Case Title: Gannon v. Quechee Lakes Corp.

Citation: 162 Vt. 465, 648 A.2d 1378

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 1994-08-26T00:00:00Z

Document:
GANNON_V_QUECHEE_LAKES_CORP.93-087; 162 Vt. 465; 648 A.2d 1378

Filed:  26-Aug-1994

 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. 93-087


 Donald Gannon, et al. and                    Supreme Court
 Quechee Lakes Landowners'                    
 Association, Inc.
                                              On Appeal from
      v.                                      Windsor Superior Court

 Quechee Lakes Corporation, et al.            March Term, 1994



 Matthew I. Katz, J.

 W.E. Wittington IV of Brooks McNally Whittington Platto & Vitt, Norwich,
   for plaintiff-appellant Quechee Lakes Landowners' Association, Inc.

 James B. Anderson of Ryan Smith & Carbine, Ltd., Rutland, for defendants-
   appellees


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


      ALLEN, C.J.   Defendant Quechee Lakes Corporation (QLC) is the
 developer of Quechee Lakes Development, a planned second-home community in
 Quechee.  Plaintiff Quechee Lakes Landowners' Association, Inc. (QLLA), is a
 nonprofit corporation representing the interests of individual unit owners
 in the community.  QLLA appeals from a superior court decision construing a
 1981 order that followed settlement of a class action suit by unit owners
 against QLC.
      QLC drafted the Quechee Lakes Master Plan for development of the land;
 prepared and recorded covenants, declarations and bylaws to govern the
 development; and created QLLA in accordance with those governing documents.

 

 Thereafter, QLC developed and sold units within the development to third-
 party purchasers.  QLLA holds title to and administers the common lands,
 including golf courses, ski areas, lakes, common buildings and other areas
 sometimes referred to by the parties as "greenbelt."  QLLA also administers
 other facilities shared by members of the community, sets and collects dues
 and assessments, and represents members' interests generally.  All "bona
 fide third party purchasers" of units are required to be QLLA members and
 pay dues and assessments to the association.  Memberships are based on unit
 ownership.  QLC is required to make contributions to QLLA's capital
 improvement fund on the sale of units to bona fide third parties.
      This action originated in a class action brought in 1978 by certain
 individual unit owners against QLC and its affiliated companies.  QLLA was
 not a member of the original class because QLC controlled QLLA from its
 inception in 1970 until after the action was filed, when QLC lost its
 majority share in QLLA through sale of units.  The class representatives and
 QLC held negotiations in late 1979 and early 1980, and reached an agreement
 resolving many of their disputes.  The parties executed the agreement and
 submitted it to the court for approval, pursuant to V.R.C.P. 23(e), in
 November 1980.
      In February 1981, after QLC lost its controlling interest, QLLA moved
 for admission to the plaintiff class so it could file objections to the
 proposed settlement.  In March 1981, QLC moved for "clarification" of the
 agreement as to stated issues.  The court granted QLLA's motion for
 admission to the plaintiff class, but found the settlement to be fair and
 approved it over QLLA's objections.  On August 5, 1981, the court entered an
 order incorporating the terms of the settlement agreement.  The court also

 

 denied QLC's motion to "clarify" the agreement.  Neither QLC nor QLLA
 appealed.
      Though numerous questions arose after entry of the 1981 order, no
 litigation ensued in the years immediately thereafter.  The parties entered
 an "Open Space Agreement" in 1987 in an attempt to define and describe
 "common land" within the meaning of the 1981 settlement.  By 1988, however,
 at least three major issues had arisen, and both parties moved for relief
 under the 1981 order.  QLLA requested that QLC be compelled to pay dues and
 assessments to QLLA with respect to units it has reacquired from individual
 owners, and that QLC be ordered to convey to QLLA the common lands it holds,
 free of any encumbrance.  QLC sought an amendment to the provision in the
 1981 order relating to its obligation to pay capital contributions to QLLA
 upon sale of units.
      After hearing, the court ruled that QLC was not required to pay dues or
 assessments on lots or units previously conveyed to "ultimate user" third
 parties but thereafter reacquired by QLC.  The court also held that QLC was
 obligated to convey the "common lands" to QLLA, but was not obligated to
 secure mortgage releases with respect to those lands.  In addition, the
 court concluded that there was no complete and definitive description of
 common lands under the 1981 order, and directed QLLA to draft and submit
 deeds to be executed by QLC in furtherance of its conveyance covenant.
 Finally, regarding capital contributions, the court concluded that QLC was
 not obligated under the 1981 order to pay into QLLA's capital improvement
 fund for what the court termed "bulk land sales."  QLLA unsuccessfully
 moved for reconsideration of the court's order, and now appeals.  We affirm
 the trial court's ruling regarding dues for reacquired units and capital

