Jolie Chu v. Windermere Lakes Homeowners Association, Inc. ( 2022 )

Affirmed and Opinion filed August 30, 2022.
In The
Fourteenth Court of Appeals
NO. 14-21-00001-CV
JOLIE CHU, Appellant
V.
WINDERMERE LAKES HOMEOWNERS ASSOCIATION, INC., Appellee
On Appeal from the 333rd District Court
Harris County, Texas
Trial Court Cause No. 2019-76668
OPINION
In this appeal by a homeowner from a declaratory judgment, the trial court
ruled that an amendment to a subdivision’s declaration of covenants, conditions,
and restrictions—which established a minimum duration for leasing, essentially
banning “short-term leasing”—was valid and enforceable against the homeowner.
We affirm.
I. STANDARD OF REVIEW
We review de novo a case tried on agreed facts, as here. Andriukaitis-
Woodlands Med. Office, I, LLC v. Woodlands-N. Houston Heart Ctr., PA, No. 14-
13-00612-CV, 2014 WL 4854590, at *2 (Tex. App.—Houston [14th Dist.] Sept.
25, 2014, pet. denied) (mem. op.).1 Agreed facts are binding on the parties and
courts. Id. “In an appeal from a trial court’s judgment on an agreed case, the only
issue on appeal is whether the trial court properly applied the law to the agreed
facts.” Taylor v. First. Cmty. Credit Union, 316 S.W.3d 863, 866 (Tex. App.—
Houston [14th Dist.] 2010, no pet.).
II. BACKGROUND
In 2014 and 2016, appellant Jolie Chu purchased two homes in the
Windermere Lakes subdivision. Chu bought, improved, and furnished her homes
with the intent to lease them for short terms of thirty days or less.
Appellee Windermere Lakes Homeowner’s Association, Inc. (the HOA) is a
mandatory governing body over the Windermere Lakes subdivision. A
“Declaration of Covenants, Conditions and Restrictions” (the Declaration)
establishes a private contractual relationship between the homeowners and the
HOA. The Declaration was filed and recorded in 1998. It provides that no activity
“which is not related to single family residential purposes[] shall be performed on
any Lot.”
1
The parties signed a Rule 11 agreement that the case be tried under Rule 263 of the
Texas Rules of Civil Procedure as an agreed case with stipulated facts. See Tex. R. Civ. P. 263.
Although the record does not contain an agreed statement of facts certified by the trial court, as
required by the rule, we may treat the case as one under Rule 263. See Taylor v. First Cmty.
Credit Union, 316 S.W.3d 863, 866 (Tex. App.—Houston [14th Dist.] 2010, no pet.). The
agreed facts appear in the record, and the parties agree on appeal that the case is governed by
Rule 263.
2
Article X of the Declaration provides that it may be amended by an
instrument signed by owners of not less than fifty-one percent of the lots. In 2019,
about 79% of the members of the HOA voted to approve an amendment to the
Declaration that barred leasing for less than 180 days, among other specific
requirements, including that the owner and occupants intend for the occupants to
remain on the lot and that it become the occupants’ place of residency. Chu
stipulated to the validity of the voting procedures for the amendment, did not
challenge the validity of the voting procedures or individual votes for the
amendment, and agreed that all procedures required for the amendment were
followed.
Chu sued the HOA, seeking a declaratory judgment that the amendment
could not be enforced against her based on the theory that the HOA could not
“impose new restrictions which take away settled rights under prior restrictions.”
The parties agreed to the facts recited above and submitted to the court copies of
the Declaration and the amendment, along with memoranda of law.
The trial court signed a final declaratory judgment, ruling that the
amendment was enforceable against Chu and that Chu shall comply with the
amendment. Chu appeals.
III. ANALYSIS
Chu presents a single issue on appeal: “Can a majority of owners within a
subdivision adopt new restrictive covenants which deprive existing owners of their
rights under prior restrictive covenants?” Chu contends that she had the right to
lease her properties for short-term rentals before the amendment, and the
amendment destroyed this right. She contends that Texas courts have enforced
amendments to deed restrictions on owners only when the amendments removed
restrictions or furthered the original plan of development. She contends that, under
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the common law developed in other states, new restrictions on land use adopted by
amendment cannot be enforced against existing owners. Finally, she contends that
the amendment is void as against public policy because it tramples on the
constitutional rights of tenants.
A. Poole Point and Adlong
After the parties filed briefing in this case, two Texas courts of appeals
addressed similar issues. See Poole Point Subdivision Homeowners’ Ass’n v.
