Loblolly Props. v. Le Papillon Homeowner's Ass'n
| Decision Date | 27 September 2022 |
| Docket Number | 2021-CA-00767-COA |
| Parties | LOBLOLLY PROPERTIES LLC APPELLANT v. LE PAPILLON HOMEOWNER'S ASSOCIATION INC. APPELLEE |
| Court | Mississippi Court of Appeals |
BEFORE CARLTON, P.J., McDONALD AND EMFINGER, JJ.
¶1. Loblolly Properties LLC (Loblolly) appeals the Lamar County Chancery Court's grant of summary judgment in favor of Le Papillon Homeowner's Association Inc. (HOA) in a dispute over the enforcement of restrictive covenants on lots Loblolly purchased after a foreclosure sale. On appeal Loblolly argues that the restrictive covenants were unenforceable because they were extinguished by the foreclosure sale. HOA counters that the covenants ran with the land and that Loblolly purchased the lots by a special warranty deed that specifically stated the lots were purchased subject to the restrictions of record. Having considered the arguments of the parties and relevant precedent, we affirm the chancery court's judgment.
¶2. Loblolly owned nine lots in Le Papillon Subdivision in Lamar County that Loblolly purchased from First State Bank (First State) after First State had acquired them through foreclosure. Loblolly was assessed homeowner dues by HOA, which Loblolly refused to pay. It felt its lots were not subject to the restrictive covenants that were imposed after the initial deed of trust and required payment of such dues. To understand Loblolly's position, we review the history of the transfers of the properties and the creation of the restrictions.
¶3. The Chattel Group LLC (Chattel) initially owned and platted thirty-five lots in Phase V of Le Papillon Subdivision. On March 10, 2008, Chattel executed a deed of trust to First State and pledged twenty-two of its lots as security, including Lots 108-126, 129, 131 and 132. When the property was given by Chattel to secure the deed of trust, the lots were not subject to any restrictive covenants. In the deed of trust, Chattel retained the "right to remain in possession and control of the property. . . [and] use, operate or manage the property."
¶4. Thereafter, on December 19, 2008, Chattel filed a "Declaration of Covenants, Conditions and Restrictions" with the chancery clerk's office. The declaration covered all thirty-five of the lots Chattel owned, including the lots pledged as security to First State, as noted by the plat attached to the declaration. The declaration included numerous provisions, including HOA's rights to levy fees for the use of the common areas such as streets, roads, and parking areas, and to levy assessments for the upkeep of the subdivision. According to the covenants, non-payment of fees would become a continuing lien on the property. The only properties exempt from the covenants were properties dedicated to public use by the local public authority and areas unplatted or reserved by Chattel on its recorded plat of the property. According to Article XIII of the declaration, the covenants ran with and were bound the land for thirty-five years, and thereafter they were automatically renewed every ten years unless abolished by an instrument signed by a majority of the owners of record. Moreover, during the first thirty-five years they were in effect, the covenants could be amended with the agreement of ninety percent of the affected property owners; thereafter, only a seventy-five percent approval was needed.
¶5. After Chattel failed to comply with the terms of the March 2008 deed of trust, on February 6, 2009, First State foreclosed on the lots pledged to it. The trustee executed a trustee's deed, which conveyed the twenty-two lots to First State.
¶6. Four years later in 2013, prior to the lawsuit at hand, First State sued HOA regarding the validity of the covenants in a different chancery-court action. The record does not contain the specific allegations in that lawsuit, but in an order dealing with joinder of parties in that litigation, which does appear in the record, the chancery court stated:
A primary issue in dispute before the Court is the applicability or inapplicability of the Declaration of Covenants, Conditions and Restrictions for phase V of LePapillon Subdivision ....to Plaintiff's (First State) property consisting of 18 lots situated therein.