 

 contributions, but remand for further proceedings on QLLA's rights to
 capital contributions from bulk transferees.  We reverse the trial court's
 ruling regarding conveyance of common lands and remand for further
 proceedings.
                                     I.
      Before addressing the substantive issues on appeal, we first consider
 the appropriate standard of review.  The trial court's findings of fact will
 not be disturbed unless they are clearly erroneous, V.R.C.P. 52(a)(2).  The
 1981 judgment order essentially ratified an agreement between the parties to
 the class action, a clear quid pro quo in which QLLA and QLC each advanced
 vital interests in exchange for surrender of certain claims and recognition
 of rights and interests of the other party.  On appeal, the parties agree
 that the order should be construed as a contract.  QLLA may have wanted a
 different bargain after it entered the action, but as a party it took the
 bargain incorporated into the order without appeal, and its prior objections
 and misgivings did nothing to deprive the consent decree of its essential
 contractual nature.  Construction of a contract is a matter of law, not a
 factual determination.  Ianelli v. Standish, 156 Vt. 386, 389, 592 A.2d 901,
 903 (1991).  Thus, this Court must make its own inquiry into the proper
 legal effect of the terms of the agreement, Hospitality Inns, Inc. v. South
 Burlington R.I., Inc., 153 Vt. 410, 415, 571 A.2d 40, 43 (1990), employing
 the trial court's valid findings of fact.
      QLLA argues for a strict construction of the order, contending that the
 intended meaning of the order is plain from the language of the document
 itself, and alternatively argues that any ambiguities must be resolved
 within the four corners of the judgment itself.  Therefore, QLLA argues, the

 

 trial court erred in considering extrinsic evidence of the parties' actions
 and intentions to discern the proper meaning of the order.  We agree with
 the trial court that the intended meaning of the contested provisions is not
 self-evident from the text of the order and that extrinsic evidence was
 permissible.  See Stratton v. Cartmell, 114 Vt. 191, 194,  42 A.2d 419, 421
 (1945) (when the language used will admit more than one interpretation,
 parole evidence is admissible).  We reach this conclusion, however, for
 different reasons which are outlined in the discussion below.  Moreover,
 QLLA fails to demonstrate how our review of the court's decision would
 differ in any significant way if we agreed that the terms of the 1981 order
 were strictly court-imposed and not based on an underlying settlement
 between the parties.
                                     II.
      QLLA first disagrees with the trial court's construction of the
 provision dealing with unit dues and assessments payable by QLC to QLLA.  In
 relevant part, paragraph 9 of the 1981 order states:
           Except as otherwise provided herein, [QLC] shall not be
           obligated to pay any dues, assessments, fees or special
           charges, including delinquent dues which may be owing on
           repossessed lots, on any membership attributable to a
           lot which is owned, both legally and equitably, by
           [QLC].

 (Emphasis added.)  The court concluded that QLC's exemption for repossessed
 units also covers units that QLC had conveyed to ultimate-user third parties
 and subsequently reacquired.  The term "repossessed" is defined nowhere in
 the order, but we conclude that, in light of the general purpose and
 context of the agreement incorporated in the 1981 order, "repossession"
 should not be limited to a retaking by a creditor in the wake of a debtor's
 default.  Stratton, 114 Vt. at 194, 42 A.2d  at 421 (in construing contract

