Dutrac Cmty. Credit Union v. Radiology Grp. Real Estate, L.C.

• Decision Date: 03 March 2017
• Docket Number: No. 16-0661,16-0661
• Parties: DUTRAC COMMUNITY CREDIT UNION and Kwik Trip, Inc., Appellees, v. RADIOLOGY GROUP REAL ESTATE, L.C.; Shamrock Properties, L.C.; Duffy Family Limited Partnership; Bigger Better Betty Building, L.L.C.; and Quad City OMS, L.C., Appellants.
• Court: Iowa Supreme Court

891 N.W.2d 210

DUTRAC COMMUNITY CREDIT UNION and Kwik Trip, Inc., Appellees,

v.RADIOLOGY GROUP REAL ESTATE, L.C.; Shamrock Properties, L.C.; Duffy Family Limited Partnership; Bigger Better Betty Building, L.L.C.; and Quad City OMS, L.C., Appellants.

No. 16-0661

Supreme Court of Iowa.

Filed March 3, 2017

Martha L. Shaff and Brandon W. Lobberecht of Betty, Neuman & McMahon, P.L.C., Davenport, for appellants.

Peter D. Arling and Tonya A. Trumm of O'Connor & Thomas, P.C., Dubuque, for appellees.

ZAGER, Justice.

We are asked to determine whether the district court properly granted the plaintiffs' motion for summary judgment. DuTrac Community Credit Union owns a parcel of real estate in Waterford Place, a commercial development located in Davenport, Iowa. DuTrac is now attempting to sell this parcel to Kwik Trip, Inc. As part of its due diligence, Kwik Trip discovered that the real estate was subject to a 1996 restrictive covenant that required the approval by an architectural control committee before any building or other structure could be erected. This committee consisted of two named individuals. One of the named members is deceased and the other named member has now either resigned from the committee or refuses to act on its behalf. DuTrac and Kwik Trip filed a declaratory judgment action asking the district court to declare the restrictive covenant unenforceable based on the doctrines of impossibility and supervening impracticability. The defendants filed a resistance and asserted the restrictive covenant could be made enforceable by modification. The district court granted the plaintiffs' motion for summary judgment. For the reasons set forth below, we affirm the judgment of the district court. We find the restrictive covenant cannot be enforced as written, the defendants' proposed modification is not a practical or effective way to carry out the original purpose of the covenant, and the covenant should be terminated.

I. Background Facts and Proceedings.

DuTrac Community Credit Union (DuTrac) owns a parcel of real estate located in Davenport which is legally described as "Lot 6 and the Southerly 20 feet of Lot 5 of Waterford Place, an Addition to the City of Davenport, Scott County, Iowa." The land is located in an area more commonly known by the name of its development, Waterford Place. The developer of Waterford Place was Cathedral Partners, a general partnership. Waterford Place consists of eighteen commercial lots. Kwik Trip, Inc. (Kwik Trip) is seeking to purchase the parcel of real estate owned by DuTrac. While investigating title to the real estate, Kwik Trip discovered a restrictive covenant that affects the land. The restrictive covenant states in its entirety,

No building or other structure shall be erected on any lot in this addition without the approval of the architectural control committee consisting of David W. Lundy and/or Dennis J. Britt. This shall be interpreted to include approval of the structure, design, building materials, site plan, landscaping and signage.^{[1 ]}

On September 4, 2015, DuTrac and Kwik Trip filed a petition for declaratory judgment naming seventeen defendants.² All of the defendants have an ownership interest in a parcel of real estate contained in Waterford Place.

On September 21, Defendant Hawkeye Real Estate Investment Co. filed an answer indicating it had no objections to the plaintiffs' petition. On October 6, these defendants—Radiology Group Real Estate, L.C.; Shamrock Properties, L.C.; Quad City OMS, L.C.; Duffy Family Limited Partnership; and Bigger Better Betty Building, L.L.C.—filed an answer to the plaintiffs' petition denying the allegation that the restrictive covenant was unenforceable.³ Defendants St. Ambrose University and JTG, L.L.C. filed answers denying the invalidity of the restrictive covenant. Both St. Ambrose and JTG later filed withdrawals of the previously filed answers and consented to entry of judgment as deemed equitable by the district court. No other named defendant filed a responsive pleading with the court, and default judgments have been obtained against them.

