Court Opinion

ID: 3203314
Source: CourtListenerOpinion
Date Created: 2016-05-13 15:03:27.558617+00
Date Added: 2024-06-11T14:02:52.524631
License: Public Domain

MEMORANDUM DECISION

Pursuant to Ind. Appellate Rule 65(D),                                           FILED
this Memorandum Decision shall not be                                       May 13 2016, 8:01 am

regarded as precedent or cited before any                                        CLERK
                                                                             Indiana Supreme Court
court except for the purpose of establishing                                    Court of Appeals
                                                                                  and Tax Court
the defense of res judicata, collateral
estoppel, or the law of the case.

ATTORNEY FOR APPELLANT                                   ATTORNEYS FOR APPELLEE
Shaun T. Olsen                                           Ray L. Szarmach
OlsenCampbell Ltd.                                       Merrillville, Indiana
Merrillville, Indiana

                                          IN THE
    COURT OF APPEALS OF INDIANA

Castlewood Property Owners                               May 13, 2016
Association, Inc.,                                       Court of Appeals Case No.
Appellant-Plaintiff,                                     45A03-1508-PL-1105
                                                         Appeal from the Lake Superior
        v.                                               Court
                                                         The Honorable William E. Davis,
Leticia Guerra-Danko,                                    Judge
Appellee-Defendant.                                      Trial Court Cause No.
                                                         45D05-1007-PL-62

Baker, Judge.

Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016                  Page 1 of 16
[1]   Castlewood Property Owners Association, Inc. (Castlewood) appeals the trial

      court’s ruling in favor of Leticia Guerra-Danko on Castlewood’s complaint for

      declarative and injunctive relief. Guerra-Danko is a homeowner in the

      Castlewood subdivision who added siding to her home before obtaining

      approval from the Architectural Review Committee (ARC) and refused to

      remove it after the ARC refused to approve the siding. Finding a dearth of

      evidence establishing that the siding would negatively affect home values in the

      neighborhood or that it presented aesthetic problems, we affirm. 1

                                                      Facts
[2]   Castlewood is a subdivision with Protective Covenants that run with the land.

      Section 12 of the Protective Covenants provides as follows:

              ARCHITECTURAL CONTROLS. No building . . . shall be
              commenced, erected, or maintained, nor shall any change or
              alteration therein be made except interior alterations, until the
              construction plans and specifications, showing the nature, kind,
              shape, height and materials, color scheme, location on Lot and
              approximate cost . . . shall have been submitted to and approved
              in writing by the Architectural Review Committee. The
              Architectural Review Committee shall, in its sole discretion, have
              the right to refuse to approve any such construction plans or
              specifications . . . for aesthetic or other reasons and in so passing
              upon such construction plans . . . the Architectural Review
              Committee shall have the right to take into consideration the
              suitability of the proposed Building . . . with the surroundings,

      1
       While the majority of the Court agrees that this appeal should be resolved in favor of Guerra-Danko, we do
      so for different reasons.

      Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016            Page 2 of 16
              and the affect [sic] of the Building . . . on the outlook from
              adjacent or neighboring properties.

      Appellant’s App. p. 26. Among the purposes of the Protective Covenants are:

              to protect each and every Owner . . . against such use of Lots in
              This Subdivision as may depreciate the value of their property; to
              guard against the erection thereon of buildings built of improper
              or unsuitable materials . . . . It is understood and agreed that the
              purpose of architectural control is to secure an attractive
              harmonious residential development having continuing appeal.

      Id. at 20. Castlewood claims that since 1998, it has not allowed the use of vinyl

      or aluminum siding on residences, but nothing explaining this prohibition is

      provided in writing to new homeowners.

[3]   In May 2009, Guerra-Danko purchased a residence in Castlewood. In October

      2009, Guerra-Danko discovered termite damage in the residence and

      determined that the cedar siding on the exterior of her residence needed to be

      replaced. She proceeded with plans to replace the siding, including obtaining a

      permit and purchasing the siding, but did not submit a request to the

      Architectural Review Committee (ARC) before construction began. Guerra-

      Danko selected “rough cedar finish siding,” which is molded from cedar

      clapboards, but evidently is classified as vinyl siding. 2 Appellee’s Br. p. 2.

