Court Opinion

ID: 9965905
Source: CourtListenerOpinion
Date Created: 2024-05-03 19:09:18.887588+00
Date Added: 2024-06-11T08:25:52.078097
License: Public Domain

05/03/2024
                  IN THE COURT OF APPEALS OF TENNESSEE
                             AT KNOXVILLE
                                   November 14, 2023 Session

        KURT M. CHAMBLESS ET AL. v. TERRY L. RUTLEDGE ET AL.

                    Appeal from the Circuit Court for Hamilton County
                         No. 21C473      Kyle E. Hedrick, Judge
                        ___________________________________

                               No. E2023-00173-COA-R3-CV
                           ___________________________________

The parties are all of the owners of four neighboring lots in a small, exclusive residential
development. Each lot is subject to restrictive covenants. Kurt M. Chambless and Jill S.
Chambless originally filed suit against Terry L. Rutledge and Cynthia L. Rutledge, averring
that the Rutledges were violating the restrictive covenants. While the Chamblesses’ suit
was pending, all of the lot owners (other than the Chamblesses) voted to amend the
restrictive covenants. The Chamblesses amended their suit to seek a declaratory judgment
invalidating the amended covenants and seeking a refund of certain monies they paid to
Mr. Rutledge for the benefit of the homeowners’ association.1 Each of the defendants filed
a motion to dismiss the Chamblesses’ declaratory judgment claim due to their failure to
state a claim upon which relief could be granted. The trial court granted the motions to
dismiss, in part, and ruled that the amended covenants were valid and enforceable. The
Chamblesses timely appealed to this Court. Upon careful review, we find that the trial
court erred in granting the motions to dismiss for failure to state a claim after determining
that the amended covenants are valid and enforceable. Accordingly, we vacate the trial
court’s dismissal of those parts of the Amended Complaint challenging the validity of the
amended covenants, and we affirm that portion of the trial court’s order declaring that the
amended covenants are valid and enforceable. Further, we affirm the trial court’s dismissal
of the declaratory judgment claim against the Maxwells and the Dotys arising out of Mr.
Rutledge’s use of association funds but decline to award the Maxwells and the Dotys their
attorneys’ fees on appeal.

 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed in
                      Part, Vacated in Part; Case Remanded

KRISTI M. DAVIS, J., delivered the opinion of the Court, in which JOHN W. MCCLARTY and
THOMAS R. FRIERSON, II, JJ., joined.

        1
         It appears to this Court that the parties constitute an unincorporated homeowners’ association as
defined by Tennessee Code Annotated section 66-27-701(5).
Steven M. Jacoway and Bryson A. Lype, Chattanooga, Tennessee, for the appellants, Kurt
M. Chambless and Jill S. Chambless.

Stephen D. Barham and Isiah C. Robinson, Chattanooga, Tennessee, for the appellees,
Robert Maxwell and Kelly Maxwell.

Scott M. Shaw, Chattanooga, Tennessee, for the appellees, Jesse Doty and Cristin Doty.

John P. Konvalinka and Cody M. Roebuck, Chattanooga, Tennessee, for the appellees,
Terry L. Rutledge and Cynthia L. Rutledge.

                                          OPINION

                                       I. Background

       In 1991, the Chamblesses and the Rutledges purchased neighboring lots in a small,
exclusive development in Chattanooga. The development has only four lots, the other two
of which are owned by Jesse Doty and Cristin Doty and Robert Maxwell and Kelly
Maxwell (the Rutledges, the Dotys, and the Maxwells collectively, the “Defendants”; the
Defendants and the Chamblesses collectively, the “Owners”). Each of the lots was subject
to extensive restrictive covenants. Relevant to this appeal, the original covenants provided:

              (k) . . . All retaining walls shall be of stone or brick finish. . . .

                                          ***

              (v) The majority of the trees may not be removed from any lot except
       in the area of the lot upon which the house and driveway are to be
       constructed. Excessive removal of trees will be deemed to be a nuisance to
       the adjoining neighbors and will mar the beauty of the subdivision.

                                          ***

              [These covenants shall be binding] unless, by action of a minimum of
       sixty-six and two-thirds per cent (66-2/3%) of the then owners of the lots, it
       is agreed to change said covenants in whole or in part; provided, further, that
       the instrument evidencing such action must be in writing and shall be duly
       recorded in the Register’s Office of Hamilton County, Tennessee. . . .

      The Chamblesses built a home on their lot shortly after purchasing it in 1991. The
Rutledges followed suit approximately ten years later. The Chamblesses’ and Rutledges’
homes were positioned on their respective lots such that they were relatively close to one

                                              -2-
another but separated by a stand of mature trees located on the Rutledge lot. In 2019, the
Rutledges began performing substantial renovations that included the expansion of their
driveway and the construction of a large concrete retaining wall along the boundary line
between the Chamblesses’ and the Rutledges’ lots. To accommodate these renovations,
the Rutledges clear cut a large number of the trees between the Rutledge home and the
Chambless home. The Chamblesses requested that the Rutledges finish the retaining wall
in stone or brick, landscape that portion of the Rutledge property from which the mature
trees had been removed, and correct storm water runoff and drainage issues, which were
purportedly caused by the Rutledges’ removal of the mature trees. The Rutledges refused
to re-finish the retaining wall and did not landscape their lot to the Chamblesses’
satisfaction.

