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

• Citation: 245 A.3d 1234
• Decision Date: 02 October 2020
• Docket Number: No. 19-184,19-184
• Parties: Sarita and Nafis KHAN, Eric and Katherine Gadpaille, Judith LaPointe and Robert Earley v. ALPINE HAVEN PROPERTY OWNERS' ASSOCIATION, INC.
• Court: United States State Supreme Court of Vermont

245 A.3d 1234

Sarita and Nafis KHAN, Eric and Katherine Gadpaille, Judith LaPointe and Robert Earley

v.ALPINE HAVEN PROPERTY OWNERS' ASSOCIATION, INC.

No. 19-184

Supreme Court of Vermont.

December Term, 2019

October 2, 2020

Motion for Reargument Denied November 2, 2020

Barry Kade, Montgomery, for Plaintiffs-Appellants.

Robert W. Scharf of Kohn Rath Danon Lynch & Scharf, LLP, Hinesburg, for Defendant-Appellee.

PRESENT: Reiber, C.J., Robinson,¹ Eaton and Carroll, JJ., and Morris, Supr. J. (Ret.), Specially Assigned

REIBER, C.J.

¶ 1. This is one in a series of cases involving Alpine Haven, a large residential development in the adjoining Towns of Montgomery and Westfield, Vermont. This appeal follows a remand in which we directed the trial court to determine the basis on which the Alpine Haven Property Owners Association, Inc. (AHPOA) could bill plaintiffs for services that AHPOA provides. The trial court determined that those plaintiffs who owned "Chalet Lots" were required by their deeds to pay AHPOA a reasonable fee for road maintenance, snowplowing, and garbage removal; those plaintiffs who owned "Large Lots" were required by statute and equitable principles to contribute to AHPOA's road maintenance costs. The court concluded that plaintiffs failed to show any material factual dispute regarding the reasonableness or accuracy of AHPOA's fees. It thus ordered plaintiffs to pay AHPOA's annual assessments between 2011 and 2018. Plaintiffs challenge this decision on appeal. We affirm.

¶ 2. This case began in 2011 when plaintiffs filed a declaratory judgment action to "determine their deeded property rights" and "to determine a reasonable fee for services they receive from [AHPOA]." AHPOA counterclaimed for its unpaid annual assessments.

¶ 3. We detailed the history of this case, the evolution of Alpine Haven, and the creation of AHPOA in Khan v. Alpine Haven Prop. Owners' Ass'n (Khan I ), 2016 VT 101, 203 Vt. 251, 153 A.3d 1218. Essentially restated, Alpine Haven is "a sprawling subdivision located along Vermont Route 242 in the Towns of Montgomery and Westfield." Id. ¶ 1. It "contains more than eighty-five lots with homes," referred to as "Chalet Lots," as well as "several undeveloped or ‘large lots.’ " Id. ¶ 10. Plaintiffs own Chalet Lots and/or Large Lots. AHPOA owns and maintains a 4.5-mile private road network within Alpine Haven. Almost all owners need these roads to access their property. AHPOA is also responsible for the streetlights, snowplowing, and garbage disposal within Alpine Haven.

¶ 4. In Khan I, we considered if Alpine Haven was a "preexisting common interest community" under 27A V.S.A. § 1-204 and thus subject to the provisions of the Vermont Common Interest Ownership Act. 2016 VT 101, ¶¶ 1, 7, 203 Vt. 251, 153 A.3d 1218. We concluded that it was not and remanded for a determination of the basis on which AHPOA could "calculate the fees for deeded services it has provided to each of [the Chalet Lot] properties and how much of a fee, if any," it could charge the Large Lot owners "for their rights of way." Id. ¶¶ 40-41 (alterations omitted) (quotation marks omitted).

¶ 5. On remand, AHPOA moved for summary judgment and plaintiffs moved for partial summary judgment in their favor. Following oral argument, the court granted summary judgment to AHPOA. It relied on the following undisputed facts. Pursuant to the terms of plaintiffs' Chalet Lot deeds, AHPOA must keep and maintain the right-of-way in a good, reasonable state of repair, supply water and garbage removal, and maintain the streetlights. Plaintiffs, in turn, must pay AHPOA "a reasonable annual fee" for these services.² The deeds do not make the reasonable annual fee contingent on actual use of these services or membership in AHPOA. The court thus found these factors immaterial to plaintiffs' obligation to pay a reasonable fee.

