Royal Oaks Vista, L.L.C. and John Hawks, Jr. v. James Maddox, Jean Maddox, Lynn A. Rice, Gary L. Yeager and Mary L. Yeager

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SUPREME COURT OF ARKANSAS  No.  07­542  ROYAL OAKS VISTA, L.L.C. and JOHN  HAWKS, JR.,  APPELLANTS,  VS.  JAMES  MADDOX,  JEAN  MADDOX,  LYNN  A.  RICE,  GARY  L.  YEAGER  and  MARY L. YEAGER,  APPELLEES,  Opinion Delivered January 17, 2008  APPEAL  FROM  THE  CLEBURNE  COUNTY CIRCUIT COURT,  NO. CV05­187­2,  HON.  JOHN  NORMAN  HARKEY,  JUDGE,  CIRCUIT COURT AFFIRMED; COURT  OF APPEALS AFFIRMED.  JIM HANNAH, Chief Justice  This appeal concerns the validity and enforcement of a bill of assurance for Royal  Oaks Vista subdivision filed in 1972 and an attempted replat of the subdivision in 2004.  Appellants  are  Royal  Oaks  Vista,  LLC  and  John  Hawks,  Jr.  (collectively  referred  to  as  1  ROV), and appellees are James Maddox, Jean Maddox,  Lynn Rice, Gary L. Yeager, and  Mary L. Yeager.  The Cleburne County Circuit Court found that the 2004 replat was invalid  and enforced the restrictions contained in the original bill of assurance.  In addition, the  circuit court ordered removal of all structures built in violation of the restrictions.  ROV  argues that the circuit court erred in finding that the replat was invalid.  Specifically, ROV 1  At various times in the record, Jean Maddox is referred to as Joan Maddox.  We will  refer to this party as Jean Maddox, as this is the spelling on the cover of the record.  contends that the doctrine of laches  should have been applied, that the temporary septic  easement  across  lot  56  did  not  violate  the  restrictive  covenant,  and  that  the  covenant  restricting  the  use  of  lots  to  residential  purposes  was  an  unreasonable  restraint  on  the  alienation of property.  In  January  1972,  a  plat  and  bill  of  assurance  were  filed  for  Royal  Oaks  Vista  subdivision located in Cleburne County.  The plat laid out twenty­one lots and streets for the  subdivision.  The bill of assurance provided that all lots were to be residential, that no lots  were to re­subdivided, and that “[n]o noxious or offensive trade or activity shall be carried  on upon any lot, nor shall anything be done thereon which may be or become an annoyance  to the neighborhood.”  Further, the bill of assurance provided that “[n]o structure shall be  erected, altered, placed or permitted to remain on any residential building plot other than a  single family dwelling, not to exceed two stories in height, and a private garage and any  outbuildings incidental to the residential use of the lot.”  Appellee Lynn Rice and her then­husband acquired lot 1 in the subdivision in 1987.  Rice acquired sole ownership of the lot in 1997.  In April 1993, appellees Jean and James  Maddox purchased lots 2, 3, and 4 in the subdivision.  ROV acquired the remaining lots (lots  5 through 21) by deed dated August 12, 2004.  On August 18, 2004, ROV filed both a replat  of the subdivision and an amended bill of assurance for the new subdivision.  The replat  created lots 7 through 18 and lot 56 from lots 5 through 21 of the original subdivision.  While ROV was preparing the replat and new bill of assurance for the subdivision,  it was proceeding with the development of streets and other infrastructure in the subdivision. ­2­  07­542  In addition, ROV proceeded with the sale of four lots. Among the lots sold by ROV was  replatted lot 8, which was sold to David Tindall.  Tindall built a house on replatted lot 8 that  was later conveyed to appellees Mary and Gary Yeager.  The Maddoxes and Rice became  aware of ROV’s activities during July and August 2004, when ROV was seeking to have the  original streets in the subdivision declared abandoned by the Greers Ferry City Council. The  city council granted ROV’s request in August 2004.  The  Maddoxes,  Rice,  and  the  Yeagers  filed  a  complaint,  later  amended,  seeking  injunctive relief and damages against ROV on September 20, 2005.  They asserted in the  complaint that the replat and new bill of assurance were in violation of the original bill of  assurance’s prohibition against resubdividing lots.  The Yeagers added an additional claim  for  damages  against  David  Tindall,  contending  that  if  the  Maddoxes  and  Rice  were  successful in their claim against ROV, Tindall breached the warranties in the deed conveying  the property to the Yeagers, as the conveyance occurred  after the replat and new bill of  assurance were filed.  ROV denied the material allegations of the complaint. It also claimed that the original  bill of assurance violated the rule against perpetuities and was an unreasonable restraint on  alienation.  ROV asserted the affirmative defenses of laches, waiver, and estoppel, and it  filed a counterclaim for declaratory relief, asserting that the original bill of assurance was an  unreasonable restraint on alienation.  After a hearing, the circuit court found that the replat was in violation of the original  bill of assurance.  