Appeal by plaintiffs from an order entered 27 February 2003
and judgment entered 27 January 2004 by Judges D. Jack Hooks, Jr.
and Gregory A. Weeks, respectively, in Brunswick County Superior
Court. Heard in the Court of Appeals 27 January 2005.
Bruce T. Cunningham, Jr. for plaintiff-appellants.
Hedrick & Morton, L.L.P., by G. Grady Richardson, Jr., for
defendant-appellees.
HUNTER, Judge.
Reid A. Page, Jr. and Mary Ann Page (“plaintiffs”) appeal from
(1) an order of dismissal without prejudice dated 27 February 2003
of their action for a declaratory judgment, and (2) a summary
judgment dated 27 January 2004 on their action for damages againstthe Bald Head Association and its individual directors
(“defendants”). As we find the trial courts' actions to be proper
as to the dismissal and the grant of summary judgment, we affirm
for the reasons stated herein.
Bald Head Island is an island community located off the coast
of southeastern North Carolina in Brunswick County. Development in
the community is regulated by both a municipal government and
defendants' non-profit property owners' association. Properties on
Bald Head Island are subject to certain covenants, conditions, and
restrictions. Many of these provisions, which are enforced by
defendant association, impose restrictions on the development and
use of property units on the island. Others contain guidelines for
computing and levying general and special assessments against
property owners.
Plaintiffs have operated a real estate business on Bald Head
Island for nearly thirty years, listing and selling properties
located on the island. During that time, plaintiffs obtained
approval from defendants and the Village of Bald Head Island to use
twelve-inch by twelve-inch signs to identify properties for sale.
In July 1998, defendants adopted an addendum to its sign guidelines
that limited the size of “for sale” signs to seven and a half (7
1/2) inches in width and three and three quarter (3 3/4) inches in
height. In addition, all signs were required to conform to a
standard “Bollard Cap Design” and were to be constructed of grey-
stained weathered wood with a top painted in light blue. The
addendum stated that as of 23 July 1998, all new twelve-inch bytwelve-inch signs would no longer be approved by the Bald Head
Association Architectural Review Board.
In February 2000, defendants recorded an amended declaration
of covenants. The revised covenants provided for a general
assessment to be levied against all units “at a level which is
reasonably expected to produce total income for the Association
equal to the total budgeted Common Expenses, including reserves.”
This provision replaced the earlier covenant, which had provided
that assessments could not exceed one point five percent (1.5%) of
the taxable value of the property without a vote of the membership.
After the new sign regulations were passed, defendants
provided plaintiffs with notice that their existing signs violated
the new guidelines. Plaintiffs refused to remove their existing
signs, leading defendants to assess and levy fines against them.
Beginning in 2000, plaintiffs ceased paying annual dues on several
lots, resulting in liens being placed on each of the subject
properties.
In July 2002, plaintiffs filed an action for (1) a declaratory
judgment to have the new assessment provisions declared null and
void, (2) injunctive relief to prevent defendants from removing
plaintiffs' “for sale” signs, and (3) damages for unfair and
deceptive business practices and tortious interference with their
business relationships.
On 2 August 2002, defendants filed an answer denying the
allegations in the complaint, moving for dismissal for failure to
join all necessary parties, and counterclaiming for (1) payment ofannual homeowners dues and annual assessments, (2) payment of
special assessments for violations of the sign ordinance, and (3)
attorneys' fees and expenses. In February 2003, the Brunswick
County Superior Court dismissed without prejudice the portion of
plaintiffs' complaint seeking to invalidate the assessment
provisions for failure to join all necessary parties. Defendants
then moved for summary judgment in favor of their counterclaims and
denying plaintiffs' remaining claims. In January 2004, the
Brunswick County Superior Court granted defendants' motions.
Thereafter, plaintiffs gave notice of appeal to this Court from
both (1) the order dismissing plaintiffs' challenge of the
assessment provision, and (2) the grant of summary judgment as to
the validity and enforceability of defendants' sign restrictions.
