Subdivision Oppression?

Below is a student commentary by Robert Herz

Reduzzi v. Eagle Pines Community Services Association, Inc., No. ED 101578 (Mo. Cir. Div. 7 2014)

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Eagle Pines Community Service Association is a homeowners association for the Eagle Pines subdivision in St. Charles, MO.  The Reduzzis are homeowners and their property is located within the Eagle Pines subdivision.  The subdivision is governed by the Declaration of Covenants, Conditions and Restrictions for Eagle Pines Community Services Association (“Declaration of Covenants”), which provides for an Architectural Control Committee (“ACC”).The ACC has sole authority to establish architectural guidelines for the subdivision.

The Reduzzis put up a fence that did not conform to the ACC’s guidelines, and Eagle Pines fined the Reduzzis.  The Reduzzis then filed suit against Eagle Pines Community Service Association (“Eagle Pines”), seeking declaratory judgment that would permit the fence.  The trial court issued summary judgment for the Reduzzis, finding that Eagle Pines had waived and abandoned the requirement in the Declaration of Covenants that a property owner obtain written approval for fence construction.  Eagle Pines appealed.

This paper addressees the following arguments raised in the parties’ briefs:

  • The Declaration of Covenants provides for the ACC, stating that “The [ACC] shall consist of three members, all of who shall be appointed by the Board of Directors[.]”  The Reduzzis’ brief seems to imply that because the ACC consisted of only two members when the fence guidelines were implement, those guidelines should void.
  • The Declaration of Covenants states that, “No fencing… of any kind shall be permitted on any Lot without the prior written approval of the [ACC]… The [ACC] … shall promulgate design guidelines and application procedures.” (emphasis added)  The Reduzzis argue that Eagle Pines failed to “promulgate” the fence guidelines, and due to such failure, Eagle Pines may not deny approval and impose sanctions against the Reduzzis for building their fence.
  • The Reduzzis allege that numerous fences were constructed without ACC approval, and therefore Eagle Pines has waived and abandoned its restrictive covenant on fence construction.
  • Eagle Pines raised two affirmative defenses: a contractual waiver provision and an in pari delicto defense.

Based upon the briefs prepared by the both parties, it appears that summary judgment in favor of the Reduzzis was inappropriate.  Additionally, even if there were as many unapproved ACC fences constructed as alleged by the Reduzzis’ brief, it is not clear that Eagle Pines waived or abandoned its restrictive covenant on fence construction.

More after the break ….

ACC membership

The Reduzzis seem to argue that the ACC fence guidelines are void because the Declaration of Covenants states that the ACC must consist of three members, but the ACC consisted of only two members at the time its fence guidelines were implemented.  Similarly, it would follows that any rule or guideline created by the ACC would also be void.  In Connelly, v. Schafer, a Missouri court found that a committee’s nonexistence did not void all provisions relating to that committee.  837 S.W.2d 344, 346 (Mo. App. W.D. 1992).  Following that rationale, a committee lacking the request membership as provided by the Declaration of Covenants does not void all provision relating to that committee.

Promulgation of fence guidelines

The Declaration of Covenants states, “The [ACC] … shall promulgate design guidelines and application procedures.” A restrictive covenant is a private contractual obligation generally governed by the same rules of construction applicable to any covenant or contract.”  Wildflower Cemetery Association v. Rinderknecht, 25 S.W.3d 530, 534 (Mo. App. W.D. 2000) (internal citations and quotation marks omitted).  If the ACC’s failure to promulgate guidelines constitutes a material breach of Declaration of Covenants by Eagle Pines, then the Reduzzis may not breached the contract by constructing a fence that was not approved by the ACC.  See Restatement (Second) of Contracts § 237 (1981).  As stipulated by the briefs, once the fence guidelines were created, they were mailed out to each homeowner as an attachment to the subdivision’s spring newsletter.  Later, the Board of Eagle Pines created a website for the homeowners of the subdivision.  The fence guidelines were subsequently uploaded to the website, they are no longer mailed out in the spring newsletter.  It is the Reduzzis’ position that the efforts of Eagle Pines did not satisfy its obligation to “promulgate” the guidelines as stated in the Declaration of Covenants.

Basic concepts of judicial construction for restrictive covenants:

  1. The terms used will be their ordinary and popular meaning and if the meaning is plain, no construction is necessary.
  2. When the meaning of the terms is open to construction, they will be strictly construed.
  3. The restriction will not be extended by implication.
  4. A reasonable doubt will be resolved in favor of free use of land.

Lake St. Louis Community Association v. Leidy.  672 S.W.2d 381, 382 (Mo. App. E.D. 1984).

