July 2007
In This Issue:
A Message to Our Readers
Alternative Dispute Resolution Is Option after Suit Is Filed
Restrictive Covenant Cannot Be Enforced after Statute of Limitations Expires
Association Is Not Responsible for Damage to Adjacent Property from Fallen Tree
Association Did Not Violate Nonresident’s Civil Rights by Mailing Speeding Ticket
House on Lot that Bordered Two Streets Did Not Have to Face Specific Street
Developer Did Not Violate Restrictive Covenants by Selling Parcel of Land to Be Used as Access Road for Contiguous Development
Developer Has Liability in Negligence after Control of Community Is Passed to Association
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A Message to Our Readers

CAI regrets that you are receiving this issue of Community Association Law Reporter late, and we apologize for the delay.

Alternative Dispute Resolution Is Option after Suit Is Filed

Finderne Heights Condominium v. Rabinowitz, 390 N.J. Super. 154, 915 A.2d 16 (2007)

Association Operations: Submission of a matter to alternative dispute resolution is not a prerequisite to litigation, but once a suit has been filed, the respondent in the action may seek to have the matter sent to alternative dispute resolution.

In January 2005, Finderne Heights Condominium Association (“association”) sued Paul and Nancy Rabinowitz and Ellen Thomas, asking the court to enjoin them from violating the association’s governing documents, to compel them to comply with the New Jersey Condominium Act (“Act”) and to enjoin Thomas from occupying or using the property in a manner that would violate the association’s rules. According to the complaint, beginning in July 2004 and continuing through December 2004, Ellen Thomas, who occupied a unit owned by her mother Nancy Rabinowitz, with her husband and two children, “continually trespassed, harassed and disrupted neighbors,” resulting in other owners fearing for their safety.

Thomas and the Rabinowitzes filed a motion to dismiss the association’s complaint, arguing that the association was required first to submit its claims to alternative dispute resolution (“ADR”). The trial court granted the motion to dismiss, and the association appealed, stating that it had no statutory duty to submit its claims to ADR and that the trial court erred in determining that the association was not entitled to bring its claims under the association’s governing documents and the Act.

The Act provides that, “[a]n association shall provide a fair and efficient procedure for the resolution of housing-related disputes between individual unit owners and the association, and between unit owners, which shall be readily available as an alternative to litigation.” The New Jersey Planned Real Estate Development Full Disclosure Act (“PREDFDA”) also contains a similar provision. The association contended that nothing in the Act or PREDFDA required that ADR must be exhausted before resorting to litigation and that the Act is applicable only to housing-related disputes, not in situations where the safety of others was at issue.

The association also pointed to another section in the Act that allowed for reasonable fines, assessments, an action for recovery of damages, injunctive relief, or a combination thereof, in the event of an owner’s failure to comply with an association’s rules and regulations. The association further argued that the association’s governing documents granted the association the ability to seek injunctive relief to enforce the covenants and restrictions in the governing documents, including the prohibition of nuisances.

The court ruled that so long as a unit owner or an association has a legitimate basis under the governing documents to file a suit, a suit may be filed pursuant to the Act without first resorting to ADR. However, once a suit is filed, either litigant may seek to dismiss the matter or make use of ADR, which must be made available under the Act. Furthermore, absent immediate compelling circumstances, such as an immediate threat to the safety of others or an immediate and substantial threat to property, if ADR has not already been exhausted, the trial judge should dismiss the matter without prejudice and require the claim to be submitted to ADR. In this case, because the instances of behavior complained about occurred over a six-month period before the litigation was filed and because the trial judge found no immediate compelling circumstances to warrant denying the owners’ request for ADR, the appeals court affirmed the trial court’s referral
of the matter to ADR.

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Restrictive Covenant Cannot Be Enforced after Statute of Limitations Expires

Girsh v. St. John, 218 S.W.3d 921 ( Tex. App. 2007)

Covenants Enforcement: A Texas appeals court ruled that a suit to enforce a restrictive covenant was barred by the four-year statute of limitations.

Tall Timbers, Section Two, is a subdivision located in Montgomery County , Texas . Restrictive covenants were recorded against the property in 1965 that prohibited house trailers and covered trailers from being built or placed on any lot or tract for any purpose. The covenants also authorized subdivision property owners to “prosecute any proceeding at law or equity” to enforce the restrictions.

