Case Title: Karner v. Roy White Flowers, Inc

Citation: 351 N.C. 433

Docket Number: 475A99

State: north-carolina

Court: North Carolina Supreme Court

Date: 2000-04-07T00:00:00Z

Document:
IN THE SUPREME COURT OF NORTH CAROLINA
No. 475A99
FILED: 7 APRIL 2000
JANET L. KARNER and LYMAN G. WELTON,
Plaintiffs
and
LORETTA LEE PENDERGRAST, APRILLE L. SHAFFER and SHELLY JORDAN,
Intervenor Plaintiffs
v.
ROY WHITE FLOWERS, INC., ROY J. WHITE, JR., MARGARET C. WHITE,
and EDWARD A. WHITE,
Defendants
Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of
a divided panel of the Court of Appeals, ___ N.C. App. ___, 518
S.E.2d 563 (1999), affirming the trial court’s denial of
plaintiffs’ and intervenor-plaintiffs’ motion for joinder entered
9 May 1996 by Gray, J., in Superior Court, Mecklenburg County,
and affirming in part and reversing and remanding in part an
order for directed verdict entered 11 February 1997 by Gray, J.,
in Superior Court, Mecklenburg County.  Heard in the Supreme
Court 15 February 2000.
Kenneth T. Davies for plaintiff-appellants Karner and Welton
and intervenor-plaintiff-appellants Pendergrast and Shaffer.
Groves, Dunklin & Boggs, P.C., by L. Holmes Eleazer, Jr.,
for defendant-appellees.
WAINWRIGHT, Justice.
Plaintiffs and defendants own lots in Elizabeth Heights, a
subdivision in Charlotte, North Carolina.  Elizabeth Heights was
developed as a residential subdivision at the turn of the
century.  When the developer began conveying lots in 1907, each
deed included a covenant restricting the use of each parcel to
residential use only.
In September 1995, defendants applied for demolition permits
for the residential structures on three of their lots. 
Subsequently, a local newspaper reported that Roy White Flowers
had applied for demolition permits for structures on the three
lots and that building plans called for a 5,300-square-foot
structure, which was to house a video rental store.
On 5 October 1995, plaintiffs filed suit alleging they and
the neighborhood would “be permanently and irreparably injured if
the [d]efendants are allowed to demolish three (3) residential
and historic structures adjacent to [p]laintiffs’ properties and
allowed to construct a commercial building thereon.”  Plaintiffs
requested relief in the form of a temporary restraining order, a
preliminary injunction, and a permanent injunction.  On
13 November 1995, defendants answered plaintiffs’ amended
complaint and claimed affirmative defenses, including an
assertion that a change of circumstances had occurred making use
of the lots for residential purposes no longer feasible.
On 21 December 1995, intervenor-plaintiffs, all property
owners within the Elizabeth Heights Subdivision, were allowed to
intervene, pursuant to N.C.G.S. § 1A-1, Rule 24, because they
“ha[d] an interest in the real property which [was] the subject
of this action and they [were] so situated that the disposition
of this action may, as a practical matter, impair or impede their
ability to protect those interests.”  On 22 January 1996,
defendants answered intervenor-plaintiffs’ complaint and
incorporated the same affirmative defenses contained in their
answer to plaintiffs’ amended complaint.
On 18 March 1996, pursuant to N.C.G.S. § 1A-1, Rule 19,
plaintiffs and intervenor-plaintiffs (plaintiffs) moved the trial
court to join all other parties who owned property in Elizabeth
Heights Subdivision as shown on map number 3 recorded in the
Office of the Register of Deeds for Mecklenburg County. 
Plaintiffs stated that by asserting the affirmative defense of
changed circumstances, defendants sought to “impair or prejudice
the property rights of all record owners of parcels of real
property located in the Elizabeth Heights Subdivision, Map
Number 3.”  Additionally, plaintiffs contended there were “third
parties who own[ed] parcels of real property in Elizabeth Heights
Subdivision, Map Number 3 . . . whose property rights [would] be
directly affected by the determination of this litigation.” 
