Arrabelle at Vail Square Residential Condominium Association, Inc. v. Arrabelle at Vail Square LLC
2016 COA 123
Colo. Ct. App.2016Background
- The Arrabelle at Vail Square is a mixed-use development (hotel, retail, amenities, parking) with an Airspace Lot later condominiumized into 66 residential units; Vail Resorts owned both the Project Lot and Airspace Lot and drafted the governing Reciprocal Easements and Covenants Agreement (RECA).
- RECA initially characterized the development as a two-lot planned community (Project Lot and Airspace Lot) and included a provision allowing the Airspace Lot Owner to "at its election" subject the Airspace Lot to a condominium regime.
- The RECA required the Airspace Lot/Association to pay a large annual expense payment composed of a flat amenity fee plus 59.7% of operating costs; the Association objected and attempted to terminate the RECA.
- The Association sued for declaratory relief and other claims; the trial court held (Phase I) the Arrabelle was not a CCIOA "small planned community" because RECA reserved development rights, reformed RECA (including striking the amenity fee, adjusting allocations to 49.1%), and ordered creation of a master association; Phase II resolved remaining claims and awarded attorney fees.
- Vail Resorts appealed classification, cost-allocation reformation, and scope of court-ordered reforms; the Association cross-appealed termination-by-email issue (not reached because reforms were affirmed).
Issues
| Issue | Plaintiff's Argument (Association) | Defendant's Argument (Vail Resorts) | Held |
|---|---|---|---|
| Whether Arrabelle is a "small planned community" under CCIOA §38-33.3-116(2) (i.e., ≤20 units and no development rights) | RECA reserved development rights (condominiumization) and the project contains >20 units, so CCIOA applies | RECA created only two lots (Project and Airspace), and the Airspace condominiumization is not a "development right" or was reserved to "Airspace Lot Owner," not declarant; thus small-planned-community exception applies | Held: Not a small planned community. RECA reserved development rights (right to create units) and the development contains 67 units (Project Lot + 66 condos); CCIOA applies. |
| Whether reservation to "Airspace Lot Owner" avoids CCIOA "development rights" limitation because reservation wasn’t to "declarant" | Reservation effected by declarant (Vail Resorts owned both interests) and therefore is a declarant reservation of development rights | Reservation language fixes the right in the "Airspace Lot Owner," not the declarant, so no development-rights bar | Held: Substance over form — the declarant reserved the right (it owned the Airspace Lot when RECA was executed); characterization does not avoid CCIOA. |
| Whether RECA’s cost allocation (59.7% to residences + flat amenity fee) violated CCIOA §38-33.3-207(2) by discriminating in favor of declarant | Allocation relied on inaccurate/old square-footage data and excluded significant Project space, unfairly shifting costs to the Association; formula did not match disclosed method | Allocation was fixed in RECA and benefits Project Owner; permissible if formula disclosed and permanent | Held: Allocation violated §38-33.3-207(2) and was unconscionable under §38-33.3-112 because the stated percentage did not follow the RECA formula, excluded substantial Project areas, and improperly favored Vail Resorts; court reformed allocation to 49.1% based on as-built measurements. |
| Whether trial court exceeded its equitable authority by (a) reforming RECA, (b) creating/ordering a master association, and (c) imposing CCIOA-based terms (e.g., arbitration, utility allocation) | Court’s equitable reformation aimed to make RECA CCIOA-compliant and place parties in position they would have had under a compliant declaration | Court lacked power to create association infrastructure or rewrite parties’ agreement | Held: Court acted within equitable powers under CCIOA and general principles of equity; appointment of a special master and entry of reformed instruments were not an abuse of discretion. |
Key Cases Cited
- Farmers Grp., Inc. v. Williams, 805 P.2d 419 (Colo. 1991) (plain statutory language controls interpretation)
- Yacht Club II Homeowners Ass’n v. A.C. Excavating, 94 P.3d 1177 (Colo. App. 2003) (adoption of uniform act intent; interpreting CCIOA/UCIOA provisions)
- CIGNA Corp. v. Amara, 563 U.S. 421 (U.S. 2011) (equitable power to reform contracts is traditional equity jurisdiction)
- Hardesty v. Pino, 222 P.3d 336 (Colo. App. 2009) (dictum vs. holdings; limits of precedent cited as nonbinding dictum)