In 1984, Laura and Charles Girsh purchased a mobile home and placed it on their property. Sometime in late 1998 or early 1999, Peggy St. John discovered the mobile home. In 2001, St. John sued the Girshes to have the mobile home removed because it violated the restrictive covenants. At trial, the Girshes argued that St. John lacked standing to sue them and pled the defenses of laches, abandonment, and limitations. The trial court ruled in favor of St. John, finding that the statute of limitations was tolled until St. John discovered the mobile home on the property. The trial court granted injunctive relief and damages to St. John, and the Girshes appealed.

In reviewing the issue of St. John’s standing to sue the Girshes, the court stated that generally any person entitled to benefit under the terms of a restrictive covenant may enforce it. The court found that the Tall Timbers, Section Two covenant language was quite explicit in authorizing property owners to enforce the restrictions. The court stated that to establish standing, a party must have a sufficient relationship with the lawsuit so as to have a justifiable interest in its outcome. Based on pleadings and evidence in the record, the court found that St. John established her standing to file suit to enforce the restrictive covenants.

The Girshes argued that the statute of limitations had run on St. John’s enforcement suit as a matter of law. At trial, St. John invoked the discovery rule, but, on appeal, the Girshes argued that St. John had failed to establish the rule’s applicability because she failed to show that the violation was undiscoverable even when exercising due diligence.

The statute of limitations for enforcement of deed restrictions is four years, and an enforcement action accrues upon breach of the restrictive covenant. The record before the appeals court firmly established that the Girshes had placed the mobile home on their property in 1984 in violation of the restrictive covenant recorded against the lot. In an attempt to avoid her suit being barred by the four-year statute of limitations, St. John argued at trial that she did not discover the existence of the mobile home until late 1998 or early 1999 because of an overgrowth of foliage on a neighboring lot. She admitted she had no knowledge of when the Girshes placed the mobile home on the property and asserted that until the Girshes’ neighbor cleared his vacant lot of underbrush and trees, the mobile home was not visible. She estimated that the neighbor cleared the lot in 1998 or early 1999. However, the court found that testimony by other witnesses failed to establish with certainty that the mobile home was not visible during the intervening years.

The court stated that the discovery rule has been applied in limited categories of cases to defer accrual of a cause of action until the plaintiff knew or, exercising reasonable diligence, should have known the facts giving rise to the cause of action. Since there was no question that Girshes’ violated the restrictive covenant, the question became whether the injury was generally discoverable by exercising reasonable diligence. The court determined that St. John failed to establish that the placing of a full-size mobile home (approximately 12 feet by 46 feet) on a residential lot located in the midst of a populated residential subdivision was undiscoverable within the relatively long four-year limitation period. The appeals court ruled that the discovery rule was inapplicable to defer the accrual of St. John’s suit against the Girshes to enforce the restrictive covenant because the suit was barred by the four-year statute of limitations. The court reversed the trial court’s decision and ruled in favor of the Girshes.

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association Is Not Responsible for Damage to Adjacent Property from Fallen Tree

Premium Point Park Association v. Lanza, 14 Misc. 3d 1215A (NY City Ct., 2007)

Risk and Liabilities: In an unreported New York decision, the court determined that the owner of a tree is under no affirmative duty to inspect trees on the owner’s property and that absent actual or constructive notice of a tree’s disease or defect the tree owner is not responsible for damage caused if his or her tree falls onto adjacent property.

If a tree falls in New Rochelle to whom does it belong?  The answer to that question depends on what the owner of the tree knows about the tree and when the owner knows it. On January 18, 2006 during a violent winter storm, a large tree on the common property of Premium Point Park Association (“association”) fell onto the property of Ronald Lanza. Lanza and the association engaged in discussion over some time as to who was responsible for the cost of removing the tree.

Lanza contacted his insurance company, which reimbursed Lanza for the loss associated with the removal of the tree except for a $1,000 deductible. Lanza’s insurance company provided him $1,500 as compensation for the removal of the tree. The total cost of tree removal was $2,500. When Lanza had the tree removed he instructed the movers to put the tree debris on the association’s property. The association then paid to have the tree debris properly removed and disposed of. The association sued Lanza in small claims court. Lanza subsequently sued the association for the costs he incurred for removal of the tree.

At trial, the court commented that the law in this area is clear: unless a tree owner is actually or constructively on notice of a tree’s disease or defect, that owner is not responsible for damage to adjacent property caused when his or her tree falls due to wind, storms, or other natural causes. Citing case law and the Restatement [Second] of Torts the court noted that it is established that no liability attaches to a landowner whose tree falls outside of his premises and injures another unless there exists actual or constructive knowledge of the defective condition of the tree.

