J. T. Hobby & Son, Inc. v. Family Homes of Wake County, Inc.

• Decision Date: 27 January 1981
• Docket Number: No. 72,72
• Citation: 274 S.E.2d 174,302 N.C. 64
• Court: North Carolina Supreme Court
• Parties: J. T. HOBBY & SON, INC., a North Carolina Corporation (successor corporation to Hobco Building Company); Robert Montgomery Paynter and wife, Shirley L. Paynter; and, Thomas C. Bogle and wife, Sara M. Bogle, v. FAMILY HOMES OF WAKE COUNTY, INC., a North Carolina Corporation.

Page 174

274 S.E.2d 174

302 N.C. 64

J. T. HOBBY & SON, INC., a North Carolina Corporation (successor corporation to Hobco Building Company); Robert Montgomery Paynter and wife, Shirley L. Paynter; and, Thomas C. Bogle and wife, Sara M. Bogle, v. FAMILY HOMES OF WAKE COUNTY, INC., a North Carolina Corporation.

No. 72.

Supreme Court of North Carolina.

Jan. 27, 1981.

Seay, Rouse, Johnson, Harvey & Bolton by James L. Seay and Ronald H. Garber, Raleigh, for plaintiffs-appellees.

Theodore A. Nodell, Jr., Raleigh, and Smith, Moore, Smith, Schell & Hunter by McNeill Smith, Greensboro, for defendant-appellant.

Blanchard, Tucker, Twiggs, Denson & Earls by Charles F. Blanchard and Irvin B. Tucker, Jr., Raleigh, for the Ass'n for Retarded Citizens of North Carolina, Inc., amicus curiae.

Carolina Legal Assistance for Mental Health by Deborah Greenblatt, Raleigh, for the Governor's Advocacy Council for Persons with Disabilities, amicus curiae.

Merritt & Gaylor by Cecil P. Merritt, Goldsboro, for The Mental Health Ass'n in North Carolina, Inc., amicus curiae.

Van Camp, Gill & Crumpler, P.A., by Douglas R. Gill, Southern Pines, for Sandhills Mental Health Center, Inc., amicus curiae.

BRITT, Justice.

In deciding this appeal, we need to address only one issue: Did the Court of Appeals err in concluding that the restrictive covenant was violated by the "institutional" use of the property by defendant? We answer in the affirmative.

Our resolution of this issue turns upon our construction of two phrases contained in the restrictive covenant upon which plaintiffs rely: "residential purpose" and "single-family dwelling".

We begin our analysis of this case with a fundamental premise of the law of real property. While the intentions of the parties to restrictive covenants ordinarily control the construction of the covenants, e. g., Long v. Branham, 271 N.C. 264, 156 S.E.2d 235 (1967), see generally J. Webster, Real Estate Law in North Carolina § 346 (1971), such covenants are not favored by the law, e. g., Cummings v. Dosam, Inc., 273 N.C. 28, 159 S.E.2d 513 (1968), and they will be strictly construed to the end that all ambiguities will be resolved in favor of the unrestrained use of land. Stegall v. Housing Authority of the City of Charlotte, 278 N.C. 95, 178 S.E.2d 824 (1971); Long v. Branham, supra. The rule of strict construction is grounded in sound considerations of public policy: It is in the best interests of society that the free and unrestricted use and enjoyment of land be encouraged to its fullest extent. Davis v. Robinson, 189 N.C. 589, 127 S.E. 697 (1925); see generally 7 J. Grimes, Thompson on Real Property § 3160 (1962). Even so, we pause to recognize that clearly and narrowly drawn restrictive covenants may be employed in such a way that the legitimate objectives of a development scheme may be achieved. Provided that a restrictive covenant does not offend articulated considerations of public policy or concepts of substantive law, such provisions are legitimate tools which may be utilized by developers and other interested parties to guide the subsequent usage of property.

It is a matter of common understanding that the pertinent terms which guide a legal relationship between parties are not always clearly defined, if they are defined at all. Sound judicial construction of restrictive covenants demands that if the intentions of the parties are to be followed, each part of the covenant must be given effect according to the natural meaning of the words, provided that the meanings of the relevant terms have not been modified by the parties to the undertaking. Callaham v. Arenson, 239 N.C. 619, 80 S.E.2d 619 (1954); Westinghouse Electric Supply Co. v. Burgess, 223 N.C. 97, 25 S.E.2d 390 (1943).

Having laid the proper foundation for our consideration of the question presented, we now turn our attention to an appropriate analysis of the terms upon which the controversy is founded.

