Camelback Del Este Homeowners Ass'n v. Warner, CA-CV

Decision Date29 September 1987
Docket NumberCA-CV
Citation156 Ariz. 21,749 P.2d 930
PartiesCAMELBACK DEL ESTE HOMEOWNERS ASSOCIATION, an unincorporated association et al., Plaintiffs/Appellees/Cross-Appellants, v. Ronald H. WARNER and Carolyn Warner, husband and wife, et al., Defendants/Appellants/Cross-Appellees. 287-0151.
CourtArizona Court of Appeals
OPINION

ROLL, Judge.

Defendants/appellants/cross-appellees Ronald H. Warner and others (Warner) appeal from an order of the superior court granting declaratory and injunctive relief to plaintiffs/appellees/cross-appellants Camelback Del Este Homeowners Association and others (Camelback Homeowners). Camelback Homeowners filed a cross-appeal, seeking additional declaratory relief and additional attorneys' fees. The primary issue on appeal is whether the restrictive covenants of a Phoenix subdivision are enforceable against commercial encroachment.

FACTS

Camelback Del Este is a Phoenix subdivision consisting of 83 single-family residences which borders on Camelback Road. The area surrounding the subdivision has undergone tremendous changes over the past three decades. Camelback Road has been widened in this area from two lanes to seven lanes. Whereas thirty years ago East Camelback Road had an average weekday traffic flow of 15,200 vehicles, it now has an average weekday traffic flow of over 50,500 vehicles, the highest daily traffic flow of any street in Phoenix. Camelback Homeowners represents the owners of the 83 residences situated in the subdivision.

The subdivision is subject to deed restrictions which include the following:

4. No structure shall be erected, altered, placed or permitted to remain on any of said lots other than one detached single-family dwelling not to exceed two stories in height, and a private garage not to exceed one story in height for not more than two cars, and a guest house or servant quarters for the sole use of actual non-paying guests or actual servants of the occupants of the main residential building.

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The foregoing restrictions and covenants run with the land and shall be binding on all persons owning any of the said lots in Camelback Del Este until February 25, 1967 at which time said covenants shall be automatically extended for successive periods of ten years each, unless by a vote of a majority of the then owners of the said lots in said Camelback Del Este it is agreed to change the said covenants in whole or in part.

Ronald H. Warner was aware of the deed restrictions of the subdivision. In September of 1983, Warner purchased one of the subdivision lots in the vicinity where a garden-office complex was planned. He then obtained options to buy eight additional lots at the proposed site of the complex. The options were obtained by offering the various owners between $150,000 and $350,000 per residence. Warner's real estate expert testified that the most any home in the subdivision sold for in 1984 was $119,000.

Warner filed an application for a zoning change with the City of Phoenix in connection with the nine lots. Thereafter, on August 12, 1984, Warner met with some of the owners in the subdivision. Warner asserts that no resident stated that they intended to enforce the restrictions and that had any homeowner informed Warner of such intent, the Warners would have amended the rezoning application.

An attorney who resided in an adjoining subdivision discussed the restrictions with Ronald Warner. During August of 1984, the attorney told Warner, "Ron, even if you get the rabbit out of the hat in this thing, and somehow get city council to approve this zoning for commercial office, you still got deed restrictions, and, you know, how are you ever going to get around the deed restrictions?" On October 9, 1984, Warner conducted a poll of all homeowners in the subdivision. The results indicated that Warner lacked substantial support for lifting the restrictions and proceeding with the project. On October 17, 1984, the Phoenix City Council held a hearing regarding Warner's zoning request. One homeowner declared in Ronald Warner's presence at the hearing, "[W]e will not relinquish these deed restrictions without a fight."

On December 5, 1984, Camelback Homeowners filed a complaint seeking declaratory and injunctive relief to enforce the restrictive covenants. On April 24, 1985, with leave of the court, the Camelback Homeowners filed an amended complaint adding a second count which also sought a declaratory judgment that the restrictions were not subject to change until February 25, 1987, and, further, that any changes had to apply to all lots uniformly unless 100% of the homeowners agreed to non-uniform amendment. The amended complaint was apparently precipitated by Warner's circulation of a petition to change the restrictions as to certain lots in the subdivision.

