Opinion
No. COA11–600.
2012-05-1
Mary A. CRAVER; Jean A. Kitchen; James C. Granoff and wife, Kathryn Granoff; Patrick Cartwright and wife, Patricia Cartwright; and Kimberly W. Young, as Trustee Under Agreement Dated October 8, 2003, Plaintiffs, v. Karen M. RAYMOND, et al., Defendants.
Sigmon, Clark, Mackie, Hanvey, & Ferrell, P.A., by Forrest A. Ferrell and Stephen L. Palmer, for plaintiffs-appellees. Di Santi Watson Capua & Wilson, by Chelsea B. Garrett, for defendant-appellant Karen M. Raymond.
Appeal by defendant from judgment entered 17 November 2010 by Judge Richard L. Doughton in Watauga County Superior Court. Heard in the Court of Appeals 24 January 2012. Sigmon, Clark, Mackie, Hanvey, & Ferrell, P.A., by Forrest A. Ferrell and Stephen L. Palmer, for plaintiffs-appellees. Di Santi Watson Capua & Wilson, by Chelsea B. Garrett, for defendant-appellant Karen M. Raymond.
HUNTER, Robert C., Judge.
Plaintiffs-appellees Mary A. Craver, Jean A. Kitchin , James C. Granoff, Kathryn Granoff, Patrick Cartwright, Patricia Cartwright, and Kimberly W. Young (collectively “plaintiffs”) began the underlying action upon filing a complaint in Watauga County Superior Court seeking declaratory judgment and preliminary and permanent injunctions against respondent-appellant Karen M. Raymond (“Raymond”) concerning her claim of ownership to certain property Raymond purchased in the Mayview Park subdivision in Blowing Rock, North Carolina, as well as her division of and intended construction on other lots purchased in the subdivision. Plaintiffs argued Raymond's actions were in violation of restrictive covenants referenced in the deeds to the Mayview Park lots held by all parties. Raymond answered arguing the restrictive covenants were not enforceable due to (1) the substantial changes in the character of Mayview Park since its formation and (2) the affirmative defenses of waiver, acquiescence, laches, unclean hands, and estoppel. After careful review, we affirm, in part, and reverse and remand, in part.
The record indicates “Kitchin” is the correct spelling of plaintiff Jean A. Kitchin's last name. Our use of “Kitchen” in the caption is a reproduction of the spelling used by the trial court in the caption of its order.
Background
In 1919 a subdivision named Mayview Park was established in Blowing Rock, North Carolina with 104 lots on the original plat. The plat was revised a few years later increasing the number of lots to a total of 143. The original owner of the subdivision conveyed deeds for the lots containing restrictive covenants (the “Restrictive Covenants”). The covenants included the following restrictions that are relevant to this case:
1. That the said land and premises shall be occupied for residence purposes only.... (“Restrictive Covenant 1”)
2. Any dwelling erected on any vacant lot shall face the street on which it fronts as shown by the plat above referred to, and no part of said house shall be nearer than thirty feet of the street on which it fronts.... (“Restrictive Covenant 2”)
3. Any residence erected on said lots shall be a single-family house, to be used and occupied for residence purposes only, and boarding-houses and hotels shall not be permitted under this condition. (“Restrictive Covenant 3”)
5. The said lots shall not be subdivided, and only one residence shall be erected on any one lot.... (“Restrictive Covenant 5”)
Over the course of the 88 years since the formation of Mayview Park, 40 of the 143 original lots have been subdivided. In 1921, several lots were deeded for the operation of the Mayview Manor Hotel; these lots were subject to a different set of restrictive covenants that did not prohibit lot division or the construction of more than one residence. The hotel ceased operation in the 1960s and the eight lots associated with the operation of the hotel have been divided for multiple developments consisting of 32 condominiums and four townhomes.
However, 34 of the lots subject to the Restrictive Covenants have been subdivided in violation of Restrictive Covenant 5, approximately 25% of the restricted lots. Of those 34 subdivided lots, 18 have more than one residence in violation of Restrictive Covenant 5, approximately 13% of the restricted lots. Nonresidential uses of lots in Mayview Park, which are in violation of Restrictive Covenant 1, include: a restaurant that has been in operation on one lot since the 1960s; the use of three lots owned by Blowing Rock Charity Horseshow Foundation, Inc. for conducting horseshows; one lot used by the public works department of the Town of Blowing Rock (the “Town”); and the operation of a business office on one lot for a development of condominiums.
The Town has held public meetings related to the division of several lots in Mayview Park. In 1994, the Town held a public hearing to consider whether lots 51, 52, 53, 91, 92, 93, and 93B should be combined and re-divided for a 14–lot subdivision called Greystone at Mayview (“Greystone”). The trial court noted there is no evidence that objections were raised to the formation of Greystone. Of these lots, lots 91, 93, and 93B were divided into 10 lots on which multiple residences were built, while a portion of 93B was reserved for green space.
