Lake Wauwanoka, Inc. v. Spain

• Decision Date: 28 July 1981
• Docket Number: 41987,Nos. 41986,s. 41986
• Citation: 622 S.W.2d 309
• Parties: LAKE WAUWANOKA, INC., A Missouri Corporation, Plaintiff-Appellant, v. Dr. Ronald E. SPAIN, et al., Defendants, and James M. Hay, et al., and William Scheifler, et al., Intervenors-Defendants-Respondents. LAKE WAUWANOKA, INC., A Missouri Corporation, Plaintiff, and David McMullan, Intervenor-Plaintiff-Appellant v. James M. HAY, et al., and William Scheifler, et al, Intervenors-Defendants-Respondents.
• Court: Missouri Court of Appeals

Page 309

622 S.W.2d 309

LAKE WAUWANOKA, INC., A Missouri Corporation, Plaintiff-Appellant, v. Dr. Ronald E. SPAIN, et al., Defendants, and James M. Hay, et al., and William Scheifler, et al.,

Intervenors-Defendants-Respondents.

LAKE WAUWANOKA, INC., A Missouri Corporation, Plaintiff, and David McMullan, Intervenor-Plaintiff-Appellant v. James M. HAY, et al., and William Scheifler, et al,

Intervenors-Defendants-Respondents.

Nos. 41986, 41987.

Missouri Court of Appeals, Eastern District, Division Four.

July 28, 1981.

Motion for Rehearing and/or Transfer to Supreme Court Denied

Sept. 21, 1981.

Application to Transfer Denied Nov. 10, 1981.

Thurman, Nixon, Smith, Howald, Weber & Bowles by John W. Howald, Jeremiah Nixon, Hillsboro, for Lake Wauwanoka, Inc.

William Stix, Clayton, for intervenors-defendants-respondents Harriman, et al.

J. Kehlor Carr, House Springs, for intervenors-defendants-respondents Scheifler, et al.

James L. McHugh, St. Louis, for David A. McMullan, intervenor-plaintiff-appellant.

SATZ, Presiding Judge.

This case is a consolidation of two appeals. One appeal was perfected by appellant Lake Wauwanoka, Inc. (Wauwanoka) which, as plaintiff below, filed a class action against certain named defendants as representatives of the class of lake development lot owners and requested the court to change an indenture covenant defining the assessment which may be levied annually against each lot owner. The other appeal was perfected by appellant McMullan, who, as a lot owner, was permitted to intervene below and filed an intervening petition seeking a change in the assessment covenant differing from the change sought by appellant Wauwanoka.

Respondents are two additional and separate groups of lot owners, not named in appellant Wauwanoka's petition, who were permitted to intervene as parties defendant to appellant Wauwanoka's petition. Each of these latter groups of intervenors filed an answer and counterclaim to appellant Wauwanoka's petition. ¹

On motion, the trial court dismissed both appellant Wauwanoka's petition and appellant McMullan's intervening petition, severed the counterclaims for separate hearings and designated its dismissal as a final order for purpose of appeal. Each appellant then perfected an appeal. The two appeals were consolidated, and, in this consolidated appeal, we affirm the judgment of the trial court.

Appellant Wauwanoka is the successor to the original grantor/developer of a residential lake development in Jefferson County. The original indenture was recorded in 1943. The covenant in issue here stems from an original covenant which allows the grantor to assess the owner of each lot an amount "deemed necessary for the upkeep of the dam, roads, and other improvements, provided, however, that no assessment for any one year shall exceed the sum of fifty-five cents (.55) per front foot...." This assessment could be extended for a 25 year period by a vote of the "owners of a majority of the front foot" (sic) in the subdivision but "the restrictions on any lot (could) be removed only by written consent ..., of (the) grantor and the owners of all other lots in the same block."

In 1967, appellant Wauwanoka brought a class action requesting the court to amend the method of removing restrictions so that any restriction could be changed, extended, amended or abrogated by "written consent of the record owners of a majority of the lots in the subdivision." The court did not grant the specific relief requested but did grant an increase in the maintenance assessment from 55 cents per front foot to 75 cents per front foot. ² Subsequently, in 1967, "owners of more than a majority of the front feet" in the subdivision recorded a written instrument extending for 25 years the original assessment covenant "as amended by" the "judgment and decree of the circuit court of Jefferson County, Missouri...."

