Opinion
No. 36094-2-II.
May 13, 2008.
Appeal from a judgment of the Superior Court for Pierce County, No. 06-2-09944-9, Vicki L. Hogan, J., entered March 2, 2007.
Reversed and remanded by unpublished opinion per Quinn-Brintnall, J., concurred in by Houghton, C.J., and Armstrong, J.
The Lake Jane Estates Homeowners Association (LJE) appeals the trial court's grant of judgment on the pleadings in favor of Randy S. Jensen, arguing that (1) judgment on the pleadings was improper because there are disputed issues of fact, (2) the trial court's order undermines the homeowners' reasonable expectations, and (3) it is the de facto successor of the Lake Tapps Development Co. (the developer). Because whether LJE is the de facto successor to the developer is a disputed material fact that may prove LJE's case, judgment on the pleadings was improper. We reverse and remand for proceedings consistent with this opinion.
FACTS
Factual Background
LJE is the homeowners association for residents of the Debra Jane Lake Plat in the City of Bonney Lake. The plat, which the developer created in 1959, is a subdivision made up of approximately 440 large residential lots. On the face of the plat, under the heading "restrictions," are several covenants regarding the use of the lots. The restrictions state in relevant part:
There are eight buildable lots that have less than 10,000 square feet, but most of the lots are over 15,000 square feet.
The following restrictions are hereby declared to be covenants running with the land and binding upon future owners, their heirs, successors or assigns on the following described real property: and said restrictions are as follows:
. . . .
6. No lot in this plat shall be subdivided without the written consent of [the developer].
. . . .
14. The breach of any of the foregoing conditions shall constitute a cause of action against the persons committing the breach by the T J Maintenance Co. or the Lake Tapps Development Co., Inc. . . .
15. If any of the foregoing restrictions are declared to be legally unenforcible [sic] with respect to all or any portion of said property, the applicabi[l]ity and enforcement of the remaining restrictions shall not otherwise be affected.
Clerk's Papers (CP) at 30.
In 1959, the developer filed articles of incorporation and bylaws for the T J Maintenance Company. In 1970, T J Maintenance Company changed its name to LJE. The articles of incorporation, in addition to the restrictions themselves, gave LJE, through its board of trustees, authority to enforce the restrictive covenants. According to the articles of incorporation, LJE's purposes include improving and maintaining common areas, collecting annual assessments from the membership, and engaging in "any and all acts" necessary or proper for, or incidental to, the exercise of any of its powers. CP at 267. In 2003, the developer filed articles of dissolution and no longer exists.
For the past 18 years, even while the developer was in existence, LJE, not the developer, has accepted applications from homeowners in the Debra Lake Jane Plat who wished to subdivide their property and subsequently approved or denied those requests without first consulting the developer. And in 2000, LJE, not the developer, successfully filed two suits to uphold its right to enforce restrictive covenant number 6.
We consolidated the two suits, which resulted in an unpublished opinion upholding LJE's authority to enforce restrictive covenant number 6. Lake Jane Estates Homeowners Ass'n v. City of Bonney Lake, noted at 117 Wn. App. 1045 (2003). We did not address the covenant's validity as the developer was still validly incorporated. See Lake Jane Estates Homeowners Ass'n, noted at 117 Wn. App. 1045.
Jensen owns two lots containing single family homes within Debra Jane Lake Plat. In August 2005, Jensen submitted an application to LJE seeking approval to subdivide these two lots into six lots, through a boundary line adjustment and two short plats. In May 2006, LJE rejected his request. On July 28, 2006, Jensen filed the present lawsuit. Procedural History
On January 24, 2007, Jensen filed a motion for judgment on the pleadings, claiming that restrictive covenant number 6 gave only the developer the authority to approve or deny subdivision requests and, since the developer dissolved in 2003, the covenant was invalid and unenforceable. Specifically, Jensen argued that, because it agreed that the developer was no longer in existence, LJE had admitted "all facts . . . material to [his] motion." CP at 8. In response to Jensen's motion for judgment on the pleadings, LJE argued that Washington courts liberally construe restrictive covenants and give effect to the purposes intended by the covenants and, as a result, LJE contended that it should be allowed to approve or deny homeowners' subdivision requests. The trial court refused to consider documents presented by LJE to support its argument that it was the de facto successor of the developer and granted Jensen's motion for judgment on the pleadings. LJE filed a motion for reconsideration 10 days later, asking the trial court to reconsider its decision in light of Green v. Normandy Park Riviera Community Club, Inc., 137 Wn. App. 665, 151 P.3d 1038 (2007), which had just been released. The trial court denied the motion. LJE timely appeals.
