Estates At Desert Ridge Trails Homeowners' Ass'n v. Vazquez

• Decision Date: 08 February 2013
• Docket Number: Nos. 30,944,31,590.,s. 30,944
• Parties: ESTATES AT DESERT RIDGE TRAILS HOMEOWNERS' ASSOCIATION, a New Mexico non-profit corporation, Plaintiff–Appellant, v. David VAZQUEZ, Defendant–Appellee.
• Court: Court of Appeals of New Mexico

300 P.3d 736

ESTATES AT DESERT RIDGE TRAILS HOMEOWNERS' ASSOCIATION, a New Mexico non-profit corporation, Plaintiff–Appellant,

v.David VAZQUEZ, Defendant–Appellee.

Nos. 30,944, 31,590.

Court of Appeals of New Mexico.

Feb. 8, 2013.

Vance, Chavez & Associates, LLC, James A. ChavezClaud E. Vance, Albuquerque, NM, for Appellant.

Espinosa & Associates, P.C., Richard D. Barish, Leonard G. Espinosa, Albuquerque, NM, for Appellee.

OPINION

FRY, Judge.

{1} In this opinion we consider two lawsuits filed by the Estates at Desert Ridge Trails Homeowners' Association (HOA) seeking to enjoin David Vasquez, Defendant, from renting his home on a short-term basis. The district court denied the HOA's request for injunctive relief in both cases, and the HOA now appeals those orders. In its first appeal, the HOA primarily argues that the short-term rentals violate the limiting language in the restrictive covenants that lots be used for “single-family residential purposes” and the HOA's rules and regulations barring certain business activities within the subdivision and rentals for less than thirty days. Between the first lawsuit and the second lawsuit, the HOA amended the restrictive covenants. In its second appeal, the HOA primarily argues that the short-term rentals violate the amended restrictive covenants barring rentals for less than ninety days. For efficiency, we address both appeals in this opinion and affirm the district court.

BACKGROUND

{2} Defendant purchased a lot in the Estates at Desert Ridge Trails subdivision (Subdivision) in 2006 and constructed a home on the lot. All lots purchased in the gated Subdivision were subject to the Declaration of Covenants, Conditions, and Restrictions recorded in 2004 (CCRs). In addition to the CCRs, rules and regulations were promulgated in 2007 supplementing the initial rules and regulations recorded with the CCRs. The Subdivision's HOA was subsequently formed and charged with enforcing the CCRs and the Subdivision's rules and regulations.

The HOA's First Lawsuit

{3} In June 2010, Defendant began renting his home on a short-term basis. Defendant's internet advertisement of the home listed a minimum rental term of three nights and did not provide for individual room rentals. Defendant testified at the hearing that he rented the home to families and that he had never rented to more than eight people. Defendant also testified that he charged renters a lodger's tax but did not carry a separate business license for his rental activities related to the home.

{4} In September 2010, the HOA's counsel sent Defendant a letter notifying him that the short-term rentals of his home violated the CCRs and the Subdivision's rules and regulations. The letter requested that Defendant cease and desist from any further short-term rental activity. When Defendant did not stop renting the home, the HOA sought and was granted an ex parte temporary restraining order and filed a verified complaint for permanent injunctive relief barring Defendant's short-term rentals. Following two hearings and supplemental briefing by the parties, the district court concluded that the CCRs did not prohibit Defendant from renting his home on a short-term basis and that the HOA rules and regulations constituted an unreasonable interference with Defendant's use and enjoyment of his property and were therefore unenforceable. The district court issued an order dissolving the temporary restraining order and denying the HOA's request for injunctive relief. The HOA appealed the district court's order.

The HOA's Second Lawsuit

{5} On November 11, 2010, the HOA board of directors resolved to amend the CCRs to prohibit rentals for less than ninety days. Notice was sent to the members of the HOA that a vote was to be held on the proposed amendments to the CCRs at the annual meeting taking place on December 6, 2010. At the December meeting, fourteen votes were cast in person and thirty-two by proxy in favor of amending the CCRs. Realizing that it did not have what it believed to be the two-thirds vote needed to amend the CCRs, the HOA called a special meeting for January 11, 2011, to again vote on the proposed amendments. Forty-nine votes were cast in favor of the proposed amendments at the January meeting. The thirty-two affirmative proxy votes and the fourteen votes cast in person from the December meeting were also included in the final vote tally, bringing the vote total to ninety-five in favor and four against. The HOA considered this vote sufficient to amend and record the Supplemental CCRs.

