STORY B & B, LLP v. BROWN COUNTY AREA PLAN COM'N

• Decision Date: 16 December 2004
• Docket Number: No. 07S01-0402-CV-53.,07S01-0402-CV-53.
• Citation: 819 N.E.2d 55
• Court: Indiana Supreme Court
• Parties: STORY BED & BREAKFAST, LLP, Appellant (Plaintiff below), v. BROWN COUNTY AREA PLAN COMMISSION, Appellee (Defendant below), and Patricia N. March, Appellee (Intervener-Defendant below).

819 N.E.2d 55

STORY BED & BREAKFAST, LLP, Appellant (Plaintiff below), v. BROWN COUNTY AREA PLAN COMMISSION, Appellee (Defendant below), and Patricia N. March, Appellee (Intervener-Defendant below).

No. 07S01-0402-CV-53.

Supreme Court of Indiana.

December 16, 2004.

Steven K. Emery, Holly M. Harvey, Bloomington, IN, for Appellant.

David B. Schilling, Bloomington, IN, Michael A. Mullett, Indianapolis, IN, for Appellees.

Karen L. Arland, Indianapolis, IN, for Amicus Curiae Indiana Municipal Lawyers Association.

BOEHM, Justice.

We hold that covenants imposed by the Brown County Area Plan Commission as conditions for approval of a planned unit development are enforceable against a subsequent purchaser of property subject to the PUD.

Factual and Procedural Background

The property involved in this case originally consisted of approximately twenty-two acres containing a restaurant and mill in an area zoned for commercial use, and a number of houses used as rental and boarding units in areas zoned for residential use. In 1986, Story Group Inc. requested the Brown County Plan Commission and the County Commissioners to designate over seven acres as a Planned Unit Development (PUD) to permit operation of a "bed and breakfast" which would take guests by reservation only.¹ After a hearing, Story Group and the Plan Commission met in a "work session" in which they discussed sixteen proposed restrictions on the property. The Plan Commission's "Primary Approval" on June 24, 1986 recited that Story Group's proposed plat "is granted primary approval subject to the following conditions: See list of covenants attached ..." The attached "covenants" listed fourteen provisions from the work session, including "(3) No outside loud speakers or audio equipment will be used for any reason what so ever [sic]," "(4) No overnight camping will be allowed within the PUD or in any of it's [sic] parking areas," "(5) No excess noise or excess lighting shall be allowed and all exterior lighting will be ... turned off at 10:00 P.M.," and "(10) The owner agrees to obtain all necessary State and Local permits, inspections, approvals and license [sic]." On September 23, 1986, the Plan Commission recommended secondary approval "subject to covenants as approved in Primary hearing." Subsequently, the Brown County Board of Commissioners unanimously approved the PUD "as submitted with covenants."

The PUD was modified in 1992 to include the entire twenty-two acre tract of land, but retained essentially the same provisions. The Plan Commission unanimously gave "primary" and "secondary" approval of the 1992 application subject to four additional "conditions" and "[s]ubject to the previously approved covenants." The "covenants" from both the 1986 and 1992 approvals were retained in the Plan Commission's office and were available for inspection, but were never recorded in the office of the county recorder.

Story Group Inc. went into receivership on December 6, 1998, and on that date Frank Mueller took possession of the Story Property. Mueller and Rick Hofstetter, two individuals who had no affiliation with Story Group, Inc., have been operating the property in one form or another ever since. The record does not make clear Mueller's and Hofstetter's initial arrangement, but it is clear that Dubois County Bank, a mortgagee of the Property, acquired title at a sheriff's sale on February 14, 1999 and deeded it to Mueller on May 18, 1999. On August 3, 1999, Mueller transferred the property to Story B & B, LLP ("B & B"), a partnership of Hofstetter and Mueller. Prior to the bank's transfer to Mueller, Mueller and Hofstetter were aware that the property was designated a PUD, but were apparently unaware of the specific requirements.² No one from B & B contacted the Plan Commission's office to inquire about the PUD or made any other effort to discover any possible conditions attached to the PUD approval.

Between December, 1998, and September, 1999, B & B expended more than $100,000 in improvements on the Story Property, including repairing leaking roofs, rotting floors, and electrical problems, removing lead based paint, increasing cooler space in the kitchen, conversion of the mill on the property to a bar and grill, and construction of a wooden deck designed for dining, an outdoor public restroom and a storage addition to the mill. In that process, beginning at least on May 3, 1999, B & B asked Doug Harden, then acting Director and Building Inspector for the Plan Commission, for assistance in securing permits from the State to construct a new septic field. On May 4, 1999, Mueller applied for a building permit from the Plan Commission. Joan Wright became director of the Plan Commission and of the Brown County Area Board of Zoning Appeals at some point between May and September 1999. According to her, although B & B received building and septic permits, it failed to obtain "improvement location permits or certificates of occupancy for the bar and grill or for the outdoor food preparation facility."