ANALYSIS
Standard of Review
We review a trial court's order for judgment on the pleadings de novo. N. Coast Enters., Inc. v. Factoria P'shp, 94 Wn. App. 855, 858, 974 P.2d 1257, review denied, 138 Wn.2d 1022 (1999). For a court to render judgment on the pleadings, the allegations in the pleadings must be construed strictly against the moving party, and only where it appears that there are no factual issues requiring trial and the issues can be determined as a matter of law can a motion for judgment on the pleadings be granted. Hodgson v. Bicknell, 49 Wn.2d 130, 136, 298 P.2d 844 (1956). In a motion for judgment on the pleadings, the moving party admits all facts well pleaded by the non-moving party, but not the truth of the opponent's conclusions or construction of the subject matter. Pearson v. Vandermay, 67 Wn.2d 222, 230, 407 P.2d 143 (1965); Hodgson, 49 Wn.2d at 136. A judgment on the pleadings is appropriate only if it is clear beyond doubt that the non-moving party can prove no set of facts that entitle him to relief. Bravo v. Dolsen Cos., 125 Wn.2d 745, 750, 888 P.2d 147 (1995).
A. Sufficiency of the Pleadings
First, LJE argues that Jensen's complaint is insufficient to support a motion on the pleadings because it did not admit "all facts material to [Jensen's] motion." Br. of Appellant at 10. Specifically, LJE argues that, although it admitted that the developer no longer exists, it denied that this fact renders restrictive covenant number 6 unenforceable. Although a party who Page 10 moves for a judgment on the pleadings admits the truth of every fact well pleaded by his opponent, that party need not admit the truth of the opponent's conclusions or construction of the subject matter. Pearson, 67 Wn.2d at 230. And the validity and enforceability of restrictive covenant number 6 is a question of law.
B. De Facto Successor
Next, LJE argues that there was a disputed issue of material fact because it presented evidence that it is the de facto successor of the developer. Specifically, LJE points out that it has historically exercised the authority to approve or deny subdivision requests without objection from the homeowners or the developer, even though it exercised this authority while the developer was still viable. Whether LJE is a successor to the developer is a disputed issue of fact under which LJE could prove its case and, thus, judgment on the pleadings was inappropriate.
In Green, Division One reasoned that "successor" is a term of art that may refer to successors of "corporate control," or simply to an entity that "has in fact succeeded." 137 Wn. App. at 686 (quoting Battery Homeowners Ass'n v. Lincoln Fin. Res., Inc., 309 S.C. 247, 250, 422 S.E.2d 93 (1992)). Here, LJE presented evidence that it was the de facto successor to the developer. The developer expressly granted LJE the authority to enforce all of its restrictive covenants, both in the plat restrictions themselves and in LJE's articles of incorporation. In addition, for at least the last 18 years, LJE has approved or denied subdivision requests without objection from the homeowners or the developer, even though LJE exercised this authority while the developer was still viable. Indeed, Jensen himself submitted his proposed subdivision to LJE as the approving authority before filing the instant suit after it denied his request.
Here, LJE's admission that the developer dissolved does not affect its right to prove that, Page 11 having exercised the authority to review and approve proposed subdivision requests with the developer's consent, LJE was the legitimate de facto successor. Because LJE presented evidence of a disputed issue of material fact under which it could be granted relief, judgment on the pleadings was improper. But by ruling that judgment on the pleadings is inappropriate in this case, we do not intend to suggest that LJE is, in fact, the de facto successor to the developer. We hold only that because LJE presented evidence that it is the de facto successor, there is an issue of fact requiring a trial sufficient to defeat a motion for judgment on the pleadings. It will be for the finder of fact to decide whether LJE is the developer's successor.
