Contracts; Deeds--implied in fact contract_-assessments for maintenance of common areas
and roads in subdivision
The trial court did not err by directing verdict (more properly a motion to involuntarily
dismiss under N.C.G.S. § 1A-1, Rule 41(b) for a nonjury trial) in favor of defendant subdivision
association based on its conclusion that an implied in fact contract existed between defendant
and plaintiffs, the owners of undeveloped subdivision lots, for plaintiffs to pay fees and
assessments for maintenance, upkeep and operation of the roads, common areas, and
recreational facilities within the subdivision, because: (1) contrary to plaintiffs' assertion, an
implied contract does not breathe new life into the pertinent expired covenant, but instead the
terms of the expired covenant evidence the terms of an implied contract; (2) the statute of frauds
was not implicated in this instance as no interest in land was at issue since the implied contract
claim is one for services rendered pursuant to an agreement with these plaintiffs; (3) plaintiffs'
conduct was consistent with the existence of a contract implied in fact when plaintiffs were
assessed specific fees for benefits to their unimproved properties, these benefits protected both
the access to and the value of their properties, plaintiffs were on clear notice that these benefits
were being incurred and approximately half of the plaintiffs actually voted for the amendments
which included consent to pay the assessment fees for the exact benefits at issue in this case, and
plaintiffs' attempt to stop payment on these known benefits without more is tantamount to
breach of that contract; and (4) any issue concerning whether the value of the services rendered
as damages was adequately assessed and attributed to plaintiffs was not before the Court of
Appeals for review.
Fisher Clinard & Cornwell, P.L.L.C., by Shane T. Stutts, for
plaintiff appellants.
Hill, Evans, Duncan, Jordan, & Beatty, P.L.L.C., by Karl N.
Hill, Jr., for defendant appellee.
McCULLOUGH, Judge.
This case arose out of a dispute between a subdivision
association, Carolina Forest Association (“CFA”), and owners of
undeveloped property in the subdivision (“plaintiffs”). CFA, byway of counterclaim, sought payments of certain fees and
assessments they contended were agreed to by plaintiffs, and which
were to be used for improvements to common areas and roads in the
subdivision. Plaintiffs objected to paying such fees and
assessments, believing themselves neither bound to do so under the
law or in equity. The parties waived trial by jury.
The underlying facts are these: On 1 June 1970, the land
development company Russwood, Incorporated (“Russwood”) prepared
covenants and restrictions (the “declarations”) to run with
Carolina Forest Subdivision, a gated community developed in
Montgomery County. These declarations were recorded on 8 July 1970
and included the requirement that each lot owner maintain
membership in and abide by the rules of Carolina Forest
Association, Inc. The declarations contain the following paragraph
which limited the duration of the covenants and restrictions to 1
January 1990:
10. These restrictions and covenants run with
the land, and shall bind the PURCHASERS, their
heirs, executors, administrators, personal
representatives and assigns, and if any of
them shall violate or attempt to violate any
of the covenants or restrictions herein
contained, it shall be lawful for any
person(s) or corporation(s) owning any such
lots in the sub-division to prosecute any
proceedings at law or in equity against those
violating or attempting to violate any such
covenants or restrictions and either to
prevent him, them or it from doing so, or to
recover damages for such violation. All of the
restrictions, conditions, covenants and
agreements contained herein shall continue
until January 1, 1990, except that they may be
changed, altered, amended or revoked in whole
or in part by the record owners of the lots inthe sub-division whenever the individual and
corporate record owners of at least 2/3 of the
said platted lots so agree in writing.
Provided, however, that no changes shall be
made which might violate the purposes set
forth in Restrictions No. 1 [limiting lots to
residential purposes generally] and No. 8
[providing a perpetual easement and rights of
ingress and egress for utility lines]. Any
invalidation of any one of these covenants and
restrictions shall in no way affect any other
of the provisions thereof which shall
hereafter remain in full force and effect.
Russwood then conveyed certain land, rights and obligations to CFA
by deed which was recorded on 16 August 1973. CFA then sold
Carolina Forest lots under these declarations to plaintiffs at
various times.
