Opinion
No. 3-390 / 02-1233.
Filed January 14, 2004.
Appeal from the Iowa District Court for Pottawattamie County, Leo F. Connolly, Judge.
Homeowners appeal from injunction that required the removal of two modular homes from a subdivision. AFFIRMED IN PART; MODIFIED IN PART; REVERSED IN PART.
Thomp J. Pattermann of Smith Peterson Law Firm, L.L.P., Council Bluffs, for appellants.
Anthony Tauke of Porter, Tauke Ebke, Council Bluffs, for appellees.
Heard by Sackett, C.J., and Miller and Hecht, JJ.
Defendants Dan L. Claar d/b/a Claar Construction and Bradley and Sandra Knott appeal from an injunction entered by the district court that ordered the removal of two modular homes from the Parkwild Subdivision. While we disagree with the district court's determination that the modular homes erected by Claar constituted "dwellings" within the context of the subdivision's restrictive covenants, we do agree that Dan Claar willfully violated another covenant provision. We nevertheless conclude it was inequitable to order removal of the homes, and reverse that portion of the district court's injunctive order.
Background Facts and Proceedings.
Dan Claar is a contractor who constructs both modular and site-built homes under the name Claar Construction. His wife, KellySue Claar, acts as Claar Construction's business manager. In the late 1990s Claar gained title to Lots 3, 4, 5, and 6 in the Parkwild Subdivision (Parkwild).
The lots in Parkwild are subject to a Declaration of Covenants, Conditions and Restrictions (Declaration), that was executed by Mary A. Favara, trustee of the J.F. Schlott Residual Trust. Paragraph seven of clause two of the Declaration required plans and specifications for proposed buildings be submitted for approval:
No building . . . or other structure shall be commenced, erected or maintained upon any residential lot . . . until the plans and specifications showing the nature, kind, shape, height, material and location of the same have been submitted to and approved in writing as to harmony of design of external design and location in relation to surrounding structures and topography by Mary A. Favara, Trustee, J.F. Schlott Residual Trust. . . . In the event said parties fail to approve or disapprove such design and location within ten days after said plans and specification[s] have been submitted to them, approval will not be required and this clause will be deemed to have been fully complied with.
Paragraph nineteen of clause two prohibited the moving of any "dwelling . . . to any lot within Parkwild development from outside the development."
In the summer of 2001 Claar contracted with Bradley and Sandra Knott for the erection of a modular home on Lot 3. On August 1, 2001 Mrs. Claar sent a letter to Mary Favara's husband Ron Favara of Charter Investments, the subdivision's developer, informing him that Claar Construction would be "constructing a home on site on lot 3." The evidence was in dispute as to whether plans for Lot 3 were attached to or enclosed with the letter. About this same time, early August, certain Parkwild homeowners learned that Claar intended to erect modular homes on his lots. They became concerned about the impact the modular homes would have on the property values of the existing, site-built homes.
On August 17, 2001, attorney A.W. Tauke, counsel for the subdivision, sent Mrs. Claar a letter in response to her August 1 letter to Ron Favara. Attorney Tauke's letter expressed concerns over whether the building being constructed on Lot 3 was in conformance with the Declaration, and advised the Claars to review the Declaration to "avoid property owners in the area asking that you terminate the construction to comply with the covenants." Neither Claar nor his wife responded to the August 17 letter, and Claar proceeded to erect a modular home on Lot 3.
On October 5, 2001, a group of Parkwild residents (plaintiffs) filed an equitable action against Claar, seeking removal of the home from Lot 3, and a prohibition on future modular home construction on Lots 4, 5, and 6. Claar filed a counterclaim for a declaratory judgment on the issue of whether the modular home constructed by Claar constituted a "dwelling" within the context of the Declaration. Bradley and Sandra Knotts, who took possession of the home on Lot 3 on October 9, 2001, were later added as party defendants.
After the suit was filed Claar prepared to erect a home on Lot 4. Attorney Tauke sent a letter to Claar's attorney, expressing the expectation that any construction on Lots 4, 5, and 6 would comply with the Declaration, including the requirement to submit plans and specifications. Claar erected another modular home on Lot 4, and the evidence was once again in dispute as to whether Claar provided the trust with the plans and specifications for the building, or even notified the trust that a building was to be erected on Lot 4.
