Estates at Prairie Ridge Homeowners Assn. v. Korth

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www.nebraska.gov/apps-courts-epub/
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Nebraska Supreme Court A dvance Sheets
298 Nebraska R eports
ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
Cite as 298 Neb. 266
The Estates at Prairie R idge Homeowners Association,
a Nebraska nonprofit corporation, appellee, v.
Duane R. Korth and K athryn A. Korth,
husband and wife, appellants.
___ N.W.2d ___
Filed December 1, 2017. No. S-16-1108.
1. Restrictive Covenants: Equity. An action to enforce restrictive cov-
enants is equitable in nature.
2. Equity: Appeal and Error. On appeal from an equity action, an appel-
late court decides factual questions de novo on the record and, as to
questions of both fact and law, is obligated to reach a conclusion inde-
pendent of the trial court’s determination.
3. Restrictive Covenants: Intent. Restrictive covenants are to be con-
strued so as to give effect to the intentions of the parties at the time they
agreed to the covenants.
4. Restrictive Covenants. The language of restrictive covenants must be
interpreted in its entirety.
5. ____. If the language of a restrictive covenant is unambiguous, the cov-
enant shall be enforced according to its plain language, and the covenant
shall not be subject to rules of interpretation or construction.
6. Contracts: Restrictive Covenants. As in the interpretation of a con-
tract, a court must first determine, as a matter of law, whether the lan-
guage of restrictive covenants is ambiguous.
7. Contracts: Words and Phrases. Ambiguity exists in a document when
a word, phrase, or provision in the document has, or is susceptible of, at
least two reasonable but conflicting interpretations or meanings.
8. Restrictive Covenants. Restrictive covenants are not favored in the law
and, if ambiguous, should be construed in a manner which allows the
maximum unrestricted use of the property.
9. Restrictive Covenants: Intent. Extrinsic evidence is not permitted to
explain the terms of restrictive covenants where they are not ambiguous.
Instead, the intentions of the parties must be determined from the docu-
ment itself.
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ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
Cite as 298 Neb. 266
10. Summary Judgment: Appeal and Error. The denial of a motion for
summary judgment is neither appealable nor reviewable.
Appeal from the District Court for Sarpy County: George
A. Thompson, Judge. Reversed and remanded with directions.
John M. Walker, of Lamson, Dugan & Murray, L.L.P., for
appellants.
Larry R. Forman, of Hillman, Forman, Childers &
McCormack, for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, and
Funke, JJ.
Cassel, J.
I. INTRODUCTION
After homeowners repainted their residence in a blue color,
a homeowners association sued to enforce restrictive covenants
and the district court decreed that the house be repainted in
an “earth tone.” The homeowners’ appeal turns on the cov-
enants’ plain language, which does not control the color of
repainting. Because the covenants were not ambiguous and did
not prohibit the homeowners’ action, we reverse, and remand
with directions.
II. BACKGROUND
1. R estrictive Covenants
The Estates at Prairie Ridge, LLC (Developer), filed the
restrictive covenants at issue in 2003. The covenants included
prohibitions of certain “external improvement[s]” (except those
specifically approved by Developer), as well as storage of any-
thing that would be “obnoxious to the eye.” They also specified
that “[n]o objectionable, unlawful or offensive trade or activity
shall be carried on upon any Lot nor shall anything be done
thereon which may be or become a nuisance or annoyance to
the neighborhood or surrounding Lots.”
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ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
Cite as 298 Neb. 266
In 2004, Duane R. Korth and Kathryn A. Korth (Homeowners)
purchased a residential lot from Developer which was sub-
ject to the restrictive covenants. Homeowners submitted
plans for construction of a residence on their purchased lot to
Developer as required by the covenants. After the residence
was built, Homeowners spoke to Developer and proposed to
paint their residence blue. Developer denied this proposal and
recommended that they choose an earth-tone color instead.
Homeowners ultimately painted their residence in an earth-
tone color.
2. A lleged Violations
Ten years later, Homeowners informed a member of The
Estates at Prairie Ridge Homeowners Association (the HOA)
of their decision to repaint their residence a shade of blue.
The parties disagreed as to whether the restrictive covenants
required approval of the new paint color, and conflict ensued.
