FI FTH DI VI SI ON

M CFA DDEN, P. J.

, RA Y and RI CKM A N, JJ.

N O T IC E : M otions for r e c ons i de r a tion m us t be ph y sic a l ly r e ce iv ed i n our c le r k ’s offic e w ithin te n da y s of the da te of de c is ion to be de e m ed tim e ly file d.

http://w w w .ga a ppe a l s .us /r ule s

October 23, 2018



# I n th e Co u r t o f

A p p eals o f

G eo r g ia

A1 8 A1 17 5 . J E SCHKE et al . v . TURNSTONE GROUP, LLC et al

.

M C F A D D E N , Pres id i n g J u d g e.

Th i s ap peal ch al l en ges a s u m m ary ju dg m en t o rd er fi n d i ng t h at a d ecl arat i o n o f

res t ri ct i v e co ven an ts ap p l i es t o t wo l o t s i n a s u b d iv i s i o n

. Th e reco rd sh o w s t h at t h ere

are n o g en u i n e i s s u es o f m at eri al fact as t o t h e d ecl arat i o n ’ s ap p l i cab i l i t y t o o n e o f t h e

l o t s , b u t t h ere are g en ui n e i ss ues o f m at eri al fact as t o i t s ap pl i cab i l i t y t o t h e o t h er l o t

.

So we affi rm

i n p art an d rev ers e i n p art

.

1

. Fa ct s a n d p r o ced

ur a l p o s t u r e.

“ On ap p eal fro m a g ran t o f su m m ary ju dg m en t

, we co n d u ct a de n ov o rev i ew

o f th e ev i d en ce t o d et erm in e if t h ere ex i st s a g en u i n e i s s u e of m at eri al fact an d

wh et h er t h e un d i s pu t ed fact s , v i ewed i n t h e l ig h t m o s t fav o rab l e to t h e n o n m o v i n gp art y , en t i t l e t he m o v an t t o ju d g m e n t as a m at t er o f law.” La f o n t a i n e v. Al exa n d

er ,

3 4 3 Ga. Ap p . 6 7 2 , 6 7 3 (8 0 8 SE2 d 5 0 ) (2 0 1 7) (ci t at i o n o m i t t ed ).

So v iewed

, t h e e v i den ce s ho ws t h at Su n ri s e Trai l s , LLC acq u i red

ap p ro x i m at el y 6 7

. 5 acres o f l an d i n Ch ero k ee Co u n ty th at i t p l an n ed t o d ev el o p as a

s u b d iv i s i o n

. On No v em

b er 5

, 20 0 3

, Su n ri s e Trai ls ex ecu ted a d eed t o s e c u r e d eb t

,

wh i ch was t h en reco rd ed on No v em b er 1 0

, 2 00 3

, co nv ey i n g t h e p ro p ert y to

So u t hBan k

, N. A. as s ecu ri t y fo r a l o an

. On J an u ary 1 4, 2 0 05

, Su n ri se Trai l s reco rd ed

a d ecl arat i o n o f p ro t ect i v e co v en an t s, co n d it i o n s , res t ri ct i o n s an d eas em en t s fo r t h e

s u b d iv i s i o n

. (h erei n aft er, “ d ecl arat i o n o f co v en an ts ”). Th ree week s l at er, in Feb ru ary

2 0 0 5

, Su n ri s e Trai l s fi l ed i t s fi n al p l at fo r th e s u b d i v is i on , referen ci n g t h e reco rd ed

d ecl arat io n o f co v en an t s an d di vi d i n g t h e p ro pert y i nt o 3 5 res i d en t ial l o t s , s treet s , an d

co m m o n areas t h at i n cl u d ed h o rs e t rai l s

. T h ereaft er, s o m e o f th e res i d en t i al l o t s were

s o l d acco rd i n g t o t h e c o m m o n s u b d i v i s i o n s ch em e es t ab l i s h ed b y t h e p l at an d

d ecl arat io n o f co v en an t s , i n cl u d i n g t h e s al e of a l o t t o Ap p el l an t s Gary an d M ary J o

J es ch k e o n Decem

b er 2 3, 2 0 09

.