        Relations between the Chamblesses and the Rutledges began to deteriorate, and
things came to a head in the spring of 2021 when the Dotys were constructing a home on
their lot. On March 13, 2021, Mr. Doty emailed the other Owners to inquire whether they
would consider updating the covenants “not [to be] adversarial or restrictive to each of
[the] current owners, but [to] protect [their] interests and investments in the future as the
plots turnover [sic] to new owners.” Mrs. Chambless replied; however, her reply email is
not included in the record. Mr. Maxwell and Mr. Rutledge each replied that they would be
in favor of revising the covenants. Mr. Rutledge made a motion that the Owners adopt his
proposed procedure set forth therein for each of the Owners to submit, and ultimately vote
on, their suggested revisions to the covenants. He also moved that they “solicit[] the
aid/council of an appropriate attorney to perform the legal revision and recording of the
amended restrictive covenants with the county as required.” Finally, he stated: “A vote for
this motion will also include approving a special assessment of all lot owners to cover these
fees.” The Chamblesses paid such special assessment to Mr. Rutledge.

        On March 16, 2021, Mr. Rutledge proposed that the other Owners send him their
suggested revisions by March 26. On March 26, a draft of the amended covenants was
prepared that incorporated the suggestions of the Defendants.2 Mr. Rutledge then emailed
this draft to all of the other Owners. The Chamblesses hired an attorney to review this draft
and, on April 29, the Chamblesses’ attorney sent a redlined version containing suggested
revisions to the attorney whom the Rutledges had hired to assist the Owners with “the legal
revision and recording of the amended restrictive covenants” (the “Owners’ attorney”). On
May 7, Mr. Rutledge emailed the other Owners a second draft of the amended covenants
including suggestions from the Chamblesses’ attorney and the Owners’ attorney but noting
that “not all suggestions from everyone [were] included in this revised draft.” On June 2,
2021, a vote was held to determine whether the Owners would adopt the May 7 draft of the
amended covenants circulated by Mr. Rutledge. The Defendants each voted in favor of
adopting that version of the amended covenants. The Chamblesses voted no. The amended

       2
           The Chamblesses did not send any proposed revisions to Mr. Rutledge before March 26.

                                                  -3-
covenants were signed and recorded by the Defendants. As relevant to this appeal, the
amended covenants removed the requirement that all retaining walls be finished with stone
or brick and removed the prohibition against excessive tree removal.

       On May 17, 2021, prior to the adoption of the amended covenants, the Chamblesses
filed suit against the Rutledges in the Hamilton County Circuit Court (the “trial court”).
The Chamblesses averred that the Rutledges were in breach of the original covenants and
that the Chamblesses had been damaged by such breach. They sought a judgment for
damages and a permanent injunction requiring the Rutledges to comply with the original
covenants by finishing their retaining wall in stone or brick, replanting the trees removed
from the Rutledge lot, and correcting purported storm water drainage issues caused by the
tree removal from the Rutledge lot. The Rutledges were originally represented by the
Owners’ attorney in this action. That attorney withdrew from representation of the
Rutledges following the trial court’s denial of a motion filed by the Chamblesses seeking
to disqualify him from such representation.

       On July 22, 2022, the Chamblesses filed an Amended Complaint, having obtained
leave to do so from the trial court. The Amended Complaint added the Maxwells and the
Dotys as defendants and sought a declaratory judgment regarding:

      (a) Whether the actions of the Defendants in amending the covenants “to cure
          existing violations of the Original Restrictive Covenants [were] improper;”
      (b) Whether the actions of the Defendants, in purportedly failing to follow the
          procedure specifically set forth by Mr. Rutledge for amending the covenants,
          “deem the [amended covenants] invalid;”
      (c) Whether the amended covenants “are arbitrary and capricious or otherwise
          against public policy because of among other things (1) their failure to serve a
          useful purpose[,] (2) mistake of fact, (3) they are based on material
          misrepresentations made or (4) were adopted in bad faith and/or with intent to
          harm [the] Chambless[es];”
      (d) Whether the original covenants were still valid as a result of the purported
          invalidity of the amended covenants;
      (f) [sic] Whether the actions of Mr. Rutledge in hiring and paying the Owners’
          attorney without the authority of the Chamblesses were improper; and
      (g) Whether the Chamblesses were responsible for payment of the Owners’
          attorney’s fees incurred by Mr. Rutledge “and/or the ‘Association’” and if not,
          whether the Chamblesses should be reimbursed for the payment of such
          attorney’s fees.

