Arrabelle at Vail Square Residential Condominium Association, Inc., Plaintiff-Appellee and Cross-Appellant,
Arrabelle at Vail Square LLC, Defendant-Appellant and Cross-Appellee.
County District Court No. 09CV320 Honorable Frederick W.
Roca Rothgerber Christie LLP, Scott M. Browning, Alex C.
Myers, Denver, Colorado; Zonies Law LLC, Sean Connelly,
Denver, Colorado, for Plaintiff-Appellee and Cross-Appellant
Gibson, Dunn & Crutcher LLP, Gregory J. Kerwin, Robert C.
Blume, M. Scott Campbell, Denver, Colorado, for
Defendant-Appellant and Cross-Appellee
1 In this case interpreting provisions of the Colorado Common
Interest Ownership Act (CCIOA), sections 38-33.3-101 to -402,
C.R.S. 2015, we are asked to determine, among other related
issues, whether a mixed-use community consisting of a hotel,
retail shops, restaurants, and sixty-six condominiums is a
"small planned community" under section
38-33.3-116, C.R.S. 2015, of CCIOA. We conclude it is not
and, therefore, affirm the judgment of the trial court.
2 The Arrabelle at Vail Square is a luxury development at the
base of Vail Mountain in Vail, Colorado. Built and managed by
Vail Resorts Development Company and Arrabelle at Vail Square
LLC (Vail Resorts), the development (Arrabelle) includes
multi-million dollar residential condominiums, a boutique
hotel, restaurants, retail shops, an ice-skating rink, a spa,
parking, and other amenities.
3 At the time of development, Vail Resorts recorded a plat
establishing seven separate real estate parcels collectively
titled "Lot 1" and "Airspace Lots A-F" at
the Arrabelle. Vail Resorts then entered into a Reciprocal
Easements and Covenants Agreement (RECA) governing those
parcels and creating two lots - the Airspace Lot (which would
be developed into condominiums) and the Project Lot (the
remainder of the property). The RECA establishes benefits,
burdens, and allocation of costs between both lots, and it
regulates the use and enjoyment of both lots.
4 In pertinent part, the RECA originally contained the
following two provisions:
18. SMALL PLANNED COMMUNITY EXCEPTION. The Parties hereby
acknowledge and agree that this Agreement constitutes a
"declaration" and creates a "common interest
community" under CCIOA. Specifically, this Agreement
creates a "planned community" under CCIOA, and not
a "condominium, " as those terms are defined by
CCIOA. The planned community created by this Agreement
contains only two lots, the Project Lot and the Airspace Lot,
and is therefor exempt from CCIOA's provisions pursuant
to the exemption contained in Section 38-33.3-116(2) of CCIOA
for planned communities containing no more than 20 lots. The
Parties acknowledge and agree that the Project Lot and the
Airspace Lot will not be bound by or subject to the
provisions of CCIOA, except as expressly required under
CCIOA, as in effect at the date of this Agreement. In
addition, the Parties acknowledge and agree that neither the
Project Owner nor the Airspace Lot Owner shall be deemed a
"master association" within the meaning of Section
38-33.3-220 of CCIOA. Without limitation on the generality of
the foregoing, the Parties acknowledge and agree that the
Airspace Lot constitutes an estate above the surface within
the meaning of Section 38-32-101, et. seq., C.R.S.,
and not a condominium within the meaning of CCIOA; the
Airspace Lot Owner Easements constitute the sole property
interest in the Project Improvements that is held by the Airspace
Lot Owner as appurtenances to the Airspace Lot; and there are
not any "common elements" or other portions of the
Project Improvements in which the Airspace Lot Owner holds
any undivided or other ownership interest.
19. CONDOMINIUMIZATION OF AIRSPACE LOT. Notwithstanding but
without limiting the provisions of Section 18 above, the
Parties acknowledge and agree that the Airspace Lot Owner
may, at its election, subject the Airspace Lot to a
condominium regime under CCIOA. Regardless of any such
condominiumization, the Airspace Lot will continue to be a
single lot for all purposes under this Agreement. Any
owners' association formed pursuant to CCIOA (the
"Association") will be deemed the "Airspace
Lot Owner, " all owners of such condominium units will
act and be treated collectively through the Association under
this Agreement and each owner of a condominium unit, by
taking title to a condominium unit, irrevocably and
unconditionally appoints the Association as its duly
authorized representative and attorney-in-fact for all
purposes of this Agreement. Notwithstanding that the
Association shall be deemed the "Airspace Lot Owner,
" the Airspace Lot Owner Easements will be deemed
granted to the Association for the benefit of its members and
the use restrictions on the Airspace Lot will apply to and
may be enforced against all or any portions of the Airspace
Lot and the owners thereof, as the Project Owner may elect
from time to time. In any event, each owner of a portion of
the Airspace Lot, whether condominiumized or not, is subject
to all provisions of this Agreement.