{6} The Supplemental CCRs were recorded on January 25, 2011. On March 3, 2011, the HOA filed suit against Defendant for a second time. The HOA's complaint sought to enjoin Defendant from engaging in short-term rental activity pursuant to the Supplemental CCRs and alleged various other violations stemming from separate provisions of the Supplemental CCRs and HOA rules and regulations. The district court concluded, however, that a valid amendment to the CCRs required unanimous agreement of the lot owners, which the HOA did not have. Therefore, the district court denied the HOA's claims, finding that all of the alleged violations fell under the Supplemental CCRs, which it concluded were void. The HOA appealed, again.

DISCUSSIONI. The First Lawsuit

A. The District Court Did Not Abuse Its Discretion in Declining to Consider Violations of CCR Provisions Not Pleaded in the Complaint

{7} We begin by addressing the issues raised by the HOA on appeal regarding alleged violations of CCRs and zoning code provisions that were not pleaded in the HOA's complaint or the motion for a temporary restraining order (TRO) in the first lawsuit. The HOA's complaint and motion for a TRO specifically alleged violations of Article VI, Section 21 of the CCRs and Rules 2.1 and 2.2 of the HOA rules and regulations (Rules 2.1 and 2.2). Neither the complaint nor the motion for a TRO specifically alleged violations of Article VI, Sections 29 (nuisances), 45 (temporary uses), or 49 (zoning; development). In addition, Defendant testified that the HOA notified him that it believed he had violated only Article VI, Section 21 of the CCRs and Rules 2.1 and 2.2 of the rules and regulations. Immediately prior to the hearing, the HOA apparently alerted Defendant that it intended to argue that Defendant violated additional CCR sections. Defendant argued prior to the hearing and during his closing argument that evidence and arguments on alleged violations of extraneous provisions of the CCRs were beyond the pleadings and should not be considered. The district court agreed and it specifically limited its ruling to the violations of Section 21 of the CCRs and Rules 2.1 and 2.2 of the HOA rules and regulations alleged in the complaint.

{8} On appeal, the HOA argues that the district court's refusal to rule on these issues was an abuse of discretion because the district court's order was inconsistent with the record. The HOA claims that its general allegation in the complaint that “Defendant has violated the covenants contained in the Declaration and the Rule[s] and Regulations of the Subdivision” put Defendant on notice that his conduct not only violated the provisions explicitly alleged in the complaint, but also any other provision the HOA conceivably considered violated by Defendant's conduct by the time of the hearing. In other words, the HOA contends that violations of Sections 29, 45, and 49 were alleged in the complaint under its general allegation regarding Defendant's violation of the CCRs and that the court abused its discretion in not considering the testimony and briefing on these alleged violations.

{9} We are not persuaded. The complaint and the motion for a TRO specified only Section 21 of the CCRs and Rules 2.1 and 2.2 of the rules and regulations. Therefore, Defendant could reasonably understand the HOA's claims to be limited to those sections. To the extent that the HOA's eleventh-hour attempt to add violations of other sections of the CCRs and of the rules and regulations can be construed as an attempt to amend its complaint, we review the district court's denial of that attempt for abuse of discretion. See Roark v. Farmers Group, Inc., 2007–NMCA–074, ¶ 14, 142 N.M. 59, 162 P.3d 896. Here, Defendant prepared for the hearing on the basis of the complaint and the motion for a TRO, and the HOA did not alert either Defendant or the district court that it intended to assert claims beyond the specific provisions cited in the complaint and the motion until immediately prior to the hearing. Consequently, the district court could have reasonably determined that permitting the purported amendment would be prejudicial to Defendant, and it acted within its sound discretion in refusing to consider the HOA's additional claims.

B. Defendant's Short–Term Rentals Did Not Violate the Original CCRs

{10} We now turn to the violations alleged in the HOA's complaint and motion for a TRO and begin with the HOA's contention that the CCRs prohibited Defendant's short-term rentals. The district court concluded that Article VI, Section 21 of the CCRs did not prohibit such use. Article VI, Section 21 states, in relevant part, “No Lot or any portion thereof shall be used except for single-family residential purposes.” The HOA argues that use of the home as a short-term rental is inconsistent with the “single-family residential purposes” limitation on the lot because the short-term nature of the rentals makes them more akin to business or commercial uses such as a hotel or lodging house.

{11} Interpretation of language in a restrictive covenant is a question of law that we review de novo. Heltman v. Catanach, 2010–NMCA–016, ¶ 5, 148 N.M. 67, 229 P.3d 1239. In interpreting a restrictive covenant, we look to certain general rules of construction:

First, when the language of a restrictive covenant is unclear or is subject to ambiguity, then the covenant will be resolved in favor of the...