Equestrian Ridge Homeowners Ass'n v. Equestrian Ridge Estates II Homeowners Ass'n

• Decision Date: 08 January 2021
• Docket Number: No. S-20-239.,S-20-239.
• Citation: 953 N.W.2d 16,308 Neb. 128
• Parties: EQUESTRIAN RIDGE HOMEOWNERS ASSOCIATION, appellee, v. EQUESTRIAN RIDGE ESTATES II HOMEOWNERS ASSOCIATION, appellant.
• Court: Nebraska Supreme Court

308 Neb. 128

953 N.W.2d 16

EQUESTRIAN RIDGE HOMEOWNERS ASSOCIATION, appellee,

v.EQUESTRIAN RIDGE ESTATES II HOMEOWNERS ASSOCIATION, appellant.

No. S-20-239.

Supreme Court of Nebraska.

Filed January 8, 2021

David L. Welch and Lisa M. Meyer, of Pansing, Hogan, Ernst & Bachman, L.L.P., Omaha, for appellant.

Thomas M. Locher and Amy M. Locher, of Locher, Pavelka, Dostal, Braddy & Hammes, L.L.C., Omaha, for appellee.

Heavican, C.J., Miller-LERMAN, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.

Heavican, C.J.

I. INTRODUCTION

This case concerns the cost of maintenance for a private street that connects two subdivisions to public roads. In 2010, the subdivisions’ developers agreed to adopt covenants requiring the subdivisions to share maintenance costs for the private street. Both developers adopted such covenants. But in 2016, one subdivision modified its covenants to repudiate any responsibility to pay for the street's maintenance costs.

The other subdivision sued, claiming, among other things, $18,732.74 in damages. The district court found for the plaintiff subdivision. We affirm.

II. FACTUAL BACKGROUND

Equestrian Ridge L.L.C. (ER) was a limited liability company established in 1995 by Ted Grace, individually, and Duane Dowd, individually and on behalf of his business, Dowd Grain Company, Inc. (Dowd Grain). Grace and Dowd owned adjoining 80-acre tracts of land near Gretna, Nebraska. Together the men agreed to contribute their tracts to ER and to cooperate in developing the tracts into residential subdivisions. Grace's tract, known as Equestrian Ridge Estates (ERE), would be developed first. ERE was a rectangular tract and bisected by a 1-mile stretch of 232d Street, a privately maintained street running north to south from Lincoln Road to Angus Road.

On November 20, 2004, Grace and Dowd executed a second agreement (2004 Agreement). In it, each acknowledged that ER had already contracted to sell 5 of the 15 lots that had been developed in ERE. Eventually all 15 lots would be sold, each subject to the authority of an Equestrian Ridge Estates Homeowners’ Association (ERE HOA). But the next step, according to the 2004 Agreement, would be to develop Dowd's tract, known as Dowd Grain Subdivision (DGS). DGS was a trapezoidal tract, located east of ERE along Shiloh Drive, which ran 2,000 feet south from Lincoln Road before turning west and ending in a dead end near the border with ERE.

Because DGS lots were only accessible by Shiloh Road, which terminated in a dead end, Grace and Dowd also determined that accessibility to DGS’ lots should be improved by extending Shiloh Road past its dead end to the west, across the border with ERE. Accordingly, the 2004 Agreement stated that "in the platting and subdivision of [DGS,] there will be a connecting street [from the Shiloh Road dead end across ERE land] to 232nd Street."

To fulfill this purpose, Grace and Dowd agreed, inter alia, that:

2. Dowd Grain will, through Subdivision Agreements, Covenants, and provisions applicable to homeowner[s’] associations or any combination of the foregoing, subject [DGS] to a sharing of one third of the costs and expenses of [ER] and [ERE HOA] in the repair and maintenance of 232nd Street within [ERE]. The obligation for such sharing of costs will begin when all public improvements consisting of necessary utilities and interior streets in [DGS] have been completed. When and if Lincoln Road is paved the cost sharing shall be reduced from one third to one fourth. These costs and maintenance expenses will include road maintenance and resurfacing, maintenance and repair of the bridge at the south end of 232nd Street near Angus Road, snow removal, mowing of right-of-way and maintenance of entrances at Angus Road and Lincoln Road.... ....

4. The parties agree to execute any and all documents necessary or appropriate to carry into effect the foregoing agreements.

....

8. ... Grace and his related entities agree not to object to [DGS].

9. The [ERE HOA] and each lot owner in [ERE] shall be a third-party beneficiary of this Agreement.

The 2004 Agreement was signed by Grace, individually and in his capacity as manager of ER, and by Dowd, individually and in his capacity as president of Dowd Grain.

Also in the 2004 Agreement, Grace and Dowd agreed that their cooperation in developing the tracts was complete. They liquidated ER's assets by allocating to each man ownership over several of the remaining ERE lots and granting all of DGS to Dowd. ER then dissolved in 2005.