Homeowners ultimately repainted their residence blue, without
seeking or acquiring approval of their chosen paint color.
After the house was repainted, Developer assigned its inter-
ests under the restrictive covenants to the HOA pursuant to
article II, section 1, of the covenants. As Developer’s succes-
sor in interest, the HOA filed a lawsuit requesting the court to,
among other things, (1) declare Homeowners to be in willful
violation of certain provisions of the restrictive covenants, (2)
order Homeowners to submit a substitute earth-tone color to be
approved by the HOA, and (3) order Homeowners to repaint
their residence in the approved color.
3. Motions for Summary Judgment
Before filing an answer, Homeowners filed a motion to
dismiss, which was converted to a motion for summary
judgment.1 The HOA then filed its own motion for sum-
mary judgment. At a hearing, both parties presented evidence
and argued that there was no genuine issue of material fact.
1
See Neb. Ct. R. Pldg. § 6-1112(b)(6).
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ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
Cite as 298 Neb. 266
However, the court disagreed and overruled both motions. It
identified issues of fact regarding the HOA’s level of control
over color under the restrictive covenants and whether the
particular color violated the restrictive covenants.
Both parties moved for reconsideration of their motions for
summary judgment. At the hearing, Homeowners principally
argued that the HOA had no control over the color of their
residence, because the restrictive covenants did not specifically
refer to exterior paint as an improvement. The court took the
matter under advisement and reviewed Kalkowski v. Nebraska
Nat. Trails Museum Found.2 and Tyler v. Tyler3 to determine
that painting the exterior of a residence can be an improvement
or an ordinary repair, depending on the factual circumstances
of the case. After concluding that this was a disputed factual
issue, the court overruled the parties’ motions. The court later
overruled Homeowners’ renewed motion for summary judg-
ment on these same grounds.
4. Trial
At trial, an agent of Developer testified over Homeowners’
objection that the intent and purpose of the restrictive cov-
enants was to give Developer “fairly broad authority to deal
with matters in [the] subdivision” and that Developer “was to
be able to control color.” He further testified that it was the
intent of Developer to keep the development “a very natural,
earth tone environment” in line with its name, The Estates at
Prairie Ridge (Prairie Ridge), and have residences “blend in
with the environment.” However, he admitted that there was
no language in the restrictive covenants specifically referenc-
ing paint color or a preference for earth tones.
2
Kalkowski v. Nebraska Nat. Trails Museum Found., 290 Neb. 798,
862 N.W.2d 294 (2015) (defining term “improvements” in farm lease
agreement as distinguished from ordinary repair).
3
Tyl. v. Tyler, 253 Neb. 209, 214, 570 N.W.2d 317, 320 (1997) (painting
of dwelling’s exterior as “improvement” of marital home).
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ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
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Current and former residents of surrounding lots also testi-
fied that they had been required to disclose exterior paint color
for approval by Developer when building their residences.
They all additionally testified to their opinions that the blue
color chosen by Homeowners was a nuisance, an annoyance,
and obnoxious.
Homeowners presented evidence that a board member of
the HOA communicated there were “not currently” any restric-
tions on paint color in the restrictive covenants and that
Homeowners were copied on the communication. The HOA
board member testified that he said “not currently,” because
there were ongoing discussions of rewriting the covenants
to specifically address paint color and clear up any ambigu-
ity in the covenants. However, he and other board members
also testified that Developer had the final say in all improve-
ments, including paint color, until it assigned its interests in
the restrictive covenants to the HOA in July 2015, at which
point, the HOA had the final say in all improvements. Even so,
Homeowners testified that they understood that the covenants
did not include restrictions on paint color before repainting
their house.
5. District Court Judgment
After trial, the district court entered a judgment in favor of
the HOA. The court found that “[t]he evidence showed that
anyone purchasing a lot and erecting a residence at Prairie
Ridge needed to obtain prior approval from [Developer] for
such items including square footage, septic system, paint color,
garage location, etc.” And, the court specifically found that
Homeowners’ painting of their residence was an improve-
ment as a “permanent addition to and for the betterment of
[Homeowners’] residence and the property.” As such, the court
concluded that they needed approval before they could repaint
the residence.