The Chamblesses also averred that the Rutledges’ actions in removing the mature trees and
constructing a concrete retaining wall that was not finished in stone or brick breached the
original covenants and created a nuisance to the Chamblesses; that the Rutledges breached

                                           -4-
the inherent covenant of good faith and fair dealing by breaching the original covenants
and “by attempting to amend the [original covenants] in bad faith and with an intent to
cause harm to [the] Chambless[es;]” that, at the time the covenants were being amended,
Mr. Rutledge “was the individual responsible for management of the neighborhood funds
or ‘Association’ funds collected from all [of the Owners] to be used solely for the
maintenance and repair of the common grounds[;]” that “[Mr.] Rutledge and the neighbors
had a fiduciary relationship whereby [Mr.] Rutledge exercised dominion and control over
the ‘Association’ common funds[;]” and, finally, that Mr. Rutledge’s “engaging an attorney
to represent the ‘Association’ and/or [Mr.] Rutledge without the express approval of [the]
Chambless[es] and paying that attorney with community funds, which included funds of
[the] Chambless[es], was a breach of his fiduciary duty” and “resulted in a conversion of
those funds.” The Chamblesses sought a judgment declaring the amended covenants to be
invalid, a judgment for damages, the same permanent injunction sought in the original
complaint, and a judgment requiring Mr. Rutledge to reimburse the Chamblesses for the
amounts paid by the Chamblesses “towards [the Rutledges’] or the ‘Association’s’
attorneys’ fees[.]”

       The Maxwells and the Dotys filed motions to dismiss the Amended Complaint
pursuant to Tennessee Rule of Civil Procedure 12.02(6). They argued that the portion of
the Chamblesses’ declaratory judgment claim seeking to invalidate the amended covenants
should be dismissed due to a failure to state a claim upon which relief could be granted.
As to the portion of the declaratory judgment claim dealing with Mr. Rutledge’s use of the
association funds to hire and pay the Owners’ attorney, the Maxwells and the Dotys each
filed an additional motion to dismiss arguing that they did not have or claim any interest
that would be affected by a declaratory judgment on that issue.

        The Rutledges also filed a motion to dismiss the Amended Complaint pursuant to
Rule 12.02(1) and (6). Like the Maxwells and the Dotys, they argued that the Chamblesses
failed to state a claim upon which relief could be granted. They also argued that the trial
court lacked subject matter jurisdiction to enter the requested injunction because the
original covenants had been amended and superseded, and the Rutledges could no longer
be compelled to comply with the original covenants.

        Following a hearing on the motions to dismiss, the trial court entered an order
granting the Maxwells’ and the Dotys’ motions. The trial court also granted the Rutledges’
motion with regard to the declaratory judgment claim seeking to invalidate the amended
covenants and the requested injunction. The trial court denied the Rutledges’ motion as to
the causes of action for breach of contract and breach of the covenant of good faith and fair
dealing. Specifically, the trial court found that the amended covenants are “valid and
enforceable” because they are “the written agreement of 75% of the property owners” and
were recorded with the Register’s Office, thus meeting the requirements for amendments
set forth by the original covenants. Accordingly, the trial court found that the Amended

                                            -5-
Complaint “lacks sufficient allegations to articulate a claim for a judgment declaring that
the [amended covenants] are arbitrary, capricious and invalid.” The trial court also found
that the Chamblesses’ request for an injunction is moot because the trial court lacked the
subject matter jurisdiction necessary to enjoin the Rutledges to comply with the original
covenants once they were superseded by the amended covenants. Pursuant to Tennessee
Code Annotated section 20-12-119, the trial court awarded the Defendants their costs and
reasonable attorney’s fees incurred in the trial court proceedings “as a consequence of the
dismissal of the claims and requests for relief dismissed” in the trial court’s order.
Although the trial court’s order did not dispose of all of the claims against all of the parties,
the trial court expressly determined that there was no just reason for delay and directed that
the order be entered as a final judgment pursuant to Tennessee Rule of Civil Procedure
54.02. This timely appeal followed.

                                          II. Issues

       The Chamblesses present two issues on appeal, which we restate slightly:

   1. Whether the trial court erred in ruling that the Chamblesses did not sufficiently state
      a claim that the amendments are invalid under the arbitrary and capricious standard.

   2. Whether the trial court erred in dismissing the Maxwells and the Dotys from the
      declaratory judgment claim regarding Mr. Rutledge’s hiring and payment of the
      Owners’ attorney when Mr. Rutledge used the Maxwells’ and the Dotys’ money in
      addition to the Chamblesses’ money.

       In their jointly filed brief, the Maxwells and the Dotys raise a third issue:

   3. Whether the Maxwells and the Dotys are entitled to an award of their reasonable
      attorney’s fees for defending this appeal.

                                         III. Analysis

                                               A.

