Alpenwald Village, Inc. v. Town of Readsboro

Alpenwald Village, Inc. v. Town of Readsboro  (96-045); 166 Vt. 28; 
687 A.2d 481

[Filed 15-Nov-1996]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 96-045


Alpenwald Village, Inc.                           Supreme Court

                                                  On Appeal from
    v.                                            Bennington Superior Court

Town of Readsboro                                 September Term, 1996


Robert Grussing III, J.

       Lon T. McClintock of Jacobs, McClintock & Scanlon, Bennington, for
  plaintiff-appellee

       Robert E. Woolmington of Witten, Saltonstall, Woolmington, Bongartz &
  Campbell, P.C., Bennington, for defendant-appellant


PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


       JOHNSON, J.   This case centers on several lots in a residential
  condominium development that are owned by defendant Town of Readsboro. 
  After taking title to the properties at its own tax sale, the Town failed
  to pay the annual fees assessed on the properties by plaintiff Alpenwald
  Village, Inc. (AVI), the corporation that manages the condominium
  development.  AVI brought this action to collect the past-due fees, plus
  interest, costs and attorney's fees.  The Town moved for summary judgment,
  arguing that AVI could collect past-due assessments under the homeowner
  covenants only by foreclosing its liens on the properties. The trial court
  denied the motion for summary judgment, but granted the Town's request for
  permission for interlocutory appeal on the following certified question:

       Assuming that the Declaration of Protective Property Rights
       creates a common scheme for a subdivision and runs with the land,
       does the purchaser of an Alpenwald lot at a tax sale, who accepts
       a tax-collector's deed, become personally liable for payment of any
       valid lot assessments thereafter levied, or is the enforcing agent's
       remedy for failure to pay such assessments limited to an action of
       foreclosure?




  We conclude that the purchaser of an Alpenwald lot at a tax sale who
  accepts a tax-collector's deed does become personally liable for payment of
  any valid lot assessments thereafter levied.

       The Alpenwald Development is a planned residential subdivision located
  in the Towns of Stamford and Readsboro.  Each owner of an Alpenwald lot is
  a member of AVI and is subject to covenants (entitled "Declaration of
  Protective Property Rights") that include a provision requiring owners to
  pay annual assessments to AVI to cover the costs of maintaining the common
  lands, roadways and facilities.  Since taking possession of the lots, the
  Town has never paid the annual fees assessed by AVI.  For purposes of this
  appeal, the parties do not contest the validity of the annual assessments,
  but dispute only whether the covenants permit AVI to bring this action
  against the Town.

       Central to the appeal are paragraphs 7 and 8 of the covenants, which
  state in relevant part:

         (7) CHARGES: In order to maintain and improve the
         ALPENWALD DEVELOPMENT . . . the owner of each Lot
         shall, on the first day of May in each year . . . pay to the
         REVERSIONARY OWNER, or its successors and assigns . . . the
         annual payment in the amount hereinafter recited.  Such annual
         payment shall be a lien on each Lot, and if not paid by June 15th
         of each calendar year, the REVERSIONARY OWNER, or its
         successors and assigns, may enforce said lien, as hereinafter
         provided, as and when the REVERSIONARY OWNER shall elect
         . . . .

         (8) REVERSIONARY OWNER:
           . . . .
         [I]n the event of a breach of any of the covenants, conditions,
         reservations, or restrictions hereby established, the
         REVERSIONARY OWNER shall have the right to enforce or
         remedy such breach or enforce such lien as hereinbefore provided
         by appropriate legal proceedings.  As to each Lot owner in such
         premises these covenants, conditions, reservations, and restrictions
         shall be covenants running with the land . . . .

  The Town argues that paragraphs 7 and 8 at most imply a personal right of
  action, but that such restrictions cannot be extended by implication to
  include options not clearly expressed, relying on Fassler v. Okemo
  Mountain, Inc., 148 Vt. 538, 542, 536 A.2d 930, 932 (1987).

 

       We agree with the Town's general proposition about the need to express
  deed restrictions clearly, but we disagree that it applies to the covenants
  in the present case.  The language of the paragraphs in question is not
  ambiguous.  Paragraph 7 allows AVI to "enforce said lien, as hereinafter
  provided, as and when [AVI] shall elect."  (Emphasis added.)  If the phrase
  "enforce said lien" stood alone, without reference to a subsequent
  provision, the Town might well be able to argue ambiguity.  But the
  "hereinafter provided" explanation appears in the very next numbered
  paragraph of the covenants, which permits AVI to "enforce or remedy such
  breach [of the covenants] or enforce such lien as hereinbefore provided by
  appropriate legal proceedings."  (Emphasis added.)  Thus, paragraph 8
  states plainly that AVI has the option of suing to "remedy such breach" or
  to "enforce such lien."  The words "as hereinbefore provided" link
  paragraphs 7 and 8 closely together, clarifying that the lien enforcement
  option is the same option described in paragraph 7.