Lanza did not claim that the association had actual knowledge of the defect in the tree, and he offered no persuasive evidence that the association had constructive notice of a defect in the tree. To the contrary, a number of witnesses testified that this tree possessed no symptoms indicative of a stressed, diseased, or weakened tree. The law does not demand the owner of a tree be clairvoyant or even impose an affirmative duty to inspect.

Because the association did not have actual or constructive notice of the tree disease, when it did fall on Lanza’s property the tree became Lanza’s problem. By removing the tree debris from his property and putting it on the association’s property, Lanza trespassed on the association’s property and is liable to the association for the cost of properly removing the tree debris.

Ultimately, the court awarded the association the cost of removing the tree debris and dismissed Lanza’s counter claim for reimbursement of the cost of his insurance deductible.

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association Did Not Violate Nonresident’s Civil Rights by Mailing Speeding Ticket

Simonson v. Hemlock Farms Community Association, Inc., No. 3:o6cv2084, U.S. Dist. Ct., Mid. Dist. of Pa., January 16, 2007

Federal Law and Legislation: Where a pro se plaintiff failed to specify the time, place, conduct, and person responsible for violating his constitutionally protected civil rights, and where the defendants were not acting under color of state law, a court could not find a violation of a federal statute.

In October 2006, George Simonson sued the Hemlock Farms Community Association, Inc. (“association”); Michael Sibio, community manager for the association; and William Hamby, chief of the Hemlock Farms Community Safety Unit, claiming that they violated his civil rights pursuant to federal law and committed fraud, attempted fraud, and extortion against him. According to Simonson, the association, Sibio, and Hamby sent him two speeding tickets that fined him for violating traffic regulations in Hemlock Farms, a private residential community in Lords Valley , Pennsylvania . Simonson claimed that they violated his civil rights because he was not a member of the association.

The association sued Simonson after he refused to pay the fines, alleging that he had regularly violated the speed limits established on community property and refused to cooperate with the association’s security force. Simonson asked the court to assign the case for arbitration and requested punitive damages in the amount of $150 million, removal of his name from any database controlled by the association containing reference to the tickets, and a refund of the fines he paid.

In November 2006, the association, Sibio, and Hamby filed a motion to dismiss the complaint, arguing that Simonson had failed to allege facts that would make the association liable for violating his civil rights. Stating that in deciding a motion to dismiss courts must accept as true all factual allegations and give the plaintiff the benefit of all reasonable inferences that can fairly be drawn and view them in the light most favorable to the plaintiff, the court proceeded to examine Simonson’s claims under the standards established for 42 U.S.C. Section 1983. These criteria are that (1) the conduct complained of must have been committed by a person acting under color of state law and (2) the conduct must deprive the complainant of rights secured under the Constitution or federal law.

The court noted that for a private party to be liable as a state actor under the federal statute, the deprivation of a federal right must be caused by the exercise of some right or privilege created by the state, a rule of conduct imposed by the state, or a person for whom the state is responsible. Additionally, the party charged with the deprivation must be a person who may fairly be said to be a state actor, a person, in other words, who is acting under color of state law. The third test for determining whether a private individual acts under color of state law is “whether the state, through its agents or laws, has established a formal procedure or working relationship that drapes private actors with the power of the state.”

Noting that neither bringing a private action in state court nor enforcing an association-set speed limit is an exercise of the authority of the state and implicated no liability under the federal law, that nothing indicated Sibio was acting to carry out state policy or in conjunction with state officials, and that Hamby operated as a private citizen to enforce the association’s regulations, the court found that Simonson’s complaint did not allege that the association, Sibio, or Hamby acted under color of state law and consequently dismissed his complaint on those grounds.

The court also addressed the question of whether Simonson’s complaint sufficiently alleged a deprivation of his rights under the Constitution or federal law. Because the law on which Simonson relied merely provides remedies for deprivations of rights established elsewhere but does not create substantive rights on its own, a complaint under that law must describe the conduct, time, place, and persons responsible for a complainant’s injury.

Finding that Simonson’s complaint lacked a statement of the particular right violated and the times and places where the violation occurred, the court stated that Simonson had failed to allege a sufficient violation of his constitutional rights to sustain the action. The court stated that Simonson’s specific allegation that the association, Sibio, and Hamby had violated his constitutional rights by sending him speeding tickets in the mail was not a constitutionally protected right. No constitutional right guarantees protection from unwanted mail. Consequently, the court dismissed Simonson’s complaint.