As 1 January 1990 approached, CFA requested plaintiffs'
consent in writing to amend declaration No. 10 to extend beyond its
expiration. Of the 906 lots in the subdivision, 618 of the
Carolina Forest lot owners agreed to the amendments. Approximately
half of plaintiffs voted in favor of the amendment to extend the
declarations. In 1997 and 1998, because some of the lot owners did
not pay assessments, CFA voided some of the plaintiffs' gate cards
which prevented access to the subdivision. Plaintiffs initiated
this action against CFA seeking (1) declaratory judgment regarding
their rights and obligations as lot owners; and (2) an injunction
to prohibit levying fees and assessments and to allow access to the
subdivision and common areas. CFA moved to dismiss these claims
under the theory that plaintiffs were bound by the declarations as
amended. The first judgment rendered in the case, certified for
appellate review, granted partial summary judgment in favor of
plaintiffs. In that order, the trial court divided plaintiffs into
two categories. In the first category were those plaintiffs to
whom the amendments applied and against whom fees and assessments
could be enforced. This category of plaintiffs was comprised of two
subsets: in the first subset were those plaintiffs who voluntarily
consented in writing to declaration No. 10 as amended and extended,
as these parties were estopped from claiming otherwise; and in the
second subset were those plaintiffs who purchased their lots at a
point in time after which their deeds expressly referred to the
covenants and restrictions. The claims of these two subsets of
plaintiffs were dismissed.
In the second category of plaintiffs were lot owners who did
not consent to the amendments to declaration No. 10, and did not
receive deeds which placed them on notice of the covenants and
restrictions. The court allowed the claims of these plaintiffs to
go forward. However, the court found that this second category of
plaintiffs was bound by an implied in fact contract with CFA, which
required them to pay fees for maintenance, repair, and upkeep of
all roadways for three years preceding the filing of CFA's answer.
This order, as certified by the trial court, was then appealed
to our Court. In reviewing the order, we held that the first
category of plaintiffs was not bound by declaration No. 10 as
amended. See Miles v. Carolina Forest Ass'n, 141 N.C. App. 707, 541
S.E.2d 739 (2001) (Miles I). Applying strict construction tonegative covenants, we found that there was no authority under the
original declarations to extend them beyond 1 January 1990 and
reversed the trial court's conclusion of law. Miles I, 141 N.C.
App. at 712-13, 541 S.E.2d at 742. Concerning the second category
of plaintiffs, we did not affirm the trial court's conclusion of
law that they were bound by an implied contract in fact, but
remanded the case, as to all plaintiffs, for the trial court to
determine the following:
[For] the trial court to address whether all
of the plaintiffs have impliedly agreed to pay
for maintenance, upkeep and operation of the
roads, common areas and recreational
facilities with the subdivision, and if so, in
what amount.
Id. at 714, 541 S.E.2d at 742.
Now for our review is the trial court's judgment issued
pursuant to the mandate of Miles I. In that judgment, the trial
court granted CFA a directed verdict at the close of all evidence,
concluding, as a matter of law, that an implied contract existed
between CFA and all plaintiffs. The trial court ordered plaintiffs
to pay these fees for benefits they received by way of maintenance
and upkeep of the roads, common areas, and recreational facilities
within the subdivision.
In their only assignment of error, plaintiffs contend that the
trial court erred in granting CFA's motion for directed verdict
finding an implied contract as to all plaintiffs, and denying
plaintiffs' same motion. Their issue is based on three alternative
arguments: The first is that the covenants under declaration No. 10are void as a matter of law, and the doctrine of implied contracts
cannot breathe new life into them. The second is that the Statute
of Frauds (SOF) requires any of the alleged implied agreements
between plaintiff and defendants be in writing, and are otherwise
unenforceable. And lastly, that the scope of an implied contract is
limited to unjust enrichment and plaintiffs have been in no way so
enriched. We do not agree with the arguments put forth by
plaintiffs, and affirm the trial court pursuant to the following
analysis.
Plaintiffs first contend, as a matter of law, that an implied
contract cannot be used to breathe new life into null and void
restrictive covenants. They do so, citing as their principal
authority Allen v. Sea Gate Assn., 119 N.C. App. 761, 460 S.E.2d
197 (1995).