From 2005 to 2010, Dowd developed 23 residential lots within DGS, and he renamed the subdivision Equestrian Ridge Estates II (ERE II). Shiloh Road, also known as 231st Street, was also extended west to connect with 232d Street.

On January 12, 2010, before any individual lots were sold in ERE II, Dowd, in his capacity as president of Dowd Grain, signed and recorded a "Declaration of Covenants, Conditions, Restrictions and Easements of [ERE II]" (Declaration). The Declaration purported to govern an "[ERE II] Homeowners’ Association" (ERE II HOA) that had been formed by articles of incorporation filed in 2007, and it required that all future owners of the 23 lots in ERE II automatically became members of ERE II HOA upon purchase of an ERE II lot.

As relevant here, the Declaration also provided:

The powers and duties to be exercised by [Dowd Grain], and subsequently by the Board of Directors of [ERE II HOA], shall include, but shall not be limited to, the following:

(a) The ... assessment for and payment of any tax liability attributable to the Common Areas and facilities, and the enforcement of the rules and regulations relating to the Common Facilities.

The costs and maintenance expenses for 232nd Street shall relate only to that portion of 232nd Street located within [ERE], including the entrances at Angus Road and Lincoln Road, and shall be in the amount of one-fourth of the costs and expenses expended by [Dowd Grain] and/or [ERE HOA] related to such matters. The costs and maintenance expenses will include road maintenance and resurfacing, maintenance and repair of the bridge at the south end of 232nd Street near Angus Road, snow removal, mowing of right-of-way and maintenance of entrances at Angus Road and Lincoln Road.

(b) The fixing, levying, collecting, abatement, and enforcement of all charges, dues, or assessments made pursuant to the terms of this Declaration or [ERE II HOA].

From 2010 to 2015, Dowd sold many of the lots within ERE II and gradually relinquished control over the subdivision. Dowd was initially a board member and was the first president of ERE II HOA, but on July 7, 2015, in his personal capacity, Dowd signed a letter titled "RESIGNATION," resigning as "an Officer and Director" of ERE II HOA. On the same day, in his capacity as president of Dowd Grain, Dowd signed a document entitled "Declarant's Release, Relinquishment and Assignment of Powers and Duties Under the Declaration of [ERE II]." The document purported to "hereby release, relinquish and assign to [ERE II HOA] any and all powers and duties of [Dowd Grain] as provided in the Declaration." The board members of ERE II HOA formally accepted Dowd's relinquishment document during the board's annual meeting on July 7. From that date forward, the ERE II HOA board managed the subdivision and, until May 24, 2016, contributed its share under the 2004 Agreement of one fourth of all maintenance costs for 232d Street.

Around 2014, however, a dispute formed between ERE HOA and ERE II HOA. In late 2014 or early 2015, the board of directors for ERE II HOA met to discuss major roadwork that was expected along 232d Street. ERE HOA had hired an engineering firm to provide cost estimates for repair of the street's bridge. At the meeting, ERE II HOA board members complained that when ERE HOA made repairs to 232d Street, it did so without the input of ERE II HOA. Board members for ERE II HOA objected that they only ever learned about 232d Street maintenance projects upon receiving invoices from ERE HOA, typically without any explanation about the maintenance for which they were being asked to contribute. ERE II HOA board members also expressed concern that ERE HOA did not contribute anything to the maintenance and upkeep costs of ERE II HOA's own private road, which connected Shiloh Drive to 232d Street.

Based on these complaints, in early 2015, ERE II HOA decided to amend its Declaration (Amended Declaration) to remove any requirement of ERE II lot owners to contribute to maintenance costs of 232d Street. ERE II HOA drafted the Amended Declaration, which 77 percent of lot owners in ERE II signed. Since May 24, 2016, ERE II HOA has refused to contribute to 232d Street maintenance costs. ERE HOA has paid the entire amount.

ERE HOA initiated this action on July 21, 2017. ERE HOA filed a complaint in the district court for Sarpy County seeking to declare the Amended Declaration null and void and to require ERE II HOA to pay one-fourth of maintenance costs for 232d Street pursuant to the 2004 Agreement. Specifically, ERE HOA alleged seven theories for recovery: breach of contract, breach of express covenant, breach of implied restrictive covenant, unjust enrichment, equitable estoppel, specific performance, and declaratory judgment. The parties agreed to try the case to the court and stipulated to certain facts.

On February 20, 2020, after a bench trial, the district court entered judgment for ERE HOA. It found that ERE II HOA was a successor in interest to Dowd and DGS and that as such, ERE II HOA was bound by the 2004 Agreement. The district court also found that the 2004 Agreement's requirement that Dowd and DGS contribute to the costs of maintaining 232d Street was given effect by Dowd's adoption of the Declaration. The district court also found that members of ERE II HOA had purchased their lots subject to the Declaration, with constructive notice of its covenant requiring contribution for maintenance costs of 232d Street. Thus, the district court...