The court also found that the blue color of the residence was
“a nuisance, annoyance, and obnoxious to the eye,” based on
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ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
Cite as 298 Neb. 266
the cumulative testimony of surrounding lot owners express-
ing the opinion that it “clashed with the neighborhood” and
“does not fit in.” The court concluded that this violated several
restrictive covenants. It therefore ordered Homeowners to sub-
mit a substitute color in an earth tone reasonably acceptable
to the HOA by a certain date and then repaint their residence
within 30 days after approval of the substitute color.
Homeowners timely appealed, and we moved the appeal to
our docket.4
III. ASSIGNMENTS OF ERROR
Homeowners assign, reordered, restated, and combined, that
the district court erred when it (1) construed sections 2(a), 15,
and 16 of article I of the covenants to give the HOA the ability
to control the paint color of Prairie Ridge residences; (2) failed
to find that the terms “or other external improvement,” “nui-
sance or annoyance,” and “obnoxious to the eye” were ambigu-
ous; (3) failed to construe ambiguous provisions in a manner
which allowed the maximum unrestricted use of their property;
(4) determined that Homeowners violated sections 2(a), 15,
16, and 14 of article I of the covenants; (5) determined that
the restrictive covenants vested the HOA’s predecessor in
interest with “absolute and sole discretion concerning the use
and makeup of the land”; and (6) ruled that genuine issues of
material fact existed as to whether the painting of a residence
was an “external improvement” or a “repair” and whether exte-
rior paint color may be a “nuisance” or an “annoyance” to the
neighborhood or surrounding lots.
IV. STANDARD OF REVIEW
[1,2] An action to enforce restrictive covenants is equitable
in nature.5 On appeal from an equity action, an appellate
4
See Neb. Rev. Stat. § 24-1106(3) (Reissue 2016).
5
See, Skyline Woods Homeowners Assn. v. Broekemeier, 276 Neb. 792, 758
N.W.2d 376 (2008); Boyles v. Hausmann, 246 Neb. 181, 517 N.W.2d 610
(1994).
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ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
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court decides factual questions de novo on the record and, as
to questions of both fact and law, is obligated to reach a con-
clusion independent of the trial court’s determination.6
V. ANALYSIS
The principal issue in this case is whether Homeowners’
repainting their residence a shade of blue without approval by
Developer violated the restrictive covenants on their property.
Homeowners argue that the restrictive covenants relied upon
by the HOA are silent regarding exterior paint color. In the
alternative, they argue that if the language is ambiguous, the
covenants must be construed against the drafter (Developer)
and its successors in interest.
1. R estrictive Covenants
Our analysis depends upon the meaning of the relevant
restrictive covenants. Thus, we begin by recalling basic prin-
ciples of the governing law.
[3-5] Restrictive covenants are to be construed so as to
give effect to the intentions of the parties at the time they
agreed to the covenants.7 The language of restrictive cov-
enants must be interpreted in its entirety.8 If the language
of a restrictive covenant is unambiguous, the covenant
shall be enforced according to its plain language, and the
covenant shall not be subject to rules of interpretation or
construction.9
[6,7] Thus, as in the interpretation of a contract, a court
must first determine, as a matter of law, whether the language
of restrictive covenants is ambiguous.10 Ambiguity exists in a
6
Mutual of Omaha Bank v. Watson, 297 Neb. 479, 900 N.W.2d 545 (2017).
7
Southwind Homeowners Assn. v. Burden, 283 Neb. 522, 810 N.W.2d 714
(2012).
8
See Wessel v. Hillsdale Estates, Inc., 200 Neb. 792, 266 N.W.2d 62 (1978).
9
Southwind Homeowners Assn. v. Burden, supra note 7.
10
See David Fiala, Ltd. v. Harrison, 290 Neb. 418, 860 N.W.2d 391 (2015).
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document when a word, phrase, or provision in the document
has, or is susceptible of, at least two reasonable but conflict-
ing interpretations or meanings.11
[8] However, as Homeowners correctly argue, ambiguity
must be interpreted in their favor. Restrictive covenants are
not favored in the law and, if ambiguous, should be construed
in a manner which allows the maximum unrestricted use of
the property.12
The district court held that Homeowners violated four
restrictive covenants: article I, sections 2(a), 15, 16, and 14.