5 The RECA established that the Airspace Lot Owner would be
responsible for a flat amenity access fee set by the Project
Owner and 59.7% of the operating and capital improvement
costs of the Arrabelle. As the owner of both the Airspace Lot
and the Project Lot, Vail Resorts signed the RECA on behalf
of both owners.
6 Immediately after recording the RECA, Vail Resorts recorded
a condominium plat creating sixty-six condominiums in the
Airspace Lot and a condominium declaration creating the
Arrabelle at Vail Square Residential Condominium Association,
Inc. (Association). The condominiums ultimately sold with
base prices ranging from $1, 195, 000 to $6, 695, 000.
7 Problems arose between Vail Resorts and the Association
within the first year of operation. While the RECA required
the Association to pay a $1, 975, 853 expense payment in
2008, the Association objected. And because the 2008
Arrabelle operations ran substantially over budget, the
Association was facing yet a larger expense payment in 2009.
On February 17, 2009, the Association notified Vail Resorts
it was terminating the RECA.
8 On June 1, 2009, the Association filed this action seeking
a declaratory judgment allowing it to terminate the RECA or
alternatively ruling that the RECA was in violation of CCIOA,
requiring reformation. The Association made additional claims
for statutory breach of good faith, breach of fiduciary
duties, and breach of the common law duty of good faith and
fair dealing. Vail Resorts counterclaimed for breach of
contract and unjust enrichment.
9 The case proceeded in three phases. First, the trial court
granted the Association's motion for partial summary
judgment, ruling that the Arrabelle is not a CCIOA small
planned community under section 38-33.3-116(2) because it was
subject to development rights. See §
38-33.3-116(2) ("If a . . . planned community created in
this state on or after July 1, 1998, contains . . . no more
than twenty units and is not subject to any development
rights, it is subject only to sections 38-33.3-105 to
38-33.3-107[, C.R.S. 2015, ] . . . .").
10 Second, the court conducted a trial addressing the method
of reforming the RECA to comply with CCIOA (Phase I Trial).
Under sections 38-33.3-112 and -203, C.R.S. 2015, the court
struck the amenity access fee from the RECA and reformed the
agreement to include, among other things, mandatory
alternative dispute resolution. See §
38-33.3-124, C.R.S. 2015 (dispute resolution under CCIOA).
The court also concluded that the RECA included an incorrect
cost allocation ratio (allocating 59.7% to the residences in
the Airspace Lot and 40.3% to the Project Lot) and readjusted
the burden to 49.1% to the Airspace Lot residences.
11 The court also ordered the parties to draft and ratify a
master association declaration. § 38-33.3-220. Because
the parties were unable to agree on a declaration after
approximately one year, the court referred the matter to a
special master who drafted a third amendment to the RECA
incorporating the court's changes along with articles of
incorporation and bylaws for a new master association. The
court adopted the special master's recommended
instruments in July 2014.
12 Third, the trial court held a trial on the remaining
claims of breach of good faith, breach of contract, and
unjust enrichment (Phase II Trial). Ultimately, the court
denied all outstanding claims and awarded the Association, as
the prevailing party, $2, 500, 000 in stipulated attorney
13 Vail Resorts appeals the following trial court rulings:
(1) the conclusion that the Arrabelle is not a "small
planned community" under CCIOA section 38-33.3-116(2)
because Vail Resorts reserved development rights under the
RECA; (2) the reformed cost allocation based on the
court's conclusion that the RECA violated CCIOA section
38-33.3-207(2), C.R.S. 2015, because the original allocation
discriminated "in favor of units owned by the
declarant"; and (3) the adopted reformed RECA and master
association documents because those documents contain terms
not required by CCIOA. The Association conditionally
cross-appeals the court's conclusion that the Association
did not validly terminate the RECA by e-mailing notice of
termination to Vail Resorts under CCIOA section 38-33.3-305,
Standard of Review
14 Statutory interpretation is a question of law that we
review de novo. Triple Crown at Observatory Vill.
