Brown v. Woodrun Ass'n, Inc.
157 N.C. App. 121, 2003 N.C. App. LEXIS 380, 577 S.E.2d 708 (2003)
Rule of Law:
Restrictive covenants that specify a clear expiration date and contain ambiguous language regarding their extension must be construed strictly against the extension, thereby terminating on the specified date.
Facts:
- In 1971, Woodrun Association, Inc. ("defendant") filed a Declaratory Statement of Covenants and Restrictions ("Declaration") for the Woodrun subdivision.
- Paragraph 11 of the Declaration stated that all restrictions would continue until January 1, 1992, "except that they may be changed, altered, amended or revoked in whole or in part" by a 2/3 written agreement of lot owners.
- On December 5, 1991, pursuant to Paragraph 11, defendant executed a "Restatement" of the Declaration, which was filed in April 1992.
- The Restatement purported to extend the restrictions until January 1, 2002, and then provided for automatic ten-year extensions unless a 2/3 vote of lot owners stated otherwise.
- In April and June of 1997, James R. Brown and his wife, and CCTD, Inc. (collectively "plaintiffs"), bought several lots in the Woodrun subdivision.
- The development of these lots by plaintiffs subsequently created problems between the parties regarding whether proposed construction plans complied with restrictions set forth in the Declaration and the Restatement.
Procedural Posture:
- On July 14, 1998, Mr. and Mrs. James R. Brown and CCTD, Inc. (plaintiffs) filed an action in Montgomery County Superior Court (trial court) challenging the validity of the restrictions, seeking a declaration of unenforceability, injunctions, and monetary damages.
- Woodrun Association, Inc. (defendant) denied the allegations, asserted affirmative defenses, and counterclaimed for overdue assessments and an injunction against non-compliant construction, but later voluntarily dismissed the counterclaim without prejudice.
- On April 7, 1999, defendant filed a motion for summary judgment.
- On October 4, 1999, the Montgomery County Superior Court denied defendant's summary judgment motion but granted partial summary judgment in favor of plaintiffs on all issues except damages.
- The Superior Court denied defendant's motion for rehearing, reconsideration, and relief from the partial summary judgment.
- Defendant appealed the partial summary judgment to the North Carolina Court of Appeals, which remanded the case as interlocutory (not yet appealable) due to remaining factual issues to be decided.
- On January 22, 2002, defendant filed a Rule 56(f) motion asking the trial court to clarify remaining factual issues for trial.
- On February 5, 2002, plaintiffs voluntarily dismissed their damages claim without prejudice.
- The trial court then denied defendant's motion to clarify issues, holding it no longer had jurisdiction over the parties due to the voluntary dismissal of the damages claim.
- Defendant gave notice of appeal to the North Carolina Court of Appeals from the partial summary judgment order, the order denying its motion to rehear/reconsider, and the order denying its motion to clarify issues for trial.
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Issue:
Does a restrictive covenant, which explicitly states an expiration date and ambiguously provides for alteration, amendment, or revocation, permit the extension of that expiration date?
Opinions:
Majority - Hunter, Judge
No, a restrictive covenant with a clear expiration date and ambiguous language regarding alteration, amendment, or revocation does not permit the extension of that expiration date. The court affirmed the trial court's grant of partial summary judgment for the plaintiffs. The court reasoned that the case is controlled by Allen v. Sea Gate Assn., which involved a virtually identical restrictive covenant provision. In Allen, the court held that a provision allowing alteration, amendment, or revocation, when following an emphatic statement of an expiration date, creates an ambiguity as to whether the expiration date itself may be extended. Citing the principle that any ambiguity in restrictive covenants must be construed in favor of limited duration and against restricting property, the court concluded that the original Declaration expired on January 1, 1992, and could not be extended by the Restatement. The court further declined to apply equitable defenses (waiver, estoppel, unclean hands) to allow recovery for the defendant where the restrictive covenants were deemed void, finding no North Carolina authority for such an application. Finally, the court noted that the defendant failed to raise an implied contract theory for collecting assessments at the trial level as a counterclaim, distinguishing the case from Miles v. Carolina Forest Ass’n, and therefore, review on appeal was limited to the enforceability of restrictions based on the Restatement.
Concurring - McGee, Judge
Judges McGee and Calabria concurred without separate written opinions.
Concurring - Calabria, Judge
Judges McGee and Calabria concurred without separate written opinions.
Analysis:
This case reinforces the strict construction doctrine for restrictive covenants in North Carolina, particularly regarding their duration and extension. It highlights the critical importance of clear and unambiguous drafting in real estate instruments. Property developers and homeowners' associations must ensure that any provisions for extending covenants are explicitly stated, rather than relying on general "alteration, amendment, or revocation" clauses, to avoid their premature expiration. The refusal to apply equitable defenses in the face of void covenants also limits the available recourse for associations failing to properly extend their restrictions.
