Cocks v. Swains Creek Pines Lot Owners Ass'n

• Citation: 2023 UT App 97
• Docket Number: 20200961-CA
• Decision Date: 24 August 2023
• Parties: Arthur W. Cocks and Julie L. Cocks, Appellees, v. Swains Creek Pines Lot Owners Association, Appellant.
• Court: Utah Court of Appeals

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2023 UT App 97

Arthur W. Cocks and Julie L. Cocks, Appellees,
v.
Swains Creek Pines Lot Owners Association, Appellant.

No. 20200961-CA

Court of Appeals of Utah

August 24, 2023

Sixth District Court, Kanab Department The Honorable Marvin D. Bagley No. 170600114

Bruce C. Jenkins, Kimball A. Forbes, and Kathryn Lusty, Attorneys for Appellant

J. Bryan Jackson, Attorney for Appellees

Justice Jill M. Pohlman authored the lead opinion, in which Judges Ryan M. Harris and Ryan D. Tenney concurred. ^[1]

Judge Ryan D. Tenney authored a concurring opinion, in which Judge Ryan M. Harris concurred.

POHLMAN, JUSTICE:

¶1 Swains Creek Pines Lot Owners Association appeals the district court's judgment in which it ruled that Arthur and Julie Cocks are entitled to continue using their two lots "for RV

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purposes until such time as there is a change of use." We reverse, vacate, and remand for further proceedings.

BACKGROUND^[2]

¶2 The Cockses, as trustees of the Cocks Family Trust, own two lots in the subdivision known as Swains Creek Pines Unit No. 3 (the subdivision), located in Kane County, Utah.^[3] When they acquired the lots via warranty deed in July 2014, the lots consisted of "undisturbed mountain forest land." They later placed an RV on their lots.

¶3 The Cockses' interest in the lots is subject to the subdivision's conditions, covenants, reservations, and restrictions (the CC&Rs). The Swains Creek Pines Lot Owners Association (the Association) is a nonprofit corporation that, through its board of directors (the Board), has controlled the enforcement of the CC&Rs since 1998. The Association also has adopted written guidelines, rules, and regulations applicable to the larger Swains Creek Pines community. One of those rules-Rule 16-provides, "All structures, including cabins, trailers, garages, sheds, decks, stairs, shelters, etc. shall be kept in safe and good repair." (Emphases added.)

¶4 Sometime after the Cockses purchased the lots, controversy arose among some lot owners over the placement of RVs and trailers (collectively, RVs) on the lots in the subdivision.

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Some owners used, or supported the placement of, RVs on at least some of the lots. Other owners opposed RV use and instead supported the use of all lots "for cabins only." Both sides demanded that the Board "take action."

¶5 In response, the Board enacted a resolution in October 2016 (the 2016 resolution) stating that the CC&Rs "do not allow for placement of RV's on lots" within the subdivision.^[4] In support of its conclusion, the Board cited paragraph 1 of the CC&Rs, which states that the lots "are for single-family residential purposes only" and are to be used and "held in such a way as to preserve and enhance their pastoral, scenic beauty as mountain cabin residential recreational sites." Notably, paragraph 1 further states, "No improvement or structure whatever, other than a first class private dwelling house, patio walls, swimming pool, and customary outbuildings, garage, carport, servants' quarters, or guest house may be erected, placed, or maintained on any lot in [the subdivision]."

¶6 Despite its conclusion that the CC&Rs do not allow for the placement of RVs on lots within the subdivision, the Board adopted an enforcement policy in the 2016 resolution to address the lot owners who had already placed RVs on their lots. Specifically, as a "compromise," the Board resolved that the Association would not "pursue enforcement action" against current owners of "[p]rior [n]on-conforming [l]ots" and that RVs could remain on those lots until their current owners sold the lots to someone other than an immediate family member. Thus, under

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the 2016 resolution, the Cockses were allowed to keep the RV already placed on their lots, but they could not sell their lots for RV use to an unrelated third party.

¶7 In November 2017, the Cockses filed suit against the Association, challenging the Board's interpretation of the CC&Rs that led to its adoption of the 2016 resolution.^[5] Believing that their lots were more valuable as lots that allow RV use rather than as lots restricted to cabin use, the Cockses sought, among other things, a declaratory judgment "construing the CC&Rs" "to allow for the use of trailers and RVs."

