Case Title: Wright v. Cypress Shores Development Co., Inc.

Citation: 413 So. 2d 1115

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1982-04-30T00:00:00Z

Document:
413 So. 2d 1115 (1982)
Gary B. WRIGHT, et al.
v.
CYPRESS SHORES DEVELOPMENT CO., INC.
80-307.

Supreme Court of Alabama.
April 30, 1982.
*1116 Thomas A. Deas of McDermott, Deas & Boone, Mobile, for appellants.
William M. Lyon, Jr. of McFadden, Riley & Parker, Mobile, for appellee Cypress Shores Dev. Co., Inc.
Charles S. Street of Clay, Massey, Street & Gale, Mobile, for appellee Norman Clark.
EMBRY, Justice.
Plaintiffs appeal in this action for a declaratory judgment and injunctive relief. The rights sought to be declared were that certain restrictive covenants, applicable to a subdivision in which plaintiffs owned lots and resided, prohibited the building and operation of a convenience store on any lot or lots within the subdivision. The injunctive relief concomitantly sought was to enjoin one of the defendants, who had purchased two lots in that subdivision, from excavating and constructing a convenience store on those lots, after the designated agent of the developer had annulled those restrictions as they applied to the two lots purchased.
The determinative issue is whether the declarant of those restrictive covenants running with the land, acting through an agent established by it in the declaration, has a legal right to unilaterally abolish or modify those restrictions if such right is clearly preserved in the original declaratory document, even though lots and dwellings had been purchased in reliance upon those covenants.
The facts in this case were less than fully developed because of the manner in which the trial was conducted. A hearing was set upon the application of plaintiffsGary B. and Audrey J. Wright; Jerry D. and Betty J. Cornelius; and, Kenner and Stella Rodgersfor preliminary injunction against defendant, Norman H. Clark, purchaser of Lots 46 and 47 in Revised Cypress Shores (Subdivision)Unit Four, which Clark had begun to excavate for the construction thereon of a convenience store. When this hearing commenced, the attorney for the Wrights, Corneliuses, and Rodgerses requested that the trial court hear the entire case, as well as the application for injunction, on the merits. Upon objection being made, this request was denied. At the conclusion of the hearing, the objection was withdrawn and it was agreed that the matters would be consolidated; that hearing, perforce, became a final one. However, when the hearing commenced, with the objection made, the trial court exerted a great deal of pressure on plaintiffs' attorney to stipulate to facts expected to come from the testimony of readily available witnesses. As a result, it appears from the record that plaintiffs were effectively prevented from fully exposing the facts to the trial court as they wished to do. Nevertheless, the facts appearing in the record are sufficient for resolution of the controlling question of law.
The pertinent facts are that, during 1963, Cypress Shores Development Company, Inc., platted and recorded a survey of Cypress ShoresUnit Four (Subdivision). A declaration of covenants, restrictions and limitations pertaining to that subdivision was also recorded. Those portions of that instrument pertinent to this case read:
The Wrights, Corneliuses, and Rodgerses own lots and residences in the subdivision that are subject to the restrictive covenants. Defendant Norman H. Clark purchased lots 46 and 47 in the subdivision likewise subject to the restrictive covenants. However, it also appears that he purchased those lots for the purpose of erecting a convenience store thereon which would be operated under the name "Compac." It further appears that before the lots were conveyed to him, defendants Kenneth R. Giddens, Arthur Tonsmeire, and William Lyon, acting as the Architectural Control Committee, annulled, canceled and modified the instrument of declaration and all the covenants, restrictions, limitations and requirements contained in it, insofar as they related to lots 46 and 47.
Additionally, the record reveals a salient fact to which the litigants seemingly attribute little significance. There had formerly been a Compac convenience store operating diagonally across the street from the Wrights' residence at the time they purchased it. That store was destroyed by Hurricane Frederic in September 1979. There was conflicting evidence regarding the duration of the operation of that store but there is abundant evidence that, although it may not have been a nuisance subject to abatement or other legal action by plaintiffs, it was certainly, at least, an extreme annoyance to residents of Unit Four, including the Wrights. What indeed is significant, but not noted by the litigants, *1119 is the fact that the previous Compac operated diagonally across the street from the Wrights was in another subdivision than Unit Four. The proposed Compac, it is true, would be located across the street from the Wrights; however, it would be in the same subdivision: Unit Four.