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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House on Lot that Bordered Two Streets Did Not Have to Face Specific Street

Smith v. Ledbetter, No. 2050836, Ala. App. Ct., December 29, 2006

Covenants Enforcement: Where a restrictive covenant placed on property is ambiguous, and in light of the prevalent rule that restrictive covenants may be enforced only if they are clear and unambiguous, a court cannot enforce the covenant against the landowner.

Randall and Julia Smith and James and Cherie Ledbetter purchased lots in 1994 and 2005, respectively, in the Highlands subdivision in Gadsden, Alabama. The subdivision was created pursuant to a plan of development limiting use of the lots with certain restrictive covenants, one of which states that “every residence shall face the street on which the lot fronts.” The Smiths constructed a house on lot 25 in 1995. In 2005 the Ledbetters purchased lot 24, which is adjacent to and to the west of the Smiths’ lot and began construction of a house late that year.

Like most of the lots in the Highlands, the Smiths’ lot had only one side of the lot bordering a street; the northern and southern boundaries of lot 24, however, both bordered streets. All but one of the houses in the Smiths’ and Ledbetters’ neighborhood bordered Audrey Lane (the exception is lot 8, a corner lot, where the house faced the other street). It became apparent to the Smiths and the other residents that the Ledbetters were building their house to face their lot’s northern boundary (Viola Lane) instead of Audrey Lane on its southern boundary. In January 2006, the Smiths sued the Ledbetters, asking the court to declare that the Ledbetters were in violation of the restrictive covenant and asking the court for an injunction barring further construction of the Ledbetters’ house. The Smiths filed an amended complaint in February 2006, seeking monetary damages for violation of the restrictive covenant, and they also filed a motion for summary judgment against the Ledbetters.

In April 2006 the trial court entered a judgment finding that the Ledbetters were not in violation of the restrictive covenant and denied relief. The Smiths appealed to the Alabama Supreme Court, which transferred the case to an Alabama appeals court.

The Smiths also submitted several affidavits to support their motion for summary judgment. One affidavit was from the developer of the subdivision in which the developer stated that she had personally drafted the restrictive covenants and that it was her intent and understanding that the lots would front Audrey Lane. The affidavit of the engineer hired to assist the developer in designing the subdivision was also submitted, in which the engineer stated that it was the design and intent for homes built on lot 24 to face Audrey Lane, and that a residence constructed on lot 24 with the rear to Audrey Lane would be inconsistent with the general design and scheme of the neighborhood.

Randall Smith also submitted his own affidavit in which he mentioned that, in his opinion, the Smiths’ house would be devalued from $300,000 to $175,000 by the construction of the Ledbetters’ house facing away from Audrey Lane. Finally, the Smiths presented the affidavit of the president of the Highlands Homeowners’ Association (“association”) in which the president stated that he had expressed concern on several occasions to the Ledbetters that the orientation of their house was in violation of the restrictive covenant, invited the Ledbetters to discuss the problem at an association meeting, and asked the association’s secretary to send the Ledbetters a letter expressing the association’s concerns regarding the issue. The affidavit also contained the president’s opinion that the Ledbetters would be in violation of the restrictive covenant and that such construction would disrupt the pattern of the neighborhood.

The Smiths argued that the unambiguous language of the restrictive covenant required the Ledbetters to build their home facing Audrey Lane. The Ledbetters, on the other hand, claimed that because their lot fronted two streets, they could choose which street their house should face. Although both parties claimed that the language of the restrictive covenant was clear and unambiguous, the court noted that because each side offered a different interpretation of the covenant, the covenant contained a latent ambiguity.

Examining the definitions of the words “front” and “frontage,” the court concluded that the restrictive covenant was ambiguous as applied to any lot that fronted more than one street. Because of such ambiguity, the court referred to previous cases in which courts had ruled that any ambiguity would be resolved against the party seeking enforcement and that a covenant subject to interpretation could not be enforced against a property owner. Therefore, the court ruled that because the restrictive covenant in this case was ambiguous, it must be interpreted against those seeking enforcement and in favor of the Ledbetters.

With regard to the affidavits submitted by the Smiths, the court ruled they were asking the court to use the affidavits to expand the application of the restrictive covenant to cover an action that the covenant did not plainly prohibit. The court did not agree with such use and affirmed the judgment of the trial court.

Editor’s Observation: The covenant was not ambiguous; the court is ducking the hard question. There cannot be two “fronts.” Thus, the evidence seemed to support the contention that the front was Audrey Lane. The affidavits did not “expand the covenant” but answered questions of what was the front. The court punted.