        “Our standard of review on appeal from a trial court’s grant of a motion to dismiss
is de novo, with no presumption of correctness as to the trial court’s legal conclusions, and
all allegations of fact in the complaint below are taken as true.” Brown v. Ogle, 46 S.W.3d
721, 726 (Tenn. Ct. App. 2000) (citing Stein v. Davidson Hotel Co., 945 S.W.2d 714, 716
(Tenn. 1997)). A trial court’s judgment of dismissal is entitled to be affirmed so long as
the trial court reaches the correct result “irrespective of the reasons stated.” Clark v. Metro.
Gov’t of Nashville and Davidson Cnty., 827 S.W.2d 312, 317 (Tenn. Ct. App. 1991) (citing
Benson v. U.S. Steel Corp., 465 S.W.2d 124 (Tenn. 1971)). See Tenn. R. App. P. 36(b)

                                              -6-
(“A final judgment from which relief is available and otherwise appropriate shall not be
set aside unless, considering the whole record, error involving a substantial right more
probably than not affected the judgment or would result in prejudice to the judicial
process.”).

      Regarding motions to dismiss declaratory judgment actions, this Court has
previously held that motions to dismiss pursuant to Rule 12.02(6)

       are rarely appropriate in declaratory judgment actions. See Glover v.
       Glendening, 376 Md. 142, 829 A.2d 532, 539 (2003). The prevailing rule is
       that when a party seeking a declaratory judgment alleges facts demonstrating
       the existence of an actual controversy concerning a matter covered by the
       declaratory judgment statute, the court should not grant a Tenn. R. Civ. P.
       12.02(6) motion to dismiss but, instead, proceed to render a declaratory
       judgment as the facts and law require. Hudson v. Jones, 278 S.W.2d 799, 804
       (Mo. Ct. App. 1955); 1 WALTER H. ANDERSON, ACTIONS FOR
       DECLARATORY JUDGMENTS § 318, at 740 (2d ed.1951).

Cannon Cnty. Bd. of Educ. v. Wade, 178 S.W.3d 725, 730 (Tenn. Ct. App. 2005).
Regardless, this Court has repeatedly affirmed dismissals of declaratory judgment actions
following a Rule 12.02(6) motion to dismiss, when the trial court erred in granting the
motion to dismiss itself but also addressed the merits of the declaratory judgment claim in
its ruling. Stated differently, although disposing of a declaratory judgment action on a Rule
12.02(6) motion is disfavored, our prevailing approach has been to deem it harmless error
if the trial court also rules on the merits of the declaratory judgment action. See e.g., Remus
v. Nunn, No. M2023-00589-COA-R3-CV, 2024 WL 1298975, at **4, 11 (Tenn. Ct. App.
Mar. 27, 2024) (concluding that the trial court erred in granting defendant’s Rule 12.02(6)
motion to dismiss but affirming the trial court’s ruling on the merits); Parsley v. City of
Manchester, No. M2021-00200-COA-R3-CV, 2021 WL 6139210, at **4–5 , 7 (Tenn. Ct.
App. Dec. 29, 2021) (concluding that a dismissal under Rule 12.02(6) was harmless error
and affirming the trial court’s ruling on the merits); Karsonovich v. Kempe, No.
M2017-01052-COA-R3-CV, 2018 WL 1091735, at **2–3, 5 (Tenn. Ct. App. Feb. 27,
2018) (concluding that defendant’s Rule 12.02(6) motion to dismiss “should have been
denied” but affirming the trial court’s ruling on the merits); Crockett v. Mut. of Omaha,
No. M2014-01038-COA-R3-CV, 2015 WL 4656533, at *4–5 (Tenn. Ct. App. July 30,
2015) (affirming trial court’s dismissal pursuant to Rule 12.02(6) after concluding that a
declaratory judgment would be “purely theoretical” due to plaintiff’s failure to allege
damages as required by the relevant statute); Highwoods Props., Inc. v. City of Memphis,
No. W2007-00454-COA-R3-CV, 2007 WL 4170821, at *14–15 (Tenn. Ct. App. Nov. 27,
2007), aff’d, 297 S.W.3d 695 (Tenn. 2009) (collecting cases) (affirming trial court’s
dismissal pursuant to Rule 12.02(6) after concluding that plaintiff’s constitutional
challenge to an annexation ordinance was meritless). Furthermore, the Wade Court

                                             -7-
recognized that “there may be exceptions to this principle” that “a party seeking a
declaratory judgment is not required to allege facts in its complaint demonstrating that it is
entitled to a favorable decision” but declined to articulate what those exceptions may be.
Wade, 178 S.W.3d at 730 n.5.