 

 terms, the court may look to the intended purpose and circumstances).  In
 exchange for an exemption from dues and assessments for properties held in
 inventory, QLC relinquished the votes associated with the memberships it
 held in inventory, effectively yielding control of QLLA to the end
 purchasers.
      The parties' conduct after 1981 confirms the strong implication of the
 language of the settlement.(FN1)  See Murphy v. Britton, 109 Vt. 522, 525, 1 A.2d 724, 725 (1938) ("[I]n determining the meaning of an indefinite or
 ambiguous contract, the construction placed upon it by the parties may be
 considered by the court.").  After entry of the order, QLLA amended its
 bylaws to exempt units held by QLC from dues, and did not bill QLC for dues
 between the settlement and consent decree and 1988.  Between 1984 and 1986,
 QLC and QLLA entered into six agreements designed to prevent the Town of
 Hartford from foreclosing on liens for delinquent taxes.  Under each of
 these agreements, QLC paid the delinquent taxes, QLLA foreclosed its lien
 for delinquent membership dues, and then QLLA sold the foreclosed unit to
 QLC for the amount of the foreclosed dues.  The trial court found that under
 this arrangement, QLC paid QLLA over $200,000.  The court added:
         There is no evidence that any party expected the lots so
         reacquired would hold a status different than others in
         developer's inventory.  At a time when developer was not



         selling all that many of its own lots, why would it
         acquire new ones on which it was to be obligated for
         association dues?

 The soundness of this conclusion is supported by the conduct of the parties
 after each of these transactions, specifically the absence of any demand for
 dues by QLLA.  It may be inferred that if, after the first such transaction
 in 1984, QLLA had demanded membership dues with respect to the foreclosed
 lot, QLC would have raised the issue in the subsequent foreclosure
 agreements.
      QLLA also argues that QLC incurred a dues obligation on reacquired
 properties because of language in paragraph 12 of the order, which provides
 that "all memberships [that QLC] transfers or assigns shall then be
 dues-paying memberships."  The effect of this provision, QLLA contends, is
 that once a property is sold, the transferred membership (heretofore non-
 dues-paying under the order) becomes dues-paying, "then" meaning "forever
 after."  We disagree that paragraph 12 unambiguously demands that QLC be
 treated as any other individual buyer after the first conveyance of the lot
 from QLC to a purchaser activates the dues obligation.  That construction
 flies in the face of the general principle -- the very heart of the
 settlement -- that QLC "shall not be obligated to pay any dues,
 assessments, fees or special charges . . . on any membership attributable to
 a lot which is owned, both legally and equitably, by [QLC]."  Considering
 the order as a whole, its general intention to reduce QLC's financial
 obligations regarding memberships held in exchange for a relinquishment of
 voting power in QLLA, and the conduct of the parties, we conclude that QLC
 does not have to comply with dues and assessments obligations associated
 with its ownership of reacquired memberships in the development.

 

                                    III.
      QLLA next contends that the court erred in construing the order so that
 QLC is not obliged to pay a "capital contribution" fee upon transfer of
 lots as part of a "bulk sale."  The court relied on the following definition
 of sale in paragraph 17:
           A "sale by [QLC]" shall be deemed to have occurred on a
           regular sale when a closing takes place and shall be
           deemed to have occurred on an installment sale contract
           when the Buyer has made his initial deposit in full and
           the Agreement has been approved by the financing bank.

 (Emphasis added.)  At issue are two transactions:  (1) a sale of properties
 worth between twelve and twenty million dollars to Quechee Development and
 Land Corporation, a company wholly owned by the owner of the controlling
 interest in QLC; and (2) a second, smaller sale to an unrelated entity also
 in the business of selling lots at retail.  The trial court concluded that
 these were not "regular" sales and therefore they did not trigger the
 payment of capital contributions for each lot in the group conveyed.  QLLA
 contends that the provision in paragraph 17 unambiguously makes no exception
 for the sale of large numbers of lots to other than end users, and therefore
 the court had no viable basis to exempt bulk transfers from the capital
 contribution requirement.
      We agree with the trial court that bulk sales do not themselves
 obligate QLC to make capital contributions, but for different reasons.  See
 Harlow v. Miller, 147 Vt. 480, 483,