road, each person shall contribute rateably to the cost of maintaining the private road, and shall have the right to bring a civil action to enforce the requirement of this section.").

¶ 9. The court applied these legal rules to AHPOA's assessments. AHPOA hires people to plow and repair the roads and to remove garbage. It owns trucks and other equipment for this purpose. AHPOA also operates various recreational facilities within the development, which are billed separately to members who use them. AHPOA submitted a spreadsheet that outlined its expenses. The court found that AHPOA based its assessments on the amount needed to cover its expenses for road maintenance, snow removal, trash removal, streetlights (electricity), as well as accounting, litigation, and other administrative costs.

¶ 10. The court then calculated a "reasonable" annual assessment to cover these costs from scratch. It found $340 to be a reasonable annual charge for trash removal and $200 a reasonable annual charge for plowing an uncomplicated driveway like that owned by defendants. The court divided the cost of providing electricity for Alpine Haven's fourteen streetlights ($3750 not including overhead) equally among unit owners, resulting in an annual cost of approximately $45 per owner.

¶ 11. Turning to the cost of maintaining the roadway, the court reasoned that defendants were not responsible for contributing to the maintenance of the entire road system because they had been deeded only a small portion of the right-of-way. Based on evidence of AHPOA's own per mile costs for maintaining its roads (not including overhead), as well as evidence of the per-mile cost incurred by the Town of Montgomery in maintaining its roads, the court found that a reasonable expense for maintaining a mile of road was around $9000. Because defendants' deeded way appeared to be three-tenths of a mile long, the court calculated that the expense of maintaining that roadway was $2700. Because the court concluded that under the common interest line of cases defendants are only accountable for "a rateable share of expenses," the court divided that $2700 cost among the twenty-four lots it found

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were served by the road between the main road and defendants' property and concluded that the...