The circuit court also found that the defense of laches did not apply and ­3­  07­542  that the rule of perpetuities was not violated.  The court granted the request for an injunction,  and it ordered that the original bill of assurance would control the subdivision.  Further,  ROV was ordered to remove any structures built in violation of the restrictive covenants.  2  The court specifically reserved the claims of Mary and Gary Yeager.  ROV appealed the circuit court’s decision to the Arkansas Court of Appeals, which  affirmed the circuit court in an unpublished opinion.  Royal Oaks Vista, LLC v. Maddox, CA  06­738 (Ark. App. May 9, 2007).  ROV petitioned this court for review, which we granted  pursuant to Ark. Sup. Ct. R. 2­4.  Upon the grant of a petition for review, we consider the  case as though it had been originally filed in this court.  Rodriguez v. Ark. Dep’t of Human  Servs., 360 Ark. 180, 200 S.W.3d 431 (2004).  We affirm the circuit court and affirm the  court of appeals.  Where a case is tried with the circuit court sitting as the trier of fact, the standard of  review on appeal is not whether there is substantial evidence to support the finding of the  court,  but  whether  the  judge’s  findings  were  clearly  erroneous  or  clearly  against  the  preponderance of the evidence.  White v. McGowen, 364 Ark. 520, 222 S.W.3d 187 (2006).  A finding is clearly erroneous when, although there is evidence to support it, the reviewing  court on the entire evidence is left with a firm conviction that a mistake has been committed. 2  We recognize that the order appealed from specifically reserves the Yeagers’ claims and  does not contain an Ark. R. Civ. P. 54(b) certification; however, this case is nevertheless  appealable under the provisions of Ark. R. App. P. 2(a)(6) in that the order granted an injunction  directing ROV to remove the structures found to be in violation of the restrictive covenants.  See  East Poinsett County Sch. Dist. No. 14 v. Massey, 317 Ark. 219, 876 S.W.2d 573 (1994).  ­4­  07­542  Id.  Disputed facts and  determinations of credibility are within the province of the fact­  finder.  Id.  At issue in this case is the interpretation of a protective or restrictive covenant on the  use  of  land.  Restrictions  upon  the  use  of  land  are  not  favored  in  the  law.  Id.;  Forrest  Constr. Co. v. Milam, 345 Ark. 1, 43 S.W.3d 140 (2001).  Further, a restrictive covenant will  be strictly construed against limitations on the free use of land. White, supra; Forrest, supra.  All doubts are resolved in favor of the unfettered use of land.  White, supra; Forrest, supra.  Any restriction on the use of land must be clearly apparent in the language of the  asserted covenant.  White,  supra;  Forrest, supra.  Where the language of the restrictive  covenant is clear and unambiguous, application of the restriction will be governed by our  general rules of interpretation; that is, the intent of the parties governs as disclosed by the  plain language of the restriction.  White, supra; Forrest, supra.  The circuit court concluded that, pursuant to Ark. Code Ann. § 18­12­103 (Repl.  3  2003),  ROV’s actions in replatting the lots in Royal Oaks Vista subdivision and in filing  a new bill of assurance without the consent of appellees Maddox and Rice constituted an 3  Arkansas Code Annotated § 18­12­103 provides:  No restrictive or protective covenants affecting the use of real property nor any  instrument purporting to restrict the use of real property shall be valid or effective  against a subsequent purchaser or owner of real property unless the restrictive or  protective covenants or instrument purporting to restrict the use of real property is  executed by the owners of the real property and recorded in the office of the  recorder of the county in which the property is located.  ­5­  07­542  “abject violation” of the original 1972 bill of assurance and plat for the subdivision.  ROV  does not challenge these findings; rather, ROV contends that the circuit court erred in ruling  that the appellees’ claims were not barred by the doctrine of laches.  In Summit Mall Co. v.  Lemond, 355 Ark. 190, 206, 132 S.W.3d 725, 735 (2003), we stated:  This court has summarized the laches defense by stating that it is based on the  equitable  principle  that  an  unreasonable  delay  by  the  party  seeking  relief  precludes recovery when the circumstances are such as to make it inequitable  or unjust for the party to seek relief.  See Anadarko Petroleum Co. v. Venable,  312  Ark.  330,  850  S.W.2d  302  (1993).    The  laches  defense  requires  a  detrimental change in the position of the one asserting the doctrine, as well as  an unreasonable delay by the one asserting his or her rights against whom  laches is invoked.  See Worth v. Civil Serv. Comm’n of El Dorado, 294 Ark.  643, 746 S.W.2d 364 (1988).  See also Goforth v. Smith, 338 Ark. 65, 991  S.W.2d 579 (1999).  In  addition,  the  application  of  the  doctrine  to  each  case  depends  on  its  particular  circumstances. Cochran v. Bentley, 369 Ark. 159, ___ S.W.3d ___ (2007) (citing Self v. Self,  319 Ark. 632, 893 S.W.2d 775 (1995)).  