Wilmington Friends School, Inc. v. Alapocas Maintenance Corporation

COURT OF CHANCERY
OF THE
SAM GLASSCOCK III
VICE CHANCELLOR
STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE
34 THE CIRCLE
GEORGETOWN, DELAWARE 19947
Date Submitted: March 14, 2022
Date Decided: June 14, 2022
Kelly E. Farnan, Esq. Bradley R. Aronstam, Esq.
Dorronda R. Bordley, Esq. Holly E. Newell, Esq.
RICHARDS, LAYTON & FINGER, P.A. ROSS ARONSTAM & MORITZ LLP
One Rodney Square 100 S. West Street, Suite 400
920 North King Street Wilmington, Delaware 19801
Wilmington, Delaware 19801
James S. Green, Jr.
SEITZ, VAN OGTROP & GREEN, P.A.
222 Delaware Avenue, Suite 1500
Wilmington, Delaware 19801
RE: Wilmington Friends School, Inc. v. Alapocas Maintenance
Corporation et al., C.A. No 2021-0655-SG
Dear Counsel:
It is with some reluctance that I begin this Letter Opinion. It was my hope,
expressed at oral argument on the instant Cross-Motions for Judgment on the
Pleadings, that the matter settle. There are various reasons why a settlement, always
favored, was particularly desirable here. One is that the parties and I had imposed
upon one of the finest public servants in the long history of our bench and bar to
invest his time and energy into mediation.1 Another, nearly as poignant, is that both
1
Randy Holland, Esq.
parties here are public institutions manifestly doing their best to act in the interests
of their organizations and the public at large, as they see it. There are no bad actors
here.2 Nonetheless, it falls to me to decide the legal issues presented; the facts are
not in dispute.
The litigation involves Alapocas, a mostly residential neighborhood in north
Wilmington subject to deed restrictions. At issue is a scenario that has played out in
this Court many times. A homeowners’ association (an “HOA”), here the Alapocas
Maintenance Corporation and its Directors (collectively, “AMC” or the
“Defendant”) has relied on deed restrictions to attempt to deny construction upon a
property subject to that association, belonging to the Plaintiff Wilmington Friends
School, Inc. (the “School” or the “Plaintiff”), a private school. The School intends
to expand the development of its campus in Alapocas, currently home to the “Upper
School,” to incorporate the “Lower School,”—apparently, a school for the primary
grades—as well.3 The School submitted an application of its plans to AMC for
review. AMC denied its consent. The School brought this litigation seeking a
declaratory judgment that its project was in compliance with the deed restrictions,
and must therefore be approved by AMC, or in the alternative that the restrictions
are unenforceable. The parties, sensibly, have cross-moved for a judgment on the
2
I complement counsel on their consistent efforts to keep animosity at a minimum, in the best
(alas, not invariably followed) tradition of our bar.
3
What we plebian public-school graduates might call an “elementary school.”
2
pleadings, resolved below. At oral argument, AMC clarified its position that it has
used the criteria specifically provided to its predecessor to ensure “harmonious”
development to deny the School’s application, solely on the ground that it will
decrease open green space in the neighborhood.
A major construction in a residential neighborhood obviously causes concerns
that good neighbors should discuss and accommodate.4 That statement is precatory,
not legal, and ideally those complex concerns would have been addressed in the
mediation process, if not before. The legal issue, to the contrary, is simple. Deed
restrictions or covenants limit the use of real property, which has historically been
disfavored at law. That historic disfavor has ameliorated to an extent to
accommodate legislative regulation of property, via zoning, for instance. But private
limitations on the full use of property, via deed restrictions, while enforceable, are
construed narrowly in favor of the landowner.5 Any ambiguity must be resolved in
favor of the landowner. 6 The burden is on the HOA to show that its actions in
4
A procedure that might be termed Friendly Persuasion.
5
See Wild Quail Golf & Country Club Homeowners’ Ass’n, Inc. v. Babbitt, 2022 WL 211648, at
*3 (Del. Ch. Jan. 11, 2022) (deed restrictions “‘are viewed with suspicion due to the tendency of
such review to be arbitrary, capricious, and therefore unreasonable,’ and are strictly construed”)
(quoting Benner v. Council of Narrows Ass’n of Owners, 2014 WL 7269740, at *7 (Del. Ch. Dec.
