Court: Court of Appeals of North Carolina; December 28, 2001; North Carolina; State Appellate Court
William F. Medearis, III and his wife, Pauline Phister Medearis, appeal a trial court's decision granting summary judgment to the Trustees of Myers Park Baptist Church, the C.D. Spangler Foundation, and Queens College regarding a petition for declaratory judgment on their rights to enforce a residential restrictive covenant. The trial court concluded that significant changes in the use of the property effectively rendered the restrictive covenant ineffective, and that the petitioners had waived their right to enforce it.
The case centers on a residential restriction affecting twelve of fourteen lots in Block 37 of the Myers Park subdivision in Charlotte. The petitioners aim to block the expansion of a church complex with the construction of the Cornwell Family Life and Learning Center. The history of the property spans eighty-five years, with the original development by the Stephens Company between 1914 and 1921, establishing residential use restrictions on select lots.
By 1929, ten of the restricted lots had residences, including Lots 9 and 10 owned by the Medearis family. Over the decades, the church acquired several of the restricted lots—specifically Lots 3, 6, and 5—demolishing existing structures and utilizing the land for church-related purposes without seeking waivers of the restrictions. Notably, the church has gradually transitioned the use of these lots from residential to institutional, leading to the current dispute over the enforceability of the restrictive covenant.
In 1991, MPBC acquired Lot 4 and the Withers House, leasing it to Queens College until 2000 for various educational and social functions. In 2000, MPBC agreed to sell the Withers House to Queens College and relocate it to Lot 8. In 1997, the Foundation acquired Lot 12 and the Archer House, donating the lot to MPBC after selling the house for one dollar. The Archer House was removed in 2000, leaving Lot 12 vacant. In December 1998, petitioners purchased Lots 9 and 10 for $880,000 and moved in on October 31, 1999. The Foundation bought Lot 11 and the Baldwin House in November 1999 for $1.6 million, which was demolished on February 2, 2000, to avoid zoning issues for the Cornwell Center. Over approximately eighty years, MPBC has acquired seven of twelve restricted lots, removed or demolished at least five structures, and constructed several buildings for its church complex. The Foundation retains one of the remaining restricted lots, while two lots belong to Queens College, used for parking and classes, and two belong to petitioners for residential use.
On August 3, 2000, petitioners filed for a declaratory judgment to enforce residential restrictions against MPBC, the Foundation, and Queens College. MPBC and the Foundation moved for summary judgment on September 12, 2000, while petitioners dismissed their case against Queens College on September 18, 2000, and later sought summary judgment. A consent motion to join Queens College was filed on September 29, 2000, followed by Queens College's own motion for summary judgment on October 13, 2000. The trial court granted the respondents' motions for summary judgment on October 26, 2000, prompting petitioners to appeal. Summary judgment is appropriate in declaratory judgment actions, and the review standards align with those for denying a motion for summary judgment, focusing on whether there are genuine issues of material fact. An issue is considered material if it could affect the legal outcome of the case or provide a defense, and genuine if supported by substantial evidence.
The moving party must demonstrate that no genuine issue of material fact exists, shifting the burden to the nonmoving party to present specific evidence to establish a prima facie case at trial. Courts will interpret the evidence in favor of the nonmoving party. Restrictive covenants are generally disfavored and ambiguities are construed to favor unrestricted land use, yet they should be reasonably interpreted to reflect the parties' intentions. Such covenants can be enforced similarly to contractual agreements and against grantees of subdivided land under a general development plan. Enforcement is applicable to subsequent purchasers with notice of the restrictions. A general plan of development exists when common restrictions apply to similarly situated lots. Restrictive covenants can be terminated by their own terms or if significant changes undermine their purpose. In the absence of termination, defenses like waiver, estoppel, or laches may still be employed. Notably, intermittent violations do not waive enforcement rights. The analysis of whether a covenant has been terminated must consider the record for termination provisions and assess any radical changes in the property’s use. Specific lots are examined for compliance with the covenants and their current uses, with certain lots being used for residential purposes and others designated for parking, indicating varied adherence to the restrictions.
Three of the twelve lots in Block 37, which are subject to residential restrictions, are currently used for parking. While North Carolina courts have previously ruled that parking does not necessarily constitute a radical change that would nullify residential covenants, the determination is case-specific. In H.L. Mills v. HTL Enters., the court differentiated a similar situation where only one lot was in violation, concluding it did not undermine the covenant. Conversely, in Tull v. Doctors Bldg. Inc., despite seven out of eighty-five lots being used for parking, the court found the change insufficient to void the restrictions, as it involved only a small percentage of the restricted lots. In the current case, however, a quarter of the lots in Block 37 are used for parking, suggesting a more significant violation.
