Deep Water Brewing v. Fairway Resources Ltd.

• Decision Date: 10 September 2009
• Docket Number: No. 27024-6-III.,No. 27014-9-III.,27014-9-III.,27024-6-III.
• Citation: 215 P.3d 990,152 Wn. App. 229
• Parties: DEEP WATER BREWING, LLC, a Washington limited liability company; Robert D. Kenagy and Roberta D. Kenagy, husband and wife, and the marital community composed thereof, Respondents, v. FAIRWAY RESOURCES LIMITED, a Washington limited liability company, and John Does 2-42, Defendants, Key Development Corporation, a Washington corporation; Key Bay Homeowners Association, a Washington nonprofit corporation; Jack A. Johnson and Jane Doe Johnson, husband and wife, and the marital community composed thereof; and Michael Taylor and Patricia Taylor, and the marital community composed thereof, Appellants.
• Court: Washington Court of Appeals

215 P.3d 990

152 Wn. App. 229

DEEP WATER BREWING, LLC, a Washington limited liability company; Robert D. Kenagy and Roberta D. Kenagy, husband and wife, and the marital community composed thereof, Respondents, v. FAIRWAY RESOURCES LIMITED, a Washington limited liability company, and John Does 2-42, Defendants Key Development Corporation, a Washington corporation; Key Bay Homeowners Association, a Washington nonprofit corporation; Jack A. Johnson and Jane Doe Johnson, husband and wife, and the marital community composed thereof; and Michael Taylor and Patricia Taylor, and the marital community composed thereof, Appellants.

No. 27014-9-III.

No. 27024-6-III.

Court of Appeals of Washington, Division 3.

September 10, 2009.

Stephan E. Todd, Attorney at Law, Bothell, WA, Robert B. Jackson, Attorney at Law, Bellevue, WA, for Appellants.

Paul S. Kube, Julie K. Norton, Ogden Murphy Wallace PLLC, Wenatchee, WA, for Respondents.

SWEENEY, J.

¶ 1 This suit follows a dispute between a developer and a restaurant owner. The restaurant owner's predecessor in interest granted the developer a right-of-way in exchange for money and the developer's promise to restrict the height of houses in the development so as not to impair the view of Lake Chelan from the restaurant building. The trial court concluded that the developer ultimately breached that agreement and that the development's homeowners association and its president tortiously interfered with the agreement. The court awarded the restaurant owner damages and attorney fees. We conclude that the restaurant owner was entitled to enforce the height restriction covenant as one that runs with the land. We also uphold the tort liability of the homeowners association president and the association. We remand for the court to revisit the attorney fees and for entry of necessary findings and conclusions to support any award of attorney fees and costs.

FACTS

¶ 2 History. Cindy Smith and Robert Ahlquist (Ahlquist) are siblings. They owned and operated the Cosina del Lago Restaurant overlooking Lake Chelan in Washington state. The dining room was on the second floor of the building and the lounge was on the first floor. The land between the restaurant building and the lake was a mature apple orchard.

¶ 3 Jack Johnson is the sole shareholder and president of Key Development Corporation. David Milne was president of Fairway Resources, Ltd. They wanted to develop the property between the restaurant and the lake for single family housing. But any development required access over Ahlquist's property. Toward that end, Mr. Johnson presented Ahlquist with a signed easement that included a provision that "[a] restrictive covenant shall be placed on the face of the plat to be developed by Fairway stating the [sic] no building will be constructed that will obscure the view from Cosina del Lago Restaurant." Ex. 37; Clerk's Papers (CP) at 639 (I Finding of Fact¹ (FF) 1.18). The proposed easement covered only the upper floor (the restaurant) view and so Ahlquist refused to sign.

¶ 4 Ahlquist referred the matter to their attorney. He drafted an easement agreement and included protection for the view from the lounge:

The Corporation warrants and covenants that it shall establish and monitor compliance with all necessary building covenants in its development so as to not affect the sight or views from Cosina del Lago restaurant to the lake. There shall not be any homes or structures in the development that interfere with the view of the lake from the restaurant or its lounge.

Ex. 2; CP at 640 (I FF 1.20). The new document was entitled "Do Not Record Agreement" but amounted to an easement across Ahlquist's property. Ahlquist's attorney titled the document "Do Not Record Agreement" because he was "concerned about the character of the individuals we were dealing with" and wanted to ensure that all compensation and consideration for the right to the easement was received before recording. Report of Proceedings (RP) at 49. Ahlquist, Mr. Johnson, and Mr. Milne all signed the agreement.

