Robert A. Hewgley, Deane Pritchett, and H. Mel Weaver v. Jose A. Vivo and wife Peggy M. Vivo ( 1997 )

IN THE COURT OF APPEALS OF TENNESSEE
MIDDLE SECTION AT NASHVILLE
ROBERT A. HEWGLEY, )
DEANE PRITCHETT, and )
H. MEL WEAVER, )
)
FILED
Plaintiffs/Appellees, )
March 5, 1997
) Coffee Chancery
) No. 94-151 Cecil W. Crowson
VS. ) Appellate Court Clerk
) Appeal No.
) 01-A-01-9506-CH-00266
JOSE A. VIVO and wife, )
PEGGY M. VIVO, )
)
Defendants/Appellants. )
APPEAL FROM THE CHANCERY COURT FOR COFFEE COUNTY
AT MANCHESTER, TENNESSEE
THE HONORABLE JOHN W. ROLLINS, JUDGE
For the Plaintiffs/Appellees: For the Defendants/Appellants:
Robert F. Hazard Frank Van Cleave
Copeland, Conley & Hazard Ray & Van Cleave
Tullahoma, Tennessee Tullahoma, Tennessee
AFFIRMED IN PART; REVERSED IN PART;
AND REMANDED
WILLIAM C. KOCH, JR., JUDGE
OPINION
This appeal involves the enforcement of a 47-year-old restrictive covenant
in a residential subdivision in Tullahoma. After a physician converted one of the
homes in the subdivision into a medical clinic, a group of property owners filed
suit in the Chancery Court for Coffee County seeking declaratory and injunctive
relief to enforce a restrictive covenant requiring the property in the subdivision to
be used for residential purposes. The trial court, sitting without a jury, determined
that the restrictive covenant remained enforceable, directed the physician to
remove an illuminated exterior sign, and awarded attorney’s fees to the property
owners. On this appeal, the physician takes issue with the enforcement of the
restrictive covenant and with the award of attorney’s fees. While we affirm the
enforcement of the restrictive covenant, we reverse the award of attorney’s fees.
I.
John Harton developed a 37-lot residential subdivision on the outskirts of
Tullahoma in early 1950. Eleven of the lots fronted on North Jackson Street;
while the remaining lots were arranged along Jackson Circle, a U-shaped road
running through the subdivision. The deed to each lot contained a restrictive
covenant limiting the use of the lots to residential purposes and authorized any of
the subdivision’s property owners to bring suit to enforce the covenants.
The subdivision has remained residential despite the development of the
surrounding area. The golf course originally located to the west of the subdivision
has been replaced by a high school. North Jackson Street has been expanded from
two to five lanes. In addition, a hospital has been built in the area, and numerous
commercial and retail establishments, including a shopping mall, have been
constructed along North Jackson Street across from the subdivision.
Dr. Jose A. Vivo and his wife purchased one of subdivision lots fronting on
North Jackson Street in 1993. Even though he was aware of the restrictive
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covenants in his deed, Dr. Vivo decided to convert the residence into a medical
clinic because he believed that the noise, pollution, and traffic in the area rendered
the location unsuitable for residential purposes. Accordingly, he had the property
re-zoned and began making alterations in 1994 including paving the front yard for
a parking lot, building an additional room on the back of the house, and erecting
an illuminated sign near North Jackson Street.
Several subdivision residents opposed Dr. Vivo’s plans from the beginning.
Deane Pritchett told Dr. Vivo that he and other neighbors objected to commercial
use of the property and later opposed Dr. Vivo’s request for a zoning change.
After Dr. Vivo obtained the zoning change, Mr. Pritchett, Robert A. Hewgley, and
H. Mel Weaver filed suit in the Chancery Court for Coffee County seeking both
a declaration that the restrictive covenant requiring the property in the subdivision
to be used for residential purposes was enforceable and an injunction to prevent
Dr. Vivo and his wife from violating the restrictive covenant. In March 1995, the
trial court upheld the validity of the restrictive covenant, ordered Dr. Vivo to
remove the illuminated sign from his front yard, and enjoined Dr. Vivo and his
wife from using the property for commercial purposes. The trial court also
ordered the Vivos to pay the prevailing property owners $2,500 to defray their
legal expenses. Dr. Vivo and his wife appealed to this court, and the trial court
stayed the judgment pending appeal.
II.
THE RESTRICTIVE COVENANT
The Vivos’ principal argument on this appeal is that the trial court erred by
enforcing the restriction in their deed that requires them to use their property as
a residence. They argue that the restrictive covenant no longer benefits the
property because of the substantial changes in the character of the surrounding
property. While extensive commercial development has occurred in the area
surrounding the subdivision, we concur with the trial court’s conclusion that
enforcing the restrictive covenant will benefit the subdivision as a whole.
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A.