In the present action, appellant Wauwanoka alleges the funds collected pursuant to the 1967 "amended covenant" are inadequate to meet present maintenance needs and seeks relief comparable to the relief sought in 1967. More specifically, appellant Wauwanoka requests the court to order the covenant amended so that the restrictions "may be changed, extended, or abrogated" by the majority of the lot owners. ³ Appellant McMullan, in his intervening petition, requests the court to amend the assessment covenant to permit the grantor to make the annual assessments according to a different formula. ⁴

As noted, the trial court dismissed each petition for lack of jurisdiction over the subject matter and failure to state a claim upon which relief can be granted. ⁵ Although the relief requested by appellant Wauwanoka in the court below differed from the relief requested by appellant McMullan, appellants on appeal maintain the same position on the issues of jurisdiction and the existence of a cause of action. Thus, we address each argument made as if the argument were jointly made.

Appellants concede their requests for relief are novel and attempt to justify their requests by drawing analogies to the present law. Appellants' analogies are not persuasive.

Appellants focus their arguments on the trial court's jurisdiction to grant the relief requested. The arguments rest on the abstract principle that the remedies of equity are plastic and may be molded to meet the needs of justice. To flesh out this principle, appellants characterize the covenant in issue as a restrictive covenant and attempt to liken the present case to those restrictive covenant cases in which the court, in equity, recognizes changed conditions and, because of the changed conditions, either refuses to enforce the covenant or may, theoretically, declare the covenant void. See, e. g., Gibbs v. Cass, 431 S.W.2d 662 (Mo.App.1968) (refusal to enforce covenant); Pickel v. McCawley, 329 Mo. 166, 44 S.W.2d 857 (1931) (covenant declared no longer binding or enforceable). Appellants argue that if they prove a change in conditions, they have established the necessary ground for the exercise of the court's power to furnish a remedy and the court should furnish an equitable remedy even though the remedy may be novel. We disagree.

Although appellants refer to the covenant in issue here as a restrictive covenant, it is more accurately described as an affirmative covenant or equitable servitude one evidencing a promise to perform an affirmative act: pay the assessment. A restrictive covenant as its name implies operates only as a restriction. It is a promise or an imposed duty to refrain from acting in a defined manner: not to build designated structures or not to conduct a specified business on the land. However, both are covenants, i. e., promises, and, as such, create rights and duties relating to the land. ⁶ In particular here, the covenant in issue is similar to a restrictive covenant in imposing a burden related to the use of the land. This similarity notwithstanding, the principles appellants extract from the restrictive covenant cases are of no help to them.

The basic principles of the restrictive covenant cases are straight forward. In determining whether to enforce a restrictive covenant or declare it void, our courts focus on the covenant's continued value and do not balance the relative economic hardships of the dominant and servient estates. Rombauer v. Compton Heights Christian Church, 328 Mo. 1, 40 S.W.2d 545 (1931); Hall v. Wester, 7 Mo.App. 56 (1879). Thus, the court will enforce a restrictive covenant if it remains of substantial value to the dominant estate, even though changed conditions have caused a hardship to the servient estate. E. g., Rombauer v. Compton Heights Christian Church, supra at 554; See Barnes v. Anchor Temple Assoc., 369 S.W.2d 893 (Mo.App.1963).

Appellants would turn this reasoning on its head. Rather than making the viability of the covenant in issue a function of its continued value without balancing economic hardships, appellants would have the viability of the covenant depend upon the balancing of economic hardships without focusing on the covenant's continued value. Appellants' rationale contradicts our Supreme Court's premise that "... the law will not permit a man to repudiate his solemn restrictive covenants, fairly entered into, merely because changed conditions render it more inconvenient for him to perform than for his adversary to suffer a breach. If the performance of contracts depended upon the convenience of the parties, there would be little need of having them." Rombauer v. Compton Heights Christian Church, supra at 545.

Admittedly, when a radical change takes place which defeats the purpose of a restrictive covenant and the covenant is no longer beneficial to the covenantee, the court, in equity, will not enforce it. See, e. g., Gibbs v. Cass, supra at 671. The court remains passive and refuses to exercise its jurisdiction. However, this refusal is "not (based) on the theory that the contract, as such, fails to cover the situation and does not apply to it, for, if that were true, it would be unenforceable even at law; but it is because the changed conditions forbid equitable intervention." Rombauer v. Compton Heights Christian Church, supra at 553. Thus, in these circumstances equitable relief is not denied because the obligation has ceased to exist but because equitable relief is not the appropriate remedy. The court's refusal to act does not change the legal relation between the parties; rather the court's inaction leaves the legal relation unaffected allowing the covenantee to pursue his remedy at law. ⁷ Id. at 553. These cases offer no comfort to appellants. Appellants seek to change the legal relation created by the covenant not leave it unaffected.

Additionally, there are those restrictive covenant cases in which the moving party requests the court to declare the covenant void rather than requesting its enforcement and, thus, present the court with a converse procedural...