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Developer Did Not Violate Restrictive Covenants by Selling Parcel of Land to Be Used as Access Road for Contiguous Development

Smokerise Homeowners Association v. Abernathy, No. 1050168, Ala. Supreme Ct., January 12, 2007

Covenants Enforcement/Developmental Rights: The Alabama Supreme Court ruled that a developer has the right to convey a parcel of land for access to an adjoining subdivision.

Smokerise is a residential subdivision in Elmore County , Alabama . The subdivision was created in the early 1990s by Smokerise, LLC and James M. Scott (collectively, “developer”). In 1987, the developer conveyed approximately 75 acres to Melvin and Neda Abernathy, a tract contiguous to and east of the Smokerise subdivision (“Abernathy tract”). In 1991, the developer started marketing residential lots in Smokerise. In March 1991, Brenda and Frederick Sides contracted to purchase Lot 13. In April 1991, Anthony and Linda McLeod contracted to purchase Lot 12. In August, the developer recorded plat 4 and restrictive covenants for Smokerise. The plat reflected a 15-foot wide road between Lots 12 and 13. The road, which was outside the subdivision boundary, provided access between the Abernathy tract and the cul-de-sac serving Lots 12 and 13. Restrictive covenant 12 states: 

 

There shall be no easements or rights of access granted across any platted lot to any contiguous lands except as shown on the plat, and except as may, in the future, be granted across lot 6 and lot 12.


In September 1991, because of disagreement between the developer and the Abernathys concerning access to the tract, the developer negotiated with the Sides and the McLeods to acquire additional access across their lots to the Abernathy tract. On September 10, 1991, the developer recorded a modification to the restrictive covenants but did not file an amended subdivision plat. The modification revised restrictive covenant 12 to state:

There shall be no easements or rights of access granted across any platted lot, to any contiguous lands except as shown on the plat, and, except as may, in the future, be granted across lot 6 and across a 45-foot wide parcel of land on the southern end of lot 13, the same being parallel to the 15-foot strip between lots 12 and 13.


On October 2, 1991, the McLeods purchased Lot 12, and the Sideses purchased Lot 13 the following day. When the developer conveyed Lot 13 to the Sideses, it retained title to a 45-foot parcel on the southern end of Lot 13 that was parallel to the 15-foot road between Lots 12 and 13, the same parcel referenced in the covenants modification. It was Mr. Sides’ understanding at the time that the Abernathys planned to build a retirement home for themselves and three or four homes for members of their family on the tract. Mr. Sides envisioned that the 45-foot parcel would be used as a private drive for the Abernathy family.

In 1992, the Sideses built a house on Lot 13. To assist the Sideses in positioning their house on the lot, the developer sold them an additional 20 feet of land north of and contiguous to Lot 13. Because the 20-foot parcel was not part of Lot 13 on the plat filed in August 1991, the developer recorded an amendment in August 1992 to reflect the boundary change to Lot 13 (“second amendment”).

The second amendment contained a modified plat (“plat 4A”) that was signed by the developer, the Sideses, and the necessary county government officials. Even though the McLeods owned Lot 12 at the time the second amendment was filed, they did not sign plat 4A or any of the other instruments recorded with the second amendment. The second amendment also contained restrictive covenants identical to the covenants in the August 1991 filing. Specifically, restrictive covenant 12 prohibited access through the subdivision to contiguous land, “except as may, in the future, be granted across lot 6 and lot 12,” and did not use the language contained in the modification filed in September 1991 that contemplated access between the subdivisions by way of the 45-foot parcel.

The dispute between the developer and the Abernathys intensified in 1992. The Abernathys filed a condemnation action seeking to acquire access to the tract across Lot 12. The Abernathys alleged that subdivision improvements and public dedication of streets serving Lots 12 and 13 denied them access to a public road. They prevailed on their claim, but the developer appealed the decision.

In an effort to settle the litigation, the developer sold a 60-foot wide parcel of property between Lots 12 and 13 to the Abernathys. The property was comprised of the 15-foot access road and the 45-foot parcel that the developer retained when it sold the Sideses their lot. The settlement agreement in the condemnation proceeding contemplated that the 60-foot parcel would be the access point between a public road and the Abernathy tract; that the Abernathys would develop the tract and sell residential lots to the general public; and that they and the development would abide by the restrictive covenants applicable to the Smokerise subdivision. Except for the developer, none of the lot owners was a party to the condemnation action.

