Court Opinion

ID: 9608309
Source: CourtListenerOpinion
Date Created: 2023-08-22 03:09:36.054887+00
Date Added: 2024-06-11T18:02:45.122590
License: Public Domain

*603Justice HUDSON
dissenting.
With respect to defendants Emerson and Huffman, the restrictive covenants at issue do not contemplate any affirmative financial assessment on defendants, and I conclude that the service charge contained in the 1996 Rules and Regulations therefore exceeds the scope of the original bargain. As for defendants Patten, the applicable restrictive covenants do explicitly provide for assessment of service charges, but I conclude that the language is not sufficiently definite to be enforceable under North Carolina law. For these reasons, I respectfully dissent.
The majority and concurring opinions emphasize “the unique, religious community character” of the Lake Junaluska Assembly Development (the “Assembly”) as “fundamental” to the holding that the amendments to the restrictive covenants here are reasonable, even going so far as to take judicial notice of facts not in the record to support that position. However, the Southeastern Jurisdictional Administrative Council (SEJAC) has advanced no argument for an exception for religious communities, in either its original complaints against defendants or its briefs to the Court of Appeals and this Court. Moreover, neither the majority or dissenting opinions below discussed such an exception. Rather, this dispute has been presented by all parties as an ordinary dispute between a commercial property developer and its property owners, and I can discern no basis for us to treat it otherwise. Indeed, I have found no statutory or case law that would support an expansive reading of restrictive covenants only here, based on the presumably religious nature of the community. I do not believe it is appropriate for us to reach out and resolve this case on grounds not argued, particularly when doing so requires the Court to consider matters not in the record. On this point, I also dissent.'
The facts are straightforward and require us to look only at the language of the deeds signed by the parties here, including the applicable restrictive covenants. Given that the language of the deeds and covenants is plain and unambiguous, we have no need to refer to the history of SEJAC or even to the parties’ relationship, in order to infer their respective intentions at the times the deeds were signed. See Long v. Branham, 271 N.C. 264, 276, 156 S.E.2d 235, 244 (1967) (“The fundamental rule in construing restrictive covenants is that the intention of the parties as shown by the covenant governs.” (emphasis added) (citation and internal quotation marks omitted))).
*604As we have previously held, this Court will generally enforce a restrictive covenant in the same manner as any other contract. Wise v. Harrington Grove Cmty. Ass’n, 357 N.C. 396, 400-01, 584 S.E.2d 731, 735-36 (2003); see also Armstrong v. Ledges Homeowners Ass’n, 360 N.C. 547, 554, 633 S.E.2d 78, 85 (2006) (“Covenants accompanying the purchase of real property are contracts which create private incorporeal rights, meaning non-possessory rights held by the seller, a third-party, or a group of people, to use or limit the use of the purchased property.” (citations omitted)). As such, “[i]f the plain language of a contract is clear, the intention of the parties is inferred from the words of the contract.” State v. Philip Morris USA Inc., 359 N.C. 763, 773, 618 S.E.2d 219, 225 (2005) (citation and internal quotation marks omitted).
While the majority speculates as to the reason defendants Emerson and Huffman purchased their respective lots in the Lake Junaluska Assembly Development, our cases show that we must restrict our determination of the “intention of the parties” based only on our “study and consideration of all the covenants . . . creating the restrictions.” Long, 271 N.C. at 268, 156 S.E.2d at 238 (citation omitted); cf. id. at 268, 156 S.E.2d at 239 (“Where the meaning of restrictive covenants is doubtful the surrounding circumstances existing at the time.of the creation of the restriction are taken into consideration in determining the intention.” (citation and internal quotation marks omitted)).
Accordingly, as with any contract, the written words of the parties, not our own theories as to their respective motivations, must underlie our analysis of the bargain they struck. We have also previously held that, because of the unique nature of restrictive covenants:
Covenants and agreements restricting the free use of property are strictly construed against limitations upon such use. Such restrictions will not be aided or extended by implication or enlarged by construction to affect lands not specifically described, or to grant rights to persons in whose favor it is not clearly shown such restrictions are to apply. Doubt will be resolved in favor of the unrestricted use of property, . . . and that construction should be embraced which least restricts the free use of the land.
Such construction in favor of the unrestricted use, however, must be reasonable. The strict rule of construction as to restric*605tions should not be applied in such a way as to defeat the plain and obvious purposes of a restriction.
Id. at 268, 156 S.E.2d at 239 (emphases added) (citation and internal quotation marks omitted). Likewise, in Armstrong we recently held that an amendment to a declaration of covenants “does not permit amendments of unlimited scope; rather, every amendment must be reasonable in light of the contracting parties’ original intent.” 360 N.C. at 559, 633 S.E.2d at 87.