Warner asserts that he will have lost between $350,000 and $400,000 expended on this project if he is not permitted to build the complex. However, only $8,000 was expended before the October 17, 1984, Phoenix City Council hearing regarding the rezoning.

TRIAL COURT'S RULINGS

The trial court refused to permit Warner to file a counterclaim against certain homeowners who attended a meeting to discuss the project and who, Warner alleges, failed to voice their intent to enforce the restrictions.

The matter was tried to the court in May and June of 1985. On January 30, 1986, the trial court granted Camelback Homeowners declaratory and injunctive relief. The restrictions were held applicable to all lots and enforceable against Warner, and Warner was restrained from removing existing single-family dwellings to construct commercial and/or office buildings. The trial court also awarded Camelback Homeowners attorneys' fees of $44,750; they had requested $63,688.50. The trial court did not rule on Camelback Homeowners' request for declaratory judgment as to whether the restrictions could be removed as to some of the subdivision lots without approval of 100% of the homeowners.

ISSUES ON APPEAL

On appeal, Warner raises the following issues: (1) whether the nine lots should have been relieved of the restrictive covenants; (2) whether the trial court should have considered the hardship on the respective parties in determining whether to relieve the nine lots of the covenants; (3) whether Camelback Homeowners is estopped from enforcing the covenants by virtue of its failure to timely manifest opposition to the project; and (4) whether the trial court erred in dismissing Warner's counterclaim against some of the homeowners. Camelback Homeowners cross-appeal, seeking a declaratory judgment that any changes in the restrictive covenants must apply to all residences in the subdivision unless 100% of the homeowners agree to piecemeal exclusion. Camelback Homeowners also seek an increase in attorneys fees awarded.

SEVERABILITY OF RESTRICTIVE COVENANTS

The issue of severing certain lots from operation of restrictive covenants governing a subdivision is not a matter of first impression in this state. In Continental Oil Company v. Fennemore, 38 Ariz. 277, 299 P. 132 (1931), our supreme court held that where the residential character of the entire neighborhood remains substantially intact, the court will not engage in a lot-by-lot analysis to consider the release of a portion of the neighborhood from restrictive covenants. This same principle has been reiterated in Decker v. Hendricks, 97 Ariz. 36, 396 P.2d 609 (1964) ("Decker I"), and Decker v. Hendricks, 7 Ariz.App. 162, 436 P.2d 940 (1968) ("Decker II"). In Continental Oil, the supreme court stated:

It is also a matter of common knowledge and accepted human experience that, if the restrictive bars were let down for appellant in this case, the business encroachment on the remainder of the addition would be a matter of gradual yet steady development against which the home owners would be helpless, and the benefits and protection of the restrictive covenants would eventually be lost to all the co-owners therein.

38 Ariz. at 285, 299 P. at 135. In Continental Oil the supreme court upheld a lower court ruling that a gas station could not be erected on a lot of a subdivision containing restrictive covenants even though the proposed gas station would have been situated at the intersection of East Roosevelt and 7th Street in Phoenix. Continental Oil Company sought relief from the covenants governing the subdivision because of the greatly diminished residential value of the particular lot where the proposed gas station was to be situated. The supreme court stated:

We adhere to the doctrine that the lot of appellant cannot be considered separate and apart from its relation to the entire restricted addition. Though there may be a fringe of property all around the borders of a restricted addition which would be more valuable for business than for residential purposes, this fact alone is not sufficient to warrant the breach of restrictions by these owners.

38 Ariz. at 286, 299 P. at 135 (emphasis added).

In Decker II, this court stated that the test for determining whether restrictive covenants should be enforced is "whether or not the conditions have changed so much that it is impossible to secure in a substantial degree the benefits intended to be secured by the covenants." 7 Ariz.App. at 163, 436 P.2d at 941. In Decker II, the proponents of the business enterprise seeking relief from the restrictive covenants emphasized the "radical and fundamental changes" on the main thoroughfare bordering the subdivision. This court stated:

[S]ince the changed conditions have occurred outside the restricted district, ...

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