The issue of laches is one of fact.  Self, supra.  A  reviewing court does not reverse the circuit court’s decision on a question of fact unless it  is clearly erroneous.  Ark. R. Civ. P. 52(a); Self, supra.  ROV argues that the doctrine of laches should apply in this case because Rice and the  Maddoxes were aware of the replat and new bill of assurance in June, July, and August 2004,  yet they did not file suit until September 2005.  ROV asserts that, as a result of the appellees’  failure to act as they observed the development of the property based on the replat, ROV had  good  reason  to  believe  that  the  appellees  were  abandoning  their  right  to  challenge  the  replatting  of  the  subdivision  and,  therefore,  ROV  continued  to  develop  the  property. ­6­  07­542  Appellees argue that, in this case, there was no detrimental change in ROV’s position in  reliance upon the action or inaction of the appellees because most of the work done in the  subdivision was done prior to ROV’s filing of the replat and new bill of assurance in August  2004.  The record reflects that Rice was the Recorder/City Treasurer for the City of Greers  Ferry during the summer of 2004 and, as such, was aware of ROV’s request to have the  streets declared abandoned.  Rice testified that, upon learning of ROV’s plans, she voiced  her objections at a city council meeting.  She testified she was aware that, in June 2004,  crews had begun clearing trees, building roads, and installing electrical and water lines. Rice  stated that she realized that the bill of assurance for  the  subdivision was being violated.  Further, Rice testified that much of the work, including one house, was completed by August  2004.  Rice said that, at that time, she “just kind of watched the development,” but did not  take  any  action  because  she  did  not  have  the  funds  to  hire  an  attorney  and  because  it  appeared from the replat that she and the Maddoxes were no longer in the subdivision.  James Maddox testified that he first became aware of ROV’s intention to replat the  subdivision when he saw a survey crew.  He stated that one house, as well as other work had  been completed by the time the city council voted to abandon the original subdivision streets  in August 2004.  Maddox testified that, when the work began, he did not understand that the  other lots in the subdivision were going to be replatted.  David  Tindall  testified  that  he  had  built  three  homes  in  the  Royal  Oaks  Vista  subdivision.  He stated that he began construction on a house on lot 8 in June 2004.  Tindall ­7­  07­542  testified that he started building a house on lot 12 in August 2004 and a house on lot 14 in  December 2004.  Tindall sold the house on lot 8 to Gary Yeager.  Yeager testified that he moved into  the house on September 19, 2004, and that the house had been under construction “quite  some time” before he moved into it.  Yeager said that he thought he had put the contract in  on  the  house  on  August  19,  2004,  and  at  that  time,  the  house  was  ninety­nine  percent  complete.  Tim Tyler testified that he is a civil engineer and that he and his various companies  have been involved in the development of approximately 100 subdivisions.  In early 2004,  Tyler became interested in acquiring undeveloped lots (lots 5 through 21) in the original  Royal Oaks Vista subdivision.  Tyler acquired the lots and thereafter conveyed the lots to  ROV  by  warranty  deed  dated  August  12,  2004.  Tyler  testified  that  electrical  lines  and  television cable lines were laid adjacent to the replatted streets by August 2004.  With respect to ROV’s laches argument, the circuit court made the following findings:  The Court finds that when plaintiffs Maddox and Rice learned of the intent of  Mr. Tyler and his company, Royal Oaks Vista, LLC, to replat and resubdivide  the subdivision in July and August 2004, they vigorously protested the petition  to abandon streets in the original subdivision before  the  Greers Ferry City  Council.  In  addition,  the  Replat  and  the  New  Bill  of  Assurance  for  the  subdivision were filed by Royal Oaks Vista, LLC on August 18, 2004, very  soon after the plaintiffs learned of Mr. Tyler’s plan to resubdivide.  Further,  many of the improvements (electrical, cable and water lines and road grading)  were installed by the defendant Royal Oaks Vista, LLC by the end of August  2004.  A  number  of  the  four  houses  that  have  been  built  on  the  replatted  subdivision were commenced (and one house was fully constructed) by August  2004 or within a short time thereafter. Plaintiffs, who were uncertain of the  legal  status  of  defendants’  actions,  hired  counsel  and  filed  suit  within  a ­8­  07­542  reasonable time.  Defendants have not been prejudiced by an unreasonable  delay  of  the  plaintiffs  in  asserting  their  rights  under  the  original  Bill  of  Assurance,  but  only  by  defendants’  own  precipitous  actions  in  the  face  of  original restrictive covenants.  