The Armstrong case is instructive to the analysis of the situation presented here. In Armstrong, we considered a challenge by property owners to their homeowners’ association’s amendment of a declaration of restrictive covenants so as to “authorize[] broad assessments ‘for the general purposes of promoting the safety, welfare, recreation, health, common benefit, and enjoyment of the residents of [the subdivision] as may be more specifically authorized from time to time by the Board.’ ” Id. at 548, 633 S.E.2d at 81. There, we noted disapprovingly that the amendment “grants the [homeowners’] Association practically unlimited power to assess lot owners and is contrary to the original intent of the contracting parties,” in part because the assessments billed were “unrelated to all other provisions of the deeds, Declaration, and plat.” Id. at 561, 633 S.E.2d at 88. In finding the amendment to be invalid and unenforceable, we concluded that “[i]n the same way that the powers of a homeowners’ association are limited to those powers granted to it by the original declaration, an amendment should not exceed the purpose of the original declaration.” Id. at 558, 633 S.E.2d at 87.
In Armstrong, we also highlighted the unexpected nature of the assessments, observing that “petitioners purchased their lots without notice that they would be subjected to additional restrictions on use of the lots and responsible for additional affirmative monetary obligations imposed by a homeowners’ association.” Id. at 561, 633 S.E.2d at 89. Significantly, we emphasized the importance of respecting the parties’ expectations regarding the original bargain struck, stating unequivocally that “[t]his Court will not permit the Association to use the Declaration’s amendment provision as a vehicle for imposing a new and different set of covenants, thereby substituting a new obligation for the original bargain of the covenanting parties.” Id.
Here, defendants Emerson and Huffman agreed to the following restrictive covenants when they signed their respective deeds:
*606Second: That said lands shall be held, owned, and occupied subject to the provisions of the charter of the [Lake Junaluska Assembly, Inc.], and all amendments thereto, heretofore, or hereafter enacted, and to the bylaws and regulations, ordinances and community rules which have been, or hereafter may be, from time to time, adopted by [Lake Junaluska Assembly, Inc.], and its successors.
Fifth: That it is expressly stipulated and covenanted between the Grantor and the Grantee, his heirs and assigns, that the bylaws, regulations, community rules and ordinances heretofore or hereafter adopted by the [Lake Junaluska Assembly, Inc.] shall be binding upon all owners and occupants of said lands as fully and to the same extent as if the same were fully set forth in this Deed, and that all owners and occupants of said lands and premises shall be bound hereby.
Defendant Huffman purchased his lots in 1970 and 1974; defendants Emerson purchased their lot in 1992. In November 1996, the Assembly enacted Rules and Regulations4 providing in part: “Each owner shall pay annually a SERVICE CHARGE in an amount fixed by the SEJ Administrative Council for police protection, street maintenance, street lighting, drainage maintenance, administrative costs and upkeep of the common areas.” Put simply, years after defendants struck their original bargains with SEJAC — and, in the case of defendant Huffman, decades later — SEJAC amended the restrictive covenants to impose affirmative financial obligations on defendants. Thus, when defendants Emerson and Huffman decided to purchase, and struck their original bargains, they had before them only the language of the original covenants, which make no mention of financial assessments.
Given that the restrictive covenants contain absolutely no reference to even the possibility of assessments or fees to be paid by prop*607erty owners, I disagree that defendants Emerson and Huffman “should have anticipated” this action by the Assembly. Likewise, in light of our holding in Armstrong and our case law directing that such covenants be strictly construed against limitations on use of property, I cannot agree with the majority that this amendment is reasonable and within the scope of the original restrictive covenants agreed to by the parties. Indeed, this amendment appears to be precisely the type of “overreaching by one party or sweeping subsequent change” that we cautioned against in Armstrong. 360 N.C. at 554, 633 S.E.2d at 84-85. I believe that the majority’s holding here today dilutes beyond usefulness the reasonableness standard that we articulated in Long and Armstrong.
The entire passage from Armstrong explaining how “reasonableness” may be determined is informative:
However, the court may ascertain reasonableness from the language of the original declaration of covenants, deeds, and plats, together with other objective circumstances surrounding the parties’ bargain, including the nature and character of the community. For example, it may be relevant that a particular geographic area is known for its resort, retirement, or seasonal “snowbird” population. Thus, it may not be reasonable to retroactively prohibit rentals in a mountain community during ski season or in a beach community during the summer. Similarly, it may not be reasonable to continually raise assessments in a retirement community where residents live primarily on a fixed income. Finally, a homeowners’ association cannot unreasonably restrict property rental by implementing a garnishment or “taking” of rents (which is essentially an assessment); although it may be reasonable to restrict the frequency of rentals to prevent rented property from becoming like a motel.