¶8 The Cockses also asserted that they were harmed by the 2016 resolution's enforcement compromise, preferring that the Board adopt a change-in-use standard rather than the standard involving a sale to an unrelated third party. Under a change-in-use standard, the Cockses would be able to sell the lots for RV use not only to family members but also to third parties. In response to the lawsuit, the Association asserted affirmative defenses, including that a statutory business judgment rule barred some or all of the Cockses' claims.

¶9 The Association eventually sought summary judgment on the ground that the plain language of the CC&Rs did not allow for the lots within the subdivision "to be used as RV/trailer lots." The Cockses countered that the Association's plain language argument was undermined by the CC&Rs' lack of express language prohibiting RV use and by the Association's history of permitting the placement of RVs on subdivision lots. The district court denied summary judgment and reserved for trial "any issues concerning the plain language of the CC&Rs and the

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Association's past course of dealing." The matter then proceeded to a three-day bench trial, after which the court issued a written decision.

¶10 As to the question of whether the CC&Rs allow or preclude RV use, the district court rejected the Association's position that the CC&Rs unambiguously prohibit RVs in the subdivision. The court reasoned that "nothing in the CC&Rs . . . expressly prohibits RV use"; rather, the language in the CC&Rs "is ambiguous as to whether RV use is prohibited." It explained that the use of the word "cabin" in paragraph 1 of the CC&Rs "does not expressly exclude RVs or trailers," nor does the phrase "first class private dwelling house." Indeed, "[t]he words 'RV' or 'trailer' are not even used . . . in paragraph 1." The court also deemed it significant that "such words were not included in the sentence which prohibits what can 'be erected, placed or permitted or maintained' in the subdivision."

¶11 The district court then turned its attention to the evidence presented at trial regarding the historical use of RVs on lots in the subdivision. The court noted that the Cockses presented testimony from association members who had placed RVs on their lots since the 1970s. Those members testified that they did so "for long periods of time . . . without ever being told or confronted by board members that they could not make such use of their property." Further, some members recounted that "they had specifically been told by realtors, contractors, association members and board members[] that RV use was allowed." In contrast, the Association presented testimony from other members "who were insistent they had been told by everyone concerned that all lots in [the subdivision] were limited to cabin development," which they understood as "stick built structures from the ground up, placed on a foundation." The court ultimately found that buyers and owners "were told what they wanted to hear" relative to RV use in the subdivision. It also found that the Association "was fully aware" of these conflicting

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messages and that the Association's position was the CC&Rs "allowed RV use on lots owned by lot owners who supported RV use" and the CC&Rs "prohibited RV use on lots owned by lot owners opposed to RV use."

¶12 Regarding enforcement, the district court noted that some former board members testified that the Association "took no action to prevent the use of lots for RV purposes." The court found that "this lack of enforcement action" was "consistent with the interpretation that the CC&Rs allow RV use." The court further reasoned that the Association's "inconsistency" regarding whether the CC&Rs prohibited or allowed RV use "supports the Court's finding of ambiguity" in paragraph 1 of the CC&Rs.

¶13 With this evidence in mind, the court next addressed the Cockses' contention that the Association had waived any right it may have had to enforce the CC&Rs to preclude RV use. In response to that argument, the Association had insisted that the court could not find waiver because there was no evidence that the Association had intentionally chosen not to enforce the RV prohibition. The Association also cited an antiwaiver clause in paragraph 22 of the CC&Rs, which provides that the Association has the right to compel compliance with the CC&Rs but that "[n]o delay or omission on the part of the [Association] . . . in exercising any rights, power, or remedy herein provided, in the event of any breach of [the CC&Rs] . . ., shall be construed as a waiver thereof or acquiescence therein."^[6]

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¶14 Without addressing the antiwaiver clause, the district court rejected the Association's counterargument on the grounds that "it comes too late" and that the Cockses "were entitled to rely upon the interpretation of the CC&Rs the association adopted prior to the adoption of the . . . 2016 resolution." The court explained that ever since the Cockses purchased their lots, they had been allowed to place an RV on them and could have "sold their property, for RV use, to someone outside their immediate family," but that the Association is "taking those rights away" under a "new interpretation of the CC&Rs." The court determined that the Association "cannot now change horses in mid stream to deprive [the Cockses] of the full use of their property."

¶15 Finally, the court addressed the Association's business judgment rule defense rooted in Utah Code section 57-8a-213. The court determined that the statute provides the Association "with the authority it claims for prospective application of the board's...