The evidence shows that plaintiffs relied upon the original restrictions when they purchased their respective properties. There is abundant evidence regarding diminution in value of the properties of plaintiffs if the Compac is erected and operated, because of the nature of the business, traffic, noise, etc. Obviously, this evidence was presented in support of the application for injunctive relief and damages. However, resolution of the issue upon which the outcome of this case turns is largely a matter of law.
Able counsel for the opposing parties have filed excellent and exhaustive briefs supporting their respective theories regarding the rights and obligations of their clients under decisional law that each regards as controlling. This is also true for the well-prepared and well-presented oral arguments.
Appellants summarize their contentions in the following excerpts from their briefs:
Appellants' reply brief, pp. 1-4.
Appellants state in their initial brief, at p. 28:
Appellees summarize their position as follows:
Appellees' brief, p. 13.
Authorities cited by the parties to support their respective positions include those of other jurisdictions as well as those of this court. The following propositions of law, paraphrasing the issues for review as presented in appellees' brief, are correct general principles of law:
A DEVELOPER-DECLARANT MAY RESERVE THE RIGHT, IF CLEARLY EXPRESSED AND PRESERVED IN THE ORIGINAL DOCUMENT, TO ANNUL, CANCEL OR MODIFY RESTRICTIVE COVENANTS RUNNING WITH THE LAND, AND THE EXERCISE OF THAT RIGHT MAY BE DELEGATED TO ITS DESIGNATED REPRESENTATIVE.
RESERVATIONS AND RESTRICTIONS ARE TO BE CONSTRUED FREELY WITHIN THE INTENT OF THE PARTIES TO AVOID UNDUE HINDRANCE TO THE FREE USE OF REAL PROPERTY.
The following statement, paraphrasing the issues as presented by appellants for resolution by this court, is also a correct general principle of law:
THE LEGAL RIGHT OF AN OWNER DEVELOPER, CLEARLY PRESERVED IN THE ORIGINAL DOCUMENT AND DELEGATED TO A DESIGNATED REPRESENTATIVE, TO ANNUL, CANCEL OR MODIFY RESTRICTIVE CONVENANTS RUNNING WITH THE LAND IS NOT UNLIMITED, AND WHERE PURCHASERS HAVE RELIED UPON THE ORIGINAL RESTRICTIONS, ACTIONS OF THE DESIGNATED REPRESENTATIVE MAKING ANY SUCH CHANGES MUST BE REASONABLE, NOT ARBITRARY OR CAPRICIOUS, AS WELL AS CONSISTENT WITH PERPETUATION OF THE ORIGINAL COMMON SCHEME OF DEVELOPMENT, AND THE RESTRICTIONS CREATE EQUITABLE EASEMENTS IN FAVOR OF THE OWNERS OF THE SEVERAL LOTS THAT MAY BE ENFORCED, IN EQUITY, BY ANY OF THOSE LOT OWNERS.
*1121 Appellees, in support of the action of the trial court, rely heavily upon three decisions of this court and one of the Maryland Court of Appeals: Schmidt v. Ladner Construction Co., Inc., 370 So. 2d 970 (Ala.1979); Laney v. Early, 292 Ala. 227, 292 So. 2d 103 (1974); Thrasher v. Bear, 239 Ala. 438, 195 So. 441 (1940); Matthews v. Kernewood, 184 Md. 297, 40 A.2d 522 (1945). The latest of these cases is Schmidt. In that case, in which the author of this opinion joined the dissent of Chief Justice Torbert, the majority stated: "... The broader question of the legal right of a declarant to modify restrictive covenants running with the land, if such is clearly preserved in the original document, is not the issue here presented...." (Emphasis added.) It was also stated: "... Nothing herein should be construed as an expression of an opinion upon any issue beyond the narrow question of ambiguity here presented." (Emphasis added.) More importantly, however, the proposed modifications under scrutiny in that case neither annulled, nor were inconsistent with, the general scheme or plan of development for the subdivision or its residential use purpose.