Additionally, Lot 13, once the Wilkes Riley House, has been converted into a vehicle turn-around for church use, which also violates the covenant. Lots 3 and 14A have been openly utilized for offices and classrooms since the mid-20th century, further violating the residential restrictions. These cumulative uses contribute to the assessment of whether a radical change has occurred in Block 37 that undermines the essence of the restrictive covenant. Historically, in 1929, ten of the twelve lots had residences, highlighting a shift in use over time.
Lot 4, previously occupied by the Withers House, was leased to Queens College and is now vacant following the house's relocation to Lot 8. Lots 6, 11, and 12, once home to residential structures, are now also vacant after the Pressley House, Baldwin House, and Archer House were demolished or moved to facilitate the construction of the Cornwell Center. Currently, Lots 5, 7, and 8 are improperly used for parking, and Lot 13 serves as a vehicle turn-around for church activities, all in violation of a restrictive covenant. Lots 3 and 14A are utilized as offices and classrooms by MPBC, again violating the covenant. In total, six of the twelve lots in Block 37 are in clear violation of residential restrictions, while four others (4, 6, 11, and 12) stand vacant.
The court found that the changes in Block 37 were significant enough to undermine the original agreement's purposes, justifying the granting of summary judgment for the respondents. The residential restrictions, intended to protect community welfare, have been rendered ineffective due to the radical transformation of the area. The precedent set in Muilenburg v. Blevins is cited, where the Supreme Court upheld the termination of a residential restriction due to significant neighborhood changes. Similar circumstances apply to Block 37, leading to the conclusion that the residential restriction is no longer valid.
In Starkey v. Gardner, the court addressed a dispute between property owners over covenants that prohibited commercial development in a subdivision. The defendant sought to build a structure that violated these covenants, prompting the plaintiff to seek an injunction. The trial court found that over eighty percent of lot owners had waived the restrictions by constructing businesses, thereby terminating the covenants. The adjacent road had also evolved into a major thoroughfare, increasing its value significantly.
The North Carolina Supreme Court affirmed the trial court's ruling, noting that even if the summary judgment regarding the termination of the residential restriction was erroneous, the petitioners had waived their right to enforce the covenant. Waiver is defined as the intentional relinquishment of a known right, and it serves as an affirmative defense that must be adequately pleaded under Rule 8(c) of the North Carolina Rules of Civil Procedure. The respondents' answers demonstrated that the petitioners had acquiesced to non-residential uses of the restricted lots over time, thus satisfying the pleading requirements.
The court concluded that the petitioners had effectively waived their right to enforce the residential restrictions, as neither an express waiver nor a dispute of fact regarding waiver was present in the record.
Determination of implied waiver by conduct is central to the case. A waiver is considered implied when a party's conduct leads another party to reasonably believe the right has been waived. In a precedent case, Rodgerson v. Davis, plaintiffs sought to prevent the construction of duplexes on property governed by restrictive covenants. Despite having violated the same covenants themselves, the court ruled that all parties had waived their rights to enforce the set-back restrictions.
In the current case, petitioners learned of MPBC’s plans for the Cornwell Center in June 1998 and purchased their home in December 1998. Mr. Medearis later circulated a petition to oppose a zoning variance but indicated it would not prevent construction, only limit its size. The petitioners moved into their home in October 1999, and by November 1999, the Foundation purchased Lot 11 and demolished a house to avoid the variance requirement. Mrs. Medearis expressed to the church that they did not oppose the construction of the Cornwell Center. Petitioners raised the issue of enforcing residential restrictions for the first time in May 2000, after numerous negotiations with MPBC to modify the building plans. These negotiations included fifty-five meetings, during which no requests to halt construction were made. The Foundation incurred substantial costs related to the construction, including purchasing and demolishing property.
MPBC committed $100,000 to Queens College to facilitate the relocation of the Withers House, enabling the construction of the Cornwell Center. The trial court determined that petitioners waived their rights to enforce residential restrictions due to their conduct, which led respondents to reasonably believe that petitioners would not challenge the nonconformity. Enforcing the restrictions would impose significant hardship on respondents, who had already incurred substantial expenses prior to the lawsuit. Consequently, the trial court’s decision to grant summary judgment in favor of respondents was upheld, declaring the residential restrictions for Block 37 terminated due to significant changes undermining their purpose. Even if the restrictions were valid, the petitioners had waived their right to enforce them. The ruling was affirmed with concurrence from Judges WYNN and McCULLOUGH.