Therefore, we must first address whether each covenant is
ambiguous in the light of the entire document and then deter-
mine whether the covenants governed the exterior paint color
of Prairie Ridge residences.
(a) Article I, Section 2
Article I, section 2, is a general use and building restrictive
covenant. That section states in pertinent part:
No residence, building, fence, wall, driveway, patio, patio
enclosure, swimming pool, dog house, tree house, pool
house, antenna, satellite receiving stations, dishes or
discs, flag poles, solar heating or cooling devices, tool or
storage shed, or other external improvement . . . shall be
constructed, erected, placed or permitted to remain on any
Lot . . . except Improvements which have been approved
by [Developer.]
Section 2(a) also requires that any “Lot owner desiring to
erect an Improvement on such Lot shall submit construction
plans to [Developer].” This language is unambiguous.
Homeowners’ residence was “constructed,” “erected,”
“placed,” and “permitted to remain” in 2004. Homeowners
submitted construction plans at that time. The “improvement”
11
See Frohberg Elec. Co. v. Grossenburg Implement, 297 Neb. 356, 900
N.W.2d 32 (2017).
12
Southwind Homeowners Assn. v. Burden, supra note 7.
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ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
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was made at that time. At the time of repainting 10 years later,
Homeowners were not “desiring to erect an Improvement”;
it had been erected 10 years earlier. Sections 2 and 2(a) are
silent as to painting the exterior of a residence. And, exterior
paint, in and of itself, is not something which is typically
“constructed,” “erected,” “placed,” or “permitted to remain”
on land. Thus, we conclude that repainting is not governed by
the plain language of the covenant. This is in line with cases
from other jurisdictions in which courts have found paint color
governed by general use and building restrictions only where
“‘exterior design and color’” or “‘color scheme’” is specifi-
cally referenced in the covenant.13
Nonetheless, the HOA advances three arguments in support
of its allegation that painting the exterior of a residence is an
“external improvement” within the plain meaning of article I,
section 2. None are persuasive.
First, the HOA argues that exterior painting is an improve-
ment, because it is a “‘betterment of real property that enhances
its capital value and that involves the expenditure of labor and
money . . . .’”14 It cites to our opinion in Kalkowski v. Nebraska
Nat. Trails Museum Found., which generally defined the term
“improvements” in two ways; however, our opinion used these
broad definitions in the context of a farm lease agreement
permitting a tenant to remove “improvements” from the land
at the expiration of the lease.15 Here, the covenants define
“external improvements” by the list of examples. And paint or
paint color is simply not in that list. Moreover, the HOA deem-
phasizes critical aspects of our broad definitions in Kalkowski.
Our “betterment” definition spoke not just of enhancement to
13
See, e.g., Village of Pheasant Run v. Kastor, 47 S.W.3d 747, 751 (Tex.
App. 2001). See, also, e.g., West Hill Colony v. Sauerwein, 138 N.E.2d 403
(Ohio App. 1956).
14
Kalkowski v. Nebraska Nat. Trails Museum Found., supra note 2, 290 Neb.
at 805, 862 N.W.2d at 301.
15
Id.
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capital value and expenditure of labor and money, but also
described such an improvement as “‘designed to make the
property more useful or valuable as distinguished from ordi-
nary repairs.’”16 And another definition of “improvements”
spoke of “‘“enhanc[ing] the value of premises permanently
for general uses.”’”17 Repainting does not fit either definition
from Kalkowski. Repainting does not permanently enhance
value. And it amounts to an ordinary, recurring repair. Under
the HOA’s application of Kalkowski, a tenant who painted the
landlord’s barn would be entitled to remove the barn or at least
the paint. That would be absurd. To the extent that the defini-
tions of Kalkowski have any application here, they inform us
that painting is not an “improvement.”
Second, the HOA suggests that this court has already spe-
cifically determined that the painting of the exterior of a resi-
dence is an “improvement” in Tyler v. Tyler.18 But we did so
in an entirely different context, where we attempted to credit a
husband for value personally contributed to a marital home. We
are not persuaded that this has any application in the context of
restrictive covenants.