      2
        In the decades after it was first introduced in the 1950s, vinyl siding had many cosmetic problems. Since
      then, however, “[o]ngoing changes in the product’s chemistry and installation techniques have improved its
      acceptance and furthered its acceptance by builders and homeowners. In fact, vinyl has captured 32 percent
      of the U.S. siding market for new homes, with no end in sight to its growing popularity.” Mark Feirer, For

      Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016             Page 3 of 16
[4]   The President of Castlewood, Christine McCulloch, noticed a dumpster in

      Guerra-Danko’s driveway and sent her an email questioning what was

      occurring at the residence. McCulloch and Guerra-Danko engaged in several

      conversations, in person and over email, and eventually Guerra-Danko

      submitted a request to the ARC for approval of the siding. The ARC, without

      holding a meeting, offering Guerra-Danko an opportunity to make her case, or

      even holding a vote that was memorialized in a writing, denied the request on

      October 30, 2009.

[5]   On July 26, 2010, Castlewood filed a complaint against Guerra-Danko, seeking

      a declaration that she had violated the Protective Covenants, an injunction

      requiring compliance with the Protective Covenants, and attorney fees and

      costs. Castlewood filed a motion for summary judgment on February 13, 2012,

      which the trial court denied on May 18, 2012, finding multiple issues of fact

      preventing summary judgment. On May 29, 2015, the trial court held a bench

      trial on the complaint, and on July 7, 2015, the trial court entered judgment in

      favor of Guerra Danko, finding as follows:

               [a]fter a review of all the facts and circumstances of this matter
               the Court has determined that the Plaintiff has failed to prove by

      the Love of Vinyl Siding, THIS OLD HOUSE, http://www.thisoldhouse.com/toh/article/0,,266296,00.html (last
      visited Mar. 14, 2016). Indeed, the “vast improvements” in technology causes vinyl siding to have a
      “positive effect” on home values in most areas. Fran J. Donegan, Vinyl Siding, THIS OLD HOUSE,
      http://www.thisoldhouse.com/toh/article/0,,213532,00.html (last visited Mar. 14, 2016). Typically, new
      vinyl siding products “have a low-gloss finish that more closely resembled painted wood. Most
      manufacturers also offer realistic-looking grain patterns and have improved the look of trim pieces. . . . Those
      with a simulated wood grain are meant to imitate rough-sawn wood that’s been stained.” Id.

      Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016                Page 4 of 16
              a greater weight of the evidence that the covenants here are
              unambiguous and/or do not violate public policy.

      Appellant’s App. p. 14. Castlewood now appeals the denial of its summary

      judgment motion and the final judgment entered in favor of Guerra-Danko.

                                   Discussion and Decision
                                     I. Summary Judgment
[6]   First, Castlewood argues that the trial court should have granted its motion for

      summary judgment. Our standard of review on summary judgment is well

      settled:

              We review summary judgment de novo, applying the same
              standard as the trial court: “Drawing all reasonable inferences in
              favor of . . . the non-moving parties, summary judgment is
              appropriate ‘if the designated evidentiary matter shows that there
              is no genuine issue as to any material fact and that the moving
              party is entitled to judgment as a matter of law.’” Williams v.
              Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R. 56(C)). “A
              fact is ‘material’ if its resolution would affect the outcome of the
              case, and an issue is ‘genuine’ if a trier of fact is required to
              resolve the parties’ differing accounts of the truth, or if the
              undisputed material facts support conflicting reasonable
              inferences.” Id. (internal citations omitted).

      Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014).

[7]   In this case, there were multiple issues of material fact rendering summary

      judgment inappropriate. Among other things, the following issues were

      disputed: whether vinyl siding is, in fact, a prohibited item pursuant to the

      Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016   Page 5 of 16
      Protective Covenants; and whether the ARC’s application of the Protective

      Covenants to Guerra-Danko’s situation was unreasonable. Indeed, Castlewood

      itself concedes that “whether or not an [ARC’s] approval was reasonable is a

      question of fact to be determined in light of the surrounding circumstances.”

      Appellant’s Br. p. 22. Consequently, we decline to reverse the trial court’s

      order denying Castlewood’s summary judgment motion.3

                                        II. Final Judgment
[8]   Castlewood also contends that the trial court erroneously granted judgment in

      favor of Guerra-Danko following the bench trial. Initially, we note that because

      Castlewood is appealing from a negative judgment, it must establish that the

      trial court’s judgment is contrary to law. Pinnacle Healthcare, LLC v. Sheets, 17
N.E.3d 947, 953 (Ind. Ct. App. 2014). A judgment is contrary to law only if

      “the evidence in the record, along with all reasonable inferences, is without

      conflict and leads unerringly to a conclusion opposite that reached by the trial

      court.” Id.

