Miles v. Carolina Forest Ass'n

• Decision Date: 16 November 2004
• Docket Number: No. COA03-1329.,COA03-1329.
• Citation: 167 NC App. 28,604 S.E.2d 327
• Court: North Carolina Court of Appeals
• Parties: Jacob E. MILES, et al., Plaintiffs, v. CAROLINA FOREST ASSOCIATION, Defendant.

604 S.E.2d 327

167 NC App. 28

Jacob E. MILES, et al., Plaintiffs, v. CAROLINA FOREST ASSOCIATION, Defendant.

No. COA03-1329.

Court of Appeals of North Carolina.

November 16, 2004.

Fisher Clinard & Cornwell, P.L.L.C., by Shane T. Stutts, High Point, for plaintiff appellants.

Hill, Evans, Duncan, Jordan, & Beatty, P.L.L.C., by Karl N. Hill, Jr., Greensboro, for defendant appellee. McCULLOUGH, Judge.

This case arose out of a dispute between a subdivision association, Carolina Forest Association ("CFA"), and owners of undeveloped property in the subdivision ("plaintiffs"). CFA, by way of counterclaim, sought payments of certain fees and assessments they contended were agreed to by plaintiffs, and which were to be used for improvements to common areas and roads in the subdivision. Plaintiffs objected to paying such fees and assessments, believing themselves neither bound to do so under the law or in equity. The parties waived trial by jury.

The underlying facts are these: On 1 June 1970, the land development company Russwood, Incorporated ("Russwood") prepared covenants and restrictions (the "declarations") to run with Carolina Forest Subdivision, a gated community developed in Montgomery County. These declarations were recorded on 8 July 1970 and included the requirement that each lot owner maintain membership in and abide by the rules of Carolina Forest Association, Inc. The declarations contain the following paragraph which limited the duration of the covenants and restrictions to 1 January 1990:

10. These restrictions and covenants run with the land, and shall bind the PURCHASERS, their heirs, executors, administrators, personal representatives and assigns, and if any of them shall violate or attempt to violate any of the covenants or restrictions herein contained, it shall be lawful for any person(s) or corporation(s) owning any such lots in the sub-division to prosecute any proceedings at law or in equity against those violating or attempting to violate any such covenants or restrictions and either to prevent him, them or it from doing so, or to recover damages for such violation. All of the restrictions, conditions, covenants and agreements contained herein shall continue until January 1, 1990, except that they may be changed, altered, amended or revoked in whole or in part by the record owners of the lots in the sub-division whenever the individual and corporate record owners of at least 2/3 of the said platted lots so agree in writing. Provided, however, that no changes shall be made which might violate the purposes set forth in Restrictions No. 1 [limiting lots to residential purposes generally] and No. 8 [providing a perpetual easement and rights of ingress and egress for utility lines]. Any invalidation of any one of these covenants and restrictions shall in no way affect any other of the provisions thereof which shall hereafter remain in full force and effect.

Russwood then conveyed certain land, rights and obligations to CFA by deed which was recorded on 16 August 1973. CFA then sold Carolina Forest lots under these declarations to plaintiffs at various times.

As 1 January 1990 approached, CFA requested plaintiffs' consent in writing to amend declaration No. 10 to extend beyond its expiration. Of the 906 lots in the subdivision, 618 of the Carolina Forest lot owners agreed to the amendments. Approximately half of plaintiffs voted in favor of the amendment to extend the declarations. In 1997 and 1998, because some of the lot owners did not pay assessments, CFA voided some of the plaintiffs' gate cards which prevented access to the subdivision. Plaintiffs initiated this action against CFA seeking (1) declaratory judgment regarding their rights and obligations as lot owners; and (2) an injunction to prohibit levying fees and assessments and to allow access to the subdivision and common areas. CFA moved to dismiss these claims under the theory that plaintiffs were bound by the declarations as amended.