       “Generally, in order to preserve judicial resources, we prefer to rule on the merits
of the case.” Karsonovich, 2018 WL 1091735, at *3 (citing Blackwell v. Haslam, No.
M2011-00588-COA-R3-CV, 2012 WL 113655, at *10 (Tenn. Ct. App. Jan. 11, 2012)).
This Court declined to rule on the merits of the case in Blackwell, concluding:

        If we decided the issues without remand, our decision would not infringe
        upon the rights of any party provided we affirmed the trial court in all
        respects. If, however, we were to disagree with the trial court, in whole or in
        part, concerning any of the constitutional grounds and rule in favor of
        Petitioner, the State would have every reason to complain. This is because
        the State has not filed an Answer to the Complaint, a fact that is
        acknowledged by Petitioner in his reply brief. Moreover, we cannot rule out
        the possibility that additional facts may need to be considered if the case is
        to be decided on the merits.

Blackwell, 2012 WL 113655, at *10 (emphasis added) (internal footnote omitted). Like
Karsonovich, this case is distinguishable from Blackwell “because [all of the] parties
briefed the [substantive] issues and there does not appear to be a need for any additional
facts.” Karsonovich, 2018 WL 1091735, at *3. Additionally, because we ultimately affirm
the trial court, our decision does not infringe upon the rights of any party.3

        Upon careful review, we determine that the Amended Complaint sufficiently
alleged facts demonstrating the existence of an actual controversy contemplated by the
declaratory judgment statute with regard to the validity of the amended covenants.
Therefore, the trial court erred in dismissing that part of the Chamblesses’ declaratory
judgment action pursuant to Rule 12.02(6). We therefore vacate the portion of the trial
court’s order dismissing the declaratory judgment action challenging the validity of the
amended covenants for failure to state a claim upon which relief can be granted. We also
vacate the trial court’s award to the Defendants of their costs and attorney’s fees incurred
in the trial court proceedings pursuant to Tennessee Code Annotated section 20-12-119 to
the extent that award is based upon the dismissal of that part of the declaratory judgment
action challenging the validity of the amended covenants.4 However, despite the

        3
           We also note that, although the Chamblesses rely on Wade to argue that this Court should reverse
the trial court’s dismissal of its declaratory judgment claim, they failed to raise this argument before the
trial court and only make such argument for the first time on appeal.
        4
            Section 20-12-119(c) provides, in relevant part:

                                                     -8-
procedural error in granting the motions to dismiss pursuant to Tennessee Rule of Civil
Procedure 12.02(6), as discussed further below, we find that the trial court nonetheless
ultimately accomplished the correct result in its consideration of the validity of the
amended covenants. For this reason, we affirm that portion of the trial court’s order.5

                                                       B.

        “Tennessee law does not favor restrictive covenants, because they are in derogation
of the rights of free use and enjoyment of property.” Hughes v. New Life Dev. Corp., 387
S.W.3d 453, 474–75 (Tenn. 2012) (citing Williams v. Fox, 219 S.W.3d 319, 324 (Tenn.
2007); Arthur v. Lake Tansi Vill., Inc., 590 S.W.2d 923, 927 (Tenn. 1979)). Despite this,
parties are “free to purchase property subject to restrictive covenants[.]” Pandharipande
v. FSD Corp., 679 S.W.3d 610, 629 (Tenn. 2023). As our Supreme Court has explained:

        . . . When a purchaser buys into such a community, the purchaser buys not
        only subject to the express covenants in the declaration, but also subject to
        the amendment provisions of the declaration. [Stewart E.] Sterk, [Minority
        Protection in Residential Private Governments,] 77 B.U. L.Rev. [273,] 282
        [(1997) (“Sterk”)]. And, of course, a potential homeowner concerned about
        community association governance has the option to purchase a home not
        subject to association governance. Sterk, 77 B.U. L.Rev. at 301. As one
        commentator has noted, people who live in private developments “are not
        just opting for private ordering in the form of covenants, but also are opting
        for a privatized form of collective decision making that can undo, replace,
        modify, or augment the private ordering already achieved.” [Lee Anne]
        Fennell, [Contracting Communities,] 2004 U. Ill. L.Rev. [829,] 848 [(2004)].

                [I]n a civil proceeding, where a trial court grants a motion to dismiss pursuant to
        Rule 12 of the Tennessee Rules of Civil Procedure for failure to state a claim upon which
        relief may be granted, the court shall award the party or parties against whom the dismissed
        claims were pending at the time the successful motion to dismiss was granted the costs and
        reasonable and necessary attorney’s fees incurred in the proceedings as a consequence of
        the dismissed claims by that party or parties.

         Because we now vacate that portion of the trial court’s order dismissing the Chamblesses’
declaratory judgment action challenging the validity of the amended covenants pursuant to Rule 12 for
failure to state a claim upon which relief can be granted, we also vacate that portion of the trial court’s order
awarding the Defendants their costs and attorney’s fees pursuant to this statute.
        5
          Where the trial court “reaches the correct result [even if] for the wrong reason[,] we will affirm.”
Torres v. Bridgestone/Firestone N. Am. Tire, LLC, 498 S.W.3d 565, 577 (Tenn. Ct. App. 2016) (quoting
Arnold v. City of Chattanooga, 19 S.W.3d 779, 789 (Tenn. Ct. App. 1999)).