[9]   It appears that Indiana law is silent regarding the amount of deference to be

      afforded to a decision of an ARC, or similar homeowner’s association-related

      entity, that certain residential modifications should or should not be permitted.

      Castlewood suggests that we apply a reasonableness standard, citing to caselaw

      3
       The trial court later denied a summary judgment motion filed by Guerra-Danko, which further
      demonstrates the presence of issues of material fact rendering a trial necessary.

      Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016            Page 6 of 16
       from multiple other jurisdictions in support. See, e.g., Bailey Dev. Corp. v.

       MacKinnon-Parker, Inc., 397 N.E.2d 405, 411-12 (Ohio Ct. App. 1977) (holding

       that subdivision’s decisions about building restrictions “must be measured

       against the standards of good faith and reasonableness”); LeBlanc v. Webster, 483
S.W.2d 647, 649 (Mo. Ct. App. 1972) (finding that an ARC’s consent to or

       rejection of residential alterations must be reasonably exercised). We agree that

       a reasonableness standard is appropriate, and will now consider whether, in this

       case, the ARC’s decision was reasonable.

[10]   Initially, we note that the so-called “prohibition” against vinyl siding is not a

       policy that has been memorialized in a writing. There was evidently a

       neighborhood agreement reached in 1998 to that effect, but homeowners

       purchasing residences in Castlewood since 1998 have no way of knowing about

       this informal prohibition. We do not go so far as to require that community

       guidelines such as this vinyl siding prohibition be written and provided to all

       community members, but we certainly believe that it would be the better

       practice to do so.

[11]   As noted above, among the purposes of the Protective Covenants are desires to

       protect the value of homes in the neighborhood and to maintain harmonious

       aesthetics in the Castlewood community. In this case, there was absolutely no

       evidence presented, expert or otherwise, remotely tending to show that Guerra-

       Danko’s selected siding would have a negative effect on property values or that

       it did not otherwise mesh with the neighborhood aesthetic.

       Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016   Page 7 of 16
[12]   Castlewood’s only two witnesses were Guerra-Danko and McCulloch.

       McCulloch testified that, in deciding whether to approve a requested

       modification, the ARC considers how the proposed modification would

       “affect[] the values of our homes and our community.” Tr. p. 79. She

       admitted, however, that no one on the ARC is a realtor or in any way involved

       in the real estate business. Tr. p. 88-92 (testifying that the ARC was comprised

       of a flight attendant, an engineer, an administrative assistant, an employee of a

       car dealership, and a teacher). Castlewood offered no testimony from anyone

       involved with the real estate business in an effort to establish that vinyl siding

       would have a negative effect on home values in the neighborhood. And

       McCulloch herself did not testify as to why, specifically, Guerra-Danko’s siding

       presented an aesthetic problem. This dearth of evidence leads unerringly to a

       conclusion that the ARC did not exercise its powers under the Protective

       Covenants in a reasonable manner. We certainly do not find that the trial

       court’s order entering judgment in favor of Guerra-Danko is contrary to law.

       Consequently, Castlewood’s appeal is unavailing.

[13]   The judgment of the trial court is affirmed.

       May, J., concurs in result with separate opinion.
       Brown, J., concurs in part and dissents in part with separate opinion.

       Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016   Page 8 of 16
ATTORNEY FOR APPELLANT                                   ATTORNEY FOR APPELLEE
Shaun T. Olsen                                           Ray L. Szarmach
OlsenCampbell Ltd.                                       Merrillville, Indiana
Merrillville, Indiana

                                          IN THE
    COURT OF APPEALS OF INDIANA

Castlewood Property Owners                               Court of Appeals Case No.
Association, Inc.,                                       45A03-1508-PL-1105

Appellant-Plaintiff,

        v.

Leticia Guerra-Danko,
Appellee-Defendant.

May, Judge, concurring in result.

Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016   Page 9 of 16
[14]   I would affirm the judgment in favor of Guerra-Danko, but I believe she was

       entitled to summary judgment. Accordingly, I concur in the result only.

[15]   At the heart of this dispute is a covenant restricting how an owner may use her

       property. “A restrictive covenant is an express contract between grantor and

       grantee that restrains the grantee’s use of land.” Harness v. Parkar, 965 N.E.2d
756, 760 (Ind. Ct. App. 2012). Covenants are “used to maintain or enhance the

       value of land” by controlling such aspects as “what may be built on the land

       (fence or above ground pool), how the land may be used (private or

       commercial), and alienability of the land.” Id. at 761.