Defendant contends first that the Court of Appeals erred in concluding that the Millbrook Road property is being utilized in an institutional rather than a residential manner. The essence of defendant's argument is that the residential usage requirement is satisfied if the property is used for the habitation of human beings and for those activities such as eating, sleeping, and engaging in recreation which are normally incident thereto. Plaintiffs respond by arguing that a family care home is analogous to a boarding house, such usage having been widely held to violate restrictive covenants requiring that real property be utilized for residential purposes only. See generally Annot., 14 A.L.R.2d 1376 (1950). While the analogy which plaintiffs seek to draw between a family care home and a boarding house is intriguing, we find its forcefulness to be unpersuasive. It is our opinion that while a family care home does not comport in all respects with the traditional understanding of the scope of the term "residential purposes", its essential purpose, when coupled with the manner in which defendant seeks to achieve its stated goals, clearly brings it within the parameters of residential usage as contemplated by the framers of the restrictive covenant which is at issue in this case.

The home at 300 Millbrook Road presently serves as a place of abode for four mentally retarded adults, as well as a married couple who serve as resident managers of the facility. The avowed function of the resident managers is to serve as surrogate parents to the handicapped individuals who live in the house. In this regard, at least one of the surrogate parents is present whenever any of the retarded persons is on the premises. All of the disabled individuals are employed in sheltered workshops in the Raleigh area between the hours of 7:45 a. m. and 5:00 p. m. on weekdays. The home is operated in such a manner that the residents are able to live in an atmosphere much like that found in the homes of traditionally structured American families. In an effort to achieve that goal, all of the retarded residents assist the married couple in the performance of the various duties which are required to maintain the normal operation of the home: cooking, cleaning, shopping, and other similar household chores. In other words, in terms of the day-to-day activities of its inhabitants, the Millbrook Road property is not employed in a manner which is significantly different from that of neighboring houses except for the fact that most of those who dwell within it are mentally retarded.

We are aware that while defendant, Family Homes of Wake County, Inc., is a non-profit corporation which is under contract to and controlled by the Wake County Mental Health Authority, its services at the family care home are not rendered gratuitously. The home operates as a single economic unit whose operating funds are provided by government grants and receipts from the residents themselves. The resident managers are compensated for their services. That the continued operation of the facility on Millbrook Road requires an on-going economic exchange is an insubstantial consideration.

Our resolution of the question of the nature of the usage of the property at issue does not turn upon the economic basis upon which the property is supported. That basis does not detract from the primary objective behind the operation of the facility and the essence of that operation: Providing a non-institutional setting for normal human habitation and the activities incident thereto for mentally handicapped adults. It is this purpose and method of operation which serves to distinguish defendant's usage of the Millbrook Road property from that normally incident to a boarding house.

While we deem it unnecessary to reach the question of whether the individuals living at the home constitute a family, we are compelled to observe that the surrogate parents and the adults subject to their supervision function as an integrated unit rather than independent persons who share only the place where they sleep and take their meals as would boarders in a boarding house. See Crowley v. Knapp, 94 Wis.2d 421, 288 N.W.2d 815 (1980); but see Seaton v. Clifford, 24 Cal.App.3d 46, 100 Cal.Rptr. 779 (1972).

That defendant is compensated for the services it renders does not render its activities at the home commercial in nature. While it is obvious that the home would not exist if it were not for monetary support being provided from some source, that support clearly is not the objective behind the operation of this facility. That defendant is paid for its efforts does not detract from the essential character of its program of non-institutional living for the retarded. Clearly, the receipt of money to support the care of more or less permanent residents is incidental to the scope of defendant's efforts. In no way can it be argued that a significant motivation behind the opening of the group home by defendant was its expectation of monetary benefits.

The Court of Appeals observed that its application for review filed with the Raleigh Board of Adjustment, defendant indicated that its proposed use of the property was of an institutional character rather than choosing to characterize the undertaking as a residential usage. In this regard, we note that it is appropriate to regard the substance, not the form, of the transaction as controlling and not be bound by the labels which have been appended to the episode by some individuals. See Thompson v. Soles, 299 N.C. 484, 263 S.E.2d 599 (1980). The uncontroverted facts of the present case belie the institutional characterization on the application before the Board of Adjustment. The manifest purpose of the operation of the home is to provide its residents with a family-like setting unlike that found in traditional institutions for the care of the mentally handicapped. Furthermore, no educational or vocational training of any kind is provided at the home for the residents. Nor is...