Ass'n v. Vill. Homes of Colo., Inc., 2013 COA 150M,
¶ 10. Because a court's primary duty is to give full
effect to the General Assembly's intent, interpretation
begins by examining the statute's plain language within
the context of the statute as a whole. Id.
"Words and phrases should be given effect according to
their plain and ordinary meaning . . . ." Farmers
Grp., Inc. v. Williams, 805 P.2d 419, 422 (Colo. 1991).
The court "must not strain to give language other than
its plain meaning, unless the result is absurd."
Colo. Dep't of Soc. Servs. v. Bd. of Cty.
Comm'rs, 697 P.2d 1, 18 (Colo. 1985), superseded
by statute on other grounds, Ch. 58, 1985 Colo. Sess.
15 CCIOA is patterned after the Uniform Common Interest
Ownership Act (UCIOA), and "we accept the intent of the
drafters of a uniform act as the General Assembly's
intent when it adopts a uniform act." Yacht Club II
Homeowners Ass'n v. A.C. Excavating, 94 P.3d 1177,
1180 (Colo.App. 2003), aff'd, 114 P.3d 862
CCIOA's Small Planned Community Exception
16 CCIOA provides in pertinent part that "[i]f a . . .
planned community created in this state on or after July 1,
1998, contains . . . no more than twenty units and is not
subject to any development rights, it is subject only to
sections 38-33.3-105 to 38-33.3-107 . . . ." §
"Development rights" means any right or combination
of rights reserved by a declarant in the declaration to:
(a) Add real estate to a common interest community;
(b) Create units, common elements, or limited common elements
within a common interest community;
(c) Subdivide units or convert units into common elements; or
(d) Withdraw real estate from a common interest community.
§ 38-33.3-103(14), C.R.S. 2015. "'Common
interest community' means real estate described in a
declaration with respect to which a person, by virtue of such
person's ownership of a unit, is obligated to pay for
real estate taxes, insurance premiums, maintenance, or
improvement of other real estate described in a
declaration." § 38-33.3-103(8). A
"'[d]eclarant' means any person or group of
persons acting in concert who: . . . [r]eserves or succeeds
to any special declarant right." §
38-33.3-103(12)(b); see § 38-33.3-103(21)
("'Person' means . . . a corporation . . .
."). And "'[s]pecial declarant rights'
means rights reserved for the benefit of a declarant to . . .
exercise any development right." § 38-33.3-103(29).
17 The provisions of CCIOA "may not be varied by
agreement, and rights conferred by this article may not be
waived. A declarant may not act under a power of attorney or
use any other device to evade the limitations or prohibitions
of this article or the declaration." § 38-33.3-104,
18 In granting the Association's motion for partial
summary judgment, the trial court concluded that section 19
of the RECA reserved the right to condominiumize the Airspace
Lot and, therefore, reserved a development right in Vail
Resorts as defined by section 38-33.3-103(14). By using plain
language indicating the existence of a future right -
"the Airspace Lot Owner may, at its election, subject
the Airspace Lot to a condominium regime" - Vail Resorts
reserved the right to create within the Airspace Lot a common
interest community in which physical portions thereof would
be designated for separate ownership. § 38-33.3-103(8)
(defining common interest community); § 38-33.3-103(9)
(defining condominium). These separately owned physical
portions of the Airspace Lot would be units. §
38-33.3-103(30) ("'Unit' means a physical
portion of the common interest community which is designed
for separate ownership . . . ."). Therefore, the plain
language of the RECA allowed Vail Resort to "[c]reate
units . . . within a common interest community." §
38-33.3-103(14). Consequently, the court concluded the RECA
subjected the Airspace Lot to "development rights"
precluding the Arrabelle from becoming a small planned
19 Vail Resorts argues that the Arrabelle is a small planned
community because (1) UCIOA section 4-103(b) (Unif. Law
Comm'n 1982) establishes that CCIOA does not consider the
ability to create nested common interest communities as
development rights; (2) the UCIOA requires that a development
right alter the legal structure of an existing common
interest community and the condominiumization of the Airspace
Lot did not alter the Arrabelle's legal structure; and
(3) the RECA did not reserve any development rights in the
"declarant" but rather in the "Airspace Lot
Owner, " who coincidentally happened to be the declarant
in these circumstances.
20 Vail Resorts relies upon UCIOA section 4-103(b) (a section
that was not adopted in CCIOA) to support an argument that
although a declarant may reserve a power to place one common
interest community inside ...