[16]   Because a covenant is a contract, we interpret covenants using the same rules of

       construction. Id. If we must interpret covenants, “they are to be strictly

       construed, and all doubts should be resolved in favor of the free use of property

       and against restrictions.” Id. We must determine the intent of those who

       drafted the covenant from “the specific language used and from the situation of

       the parties when the covenant was made.” Id. We must consider the covenant

       in its entirety and construe the provisions in a manner that harmonizes them,

       rather than one that renders some terms ineffective or meaningless. Id.

[17]   “[M]atters of contract interpretation are particularly well-suited for de novo

       appellate review, because they generally present questions purely of law.” In re

       Indiana State Fair Litigation, --- N.E.3d ----, 2016 WL 348155 *2 (Ind. 2016)

       (internal citations and quotations omitted). When ambiguity arises from the

       language used in the contract, then the determination of its meaning is a

       Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016   Page 10 of 16
       question of law for the court. AM General LLC v. Armour, 46 N.E.3d 436, 440

       (Ind. 2015).

[18]   The full text of the covenant at issue provides:

               12. ARCHITECTURAL CONTROLS. No building, fence,
               wall or other structure shall be commenced, erected, or
               maintained, nor shall any change or alteration therein be made
               except interior alterations, until the construction plans and
               specifications, showing the nature, kind, shape, height and
               materials, color scheme, location on Lot and approximate cost of
               such Building or other Structure, and the grading plan (including
               a stake survey showing the elevation of all four corners of the
               Lot) and the landscape plan of the Lot to be built upon shall have
               been submitted to and approved in writing by the Architectural
               Review Committee. The Architectural Review Committee shall,
               in its sole discretion, have the right to refuse to approve any such
               construction plans or specifications, grading plan, or landscape
               plan, for aesthetic or other reasons and in so passing upon such
               construction plans and specifications, grading plan, or landscape
               plan, the Architectural Review Committee shall have the right to
               take into consideration the suitability of the proposed Building or
               other Structure with the surroundings, and the affect [sic] of the
               Building or other Structure on the outlook from adjacent or
               neighboring properties. In no instance shall a Building or a
               design identical to an adjacent Building be permitted except as
               permitted by the Architectural Review Committee.

       (App. at 26.)

[19]   In its order denying summary judgment to Castlewood, the court noted:

               It can not [sic] be said that the Covenants prevent replacing
               damaged siding without approval of the Architectural Review
               Committee [ARC] as a matter of law. The section in question

       Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016   Page 11 of 16
               Clause IV 12 deals with construction of buildings, structures, and
               walls. It speaks of grading, and landscaping, and designs, and
               plans. But [it] is Moot [sic] as to replacing siding or anything else
               on the structure that is already there.

       (Id. at 13.) When denying summary judgment to Guerra-Danko, the court

       found “there remain genuine issues of material fact that should be resolved by

       the fact finder.” (Id. at 8.) Indeed, even after trial, the court found Castlewood

       “failed to prove by a greater weight of the evidence that the covenants here are

       unambiguous . . . .” (Id. at 14.)

[20]   I agree there were many questions of fact that could have been determined in

       this case.4 But those questions of fact were not material to the dispositive issue

       – whether the covenant required Guerra-Danko to obtain approval of the ARC

       prior to replacing her siding. See In re Indiana State Fair Litigation, 2016 WL
348155 (“The meaning of a contract is a question for the factfinder, precluding

       summary judgment, only where interpreting an ambiguity requires extrinsic

       evidence.”).

[21]   I believe the trial court correctly determined Paragraph 12 was ambiguous as to

       whether it applied only to new buildings or structures.5 Because all doubts

       4
         Indeed, my colleague’s opinion addresses one question of fact: whether the ARC exercised its power in a
       reasonable manner. In concluding the ARC did not act reasonably, Judge Baker notes the record contains no
       evidence the neighborhood would experience a negative financial or aesthetic impact because of the siding
       Guerra-Danko selected. See Slip op. at 7, 8. Because the record is silent as to the history of and
       improvements to vinyl siding, I would omit footnote 1. See id. at 3.
       5
         Castlewood notes Wedgewood Cmty. Ass’n, Inc. v. Nash, 781 N.E.2d 1172 (Ind. Ct. App. 2003), which
       involved a similarly worded covenant. The issue in that case, however, was whether the doctrine of unclean

       Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016           Page 12 of 16
       about the meaning of a covenant are to be “be resolved in favor of the free use

       of property and against restrictions,” Harness, 965 N.E.2d at 761, I would

       construe the paragraph against Castlewood and hold Guerra-Danko did not

       need ARC approval before replacing her siding.