¶ 6. The Large Lot deeds conveyed as an appurtenance "the right to use in common with others, those roadways in the Alpine Haven subdivision which provide ingress and egress to and from Vermont Route 242 to the conveyed premises." While the deeds did not expressly require plaintiffs to contribute to road-maintenance costs, the court found that plaintiffs were required to do so by equitable principles and by statute. See Hubbard v. Bolieau, 144 Vt. 373, 375-76, 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" and "[t]he obligation to contribute" is designed "to prevent unjust enrichment" and "applies in the absence of an express agreement" (quotation omitted)); see also Kelly v. Alpstetten Ass'n, 131 Vt. 165, 168, 303 A.2d 136, 138 (1973) (recognizing "equitable principle that requires persons in the enjoyment of a common benefit to all contribute their proportionate share to the discharge of the burdens incidental to the existence of the benefit" and that "[t]his principle applies in the absence of agreement, and is subject to modification by the specific terms of a particular grant"). This equitable principle is codified at 19 V.S.A. §§ 2701, 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.").

¶ 7. Construing the deeds and applicable law together, the court concluded that the Large Lot owners must pay for their use of and access to the entire Alpine Haven road network and not just the portion of the road that they allegedly used. It reasoned that the Large Lot owners knowingly purchased property in a private development with a network of roads; they were granted common access to, and they benefited from, the roads. They were thus required to contribute ratably to the maintenance of the roads.

¶ 8. The court further found that while Alpine Haven was not a legally recognized common-interest community, it operated, as a practical matter, as one unified development for the purpose of providing a means to access plaintiffs' properties. Plaintiffs had the continuing right to utilize that access at any time. This access enhanced private and commercial access to their properties and allowed for future development possibilities. As compared to landlocked parcels, the court found that these access rights added value and potential benefit to the Large Lots regardless of whether plaintiffs decided to use some or all roads.

¶ 9. Finally, the court found that a "ratable" contribution as used in 19 V.S.A. § 2702 did not necessarily mean proportionate to use but instead depended on the particular circumstances of each case. See Restatement (Third) of Prop.: Servitudes § 4.13 cmt. e (2000) ("The responsibility of each user should reflect a fair proportion of the costs. The basis of fair apportionment will vary depending on the circumstances."). It concluded under the circumstances here that plaintiffs must pay a reasonable fee for maintaining all existing roads and associated infrastructure.

¶ 10. The court thus turned to the specific fees charged by AHPOA. Relying on AHPOA's statement of undisputed facts, it found that AHPOA used a three-tiered billing system: (1) road maintenance fees only; (2) deeded services including road maintenance and street lights and garbage removal; and (3) AHPOA member services, which in addition to the above, included driveway snowplowing and basic recreational services associated with access to common-area, pool, and tennis facilities. AHPOA's bills also included an average 15% surcharge to cover operating and overhead costs.³

¶ 11. AHPOA stated that maintaining the roads was its greatest expense. Using audited financial information for the prior six years, and identifying direct costs, the road service cost averaged $1438 per property. AHPOA calculated the right-of-way fee for each property by adding up its direct costs and excluding all costs attributable to other services, together with the proportional indirect costs of overhead divided by the number of properties. It stated that this was an accepted accounting practice. Garbage collection added an average of $340 per unit to the cost, bringing the total for the deeded services to $1778.

¶ 12. The court found that plaintiffs summarily disputed these costs, fees, and surcharge but provided no tangible support for their contention that the fees and costs for road maintenance and garbage removal were unreasonable. It noted that this Court had deemed AHPOA's fees reasonable in two other cases, including, in Brewin, the inclusion of overhead. See Alpine Haven Prop. Owners' Ass'n v. Brewin, 2018 VT 88, ¶¶ 15, 30, 208 Vt. 462, 198 A.3d 533 ; Alpine Haven Prop. Owners Ass'n v. Deptula, 2003 VT 51, ¶ 26, 175 Vt. 559, 830 A.2d 78 (mem.). Citing Brewin, 2018 VT 88, 208 Vt. 462, 198 A.3d 533, the trial court rejected plaintiffs' assertion that AHPOA's fees included items and expenses that they, as nonmembers, should not have to pay. It found that AHPOA had supported its requests with an audit report indicating its billing was accurate, while plaintiffs, in response, simply "argued conclusions and innuendo while apparently foregoing discovery on the billing issues and producing no submission which raises a material issue related to [AHPOA's] invoices."

¶ 13. The court rejected plaintiffs' implied invitation to parse AHPOA's billing in search of items that plaintiffs found objectionable. The question here, the court explained, was whether plaintiffs demonstrated that AHPOA breached the covenant of good faith and fair dealing in calculating its fee. See Brewin, 2018 VT 88, ¶ 19, 208 Vt. 462, 198 A.3d 533. Based on the undisputed evidence, the court concluded that they had not. The court thus ordered plaintiffs...