                                                      -9-
       . . . We acknowledge that a homeowner’s Lockean exchange of personal
       rights for the advantages afforded by private residential communities does
       not operate to wholly preclude judicial review of the majority’s decision.
       However, because of the respect Tennessee law affords private contracting
       parties, we are reticent to inject the courts too deeply into the affairs of a
       majoritarian association that parties freely choose to enter.

Hughes, 387 S.W.3d at 476 (internal footnotes omitted). “As one commentator has
queried, ‘The scope of association power may not be unlimited, but how do we decide what
that scope is? Why are courts better situated to make that decision than the majority of
homeowners as represented by their association?’” Id. at 476 n.19 (quoting Sterk, 77 B.U.
L.Rev. at 287). Therefore, “[w]here, as here, members of a homeowners’ association adopt
an amendment, the amendment is presumed valid and the party arguing against the
amendment’s validity carries the burden of showing that the amendment was arbitrary and
capricious.” Pandharipande, 679 S.W.3d at 630 (citing Hughes, 387 S.W.3d at 478).
“[T]he arbitrary and capricious standard requires the reviewing court to determine whether
there has been a clear error in judgment.” Hughes, 387 S.W.3d at 479 (citing Jackson
Mobilphone Co. v. Tenn. Pub. Serv. Comm’n, 876 S.W.2d 106, 110–11 (Tenn. Ct. App.
1993)). “An arbitrary or capricious decision is one that is not based on any course of
reasoning or exercise of judgment, or one that disregards the facts or circumstances of the
case without some basis that would lead a reasonable person to reach the same conclusion.”
Id. at 479–80 (citing Miller v. Civ. Serv. Comm’n of Metro. Gov’t of Nashville & Davidson
Cnty., 271 S.W.3d 659, 665 (Tenn. Ct. App. 2008)).

       The Amended Complaint avers that the amended covenants “are arbitrary and
capricious or otherwise against public policy because of among other things (1) their failure
to serve a useful purpose[,] (2) mistake of fact, (3) they are based on material
misrepresentations made or (4) were adopted in bad faith and/or with intent to harm [the]
Chambless[es].” More specifically, in their brief filed with this Court, the Chamblesses
argue that the amended covenants are arbitrary and capricious because:

        The Rutledges initiated the amendment process after they breached the
         [original] covenants by constructing a non-conforming retaining wall and
         clearcutting trees.
        The Defendants eschewed the procedure the [Owners] adopted, and [Mr.]
         Rutledge pitted the Chamblesses against everyone else.
        The [Defendants’] original version of the amendment[s] included
         language prohibiting both the exterior finish of the Chamblesses’ home
         and their boathouse.
        [Mr.] Rutledge was angry at [Mrs.] Chambless, referred to her as the
         “neighborhood police” to the Maxwells and [the] Dotys, and acted in
         retaliation against her.

                                           - 10 -
        [Mr.] Rutledge made false statements to the Maxwells and [the] Dotys
         regarding the Chamblesses’ home.
        The Rutledges had a conflict of interest in proposing and voting on
         revisions that sought to retroactively negate their breach of the original
         covenants.
        The [Defendants] communicated about the amendment process behind
         the Chamblesses’ back and discussed how they would orchestrate the
         final stages of the process to create the appearance of good faith.

Ultimately, even when taken as true, these averments do not support a conclusion that the
amended covenants are arbitrary and capricious.

         The Chamblesses argue that this case is similar to Cohen v. Kite Hill Cmty. Ass’n,
191 Cal. Rptr. 209 (Cal. Ct. App. 1983), in which the California Court of Appeals reversed
a trial court’s dismissal of a complaint challenging the action of a community association’s
architectural committee. We are unpersuaded. The plaintiffs in Cohen sought to block
their neighbors from constructing a fence that the plaintiffs believed did not conform with
the restrictive covenants at issue in that case. Id. at 211. Those covenants required that
plans for certain improvements be submitted in writing to the community association’s
architectural committee for pre-approval and only allowed for the type of fence at issue to
be constructed on lots without a view. Id. at 210–11. The committee approved the plans
for the nonconforming fence, and the plaintiffs filed suit against the association and various
other parties. Id. at 211. The trial court dismissed the plaintiffs’ complaint as to the
association for failure to state a claim upon which relief could be granted. Id. The
California Court of Appeals reversed the trial court, concluding:

       Although the Declaration vests “sole discretion” in the Committee and
       allows for reasonable variances, their decisions must be “in keeping with the
       general plan for the improvement and development of the Project,” and of
       course, must be made in good faith and not be arbitrary. These are clearly
       questions of fact for a jury. Accordingly, the Association was a proper
       defendant in the action below, and dismissing it from the action was error.