¶ 5 The City of Chelan rejected the easement. It required a dedicated right-of-way before it would approve the development. Mr. Johnson drafted a right-of-way and presented it to Ahlquist. But he again left off the words "or its lounge" when addressing protection for the view from the restaurant building. CP at 640 (I FF 1.23); Ex. 40 ¶ 8. Ahlquist refused to sign the document, in part because of Mr. Johnson's failure to provide protection of the view from the downstairs lounge. Ahlquist added back in the "or its lounge" language and the parties then signed the right-of-way agreement on October 23, 1995. The right-of-way agreement incorporated all of the previous terms of the easement agreement. Mr. Johnson signed the agreement granting the right-of-way both individually and in his capacity as president of Key Development.

¶ 6 Key Development then purchased the orchard property on March 2, 1996. The right-of-way was deeded to Key Development on April 23, 1996. The parties understood that the right-of-way agreement was to be recorded with the plat, but it never was. The preamble to the right-of-way agreement provided that a homeowners association would protect Ahlquist's rights: "The Corporation shall require the establishment of a Homeowners Association which shall be responsible for all obligations owed to the Owners [Ahlquist] as set forth herein, except for the continuing obligations (joint and several) of JACK A. JOHNSON." Ex. 3 at 1-2; CP at 643 (I FF 1.43). Mr. Johnson then incorporated the Key Bay Homeowners Association and appointed himself president. He remained president and head of the Association's architectural control committee from 1996 until at least Memorial Day 2002.

¶ 7 Mr. Johnson had hired John Walcker to develop the property. He directed Mr. Walcker to draft restrictive covenants for the Homeowners Association. But Mr. Johnson did not give Mr. Walcker a copy of either the easement agreement or the right-of-way agreement. Mr. Walcker prepared covenants in late 1995. He hired landscape architect Mike Gottschalk to establish maximum roof elevations for the homes in the Key Bay development. Mr. Walcker instructed Mr. Gottschalk that the maximum elevations could be drafted to protect only the views from the upper level of the restaurant, and need not protect the views from the lower level lounge. So Mr. Walcker thought that the view from upstairs was all he had to worry about based on Mr. Johnson's instructions.

¶ 8 The Key Bay Declaration of Restrictive Covenants and the Key Bay Architectural Control Committee Rules, Regulations and Procedures were recorded in September 1996. Paragraph 11 of the committee rules limited all buildings in the development to a single story and a maximum height of 16 feet above the top of the foundation. Mr. Gottschalk, however, established higher maximum roof elevations of up to 26 feet "from elevation point" (from median curb elevation). This is reflected in exhibit "A" to the covenants — a document drafted by Mr. Gottschalk in 1996. CP at 645 (I FF 1.56); RP at 632.

¶ 9 But exhibit "A" was not recorded until September 19, 2000, when Mr. Johnson again recorded the covenants. He was then president of the Homeowners Association and still head of the architectural control committee. Mr. Johnson blamed the title company for not recording exhibit "A" in 1996. He claimed the title company must have misplaced the document. He said he did not realize the problem until 2000. Mr. Johnson recorded covenants a third time on October 2, 2000, raising the maximum height restriction to 35 feet. But he again recorded covenants in March 2002 that returned the maximum height to 26 feet.

¶ 10 Meanwhile, Robert and Roberta Kenagy purchased the restaurant from Ahlquist in 1998. Mr. Kenagy was aware of the right-of-way agreement at the time he purchased the property. Mr. Kenagy was not aware of exhibit "A" to the covenants because it was not included with any documents he received when he purchased the restaurant. He received only the preliminary title report and copies of the easement and right-of-way agreements.

¶ 11 Mr. Kenagy leased the building to his business, Deep Water Brewing, LLC. Deep Water operated the restaurant and lounge as a brew pub from spring 1999 until shortly before he sold the property on September 30, 2005. Sometime before July 2001, Mr. Kenagy learned that property owners in the Key Bay development would be allowed to build multi-story homes. He then sent letters to Mr. Johnson and other lot owners warning that he would enforce the height restrictions set out in the right-of-way agreement.

¶ 12 Michael and Patricia Taylor purchased Lot 5 in the development on April 20, 2002. They were told that the elevation of their house could not exceed 1,164 feet above sea level as stated in exhibit "A," which was attached to the covenants they received. They were also given a "Seller's Property Conditions Report Vacant Land." It represented that there were no disagreements, disputes, or legal actions concerning the property. No one told the Taylors about the Kenagys' claims regarding height restrictions or about the agreements. Ed Ferguson was a real estate broker hired by Mr. Johnson to sell Key Bay lots. Mr. Ferguson told the Taylors that a 26-foot height restriction applied. Mr. Johnson never apprised Mr. Ferguson of the easement and right-of-way agreements.

¶ 13 Proceedings. Deep Water (the Kenagys) sued Fairway Resources, Ltd., Key Development Corporation, the Key Bay Homeowners Association, and Jack Johnson on September 10, 2002, for declaratory judgment and injunctive relief to enforce the provisions in the agreements (easement and right-of-way agreements) that protected their view and to enjoin the defendants from interfering with the restaurant and lounge views. The complaint was later amended to include the Kenagys as plaintiffs and to add claims for...