At the time of the condemnation settlement, Cecil and Adrienne Brendle contracted with the developer to purchase Lot 14A. The lot is across the street from the 15-foot road between Lots 12 and 13. Before purchasing the lot, the Brendles asked about the purpose of the road. They were told by the developer’s real estate agent that it was a private road used to access the Abernathy tract for hunting. Before closing of the sale, the Brendles were provided copies of the second amendment. They did not review the modification to the covenants that contemplated access to the Abernathy tract over the 45-foot parcel. Likewise, there is no evidence that the Brendles knew about the settlement of the condemnation litigation that occurred several months before they purchased their lot or that the developer had retained title to the 45-foot parcel which it then conveyed together with the 15-foot road to the Abernathys.

In 2002, the Abernathys filed a plat for approval to subdivide their tract into 29 home sites and began constructing a road on the 60-foot parcel. Concerned that the construction and use of the 45-foot parcel as a road would alter the secluded nature of the Smokerise subdivision, the Smokerise Homeowners Association (“association”) and owners of Lots 12, 13 and 14, (the McLeods, the Sideses, and the Brendles, respectively) sued to prevent the use of the 45-foot parcel by the Abernathys as a road and to declare the Sideses the “rightful owners” of the parcel.

The association sought to have the court reform (i) the October 1991 deed that conveyed Lot 13 to the Sideses and retained title to the parcel and (ii) the May 1993 deed that conveyed the parcel to the Abernathys. The association argued that the conveyances were invalid because they violated restrictive covenant 12, the second amendment (granting access to contiguous land only over lots 6 and 12), and restrictive covenant 2(B). The association also asserted a nuisance claim against the Abernathys alleging that construction of the road caused them “hurt, inconvenience and damage,” and that the anticipated future volume of traffic would also be a nuisance. Finally, under trespass theory, the association claimed damages from the Abernathys related to the removal of trees from the 45-foot parcel.

At trial, both parties filed for summary judgment. In June 2003, the court entered summary judgment for the Abernathys on all the association’s claims. The association appealed. The appeals court affirmed the trial court’s ruling without an opinion, and the association sought a writ of certiorari from the Alabama Supreme Court.

The trial court denied the association’s motion for summary judgment on the trespass claim because the claim sought damages for removal of trees beyond the boundaries of the 45-foot parcel. That count of the complaint was then dropped from the appeal. The association also sought an injunction from the trial court to prevent the Abernathys from clearing trees off the parcel or from using the name “Smokeridge” in marketing their development. That count was also dropped from the appeal.

The appeals court reviewed the summary judgment de novo to determine whether the association had made a prima facie showing that no genuine issue of material fact existed and whether the association was entitled to a judgment as a matter of law.

The association did not dispute the Abernathy’s title to and right to use the 15-foot road to access the Abernathy tract. The plats included with the August 1991 filing and the second amendment depicted the road as being outside the boundary of the subdivision. The association’s claims addressed the 45-foot parcel exclusively. The association contended that the trial court should have reformed the deeds for the transactions because they violated restrictive covenants 12 and 2(B). Further, the association argued that when a developer adopts a general scheme for development and restricts the use of lots in the development, the restrictions create equitable easements in favor of the owners of the lots that may be enforced in equity by any one of the owners. The trial court denied the reformation claim because it concluded that the association had notice of the key transaction and intended use of the 45-foot parcel in the early 1990s, noting that the developer had negotiated with the McLeods and the Sideses to acquire additional land to access contiguous property. It further concluded that the lot owners had received consideration from the developer in connection with its retention of the 45-foot parcel. The trial court also found that certain of the owners had knowledge of and were bound by actions taken in the condemnation proceeding between the developer and the Abernathys. The court, therefore, ruled that the deed-reformation claim was barred by equitable defenses of laches and estoppel.

The application of those defenses in an action to enforce restrictive covenants involves mixed questions of law and fact. Alabama courts have determined that a plaintiff must “delay in asserting his rights” before laches is invoked, and estoppel requires evidence “of intent not to enforce” a plaintiff’s rights. Reliance on either of these doctrines assumes that the association failed to assert a known right or a right of which it should have reasonably been aware.

The association effectively argued to the Supreme Court that it had presented evidence at trial to dispute the argument that they had actual knowledge in the 1990s of the key transactions and intended use of the 45-foot parcel. Nevertheless, even though the court felt the association’s argument had merit, it found that the trial court had correctly entered summary judgment for the Abernathys because the association had constructive notice that the parcel was to be used to access contiguous property when the developer recorded the covenant modification in September 1991. The revised language permitted access “across a 45-foot wide parcel of land on the southern end of lot 13...”