In 2001, the Town held a meeting regarding the division of lots 5 and 6. Portions of the divided lots 5 and 6 were used for a private residence while other portions were combined with lot 7 for the construction of a condominium complex. Lot 7 was originally used in association with the Mayfair Hotel, which, by its original deed, appears not to have been subject to restrictive covenants prohibiting lot divisions or the construction of more than one residence. It is unclear whether lot 5 was subject to the Restrictive Covenants. However, lot 6 was made subject to the Restrictive Covenants in a 1926 deed.
In 2003, the Town approved the combination and division of lots 61, 62, 63, and 64 to produce five new lots. At the time of the filing of this action, only four residences had been built on these five lots. Additional Mayview Park lots were divided over the years that were not the subject of public meetings.
Several of plaintiffs and Raymond have purchased lots that at one time were divided from an original lot or they lived in Mayview Park when other lots were divided or subject to construction in violation of Restrictive Covenant 5. Plaintiffs Granoff acquired lot 84 in 1990 and, later, lot 85; the Granoffs combined the two lots before selling the newly formed lot to plaintiffs Cartwright. In 2003, plaintiff Young acquired, as a trustee, lots 1, 2, 3, and 4. While Young's lots have not been divided and have no more than one residence on each lot, they are adjacent to lots 5 and 6, which were combined and divided, and on which condominiums were built years earlier; as lot 6 was subjected to the Restrictive Covenants by a 1926 deed the division of lot 6 and construction of the condominiums thereon are in violation of Restrictive Covenant 5. Additionally, plaintiffs conceded at the summary judgment hearing that the condominiums are operated as a business with the business office located on site; such use is in violation of Restrictive Covenant 1 prohibiting nonresidential use.
In 2007, plaintiff Kitchin purchased a divided portion of lot 76; the same lot of which Raymond later purchased a portion. At the summary judgment hearing, Raymond noted that when plaintiff Kitchin purchased her portion of lot 76 there was a house on Kitchin's portion that was in violation of a setback restriction in the Restrictive Covenants. At the time of the hearing, Kitchin was constructing a new house on the foundation of the home that existed at the time she purchased the lot. Kitchin's new house was therefore in violation of the setback provision of Restrictive Covenant 2. Despite plaintiffs' proximity to these violations, plaintiffs have not filed any suit to enforce any one of the Restrictive Covenants against any owner in Mayview Park before filing the underlying action against Raymond.
Within a few days after plaintiff Kitchin acquired her divided portion of lot 76, Raymond bought a divided portion of lot 76 adjacent to plaintiff Kitchin. Raymond also acquired lot 81 and a separate unwarranted 0.03 acres for a total of $500,000. The deed by which Raymond acquired her property expressly stated the land was subject to a declaration of restrictions on record at the Watauga County Public Registry. The title insurance policy Raymond obtained for the purchase also referenced the Restrictive Covenants and excluded coverage for any loss due to the covenants. Raymond, however, was advised by her attorney that the Restrictive Covenants were not enforceable. Raymond intended to build homes on these lots and sell at least one of them. Indeed, Raymond divided lot 81 into two lots, 81A and 81B, constructed one residence on lot 81B and sold it, with lot 81A, for approximately $1.3 million dollars. Raymond advertised lot 81A as being subject to “Deed Restrictions.” When Raymond began construction on her portion of lot 76, plaintiffs filed the underlying action.
Raymond has retained an option to repurchase lot 81A for one dollar pending the outcome of this suit.
By consent order, the parties joined all other property owners within Mayview Park as defendants to plaintiffs' action. Of these additional 208 defendants only Anthony S. and Deborah W. di Santi (the “di Santis”) filed an answer. In their answer, the di Santis asserted that the restrictive covenants for Mayview Park were unenforceable due to consistent and continuous violations of the covenants; and that because a number of the plaintiffs owned property that violated the covenants or have ignored other violations they should not be permitted to enforce the restrictive covenants. The di Santis own lot number 40, which appears not to be in violation of Restrictive Covenant 5.
In addition to owning property in Mayview Park, Anthony di Santi represented Raymond in the purchase of her lots in the subdivision. In an affidavit, Mr. di Santi testified that when he prepared the deed to lot 81 for Raymond he included language stating the lot was subject to the Restrictive Covenants. He did so, however, out of his practice to include in a deed any condition in the previous deed. Mr. di Santi did not intend to “breathe new life into dead restrictions” and he advised Raymond that the restrictive covenants were not enforceable.
Plaintiffs and Raymond filed cross motions for summary judgment. On 18 November 2010, following a hearing on the parties' motions, Judge Richard Doughton concluded the Restrictive Covenants had not been terminated as a result of changed circumstances; and that plaintiffs were not barred from enforcing the Restrictive Covenants by waiver, acquiescence, laches, unclean hands, estoppel, or any similar affirmative defense. The trial court granted summary judgment in favor of plaintiffs, issuing a permanent injunction against Raymond, and anyone claiming title through her, from construction of a residence on her portion of lot 76 or the unoccupied portion of lot 81. The trial court held void Raymond's claim of ownership to the unwarranted 0.03 acres in which the rock formation the Lover's Leap is located. Raymond appeals.