Su n ri s e T rai l s s u b s eq u en t l y d efau l ted o n t h e l o an s ecu red b y t h e deed i n fav o r

o f So u t h Ban k

. On N o v em b er 1

, 2 0 1 1

, St at e Ban k an d Tru s t Co m p an y , as s u cces s o r

i n in t eres t t o So u t h Ban k, fo recl o s ed o n t h e u ns o ld p o rt i o n s o f t h e 6 7.5 acres

. Th e l o t s

2s o l d pri o r to th at d at e, i ncl u d i ng t he l ot p u rch as ed b y t h e J es ch k es , were ex p res s l y

ex cl u d ed fro m t h e fo recl os u re sal e, at wh i ch St at e Ban k i t s el f pu rch as ed th e l o t s

. On

Sep tem b er 1 4

, 2 0 1 2

, St at e Ban k so l d t h e fo recl o s ed s u bd i v i s i o n pro p ert y t o REO

F u n d i n g

. Fo u r y ears lat er, on Sep t em b er 9

, 2 0 1 6

, REO s o ld an o t h er lo t i n t h e

s u b d iv i s i o n t o t h e J e s c h k es

. In Ap ri l 20 1 7

, th e J es ch k es recei ved a l et t er fro m

Tu rn s t o ne Gro u p , LLC, ap p aren t l y sen t o n b eh al f o f REO

, wh i ch s t at ed t h at t h e

h o m eo wn ers as so ci at io n creat ed b y t h e ori g i n al d ev el o p er h ad g o ne d o rm an t, t h at t h e

h o m eo wn ers as s o ci at i o n h ad b een rei nco rp o rat ed

, an d th at a m eet in g wo u ld b e h el d

t o el ect a n ew b o ard o f d i rect o rs fo r t h e as so ci at i o n

.

On M ay 3

, 2 01 7

, t h e J es ch kes fi l ed a co m p l ai n t ag ai ns t Tu rn s t o n e, REO, an d

t h e p u rp o rt ed l y rei n co rp o rat ed h o m e ow ne r s a ssoc ia tion, se e king, a m ong o t h er t h i n g s ,

i n ju n ct i v e rel i ef an d a decl arat o ry ju d g m en t as t o th e ap p l i cab i l i t y o f t he decl arat i o n

o f co v en an t s t o t h ei r lo ts i n l i g h t o f th e 2 0 1 1 fo recl o s u re. Th e d efen dan t s fi l ed a

m o ti o n fo r p art i al su m

m ary ju d g m en t o n , am o n g o t h er t h in gs , t h e ap pl icab i l i t y o f t h e

d ecl arat io n o f co v en an t s t o t h e l o t s o w n e d b y t h e J es ch k es

. Aft er a h eari n g o n t h e

m o ti o n , t h e tri al co u rt i s s u e d a n o r d er g ran t i n g t he m o t i o n i n part

, fi n d i n g t h at t h e

d e cl arat i on o f co v en an t s i s ap pl i cab l e t o al l t h e l o t s an d co m m o n p ro p ert y i n t h e

s u b d iv i s i o n . Th e J es ch k es ap p eal fro m t h at p art i al s u m

m ary ju d gm en t o rd er.

32

. Lo t s s o l d p r i o r t o t h e f o r ecl o s u re.

Th e J es ch k es ch al l en g e t h e t ri al co u rt ’ s fi n d i n g t h at l o ts s ol d p ri o r t o t h e 2 0 1 1

fo recl o s ure sal e, wh i ch i n cl u d es t h e lo t t h ey b o u g ht i n 2 00 9

, are b o un d b y t h e

d ecl arat io n o f co ven an t s . W e fi n d n o erro r.

It is u n d i s p u t ed t h at t h e J es ch k es b o u gh t t h e i r l o t i n 2 0 0 9 s u b ject t o t h e

d ecl arat io n o f co v en an t s. In d eed

, t h e J es ch k es h av e ad m i t t ed

, b o t h i n th e t ri al co u rt

an d o n ap p eal

, t h a t th e l o t was acq u i red s u bject t o t he d ecl arat io n o f co v en an t s

.

Nev ert h el es s , t h ey cl ai m t hat t h e 2 0 1 1 fo recl o s u re s al e ex t i n gu i s h ed t h e decl arat i o n

o f co v en an t s as t o t h ei r lo t. Bu t as n o ted ab o v e, i t i s u n di s p u t ed th at o n l y t h e u n s o ld

l o t s i n t h e s u b d i v is i o n were i n cl u d ed i n t h e fo recl o s ure an d t h e Jes ch k es ’ lo t

, al o n g

wi t h t h e o t h er p rev i o u s l y s o ld l o t s , was ex p res sl y ex cl u ded fro m t h at fo recl o s u re s al e.