Degon, No. 03-20-00618-CV, 2022 WL 869809 (Tex. App.—Austin Mar. 24,
2022, pet. filed) (mem. op.); Adlong v. Twin Shores Prop. Owners Assoc., No. 09-
21-00166-CV, 2022 WL 869801 (Tex. App.—Beaumont Mar. 24, 2022, pet. filed)
(mem. op.). Both courts upheld amendments to restrictions that imposed
minimum-stay requirements for leasing, effectively banning short-term leasing.
In Poole Point, the original restrictions provided that the lots should be used
for single-family residential use and that no business or commercial activity could
be conducted except “this shall not be read to prevent the leasing of a single family
dwelling.” Poole Point, 2022 WL 869809, at *1. After the plaintiffs purchased
their property and began short-term leases, the owners passed an amendment to
ban short-term leases. See id. at *1–2. The trial court ruled for the plaintiffs, and
the Austin court of appeals reversed, thus upholding the amendment. Id. at *4.
The Austin court of appeals reasoned that to amend deed restrictions, three
conditions must be met: (1) the instrument creating the original restrictions must
establish the right to amend and the method of amendment; (2) the amendment
must be a correction, improvement, or reformation of the agreement rather than its
complete destruction; and (3) the amendment must not be illegal or against public
policy. See id. at *3; accord Hanchett v. East Sunnyside Civ. League, 696 S.W.2d
613, 615 (Tex. App.—Houston [14th Dist.] 1985, writ ref’d n.r.e.) (noting the three
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conditions). Like Chu, the plaintiffs did not challenge the first element. See Poole
Point, 2020 WL 869809 at *3. Regarding the second element, the court held that
the amendment did not completely destroy the deed restrictions even though the
restrictions had specifically authorized leasing. See id.; see also Couch v. S.
Methodist Univ., 10 S.W.2d 973, 974 (Tex. Comm’n App. 1928) (“Now, a change
of these conditions in any or all respects is not a destruction of the contract, nor
does it change the essential nature of the same. It is still a deed of conveyance.”).
Regarding the third element, the court held, “Modifications to deed restrictions that
impose greater restrictions are not prohibited by law when they are consistent with
the overall plan of development.” Poole Point, 2022 WL 869809, at *4. The
amendment “reinforced the existing residential use and occupancy restriction and
the prohibition against commercial activities.” Id. The court noted that the
Supreme Court of Texas had already signaled its approval of amendments such as
these. See id. (citing Tarr v. Timberwood Park Owners Ass’n, 556 S.W.3d 274,
277 (Tex. 2018)).2 And, the court reasoned that because the plaintiffs purchased
their property knowing that the restrictions could be amended, they “could not
reasonably have expected that there could never be restrictions placed on the right
to lease their residence.” Id. at *3 n.1.
In Adlong, the restrictions in effect when the plaintiffs purchased their home
provided that no lot could be used except for residential purposes. Adlong, 2022
WL 869801, at *2. After the plaintiffs purchased their property and leased it for
2
In Tarr, the supreme court held that short-term rentals did not violate restrictive
covenants that limited the use of properties to “residential purposes.” Tarr, 556 S.W.3d at 291–
93. The court noted that neither the plaintiff nor the homeowners’ association in that case
“attempted to amend the deed restrictions to specify a minimum duration for leasing—an option
available to both of them under the deed’s amendment provisions.” Id. at 277. The court made a
similar observation in another case: “The Association is not without recourse against conduct of
short-term tenants [because] the deed restrictions permit the neighborhood to amend the
covenants to restrict leasing.” JBrice Holdings, L.L.C. v. Wilcrest Walk Townhomes Ass’n, 644
S.W.3d 179, 188 (Tex. 2022).
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short terms, the subdivision homeowners amended the restrictions to require leases
to be a minimum of six months, thus banning short-term rentals. See id. at *4. The
trial court granted a declaratory judgment in favor of the property owners’
association, and the Beaumont court of appeals affirmed, thus upholding the
amendment. Id. at *1.
The plaintiffs in Adlong raised many of the same arguments as Chu raises in
this appeal. See id. at *4–5. In an extensive opinion that surveyed various
decisions by the Supreme Court of Texas and other courts of appeals, the
Beaumont court held that “amended or modified restrictive covenants may be
enforced, against owners who acquired their property before the amendment, even
if they did not vote for the amendment, when the original restrictions provided a
method for amendment, that method was followed, and the owners were on
constructive notice the restrictions could be amended by amendment.” Id. at *11.
The court reasoned that no Texas precedent supported the plaintiffs’ argument that
amendments could only apply to new property owners and could not be “enforced
in a manner that would take away the rights of owners who bought before the
amendment.” Id.