       Fassler does not suggest a different result.  That case recites the
  standards for construing arguably ambiguous covenants, but states that
  "`[i]f the instrument is clear and unambiguous it is to be given effect
  according to its language, for the intention and understanding of the
  parties must be deemed to be that which their writing declares.'"  148 Vt.
  at 542, 536 A.2d  at 932 (quoting Davidson v. Vaughn, 114 Vt. 243, 246, 44 A.2d 144, 146 (1945)).  We held that the covenant in Fassler was not
  ambiguous and noted with respect to the parties' numerous citations from
  other states that "[t]hese cases, almost without exception, instruct that
  each case must be determined on its own merits and that the language of the
  instrument controls." Id. at 543, 536 A.2d  at 933.

       The Town cites treatises containing model documents dealing with legal
  relationships between condominium developments and their homeowners and
  spelling out the personal obligation of owners to pay assessments.  The
  Town's contention appears to be that the covenants in the present case fall
  short by comparison, since they do not directly speak of "the personal
  liability of the owner."  Though that phrase is not found in the covenants,
  paragraph

 

  7 describes an obligation to pay assessments, and paragraph 8 creates the
  right to remedy a breach of that obligation.  A homeowner could not have
  purchased a lot from Alpenwald, claiming ignorance of the right of the
  reversionary owner (here AVI) to remedy a breach of the assessment
  obligation via lien foreclosure or personal enforcement -- again, a
  distinction made clear in paragraph 8.  Nor does the Town support its
  suggestion that successors in interest to original owners are not on the
  same notice as their predecessors.

       The Town recites numerous public policy arguments, most of which
  proceed from the principle that enforcing vague covenants is harmful to the
  public weal.  These arguments, however, depend for their validity on the
  proposition that the covenants in this case are vague -- essentially the
  principal argument advanced by the Town and one that we do not accept.

       The Town also argues that "scarce public funds in a tax-poor
  community" should not be allocated to assessments on property the Town has
  acquired at a tax sale.  Apart from the silence in the record concerning
  the Town's financial condition, Vermont law does not lend support to the
  argument.  "Apartment Owner" is defined in the Condominium Ownership Act,
  27 V.S.A. § 1302(2),(FN1) in a manner that does not exclude any class of
  owners.  Moreover, 27 V.S.A. § 1323(b) states that upon foreclosing on a
  first mortgage, the acquirer of title shall not be liable for assessment
  arrearages prior to obtaining such title, and that such unpaid share of
  common assessments "shall be considered common expenses collectible from
  all of the apartment or site owners including the acquirer."  Section
  1323(b) does not apply to towns acquiring title at tax sales, but the
  provision does illustrate that the Legislature was aware of instances where
  new ownership triggered by an owner's default on a debt should be treated
  as a special case and equitable rules applied to the obligations of that
  ownership.  Those equitable rules do not excuse foreclosing banks or their
  assigns from paying assessments that come due after the foreclosure.

 

       The Town complains that in the absence of foreclosure, which it states
  it would not oppose, it is essentially bound to continue to pay assessments
  to AVI as a member of the development, with no end in sight, so long as the
  lots it owns have little market value.  The Town appealed from the denial
  of a motion for summary judgment, and there is nothing in the record at
  this stage that sheds light on options that may be available to the Town as
  an owner solely in pursuit of tax revenues.  The only question before this
  Court relates to the proper interpretation of the covenants.  The trial
  court has not yet had the opportunity to make findings or to frame an
  appropriate order.  It is therefore premature to consider the Town's
  concern that its assessment obligation will be permanent, in the absence of
  a foreclosure action by AVI or an increase in the value of the properties
  it acquired via tax sale.

       Moreover, the Town does no more in its brief than to mention the
  dilemma, presenting no further legal argument.  Should the issue come
  before us again after remand, it will be incumbent upon the Town to
  demonstrate in fact that it has no options in the absence of a foreclosure
  action by AVI, why its position mandates judicial relief, and what the
  nature of that relief should be.

       In sum, the covenants at issue in this case expressly provide that AVI
  may enforce their terms directly against each defaulting lot owner,
  including commencing an in personam suit against the Town as purchaser at a
  tax sale.

       The certified question is answered as follows:  the purchaser of an
  Alpenwald lot at a tax sale, who accepts a tax collector's deed, becomes
  personally liable for payment of any valid lot assessments thereafter
  levied.


                              FOR THE COURT:



                              _______________________________________
                              Associate Justice




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                                  Footnotes


FN1.  The phrase "apartment owner" may seem inapposite on the present
  facts.  It is, however, a term of art in 27 V.S.A. § 1302(2) and includes
  fee simple owners of apartments or "any other estate in real property
  recognized by law of the common areas and facilities in the percentage
  specified and established in the declaration."  Id.