Plaintiffs argued the third parties were necessary parties
because defendants were seeking to set aside or void the
residential restrictive covenants.  In an order entered 9 May
1996, the trial court found, inter alia, that “[j]oinder of the
non-party property owners in Elizabeth Heights would work a[]
financial hardship on those who would be brought involuntarily
into this litigation.”  In denying plaintiffs’ motion for
joinder, the trial court concluded “[t]he non-party property
owners in Elizabeth Heights are not united in interest with the
[p]laintiffs under the claim asserted herein.  The [c]ourt may
determine the pending claim for injunctive relief without
prejudice to the rights of such others not before the [c]ourt.”
On 29 May 1996, the Chief Justice of this Court designated
this case “exceptional” and assigned it to the Honorable
Marvin K. Gray pursuant to a joint motion by plaintiffs and
defendants.  The case came on for trial by jury at the 13 January
1997 session of Superior Court, Mecklenburg County.  At the close
of all the evidence, defendants moved for a directed verdict
pursuant to N.C.G.S. § 1A-1, Rule 50.  After considering all the
evidence presented by both plaintiffs and defendants, the trial
court found that defendants used their parcels of land and the
structures thereon for nonresidential purposes in a continuous,
open, and notorious manner for a period of time in excess of six
years prior to plaintiffs filing their complaint.  Accordingly,
the trial court concluded plaintiffs’ action was barred by the
applicable statute of limitations.  The trial court, on
11 February 1997, entered an order granting defendants’ motion
for a directed verdict.
Plaintiffs (except Shelly Jordan) appealed to the Court of
Appeals from the 11 February 1997 order directing verdict in
favor of defendants and the 9 May 1996 order denying plaintiffs’
motion for joinder.  The Court of Appeals affirmed in part and
reversed in part the trial court’s directed verdict.  Karner v.
Roy White Flowers, Inc., ___ N.C. App. ___, ___, 518 S.E.2d 563,
571 (1999).
In addition, the Court of Appeals affirmed the trial court’s
denial of plaintiffs’ motion for joinder.  Id. at ___, 518 S.E.2d
at 566.  The Court of Appeals interpreted this Court’s decision
in Sheets v. Dillon, 221 N.C. 426, 20 S.E.2d 344 (1942), “to
stand for the proposition that if one party seeks to ‘annul’ or
invalidate a restrictive covenant in equity, based on changed
conditions, the interest of other property owners . . . must be
represented in the suit.”  Karner, ___ N.C. App. at ___, 518
S.E.2d at 566.  The court reasoned that the interests of the
nonparty property owners within the subdivision were represented
by the parties in the case and that the nonparty property owners
were not necessary parties whose presence in the case was
required by Rule 19.  Judge Greene dissented on this issue,
stating, “When there is a uniform plan of development for real
property and a restrictive covenant placed on that property is in
dispute, all the owners of lots in that development are
‘necessarily interested parties in any action against or by [any]
lot owner.’”  Id. at ___, 518 S.E.2d at 571 (Greene, J.,
dissenting) (quoting Hillcrest Bldg. Co. v. Peacock, 7 N.C. App.
77, 82, 171 S.E.2d 193, 196 (1969)).
The sole issue before this Court is whether the nonparty
property owners of the Elizabeth Heights Subdivision as shown in
map number 3 (Elizabeth Heights) were required to be joined in
this action pursuant to Rule 19 of the North Carolina Rules of
Civil Procedure.  Plaintiffs contend defendant’s change-of-
circumstances affirmative defense could result in the
invalidation of the restrictive covenant requiring residential
use of property in the subdivision.  Consequently, the additional
property owners should be joined as parties to the action.  We
agree.
A restrictive covenant creates “a species of incorporeal
right.”  Sheets, 221 N.C. at 431, 20 S.E.2d at 347.  Restrictive
covenants are valid so long as they do not impair the enjoyment
of the estate and are not contrary to the public interest.  Id. 
“[T]he court will enforce its restrictions and prohibitions to
the same extent that it would lend judicial sanction to any other
valid contractual relationship.”  Id.