Furthermore, if, on a motion for judgment on the pleadings, the parties present matters outside the pleadings to the trial court and the trial court does not exclude them, the trial court should treat the motion as one for summary judgment. CR 12(c). Where the matters outside of the pleadings are not material to the issue presented in the motion on the pleadings, the trial court should not consider them. Cary v. Mason County, 132 Wn. App. 495, 498-99, 132 P.3d 157 (2006), review denied, 153 P.3d 196 (2007). But here, LJE's trial counsel submitted a declaration that included evidence that LJE was the de facto successor to the developer; because this was a material issue in the case, the trial court improperly refused to consider this evidence and failed to treat the motion as one for summary judgment. See Cary, 132 Wn. App. at 498-99. Had it properly analyzed the motion as one for summary judgment, it would have been required to review the covenants, thus, we do so now. Restrictive Covenants
Restrictive covenants are enforceable promises regarding the use of land. Viking Props., Inc. v. Holm, 155 Wn.2d 112, 119, 118 P.3d 322 (2005). A covenant that runs with the land "has Page 12 an indefinite life, subject to termination by conduct of the parties or a change in circumstances which renders its purpose useless." Thayer v. Thompson, 36 Wn. App. 794, 797, 677 P.2d 787, review denied, 101 Wn.2d 1016 (1984).
Enforcement of restrictive covenants protects the character of established residential neighborhoods. Hagemann v. Worth, 56 Wn. App. 85, 88-89, 782 P.2d 1072 (1989). And such enforcement is increasingly important to preserve the expectations of property owners in the face of increased urban growth patterns. Mains Farm Homeowners Ass'n v. Worthington, 64 Wn. App. 171, 179, 824 P.2d 495 (1992), affirmed, 121 Wn.2d 810, 854 P.2d 1072 (1993). Plat restrictions are "indispensible to the functioning of a home owner[s] association" and, thus, can be enforced by such associations. 6-2 Home Owner Associations Planned Unit Developments § 2.04(2) (2008). Indeed, the core feature of the homeowners association concept is an agreement by homeowners to share real property rights and obligations that can only be enforced by restrictive covenants. Id.
Without the ability to enforce its rules, the community cannot maintain its planned character, nor provide the lifestyle that its residents bargained for when they chose to purchase homes in that particular community. 6A-8 Home Owner Associations Planned Unit Developments § 8.04. It is through the use of recorded restrictive covenants that "run with the land" that homeowners associations can maintain the control and assessments vital to the community's continued existence, binding not only those who acquired their homes from the developer, but also on those who are successors to that interest, who may not have personally agreed to be bound by the community's rules. Id. § 8.07. Thus, restrictive covenants allow residents to have greater predictability and control over the environment in which they live; by sacrificing the right to use their property to its fullest potential, residents are assured that development will occur within pre-set parameters. See id.
The interpretation of a restrictive covenant is a question of law that we review de novo. Wimberly v. Caravello, 136 Wn. App. 327, 336, 149 P.3d 402 (2006). Like the trial court, our primary task is to determine the intent of the covenant's drafters. Wimberly, 136 Wn. App. at 336 (citing Hollis v. Garwall, Inc., 137 Wn.2d 683, 695, 974 P.2d 836 (1999)). Basic rules of contract interpretation apply to our review of restrictive covenants. Wimberly, 136 Wn. App. at 336. Under such rules, reviewing courts must generally give words in a covenant their ordinary, usual, and popular meaning unless the entirety of the agreement clearly demonstrates a contrary intent. Hearst Commc'ns, Inc. v. Seattle Times, 154 Wn.2d 493, 504, 115 P.3d 262 (2005). In order to be ambiguous, a covenant must be uncertain or two or more reasonable and fair interpretations must be possible. White v. Wilhelm, 34 Wn. App. 763, 771, 665 P.2d 407, review denied, 100 Wn.2d 1025 (1983). But ambiguity is not a prerequisite for a court to examine the context surrounding the execution of a contract. Berg v. Hudesman, 115 Wn.2d 657, 666-67, 801 P.2d 222 (1990).
Washington courts have moved away from the position of strict construction historically adhered to when interpreting restrictive covenants. Viking Props., 155 Wn.2d at 120. This is due in large part to a shift in perception regarding restrictive covenants. See Viking Props., 155 Wn.2d at 120. Instead of viewing such covenants as restraints on the free use of land, Washington courts have acknowledged that restrictive covenants "tend to enhance, not inhibit, the efficient use of land." Viking Props., 155 Wn.2d at 120 (quoting Riss v. Angel, 131 Wn.2d 612, 622, 934 P.2d 669 (1997)). Consequently, we strive to interpret restrictive covenants in such a Page 14 way that protects the homeowners' collective interests and gives effect to the purposes intended by the drafters of those covenants to further the creation and maintenance of the planned community. Lakes at Mercer Island Homeowners Ass'n v. Witrak, 61 Wn. App. 177, 181, 810 P.2d 27, review denied, 117 Wn.2d 1013 (1991).
