Montgomery v. 232511
Investments, Ltd., 2012 VT
31 (mem.).
If you practice land use law in Vermont the phrase Stowe Club Highlands acts like a CIA sleeper
agent’s trigger and will cause you to automatically rattle off the three
conditions that allow you to alter an existing permit (unanticipated change in
law or fact, unanticipated change in conditions, or changes in technology).
If you don’t, the phrase probably conjures up the image of a
yuppie playing the bagpipes in front of a ski lift.
But like any good legal precedent, the Stowe Club Highlands analysis comes with a back story that has
played out across the legal landscape for nearly 30 years.
Beginning in 1985, the Stowe Club Highlands sought to
develop a 236-acre parcel into a series of homes, open space, and a
resort. The group received the necessary
permits from the state and a Resort Planned Unit Development (PUD) permit from
the town. The later gave the Club the
authority to subdivide and develop the property along the lines of a
pre-approved plan that granted flexibility in lot sizes, setback, and other
zoning requirements.
The Club subdivided and sold several of the housing lots to
individuals who constructed houses and began to occupy the land. All was well for a short while. Then times, resources, and circumstances
being what they are, the plan started to fall apart. The original owners of the club sold to new
buyers who sold to new buyers, and before long there was a new developer in
town who did not want a big resort but did want to profit by filling the
remaining land with more houses.
Unfortunately, for the developer, there were those original
permits. When developers announced their
plans to amend and modify the plan, many of the individual homeowners who
expected a resort or open space were not particularly pleased. Individually and as a homeowners association,
they opposed the Club’s attempts to modify the permits, and the litigation on
the Act 250 permit gave birth in 1996 to the Stowe Club Highland analysis,
which says that you cannot modify or amend an existing permit unless there is a
change in technology, an unanticipated change in the facts or law, or an
unexpected condition (“we changed our mind” or “Gee, it really costs a lot to
build a resort” does not make the grade as unanticipated facts or conditions).
Since that decision, Club has been stuck in what the Italian
poets might call Local Zoning Hell. With
no less than four appeals over the past six years, the owners of the Club have
been bravely, doggedly, and somewhat foolishly trying to extract themselves
from a Resort PUD permit.
The problem is that the Club needs to exchange its Resort
PUD for a Planned Residential Development (PRD) Permit to put in more houses. It sounds simple. Just switch out U for R, but land use is
never that easy. To succeed, the Club
must control the property—all 236 acres.
That means that either every landowner has to get on board and sign off
on the application, or the Club has to produce a legal document that shows that
each individual homeowner within the 236 acres is obligated to support the
obligation.
Given the remote possibility of the former (call it the
freezing over of local zoning hell), the Club, after a few false starts had
opted to try for the latter. Thus, it
began executing various amendments to the original declaration of covenants
that carried titles like: “Second Amended and Restated Declaration of
Covenants, Easements, Conditions and Restrictions for the Stowe Club property
known as the Twelfth Supplement.”
The fact that each of these supplements was executed after
the individual lots had been sold, developed, and re-sold several times over
did not sit well with the Town, the Environment Court, or the SCOV. As you might expect, these so-called
supplements were rejected, and the consistent ruling was that the Club
continued to lack the control and authority necessary to apply for a
modification to a PRD.
Today’s case is kind of a clean-up action to those prior
zoning cases. Basically, the homeowners
got sick of these supplements popping up every time the Club felt the stars had
aligned for another shot at the PRD cup.
So the homeowners brought an action in the trial court to have these
supplements declared void.
As the litigation progressed, the Club and the Homeowners’
Association entered into an agreement where a thirteenth supplement was adopted
by the parties and the tenth and twelfth supplements at issue in the litigation
were declared null and void.
Hold onto the confetti.
The trial court, with the parties’ consent, adopted this settlement
agreement into a final order. It then
took up the issue in regard to the individual homeowners, and it ruled that the
tenth and twelfth supplements were void and unenforceable as a matter of
law. This would not be that big a
deal—essentially the trial court came to the same conclusion for the
individuals as the parties did in their dealt—but the trial court then went on
to award attorney’s fees to the homeowners.
And that is what brought on today’s appeal where the Club
first asks the SCOV to reverse the trial court on the ruling that the tenth and
twelfth supplements were void. The SCOV
wastes no time in denying this argument by noting that it is moot. The parties have changed their situation by
agreeing through their thirteenth supplement to void the tenth and twelfth
supplements. The SCOV is not going to
rule whether the supplements were or were not valid. That issue became academic once the
thirteenth was signed, and the SCOV will not revisit it because its ruling will
not change the parties’ positions.
This leaves the Club with two arguments. First, it takes issue with the award of
attorney’s fees to the homeowners.
Second, it takes issue with the trial court’s denial of the Club’s
motion for attorney’s fees. Both come up
short.
To the questions of attorney’s fees for the homeowners, the
Club argues that the attorney’s fees are inappropriate because the thirteenth
supplement, which settled the case, occurred outside of court and cannot be the
basis for court-awarded attorney’s fees.
This gives the SCOV some pause. In earlier cases, the SCOV had allowed
attorney’s fees for anyone who brought a lawsuit that resulted in
relief—whether it was a jury verdict or an early, out-of-court settlement. The SCOV notes, however, that this so-called
“catalyst” theory has been rejected by the U.S. Supreme Court. This is the second time the SCOV has noted
this distinction, and for a second time, the SCOV declines to overrule the
catalyst theory of attorney’s fees.
Instead, the SCOV notes that today’s case deserves
attorney’s fees under either regime. Not
only did the homeowners catalyze the settlement by filing the initial lawsuit,
but they brought it to the trial court for its review and acceptance. This final act, referred to as a judicial
imprimatur over the settlement, is enough to trigger attorney’s fees under
either the U.S. Supreme Court’s more restrictive version.
The SCOV then devotes a few lines to showing why the
homeowners were in fact the prevailing parties and that they suffered actual
harm that required them to file a lawsuit to protect themselves from the threat
and property-value-lowering shadow of the tenth and twelfth supplements.
In short, no dice for the Club.
This leaves the SCOV to take up the last question of whether
the Club should have received attorney’s fees too since it prevailed on some of
its sewer-system supplements, which the homeowners also challenged in the
action. The SCOV affirms the trial
court’s denial, but the reasoning is slightly different from the process above.
When the homeowners sought attorney’s fees, they did so
under a common-ownership statute. When
the Club sought fees, they did so under provisions within the Declaration. Unfortunately, that language only granted
attorney’s fees if the Club had to enforce the sewer covenants against someone
who was violating them or attempting to violate them.
That, the SCOV notes, is not the case here. No one was attempting to violate the sewer
easements. The homeowners were simply
challenging their validity, and that is not enough to trigger the Declaration’s
attorney’s fees. End of story.
Or should we say, the end for now. Basically, today’s litigation puts every one
back at square one. Well, almost
everyone— presumably the attorneys have not invested their hourly rates in
either Facebook stock or JP Morgan Chase’s new 401k Gambling Fund.
The Club now has the burden to figure out what it wants to
do. It is unlikely to obtain permission
from the landowners, and it seems convinced that a resort will not work. Their attorney has hopefully warned them not
to bring in spite
pigs. Apart from that, there seems
to be little left for the Club to do.
Maybe a scaled back resort? Anyone want to sponsor a mini-golf and root
beer stand?
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