In the petition for declaratory judgment, DuTrac and Kwik Trip allege that the restrictive covenant is no longer enforceable. Specifically, DuTrac and Kwik Trip allege that the restrictive covenant is ambiguous so it may be interpreted as a matter of law. Additionally, the restrictive covenant provides no process by which new members of the architectural control committee can or shall be added. The restrictive covenant names two members to the committee. However, David Lundy is deceased, and Dennis Britt has either resigned from the committee or refuses to act on its behalf. Because the restrictive covenant does not provide a method for determining the succession of membership to the committee, DuTrac and Kwik Trip argue the committee is now effectively defunct. DuTrac and Kwik Trip sought a judgment from the district court declaring the restrictive covenant unenforceable against them based on the doctrine of impossibility and the doctrine of supervening impracticability.

The surviving member of the architectural control committee, Dennis J. Britt, executed three separate affidavits with regard to his participation on the architectural control committee. Britt executed the first affidavit on December 11, 2015, and stated that he had "no interest in being a member of the [c]ommittee, and ... no intention of making any decisions or taking any actions on behalf of the [c]ommittee." He further stated that he had no intention to act on behalf of the committee, and thus had "effectively resigned" from it. However, on December 16, Britt executed a second affidavit wherein he discussed the terms of his resignation from the committee by stating "[o]nce representatives are appointed, I will resign." Last, on February 16, 2016, Britt executed a third affidavit that appeared to reaffirm the statements from his first affidavit. He stated that he signed the second affidavit "in response to a hypothetical situation posed to [him]: namely, if [he] was still a member of the [c]ommittee, would [he] be willing to resign upon the appointment of new representatives?" He then clarified that the second affidavit did not affect his refusal to act on behalf of the committee and reaffirmed that he had effectively resigned from it.

On January 29, 2016, DuTrac and Kwik Trip filed an application for entry of default judgment against the remaining defendants who did not file any responsive pleadings. DuTrac and Kwik Trip also filed a motion for summary judgment that alleged there were no genuine issues of material fact as to the allegations contained in their petition for declaratory judgment. The motion for summary judgment requested that the district court declare the restrictive covenant unenforceable and terminate the restrictive covenant. The appellants resisted the motion for summary judgment. The appellants asserted a factual dispute existed as to the continued viability of the architectural control committee based on the multiple affidavits submitted by Britt. Accordingly, DuTrac and Kwik Trip could not establish, as a matter of law, an objective impossibility or a legally sufficient supervening impracticability to warrant the district court invalidating or declaring the restrictive covenant unenforceable. Rather, the appellants argued that under the Restatement (Third) of Property the appropriate remedy was not to terminate the restrictive covenant, but to modify it. The appellants provided a proposed method to modify the restrictive covenant. Their proposal was to have all eighteen lot owners, or those willing to serve, act as the successor architectural control committee.

A hearing was conducted on the motion for summary judgment on March 10, and the district court issued its order granting summary judgment to DuTrac and Kwik Trip on March 17. The district court concluded that, due to the death and resignation or refusal to act of its designated members, the architectural control committee no longer existed. Accordingly, the district court found it was objectively impossible for DuTrac and Kwik Trip to comply with the restrictive covenant requiring approval of the architectural control committee prior to the erection of any building or structure. The district court also concluded it would be inappropriate to revise or modify the restrictive covenant. The district court declared that the restrictive covenant establishing an architectural control committee was invalid, unenforceable, and of no further force or effect. The appellants filed a timely notice of appeal, which we retained.

II. Standard of Review.

We review a district court's grant of a motion for summary judgment for correction of errors at law. Concerned Citizens of Se. Polk Sch. Dist. v. City of Pleasant Hill , 878 N.W.2d 252, 258 (Iowa 2016). "Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Iowa Arboretum, Inc. v. Iowa 4-H Foundation , 886 N.W.2d 695, 701 (Iowa 2016) (quoting McKee v. Isle of Capri Casinos, Inc. , 864 N.W.2d 518, 525 (Iowa 2015) ). The district court's grant of a motion for summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact." Id. (quoting Iowa R. Civ. P. 1.981(3) ). There is a question of material fact "if reasonable minds can differ on how the issue should be resolved." Cemen Tech, Inc. v. Three D Indus., L.L.C. , 753 N.W.2d 1, 5 (Iowa 2008) (quoting Walker v. Gribble , 689 N.W.2d 104, 108 (Iowa 2004) ). On our review, we view the record in the light most favorable to the nonmoving party. Iowa Arboretum , 886 N.W.2d at 701.

III. Analysis.

A. Impact of Britt Affidavits. The appellants argue that there is a genuine issue of material fact as to whether Britt resigned from the...