Th u s, as t h e t ri al co u rt co rrect l y fo u n d

, t h e J es ch k es ’ l o t was u n affect ed b y t h e

fo recl o s ure o f o t h er l o t s an d t h ei r 20 0 9 l o t i s bo u nd by t h e d ecl arat i o n o f co v en an t s

u n d er wh i ch t h ey b ou g h t t h e p ro p ert y

. See In t er ch an g e Dr i ve, LLC v. Nu sl o ch

, 3 1 1

Ga. Ap p

. 5 5 2

, 5 5 7 (7 1 6 SE2 d 6 0 3 ) (2 01 1 ) (p art y accep t i n g a d eed t h at ex p res s l y

m ak es i t s i n t eres t i n s ub d i v i si o n p ro p ert y s u bject t o res t ri ct iv e co v en an t s t h ereb y

co n sen t s t o b e b o un d b y

s u ch co v en an ts an d res t ri ct i o ns ).

4Th e Jes ch k es m i s tak en l y rel y o n th e fact t h at t h e secu ri t y d eed was fi l ed b efo re

t h e d ecl arat i o n o f co v en an t s

. Co n s eq u en t l y , th ey co n t en d

, t he 2 0 1 1 fo recl o su re u n d er

t h e s ecu ri t y d eed ex t i n gu is h ed t h e d ecl arat i o n o f co ven an t s. See S p r i n g mo nt

Ho meo wn er

s A s s n

. v. Ba r b er , 2 2 1 Ga. Ap p

. 7 13

, 7 1 4 (4 7 2 SE2 d 6 9 5 ) (1 9 9 6) (b an k ’ s

s e c u r i t y d eed h ad pri o ri t y o v er a s u b s eq u en t l y reco rd ed d ecl arat i o n o f res t ri ct i v e

co v en an t s an d fo recl o s u re wo u l d h av e i nv al i d at ed res t ri ct i o n s h a d t h ey at t ach ed ).

Th at p ri ori t y o f fi l i n g m ay b e rel ev an t t o wh et h er t h e decl arat i o n o f co v en an t s ap p li es

t o t h e fo recl o s ed l o t s

. Bu t it i s n o t rel ev an t t o l o t s

— l i k e t h e 2 0 09 l o t

— th at were

ex p res s l y ex cl u d ed fro m t he fo recl os u re; t h o s e l o t s are s t il l bo u nd b y t h e decl arat i o n

o f co v en an ts u n d er w hi ch th ey were acq u ired

. S p r i n g mo n t is co n t ro ll i n g

. In t h at cas e,

as h ere, cert ai n s ub d i v is i o n lo t s were al s o s o l d b y a d ev el o p er s u b ject to a decl arat i o n

o f co ven an t s an d o t h er u np u rch as ed l o t s were s u b s eq u en t l y fo recl o s ed b y a b an k

. W e

h el d

, “ t he [d ] ecl arat i o n b o u n d t h o s e tak i n g [l o t s ] u n d er t h e dev el o per[.] ” Id

. (ci t at i on s

o m it t ed ).

Th e al t ern at i v e arg u m en t s p u t fo rt h b y t h e J es ch kes

, ci t i n g ev i d en ce t h at t h e

d ecl arat io n h ad n o t b een en fo rced an d t h at t h ere i s an ab s en ce o f m u t u al it y of co n t ract

aft er t h e fo recl os u re, d o n ot creat e g en u in e i s s u es o f m at eri al fa c t a s t o t h e

ap p li cab i l i t y o f t h e decl arat i o n o f co v en an t s t o t h e 2 0 0 9 l o t

. Th e t ri al co u rt t h erefo re

5d i d n o t err i n co n cl u d i n g t h at t h e l o t p u rch as ed b efo re t he fo recl o s ure i s b o u n d b y t h e

d ecl arat io n o f co ven an t s

.

3

. Imp l i ed

co ven a n t t h eo r y.

As fo r t h e l o t s o b t ai n ed b y REO aft er t h e 2 0 1 1 fo recl o s u re — i n cl u di n g t h e l ot

t h ey pu rch as ed fro m REO i n 2 0 1 6

— t h e J es ch k es as s ert an i m p l i ed co v en an t t h eo ry

.

W e ag ree t h at t here are g en ui n e i s s u es o f m at eri al fact as t o wh et her t h e l o t b o u g ht

i n 2 0 1 6 i s b o u nd b y

t h e d ecl arat i o n u n der an i m p l i ed co v en an t t h eo ry

.

