Council of Association of Unit Owners of Pelican Cove Condominium v. Dale E. Yeilding

COURT OF CHANCERY
OF THE
SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE
VICE CHANCELLOR 34 THE CIRCLE
GEORGETOWN, DELAWARE 19947
Date Submitted: March 26, 2020
Date Decided: May 13, 2020
Richard E. Berl, Jr., Esq. Dean A. Campbell, Esq.
HUDSON, JONES, JAYWORK & LAW OFFICE OF DEAN A. CAMPBELL,
FISHER, LLC P.A.
Dartmouth Business Center 110 W. Pine Street
34382 Carpenter’s Way, Suite Georgetown, Delaware 19947
Lewes, Delaware 19958
Blake W. Carey, Esq.
THE SMITH FIRM, LLC
323D Rehoboth Avenue
Rehoboth Beach, Delaware 19971
RE: Council of Association of Unit Owners of Pelican Cove
Condominium v. Dale E. Yeilding, et al.
C.A. No: 12793-VCG
Dear Counsel:
This matter is before me on the Petitioner’s Renewed Motion for Summary
Judgment. The Petitioner is the Council for the Association of Unit Owners of
Pelican Cove Condominium (the “Council”), a condominium owners’ association.
The condominium, Pelican Cove Condominium (“Pelican Cove”), is a former motel
property located just south of Head of Bay Cove in Dewey Beach. The Respondents
(the “Yeildings”) are owners of Unit 7 in Pelican Cove.1
The Council’s claims in this action seek permanent mandatory injunctive
relief requiring the Yeildings to comply with a six-person per unit maximum
occupancy limitation, located in the declaration of Pelican Cove (the “Declaration”),
recorded in the chain of title to the property.2 The Declaration at all times has
included a provision, titled “Restriction on Use,” which provides that:
Each unit shall be used exclusively for residential purposes as a single-
family dwelling, and each unit shall not be occupied by more than 6
persons. No unit shall be used for any business or commercial or other
purposes, except that units may be leased for single-family occupancy
of not more than 6 persons by the owners, any unit owner, or any unit
mortgagee in possession; . . .3
Since the Yeildings purchased Unit 7 in 2015, a property manager hired by the
Yeildings has advertised and leased Unit 7 for rent with an occupancy limit of ten
people.4
On June 3, 2019, I issued a Memorandum Opinion resolving the parties’
Cross-Motions for Summary Judgment (“Pelican Cove I”).5 I found that the
1
Council of Ass’n of Unit Owners of Pelican Cove Condo. v. Yeilding, 2019 WL 2339531, at *3
(Del. Ch. June 3, 2019).
2
Id. at *1.
3
Id. at *2.
4
Id. at *4.
5
Council of Ass’n of Unit Owners of Pelican Cove Condo. v. Yeilding, 2019 WL 2339531, (Del.
Ch. June 3, 2019). Pelican Cove I also dealt with the Yeildings’ Motions for Summary Judgment
against certain Third-Party Respondents, which are not pertinent here.
2
Yeildings’ advertising and leasing of Unit 7 to groups as large as ten person was “in
clear violation of the Declaration.”6 I found that the Yeildings “had, at least,
constructive notice of the Declaration because it was recorded with the Recorded of
Deeds in and for Sussex County.”7 Therefore, I found the Yeildings in ongoing
breach of the Declaration.8 I additionally found that none of the several defenses to
enforcement of the occupancy limit proffered by the Yeildings had merit.9
Notwithstanding that the Council had succeeded on the merits of its claim that
the Yeildings have breached the Declaration’s occupancy limit, in Pelican Cove I I
was unable to grant the Council the permanent injunctive relief sought.10 My
inability to grant the Council such relief was because the Council “made no argument
demonstrating irreparable harm or the balance of the equities,” which, along with
actual success on the merits, are required showings to successfully obtain a
permanent injunction.11 Therefore, I found it “inappropriate” to parse the facts and
make a determination on irreparable harm or the balance of the equities without
6
Id. at *5.
7
Id.
8
Id. at *6.
9
Id. at *8.
10
Id.
11
Id. (quoting North River Ins. Co. v. Mine Safety Appliances Co., 105 A.3d 369, 379 n.47 (Del.
2014)) (“To succeed in a request for a permanent injunction, a party must show (i) actual success
on the merits; (ii) that it would suffer irreparable harm if the injunction is not granted; and (iii) that
the balance of the equities favors it.”).