Persons who develop property may place restrictions on its future use for
their own benefit and for the benefit of the other property owners in the
development. Laughlin v. Wagner, 146 Tenn. 647, 653, 244 S.W. 475, 476-77
(1922); Benton v. Bush, 644 S.W.2d 690, 691 (Tenn. Ct. App. 1982). These
restrictions are commonly known as restrictive covenants. They need not have
specific time limits, Elm Hill Homes, Inc. v. Jessie, 857 S.W.2d 566, 571 (Tenn.
Ct. App. 1993), and are binding on remote grantees when they appear in the chain
of title or when the grantee actually knew about the restrictive covenant when it
acquired title. Land Developers, Inc. v. Maxwell, 537 S.W.2d 904, 913 (Tenn.
1976); Hillis v. Powers, 875 S.W.2d 273, 274 (Tenn. Ct. App. 1993); Stracener
v. Bailey, 737 S.W.2d 536, 539 (Tenn. Ct. App. 1986).
Like other contracts, restrictive covenants are enforceable according to the
clearly expressed intent of the parties. Jones v. Englund, 870 S.W.2d 525, 529
(Tenn. Ct. App. 1993). Grantees under a common development plan may enforce
their rights under a restrictive covenant against other grantees. Turnley v.
Garfinkel, 211 Tenn. 125, 130, 362 S.W.2d 921, 923 (1962); Benton v. Bush, 644
S.W.2d at 692. The remedies available include injunctive relief, Lowe v. Wilson
194 Tenn. 267, 269, 271, 250 S.W.2d 366, 367, 368 (1952), or compensatory
damages. Hysinger v. Mullinax, 204 Tenn. 181, 189, 319 S.W.2d 79, 83 (1958).
In most circumstances, restrictive covenants cannot be released without the
consent of the purchasers and grantees for whose benefit they were imposed.
Ridley v. Haiman, 164 Tenn. 239, 247, 47 S.W.2d 750, 752 (1932). Restrictive
covenants can, however, lose their force when they fail to serve a useful purpose.
Elm Hill Homes, Inc. v. Jessie, 857 S.W.2d at 571. Thus, they may be rendered
unenforceable if radical changes in the character of the entire neighborhood
completely defeat the purpose of the covenant. Land Developers, Inc. v. Maxwell,
537 S.W.2d at 917. When determining whether a restrictive covenant continues
to serve any useful purpose, the courts must be concerned primarily with the
continuing value of the restrictive covenant to the entire neighborhood, not the
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hardship to the parties attempting to avoid the restrictive covenant. Hackett v.
Steele, 201 Tenn.120, 127, 297 S.W.2d 63, 66 (1956); see also 5 Richard R.
Powell & Patrick J. Rohan, The Law of Real Property ¶ 679[2] (1994). While
rezoning of property covered by a restrictive covenant is some evidence of a
change in the character of the use of the property, rezoning alone does not require
the courts to conclude that the restrictive covenant no longer serves a useful
purpose. Hysinger v. Mullinax, 204 Tenn. at 186-87, 319 S.W.2d at 82; Hackett
v. Steele, 201 Tenn. at 132, 297 S.W.2d at 68.
B.
During the past forty years, the City of Tullahoma has sprawled toward and
past the subdivision involved in this case. Extensive commercial development has
unquestionably taken place along North Jackson Street, and this development,
along with its accompanying noise, pollution, and congestion, has affected the
residential desirability of the houses facing North Jackson Street. But
notwithstanding the development of the surrounding area, most of the property in
the subdivision has retained its residential character.
The value of the protection afforded to residential property by restrictive
covenants is reflected in the price of the property. Purchasers of residential
property will pay a premium for the protections that restrictive covenants provide.
See Ridley v. Haiman, 164 Tenn. at 253-54, 47 S.W.2d at 754. While the value
of the front-tier lots in a subdivision may decline because of the development of
the surrounding property, this decline in value does not render the restrictive
covenants unenforceable as to the front-tier lots if the surrounding development
has not altered the residential character of the subdivision as a whole. Hackett v.
Steele, 201 Tenn. at 131, 297 S.W.2d at 67-68; Hawthorne v. Realty Syndicate,
Inc., 268 S.E.2d 494, 499 (N.C. 1980) (noting that “an island is not made a swamp
simply because waves lick at its shores”).
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The Vivos’ arguments to excuse them from honoring the restrictive
covenants in their deed have two significant shortcomings. First, the commercial
development along North Jackson Street has not altered the essential character of
the entire subdivision. Second, the commercial development had already occurred
by the time the Vivos purchased the property. They are not entitled to equitable
relief when they knew or should have known that the existing conditions would
affect the residential use of their property and when they have already benefitted
from the effects of the surrounding development by paying a lower price for the
property.1
III.