(W )h ere an o wn er o f l an d s u b d i v i d es i t i nt o l o ts fo r th e pu rp o s e

o f s al e, u n d er a g en eral p l an o r s ch em e res t ri ct in g t h e l o t s t o cert ai n

u s es , res t ri ct io n s th at are em b o d i ed in s u ch g en eral p l an o r sch em e m ay i n a p ro p er cas e be i m

po s ed u p o n t h e l o t s bey o n d t h e ex p res s res tri ct i o n s

co n t ai n ed i n t he d ee d s t o t h e p u rch as ers , o n t h e t h eo ry o f i m p l ied

co v en an t s

. Th e n eed fo r s u c h a ru l e is p art icu l arl y co m p el l i n g wh ere

t h i rd p art i es hav e rel i ed o n t h e ap pl i cab i l i t y o f t h e co ven an t s

. T h e p art y wi s h i n g t o en fo rce a n o n-e x pres s ag reem en t m u st

, o f co u rs e, es t ab l i s h

t h e area co v ered b y t h e ag reem en t an d t h e s p eci fi c co n ten t of th e

res t ri ct i o n s al l eg ed

. Th i s i s u s u al l y acco m p l i s h ed b y sh o wi n g a co m m o n

g ran to r’ s g en eral s ch em e o r p l an fo r d ev el o p i ng t h e p ro pert y i n

q u es t i o n

.

Ca s t le P o i n t Ho meo wn er s As s n

. v. S i mmo n s , 3 33 Ga. Ap p

. 5 0 1

, 5 0 5-5 0 6 (7 7 3 SE2 d

8 0 6 ) (2 0 1 5 ) (ci t at i o n s an d p u n ct u at i o n o m i t t ed ). “ Res t ri ct iv e co v en an t s m ay ap p l y

t o l ot s i n a p l an n ed d ev el o p m en t u n d er an i m p l i ed co v en an t t h eo ry , ev en i f t h e

d ev el o p er fai l ed t o co m p l y wi t h al l fo rm al it i es , a s l o n g a s t h e l an d o wn er h ad

6k n o wl ed g e o f t h e res t ri ct i v e co v en an t s at t h e ti m e h e p u rch as ed t h e p ro p ert y .”

W a t er f r o n t

, LLP v. R i ver Oa ks Co n d o

. As sn

. , 2 87 G a. Ap p

. 44 2

, 4 45 (6 51 SE2 d 4 8 1 )

(2 0 0 7) (ci t at i o n s an d p u nct u at i o n o m i t t ed ).

In th i s cas e, t h e J es ch k es h av e p o i n t ed t o ev i d en ce creat i n g m at eri al q u es t i on s

o f fact as t o wh et her t h e d ecl arat i o n o f co v en an t s i s ap p l i cab l e t o t h e l o t t h a t t h ey

acq u ired aft er t h e fo recl o s u re. As n o t ed ab o v e, t h e s ecu ri t y d eed was fi l ed b efo re an d

was t h u s s u p eri o r to th e decl arat i o n o f co v en an t s , s o t h ere i s a q u es t i o ns o f fact as to

wh et h er th e d ecl arat i o n o f co v en an t s rem ai n ed ap pl i cab l e t o t h e u ns o l d l o t s aft er t h e

fo recl o s ure. See S

p r i n g mo n t

, s u p ra. M o reo v er, t h e Jes ch k es h av e ci t ed ev i d en ce t h at

t h e d e c l a r a t i o n o f co ven an ts h as n o t b een i m pl em en t ed

, t h at t h e ho m eo wn ers

as s o ci at io n was no t p ro p erl y fo rm ed

, t h at n o d ues or as s es s m en t s were ev er co l l ect ed

,

an d t h a t th e d ecl arat i o n o f co v en an ts h as n ev er b een en fo rced

. So ev en t h o u g h t h e

J es ch k es were cl earl y aware of t h e d ecl arat i o n o f co v en an t s , h a v i n g prev i o u s l y

b o u g h t a l o t i n 2 0 0 9 s ub ject t o t h e d ecl arat i o n , th ere are qu es t io n s o f fact as to

wh et h er t h ey h ad kn o wl ed g e t h at t h o s e res t ri ct i v e co v en an t s were s t i l l i n effect an d

ap p li cab l e to t h e l ot t h ey p u rch as ed i n 2 0 16

. Th e tri al co u rt t herefo re erred i n g ran t i n g

p art i al s u m

m ary ju d g m en t as t o t h at l o t acq u i red aft er t h e fo recl o s u re b ecau s e t h ere

7are “ i s su e[s ] o f fact as t o wh et h er [i t ] is b o u n d by t h e [d ecl arat io n o f] co v en an t s u n d er

t h e t h eo ry

o f i m p l i ed co v en an t s .” Ca st l e Po i n t

, s up ra at 50 6 -5 0 7 (ci t at i o n o m i t t ed ).

Ju d g men t a f f i r med in p a rt a n d r ever

s ed i n p a r t

. R a

y a n d R i ckma n, JJ., co n cu r

.

8