3
argument on these issues from the parties, and denied the Council’s request for
summary judgment on the occupancy claim.12
The Council has made a Renewed Motion for Summary Judgment, and the
parties’ briefing on this Motion has addressed irreparable harm and the balance of
the equities.13 Consequently, this Letter Opinion resolves the Council’s Motion for
Summary Judgment on its claim seeking permanent mandatory injunctive relief
requiring the Yeildings to comply with the Declaration.
Summary judgment is appropriate “if the pleadings, depositions, answers to
interrogatories and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.”14 As of Pelican Cove I, the parties did not contend
that material factual disputes existed, and the briefing for this Renewed Motion for
Summary Judgment has not disclosed any material factual disputes.15
12
Id. I also denied the Council’s Motion for Summary Judgment on their nuisance claim, which
is not pertinent here. Id.13
See Letter Mem. in Supp. of Pet’rs’ Renewed Mot. for Summ. J., D.I. 80 (“Council’s Opening
Br.”); Resp’ts. Dale and Sandra Yeilding’s Resp. in Opp’n to Pet’rs’ Renewed Mot. for Summ. J.,
D.I. 83 (“Yeildings’ Opp’n Br.”); Pet’rs’ Reply Mem. in Supp. of Renewed Mot. for Summ. J.,
D.I. 84 (“Council’s Reply Br.”).
14
Ch. Ct. R. 56(c).
15
Pelican Cove, 2019 WL 2339531, at *4; see id. at *4 n.61 (explaining that while the parties take
issue with certain aspects of the factual background as presented by the other parties, “many of the
issues are not disputes of fact but disputes over the conclusion to be drawn from certain facts.”).
4
In order to succeed on its Motion, the Council must show that it will suffer
irreparable harm if injunctive relief is not granted.16 Irreparable harm “consists of
harm for which there can be no adequate recompense at law, i.e., an award of
compensatory damages will not suffice.”17
This Court has addressed irreparable harm in the context of breach of a
restrictive covenant in a residential community. Generally, the mere existence of
breach of such a covenant implies irreparable harm. For example, in Slaughter v.
Rotan,18 this Court held that purchasers in a residential subdivision entered into a
“social contract” that included the restrictive covenant applicable there, and that
because “[o]nce a restriction is breached, the Plaintiffs can never again regain the
sanctity of the covenant,” breach of the restrictive covenant constituted irreparable
harm.19 In The Cove on Herring Creek Homeowners’ Association, Inc. v. Riggs,20
this Court enforced a restrictive covenant prohibiting sheds on certain homeowners’
lots, noting that “the social contract among the residents of the [residential
16
Draper Commc’ns, Inc. v. Delaware Valley Broadcasters Ltd. P’ship, 505 A.2d 1283, 1288
(Del. Ch. 1985).
17
Horizon Pers. Commc’ns, Inc. v. Sprint Corp., 2006 WL 2337592, at *24 (Del. Ch. Aug. 4,
2006) (internal quotation marks omitted).
18
1994 WL 514873 (Del. Ch. Sept. 14, 1994).
19
Id. at *3.
20
2003 WL 1903472 (Del. Ch. Apr. 9, 2003), aff’d sub nom. Riggs v. Cove on Herring Creek
Homeowners’ Ass’n, Inc., 832 A.2d 1252 (Del. 2003).
5
subdivision] as reflected in the Declaration would mean little if injunctive relief were
not available to exclude the structures erected by the Defendants.”21
Beyond the quantum of harm arising from the ongoing breach of the other unit
holders’ mutual rights under the Declaration, the specific allegations of harm to the
Council consist, in the main, of the effect of the Yeildings’ breach on the quiet
enjoyment of the other units in Pelican Cove. The Council contends that the
availability of Unit 7 to large rental groups may allow sometimes unruly groups to
disturb those occupying the other units and notes that the larger the group rental, the
more opportunity for such disruption. The record reflects some instances of such
problems in the past.22
To my mind, the Council will continue to suffer some irreparable harm if a
permanent injunction is not granted. The rationale for recognizing that a breach of
a restrictive covenant in residential communities constitutes irreparable harm,
evident in Slaughter and The Cove, is even stronger here. Slaughter involved the
placement of a mobile home on the Defendants’ parcel of land, The Cove, as noted,
concerned storage sheds. In both of those cases, the real property at issue consisted
21
Id. at *5.
