Appel v. Presley Cos.
806 P.2d 1054 (N.M.1991) (1991)
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Rule of Law:
A provision in a restrictive covenant that grants a developer-controlled committee the power to amend or make exceptions to the restrictions must be exercised reasonably and in a manner that does not destroy the general scheme or plan of development.
Facts:
- In 1979, The Presley Company of New Mexico (Presley) recorded a subdivision plat for Vista Del Sandia.
- In October 1982, Presley recorded a set of restrictive covenants for all lots in the subdivision, establishing a general plan for single-family residential dwellings.
- In November 1982, Daniel and Patricia Appel met with Presley agents, who they allege made representations about the covenants, which the Appels relied upon when purchasing their lot.
- The covenants granted an Architectural Control Committee, composed entirely of Presley employees or officers, the power to 'make amendments and/or exceptions to these restrictions.'
- On April 25, 1984, this committee amended the covenants to completely remove nine lots, including Lots 28-A and 30, from being subject to the restrictions.
- Presley later sold Lot 28-A to Wolfe Company, Inc. (Wolfe), which planned to replat the lot to build four residences, contrary to the original single-family dwelling scheme.
- Following the amendment, some of the other exempted lots were subdivided and had townhouses constructed on them.
Procedural Posture:
- Daniel and Patricia Appel sued The Presley Company of New Mexico and Wolfe Company, Inc. in a New Mexico trial court.
- The complaint sought injunctive relief and damages for breach of restrictive covenants, misrepresentation, and unfair trade practices.
- The defendants moved for summary judgment on all claims.
- The trial court granted the defendants' motion for summary judgment.
- The Appels, as appellants, appealed the trial court's order to the New Mexico Supreme Court, with Presley and Wolfe as appellees.
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Issue:
Does a provision in a restrictive covenant allowing a developer-controlled architectural committee to make 'amendments and/or exceptions' permit the committee to unilaterally exempt entire lots from the covenant's effect without regard to reasonableness?
Opinions:
Majority - Franchini, Justice
No. A provision allowing a committee to amend or make exceptions to restrictive covenants does not grant unlimited power; any such changes must be exercised reasonably so as not to destroy the general scheme of the development. The court reasoned that an inherent inconsistency exists between establishing an elaborate set of restrictive covenants for a general plan and a clause allowing the developer to unilaterally abandon any part of it. Citing its own precedent in Montoya v. Barreras, the court reinforced that relieving individual lots from covenants requires a clear expression, and it reconciled the apparent power to amend with the need to protect the development plan by imposing a requirement of reasonableness, a standard also adopted in other jurisdictions. Therefore, whether Presley's committee acted reasonably by removing entire lots from the covenants is a question of fact that must be determined at trial, precluding summary judgment.
Analysis:
This decision significantly limits a developer's seemingly absolute power to amend restrictive covenants, even when such power is explicitly reserved in the governing documents. By implying a standard of reasonableness, the court protects the reliance interests of homeowners who purchase property based on a promised uniform development scheme. The ruling shifts the legal analysis from a purely contractual interpretation of the amendment clause to a fact-intensive inquiry into the reasonableness of the developer's actions and their effect on the overall plan. This creates a greater check on developer authority and provides homeowners with a stronger legal basis to challenge amendments they believe undermine the character of their community.
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