I.
[1] In their first assignment of error, plaintiffs argue that
the trial court erred in dismissing the assessment claim for
failure to join all property owners on Bald Head Island. We
disagree.
In
Karner v. Roy White Flowers, Inc., 351 N.C. 433, 527 S.E.2d
40 (2000), the Supreme Court of North Carolina ruled that all
property owners affected by a residential use restrictive covenant
were necessary parties to an action to invalidate that covenant.
Id. at 438-40, 527 S.E.2d at 43-44 (discussing the applicability of
N.C. Gen. Stat. § 1A-1, Rule 19 regarding joinder of parties).
Plaintiffs acknowledge that
Karner is controlling in this case and
concede that this Court is bound by prior decisions of our SupremeCourt.
See Dunn v. Pate, 334 N.C. 115, 118, 431 S.E.2d 178, 180
(1993). Accordingly, we find this assignment of error to be
without merit and affirm the trial court's dismissal.
II.
[2] Plaintiffs next contend summary judgment was improper in
this case as there was a material issue of fact as to whether the
actions taken by defendants pursuant to the amended sign
restrictions were valid and within defendants' authority to act.
For the reasons stated herein, we disagree.
Summary judgment is proper where the pleadings, depositions,
answers to interrogatories, affidavits, and admissions on file tend
to show that there is no genuine issue as to any material fact,
such that a party is entitled to a judgment as a matter of law.
Wall v. Fry, 162 N.C. App. 73, 76, 590 S.E.2d 283, 285 (2004)
(quoting N.C. Gen. Stat. § 1A-1, Rule 56(c) (2001)). A party may
prevail on summary judgment if (1) it can prove that an essential
element of the opposing party's claim is nonexistent, or (2) it can
demonstrate through discovery that the opposing party has failed to
produce evidence supporting an essential element of its claim.
Id.
Once the moving party satisfies its burden of proof, the burden
then shifts to the nonmoving party to set forth specific facts
showing a genuine issue of material fact, or to provide a valid
excuse for not doing so.
Id. If the nonmoving party does not take
affirmative steps to defend its position with additional proof and
instead rests on mere allegations or a denial of the pleadings,that party risks having judgment entered against it.
Id. at 76-77,
590 S.E.2d at 285.
Restrictive covenants are considered contractual in nature and
acceptance of a valid deed incorporating the covenants implies the
existence of a valid contract.
See Rodgerson v. Davis, 27 N.C.
App. 173, 178, 218 S.E.2d 471, 475 (1975). Restrictive covenants,
“clearly and narrowly drawn,” are recognized as a valid tool for
achieving a common development scheme.
Hobby & Son v. Family
Homes, 302 N.C. 64, 71, 274 S.E.2d 174, 179 (1981). Parties to a
restrictive covenant may use almost any means they see fit to
develop and enforce the restrictions contained therein.
Wise v.
Harrington Grove Comty. Ass'n, 357 N.C. 396, 401, 584 S.E.2d 731,
736 (2003).
Judicial enforcement of a covenant will occur as it would in
an action for enforcement of “any other valid contractual
relationship.”
Sheets v. Dillon, 221 N.C. 426, 431, 20 S.E.2d 344,
347 (1942). Because they infringe upon the unrestrained use of
land, however, restrictive covenants are only valid “so long as
they do not impair the enjoyment of the estate and are not contrary
to the public interest.”
Karner, 351 N.C. at 436, 527 S.E.2d at
42. Restrictive covenants are to be strictly construed and “all
ambiguities will be resolved in favor of the unrestrained use of
land.”
Hobby & Son, 302 N.C. at 70, 274 S.E.2d at 179.
Nonetheless, a restrictive covenant “must be reasonably construed
to give effect to the intention of the parties, and the rule of
strict construction may not be used to defeat the plain and obviouspurposes of a restriction.”
Black Horse Run Ppty. Owners Assoc. v.