A. Validity and Enforceability of Restrictive Covenant Number 6
The gravamen of the dispute between Jensen and LJE is whether restrictive covenant number 6 is valid and enforceable when the named approval entity, in this case the developer, no longer exists. Jensen contends that a restrictive covenant becomes invalid and unenforceable when it requires approval of an entity that no longer exists. LJE argues that it holds enforcement authority as a de facto successor and also through restrictive covenant number 6 and its articles of incorporation. Because homeowners in a planned community have the right to rely on restrictive covenants that "run with the land," LJE maintains that restrictive covenant number 6 is valid.
LJE also argues that restrictive covenant number 6 is ambiguous, and asks that we liberally construe it in LJE's favor. Jensen responds that restrictive covenant number 6 is not ambiguous and, thus, needs no interpretation. But we need not reach the issue of whether restrictive covenant number 6 is ambiguous because the purpose of a restrictive covenant is part of the context surrounding the execution of the agreement, which we may examine without first having to make a finding with regard to ambiguity. See Berg, 115 Wn.2d at 666-67.
Jensen relies on White to support his contention that the "law is clear in Washington . . . that a restrictive covenant becomes unenforceable when it requires approval of an entity that no longer exists." Br. of Resp't at 12. But the facts and analysis in White do not support Jensen's blanket assertion.
In White, the covenant at issue required that the architectural control committee approve buildings before construction commenced. 34 Wn. App. at 765. The plaintiffs failed to seek committee approval prior to construction, and other homeowners in the community sued to enjoin the construction. White, 34 Wn. App. at 765-66. At the time the plaintiffs filed suit, the committee no longer existed, there had been several homes built without prior approval of the committee, and the plaintiffs themselves had built their home without first seeking the committee's approval. White, 34 Wn. App. at 770.
The trial court determined that the homeowners had abandoned the covenant by violating it "habitually and substantially," thereby making it unenforceable. White, 34 Wn. App. at 770. But, contrary to Jensen's assertions, the White court did not base its decision on the absence of the approval committee, but rather on whether the enforcing parties had abandoned the covenant's protections through repeated violations by other homeowners. 34 Wn. App. at 770. The non-existence of the committee was merely one factor the court considered in its abandonment analysis. See White, Wn. App. at 770. Here, there is no evidence that the homeowners abandoned restrictive covenant number 6.
Jensen also points us to Barbato v. Shundry, 1991 WL 115949 (Ohio Ct. App. 1991), an unpublished Ohio Court of Appeals case that addressed a similar issue. Under GR 14.1, a party may cite to an unpublished opinion from another jurisdiction if citation to that opinion is permitted under the law of the jurisdiction of the issuing court. See Oltman v. Holland Am. Line USA, Inc., ___ Wn.2d ___, 178 P.3d 981 (2008). In 2002, the Ohio Supreme Court abolished the distinction between controlling and persuasive opinions based on whether they had been published. See Ohio S. Ct. Rep. Op. Rule 4(A). All court of appeals opinions issued after the effective date may be cited as legal authority and weighted as deemed appropriate by the courts. Ohio S. Ct. Rep. Op. Rule 4(B).
In Barbato, the restrictive covenant required that the grantor approve plans for all buildings that homeowners wanted to build on their land. 1991 WL 115949, at *3. The "grantor" was a corporation that subsequently dissolved, without naming a successor. Barbato, 1991 WL 115949, at *3. Prior to building a structure, the defendants attempted to obtain approval from the former principal of the corporation since the original grantor had dissolved, but he informed the defendants that the covenant was invalid and that they did not need his approval. Barbato, 1991 WL 115949, at *4.
But like White, the non-existence of the approval entity authorized to review plans alone was insufficient for the court to find the covenant unenforceable. See Barbato, 1991 WL 115949, at *5. Rather, the Ohio court found that the restrictive covenant had been abandoned because the covenant had not been enforced for quite some time, the development company had dissolved and failed to appoint a successor, and the principal of the former corporation refused to get involved. Barbato, 1991 WL 115949, at *5. Furthermore, unlike Washington courts, Ohio courts do not favor restrictions on the use of land and, as a result, strictly construe restrictions on property against those limitations. Barbato, 1991 WL 115949, at * 1 (citing Driscoll v. Austintown Ass'n, 42 Ohio St. 2d 263, 328 N.E.2d 395 (1975)).