The plaintiffs were granted a temporary injunction on November 6, 2001, that barred Claar from further construction on Lots 4, 5 and 6. The injunction was subject to the plaintiffs posting a $150,000 bond. On November 28 Claar filed a motion to set aside the temporary injunction because the plaintiffs had yet to post bond. On December 3 the court entered an order directing that the temporary injunction would be set aside and dissolved unless bond was posted by December 13. No bond was posted.
In its June 3, 2002 ruling, the district court concluded that Claar had failed to submit plans for the home on Lot 3 as required by paragraph seven, had violated paragraph nineteen by moving a dwelling onto Lot 3, and could not "credibly state [he] did so without knowledge of the covenants and restrictions imposed. . . ." The court decreed the home on Lot 3 was in violation of paragraph nineteen and "must be removed as violative of the Declaration." It further decreed that no other dwelling could be moved onto any of the lots owned by Claar without "compliance with the requirements as set forth in the Declaration." Granting a post-ruling motion filed by the plaintiffs, the court further decreed that the home on Lot 4 was also in violation of the Declaration, and must be removed.
Claar and the Knotts appeal. They contend the court erred in concluding that the homes on lots 3 and 4 were "dwellings," and in finding Claar had not submitted plans to the trust and had knowingly violated the Declaration. They also argue that ordering removal of the homes was an inequitable remedy.
Scope of Review.
Our review of this equitable proceeding is de novo. Iowa R. App. P. 6.4. Although not bound by the district court's factual findings, we give them weight, especially when assessing witness credibility. Iowa R. App. P. 6.14(6)( g).
Dwelling.
The primary issue in this case was whether the modular homes on Lots 3 and 4 violated paragraph nineteen of clause two, because they constituted "dwelling[s that] shall [not] be moved to any lot within Parkwild development from outside the development." Since paragraph nineteen requires us to look to the time the homes were moved into Parkwild, it is necessary to have an understanding of the modular home construction process. The modular homes in this case were prefabricated in two sections, and then moved into the subdivision, where they were permanently affixed to their foundations. Once on site the two halves of each home were "married," which required additional drywall, siding, trim, paint, and other finishing work. Thus we focus, not on the completed structures, but on their prefabricated segments.
The term "dwelling" is not defined within the Declaration, and we have no direct testimony or evidence as to what the signers of the Declaration intended by the term. We therefore turn to the language of the Declaration itself, giving words their obvious and ordinary meaning. See First Sec. Co. v. Dahl, 560 N.W.2d 327, 332 (Iowa 1997). The plain and ordinary meaning of the term "dwelling" contemplates a building or structure where people live or reside. See Webster's Third New International Dictionary Unabridged 706 (2002); Black's Law Dictionary 524 (7th ed. 1999). Accordingly, we find instructive two cases where courts of other jurisdictions, interpreting restrictive covenants similar to paragraph nineteen, determined that a modular home was not a building or structure within the context of the covenant.
In Ussery Investments v. Canon Carpenter, Inc., 663 S.W.2d 591, 592 (Tex. Ct. App. 1983), the first district of the Texas Court of Appeals was asked to interpret a restrictive covenant that provided "no `structure' shall be moved onto any lot, but all buildings erected on said lots shall be of new construction." In concluding the covenant did not prohibit a modular home construction technique, the court determined:
The term "structure," as used in the restrictions, clearly means a whole, pre-existing, and habitable building, and its clear purpose is to require that only newly-erected, permanent buildings be placed on the subdivision lots. . . . The restrictions did not require that the structure be "built in place" or otherwise indicate a prohibition against modular construction. . . . Here the separate elements were never joined together to form a structure until they were permanently anchored to the foundation at the building site. Until all of the component elements comprising the basic structure were actually assembled, the unit could not be considered a "structure" within the meaning of the restrictive covenant.
Ussery Inv., 663 S.W.2d at 594-95.
