Conlin v. Upton, Docket No. 322458.

Decision Date24 November 2015
Docket NumberDocket No. 322458.
Citation881 N.W.2d 511,313 Mich.App. 243
PartiesCONLIN v. UPTON.
CourtCourt of Appeal of Michigan — District of US

Bredell & Bredell, Ypsilanti (by John H. Bredell ) for plaintiffs.

Soble Rowe Krichbaum LLP, Ann Arbor (by Matthew E. Krichbaum ) for defendants.

Before: M.J. KELLY, P.J., and MURRAY and SHAPIRO, JJ.

PER CURIAM.

In this real property dispute, plaintiffs, Philip F. Conlin, Jerry L. Helmer, Ruthann Helmer, John D. McCullough, and David G. Helmer (collectively, the Developers), appeal by leave granted the trial court's final judgment and order, which the trial court entered after the jury returned a verdict in favor of defendants, Dixboro Farms Property Owners Association (the Association) and the Association's officers and directors, Tom Upton, Tim Haller, Chris Conlin, Barbara Haller, and David Baker (collectively, the Officers). The Developers and the Officers each own or owned real property in a residential development known as Dixboro Farms. Dixboro Farms had 34 total lots. During the events at issue, the Developers owned 11 undeveloped lots, which they hoped to sell to third parties. The present dispute arose after the Association adopted bylaws that required the lot owners to submit plans to the Association's architectural review committee for approval before any new construction or renovation. The Developers sued, in part, to prevent the Officers and the Association from enforcing the bylaws in a way that restricts their right to develop their lots. For the reasons explained below, we reverse the jury's verdict, vacate the judgment, and remand for further proceedings.

I. BASIC FACTS

Philip Conlin testified that he and others purchased “just over ninety” acres of land in 1998 or 1999 and split the land into lots for development as Dixboro Farms. The land gently sloped down from north to south. The north end of the property had nicer features—it was hilly, wooded, and has a seasonal creek. The south end, however, abutted an easement with 200–foot–high towers for power lines. Accordingly, the northern lots were more expensive than those on the south end of the development.

Philip Conlin stated that he and his codevelopers established a set of restrictions and protective covenants for the development and recorded them in January 2001. The restrictions and covenants served as a “roadmap to any prospective purchaser” and helped define the “future use” of the land. He placed a restriction in the covenants that required a prospective purchaser to obtain his permission—in his role as the developer—before building on any parcel. He required the purchaser to provide him with plans, and had the right to determine whether the proposed home was harmonious with the development as a whole. Philip Conlin rejected more proposals with this development than he had rejected in any of his previous developments; he was surprised by the number of people who wanted to buy a $200,000 lot and then build a $100,000 home. “I mean, I had more people that were just so off base with what they thought that I would allow there but still knew the high quality of the development and thought that paying for the land would raise up their value of the inferior structure that I wouldn't allow to be built.”

The covenants included a provision for the formation of a property owners association, which Philip Conlin incorporated in 2007. The covenants provided that Philip Conlin would appoint the board of directors for the association after the sale and development of 50% of the lots. The members had the right to elect the board of directors after the sale of 90% of the lots.

William Farley testified at his deposition, which was read into the record at trial, that he was one of the first purchasers in Dixboro Farms. As one of the first to build, he felt he was setting “the standard for the development” and was “very concerned” about building a house that might not be “compatible with what was going to be built in the remaining lots.” He did not want to build a high-end home only to have “mid-level tract homes” follow. The lots were priced at the high end—around $150,000 to $200,000—which suggested to him that the whole development would be high-end. Farley spoke with Philip Conlin about his concerns. He submitted plans to Philip Conlin for a home that was between 3400 and 3800 square feet in size, had a four-stall garage, and was four-sided brick. Philip Conlin told him that the plans reflected ‘precisely what we want the Dixboro Farms subdivision to be.’

