Farmington Woods Homeowners Ass'n, Inc. v. Wolf

• Decision Date: 03 August 2012
• Docket Number: No. S–11–970.,S–11–970.
• Citation: 817 N.W.2d 758,284 Neb. 280
• Parties: FARMINGTON WOODS HOMEOWNERS ASSOCIATION, INC., appellee, v. Glen WOLF and Rhonda Wolf, husband and wife, appellants.
• Court: Nebraska Supreme Court

284 Neb. 280

817 N.W.2d 758

FARMINGTON WOODS HOMEOWNERS ASSOCIATION, INC., appellee,

v.Glen WOLF and Rhonda Wolf, husband and wife, appellants.

No. S–11–970.

Supreme Court of Nebraska.

Aug. 3, 2012.

Syllabus by the Court

[284 Neb. 280]1. Summary Judgment: Appeal and Error. An appellate court will affirm a lower court's granting of summary judgment if the pleadings and admitted evidence show that there is no genuine issue as to any material facts or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.

2. Summary Judgment: Appeal and Error. In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment was granted, and gives that party the benefit of all reasonable inferences deducible from the evidence.

3. Summary Judgment. Summary judgment proceedings do not resolve factual issues, but instead determine whether there is a material issue of fact in dispute.

4. Summary Judgment. Where reasonable minds differ as to whether an inference supporting the ultimate conclusion can be drawn, summary judgment should not be granted.

5. Restrictive Covenants: Waiver. The right to enforce restrictive covenants may be lost by waiver or acquiescence in the violation of the same. Whether there has been such a waiver or acquiescence depends upon the circumstances of each case.

6. Restrictive Covenants: Waiver. Generally, mere acquiescence in the violationof a restrictive covenant does not constitute an abandonment thereof, so long as the restriction remains of any value, and a waiver does not result unless there have been general and multiple violations without protest.

7. Restrictive Covenants: Waiver: Proof. In order to prove a waiver of a restrictive covenant, a defendant must prove that a plaintiff has waived the covenant through substantial and general noncompliance.

8. Restrictive Covenants: Intent. The enforcement of valid restrictive covenants may be denied only when noncompliance is so general as to indicate an intention or purpose to abandon the condition.

9. Restrictive Covenants: Waiver. The criteria for determining whether a waiver of a restrictive covenant has occurred includes, but is not limited to, whether those seeking to enforce the covenants had notice of the violation and the period of time in which no action was taken, the extent and kind of violation, the proximity of the violations to those who complain of them, any affirmative approval of the same, whether such violations are temporary or permanent in nature, and the amount of investment involved.

10. Equity: Estoppel. The elements of equitable estoppel are, as to the party estopped: (1) conduct which amounts to a false representation or concealment of material facts, or at least which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) the intention, or at least the expectation, that such conduct shall be acted upon by, or influence, the other party or other persons; and (3) knowledge, actual or constructive, of the real facts. As to the other party, the elements are: (1) lack of knowledge and of the means of knowledge of the truth as to the facts in question; (2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and (3) action or inaction based thereon of such a character as to change the position or status of the party claiming the estoppel, to his or her injury, detriment, or prejudice.

11. Laches. Laches occurs only if a litigant has been guilty of inexcusable neglect in enforcing a right and his or her adversary has suffered prejudice.

12. Equity. Under the doctrine of unclean hands, a person who comes into a court of equity to obtain relief cannot do so if he or she has acted inequitably, unfairly, or dishonestly as to the controversy in issue.

13. Equity: Words and Phrases. Generally, conduct which forms a basis for a finding of unclean hands must be willful in nature and be considered fraudulent, illegal, or unconscionable.

[284 Neb. 282]14. Evidence: Appeal and Error. Generally, the control of discovery is a matter for judicial discretion, and decisions regarding discovery will be upheld on appeal in the absence of an abuse of discretion.

Jason M. Bruno and Thomas D. Prickett, of Sherrets, Bruno & Vogt, L.L.C., Omaha, for appellants.

Larry R. Forman and Ryan Baldridge, Senior Certified Law Student, of Hillman, Forman, Childers & McCormack, for appellee.

HEAVICAN, C.J., WRIGHT, CONNOLLY, STEPHAN, and MILLER–LERMAN, JJ.

STEPHAN, J.