The Reduzzis’ brief cites to a Missouri decision in which the term “promulgate” was defined as: “to make (as a doctrine) known by open declaration” or to make known or public the terms of (a proposed law).”  State ex rel. Office of Public Counsel and Missouri Industrial Energy Consumers v. Missouri Public Service Commission, 331 S.W.3d 677, 688 (Mo. App. W.D. 2011) (citing the Merriam-Webster dictionary).  It is noteworthy that the Missouri case cited by the Reduzzis is not analogous to the Reduzzis’ situation.  The Office of Public Counsel decision interpreted the word ‘promulgate’ in the context of a Missouri statute, while the instant situation involves interpreting the word in the context of a private contract.

Brief research did not disclose a case which defines the term ‘promulgate’ in a similar context of homeowners and restrictive covenants.  However, a recent Missouri decision similar to that of the Reduzzis’.  Sellers v. Woodfield Property Owners Association, 2015 WL 392893 (Mo. App. 2015).  In Sellers, the homeowners in a subdivision were also subject to restrictive covenants.  Id. at 1.  The restrictive covenants provided for an architectural committee which “shall develop guidelines and policies for the development and of a residential community which is harmonious and aesthetically pleasing.”  Id.  The architectural committee made its guidelines and policies available on an online website.  Id.  The Missouri court held that “because the language of the deed made it clear that a committee existed and the committee had authority to establish independent standards, the homeowners could be held to those standards.” Id. at 3 (citing Village of Pheasant Run Homeowners Association v. Kastor, 47 S.W.3d 747, 752-53 (Tex. App. 2001) (holding that the language in a deed provided adequate notice to the homeowner of the association’s ability to create the committee and enforce the committee’s guidelines.)).

Waiver and Abandonment

The Eagle Pines subdivision contains more than 100 homes.  The Reduzzis allege that Eagle Pines “has allowed [14] unauthorized fences to stand unchallenged[.]”  In contrast, Eagle Pines argues that there were only three unauthorized fences in the subdivision, including the Reduzzis’ property.  Eagle Pines further alleged that the remaining fences alleged by the Reduzzis to be unauthorized were actually authorized by the developer of the Eagle Pines subdivision when the developer had control of the ACC.  In their briefs, both the Reduzzis and Eagle Pines address the issue of possible waiver of the restrictive covenants.  The Reduzzis argue that Eagle Pines has waived the restrictive covenants governing fence construction.

Missouri law favors “the free and untrammeled use of real property, but valid restrictions thereon cannot be and are not disregarded by the courts.” Dierberg v. Willis, 700 S.W. 461, 466 (Mo. App. E.D. 1985).   Dierberg held that releasing one tract from a restrictive covenant did not result in the releasing of all tracts from that covenant. 700 S.W.2d 461, 466 (Mo.App.E.D. 1985) (citing Massie v Benton, 678 S.W.2d 445, 447 (Mo. App. E.D. 1984)).  Release due to a “practical and reasonable response to changed conditions” neither constitutes waiver nor abandonment.  Id.

In Dierberg, the covenant in dispute “prohibited the construction of any building intended for any purpose except a one family private residence[.]” Id. at 463 (internal quotation marks omitted).  Five tracts of land were subject to this covenant, and one tract was conveyed to the State Highway Commission of Missouri (the Commission), which already had a four-lane highway running across the land.  Id. at 464-65.  The sale to the Commission was effectively the state’s use of its power of eminent domain, which subordinates deed restrictions.  Id. at 466.  Therefor the construction of this highway was not a voluntary or intentional waiver.  In a different transaction, the deed conveyed a tract of land expressly releasing the land from the covenant.  Id.

The Commission’s taking of Tract D severed Tract E, a small narrow strip of land from Tracts, A, B, and C (see diagram).  This severance made enforcement of the covenant against Tract E impractical and irrelevant to the purpose for which the owners of Tract A, B, and C desired to maintain the covenant.  The release of Tract E was thus merely a practical and reasonable response to changed conditions and not a conscious waiver or abandonment of the covenant.

Id.

In Massie v. Benton, the property owners asked the court to release their land from the restrictions “limited the use to residential purposes.”  678 S.W.2d 445, 446 (Mo. App. E.D. 1984).  The property owners argued that the land owners were not permitted to selectively waive the restrictions from some of the lots of land. Id. at 447.  Massie found that the knowing release of the deed restrictions did not constitute waiver.  Id.

Restrictive covenants running with the land, while in effect pursuant to the terms of the instrument creating them, may be extinguished, modified or changed by mutual agreement between all of those subject to the restrictions and all of those entitled to enforce them, and in making such modification or change, the restrictions need not be uniform as to all lots but may contain any pattern of restrictions which could have been contained in the instrument originally creating the restrictions.

Id. (quoting Steve Vogli & Co. v. Lane, 405 S.W.2d 885, 888 (Mo. 1966)).