22, 2014), adopted, 2015 WL 1206724 (Del.Ch. Mar. 16, 2015)); Tusi v. Mruz, 2002 WL
31499312, at *3 (Del. Ch. Oct. 31, 2002) (“[B]ecause they restrict the ‘free use of property,’
restrictive covenants must be strictly construed.”).
6
See Dolan v. Villages of Clearwater Homeowner’s Ass’n, Inc., 2005 WL 2810724, at *3 (Del.
Ch. Oct. 21, 2005) (“The Deed Restriction, if ambiguous, of course, must be read in [the
homeowner’s] favor.”).
3
enforcing the restrictions are non-arbitrary, and are reasonable as applied. 7 A
decision to deny improvement based solely on aesthetics is not enforceable,
regardless of whether such authority was explicitly granted to an HOA in the deed
covenants.8 Covenants restricting use may not be enforced beyond their explicit
terms, nor may they be applied if vague or otherwise permissive of arbitrary
enforcement.9
AMC relies on Paragraph 5 of the Deed Restrictions applicable to Alapocas.
The parties dispute whether the School’s property10 (the “Property”) is subject to
Paragraph 5, which I assume, without deciding, that it is. Paragraph 5 provides that
proposed structures must be submitted for approval to the Woodlawn Trustees—
AMC’s predecessor—and that the Woodlawn Trustees may refuse any such plans
“which in its opinion are not suitable or desirable.”11 In making such a
determination, the Woodlawn Trustees “may take into account the suitability of the
7
Id. at *4 (“burden is on the Review Board to show its actions are reasonable” in applying deed
restrictions).
8
See Lawhon v. Winding Ridge Homeowners Ass’n, Inc., 2008 WL 5459246, at *5 (Del. Ch. Dec.
31, 2008) (“[R]estrictions based on abstract aesthetic desirability are impermissible.”).
9
Equitable Tr. Co. v. O’Neill, 420 A.2d 1196, 1201 (Del. Super. Ct. 1980) (restrictive covenants
“will not be enforced beyond the fair and natural meaning of the words used”); Seabreak
Homeowners Ass’n, Inc. v. Gresser, 517 A.2d 263, 269 (Del. Ch. 1986) (“[W]here the language
used in the restrictive covenant empowering the committee is overly vague, imprecise, or so
unclear as not to lend itself to evenhanded application, then the grant of authority is normally not
enforceable.”), aff’d, 538 A.2d 1113 (Del. 1988).
10
The Property is unlike the residential lots in Alapocas. It is a large parcel—21 acres—indicated
on the plot plan of Alapocas as the “Friends School tract.” See Oral Arg. Tr. Pl.’s Defs.’
Cross-Mots. J. Pleadings at 6:19–7:6, 80:13–17 [hereinafter “Oral Arg. Tr.”].
11
Verified Compl. Declaratory J. Inj. Relief, Ex. A ¶ 5, Dkt. No. 1.
4
proposed building[,] . . . the materials of which it is to be built, . . . the site upon
which it is proposed[,] . . . the harmony thereof with the surroundings and the effect
of the building . . . on the outlook from adjacent or neighboring properties.” 12 As a
transfer of the ability to develop property from the owner to the predecessor of AMC,
this is manifestly overbroad. It purports to allow AMC to act arbitrarily based on
“suitability,” which is a concept without defining or limiting characteristics. There
are no objective criteria upon which a property owner may know what is permitted,
or within which the discretion of AMC is cabined. AMC concedes that the only one
of the criteria set out in Paragraph 5 that is not unenforceable is “harmony . . . with
the surroundings.” This brief Letter Opinion thus focuses on that criterion.
AMC has rejected the School’s application to construct a primary school
building and associated structures because that will result in loss of open space and
green areas on the Property. AMC denies that this action is arbitrary, based on the
criteria it relied on, which it maintains is the lack of “harmony with the
surroundings” represented by any development of a significant part of the Property.