[9] Third, the HOA argues that Homeowners’ initial disclo-
sure to Developer of their intent to paint their residence blue in
2005 is evidence of the parties’ intent that exterior paint color
is an external improvement. But at oral argument, the HOA
reiterated its argument that the covenants were not ambigu-
ous. Extrinsic evidence is not permitted to explain the terms of
restrictive covenants where they are not ambiguous.19 Instead,
the intentions of the parties must be determined from the docu-
ment itself.20
16
Id.
17
Id. (emphasis supplied).
18
Tyl. v. Tyler, supra note 3.
19
See In re Claims Against Pierce Elevator, 291 Neb. 798, 868 N.W.2d 781
(2015).
20
See id.
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ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
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Because we have determined that exterior paint color is
not subject to the plain language of article I, section 2, we
conclude that Homeowners did not violate the covenant when
they repainted their residence without first seeking and acquir-
ing approval from Developer.
(b) Article I, Section 15
Article I, section 15, states: “No objectionable, unlawful or
offensive trade or activity shall be carried on upon any Lot
nor shall anything be done thereon which may be or become
a nuisance or annoyance to the neighborhood or surround-
ing Lots.” Because there is nothing inherently ambiguous
in this language, we must enforce the covenant by its plain
language.
The covenant’s plain language is limited to trade or activ-
ity on a lot. Nowhere does it describe external paint, color, or
siding as a trade, activity, or something which may be done on
a lot. And, while numerous Prairie Ridge residents opine that
the paint color at issue is a nuisance or annoyance, their opin-
ions cannot vary the plain language of the covenant. We find
no merit to the HOA’s reliance on article I, section 15.
(c) Article I, Section 16
The applicable provision in article I, section 16, prohibits
the “storage of any property or thing that . . . will be obnoxious
to the eye.” Though what constitutes “obnoxious to the eye”
may be subjective, the relevant language of the covenant is not
ambiguous and clearly indicates that it is limited to the “stor-
age” of things on Prairie Ridge lots.
The parties do not contest that exterior paint color is not
something “stor[ed]” on land. Rather, the HOA would appar-
ently have us ignore the limiting language “storage of any
property or thing” to find that the covenant prohibits all things
obnoxious to the eye. This would effectively rewrite the cov-
enant. Therefore, we decline to adopt the HOA’s interpretation
and we adhere to the plain language.
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ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
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Because a residence’s exterior paint color is not something
which is stored on the property, it is not governed by article I,
section 16. Thus, Homeowners did not violate the covenant
when they repainted their residence blue.
(d) Article I, Section 14
The last covenant, article I, section 14, provides: “Each Lot
owner shall comply with all county and state health require-
ments and permits, and observe all rules and regulations of all
lawfully constituted authorities in the use and ownership of
such Lot.”
The district court apparently found Homeowners violated
this covenant by failing to observe the rules provided in the
restrictive covenants listed above, since no other evidence of
alleged noncompliance was presented at trial. But because
Homeowners did not violate any other restrictive covenants
and the evidence does not show any other violations of laws,
rules, or regulations, it necessarily follows that Homeowners
did not violate article I, section 14.
Although the plain language of the restrictive covenants does
not control the color of repainting of an existing residence, the
other residents are not without a potential remedy. Article III,
section 3, states that the covenants “may be amended by and
[sic] instrument signed by the owners of not less than seventy-
five percent (75%) of the Lots covered by [the covenants].” It
is not our function to in effect amend the covenants by inter-
pretation or construction contrary to the plain meaning of the
language used.
2. R emaining Assignment of Error
[10] We do not address Homeowners’ remaining assignment
of error, because it challenges the denial of their motion for
summary judgment. The denial of a motion for summary judg-
ment is neither appealable nor reviewable.21
21
Caruso v. Parkos, 262 Neb. 961, 637 N.W.2d 351 (2002).
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VI. CONCLUSION
The restrictive covenants at issue were not ambiguous and
did not apply to Homeowners’ repainting of their residence.
Because Homeowners did not violate any restrictive covenants,
we reverse, and remand with directions to the district court to
enter judgment in Homeowners’ favor.
R eversed and remanded with directions.
Wright and K elch, JJ., not participating.