Appeal by plaintiffs from order entered 2 February 2004 by
Judge Ronald L. Stephens in Chatham County Superior Court. Heard
in the Court of Appeals 26 January 2005.
INTELLECTUAL PROPERTY/TECHNOLOGY LAW, by Steven J. Hultquist,
for plaintiffs-appellants.
BRADSHAW & ROBINSON, L.L.P., by Nicolas P. Robinson, for
defendants-appellees.
TIMMONS-GOODSON, Judge.
Steven Hultquist and Debra Hultquist (collectively,“plaintiffs”) appeal the entry of summary judgment in a declaratory
judgment action construing a restrictive covenant. For the reasons
discussed herein, we affirm the trial court order.
The facts and procedural history pertinent to the instant
appeal are as follows: In 1998, plaintiffs became interested in
purchasing a lot located in the Willowbend Plantation Subdivision
(“Willowbend”) in Chatham County. Due to the quality of the soil
of the lots in Willowbend, above-ground septic disposal systems
were required for each lot. According to Patrick A. O'Neal
(“O'Neal”), president of the subdivision's developer, Chatham
Development Corporation (“Chatham Development”), Chatham
Development was required to apply for an above-ground septic
disposal system permit for each lot prior to the sale of that lot.
On 25 April 1998, plaintiffs paid Chatham Development $1,000.00 in
order to obtain the fourth right of selection when the lots were
sold. As part of their deposit, plaintiffs executed a Reservation
Deposit form, in which plaintiffs indicated that they were “aware
that each parcel will be pre-approved for septic by Chatham County
Health Department or The State of North Carolina DEHNR.”
In July 1998, plaintiffs selected lot 9 of Willowbend in the
lottery sale conducted by Chatham Development. Chatham Development
sited potential locations for each lot's above-ground septic
disposal system, and, on 12 August 1998, Chatham Development filed
applications with the North Carolina Department of Environment and
Natural Resources, Division of Water Quality (“NCDENR/DWQ”),
seeking approval of the proposed construction, location, andoperation of an above-ground septic disposal system on plaintiffs'
lot as well as on an adjacent lot, lot 8. At that time, lot 8 was
still owned by Chatham Development.
On 26 August 1998, Chatham Development filed a restrictive
covenant (“Willowbend Covenant”) concerning the property contained
within Willowbend. On 29 September 1998, plaintiffs closed the
sale of lot 9. On 31 December 1998, NCDENR/DWQ issued Chatham
Development permit No. WQ0015717 for lot 8, and permit No.
WQ0015718 for lot 9. The permits authorized the construction and
operation of an above-ground septic system in the areas sought in
the respective applications, and the permits stated that they were
effective until 31 December 2003. Plaintiffs began construction of
a residence on lot 9 in 2001, and they completed the construction
in January 2002.
In early 2003, Dr. Michael Lish (“Lish”) and Dr. Leslie Morrow
(“Morrow”) acquired lot 8 from Richard Cronheim (“Cronheim”), who
had previously purchased lot 8 from Chatham Development. Lot 8 was
empty when Lish and Morrow acquired it. On 15 April 2003,
NCDENR/DWQ reissued permit No. WQ0015717 to Lish, the only
modification being a change in the name of the individual to whom
the permit was issued. The permit remained effective until 31
December 2003.
Lish and Morrow subsequently hired David Daniel Construction
Company (“Daniel Construction”) to serve as general contractor for
the construction of a residence on lot 8. Shortly after
construction began, plaintiffs, through the Architectural ReviewCommittee of the Willowbend Homeowners Association, requested that
Lish and Morrow reposition the proposed location of the above-
ground septic disposal system on lot 8. According to the record,
Lish and Morrow's above-ground septic system was to be installed
approximately fifty feet from the common boundary line of lots 8
and 9, and approximately 148 feet from the corner of plaintiffs'
residence. Plaintiffs contended that the placement of the septic
system in the proposed location violated the Willowbend Covenant,
which, plaintiffs further contended, prohibited the installation of
septic systems within 400 feet of residences.