In Allen, we found that covenants imposing affirmative
obligations could not be amended to allow them to extend into the
future, unless they were clearly authorized to do so within the
covenants. We held that the language of the covenant in that case,
“except that they may be changed, altered, amended or revoked in
whole or in part[,]” did not grant such authority. Id. at 765, 460
S.E.2d at 200. This is the exact same language found in
declaration No. 10 in the case at bar. Therefore, we based our
reversal as to the first category of plaintiffs in Miles I on the
decision in Allen. Miles I, 141 N.C. App. at 712-13, 541 S.E.2d at
742. However, nothing in Allen supports plaintiffs' contention that
an implied contract on these facts is precluded as a matter of law.
In reading the Allen decision, it appears the defendants in that
case did not raise the implied contract theory in any claim. In
Brown v. Woodrun Ass'n, 157 N.C. App. 121, 577 S.E.2d 708 (2003)
disc. review denied, 357 N.C. 457, 585 S.E.2d 384 (2003), a case
comparing Miles I and Allen, the Brown Court stated:
In Miles, a declaration containing a
provision with language similar to that in
Paragraph 11 in this case was at issue. By
relying on Allen, the Miles Court held the
declaration was unenforceable because the
ambiguous provision did not clearly authorize
an extension. However, unlike Allen, the trial
court in Miles had found that an implied
contract existed between the defendant and
several of the plaintiffs, which required
those plaintiffs to contribute to the
maintenance, repair, and upkeep of their
subdivision for a specific period of time.
Thus, on appeal, this Court remanded the case
to the trial court for a determination as to
whether all plaintiffs had impliedly agreed to
pay for maintenance, repair, and upkeep of
the subdivision, and if so, in what amount.
Unlike Miles, the trial court in the case
sub judice never found that an implied
contract existed. This theory of relief was
never raised by defendant at the trial level
as a counterclaim even though defendant had
raised two other counterclaims which it later
voluntarily dismissed. Therefore, defendant's
failure to raise an implied contract theory as
a counterclaim limits our review on appeal to
whether defendant had the ability to enforce
restrictions and dues based on the 1991
Restatement. Nevertheless, as plaintiffs'
counsel stated in oral arguments, the possible
existence of an implied contract between the
parties raises a separate issue that can be
determined in a separate action.
Id. at 125-26, 577 S.E.2d at 712-13 (citations omitted) (emphasis
added). Therefore, though the underlying covenant as written has
been held to have expired by its own terms, it is clear under Brown
and Miles I that an implied contract is a cognizable claim in this
instance. Thus, the implied contract does not breathe new life
into the expired covenant; rather, it is the terms of the expired
covenant that evidences the terms of the implied contract.
In the case at bar, CFA brought a counterclaim under both
theories of implied contracts, implied in fact and in law. These
are cognizable claims and were properly before the court to
consider.
Plaintiff next argues, as a matter of law, that the SOF is
applicable in this case. Plaintiffs claim that if a contract exists
that otherwise meets the elements of an implied contract, it fails
as not having been put in writing and signed by plaintiffs thus
violating SOF. North Carolina's SOF states:
All contracts to sell or convey any
lands...or any interest in or concerning
them...exceeding in duration three years from
the making thereof, shall be void unless said
contract, or some memorandum or note thereof,
be put in writing and signed by the party to
be charged therewith, or by some other person
by him thereto lawfully authorized.
N.C. Gen. Stat. § 22-2 (2003). Plaintiffs assert that an agreement
to pay for maintenance, upkeep and operation of the roads, common
areas and recreational facilities within a subdivision concerns an
interest in land, as it acts as a restrictive covenant, or a
negative easement. Hege v. Sellers, 241 N.C. 240, 248, 84 S.E.2d892, 898 (1954). However, to be a restrictive covenant or negative
easement such that it is binding against subsequent purchasers of
land, restrictive covenants must not only be in writing, Cummings
v. Dosam, Inc., 273 N.C. 28, 32, 159 S.E.2d 513, 517 (1968), but
also must be duly recorded. Hege, 241 N.C. at 248, 84 S.E.2d at
898.