A similar result was reached in Kennedy v. Classic Designs, Inc., 722 P.2d 504 (Kan. 1986). Relying on Ussery, the Kansas Supreme Court determined a covenant requiring that "no building shall be moved into the Addition" did not prohibit modular home construction:
[U]se of the word "building" clearly imports some sort of assembled or completed structure, rather than various component parts that are intended to be attached together to comprise a finished product. We think it is clear that the restrictive covenant . . . contemplated a completed building rather than a method of construction. When the restrictive covenants are considered as a whole, it would appear the intent is to prevent moving used or inferior buildings or structures onto the property as opposed to new construction whether stick-built or modular.
Kennedy, 722 P.2d at 509.
We find the reasoning of these two cases persuasive. Paragraph nineteen indicates an intent to prohibit, not a mode or method of construction, but the moving of a completed structure into Parkwild. Although prefabrication of the modular homes was extensive, the fact remains that what Claar moved into Parkwild were incomplete segments; components to be used in the construction of a habitable dwelling, rather than the dwelling itself. See Sturtz v. Iowa Dept. of Revenue, 373 N.W.2d 131, 134 (Iowa 1985) (treating modular homes as building materials for sales tax purposes).
The plaintiffs argue that we must view the term dwelling not merely within the context of paragraph nineteen, but within the context of the entire Declaration. We agree. See Koenigs v. Mitchell County Bd. of Supervisors, 659 N.W.2d 589, 594 (Iowa 2003). We also agree the language of the Declaration indicates an overall intent to exclude from the subdivision structures that could negatively impact the beauty and marketability of the subdivision, as well the value of the various homes located therein. However, we do not agree that this underlying intent requires that the term dwelling be interpreted to include modular homes.
There is no evidence the modular homes on Lots 3 and 4 are of inferior quality or construction. Rather, evidence was introduced that the quality of modular homes is equal if not superior to that of typical site-built homes. The only substantiated complaint against the homes on Lots 3 and 4 went, not to their quality, but to their aesthetic appearance and architectural interest.
Concerns about aesthetic and architectural issues are not unique to, or inherent in, the mode of modular construction. While the home on Lot 3 is of simpler design than its site-built neighbors, the defendants submitted evidence that modular homes are available in a variety of styles, some similar to the homes of the plaintiffs. Moreover, the parties stipulated that, if called to testify, Mary and Ron Favara would state approval would have been withheld for the homes on Lots 3 and 4, even if they were to be site built, as their architectural plans did not conform to the other homes in the subdivision in style, looks, and location within the lot.
It is the long-settled rule of this state that a restriction on the free use of property is to be strictly construed against the party seeking to enforce it, and any doubts are resolved in favor of the unrestricted use of property. Fischer v. Driesen, 446 N.W.2d 84, 86 (Iowa Ct. App. 1989). Under this standard, the plain language of the Declaration demonstrates the term "dwelling," as used in paragraph nineteen, encompasses only completed or finished structures. To hold otherwise because the Declaration seeks to control the aesthetics of the subdivision, a concern addressed by paragraph seven's requirement to submit plans and specifications prior to construction, would both violate the rule of strict construction and go beyond the plain and ordinary meaning of the term. We therefore reverse the portion of the district court's order that found the homes on Lots 3 and 4 to be dwellings within the context of paragraph nineteen.
Submission of Plans.
The Declaration clearly required Claar to submit the plans and specifications for the homes on Lots 3 and 4 to the trust for its approval. The parties presented conflicting evidence on the issue. Although the August 1 letter to Ron Favara made no reference to any enclosed or attached plans, Mrs. Claar testified that she stapled plans for the home on Lot 3 to the letter, and assumed the trust's failure to respond within ten days meant the plans were approved. Mrs. Claar further testified that she submitted to the trust a letter and plans regarding the home on Lot 4, but again received no response. She could not recall the date the second letter was sent, but indicated it had been sent in the fall of 2001, and that a copy had been provided to Claar's attorney. However, no letter regarding Lot 4 was admitted into evidence. In addition, the parties stipulated that, if called to testify, Mary and Ron Favara would state no plans had been submitted for Lot 3, that no notice was ever received as to any proposed improvements to Lot 4, and that if the plans had been submitted they would not have been approved.