The record in this case does include the December 19, 2014 agreed final judgment incorporating the parties' settlement of the suit. In that judgment, the chancery court held that the 2008 "Declaration of Covenants, Conditions and Restrictions" was properly filed and that its provisions were "valid and enforceable in each and every respect, on the real property and its improvements." In compliance with the agreed order, First State began paying its HOA dues on the lots.[1]
¶7. Several years later, on January 31, 2018, First State sold Loblolly ten of the lots it had acquired in the foreclosure sale, and owned at the time of the settlement of its lawsuit regarding the coverage of the Declaration of Covenants, including lots 109-113, 119-121, 124, and 131. The "Special Warranty Deed" conveying title to Loblolly was prepared by Loblolly's attorney and specifically provided that "this conveyance and the warranty hereof is subject to any and all Covenants and Restrictions of record."
¶8. Although Loblolly said that it was not aware of any covenants or restrictions binding the lots when it purchased them, on January 29, 2019, Loblolly sent HOA a $2,500 check for dues on nine house lots. In March 2019, HOA wrote Loblolly's attorney and returned the $2,500 check because it did not cover the full amount of dues owed. (The amount owed was $4,500 if paid by April 19 or $4,725 if paid by May 1.) On May 22, 2019, Loblolly's attorney responded that after researching the matter, it was his opinion that when First State foreclosed, the title acquired related back to the date of the mortgage, thereby extinguishing the covenants that were filed after the mortgage. He informed HOA's attorney that he felt Loblolly had no obligation to comply with any of the covenants or pay any dues assessed. Thereafter, on July 19, 2019, HOA filed a notice of lien against Loblolly's properties for $4,500 in unpaid HOA dues.[2] These interactions resulted in the present lawsuit.
¶9. On December 31, 2019, Loblolly filed a complaint in the Lamar County Chancery Court against HOA to void the lien and for slander of title. Loblolly sought a declaratory judgment that would set aside the notice of lien and declare that the covenants and restrictions did not bind Loblolly's lots. It further alleged that HOA had maliciously and/or intentionally filed the notice of lien without authority to do so, disparaging Loblolly's title to the lots. Loblolly sought compensatory damages, punitive, and attorney's fees.
¶10. HOA filed a motion to dismiss pursuant to Rule 12(b) of the Mississippi Rules of Civil Procedure, arguing that the complaint had failed to state a claim for relief. After hearing the parties' arguments, the chancery court denied the motion to dismiss, finding that Loblolly had raised sufficient facts and legal authority to support the pleadings and prevent dismissal.
¶11. On July 15, 2020, Loblolly filed a motion for partial summary judgment, arguing that the foreclosure on the lots had extinguished the covenants binding them. HOA responded that the wording of the special warranty deed conveying the property to Loblolly should control and that the lots were subject to the covenants. HOA also referred to the agreed judgment dismissing the prior lawsuit between First State and HOA in which the parties agreed that the covenants and restrictions did apply to the properties that First State acquired through the foreclosure.
¶12. After a hearing, on January 25, 2021, the chancery court denied Loblolly's motion for partial summary judgment, finding that although the covenants may have been extinguished by the foreclosure, the clause in the special warranty deed clearly conveyed the property subject to the covenants and restrictions that were on record at the time.
¶13. After the chancery court's ruling, on April 19, 2021, HOA filed its own motion for summary judgment, arguing that Loblolly's lots were subject to the covenants and restrictions based on the language of the special warranty deed. Loblolly responded, and on June 24, 2021, the chancery court granted HOA's motion for summary judgment. The court found that HOA was entitled to summary judgment "for the reasons stated in the Court's prior Order . . . entered herein on January 25, 2021." The chancery court denied Loblolly's request for attorney's fees. On July 8, 2021, Loblolly appealed.
¶14. Loblolly raises two issues on appeal: whether the covenants and restrictions were no longer "of record" after the foreclosure and not binding, despite the language of the special warranty deed and whether First State's foreclosure on the lots extinguished Chattel's covenants and restrictions.
¶15. Mississippi Rule of Civil Procedure 56(c) provides that a trial court should grant a motion for summary judgment if the pleadings and responses to discovery "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." This Court reviews any order granting or denying summary judgment de novo. Alexander v. Wardlow, 910 So.2d 1141, 1143 (¶2) (Miss. Ct. App. 2005). In this case, neither party argues that there were any material facts in dispute, but each claims that it is entitled to judgment as a matter of law.
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