To be clear, AMC does not object to the appearance or location of the proposed
construction, but simply to its use, for school buildings and parking lots, of ground
currently devoted to lawn and ball fields.13 This loss of green open space, per AMC,
12
Id.13
In the words of AMC’s counsel, “the vastness of the [School’s] proposal and the consequences
of that proposal, would be inharmonious with its surroundings because it would decrease the open,
5
would be unharmonious with the rest of Alapocas. But the lack of “harmony” as
AMC attempts to apply it is no less arbitrary than a finding of “unsuitability.” AMC
simply wants to maintain the green and pleasant aspect of much of the Property as
an amenity of Alapocas. This is entirely understandable; I feel the same way about
the wooded vacant lot adjoining my own house. But those development rights
belong to the School, absent an enforceable limitation in the deed restrictions. AMC
cannot enforce an open space requirement, not provided for explicitly via covenant,
and that it applies to no other property in Alapocas, under the rubric of “harmony.”
The “harmony” restriction, as applied to the School, is, in my view, a matter of the
aesthetic sensibilities of AMC’s current board, nothing more.
AMC relies on a case in this Court, Dolan v. Villages of Clearwater
Homeowner’s Association, Inc. 14 That case involved deed restrictions that permitted
an architectural review board of an HOA to reject proposed construction as “visually
inharmonious” with the surrounding neighborhood.15 The Dolan Court found the
deed restrictions enforceable.16
The facts in Dolan are significantly different from the instant situation, and
the holding in Dolan is strictly cabined by those facts. The section of the “Villages”
green space at the heart of the [School’s] campus and the neighborhood.” Oral Arg. Tr. at 44:14–
20.
14
Dolan v. Villages of Clearwater Homeowner’s Ass’n, Inc., 2005 WL 1252351 (Del. Ch. May
12, 2005), aff’d, 2005 WL 2810724 (Del. Ch. Oct. 21, 2005).
15
Id. at *7.
16
Id.
6
in question involved homes built in Key West style—stilt homes with white pea
gravel from the street to and under the house. 17 The white gravel yards were obvious
to the plaintiff at the time she bought her house, and to all who viewed the
development.18 The HOA had consistently denied requests to remove the gravel
yards from “Key West” homes.19 The homeowner-plaintiff’s proposed
improvement was to remove the pea gravel and replace it with pavement.20 That
was inconsistent with the “Key West” style, which itself was a unique and coherent
style including the gravel yard as a significant architectural element. 21 The Court
found, therefore, that the “visual harmony” restriction under that particular set of
facts could be (and had been) applied in a non-arbitrary manner. 22
The Dolan rationale is not applicable here. 23 There is only one school in
Alapocas; the lots in Alapocas are not restricted as to percentage of open space by
17
Id. at *1.
18
See id. at *1–2, 5, 7.
19
Id. at *5, 7.
20
Id. at *1–2.
21
Id. at *7.
22
Id.
23
AMC also cites to Alliegro v. Home Owners of Edgewood Hills, Inc., 122 A.2d 910 (1956) (in
neighborhood of dwellings averaging approximately 2,400 square feet and 30,000 cubic feet,
proposed cottage with 1,220 feet and 18,100 cubic feet may be objectively inharmonious);
Lawhon, 2008 WL 5459246 (proposed deviation from consistent color scheme may be objectively
inharmonious); and Christine Manor Civic Ass’n v. Gullo, 2007 WL 3301024 (Del. Ch. Nov. 2,
2007) (very large garage may be objectively inharmonious). The rationale applied to Dolan,
above, makes these cases unpersuasive here, as well. These cases all involve restrictions on
residential lots made objective by visual reference to other such lots. I make no decision on the
enforceability of the “harmony” restrictions here with respect to the residential lots within
Alapocas.
7
the deed covenants; and no other Alapocas property is subject to use restriction
simply because such use would decrease open space. Unlike in Dolan, here there
are no criteria by which to apply the “harmonious” standard to the School on density
grounds, other than whether the current board of the AMC dislikes the improvement
proposed.