In assessing whether the plans for the home on Lot 3 had been submitted, the district court specifically found the Claars' testimony was not credible. We not only give weight to the court's credibility assessment, Iowa R. Civ. P. 6.14(6)( g), but concur in it. Reviewing the totality of the evidence on this issue, we conclude, as did the district court, that the greater weight of credible evidence supports the plaintiffs' claim that Claar failed to submit the plans for the home on Lot 3. Although no specific findings were made in regard to notification of and plans for the home on Lot 4, we similarly conclude the greater weight of credible evidence demonstrates Claar also failed to submit plans for that home. Both failures constituted violations of the Declaration. Because Claar knew of the Declaration provision, we conclude the violations by Claar were willful, particularly in regards to the home erected on Lot 4. We therefore turn to the question of whether ordering the removal of the two homes constituted appropriate and equitable relief for the violations.
Equitability of Relief.
In assessing the equitability of the court's injunctive ruling, we apply the doctrine of comparative injury. See Fischer v. Driesen, 446 N.W.2d 84, 87 (Iowa Ct. App. 1989). The court must ask whether the plaintiffs will suffer irreparable harm or are otherwise without an effective remedy, and whether the injury to the plaintiffs is slight and the injury or loss to the defendants great. Id. "[I]njunctions which are likely to cause greater injustice than they seek to prevent are properly refused." Id. at 87-88 (quoting Johnson v. Pattison, 185 N.W.2d 790, 797 (Iowa 1971)).
Evidence of the plaintiffs' injury focused on the value of their own property, and assertions that allowing modular homes to remain in Parkwild would negatively affect those values. The complaints went, not to the quality of the modular homes, but their appearance. The only evidence of a specific monetary reduction in value was the testimony of one homeowner who, without foundation, estimated that if he were to sell his home he would "probably lose . . . 10 to 15 percent. . . ." There was no evidence presented as to what effect less drastic measures than removal, such as cosmetic alterations to the homes and lots, would have on the purported reductions in property values.
Conversely, evidence was presented indicating it would be difficult and costly to move the homes. The homes could be picked up in one piece and moved in the same manner as a site-built home, or significant effort could be expended to remove the finishing work and return each home to two movable halves. In either event, moving the homes would likely cause some structural damage, and void the warranties. New lots would need to be located, and new foundations dug. Even without evidence of specific cost, it is clear the expense of such a move would be significant.
We are particularly loath to impose this expense on the Knotts. They appear to be relatively free from culpability in this matter, and are ill placed to bear the burden of a move. They have also indicated a willingness to finish their home in a manner that will comply with the covenants.
Sandra Knott testified that Claar's sales representative, Jim Rock, had informed them other subdivision homeowners were concerned about violations of the covenants, but that the Knotts did not need to worry as "things were being taken care of." She also testified she and her husband could not afford the expense of moving their home, and that any move could disrupt the status of their foster children.
The same cannot be said for Claar. Proceeding with the construction on Lot 4 without submitting plans and specifications to the trust, even though the plaintiffs had filed suit and despite the written reminder from attorney Tauke, strikes this court as particularly willful and obdurate. We nevertheless determine that requiring him to bear the expense of a move is inequitable, in light of the limited evidence of the plaintiffs' damages, and other evidence that indicated the home on Lot 4 had more aesthetic attributes than the home on Lot 3.
Conclusion.
We reverse the district court's conclusion that the modular homes constructed by Claar constituted "dwellings" within the context of paragraph nineteen of clause two of the Declaration. We affirm the court's conclusion that Claar willfully violated paragraph seven of clause two of the Declaration by failing to submit plans and specifications for the home on Lot 3, and determine the same is true regarding the plans for the home on Lot 4. We reverse the district court's injunctive order to remove the homes from Lots 3 and 4. The district court's decree provided in part that, "No other dwelling may be moved to any of the lots owned by Claar without compliance with the requirements as set forth in the Declaration [of Covenants, Conditions and Restrictions]." We modify that part of the decree to provide that "no other building or structure may be moved to or constructed upon any of the lots owned by Claar without full compliance with the requirements as set forth in the Declaration."