The Sideses and the McLeods had contracted to purchase their lots but the sales had not closed when the developer filed the modification. They did not execute or approve the modification. Citing Davis v. Williams, 130 Ala. 530, So. 488 (1900), the association argued that recording of the modification was not effective because their equitable interests could not be “diminished” without their consent.

Alabama law provides that the proper recordation of an instrument constitutes “conclusive notice to all the world of everything that appears from the face” of the instrument. Therefore, purchasers of real property are “presumed to have examined the title records and knowledge of the contents of those records is imputed.”

The Abernathys argued that when the modification was filed in September 1991, the developer owned all the lots in the Smokerise subdivision. They contended that any person who subsequently purchased a lot took title subject to the terms of that modification. Applying the recordation principles cited in Boyce v. Cassese, 941 So. 2d 932 (2006), the Supreme Court agreed.

The Supreme Court rejected the association’s argument at trial that the covenant modification was ineffective under Alabama law. Alabama law provides that an owner may vacate a plat any time before sale of a lot in the development by executing, acknowledging, and recording a written declaration that the plat is vacated. If lots have been sold, the plat may be vacated by all owners of lots in the plat joining in execution of the declaratory instrument. The trial court rejected this argument because the ordinary meaning of the word “owner,” as it is used in the statute, is defined in Black’s Law Dictionary as “one who has the right to possess, use, and convey,” property and the meaning of “sale” is defined as the “transfer of property or title for a price.”

The trial court determined that the McLeods and the Sideses could not possess or use their lots at the time the modification was filed because they were not “owners” within the ordinary meaning stated in the statute. The court further found that the word “sale” in the statute connotes the time at which legal, not equitable, title passes by deed for a price. Therefore, the developer had the exclusive right under the statute to modify the covenants because it was the owner of all the lots in the subdivision.

That court also rejected two other arguments by the association as to why the modification was ineffective. First it argued that the Elmore County Commission must have approved the filing of the modification. The Commission approved the plats that were recorded in August in 1991 and with the second amendment in 1992 but did not approve the covenant modification. The Alabama statute provides that maps and plats must be approved by the governing body of lands where more than 10,000 persons reside in the jurisdiction. The statute does not require that restrictive covenants be recorded. Second, they argued that the second amendment revoked the covenant modification. Assuming that the modification was ineffective, the association posited that the language in restrictive covenant 12 of the second amendment (i.e., that access could be granted only as shown on the plat or across lots 6 and 12) controlled. In rejecting this argument, the Supreme Court found that the McLeods owned Lot 12 when the second amendment was filed, but did not sign it. Therefore, the restatement of restrictive covenant 12 in the second amendment was null because all owners of lots in the subdivision did not sign that amendment.

The association’s deed-reformation claim failed because the operative record was the covenant modification, and the recordation of the modification constituted notice to the association that access to contiguous lands could be granted over the 45-foot parcel. Regardless of whether the McLeods and the Sideses consented to the covenant modification, the September 1991 filing was effective and constituted notice that access between platted lots in the subdivision and contiguous land could be granted over the 45-foot parcel. Because the modification was duly recorded before the developer sold any lots, the association and subsequent purchasers of the lots were charged with constructive notice of its terms as a matter of law. The court found that the developer did not violate restrictive covenant 12 (as it was revised in September 1991) when it conveyed access to the 45-foot parcel to the Abernathys. The court found, moreover, that the developer did not violate restrictive covenant 2(B) when it sold Lot 13 to the Sideses but retained the 45-foot parcel. Restrictive covenant 2(B) states that lots in the subdivision can be subdivided only if the parcel contains “at least 2-1/2 acres with suitable road frontage.” Even though the parcel contained only a fraction of an acre, the court found that, notwithstanding the term of the covenant, the association had constructive notice before they purchased their lots that the parcel subsequently could be used for an access road to contiguous lands. The court found that the trial court correctly entered summary judgment in favor of the Abernathys.

The association made two allegations in the nuisance claim against the Abernathys: (i) that clearing of the trees, use of road machinery, and construction activities on the 45-foot parcel caused hurt and inconvenience to members of the association and that (ii) the future use of the 45-foot parcel as a means of access to the Abernathy tract would significantly increase the volume of traffic through the subdivision, causing additional hurt and inconvenience. The trial court concluded that the Abernathys’ use of the parcel was within the legally prescribed and permitted uses of the land and concluded that nothing in the pleadings presented at trial rose to the proof required to prevail on a nuisance claim.