This Court has recently examined a deed restriction purporting to give an
HOA a right to reject improvements on ground of harmony, in a thoughtful Master’s
Report, based on a covenant strikingly similar to Paragraph 5 here. In that case,
Civic Association of Surrey Park v. Riegel, the HOA denied permission to construct
a shed, as “not suitable, desirable or in harmony with the neighborhood.” 24 The deed
covenant in question authorized the HOA to reject plans as “‘not suitable or
desirable, in [the HOA’s] opinion, for aesthetic or other reasons’ with the right to
take into account ‘the harmony thereof with respect to the surroundings and the
effect of the building . . . as planned, on the outlook for the adjacent or neighboring
property.’”25 The Master found these criteria—directly comparable to those in the
Alapocas restriction—unenforceable: “These three inquiries—
suitability/desirability, harmony and outlook—are overly vague, imprecise, and
unclear as written.”26 The Riegel Court rejected the first and third criteria as nothing
24
2022 WL 1597452, at *1 (Del. Ch. May 19, 2022).
25
Id. at *12.
26
Id.
8
more than a delegation to the HOA of development oversight based on its sense of
aesthetics—a delegation this court has repeatedly found unenforceable. 27 The
Master then noted that “harmony restrictions, like the one here, have only been found
enforceable when that community possesses a ‘sufficiently coherent visual style’
enabling fair and even-handed application.” 28 Finding that coherence was lacking
in the community in question, the Master found the provision unenforceable.29
So it is here with the near-identical Paragraph 5. AMC here does not even
argue that the style of the improvements the School desires are unharmonious with
the residential architecture of Alapocas. Instead, it seeks to apply its sense of
aesthetics—open space is better. Perhaps so, but that decision is for the landowner.
27
Id. at *12–13. See also Campanelli v. Coffee Run Condo. Council, 2021 WL 3120198, at *7
(Del. Ch. July 23, 2021) (declaration plan that allowed plans to “‘var[y]’ from the Declaration
Plan” without providing standards “for how the Council will determine whether variances are
acceptable” was unenforceable); O’Marrow v. Roles, 2015 WL 5714847, at *10 (Del. Ch. Sept.
30, 2015) (restrictive covenants that left “to the discretion of a Board of Governors the
determination whether the color or construction of an outbuilding is ‘similar’ to existing barns or
buildings in HFA” was “too vague and imprecise to be enforceable”); Serv. Corp. of Westover
Hills v. Guzzetta, 2009 WL 5214876, at *6 (Del. Ch. Dec. 22, 2009) (restrictive covenant that
“provide[d] no guidance as to how . . . to consider ‘the suitability of the proposed building or other
structure,’ the ‘materials of which it is to be built,’ the site where it is ‘proposed to erect the same,’
or ‘the effect of the building or other structure . . . on the outlook from the adjacent or neighboring
property’” were “unreasonable as a matter of law”); Benner, 2014 WL 7269740, at *9 (deed
restriction “unenforceable under Delaware law because of the absence of any clear and precise
standard governing the review”).
28
Riegel, 2022 WL 1597452, at *13.
29
Id.9
To what extent is a school harmonious, or otherwise, with a residential
development? 30 What portion of its land may the School develop, consistent with
AMC’s understanding of “harmony?” No one can say. Where can the School locate
additional buildings? There is no way to tell, other than to rely on an arbitrary
decision from AMC. The “harmony” provision cannot be applied to limit the density
of construction on the property in a non-arbitrary way, and thus is unenforceable
with respect to the School. Accordingly, the School’s motion for judgment on the
pleadings is granted, and AMC’s is denied, to the extent consistent with this Letter
Opinion. The parties should submit an appropriate form of order, and should inform
me what issues, if any, remain.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
cc: All counsel of record (by File & ServeXpress)
30
The Oxford English Dictionary provides numerous definitions for “harmony,” the most pertinent
of which appears to be a “[c]ombination of parts or details with each other, so as to produce an
aesthetically pleasing effect.” Harmony, SHORTER OXFORD ENGLISH DICTIONARY, VOL. I (3d ed.
1973). Just so: absent the unusual situation of a coherent development regime as in Dolan which
in context can provide objective criteria, an appeal to harmony is simply an appeal to an aesthetic
sensibility. And with harmony, one HOA’s Bach or Brahms is another’s John Cage.
10