128 A.3d 397
Vt.2015Background
- Arapaho Village Condominium (created 1979 under VCOA) listed 50 units in its Declaration Schedule D but 54 units were built (five planned units were split into upper/lower units; one planned unit, 23F, was never built). Schedule D was never amended.
- In 2010 the Association’s Board (BOD) attempted two amendments: (1) reallocate ownership percentages to reflect actual units (required unanimous consent) and (2) adopt a new formula for allocating common expenses. The first failed; the BOD certified and recorded the second based on its view that a 75% vote sufficed.
- Split-unit owners challenged the reallocation and sued; the trial court voided the 2010 amendment changing the expense formula, reformed Schedule D to eliminate the unbuilt unit and redistribute its percentage among built units, ordered a assessments "true-up," and awarded fees to the split-unit owners.
- On appeal the Supreme Court affirmed: it held unanimous consent was required to change allocated interests/common-expense liability for a VCOA condominium, upheld equitable reformation of the Declaration to reflect original intent and marketable title, and affirmed a discretionary attorney-fees award to the prevailing unit owners.
- The court remanded the mechanics of the true-up to the trial court to implement the opinion.
Issues
| Issue | BOD (Plaintiff) Argument | Split-unit Owners (Defendant) Argument | Held |
|---|---|---|---|
| Whether unanimous owner consent is required to amend the allocation formula for common expenses | 75% vote under Declaration Article 15 sufficed to adopt a new allocation formula | VCOA §1306(b) (and analogous VCIOA §2-117) protects allocated interests; unanimous consent required to change allocated interests/common-expense liability | Unanimous consent is required for changes that alter allocated interests/common-expense liability for a VCOA condominium; §1306(b) controls (VCIOA §2-117 supports same view) |
| Validity of the BOD’s 2010 recorded amendment reallocating common expenses | Amendment passed by required owners and was properly recorded | Amendment was void because it altered allocated interests/common-expense liability without unanimous consent | The 2010 certification/amendment was void for lack of unanimous approval |
| Availability and scope of equitable reformation to fix Declaration errors (unbuilt unit and split units) | Sought reformation to reflect units actually built and adopt proposed allocation formula | Sought reformation to give effect to original 1979 Schedule D and clear title; proposed revised Schedule D consistent with original developer intent | Court may use equitable reformation to correct mutual mistake and effect the developer’s original bargain; trial court’s reformation (eliminate unbuilt 23F and reallocate its percentage among built units per 1979 Schedule D) was within discretion and affirmed |
| Award of attorney’s fees to prevailing owners | Fees not recoverable (or statute version in effect should preclude award); BOD acted reasonably | Fees permitted under VCIOA statutory authority; owners substantially prevailed and fees reasonable | Fee award discretionary under statute; trial court did not abuse discretion in awarding $40,000 (reduction from claimed amount reasonable) |
Key Cases Cited
- Cassani v. Northfield Sav. Bank, 179 Vt. 204 (2005) (reformation corrects mutual mistake to reflect parties’ original intent)
- Burlington Sav. Bank v. Rafoul, 124 Vt. 427 (1965) (equitable reformation principle described)
- Shaw v. Barrows, 134 Vt. 343 (1976) (scope and purpose of declaratory judgment to determine parties’ rights)
- Griffith v. Nielsen, 141 Vt. 423 (1983) (declaratory judgment elucidates rights “so far as is requested and appropriate”)
- L’Esperance v. Benware, 175 Vt. 292 (2003) (lodestar method and factors for adjusting attorney-fee awards)
- Montgomery v. 232511 Invs., Ltd., 191 Vt. 624 (2012) (standards for awarding fees where award is discretionary)
- Bonanno v. Verizon Bus. Network Sys., 196 Vt. 62 (2014) (trial courts have broad discretion in fee awards)
- Grice v. Vt. Elec. Power Co., 184 Vt. 132 (2008) (statutory fee-shifting displaces American rule)
- Perez v. Travelers Ins., 181 Vt. 45 (2006) (reasonableness is the touchstone for attorney-fee awards)