The placement of the same restrictive covenant in all of the
deeds conveying lots out of a subdivision according to a common
plan of development presents a unique situation regarding the
enforcement and continued vitality of the covenant.  Under those
circumstances, any grantee may enforce the restriction against
any other grantee governed by the common plan of development. 
See Hawthorne v. Realty Syndicate, Inc., 300 N.C. 660, 665, 268
S.E.2d 494, 497 (1980).  Furthermore, any grantee may enforce the
restriction against any purchaser who takes land in the tract
with notice of the restriction.  Id.  If the restrictive covenant
is removed from a lot within a subdivision, that action
extinguishes the restrictive covenant on all properties within
the subdivision.  See Tull v. Doctors Bldg., Inc., 255 N.C. 23,
41, 120 S.E.2d 817, 829-30 (1961).
In Tull, the parties were all property owners within a
portion of the Myers Park development in Charlotte.  The common
plan of development for Myers Park called for the lots to be used
for residential purposes only.  Plaintiffs sought a declaratory
judgment determining their rights to use their property for other
purposes.  Within the tract, several lots had been zoned for
business purposes despite the restrictions governing the
property.  The trial court concluded the restrictive covenant
should have been lifted from those particular lots but declined
to do so itself, stating “the law requires either a complete
abrogation of the restrictive covenants on all of the lots in the
subdivision, or a complete enforcement of the restrictive
covenants as to all of the lots in the subdivision.”  Id. at 35,
120 S.E.2d at 825.  This Court agreed with the trial court and
adopted its statement of the rule.  Id. at 41, 120 S.E.2d at 830. 
The determination of whether a change of circumstances has taken
place so as to void a restrictive covenant in equity depends on
the specific facts of each individual case.  Id. at 39, 120
S.E.2d at 827.  However, in situations where there is a common
plan of development, the Court emphasized the need for equal
enforcement of restrictive covenants.  The Court examined a
situation where a covenant was removed from only a few lots in a
subdivision:
If equity should permit these border lots to deviate
from the residential restriction, the problem arises
anew with respect to the lots next inside those
relieved from conforming.  Thus, in time, the
restrictions throughout the tract will become nugatory
through a gradual infiltration of the spreading change.
“Contractual relations do not disappear as
circumstances change.  So equity cannot balance the
relative advantages and disadvantages of a covenant and
grant relief against its restrictions merely because it
has become burdensome.”
Id. at 40, 120 S.E.2d at 829 (quoting Vernon v. R.J. Reynolds
Realty Co., 226 N.C. 58, 61, 36 S.E.2d 710, 712 (1946)).  The
Court explained further that the right to enforce the restriction
was a property right with value:
To release all the lots . . . in direct violation
of the valid residential restrictions here would
undoubtedly substantially affect the value of every
home in this subdivision.  It is clear in our minds
that residential restrictions generally constitute a
property right of distinct worth, certainly to those
who desire to keep their homes for residential use.
Id. at 41, 120 S.E.2d at 829.  Although property owners may
decide not to object to minor nonresidential uses by other
property owners in some cases, this acquiescence “‘should not, in
equity be held to have estopped them from asserting their right
against the subsequent substantial violation by defendants.’” 
Id. at 39, 120 S.E.2d at 828 (quoting Holling v. Margiotta, 231
S.C. 676, 682, 100 S.E.2d 397, 400 (1957)).  Thus, this Court
concluded that a restrictive covenant common to all deeds from a
subdivision must be either abrogated as to all lots or enforced
as to all lots.
North Carolina Rule of Civil Procedure 19 governs the
necessary joinder of parties and provides in part:
  (a) Necessary joinder. -- Subject to the provisions
of Rule 23, those who are united in interest must be
joined as plaintiffs or defendants; but if the consent
of anyone who should have been joined as plaintiff
cannot be obtained he may be made a defendant, the
reason therefor being stated in the complaint;
provided, however, in all cases of joint contracts, a
claim may be asserted against all or any number of the
persons making such contracts.