Philip Conlin confirmed on cross-examination that there were no new homes built in Dixboro Farms from 2006 through 2009 because the real estate market had taken a turn for the worse. However, he approved two new homes—referred to as the Guenther homes—for construction in 2010. After the completion of the homes later that year, Philip Conlin learned that many of the existing homeowners were upset about the new homes. They were dissatisfied with the homes and felt that they were not in harmony with the quality of the existing homes.

There was, according to Farley, “a lot of discussion among the neighbors” about the new homes; they had invested several hundred thousand dollars in their own homes and were worried that if the remaining lots were built with similar housing to the Guenther homes, it would dramatically alter the character of Dixboro Farms. Timothy Haller, who also owned a home in Dixboro Farms, explained that there was “a groundswell of dissatisfaction that these homes had been erected....” Farley said the neighbors all thought the new homes were not in harmony with the previous 11 homes: they “were typical low-end, middle, medium-type tract homes, no brick and mortar, no architectural definition, lots of shingles, exposed roof lines, vinyl-sided.” Farley felt that Philip Conlin had backed away from his earlier representation about the character of Dixboro Farms when he approved those homes. Haller similarly testified that the Guenther homes were “not even close” to the homes that were built over the “prior ten years.” Because the neighbors now had “trust issues” with Philip Conlin, Farley stated that they met to consider how they might exercise some influence over future development.

In December 2010, Chris Conlin, who is Philip Conlin's cousin and a homeowner in Dixboro Farms, sent an e-mail to Philip Conlin requesting that he appoint the board of directors for the Association and call a meeting of the homeowners. Chris Conlin wrote that it was “understood” that the new board would form an architectural committee at this first meeting and that the residents would “move to amend” the covenants to include ‘preferred three sides brick’ in the language.” Philip Conlin appointed the Association's first board of directors later that month.

The homeowners met in January 2011. All the homeowners in attendance at the meeting signed a letter with a summary of their position, which was sent to Philip Conlin. In the letter, which is misdated January 2010, they expressed their gratitude to Philip Conlin for establishing and developing Dixboro Farms. They noted that they had reached a consensus on “a number of issues” and were sending him the letter to “inform” him about their decisions and seek his “concurrence in the progress and basis of continuing cooperation.” They wanted to elect their own board for the Association and they expected him to “concur” with this decision. The homeowners also “acted to appoint” an architectural control committee to “cooperate and assist in maintaining architectural harmony of the subdivision.” They wrote that the committee's duties would be defined in cooperation with him. Finally, the homeowners stated that they intended to develop bylaws for the Association. The homeowners closed the letter with a request that he sign the letter to indicate his “acceptance and acknowledgement” of the newly formed Association.

Philip Conlin signed the letter and dated it January 14, 2011. He conceded at trial that he had signed the letter and acquiesced to the homeowners' decision to elect their own board of directors for the Association, notwithstanding his continued right to appoint the board.

Haller testified that the Association hired a lawyer, Walter Hamilton, to advise it on the adoption of bylaws. In June 2011, Haller hosted a meeting of the property owners to consider a proposed set of bylaws. Haller stated that the debate centered on the “purpose of the bylaws and protecting our property values moving forward....” Philip Conlin and Jerry Helmer attended the meeting and actively opposed the adoption of the bylaws, but a majority approved them.

The Association's bylaws established an architectural review committee and, in relevant part, prohibited the Association's members from commencing, erecting, or maintaining on “any Lot” a “building, fence, wall, deck, swimming pool, out-building or other structure, original landscaping on new construction or exterior improvement” without first obtaining the committee's approval. Under § 3 of that same article, a lot owner had to submit a $2,000 fee with a set of required plans. Although the committee had the authority to deny a plan that violated the original covenants or restrictions, it could also deny the plan on the basis of “dissatisfaction with the effect of the proposed construction on the harmonious development” of Dixboro Farms. The bylaws included guidelines that the committee was to enforce “to insure that all construction in the subdivision is in harmony with the character of the subdivision as it develops. The Association's lawyer recorded the bylaws in December 2011.

In December 2011, Philip Conlin submitted a proposed plan of development for a lot to the Association. In his cover letter, he stated that he was submitting the plans as part of the review that he was required to perform as the developer, but he invited the Association's comments and...

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