Lish and Morrow refused to reposition the proposed location of
the septic system, and, on 10 November 2003, plaintiffs sought a
declaratory judgment against Lish, Morrow, and Daniel Construction
(collectively, “defendants”). In their declaratory judgment
complaint, plaintiffs requested that the trial court prohibit
defendants from placing the septic system within 400 feet of
plaintiffs' residence. On 12 November 2003, plaintiffs filed a
motion for preliminary injunction, and on 21 November 2003,
defendants filed a motion for summary judgment, requesting that the
trial court award judgment in their favor as a matter of law.
On 1 December 2003, defendants filed an answer to plaintiffs'
declaratory judgment complaint. The trial court held a hearing on
the matter, following which plaintiffs orally moved for summary
judgment in their favor. On 2 February 2004, the trial court
granted defendants' motion for summary judgment and denied
plaintiffs' motion for a permanent injunction, thereby allowingdefendants to install the septic system in the proposed location.
Plaintiffs appeal.
The issue on appeal is whether the trial court erred by
construing the Willowbend Covenant in favor of defendants.
“Summary judgment is appropriate in a declaratory judgment
action where there is no genuine issue of material fact and a party
is entitled to judgment as a matter of law.”
Early v. Bowen, 116
N.C. App. 206, 208, 447 S.E.2d 167, 169 (1994). In the instant
case, the trial court was asked only to determine as a matter of
law whether the Willowbend Covenant prohibited defendants from
installing the septic system in the proposed location.
Restrictive covenants are strictly construed, but they should
not be construed “in an unreasonable manner or a manner that
defeats the plain and obvious purpose of the covenant.”
Cumberland
Homes, Inc. v. Carolina Lakes Prop. Owners' Ass'n, 158 N.C. App.
518, 521, 581 S.E.2d 94, 97 (2003). “[T]he fundamental rule is
that the intention of the parties governs, and that their intention
must be gathered from study and consideration of
all the covenants
contained in the instrument or instruments creating the
restrictions.”
Long v. Branham, 271 N.C. 264, 268, 156 S.E.2d 235,
238 (1967).
In the instant case, the Willowbend Covenant creates a seventy-
five foot natural setback from the boundary lines of each lot,
wherein no building or other structure may be placed. However,
according to Article IV of the Willowbend Covenant, “[a]llowableexceptions to the natural setback area” include “activities
required for the installation and maintenance of septic systems and
wells.” Article IV of the covenant further provides as follows:
Lots may have aboveground septic disposal
spray and drip systems. There shall be a
variance in the setbacks for aboveground
septic systems such that no Residential
dwelling o[n] any Lot shall be located closer
than 400 feet to said aboveground disposal
system. Construction of any building within
400 feet of such a septic disposal system
shall constitute a waiver of any rights or
claims, at law or in equity, against any
property owner or developer; and acceptance of
any building or parcel of land in violation of
said 400 foot setback shall constitute a
waiver of any rights or claims, at law or in
equity, against any property owner or
developer.
The parties disagree as to the effect of the above-quoted
language. Plaintiffs contend that the covenant prohibits
defendants from installing the septic system in the proposed
location, because the installation would place the septic system
within 400 feet of plaintiffs' residence. Defendants contend that
the covenant prohibited plaintiffs from constructing their
residence within 400 feet of the proposed septic system location.