We cannot say that the circuit court’s findings are clearly erroneous.  Laches requires  a demonstration of prejudice to the party alleging it as a defense resulting from a plaintiff’s  delay in pursuing a claim.  Goforth v. Smith, 338 Ark. 65, 991 S.W.2d 579 (1999).  Here,  ROV claims that it was prejudiced because it spent approximately $200,000 in infrastructure  prior to the appellees’ filing suit in September 2005.  However, the circuit court found, and  ROV  does  not  directly  dispute,  that  most  of  this  work  was  completed  by  August  2004,  shortly after the replat and new bill of assurance were filed.  ROV has failed to show that it  suffered or changed its position as a result of the appellees’ lack of diligence or delay in  assertion of their rights. Accordingly, we hold that the circuit court did not err in finding that  the doctrine of laches was inapplicable in this case.  ROV  next  argues  that  the  circuit  court  erred  in  ruling  that  the  temporary  septic  easement across lot 56 violates the restrictive covenant.  ROV claims that the temporary  easement  cannot  be  considered  as  violative  of  the  restrictive  covenant  allowing  only  residential use of the lots because the septic easements are clearly necessary for residential  purposes and must be considered “incidental to the residential use of the lot” as allowed by  the covenant.  In Hays v. Watson, 250 Ark. 589, 466 S.W.2d 272 (1971), this court affirmed an  injunction  prohibiting  the  use  of  a  lot  subject  to  restrictive  covenants  limiting  lots  to ­9­  07­542  “residential use” as a septic system to serve an adjacent mobile home park.  In the instant  case, the circuit court concluded that Hays was controlling and ruled that the use of any lots  in Royal Oaks Vista subdivision as part of a septic system serving other lots would not be  a “residential use” and would violate the restrictive covenant allowing on each lot only “a  single family dwelling, not to exceed two stories in height, and a private garage and any  outbuildings  incidental  to  the  residential  use  of  the  lot.”    ROV  claims  that  Hays  is  distinguishable  from  the  instant  case  because  it  involved  the  construction  of  a  sewage  disposal system to accommodate property outside of the platted area.  Further, ROV states  that in the Hays case, the restrictive covenants, which allowed only single family dwellings  and provided that no individual sewage disposal system was permitted on any lot unless it  met approval by the state, were interpreted to mean that a single family residence on each  lot can have only a single disposal system such that the use of the lots for the septic disposal  system to serve lots outside the platted area was prohibited.  Therefore, ROV states, because  there is no restrictive covenant regarding individual sewage disposal systems in the instant  case and the temporary system is not serving lots outside of the platted area, the Hays case  is not controlling.  We are not persuaded by ROV’s argument.  The plain language of the restrictive  covenant limits the use of each lot to a single family dwelling, not to exceed two stories in  height, and a private garage and any outbuildings incidental to the residential use of the lot.  However, lot 56 is not being used as a residential lot; rather, it is being used as a community  septic system to service several lots.  The restrictive covenants in both the original bill of ­10­  07­542  assurance and in the new bill of assurance provide that all lots shall be used as residential  lots.  The circuit court did not err in finding that lot 56 was in violation of the restrictive  covenant. Alternatively, ROV argues that the covenant prohibiting such temporary easements  is void as an unreasonable restraint on the alienation of property.   ROV cites City of Little  Rock  v.  Joyner,  212  Ark.  508,  206  S.W.2d  446  (1947),  to  support  its  argument  that  conditions have changed in the subdivision and it would be oppressive and inequitable to  enforce the restriction because, without using lot 56 as a septic system, ROV cannot sell the  other lots in the subdivision.  Here, ROV has failed to show that there has been a change in  conditions sufficient to warrant invalidation of the covenant at issue.  The requirements that  the lots be used only for residential purposes simply does not injure or harass anyone owning  property subject to the covenant.  See Cochran v. Bentley, 369 Ark. 159, ___ S.W.3d ___  (2007).  The circuit court concluded, and ROV does not dispute, that ROV was aware of the  conditions and the requirements when it purchased the property.  In sum, ROV has failed to  adduce facts that there has been a change in conditions sufficient to justify modification or  elimination of the conditions.  For the foregoing reasons, we affirm the circuit court.  Affirmed.  GLAZE, J., not participating. ­11­  07­542 

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