[22]   For all these reasons, I respectfully concur in the result.

       hands prohibited Wedgewood from enforcing the covenant. Neither Wedgewood nor Nash asserted the
       covenant was ambiguous. Wedgewood therefore does not control.

       Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016    Page 13 of 16
                                                 IN THE
           COURT OF APPEALS OF INDIANA

       Castlewood Property Owners                               Court of Appeals Case No.
       Association, Inc.,                                       45A03-1508-PL-1105

       Appellant-Plaintiff,

               v.

       Leticia Guerra-Danko,
       Appellee-Defendant.

       Brown, Judge, concurring in part and dissenting in part.

[23]   Although I concur with Judge Baker’s conclusion to affirm the trial court’s

       decision denying Castlewood’s summary judgment motion, I respectfully

       dissent from his conclusion that the court’s judgment in favor of Guerra-Danko

       is not contrary to law. The court ruled in its order of July 7, 2015, that

       Castlewood “has failed to prove by a greater weight of the evidence that the

       covenants here are unambiguous and/or do not violate public policy.”

       Appellant’s Appendix at 14. Initially, I note that in reviewing the record I

       could not find any matters of public policy which were litigated at trial, and

       Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016   Page 14 of 16
       indeed the court did not suggest any specific tenet of public policy which was

       violated by the Protective Covenants and specifically Section 12 therein.

       Accordingly, I do not believe that public policy provides a basis on which to

       rule in favor of Guerra-Danko.

[24]   Regarding the court’s conclusion that Section 12 was ambiguous, I disagree.

       That section states in relevant part that:

               No building, fence, wall or other structure shall be commenced,
               erected, or maintained, nor shall any change or alteration therein be
               made except interior alterations, until the construction plans and
               specifications, showing the nature, kind, shape, height and
               materials . . . shall have been submitted to and approved in
               writing by the Architectural Review Committee.

       Appellant’s Appendix at 26 (emphases added). In my view, Section 12

       unambiguously requires that projects to maintain, change, or alter buildings,

       except for interior alterations, be reviewed and approved by the ARC and that

       materials used are among the factors taken into consideration by the ARC in

       reviewing such projects.

[25]   Judge Baker reasons that courts should review decisions of the ARC under a

       reasonableness standard and concludes that there was a “dearth of evidence”

       presented at trial by Castlewood regarding the bases for its decision, which

       “leads unerringly to a conclusion that the ARC did not exercise its power under

       the Protective Covenants in a reasonable manner.” Supra at 8. However,

       McCulloch testified that in 1998, eleven years prior to the facts leading to this

       suit, the ARC conducted a survey of the homeowners asking whether vinyl
       Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016   Page 15 of 16
       siding should be allowed in the neighborhood, and the results of the survey

       showed that a majority of homeowners believed vinyl siding should not be

       allowed. (See Transcript at 18, 22) The ARC thereafter enforced such a

       prohibition, including on two previous occasions. (Transcript at 22) In this

       regard, Judge Baker observes that “homeowners purchasing residences in

       Castlewood since 1998 [had] no way of knowing about this informal

       prohibition.” Id. at 7. Had Guerra-Danko brought the matter before the ARC

       prior to beginning the project, as required by Castlewood’s Protective

       Covenants, she would have learned of this. Further, it is undisputed that on

       September 16, 2009, prior to the commencement of the project, Guerra-Danko

       received a letter from Castlewood which specifically stated that “[a]ny

       structural changes or changes to the outside of a home, siding, fences, pools,

       etc., must be submitted and approved by the [ARC].” Exhibit 10 (emphasis

       added). Under such circumstances, I cannot say that the ARC’s decision to

       prohibit Guerra-Danko from using vinyl siding on her home was unreasonable.

[26]   I would find that the court’s July 7, 2015 order is contrary to law and would

       reverse and remand with instructions to enter judgment in favor of Castlewood

       as requested in its complaint.

       Court of Appeals of Indiana | Memorandum Decision 45A03-1508-PL-1105 | May 13, 2016   Page 16 of 16