After reviewing the Willowbend Covenant, we conclude that, in
drafting the convenant, Chatham Development contemplated a distance
of 400 feet separating all septic systems and residences in
Willowbend. However, we further conclude that the language and
terms of the restrictions used by Chatham Development to achieve
this separation are ambiguous. The covenant clearly provides that
when a residence is constructed within 400 feet of an above-ground
septic system, the owner of the residence and all future owners ofthe residence waive any rights or claims against the owner of the
septic system. However, the covenant contains no provision
addressing the respective rights and claims of owners when one lot
owner installs an above-ground septic system within 400 feet of
another lot owner's residence. Plaintiffs' interpretation of the
covenant requires this Court to add the term “existing” to Article
IV, so that the covenant provides that “no Residential dwelling
o[n] any Lot shall be located closer than 400 feet to said
existing
aboveground disposal system.” Under plaintiffs' interpretation,
property owners waive their rights and claims only when they
construct “any building within 400 feet of such a[n]
existing
septic disposal system[.]” On the other hand, defendants'
interpretation of the covenant requires this Court to add the terms
“permitted” and “location” to Article IV, so that the covenant
provides that “no Residential dwelling o[n] any Lot shall be
located closer than 400 feet to said
permitted aboveground disposal
system
location.” Under this interpretation, property owners waive
their rights and claims when they construct “any building within
400 feet of such a
permitted septic disposal system
location[.]”
It is well established that covenants restricting the free use
of property are strictly construed against limitations upon such
use.
Long, 271 N.C. at 268, 156 S.E.2d at 239. “'Such
restrictions will not be aided or extended by implication or
enlarged by construction to affect lands not specifically
described, or to grant rights to persons in whose favor it is not
clearly shown such restrictions are to apply.'”
Id. (quoting 20Am. Jur. 2d, Covenants, Conditions and Restrictions § 187 (1965)).
Therefore, because we are unable to add the pertinent language to
the covenant necessary to satisfy either parties' interpretation,
we must examine all the provisions of the instrument creating the
restriction as well as “'the surrounding circumstances existing at
the time of the creation of the restriction'” in order to determine
the effect of the covenant's terms.
Long, 271 N.C. at 268, 156
S.E.2d at 239 (quoting V. Woerner, Annotation,
Maintenance, Use, or
Grant of Right of Way Over Restricted Property As Violation of
Restrictive Covenant, 25 A.L.R. 2d 904, 905 (1952)).
As discussed above, the record reflects that on 12 August 1998,
Chatham Development applied for above-ground septic system permits
for each lot in Willowbend. On 26 August 1998, approximately two
weeks after submitting the applications, Chatham Development filed
the Willowbend Covenant with the Chatham County Register of Deeds.
Defendants contend that these circumstances suggest that Article IV
of the covenant was written with the intent to prevent lot owners
from constructing residences within 400 feet of the applied-for
locations of above-ground septic systems. We agree. Although the
applied-for permits for these locations were not approved by
NCDENR/DWQ until 31 December 1998, both the permit applications and
the covenant were filed prior to plaintiffs' closing the sale of
their lot. Furthermore, we note that when signing the Reservation
Deposit form, plaintiffs indicated that they were “aware that each
parcel will be pre-approved for septic by Chatham County Health
Department or The State of North Carolina DEHNR.” Plaintiffs'assent to this statement indicates a recognition on their part
that, prior to each lot-owner's selection and subsequent purchase
of a lot, Chatham Development would have applied for and received
a permit for a specific septic system location on each lot.
(See footnote 1)
We note that in interpreting restrictive covenants, doubt and
ambiguity are resolved in favor of the unrestricted use of
property, “'so that where the language of a restrictive covenant is
capable of two constructions, the one that limits, rather than the
one which extends it, should be adopted, and that construction
should be embraced which least restricts the free use of the
land.'”
Long, 271 N.C. at 268, 156 S.E.2d at 239 (quoting 20 Am.
Jur. 2d § 187). In the instant case, we conclude that the terms of
the Willowbend Covenant and its surrounding circumstances suggest
that the covenant should be interpreted to prohibit construction of
a residence within 400 feet of an existing above-ground septic
system as well as a proposed or permitted above-ground septic
system location. Therefore, we hold that the trial court did not
err in construing the terms of the Willowbend Covenant, and,
accordingly, we overrule plaintiffs' first argument.