Considering these decisions and the authorities cited therein, we agree with
our sister courts that validly passed amendments to restrictions, for which
purchasers had constructive notice of the possibility of amendment, should be
enforced if the amendment is not illegal or against public policy. See Poole Point,
2022 WL 869809, at *3–4; Adlong, 2022 WL 869801, at *9, *11.
B. Reasonableness
Chu urges this court to follow decisions from courts outside Texas, which
Chu contends “employ one variety or another of a fairness or reasonableness
analysis, which asks whether, when compared to the original restrictions, an
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amendment is new and unexpected.”3 Although we decline to adopt such a test
when the Supreme Court of Texas has not yet done so, the supreme court has noted
that covenants generally will be enforced if they are “within reasonable bounds.”
Tarr, 556 S.W.3d at 280. Even if a “reasonableness” test is employed here, the
amendment is reasonable because it reinforces the existing single-family
residential use restriction; thus, it is consistent with the general plan or scheme of
development for the subdivision. See Poole Point, 2022 WL 869809, at *4 (“The
minimum duration requirement created by the Amendment reinforced the existing
residential use and occupancy restriction and the prohibition against commercial
activities.”); Adlong, 2022 WL 869801, at *11 (“[A]mended restrictive covenants
may be enforced against an owner who bought property before the amendment,
when the amendment is consistent with the general plan or scheme of development
for the subdivision.”).
C. Public Policy
Finally, Chu contends that the “physical, continuous occupancy
requirement” is against public policy because it is inconsistent with legislative
enactments and constitutional law. Chu complains of a provision in the
amendment requiring the owner and occupants to intend for the occupants to
remain on the lot and that it become the occupants’ place of residency.
“Courts should refrain from nullifying a transaction because it is contrary to
public policy, ‘unless the transaction contravenes some positive statute or some
well-established rule of law.’” Teal Trading & Dev., LP v. Champee Springs
Ranches Prop. Owners Ass’n, 593 S.W.3d 324, 338 (Tex. 2020) (quoting
3
See Armstrong v. Ledges Homeowners Ass’n, Inc., 633 S.E.2d 78 (N.C. 2006); see also
Wilkinson v. Chiwawa Cmty. Ass’n, 327 P.3d 614 (Wash. 2014); McMillan v. Iserman, 327
N.W.2d 559 (Mich. App. 1982).
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Lawrence v. CDB Servs., Inc., 44 S.W.3d 544, 553 (Tex. 2001)). Courts generally
consider the Legislature’s statutory enactments to be expressions of public policy.
Id. at 339. The Legislature “has spoken extensively about restrictive covenants,
both upholding their enforcement and setting limits.” Id. “These legislative
decisions to regulate and even prohibit some restrictive covenants—but not
restrictive [covenants] like this one—militate against this Court’s exercise of its
common-law authority” to invalidate a restrictive covenant. Id. Thus, we find
unpersuasive Chu’s contention that the Legislature’s imposition of a hotel
occupancy tax on short-term rentals, see Tex. Tax Code § 156.001(b), or that the
Legislature has generally regulated the area of residential tenancy without
restricting short-term rentals, see Tex. Prop. Code ch. 92, shows that a restrictive
covenant banning short-term leasing is against public policy.
Chu references authority that state courts may not enforce restrictive
covenants that violate the Fourteenth Amendment to the United States
Constitution. See Shelley v. Kraemer, 334 U.S. 1, 20–21 (1948) (invalidating state
court’s enforcement of restrictive covenants that denied equal protection of the
laws based on race). But Chu cites no authority invalidating a restrictive covenant
concerning short-term rentals, or any other type of restrictive covenant, based on
constitutional limitations other than racial discrimination. Even if a state actor
could not impede certain constitutional rights of individuals utilizing short-term
rentals, see Zaatari v. City of Austin, 615 S.W.3d 172, 202 (Tex. App.—Austin
2019, pet. denied), a restrictive covenant with similar provisions is not necessarily
unconstitutional. See Covered Bridge Condo. Ass’n, Inc. v. Chambliss, 705
S.W.2d 211, 213–14 (Tex. App.—Houston [14th Dist.] 1985, writ ref’d n.r.e.)
(holding that precedent—regarding unconstitutional city ordinance restricting
cohabitation of certain family members, in violation of fundamental right under the
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Fourteenth Amendment of family members to live together—was “inapplicable” to
an age-restriction covenant that operated to prevent a parents’ child to live with
them because “the restriction is created by a private contract, not by a
governmental ordinance or law”).
Chu has not shown that the amendment—which adds a restrictive covenant
setting the minimum term for leases and requiring owners and occupants to intend
for the occupants to make the property their home—is unenforceable because it is
against public policy.
IV. CONCLUSION
Chu’s sole issue is overruled. The trial court’s judgment is affirmed.
/s/ Ken Wise
Justice
Panel consists of Justices Wise, Poissant, and Wilson.
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