As for Laney, that holding denied relief to an owner of several lots in a subdivision who sought to have restrictions for residential use only removed in order that he might construct buildings for commercial purposes. Relief from the restrictions was not sought on the basis of a reserved right to repeal or modify them, but rather was requested on the equitable theory that changed conditions in the neighborhood had impaired the benefits to the owners from the covenants and had rendered the restrictions inequitable. We therefore consider the facts and holding of Laney inapposite to the situation which we today appraise.
Turning to the older cases cited by appellees, Thrasher and Matthews, both of these decisions are noted in 4 A.L.R.3d 570 (1965) as authority for the traditional view with respect to a grantor's reservation of the right to revoke or amend restrictive covenants, stated as follows:
4 A.L.R.3d at 573-574.
It is important to note that this view is premised on the notion that restrictive covenants accompanied by the retained right in the grantor to revoke or amend them are personal in nature, as opposed to covenants running with the land. The rationale for considering these covenants personal in nature is that the reservation in the grantor of the power to revoke or amend destroys the mutuality or reciprocity of the restrictions. Gibney v. Stockdale Corp., 20 Del.Ch. 272, 174 A. 117 (1934); Suttle v. Bailey, 68 N.M. 283, 361 P.2d 325 (1961); Brighton by the Sea v. Rivkin, 201 A.D. 726, 195 N.Y.S. 198 (1922).
In the approximately 40 years since Thrasher and Matthews were decided, several courts, including this one, have adopted a more enlightened and realistic perspective *1122 when reviewing transactions between land developers and individual lot purchasers involving restrictive covenants. Most marked for our purposes is the following recitation from Hall v. Gulledge, 274 Ala. 105, 145 So. 2d 794 (1962):
*1123 The holding of Hall v. Gulledge was noted with approval, as the modern view, by our sister state of Florida in Loch Haven Homeowners' Ass'n, Inc. v. Nelle, 389 So. 2d 697 (Fla.App.1980); wherein that court said:
In another case from that jurisdiction, Flamingo Ranch Estates, Inc. v. Sunshine Ranches Homeowners, Inc., 303 So. 2d 665 (Fla.App.1974), the Florida court was faced with a fact situation almost identical to that which we confront in this case. The successor to the original developer of a residential subdivision sought to amend restrictive covenants, initially imposed to insure "the development of the lands as a residential area of high standards," to permit a portion of the property to be used for business purposes. Amendment of the restrictions was attempted by virtue of a clause in the conveying instruments which reserved to the developer the right to alter, amend, repeal or modify them at any time, in its sole discretion. On appeal, the court did not step as far as the trial court, which had declared the reservation of the right to amend null and void, but rather adopted a more reasonable and equitable position, which we approve. It is stated thus:
303 So. 2d  at 666.
The recorded declaration, in the case at hand, contained the provision that "[s]aid covenants, restrictions, and limitations shall run with the land and be binding on all parties and all persons claiming under them ...." Although the technical language employed in the conveying instrument is not controlling in an equitable inquiry, as the one in which we are here engaged, the assertion in such an instrument that restrictive covenants are to run with the land has been cited as a significant factor in determining that a grantor intended a general scheme or plan of development, so that he could only amend the restrictions in a reasonable manner consistent with that scheme or plan, despite broad language in the clause reserving to the developer the right to amend, modify or repeal the restrictions. Golian v. Polhironakis, 390 So. 2d 187 (Fla.App.1980). See also Hall v. Gulledge, supra.
Furthermore, the uncontroverted evidence advanced by plaintiffs was that they were induced by, and relied upon, the restrictive covenants when purchasing their respective lots in Cypress Shores, and construction of a convenience store on Lot 46 would result in a significant reduction in value of those lots.
Given these facts, we conclude that the declaration of "Covenants, Restrictions and Limitations" recorded by Cypress Shores Development Company, in light of the surrounding circumstances, was intended by the company to create a general scheme or plan of development with restrictions benefiting all owners of land within Cypress Shores.