Correspondingly, restrictions are generally enforceable when clearly set forth in the original declaration.
Id. at 559-60, 633 S.E.2d at 88. We made these observations in the context of our concern that, with homeowners’ associations in general, “[t]he law . . . not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land merely because the covenant agreement permitted a majority to make changes in existing covenants.” Id. at 561, 633 S.E.2d at 89 (citation and internal quotation marks omitted).
*608Here, that concern is even greater, as SEJAC is the corporate property developer; there is no homeowners’ association or other representative vehicle through which defendants and other property owners could vote to approve or strike down amendments to the original covenants. “[Retaining significant control over minute aspects of the Assembly” is not equivalent to charging property owners monthly assessments, sometimes totaling thousands of dollars a year, that were not contemplated, and therefore, not agreed to, in the original contracts signed by the parties.
The majority opinion distinguishes the facts here from those in Armstrong by focusing on the “unique, religious community character” of the Assembly, as opposed to the “fairly typical subdivision” at issue in Armstrong. Our analysis in Armstrong was based not only on the nature of the community in question, but also in large part on the expectations of the property owners themselves as to future financial obligations at the time they purchased their lots. While it is true that we quoted two of the six petitioners in Armstrong regarding their express decision not to live in “a gated community with ‘all the amenities,’ ” id. at 552, 633 S.E.2d at 83, we did so to illustrate their opposition to the notion of living in a planned community in light of the homeowners’ association’s repeated references to North Carolina’s Planned Community Act in its attempts to amend the bylaws.
Significantly, the original declaration of covenants in Armstrong did, in fact, allow property owners to be assessed for “an equal pro-rata [sic] share of the common expense for electrical street lights and electrical subdivision entrance sign lights and any other common utility expense for various lots within the Subdivision.” Id. at 550, 633 S.E.2d at 82. Even with that language, which gave property owners notice that they were subject to future financial obligations related to their lots, this Court found an amendment expanding the assessments to be invalid and unenforceable. Here, purchasers of Assembly property had no such notice. Further, I see no distinction between the new affirmative obligations this Court struck down in Armstrong for “ ‘promoting the safety, welfare, recreation, health, common benefit and enjoyment’ ” of residents, id. at 553, 633 S.E.2d at 84, and those that the majority would allow here, as “necessary to preserve the unique religious character and history of the community.” Neither the majority nor the concurring opinion articulates a legal basis or cites any authority for the proposition that the development corporation managing this community should be permitted *609to infringe upon the individual property rights of its property owners in a manner that would be impermissible for any other developer.
Here, the parties have not argued in their briefs, nor does anything in the record before us give any indication, why defendants Emerson and Huffman elected to purchase property in the Assembly. We do have their sworn affidavits that their deeds contain no reference to “any charges or assessments by Lake Junaluska Assembly, Inc.” and that the reference to the “ ‘bylaws and regulations, ordinances and community rules’ ” is “too vague to give any notice of an obligation to pay money for anything.” Perhaps they purchased their lots because they were attracted to the Assembly’s “unique, religious community character” or maybe they did so because they expected that the community would be fully maintained by SEJAC, without any additional.financial burden on them as property owners. Neither the briefs nor the record reflect why they made their decisions to purchase, and we simply do not know. In light of well-established principles requiring strict construction of covenants, I do not agree that we should allow speculation as in the majority opinion to form the basis of a decision to expand these covenants.
Although amendments are sometimes necessary, as we recognized in Armstrong, they must be reasonable and “preserv[e] the original nature of [the parties’] bargain.” Id. at 558, 633 S.E.2d at 87 (citations omitted). The majority’s holding allows the Assembly to infringe on the individual property rights of defendants Huffman and Emerson by amending the original covenants in a manner that impermissibly “substitute [s] a new obligation for the original bargain of the covenanting parties.” Id. at 561, 633 S.E.2d at 89. Further, it runs contrary to our long-standing case law directing such covenants to be strictly construed. I would find the amendments to be invalid and unenforceable.
Defendants Patten are differently situated than defendants Emerson and Huffman, as the Pattens purchased their lot in 1996, at which point the covenants included the following language: “Each owner shall pay annually a SERVICE CHARGE in an amount fixed by the SEJ Administrative Council for garbage and trash collection, police protection, fire protection, street maintenance, street lighting, and upkeep of common areas.” Thus, defendants Patten had notice that they owed an ongoing financial obligation to the Assembly for those services.