The Supreme Court also determined that construction of the road on the parcel was reasonably foreseeable after the developer recorded the covenant modification in September 1991. The association failed to show the court that the Abernathys used the parcel in a manner inconsistent with its intended use. Furthermore, the court found the association’s argument that future traffic volume would constitute a common-law nuisance to be speculative. Therefore, the Supreme Court found that summary judgment for the Abernathys was correctly entered by the trial court on the nuisance claim.

The association’s trespass claim against the Abernathys assumed that the Abernathys did not have the right to enter the 45-foot parcel to construct a road or remove trees. The parcel was part of a 60-foot parcel the developer conveyed to the Abernathys in May 1993. Because the developer was authorized to retain the 45-foot parcel when it conveyed Lot 13 in October 1991, its subsequent conveyance of the parcel to the Abernathys was valid. Because the Abernathys owned the parcel after May 1993, the Supreme Court found that the trial court correctly ruled in favor of the Abernathys.

For the reasons explained above, the court concluded that the appeals court correctly affirmed the trial court’s ruling for summary judgment in favor of the Abernathys and quashed the writ of certiorari.

 

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Developer Has Liability in Negligence after Control of Community Is Passed to Association

Westlake Properties, Inc. v. Westlake Pointe Property Owners Association, Inc., 639 S.E.2d 257 (Virginia 2007)

Powers of the Association: A court determined that a developer was liable in negligence and ordered the developer to pay the costs associated with a new sewage system after the community had been turned over to the association for maintenance and control.

Westlake Pointe is a townhome community on Smith Mountain Lake in Virginia that was originally constructed in 1998. The community consists of 46 separately owned townhomes in eight buildings. Westlake Pointe’s septic system includes eleven septic tanks and pump stations to service the townhomes. Individual sewer lines connect each town home to one of the eleven septic tanks. Most of the septic system was installed in a slope that is located behind four of the buildings and between those buildings and the lake. Engineering design specifications for the septic system called for the soil of the slope, where the principal fixtures of the septic system would be located, to be filled, compacted, and graded in a specific manner to prevent excessive erosion and runoff. Instead, a lesser quality fill material was used that did not contour the slope to the recommended grade.

The covenants for the community were recorded on May 1, 1998, and established easements over limited common areas for location, repair, maintenance operation, and replacement of sewer lines, septic systems, and drain. The covenants established the developer as the initial owner of the septic system and of the permit issued by the state health commissioner for the construction, maintenance, and operation of the system. The covenants further provided that the permit and ownership of the septic system would be transferred to the association when the development was substantially completed or upon sale of 75 percent of the townhomes.

The community was turned over to association control on May 2, 2003. With the transfer of control, the association became the record owner of the common areas of the community, including the fixtures that made up the infrastructure of the common portions of the septic system, as well as the permit issued by the state health commissioner for its operation. Prior to transfer of control to the association, the property owners had reported to the developer numerous problems with the slope. Specifically, there had been multiple instances of soil erosion and resulting structural damage to various fixtures of the septic system. Heavy rain in early August 2003 resulted in catastrophic failure of the septic system. Due to excessive erosion in the slope, the septic tanks and pump stations that served a number of the town homes were completely exposed and damaged or were dislodged entirely from their proper placement in the system so that they were no longer capable of functioning.

The association received several estimates from engineers for making the repairs and determined that an assessment from each homeowner for $13,050 was necessary to cover the cost of construction. The association told owners that it would seek to recover the cost of repairing the septic system from the developer and noted that any recovery would be redistributed to the association members.

On June 17, 2004, the association sued the developer, asking the court to award it $750,000 in damages under the theories of breach of implied warranty, breach of contract, negligence, and indemnity. The developer argued that the association did not own the real property (the slope) where the majority of the common fixtures that made up the original septic system were located. Instead, the developer contended, individual property owners had the primary responsibility to maintain the septic system as a whole. The trial court ruled that the association had standing to sue on behalf of its members, and the developer appealed.

The appeals court noted that the developer’s contention regarding individual owners being responsible for maintaining the system was contrary to the clear and unambiguous express provisions of the pertinent recorded documents. Those documents require individual property owners to maintain their individual sewer lines between their townhomes and the common septic system but places responsibility for maintenance and repair of the common fixtures of the system exclusively with the association.

As a result, the appeals court affirmed the trial court’s award to the association of $641,788.43 based on negligent installation of the sewer system. The court reasoned that removal of the original septic system and the necessary repair of the slope was the most cost-effective and beneficial method of remedying the damages caused by the developer’s negligence.

©2007 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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