LJE cites Green to support its proposition that when a homeowners association succeeds a development company, it retains the right to enforce the covenants. In Green, the subdivision was subject to a 1929 covenant requiring that building plans be approved by the developer. Page 17 137 Wn. App. at 682. In 1947, the developer conveyed all of its rights, titles, interests, and enforcement powers to the homeowners association. Green, 137 Wn. App. at 682. In 1977, the developer dissolved, and the homeowners association continued to enforce the covenants. Green, 137 Wn. App. at 682. Several homeowners sued, arguing that the authority to enforce the covenants vested exclusively in the developer and could not be passed on to subsequent owners of the developer's interests. Green, 137 Wn. App. at 683-86. Division One disagreed, holding that, because the covenants ran with the land, they had passed automatically to successors to the benefited and burdened estates, without the requirement of a specific instrument of transfer. Green, 137 Wn. App. at 683-86.
LJE also points us toward Sherwood Estates Homes Ass'n v. Schmidt, 592 S.W.2d 244 (Mo.Ct.App. 1979), a case in which the Missouri Court of Appeals addressed a virtually identical issue and ruled in favor of the homeowners association. In Sherwood Estates, the developer of a planned community gave the homeowners association the right to enforce restrictive covenants limiting new structures, but the language of the covenant explicitly required approval of any plans by the developer prior to construction. 592 S.W.2d at 245. The developer assigned the right to enforce the covenant to the association, but not the right to approve the plans. Sherwood Estates, 592 S.W.2d at 247. Despite this, the court held that the association also had the right to approve plans because the "power to enforce [the restriction] is a legally sterile power if it does not include the power to grant or withhold approval of plans . . . falling within its purview." Sherwood Estates, 592 S.W.2d at 247.
Because a subdivision's restrictive covenants that "run with the land" tend to enhance the efficient use of land and its value by maintaining the character of the neighborhood in which the burdened land is located, the restrictive covenant is a benefit shared by the owners of the other properties burdened by the same covenant. Green, 137 Wn. App. at 683. Thus, we must "place 'special emphasis on arriving at an interpretation that protects the homeowners' collective Page 18 interests'" and "reasonable expectations." Green, 137 Wn. App. at 683 (quoting Riss, 131 Wn.2d at 624). Accordingly, if more than one reasonable interpretation of the covenant is possible, we favor the interpretation that avoids frustrating the reasonable expectations of those affected by the covenant's provisions. Green, 137 Wn. App. at 683.
Here, the purpose of restrictive covenant number 6 is to protect the planned development in the Debra Lake Jane Plat by providing a method for community approval of any subdivisions within the plat. Restrictive covenant number 6 benefits the community's homeowners because it requires homeowners to seek approval before subdividing their land, thus maintaining the character of the community. Moreover, the benefit created by the covenant adds value to the homeowners' land. See Green, 137 Wn. App. at 684. By the terms of the covenants, they run with the land and, thus, subsequent purchasers of individual lots are bound by the restrictions automatically. If the covenant became invalid and unenforceable when the developer dissolved, as Jensen asserts it should, it would compromise the benefit homeowners had purchased and bargained for. These other homeowners have the right to rely on the restrictive covenants in place when they purchased into the Debra Lake Jane Plat. See Green, 137 Wn. App. at 684. Accordingly, we hold that the developer's dissolution did not terminate authority to enforce these covenants. Whether LJE has such enforcement authority either as a de facto successor or under the terms of the covenants remain issues for trial. Attorney Fees
Neither party requests attorney fees, but each party asks that we sanction the other.
LJE urges us to sanction Jensen for citing to Barbato, an unpublished Ohio decision. But under GR 14.1, a party may cite to an unpublished opinion from another jurisdiction if citation to that opinion is allowed under the law of the jurisdiction of the issuing court. See Oltman v. Holland Am. Line USA, Inc., ___ Wn.2d ___, 178 P.3d 981 (2008). Furthermore, Barbato is not persuasive, and we ignore the case for purposes of our analysis.
Jensen asks us to sanction LJE for citing to an unpublished decision of this court in which we affirmed that LJE has the general enforcement power over restrictive covenant number 6. But LJE cited these cases as evidence rebutting Jensen's claim that it had abandoned any enforcement authority it may have otherwise had. It did not cite the unpublished case as legal authority, and sanctions are not warranted.
Accordingly, we reverse and remand for further proceedings consistent with this opinion.
A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.
HOUGHTON, C.J., ARMSTRONG, J., concur.