Id. at 216. The Chamblesses argue that, like in Cohen, their Amended Complaint “contains
ample allegations to support a finding that the amended covenants are arbitrary and
capricious[.]” In making this argument, the Chamblesses essentially ask this Court to adopt
the “reasonableness” test expressly rejected by the Hughes Court. Furthermore, an
important distinction between this case and Cohen renders Cohen inapplicable here.

       To address this distinction, we turn to Apple II Condo. Ass’n v. Worth Bank and Tr.
Co., 659 N.E.2d 93 (Ill. App. Ct. 1995), a case cited with approval by our Supreme Court
in both Hughes and Pandharipande. In Apple II, a majority of the members of a

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condominium association amended their restrictive covenants to limit who could occupy
condominiums owned by the association’s members. 659 N.E.2d at 95. The association
subsequently filed a detainer action to evict nonconforming tenants, and the owners of the
unit at issue moved to dismiss the association’s complaint. Id. at 96. The trial court granted
the unit owners’ motion; on appeal, the Illinois Appellate Court was tasked with
determining whether the adoption of the amended covenant was a valid exercise of the
association’s power. Id. at 97. In discussing the proper level of deference with which to
review the association’s action, the Apple II Court reasoned:

       . . . A higher level of deference is necessary when courts review decisions
       made by self-governing bodies such as condominium associations. We
       therefore employ what we conclude is a better-reasoned approach to the
       problem which was employed by the Florida Appellate Court in Hidden
       Harbour Estates, Inc. v. Basso (Fla. App. 1981), 393 So.2d 637.

              In reviewing the merits of the trial court’s decision to restrict a unit
       owners’ use of association property, the Florida Appellate Court in Basso
       found that there were “two categories of cases” in which a condominium
       association attempts to enforce rules of restrictive use. “The first category is
       that dealing with the validity of restrictions found in the declaration of
       condominium itself. The second category of cases involves the validity of
       rules promulgated by the association’s board of directors or the refusal of the
       board of directors to allow a particular use when the board is invested with
       the power to grant or deny a particular use.” Basso, 393 So.2d at 639.

               The court held that “category one” restrictions are clothed in a very
       strong presumption of validity and will not be invalidated absent a showing
       that they are wholly arbitrary in their application, in violation of public
       policy, or that they abrogate some fundamental constitutional right. The court
       specifically found that “reasonableness” is not the appropriate test for such
       restrictions. “Indeed, a use restriction in a declaration of condominium may
       have a certain degree of unreasonableness to it, and yet withstand attack in
       the courts. If it were otherwise, a unit owner could not rely on the restrictions
       found in the declaration of condominium, since such restrictions would be in
       a potential condition of continuous flux.” Basso, 393 So.2d at 640.

              “Category two” restrictions are treated differently under the Basso
       test. When the discretion of the Board is challenged by a unit owner, the
       Board must affirmatively show the use it wishes to prohibit or restrict is
       “antagonistic to the legitimate objectives of the condominium association.”
       (Basso, 393 So.2d at 640.) In such cases, courts consider whether the

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       restriction will promote the health, happiness and peace of mind of the unit
       owners. Basso, 393 So.2d at 640.

Id. at 98. It then concluded that the action at issue in Apple II was a “category one”
restriction because it had been adopted by a majority of the members of the association and
was not simply a challenge to a discretionary action of the association’s board. Id. The
instant case, like Apple II, Hughes, and Pandharipande, is a “category one” case
challenging an action taken by the association as a whole. Conversely, Cohen is a
“category two” case challenging an action taken by a committee to whom various
discretionary decision making has been delegated. Accordingly, the amended covenants
in this case are entitled to a presumption of validity that was not afforded to the defendants’
actions in Cohen.

       The Chamblesses’ argument with respect to this issue is essentially that the amended
covenants are arbitrary and capricious because, at the time they were adopted, there was
personal discord between the Chamblesses and the Rutledges arising from the Rutledges’
purported violations of the original covenants. This personal discord and the Rutledges’
purported violations of the original covenants are not sufficient grounds for this Court to
find that the amended covenants are arbitrary and capricious. Personal discord between
neighbors while restrictive covenants are being amended is not unexpected, nor is it
unexpected that an association member may seek to amend a covenant with which their lot
is nonconforming. See Hughes, 387 S.W.3d at 462 (upholding amended covenants adopted
specifically to address an ambiguity identified by this Court as part of ongoing litigation
between the parties).

       The original covenants in this case expressly provided that they could be amended
upon agreement of at least 66.66% of the lot owners. There was no specific procedure
required by the original covenants for such amendment, and the amended covenants were
agreed upon by 75% of the lot owners. Finally, like in Hughes, the amended covenants
apply uniformly to each of the lots at issue. In short, the record before us does not
demonstrate anything arbitrary or capricious about the amended covenants. Therefore, we
affirm the trial court’s declaration that the amended covenants are valid and enforceable.

                                              C.