Kaleel, 88 N.C. App. 83, 85, 362 S.E.2d 619, 621 (1987). Thus,
judicial enforcement of a restrictive covenant is appropriate at
the summary judgment stage unless a material issue of fact exists
as to the validity of the contract, the effect of the covenant on
the unimpaired enjoyment of the estate, or the existence of a
provision that is contrary to the public interest.
The record before us indicates that plaintiffs are owners of
several properties on Bald Head Island. All properties on Bald
Head Island are subject to restrictive covenants imposed by the
developer of the island. Defendants contend that plaintiffs, by
acquiring properties on the island, became bound to these
restrictive covenants. Indeed, defendants contend that by
obtaining properties on Bald Head Island, plaintiffs became members
of defendant association and become obligated to pay annual
assessments and any special assessments, dues or fines authorized
by the restrictive covenants. Plaintiffs do not dispute these
allegations.
Articles 3 and 10 of defendants' Declaration of Covenants,
Conditions and Restrictions state that all property owners are
obligated to abide by certain rules and regulations as developed
and passed by defendant association. These rules and regulations
include guidelines for the use of real estate signs. The amended
“for Sale Bollard Cap” guidelines adopted by defendants'
architectural review board on 22 July 1998 were imposed on all real
property owners subject to defendants' restrictive covenants,including plaintiffs. Plaintiffs, however, contend that the sign
restrictions are unreasonable and thus invalid and unenforceable at
law.
Plaintiffs fail to show the existence of any material issue of
fact as to the validity of the restrictive covenants and the
unreasonableness of their enforcement as to plaintiffs. Nowhere do
plaintiffs make any argument or cite any authority supporting the
proposition that these regulations impair the enjoyment of the
estate or violate the public interest. Similarly, plaintiffs do
not argue against the covenant's validity as a contract or that
defendants failed to conform to required procedure in adopting the
amended guidelines. Instead, plaintiffs rely solely on this
Court's decision in
Smith v. Butler Mtn. Estates Property Owners
Assoc., 90 N.C. App. 40, 367 S.E.2d 401 (1988), for the proposition
that the restrictive covenants at issue here are invalid and
unenforceable because they are not reasonable.
Id. Specifically,
plaintiffs contend that genuine issues of material fact exist as to
the reasonableness of these restrictions as applied to them,
sufficient to preclude an award of summary judgment.
Plaintiffs' reliance on
Butler Mtn. is misplaced. In the
present case, the covenants lay out explicit standards governing
the size and style of approved signs. In contrast, the covenants
at issue in
Butler Mtn. provided broad discretion to the defendant
homeowners' association to approve or deny home construction plans
based on conformance with the existing development scheme.
See id.
at 41-42, 367 S.E.2d at 402 (describing the approval authoritygranted to the defendant property owners association). The
Butler
Mtn. Court relied on
Boiling Spring Lakes v. Coastal Services
Corp., 27 N.C. App. 191, 218 S.E.2d 476 (1975), in stating that
approval of building plans could not be arbitrary, but must be
based on some standards, either contained within the covenants
themselves, or otherwise clearly established.
Id. Thus, covenants
granting broad approval authority are enforceable “only if the
exercise of the power in a particular case is reasonable and in
good faith.”
Id. at 196, 218 S.E.2d at 479. In the present case,
unambiguous standards were established as to the size and style of
signs to be approved for use by all residents of the island.
Enforcement of the sign restriction as to plaintiffs required no
exercise of discretionary authority. We find, therefore, no merit
to plaintiffs' contention that an issue of material fact existed as
to the enforcement of the sign restrictions.
In sum, we conclude the trial court properly dismissed
plaintiffs' action to invalidate defendants' revised assessment
covenants for failure to join all property owners subject to the
covenants as necessary parties. We also find that as plaintiffs
have failed to present any genuine issues of material fact
concerning the validity or enforcement of the defendants' sign
restrictions, the trial court did not err in granting summary
judgment to the defendants on this issue.
Affirmed.
Judges BRYANT and JACKSON concur.
*** Converted from WordPerfect ***