*610In Armstrong, we cited with approval the Court of Appeals holding in Beech Mountain Property Owner’s Ass’n v. Seifart, 48 N.C. App. 286, 269 S.E.2d 178 (1980), that affirmative covenants are unenforceable “unless the obligation [is] imposed in clear and unambiguous language which is sufficiently definite to guide the courts in its application.” 360 N.C. at 556, 633 S.E.2d at 85 (quoting Beech Mountain, 48 N.C. App. at 295, 269 S.E.2d at 183 (alteration in original)). In Beech Mountain, the Court of Appeals articulated a three-part test to determine if an obligation is “sufficiently definite”: Does the covenant (1) describe an adequate standard to determine the amount of the assessment; (2) identify with particularity the property to which the assessment applies; and (3) give guidance to the reviewing court regarding the facilities maintained with the assessment funds? 48 N.C. App. at 295-96, 269 S.E.2d at 183-84.
Here, the deed and covenants signed by defendants Patten refer to their subdivision, Hickory Hill, but also include references to the larger Assembly development. Each property owner in the Assembly receives a copy of policies and procedures outlining how the service charges are calculated using property values, and I find that explanation sufficient to meet the first prong of the test.
Turning to the second and third prongs, I find that the language in the covenants gives no guidance on the property or facilities that will be maintained with the assessment funds. Although defendants Pattens’ deed specifies that it subjects Section One of the Hickory Hill subdivision to the covenants therein, nothing in the service charge description specifies that the assessment funds will be used for the Assembly Development as a whole, or even limited to use only in the Assembly. From the documents in the record, it is clear that the service charges are being used for maintenance and upkeep throughout the Assembly Development as a whole, which, without operative language to allow for such application, goes beyond what our case law. permits. See Long, 271 N.C. at 274, 156 S.E.2d at 243 (“It is our opinion, however, that, nothing else appearing, restrictions imposed upon a particular subdivision are for the benefit of that particular development and no other.”).
Moreover, although the service charge includes a reference to “common areas,” Mitchell Buddy Young, SEJAC’s Director of Residential Services at the Assembly, admitted in his deposition that there are no common area fees, a fact which was also admitted in SEJAC’s responses to interrogatories. Likewise, defendants. Patten *611also pay a separate monthly fee for garbage and trash collection and fire protection. Thus, as to at least some of the “eminently reasonable community expenses” highlighted by the majority opinion, defendants are already contributing financially “to the maintenance of their community” through other monthly charges. More troubling, SEJAC in its response to interrogatories, and Mr. Young in his deposition, conceded that the service charge assessed to defendants Patten is also used for administrative costs (including payroll, pension and retirement benefits, and attorney’s fees), which are not purposes mentioned explicitly or by implication in the covenants.
As the majority opinion itself observes, “the proceeds of the service charges must actually be used to fund the specific purposes stated in the restrictions.” Here, by SEJAC’s own admission, they are not. Moreover, the deed contains no language limiting the property or facilities to which the service charge may be applied, again giving SEJAC unfettered discretion to continue to expand the streets, lighting, and other areas that might be maintained using the service charges. If this language is sufficiently definite to be enforceable, defendants Pattens’ liability could be virtually unlimited. Similarly, the covenants struck down in Beech Mountain required an assessment for “road maintenance and maintenance of the trails and recreational areas,” “road maintenance, recreational fees, and other charges assessed by the Association,” and “all dues, fees, charges, and assessments made by that organization, but not limited to charges for road maintenance, fire protection, and security services,” without specifying which roads, trails, or areas in the development were covered. 48 N.C. App. at 288, 269 S.E.2d at 179-80. I find the language here to be at least as vague and would affirm the Court of Appeals in reversing summary judgment against defendants Patten.
For the foregoing reasons, I would hold that the restrictive covenants and the 1996 Rules and Regulations at issue here impermissibly infringe on the property rights of defendants. I therefore respectfully dissent.
Justice TIMMONS-GOODSON joins in this dissenting opinion.

. I note that the majority opinion does not address defendants’ argument that the 1996 Rules and Regulations are not an enforceable amendment to the covenants because they are contained in a private document that has not been recorded. See Armstrong, 360 N.C. at 555, 633 S.E.2d at 85 (“An enforceable real covenant is made in writing, properly recorded, and not violative of public policy.” (citations omitted)); Hege v. Sellers, 241 N.C. 240, 248, 84 S.E.2d 892, 898 (1954) (stating that real covenants must be recorded). Because I would find the service charges to be unenforceable regardless, I have not discussed this point.