The Reduzzis seem to argue that because there is no written approval of fence construction by the developer prior to 2004, all the fences built during that time period are unauthorized fences, and thus are releases from the restrictive covenant.  Eagle Pines could argue that these approvals by the developer were a practical and reasonable response to changed conditions and not a conscious waiver or abandonment of the covenant.  However, without any evidence by Eagle Pines, the association is unable to prove these releases by the developer were practical or reasonable responses.

As a reminder, the Eagle Pines subdivision contains more than 100 properties, and the Reduzzis allege there are as many as 14 violations of the fence guidelines, while Eagle Pines argues there are only 3 violations.   “[A] restrictive covenant may be waived and abandoned by a landowner’s conscious acquiescence as evidenced by persistent violation of the provision.”  Connelly v. Shafer, 837 S.W.2d 344, 347 (citing Lake Saint Louis Community Association v. Kamper, 503 S.W.2d 447 (Mo. App. 1973).     Conversely, limited violations may be insufficient to constitute either waiver or abandonment of the restrictive covenant.  Id. at 348.

Based on Missouri case law, the summary judgment in favor of the Reduzzis appears to inappropriate.  As argued by Eagle Pines, even if there are as many violations as alleged by the Reduzzis, it is not clear that the number of violations is sufficient to constitute waiver and abandonment.  In Connelly v. Shafer, the Missouri court held that 4 of 17 violations of wood shingle restrictions did not constitute waiver or abandonment.  837 S.W.2d at 347-48.  That constitutes approximately 23% violation rate.  In Eichelsbach v Harding, the Missouri court held that 29 fence restriction violations, out of 160 lots, did not constitute waiver or abandonment.  309 S.W.2d 662, 670-671 (Mo. App. 1968).  Thus the Missouri court found that an 18% violation ratio did not constitute waiver or abandonment.  If the alleged 14 violations are all considered, then Eagle Pines subdivision consists of at most a 14% violation ratio.  The Eagle Pines violation ratio does not seem to be sufficient to issue a summary judgment finding waiver or abandonment.

No waiver agreement

One defense raised by Eagle Pines against Reduzzis waiver argument is a contractual defense.  As alleged by Eagle Pines, pursuant to the Declaration of Covenants agreed to by Reduzzis, Eagle Pines’ and the ACC’s actions with other property owners cannot constitute as waiver by contractual agreement.  The Declaration of Covenants states:

12.2 No Waiver of Future Approvals.  The approvals of the [ACC] of any proposals or plans and specification s or drawings for any work done or proposed, or in connection with any other matter requiring the approval and consent of [the ACC], shall not be deemed to constitute waiver of any right to withhold approval or consent as to any similar proposals, plans and specifications, drawings or matters whatever subsequently or additionally submitted for approval or consent.

(emphasis added)

Eagle Pines argues this provision the Reduzzis waived the right to rely on the ACC’s prior decisions to grant a construction application pursuant to the No Waiver of Future Approvals provision.  However, this provision in unenforceable.

“[P]arties to contract cannot, even by an express provision in that contract, deprive themselves of the power to alter or vary or discharge it by subsequent agreement.”  Fritts v. Cloud Oak Flooring Co., 478 S.W.2d 8, 14 (Mo. App. 1972); Williston on Contracts § 39:36.  “The promisor still has the power to waive the condition, or by his conduct to estop himself from insisting upon it, to the same extent that he would have had this power if there had been no such provision.”  Fritts, 478 S.W.2d at 14.  The No Waiver of Future Approvals provision could be waived, meaning that the approval of the ACC could constitute a waiver to withhold approval or consent as to any similar proposals, and therefore the provision has no effect.  Eagle Pines cannot deprive themselves of such a waiver of conduct by a subsequent agreement.

In pari delicto

Additionally, Eagle Pines brief raises the issue of an affirmative defense against the Reduzzis, claiming that the Reduzzis have willfully constructed other unapproved structures and was acting as a bad actor or wrong-doer in the context of contract performance.  “The general rule that neither party is entitled to restitution is subject to an exception in favor of a party who is not equally in the wrong, or as it is sometimes said is not in pari delicto[.]” Restatement (Second) of Contracts § 198 (1981); see Kansas City Operating Corp. v. Durwood, 278 F.2d 354, 358 (8th Cir. 1960).  If the parties are found to be in pari delicto, “the law will leave them where it finds them.” (citing Durwood, 278 F.2d at 358).  Therefore, even if the Reduzzis and Eagle Pines were both found to have violated the Declaration of Covenants in other prior instances, the Reduzzis would be allowed to keep the fence.  Eagle Pines does not want to successfully raise this affirmative defense if their goal is to not permit the Reduzzis’ fence.

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