        Next, the Chamblesses argue that the trial court erred in dismissing their declaratory
judgment claim against the Maxwells and the Dotys related to Mr. Rutledge’s use of
association funds, including monies paid by the Chamblesses, the Maxwells, and the Dotys,
to hire the Owners’ attorney. They premise their argument on Tennessee Code Annotated
section 29-14-107(a). That statute applies to declaratory judgment actions and requires
that “all persons shall be made parties who have or claim any interest which would be
affected by the declaration[.]” Tenn. Code Ann. § 29-14-107(a). Despite this, “[g]enerally,

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the trial court has discretion to determine who should be made parties to proceedings for
declaratory judgment[.]” Timmins v. Lindsey, 310 S.W.3d 834, 839 (Tenn. Ct. App. 2009)
(citing Huntsville Util. Dist. of Scott Cnty., Tenn. v. Gen. Tr. Co., 839 S.W.2d 397, 399
(Tenn. Ct. App. 1992)). Absent an abuse of that discretion, the trial court’s determination
should not be disturbed on appeal. Id. “A trial court abuses its discretion when it causes
an injustice by applying an incorrect legal standard, reaching an illogical decision, or by
resolving the case ‘on a clearly erroneous assessment of the evidence.’” Tenn. Farmers
Mut. Ins. Co. v. DeBruce, 586 S.W.3d 901, 905 (Tenn. 2019) (quoting Henderson v. SAIA,
Inc., 318 S.W.3d 328, 335 (Tenn. 2010)). “We presume that the trial court’s discretionary
decision is correct, and we review the evidence in the light most favorable to the trial
court’s decision.” Id.

       “The non-joinder of necessary parties is fatal on the question of ‘justiciability’
which, in a suit for a declaratory judgment, is a necessary condition of judicial relief.”
Wright v. Nashville Gas & Heating Co., 194 S.W.2d 459, 461 (Tenn. 1946). “This does
not mean, however, [that] all persons who might be remotely affected need [be] joined.”
Shelby Cnty. Bd. of Comm’rs v. Shelby Cnty. Q. Court, 392 S.W.2d 935, 940 (Tenn. 1965).
The Chamblesses contend, but fail to provide sufficient evidence, that the rights of the
Maxwells and the Dotys would be affected by the trial court’s declaration regarding the
use of the association funds to hire the Owners’ attorney. Although this issue involves the
use of funds paid to the association by the Maxwells and the Dotys, those parties have not
challenged Mr. Rutledge’s use of those funds to hire the Owners’ attorney, nor have they
requested a refund of their monies paid to the association.

       This portion of the Chamblesses’ declaratory judgment claim involves a dispute
solely between the Chamblesses and Mr. Rutledge. Thus, we conclude that the trial court
did not abuse its discretion in dismissing the Chamblesses’ declaratory judgment claim
against the Maxwells and the Dotys concerning Mr. Rutledge’s use of the association
funds.

                                            D.

       The Maxwells and the Dotys argue that this is a frivolous appeal and request their
attorney’s fees on appeal. “A frivolous appeal is one that is ‘devoid of merit,’ or one in
which there is little prospect that [an appeal] can ever succeed.” Morton v. Morton, 182
S.W.3d 821, 838 (Tenn. Ct. App. 2005) (quoting Indus. Dev. Bd. of the City of Tullahoma
v. Hancock, 901 S.W.2d 382, 385 (Tenn. Ct. App. 1995)). Tennessee Code Annotated
section 27-1-122 provides:

             When it appears to any reviewing court that the appeal from any court
      of record was frivolous or taken solely for delay, the court may, either upon
      motion of a party or of its own motion, award just damages against the

                                          - 14 -
       appellant, which may include, but need not be limited to, costs, interest on
       the judgment, and expenses incurred by the appellee as a result of the appeal.

       In the exercise of our discretion, we decline to find this appeal frivolous and further
decline to award the Maxwells and the Dotys their attorney’s fees incurred in this appeal.

                                      IV. Conclusion

        For the foregoing reasons, the trial court’s dismissal pursuant to Tennessee Rule of
Civil Procedure 12.02(6) of the Chamblesses’ declaratory judgment action challenging the
validity of the amended covenants is vacated. The trial court’s award of costs and
attorney’s fees to the Defendants pursuant to Tennessee Code Annotated § 20-12-119(c) is
also vacated to the extent that award is based upon the dismissal of that part of the
declaratory judgment action challenging the validity of the amended covenants. In all other
respects, the trial court’s declaration that the amended covenants are valid and enforceable
is affirmed. The trial court’s dismissal of the remainder of the declaratory judgment action
against the Maxwells and the Dotys is also affirmed. Costs of this appeal are taxed equally
between the appellants and the appellees, for which execution may issue if necessary. This
case is remanded for proceedings consistent with this Opinion.

                                                     _________________________________
                                                     KRISTI M. DAVIS, JUDGE

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