We further note that the Architectural Control Committee, in which the right to annul, cancel, modify or amend is reserved, is comprised only of officers of the developing company, and will continue to be so constituted under the terms of the recorded declarations. Viewed realistically, the actions of the Committee are, no more or less, actions of the developer and are treated as such in this case. However, even where an architectural control committee is not the alter ego of the developer, the exercise of its powers has been held subject to a standard of reasonableness. In 4626 Corporation v. Merriam, 329 So. 2d 885 (La.App. 1976), the court stated:
Having determined from the recorded declaration of "Covenants, Restrictions and Limitations," and from the surrounding circumstances, that Cypress Shores Development Company intended to create a general scheme or plan or development for Cypress ShoresUnit Four (Subdivision), we hold the reservation of the right to annul, cancel, amend or modify the restrictive covenants could only be exercised by the Architectural Control Committee in a reasonable manner consistent with that general scheme or plan of development. Amendment or cancellation of the restrictions so as to permit the construction of a convenience store on Lot 46 was, we hold, an unreasonable exercise of the Committee's authority and highly inconsistent with the general scheme or plan of development upon which plaintiffs relied when purchasing their lots, and was therefore null and void. Accordingly, the judgment of the trial court is due to be and is hereby reversed and this case remanded for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
*1125 FAULKNER, JONES, ALMON, SHORES, BEATTY and ADAMS, JJ., concur.
TORBERT, C. J., and MADDOX, J., dissent.
TORBERT, Chief Justice (dissenting).
Appellants "by virtue of becoming [an] owner [`in that certain subdivision known as `Cypress Shores' and being designated as UNIT NO. 4'] ... agree[d] with Declarants [Appellees] ... that the following covenants, restrictions and limitations shall apply to said subdivisions ....:
"1. Use. All lots in said subdivision shall be known and designated as residential lots ... [and the Architectural Control Committee] may waive any one or more of the covenants, restrictions, limitations or requirements herein specified by an instrument in writing signed and acknowledged by a majority of the members comprising such committee ...."
This agreement by the parties bound both the appellants and appellees to the restrictive covenant and the waiver process. The majority opinion allows appellants to overrule a decision by the Architectural Control Committee, contrary to this agreement, because the majority believes that the committee's actions were unreasonable. While the ambiguity of the clause establishing the waiver process was held to be a proper basis for judicial review in Schmidt v. Ladner Construction Co., 370 So. 2d 970 (Ala.1979), it is my view that the "reasonableness" of the committee's decision because of its contractual nature should not be the basis for review by a court:
20 Am.Jur.2d Covenants, Conditions, & Restrictions § 270 (1965) (footnotes omitted). See, Matthews v. Kernewood, Inc., 184 Md. 297, 40 A.2d 522 (1945).
This Court has previously upheld the modification of a restrictive covenant where the grantor expressly reserved all of his rights and those of his personal representatives to waive, release or annul the restrictions contained in the conveyance. Thrasher v. Bear, 239 Ala. 438, 195 So. 441 (1940). While the majority relies on Hall v. Gulledge, 274 Ala. 105, 145 So. 2d 794 (1962), to support its decision, a careful reading of Hall reveals that this Court was discounting the argument by the grantor that the grantees had no standing to enforce restrictive covenants. There was no evidence presented that the grantors followed any modification or alteration of the restrictive covenants procedure as set out in the original conveyance. The only issue was the standing of the grantees to enforce restrictive covenants against subsequent grantors; thus, reliance on the case to support the majority opinion is misplaced.
In Callahan v. Weiland, 291 Ala. 183, 279 So. 2d 451 (1973), the successor to the grantor relinquished its right to waive, modify or annul restrictive covenants contained in deeds theretofore conveying lots. Thus, when the grantor's successor tried to erect a condominium when buildings of this type were restricted by deed, this Court allowed the grantees to enforce the restriction. The relinquishment of the rights by the grantor's successor was the focal point of the *1126 Court's decision; there was no indication that the same result would have been reached if the successor's rights had not been waived.
None of our cases supports the "reasonableness test" implemented by the majority. Instead, our cases support the proposition that if a grantor waives a restriction pursuant to a reservation of this power in the deed, this waiver is valid and binding on the parties. Because the majority departs from upholding a valid exercise of contractual power, I must dissent.
MADDOX, J., concurs.