THE AWARD FOR LEGAL EXPENSES
The Vivos also take issue with the decision to require them to pay $2,500
of their adversaries’ legal expenses. They assert that the facts of this case do not
warrant departing from the “American Rule” requiring civil litigants to bear their
own legal expenses. We agree that the property owners who filed suit to enforce
the restrictive covenants should be responsible for their own legal expenses.
A.
Tennessee’s courts follow the “American Rule” with regard to awarding
attorney’s fees. They will not compel losing parties to pay the legal expenses of
prevailing parties unless such fee-shifting is authorized by statute, contract, or
some other recognized equitable ground. Kultura, Inc. v. Southern Leasing Corp.,
923 S.W.2d 536, 540 (Tenn. 1996); Kimbrough v. Union Planters Nat’l Bank, 764
S.W.2d 203, 205 (Tenn. 1989). Thus, a prevailing litigant cannot ordinarily
collect attorney’s fees no matter “however wrongful may have been the suit, or
however groundless the defense.” Corinth Bank & Trust Co. v. Security Nat’l
Bank, 148 Tenn. 136, 154, 252 S.W. 1001, 1006 (1923).
1
Dr. Vivo conceded that one of the most important considerations in the purchase of the
property on North Jackson Street was its low cost.
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We have recognized a narrow exception to the “American Rule” for slander
of title actions involving the willful publication of false and malicious statements
disparaging another’s interest in real or personal property by persons who
recognize or should recognize that the statements are likely to cause pecuniary
harm. See Restatement (Second) of Torts § 624 (1977). After recognizing that the
sole way to dispel another’s wrongful assertion of title is to retain a lawyer and
litigate, this court held that the litigation expenses, including attorney’s fees,
incident to a slander of title action were part of the prevailing property owner’s
damages. Ezell v. Graves, 807 S.W.2d 700, 702-03 (Tenn. Ct. App. 1990); see
also Brooks v. Brake, App. No. 01A01-9508-CH-00365, 1996 WL 252322, at *
3-4 (Tenn. Ct. App. May 15, 1996) (No Tenn. R. App. P. 11 application filed);
Harmon v. Shell, App. No. 01A01-9211-CH-00451, at *5 (Tenn. Ct. App. Apr. 27,
1994) (No Tenn. R. App. P. 11 application filed).
B.
In this case, the prevailing property owners base their claim for attorney’s
fees on a provision in the restrictive covenant stating that
it shall be lawful for any other person or persons
owning any real property situated in said development
or sub-division to prosecute any proceedings at law or
in equity against the person or persons violating or
attempting to violate any such Covenant and to prevent
him or them from so doing or to recover damages or
other dues for such violation.
The property owners insist that “damages or other dues” referred to in the
covenant include attorney’s fees. We do not agree.
Attorney’s fees are not ordinarily an element of contract damages.
Stringfield v. Hirsch, 94 Tenn. 425, 437-38, 29 S.W. 609, 613 (1895); Goings v.
Aetna Cas. & Sur. Co., 491 S.W.2d 847, 848 (Tenn. Ct. App. 1972). Accordingly,
a contract must contain an express provision for the payment of attorney’s fees in
order to enable a prevailing party to recover the legal expenses it incurred to
enforce the contract. Pullman Standard, Inc. v. Abex Corp., 693 S.W.2d 336, 338
(Tenn. 1985); Pinney v. Tarpley, 686 S.W.2d 574, 581 (Tenn. Ct. App. 1984).
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We do not construe the language of the restrictive covenant in this case as
enabling property owners to collect their attorney’s fees if they file suit to enforce
a restriction in their deeds. The reference in the restrictive covenant to “damages
or other dues” refers to the damages traditionally associated with breaches of
restrictive covenants. These damages include either nominal damages or actual
damages measured by the reduction in property values caused by the breach of the
restrictive covenant. Womack v. Ward, 186 S.W.2d 619, 620 (Tenn. Ct. App.
1944).
Thus, we find that the property owners’ claim for attorney’s fees based on
the language of the restrictive covenants must fail. The property owners likewise
failed to demonstrate any other recognized equitable ground for awarding them
attorney’s fees or any basis for including their claim within the holding of Ezell
v. Graves. Accordingly, the trial court had no basis for awarding attorney’s fees
in this case and the portion of the judgment directing the Vivos to pay $2,500 of
their adversaries’ legal expenses must be reversed.
IV.
We affirm the portion of the judgment enforcing the restrictive covenants
but reverse the portion of the judgment awarding attorney’s fees to Messrs.
Hewgley, Pritchett, and Weaver. We remand the case for whatever further
proceedings may be required and tax the costs of this appeal in equal proportions
to Jose A. and Peggy M. Vivo and their surety and jointly and severally to Messrs.
Hewgley, Pritchett, and Weaver for which execution, if necessary, may issue.
__________________________________
WILLIAM C. KOCH, JR., JUDGE
CONCUR:
__________________________________
HENRY F. TODD, P.J., M.S.
__________________________________
BEN H. CANTRELL, JUDGE
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