In September, 1999, Wright sent B & B a copy of the PUD restrictions under cover of a letter stating that the "PUD does not permit use of the Mill building as a bar and grill. It is designed as a shop/Office/B & B unit and any other use of the building violates the terms of the PUD. Further, any use of or on the property which is not specified in the PUD violates the conditions of approval." In May 2000, Wright advised B & B that the PUD also contained prohibitions against "primitive camping" and amplified music. At least since the spring of 2000, B & B has hosted a number of events on the property throughout the year including Story Fest in the spring and October Fest in the fall. In 2000, Story Fest drew 1,500-2,000 people and October Fest doubled that attendance. These festivals involved bringing in artists and musicians for a day of music, arts and crafts, food, and libations. After the 2000 Story Fest the Plan Commission received complaints from B & B's neighbors that the festival included amplified music audible from neighboring properties, used a portion of the grounds as an amphitheater, used a building designated as a picnic shelter as a stage, and allowed overnight camping.

In April 2001, B & B filed a Petition for Declaratory Judgment and sought a preliminary injunction against the Plan Commission's enforcement of the requirements of the PUD. After one half day the hearing was adjourned without resolution due to the court's other scheduled commitments. In May 2001, a neighbor of the property, Patricia March, was granted leave to intervene in the dormant lawsuit. The Plan Commission then counterclaimed for declaratory judgment and moved for summary judgment. B & B responded with its own motion for summary judgment. The parties' contentions focused on the terms "conditions" and "commitments" as they appear in the PUD statutes explained below. The Plan Commission argued that the Story Property was subject to the PUD, that the restrictions in the PUD constituted valid "conditions," and that B & B was in violation of these conditions. B & B asserted that the restrictions were "commitments," and under the applicable statute, were not enforceable against B & B because they were not recorded. In the alternative, B & B contended that the Plan Commission was estopped from enforcing the PUD by reason of its grant of the building permit.

In the meantime, in preparation for October Fest 2001, B & B spent an additional $250,000 on musicians, artists, and advertising. In an attempt to comply with the PUD covenants, B & B planned to end the music at October Fest 2001 at 9:50 p.m., place speakers inside the barn that housed the stage, provide shuttle service to alleviate traffic congestion, add security, and disallow overnight camping. October Fest 2001 then proceeded without interference.

After a December hearing on the cross motions for summary judgment, the trial court found that most of the PUD restrictions at issue were phrased as directives, but observed that some others were phrased as "agreements" by the developer.³ The trial court ruled that at least the restrictions framed as directives were "conditions" and therefore did not need to be recorded. The trial court found that questions of fact remained as to what the Plan Commission discovered during the inspection of the property pursuant to the issuance of the improvement location permit, what B & B told the Plan Commission, and what representations, if any, were made by the Plan Commission at that time. Accordingly, the trial court left for trial whether the Plan Commission was equitably estopped from enforcing the restrictions against outdoor food preparation and use of the mill as a grill and tavern. The trial court left for trial whether the conditions were required to be recorded pursuant to the Brown County ordinance discussed below, whether this requirement prohibits enforcement of the restrictions, and whether B & B has violated the PUD. At B & B's request the trial court certified its order on summary judgment for interlocutory appeal.

The Court of Appeals concluded that it was impossible to draw a meaningful line between "conditions" and "commitments" and focused on whether B & B had reasonable notice of the land use restrictions. Story Bed & Breakfast, LLP v. Brown County Area Plan Comm'n, 789 N.E.2d 13, 17-18 (Ind.Ct.App.2003). The Court of Appeals held that placing the restrictions in the minutes of the plan committee meetings did not provide B & B reasonable notice and therefore the restrictions were unenforceable. Id. at 20. Clarifying its earlier holding on rehearing, the Court of Appeals rejected the Plan Commission's claim that B & B's knowledge of the PUD designation put B & B on inquiry notice of the specific terms of the conditions. Story Bed & Breakfast, LLP v. Brown County Area Plan Comm'n, 794 N.E.2d 519, 523 (Ind.Ct.App.2003). We granted transfer. Story Bed & Breakfast, LLP...