Discussion
Raymond first argues the trial court erred in granting summary judgment to plaintiffs because the number and nature of the violations of the restrictive covenants require the conclusion that the purpose of the covenants has been destroyed. As to the restriction on the division of lots, we agree that restriction is no longer enforceable.
Plaintiff cites Starkey v. Gardner, 194 N.C. 74, 76, 138 S.E. 408, 409 (1927), in which our Supreme Court first addressed the question of when restrictive covenants in residential deeds are rendered unenforceable. As a case of first impression, the Starkey Court noted “[t]he weight of authority is to the effect that if substantial, radical and fundamental changes have taken place in a development protected by restrictive covenants that courts of equity will not enforce the restriction.” Id. at 79, 138 S.E. at 410. Such changes “destroy the uniformity of the plan and the equal protection of the restriction.” Id. At issue in Starkey was whether the plaintiff could enforce restrictive covenants prohibiting commercial development against his defendant-neighbor. Id. at 75, 138 S.E. at 408. At the time the defendant purchased his property, the street on which the parties' properties were situated was originally suitable only for residential purposes and both parties' deeds contained restrictions prohibiting commercial development. Id.
However, the Court noted that over the next several years the street had been improved and multiple businesses were constructed in proximity to the parties' lots. Id. at 80, 138 S.E. at 410. As a result, the property was worth 100 percent more as commercial property than as residential property. Id. Additionally, 80 percent of the owners of the lots in the neighborhood joined the defendant in seeking removal of the restrictions on their land. Id. Thus, the Starkey Court concluded the area had “undergone a total change,” the restrictive covenants were “detrimental and injurious” and could not be enforced. Id. at 80, 138 S.E. at 411.
More recently, this Court addressed the enforceability of restrictive covenants in Medearis v. Trustees of Myers Park Baptist Church, 148 N.C.App. 1, 558 S.E.2d 199 (2001). In Medearis, homeowners sought declaratory judgment to enforce restrictive covenants against nearby property owners who sought to expand their nonresidential use of the land in contravention of the restrictive covenants in their deeds. 148 N.C.App. at 2, 558 S.E.2d at 201. The trial court granted summary judgment permitting the nonresidential use. Id. at 4, 558 S.E.2d at 202. This Court affirmed the trial court's order, reasoning that the nonresidential use (parking lots and business offices) on one-half of the lots subject to the residential restriction were “open and obvious violation[s] of the restriction,” while another third of the lots were vacant. Id. at 9, 558 S.E.2d at 205. These changes, we concluded, were “ ‘so radical as practically to destroy the essential objects and purposes of the agreement.’ “ Id. (quoting Tull v. Doctors Bldg., Inc., 255 N.C. 23, 39, 120 S.E.2d 817, 828 (1961) (citation and quotation marks omitted)).
According to the record before this Court, 25% of the restricted lots in Mayview Park have been subdivided in violation of Restrictive Covenant 5. This includes 13% of the restricted lots that have more than one residential structure, also a violation of Restrictive Covenant 5. Additionally, the lots in violation of Restrictive Covenant 5 are not confined to one area of Mayview Park but are dispersed throughout the subdivision. The majority of additional lot owners, though properly served and joined as defendants to the instant case, have remained silent throughout the course of this litigation. The trial court concluded it could take judicial notice of the fact the majority of the property owners have remained silent. The one exception, the di Santis, join Raymond in arguing the Restrictive Covenants are unenforceable.
The parties have not cited, nor have we found, a case in this state analyzing whether the division of residential lots in violation of a restrictive covenant amounted to a radical change sufficient to render the covenant unenforceable. As we noted in Medearis, “[w]hether or not a radical change has taken place depends on the facts and circumstances of each case.” 148 N.C.App. at 7, 558 S.E.2d at 204. Under the facts of this case, we conclude the numerous violations of the prohibition on lot divisions recurring over many decades throughout Mayview Park are substantial violations of Restrictive Covenant 5 that have “destroy[ed] the uniformity of the plan and the equal protection of the restriction.” Starkey, 194 N.C. at 79, 138 S.E. at 410. Accordingly, we conclude summary judgment for plaintiffs was improper; defendants are entitled to entry of summary judgment in their favor.
Our holding is limited in scope and only applies to the prohibition on lot divisions. We conclude the other Restrictive Covenants in the parties' deeds are enforceable. While the restriction on erecting more than one residence per lot remains enforceable, it permits the erection of one residence on any lot resulting from the division of an original lot of the Mayview Park plat.
Conclusion
In sum, we conclude the trial court erred in granting summary judgment in favor of plaintiffs. That part of the trial court's order granting summary judgment is reversed. We remand to the trial court for entry of an order of summary judgment in favor of defendants. We do not reach Raymond's remaining argument that plaintiffs have waived their right to seek enforcement of the Restrictive Covenants. Because Raymond does not appeal from that portion of the trial court's order declaring void her deed to the 0.03 unwarranted acres that portion of the trial court's order is affirmed.
Affirmed, in part, and reversed and remanded, in part. Judges THIGPEN and McCULLOUGH concur.
Report per Rule 30(e).