Plaintiffs argue in the alternative that the trial court erred
by considering O'Neal's affidavit. Plaintiffs assert that O'Neal'saffidavit was inadmissible because it contains non-expert opinion
and conclusions regarding the ultimate issue of fact in the case.
However, we note that at the summary judgment hearing, plaintiffs
objected to the introduction of O'Neal's affidavit only on the
grounds that the affidavit constituted parol evidence. “As has
been said many times, 'the law does not permit parties to swap
horses between courts in order to get a better mount,' meaning, of
course, that a contention not raised and argued in the trial court
may not be raised and argued for the first time in the appellate
court.”
Wood v. Weldon, 160 N.C. App. 697, 699, 586 S.E.2d 801,
803 (2003) (quoting
Weil v. Herring, 207 N.C. 6, 10, 175 S.E. 836,
838 (1934));
see Creasman v. Creasman, 152 N.C. App. 119, 123, 566
S.E.2d 725, 728 (2002). Therefore, we decline to address the
merits of this assertion.
We note that on appeal, plaintiffs nevertheless reassert their
contention that O'Neal's affidavit was inadmissible because it
constitutes parol evidence. In general, “'[t]he parol evidence
rule excludes prior or contemporaneous oral agreements which are
inconsistent with a written contract if the written contract
contains the complete agreement of the parties.'”
Opsahl v.
Pinehurst Inc., 81 N.C. App. 56, 65, 344 S.E.2d 68, 74 (1986)
(quoting
Cable TV, Inc. v. Theatre Supply Co., 62 N.C. App. 61,
64-65, 302 S.E.2d 458, 460 (1983)). In the context of restrictive
covenants, our Supreme Court has stated that
[o]rdinarily [the covenanting parties' intent]
must be ascertained from the deed itself, but
when the language used is ambiguous it is
proper to consider the situation of theparties and the circumstances surrounding
their transaction. However, this intention
may not be established by parol. Neither the
testimony nor the declarations of a party is
competent to prove intent.
Stegall v. Housing Authority, 278 N.C. 95, 100, 178 S.E.2d 824, 828
(1971);
see Runyon v. Paley, 331 N.C. 293, 313, 416 S.E.2d 177, 191
(1992) (“[D]eclarations and testimony of the parties are not
admissible to prove the covenanting parties' intent.”).
In the instant case, O'Neal's affidavit was included in the
memoranda and documents submitted to the trial court by defendants,
and it contains statements regarding Chatham Development's intent
in drafting the Willowbend Covenant. Although neither O'Neal nor
Chatham Development are parties to the litigation, O'Neal's
affidavit was introduced by defendants in an effort to establish
their rights under the covenant. The affidavit contains statements
regarding intent that tend to add to and vary the terms of the
covenant. However, we note that “[w]hen parties waive a jury trial
'the rules of evidence as to admission and exclusion are not so
strictly enforced as in a jury trial. . . . “[I]t is presumed that
incompetent evidence was disregarded by the Court in making up its
decision.”'”
Insurance Co. v. Shaffer, 250 N.C. 45, 53, 108 S.E.2d
49, 54-55 (1959) (quoting
Bizzell v. Bizzell, 247 N.C. 590, 604-05,
101 S.E.2d 668, 678 (1958) (citations omitted)). In the instant
case, there is no indication that the trial court based its ruling
solely upon O'Neal's affidavit, and, notwithstanding the statements
of O'Neal's affidavit, the trial court's decision is supported by
competent evidence in the record regarding the covenant and itssurrounding circumstances. Accordingly, we overrule plaintiffs'
final argument.
In light of the foregoing conclusions, we hold that the trial
court did not err in granting summary judgment in favor of
defendants. Thus, the trial court order is affirmed.
Affirmed.
Judges HUDSON and STEELMAN concur.
Footnote: 1