Opinion ID: 1264387
Heading Depth: 2
Heading Rank: 2

Heading: A Balancing Of The Relative Hardships Was Necessary For The Benefit Of The Individual Defendants.

Text: Pelosi argues that, even if the relative hardship test were appropriate, the individual defendants acted intentionally or took a chance, and should therefore not have benefitted from the application of the test. Pelosi contends that, inasmuch as the individual defendants were aware, from the beginning, of the litigation involving Lot 29, their acquisition of Wailea Ranch lots could not have occurred innocently. Pelosi's argument that balancing the relative hardships was inappropriate is untenable. The ICA majority's application of the term innocent purchasers to the individual defendants is a bit misleading. [12] While this jurisdiction has not defined innocent purchaser, the term has long been understood in other jurisdictions as one who, by an honest contract or agreement, purchases property or acquires an interest therein, without knowledge, or means of knowledge sufficient to charge him in law with knowledge, of any infirmity in the title of the seller. Sun Oil Co. v. Broadhead, 323 So.2d 95, 98 (Miss.1975) (citation and internal quotation signals omitted); see also A.C. Nelsen Auto Sales v. Turner, 241 Iowa 927, 44 N.W.2d 36, 47 (1950); First Nat'l Bank of Omaha v. Provident Finance Co., 176 Neb. 45, 125 N.W.2d 78, 85 (1963); Simon v. Travelers Ins. Cos., 85 Misc.2d 264, 378 N.Y.S.2d 870, 872 (N.Y.Civ.Ct.1975); Jenkins v. Maintenance, Inc., 76 N.C.App. 110, 332 S.E.2d 90, 92 (1985). The individual defendants in the present matter had constructive notice, by virtue of their deeds, of the MM III covenants. Accordingly, they cannot accurately be referred to as innocent purchasers. Nonetheless, the circuit court did not err in balancing the equities to determine whether an injunction should be granted for the removal of the roadway and the tennis court. This court applies the relative hardship test when a prior landowner has violated a restrictive covenant and a subsequent purchaser, who took no action regarding the initial violation, is asked to bear the burden of a mandatory injunction to remove the violation. See section III.A, supra. As noted previously, however, the relative hardship test will not be applied where a property owner `deliberately and intentionally violates a valid express restriction running with the land or intentionally takes a chance. ' Sandstrom, 59 Haw. at 500, 583 P.2d at 978 (emphasis in original) (quoting Peters v. Davis, 426 Pa. 231, 231 A.2d 748, 752 (1967) (citing, inter alia, Ventresca v. Ventresca, 182 Pa.Super. 248, 126 A.2d 515 (1956))). As noted previously, the individual defendants in the present matter did have constructive notice of the MM III covenant. The individual defendants did not, however, engage in a deliberate and intentional violation. Id. at 501, 583 P.2d at 979. Inasmuch as most of the individual defendants did not own property at Wailea Ranch until the roadway and tennis court were complete, they cannot be said to have performed deliberate or intentional acts with regard to the creation of the two structures in violation of the MM III covenant. Furthermore, the individual defendants cannot be said to have intentionally `take[n] a chance' regarding the violation of the covenant. The use of the phrase take a chance in Sandstrom refers to an affirmative act, not a passive one. See Sandstrom, 59 Haw. at 500, 583 P.2d at 978 (declining to apply the relative hardship test where [a]ppellants took just such a chance in proceeding with construction of the second story of their home). The use of the phrase take a chance in this context traces its origins to Ventresca, supra . In Ventresca, a property owner, who was notified that he was violating a deed restriction by building a garage too close to the side lines of his lot, told his aggrieved neighbor that he would take a chance. 126 A.2d at 518. Thus, the chance referred to in Ventresca concerned the affirmative violative act of a property owner. See also Denniston v. Plaksin, 72 N.Y.S.2d 353, 354-55 (N.Y.Sup.Ct.1947) (injunction issued against property owner who deliberately and confessedly decided `to take a chance' in avoiding the restrictive covenants by building a multi-family house); Ingle v. Stubbins, 240 N.C. 382, 82 S.E.2d 388, 395-96 (1954) (injunction appropriate where property owner built in violation of property restrictions, and so proceeded to take his chances as to the effect of his conduct upon plaintiffs' rights); cf. Gladstone v. Gregory, 95 Nev. 474, 596 P.2d 491, 495 (1979) (injunction issued against property owner who assumed the risk of increased damages by continuing construction after neighbors' objections; equities not balanced where property owner  act[s ] in violation of a covenant (emphasis added)); Foster v. Nehls, 15 Wash. App. 749, 551 P.2d 768, 772 (1976) (property owner `assumed the risk' of the outcome by continuing to build in violation of restrictive covenant). If taking a chance were read to refer to passive acts, such as the mere purchase of property with respect to which there is a preexisting breach of a covenant, the relative hardship test would be applied only in the very limited situation where the property owners had made a mistake of fact. This harsh result does not satisfy the equitable interests of purchasers who have committed no affirmative violative act. As it stands, the relative hardship test will be applied when the rights of a neighbor clash with the rights of a purchaser with notice. In order to protect the neighbor, it should be noted that the state of mind of the purchaser may be weighed in the balancing of the equities. See Harksen, 581 N.W.2d at 176. In the present matter, the individual defendants purchased Wailea Ranch parcels once the covenant had already been violated by the commencement, at the very least, of the construction by WRE of the roadway and tennis court, see supra at 483-484, 985 P.2d at 1050-1051. At the point of their purchases, it was no longer possible for them to intentionally take a chance. The individual defendants merit different analysis, therefore, than that imposed by the Sandstrom court on property owners who affirmatively originate intentional breaches of restrictive covenants. The ICA correctly analogized the present matter to that confronted by the Supreme Court of Nevada in Horvath, supra . In Horvath, the Gregorys, owners of a plot of land subject to a restrictive covenant limiting homes to one story, commenced construction of a second story addition to their home in violation of the covenant. 637 P.2d at 532. While litigation regarding the addition was pending, the Gregorys sold their home to the Horvaths. Id. Thereafter, a Nevada district court granted an injunction, ordering that the second story be removed. Id. On appeal, the supreme court observed, [i]n the present case, which deals with a purchaser who has performed no act in violation of the restrictions and who merely purchased a house which contained an existing violation of the restrictions, we perceive no reason to preclude a balancing of equities[.] Id. at 533 (emphasis added). As in Horvath, the individual defendants in the present matter performed no acts with regard to Lot 29, but merely purchased property that contained existing violations. [13] The circuit court was correct, therefore, in applying the relative hardship test to the individual defendants.