At issue is an alleged implied agreement between plaintiffs
and CFA for the years of 1998 through 2003. Pursuant to CFA's
implied contract theory, they do not argue a duty exists to pay for
the benefits conferred which would run with the land to subsequent
purchasers of Carolina Forest property. Rather, CFA's implied
contract claim is one for services rendered pursuant to an
agreement with these plaintiffs. With the exception of restrictive
covenants, we can find no case that evokes the SOF in instances
where services such as maintenance and upkeep to common areas and
roads in a subdivision require the signature by the party to be
charged. The SOF is not implicated in this instance, as no
interest in land is at issue.
Turning to plaintiffs' final argument, they allege there is
insufficient evidence of unjust enrichment for the court to grant
a directed verdict in favor of defendant under the theory of an
implied contract. We do not agree.
In applying our relevant standard of review to the trial
court's findings supporting its order granting a directed verdict
in favor of defendant, we note that directed verdicts are
appropriate only in jury cases. Bryant v. Kelly, 279 N.C. 123, 129,181 S.E.2d 438, 441 (1971); N.C. Gen. Stat. § 1A-1, Rule 50(a)
(2003). This case was tried without a jury. Therefore, we shall
treat these motions as having been a motion for involuntary
dismissal under Rule 41(b) and shall apply our correct standard of
review under that rule. N.C. Gen. Stat. § 1A-1, Rule 41(b) (2003);
Higgins v. Builders and Finance, Inc., 20 N.C. App. 1, 7, 200
S.E.2d 397, 402 (1973), cert. denied, 284 N.C. 616, 201 S.E.2d 689
(1974). When a motion to dismiss pursuant to Rule 41(b) is made,
the judge becomes both the judge and the jury; he must consider and
weigh all competent evidence before him; and he passes upon the
credibility of the witnesses and the weight to be given to their
testimony. Dealers Specialties, Inc. v. Housing Services, 305 N.C.
633, 636, 291 S.E.2d 137, 139 (1982). In the absence of a valid
objection, the court's findings of fact are presumed to be
supported by competent evidence, and are binding on appeal. Id. A
general exception to the judgment and an assignment of error that
the court erred in entering the findings of fact and signing the
judgment is a broadside assignment of error and does not bring up
for review the findings of fact or the evidence on which they are
based. Sweet v. Martin, 13 N.C. App. 495, 495, 186 S.E.2d 205, 206
(1972); Merrell v. Jenkins, 242 N.C. 636, 637, 89 S.E.2d 242, 243
(1955). Where the assignments of error are insufficient to present
the findings of fact for review, the appeal presents the question
of whether the findings support the court's inferences, conclusions
of law, judgment, and whether error appears on the face of therecord. Taney v. Brown, 262 N.C. 438, 443, 137 S.E.2d 827, 830
(1964).
In the case at bar, plaintiffs' only assignment of error
states that CFA's motion for directed verdict should have been
denied and plaintiffs' motion for directed verdict should have been
granted. Plaintiffs offered no evidence in this case for the trial
court to consider because their basis for directed verdict was
pursuant to issues of law as set out above. Furthermore, they have
made no exceptions to and have not assigned as error any of the
trial court's findings of fact. Therefore, in our review, we look
to the record to determine whether the findings of fact support the
trial court's conclusion of law that an implied contract existed
between plaintiffs and CFA.
The trial court, in the order now on appeal, did not
specifically set out which theory of implied contract it used in
granting defendant a directed verdict, whether it was a contract
implied in law or in fact. The trial court cited Miles I for its
conclusion that an implied contract existed, and in Miles I we
considered that an implied contract existed pursuant to the
initial summary judgment order in this matter. In that initial
summary judgment order, the trial court found a contract implied in
fact existed as to one subset of plaintiffs. It is clear that the
trial court's later directed verdict judgment, on remand to
determine whether an implied contract existed as to all plaintiffs,
was made pursuant to the conclusion that a contract implied in factexisted. Miles I, 141 N.C. App. at 713, 541 S.E.2d 739, 742; see
Summary Judgment Order.
Concerning an implied in fact contract, this Court has held
that:
An implied in fact contract is a genuine
agreement between parties; its terms may not
be expressed in words, or at least not fully
in words. The term, implied in fact contract,
only means that the parties had a contract
that can be seen in their conduct rather than
in any explicit set of words.