  (b) Joinder of parties not united in interest. -- The
court may determine any claim before it when it can do
so without prejudice to the rights of any party or to
the rights of others not before the court; but when a
complete determination of such claim cannot be made
without the presence of other  parties, the court shall
order such other parties summoned to appear in the
action.
N.C.G.S. § 1A-1, Rule 19 (1999).  “Necessary parties must be
joined in an action.  Proper parties may be joined.”  Booker v.
Everhart, 294 N.C. 146, 156, 240 S.E.2d 360, 365 (1978).  A
necessary party is one who “is so vitally interested in the
controversy that a valid judgment cannot be rendered in the
action completely and finally determining the controversy without
his presence.”  Strickland v. Hughes, 273 N.C. 481, 485, 160
S.E.2d 313, 316 (1968).  A proper party is “‘a party who has an
interest in the controversy or subject matter which is separable
from the interest of the other parties before the court, so that
it may, but will not necessarily, be affected by a decree or
judgment which does complete justice between the other parties.’” 
Id. (quoting 67 C.J.S. Parties § 1 (1950)).
In its opinion, the Court of Appeals relies on Sheets to
support its reasoning that the other property owners in Elizabeth
Heights were not necessary parties to the action because their
interest was represented by the current parties.  The court’s
reliance on Sheets for that holding is in error.  This Court, in
Sheets, specifically stated, “If plaintiff desires to have this
covenant invalidated and stricken from the deed of the original
grantee, he must bring in the interested parties and give them a
day in court.”  Sheets, 221 N.C. at 432, 20 S.E.2d at 348
(emphasis added).  In fact, this Court made no mention of
“representation” in Sheets.  Moreover, whether other property
owners’ interests are represented by current parties is not
relevant to a determination of whether joinder is required under
Rule 19.  The text of Rule 19 refers only to whether a “complete
determination” of a claim can be made without a party’s presence. 
N.C.G.S. § 1A-1, Rule 19(b).
Defendants claim the nonparty property owners are not
required to be joined because they are “proper” rather than
“necessary” parties.  They cite Hawthorne, 300 N.C. 660, 268
S.E.2d 494, as approving that assertion.  This reliance is
misplaced.  In Hawthorne, this Court addressed the issue of the
continued validity of a residential-use restrictive covenant
after the defendants alleged a change of circumstances.  The
trial court found that a change of circumstances had occurred and
voided the restrictive covenant, but the Court of Appeals
reversed that decision.  Id. at 664, 268 S.E.2d at 497.  This
Court affirmed the decision of the Court of Appeals.  Id. at 669,
268 S.E.2d at 500.  All of the property owners subject to the
residential restrictive covenant were not made parties in
Hawthorne.  However, that issue was neither addressed by this
Court nor raised by the parties.  As such, Hawthorne is not
persuasive in our determination of whether the additional
property owners are necessary parties.
In the instant case, each property owner within Elizabeth
Heights has the right to enforce the residential restriction
against any other property owner seeking to violate that
covenant.  This right has a “distinct worth.”  Tull, 255 N.C. at
41, 120 S.E.2d at 829.  By operation of law, if the residential
restrictive covenant is abrogated as to the lots owned by
defendants, each property owner within the subdivision would lose
the right to enforce that same restriction.  Id. at 41, 120
S.E.2d at 829-30.  Unless those parties are joined, they will not
have been afforded their “day in court.”  Sheets, 221 N.C. at
432, 20 S.E.2d at 348.  An adjudication that extinguishes
property rights without giving the property owner an opportunity
to be heard cannot yield a “valid judgment.”  See Strickland, 273
N.C. at 485, 160 S.E.2d at 316; see also N.C.G.S. § 1A-1, Rule
19.  For this reason, we conclude the nonparty property owners of
Elizabeth Heights are necessary parties to this action because
the voiding of the residential-use restrictive covenant would
extinguish their property rights.
Based on the foregoing, the decision of the Court of Appeals
affirming the trial court’s denial of plaintiffs’ motion to
require joinder is reversed.  This case is remanded to the Court
of Appeals for further remand to the trial court for further
proceedings consistent with this opinion.
REVERSED AND REMANDED.