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SKI, Ltd. v. Mountainside Props., Inc.

Supreme Court of Vermont

February 6, 2015

SKI, Ltd.
Mountainside Properties, Inc

Editorial Note:

This Opinion is subject to motion for reargument or formal revision before publication. See V.R.A.P. 40

On Appeal from Superior Court, Rutland Unit, Civil Division. Cortland Corsones, J.

Affirmed in part, reversed in part, and remanded with instructions to enter declaratory judgment that SKI's offer to Mountainside dated August 30, 2012 does not meet the requirements of the ROFO executed by the parties in 1988.

Christopher D. Roy of Downs Rachlin Martin PLLC, Burlington, for Plaintiff-Appellee/Cross-Appellant.

Peter H. Banse of Banse & Banse, P.C., Americus, Georgia, for Defendant-Appellant/Cross-Appellee.

Present: Reiber, C.J., Dooley, Skoglund, Robinson and Crawford, JJ.[1]


Page 1170

Robinson, J.

[¶1] This appeal concerns the parties' respective rights and obligations arising from a contract for the sale of land from SKI, Ltd.'s predecessor-in-interest to Mountainside Properties, Inc. The contract included a " right of first offer" (ROFO) with respect to an adjacent parcel. Mountainside appeals a declaratory judgment of the trial court concluding that the terms of the ROFO provision constitute an unlawful restraint on alienation. SKI cross-appeals the trial court's judgment that the offer that it made to Mountainside pursuant to the ROFO violated the covenant of good faith and fair dealing implied in the agreement, and that it therefore was not free to sell the property to another buyer on the terms offered to Mountainside upon Mountainside's rejection of the offer. Both parties argue that the trial court erred in proposing an offer by SKI to Mountainside on alternative terms which the court concluded would satisfy the requirements of the ROFO while avoiding an unlawful restraint on alienation. We affirm in part and reverse in part.

Page 1171

[¶2] The relevant facts, as found by the trial court, are as follows. This case begins with the 1988 purchase and sale agreement between Mountainside (a Vermont corporation), and Killington, Ltd., a former subsidiary of and predecessor-in-interest to SKI (a Delaware corporation). At the time, Killington, Ltd. owned the Killington Ski Area. Mountainside purchased thirty-three acres from Killington, Ltd. for the purpose of residential development. At the time, Mountainside also wanted to purchase the adjoining sixty-two acre tract, but the Killington, Ltd.-owned sewage-treatment facility which provided service to the area lacked sufficient capacity to serve the homes that Mountainside intended to build on that parcel.[2] Given the limited sewage capacity, Mountainside purchased the thirty-three acres and negotiated a ROFO on the remaining sixty-two acres; it hoped to be able to purchase the remaining acreage when Killington, Ltd. had more sewage capacity.

[¶3] Accordingly, in § 6(e) of the 1988 purchase and sale agreement for the thirty-three acres, the parties agreed, with respect to the sixty-two-acre parcel, as follows:

Seller grants Purchaser the option to purchase, at market value as determined by Killington, Ltd., the adjacent [sixty-two acre] parcel of land ... when and if Seller in its sole discretion decides to sell such parcel, together with sufficient off-site sewage disposal rights to provide sewage disposal to the designed number of dwelling units thereon as determined by Killington, Ltd. If Purchaser fails to exercise this option within thirty days of receipt of a written offer, Seller may sell said land and sewage disposal capacity to others at the stated price or more, but shall not thereafter sell said land and sewage disposal capacity, or any part thereof, at a lesser price without first extending to Purchaser the further opportunity and time to purchase at the lower price.

The agreement provides that the seller's obligations under the agreement " shall be binding upon its successors and assigns."

[¶4] Subsequently, Mountainside improved the thirty-three-acre parcel with connector ski trails to the Killington Ski Area, new roads, and sewer and electrical lines. The connector trail crosses the sixty-two-acre parcel. Mountainside also drilled wells on the sixty-two acre parcel to benefit the thirty-three acres, pursuant to an easement with Killington, Ltd.

[¶5] In 2006, Mountainside entered into negotiations with Killington, Ltd. to purchase the sixty-two acres, but the parties did not reach an agreement. Soon after these failed negotiations, Mountainside learned that Killington, Ltd. was selling off its properties. Mountainside reminded Killington, Ltd. of the ROFO on the sixty-two acres.

[¶6] In 2007, Killington, Ltd. sold the Killington Ski Resort to three entities as tenants in common (TICs).[3] Killington, Ltd. sold the TICs all the real estate it owned -- except for the sixty-two acres subject to Mountainside's ROFO. At the same time, it sold its sewage-treatment plant to the TICs. In connection with these sales, Killington did not take any steps to retain any rights for sewage capacity to serve the sixty-two acres it retained; the trial court found that there was no evidence presented as to whether there was sewage capacity

Page 1172

available at that time. Killington, Ltd. merged into SKI, and SKI proceeded to sell or otherwise divest itself of all its assets -- except the sixty-two acres. After these transactions, the TICs owned the Killington Ski Resort and the sewage-treatment plant, and SKI retained the sixty-two-acre parcel as its sole remaining asset.

[¶7] Mountainside, through its sole owner Stephen Durkee, has been actively involved in land development in Killington since 1981. After the 2007 sale, Mountainside became interested in the TICs' development plans for the area, including the 400-acre planned unit development, and actively opposed one of their development plans. Mountainside's challenge reached this Court, and we ruled in its favor. In re SP Land Co., 2011 VT 104, ¶ 28, 190 Vt. 418, 35 A.3d 1007. At the time that the trial court issued its judgment, Mountainside remained in litigation with the TICs over their development plans for the Killington area.

[¶8] In 2012, SKI decided to sell the sixty-two-acre parcel. Because any offer to Mountainside would have to include sewage disposal rights, SKI contacted the TICs to obtain sewage rights. The TICs agreed to provide sewage capacity for eight single-family dwellings so that an offer could be made to Mountainside, but only on the condition that Mountainside agree not to contest any permits for the development of land by SP Land Co. or the TICs. Accordingly, on August 30, 2012, SKI made a written offer to Mountainside for the sale of the sixty-two acres. The accompanying purchase and ...

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