The issue in this appeal is whether a homeowners' association may enforce a covenant prohibiting “business activities of any kind whatsoever” against homeowners who have operated a daycare in their home for a period of 12 years. We conclude that the covenant is generally enforceable, but that the district court erred in granting summary judgment in favor of the homeowners' association because there are genuine issues of material fact with respect to an affirmative defense raised by the homeowners.

I. BACKGROUND

In December 1994, a “Declaration of Covenants, Conditions, Restrictions and Easements for Farmington Woods in Douglas County, Nebraska” (declaration), was filed with the Douglas County register of deeds. The declaration is applicable to all lots in the Farmington Woods subdivision. The declarant was listed as R.S. Land, Inc., and the declaration was signed by Ronald E. Smith as president of R.S. Land. Included in the declaration was a restrictive covenant providing that “no business activities of any kind whatsoever shall be conducted on any Lot.”

In November 1998, Glen Wolf and Rhonda Wolf purchased a lot in Farmington Woods and subsequently built a home. Ralph Marasco was their real estate agent, and because he was selling other lots in the subdivision, the Wolfs believed that Marasco owned all of the lots. The Wolfs told Marasco and their homebuilder that they intended to operate a daycare from the new home, and neither told them a daycare would not be allowed on the property. Marasco has no legal relationship with R.S. Land or Smith.

The Wolfs both testified that they did not read the declaration, but they acknowledge its 1994 filing. The declaration provided that after either 10 years or the “closing of eighty (80%) percent of the lots to independent third party homeowners,” the right to enforce the covenants would transfer to the Farmington Woods Homeowners Association, Inc. (FWHOA). In approximately 2000, the FWHOA formed and became the enforcer of the covenants. The Wolfs continued to operate their daycare from and after 2000.

In 2010, the Wolfs and one of their neighbors became involved in a dispute regarding drainage on their respective properties. The neighbor filed a complaint with FWHOA, alleging the Wolfs were violating the covenant prohibiting business activities by operating a daycare. Through its attorney, FWHOA gave written notification to the Wolfs that operating a daycare violated the covenant. FWHOA then filed suit to enjoin the Wolfs from operating the daycare.

After the complaint and answer were filed, both parties moved for summary judgment. At a hearing on the motions, FWHOA presented evidence that the “no business activities” covenant was in effect in 1994 and that the Wolfs purchased their lot subject to the covenant in 1998. Evidence was also offered that showed FWHOA's unwritten policy was to act on an alleged covenant violation only after a complaint had been filed. No complaint had been filed with respect to the Wolfs' or any other homeowners' business activities prior to the 2010 complaint. The Wolfs presented evidence that at least two members of FWHOA were aware as early as 1998 that the Wolfs operated a daycare out of their home. The Wolfs also presented evidence that at least one member of FWHOA knew of the operation of another daycare in Farmington Woods sometime between 2000 and 2010 and took no action to enforce the “no business activities” covenant. In addition, the Wolfs presented evidence that a number of home-based businesses had operated “openly and notoriously” in Farmington Woods, with no action by FWHOA. And, finally, the Wolfs presented evidence that the president of FWHOA had operated businesses from his home since 2000, with the knowledge of at least one other FWHOA member, and that no action was taken to enforce the “no business activities” covenant against him prior to 2010.

The district court granted summary judgment in favor of FWHOA, finding that the Wolfs had at least constructive knowledge of the “no business activities” covenant. Without detailed analysis, the district court determined that the Wolfs' defenses had no basis as a matter of law. The Wolfs filed this timely appeal.

II. ASSIGNMENTS OF ERROR

The Wolfs assign, restated, that the district court erred in (1) finding their operation of a home daycare violates the “no business activities” covenant; (2) failing to apply the defenses of waiver, estoppel, and laches; (3) failing to find FWHOA was barred from receiving relief by the doctrine of unclean hands; (4) failing to hold FWHOA in contempt for discovery violations; and (5) granting FWHOA's motion for summary judgment.

III. STANDARD OF REVIEW

An appellate court will affirm a lower court's granting of summary judgment if the pleadings and admitted evidence show that there is no genuine issue as to any material facts or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.¹ In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment was granted, and gives that party the benefit of all reasonable inferences deducible from the evidence.²

IV. ANALYSIS

1. Enforceability of Covenant Against...