22
For example, an email from June 2019 written by the owner of Unit 2 states: “[t]here are 10
renters in unit 7 and one renter was just outside smoking from a bong doing marijuana . . . [t]he
renters were outside counting how many people would be staying at the property and smoking
marijuana . . . I am not able to have my daughter outside for fear of her breathing marijuana fumes
. . . .” Council’s Opening Br., Ex. A. The email is attached to a sworn affidavit. I note that the
Yeildings have argued that an injunction would be futile, and contends that on the occasion cited,
there was only one tenant of Unit 7. Yeildings’ Opp’n Br., at 9–10.
6
of separate lots.23 In The Cove, Vice Chancellor Noble remarked: “[t]he harm
resulting from a breach of a restrictive covenant is difficult to quantify because the
effect frequently is largely aesthetic.”24 In both of those cases, the breach of the
restrictive covenant did not, on the whole, affect the other property owners’ use and
enjoyment of their own property, yet in both cases the Court found that the social
contract had been breached and the other parties to the social contract would suffer
irreparable harm without permanent injunctive relief.
The case law indicates that ongoing violation of a restrictive covenant may
constitute irreparable harm, per se. Here, the other unit owners of Pelican Cove,
represented by the Council, will suffer irreparable harm absent injunctive relief
beyond that implicated in the violation of the declaration per se, because here the
Yeildings breach of the Declaration diminishes the other unit holders’ own
enjoyment of their property. These are not private lot-owners forced to contemplate
a tool shed from afar. Instead, they are residents sharing an old motel building, with
all the tight quarters that implies. The effect of the breach of restrictive covenant
here is not largely aesthetic. Loss of the covenanted right inherent in the Yeildings’
conduct would increase crowding of the common areas and the possibility of
disruptive group rentals. Without injunctive relief, there is nothing to stop the
23
Slaughter, 1994 WL 514873, at *1; The Cove, 2003 WL 1903472, at *1.
24
The Cove, 2003 WL 1903472, at *5.
7
occupancy of Unit 7 by more than six persons. The Defendants point out that
nothing guarantees that an injunction limiting the occupancy of Unit 7 to six persons
will eliminate noisy or disruptive renters altogether; however, it is reasonable to
believe that the likelihood of such disruptive groups will be lessened, and their effect
minimized, by enforcement of the covenant. Contrary to the Yeildings’ arguments,
therefore, the issuance of an injunction would not be futile. I find that the Council
has made the required showing that it will suffer irreparable harm absent injunctive
relief.
The Council must also show that the balance of the equities weighs in favor
of issuing an injunction.25 Pelican Cove I found that the Yeildings had at least
constructive notice of the Declaration and, consequently, the occupancy limitation.
Remedying clear violations of the Declaration will honor the reasonable
expectations of the unit owners of Pelican Cove.26 There is no evidence that the
Declaration has been abandoned or unfairly enforced.27 Failing to grant a permanent
injunction here would result in the other unit owners being denied the benefits of the
25
Homsey Architects, Inc. v. Nine Ninety Nine, LLC, 2010 WL 2476298, at *8 (Del. Ch. June 14,
2010); Draper Commc’ns, Inc. v. Delaware Valley Broadcasters Ltd. P’ship, 505 A.2d 1283, 1288
(Del. Ch. 1985) (“the harm that would result if an injunction does not issue outweighs the harm
that would befall the opposing party if the injunction is issued.”).
26
See Jackson’s Ridge Homeowners Ass’n v. May, 2007 WL 4179310, at *7 (Del. Ch. Nov. 20,
2007).
27
Id.8
social contract.28 While the Yeildings may suffer economic consequences because
they are unable to rent to groups larger than six, I “cannot accord it any weight”
because to do so “would create a perverse economic incentive by benefiting those
homeowners who breach the social contract at the expense of those who abide by
the rules.”29 Therefore, the balance of the equities is in favor of granting the Council
the permanent injunction it seeks.
In Pelican Cove I, the Council succeeded on the merits demonstrating that the
Yeildings were in breach of the Declaration. I have found here that the Council and
the unit holders it represents will suffer irreparable harm absent an injunction and
that the balance of the equities weighs in favor of issuing an injunction.
Accordingly, a permanent injunction should issue.
The parties should submit a form of order consistent with this Letter Opinion.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
28
Grand Oaks Maint. Corp. v. Acocella, 2008 WL 4484826, at *3 (Del. Ch. Sept. 26, 2008) (citing
id.).
29
Id.9