Ellis Jones, Inc. v. Western Waterproofing Co., 66 N.C. App. 641,
646, 312 S.E.2d 215, 218 (1984) (where the fact that defendant's
representatives observed plaintiff doing the work and did not tell
plaintiff to stop the job was conduct consistent with the existence
of a contract). Although the terms of an implied in fact contract
may not be expressed in words, or at least not fully in words, the
legal effect of an implied in fact contract is the same as that of
an express contract in that it too is considered a “real” contract
or genuine agreement between the parties. Kiousis v. Kiousis, 130
N.C. App. 569, 573, 503 S.E.2d 437, 440 (1998), disc. review
denied, 350 N.C. 96, 528 S.E.2d 363 (1999). Under such an implied
in fact contract, damages are based on the reasonable value of the
services “'rendered pursuant to request and agreement to pay
therefor (sic).'” Ellis Jones, Inc., 66 N.C. App. at 646, 312
S.E.2d at 218 (quoting Turner v. Marsh Furniture Co., 217 N.C. 695,
697, 9 S.E.2d 379, 380 (1940)).
(See footnote 1)
We need not look far beyond the trial court's unchallenged
findings of fact to determine whether they support the conclusion
of law that:
There is an implied contract between all of
the plaintiffs and the defendant in which the
plaintiffs impliedly agreed to pay for the
maintenance, upkeep and operation of the
roads, common areas and recreational
facilities within the subdivision.
(Emphasis added.) This conclusion was based on the following:
1. Each lot owner is obligated to pay
dues in the amount of $50.00 per year.
Payments were due from the plaintiffs
beginning in 1998 and continuing to 2003, a
total of six payments.
2. Each unimproved lot owner was assessed
an amount for maintenance of common areas and
recreational facilities. For the years 1998
and 1999, the assessment was $145.00 per year.
For the year 2000, the assessment was $150.00.
For the years 2001, 2002 and 2003, the
assessment was $170.00 per year.
3. Each unimproved lot owner was assessed
an amount primarily for the purpose of
resurfacing the roadways in Carolina Forest
and the Lake in the Pines. The amount of the
assessment was $45.00 in 1998, $50.00 in 1999,
and $60.00 thereafter for the years 2000,
2001, 2002 and 2003.
4. Each unimproved lot owner was assessed
an amount for road repairs, including but not
limited to repair of pot holes and necessary
patching or work on the road shoulders. This
amount was $20.00 for 2002 and $20.00 for
2003, a total of $40.00.
5. In the year 2001, there was a severe
ice storm which left fallen trees, limbs, and
other debris blocking the roadways and
requiring road cleanup. In order that property
owners could have access to and from their
property, Carolina Forest Association made an
assessment for storm damage cleanup. This
assessment was made in 2001 as $80.00 and is
listed as “Special Road Clean-up Assessment.”
6. None of the road maintenance fund has
been used by the defendant for non-road
matters.
These uncontested findings of fact support the trial court's
conclusion that a contract implied in fact existed between
plaintiffs and CFA, and these findings are supported by competent,
unchallenged evidence. Plaintiffs were assessed specific fees for
benefits to their unimproved properties. These benefits protected
both the access to and the value of their properties, by way of
maintaining private roads, recreational facilities, a pool, a guard
station, and an administrative office. The record shows that
plaintiffs were on clear notice that these benefits were being
incurred: Approximately half of them actually voted for the
amendments to declaration No. 10 as recorded in 1990, which
included consent to pay the assessment fees for the exact benefits
at issue in this case. All of the plaintiffs had paid some or all
of the fees and assessments up until 1997 and 1998, and were
incurring the benefit from the improvements funded by such
payments. This conduct is consistent with the existence of a
contract implied in fact, and plaintiffs' attempt to stop paymenton these known benefits, without more, is tantamount to breach of
that contract.
Having thoroughly reviewed the record, transcript, and
briefs, we find the record sufficient for the trial court's
determination that an implied in fact contract existed between
defendant and all plaintiffs. As noted, any issue concerning
whether the value of the services rendered, as damages, was
adequately assessed and attributed to plaintiffs was not before us
on review. Thus, plaintiffs' assignment of error is overruled, and
we uphold the trial court's directed verdict (motion to
involuntarily dismiss) in favor of defendant.
Affirmed.
Judges McGEE and ELMORE concur.
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