The first judgment rendered in the case, certified for appellate review, granted partial summary judgment in favor of plaintiffs. In that order, the trial court divided plaintiffs into two categories. In the first category were those plaintiffs to whom the amendments applied and against whom fees and assessments could be enforced. This category of plaintiffs was comprised of two subsets: in the first subset were those plaintiffs who voluntarily consented in writing to declaration No. 10 as amended and extended, as these parties were estopped from claiming otherwise; and in the second subset were those plaintiffs who purchased their lots at a point in time after which their deeds expressly referred to the covenants and restrictions. The claims of these two subsets of plaintiffs were dismissed.

In the second category of plaintiffs were lot owners who did not consent to the amendments to declaration No. 10, and did not receive deeds which placed them on notice of the covenants and restrictions. The court allowed the claims of these plaintiffs to go forward. However, the court found that this second category of plaintiffs was bound by an implied in fact contract with CFA, which required them to pay fees for maintenance, repair, and upkeep of all roadways for three years preceding the filing of CFA's answer.

This order, as certified by the trial court, was then appealed to our Court. In reviewing the order, we held that the first category of plaintiffs was not bound by declaration No. 10 as amended. See Miles v. Carolina Forest Ass'n, 141 N.C.App. 707, 541 S.E.2d 739 (2001) (Miles I). Applying strict construction to negative covenants, we found that there was no authority under the original declarations to extend them beyond 1 January 1990 and reversed the trial court's conclusion of law. Miles I, 141 N.C.App. at 712-13, 541 S.E.2d at 742. Concerning the second category of plaintiffs, we did not affirm the trial court's conclusion of law that they were bound by an implied contract in fact, but remanded the case, as to all plaintiffs, for the trial court to determine the following:

[For] the trial court to address whether all of the plaintiffs have impliedly agreed to pay for maintenance, upkeep and operation of the roads, common areas and recreational facilities with the subdivision, and if so, in what amount.

Id. at 714, 541 S.E.2d at 742.

Now for our review is the trial court's judgment issued pursuant to the mandate of Miles I. In that judgment, the trial court granted CFA a directed verdict at the close of all evidence, concluding, as a matter of law, that an implied contract existed between CFA and all plaintiffs. The trial court ordered plaintiffs to pay these fees for benefits they received by way of maintenance and upkeep of the roads, common areas, and recreational facilities within the subdivision.

In their only assignment of error, plaintiffs contend that the trial court erred in granting CFA's motion for directed verdict finding an implied contract as to all plaintiffs, and denying plaintiffs' same motion. Their issue is based on three alternative arguments: The first is that the covenants under declaration No. 10 are void as a matter of law, and the doctrine of implied contracts cannot breathe new life into them. The second is that the Statute of Frauds (SOF) requires any of the alleged implied agreements between plaintiff and defendants be in writing, and are otherwise unenforceable. And lastly, that the scope of an implied contract is limited to unjust enrichment and plaintiffs have been in no way so enriched. We do not agree with the arguments put forth by plaintiffs, and affirm the trial court pursuant to the following analysis.

Plaintiffs first contend, as a matter of law, that an implied contract cannot be used to breathe new life into null and void restrictive covenants. They do so, citing as their principal authority Allen v. Sea Gate Assn., 119 N.C.App. 761, 460 S.E.2d 197 (1995).

In Allen, we found that covenants imposing affirmative obligations could not be amended to allow them to extend into the future, unless they were clearly authorized to do so within the covenants. We held that the language of the covenant in that case, "except that they may be changed, altered, amended or revoked in whole or in part[,]" did not grant such authority. Id. at 765, 460 S.E.2d at 200. This is the exact same language found in declaration No. 10 in the case at bar. Therefore, we based our reversal as to the first category of plaintiffs in Miles I on the decision in Allen. Miles I, 141 N.C.App. at 712-13,541 S.E.2d at 742.

However, nothing in Allen supports plaintiffs' contention that an implied contract on these facts is precluded as a matter of law. In reading the Allen decision, it appears the defendants in that case did not raise the implied contract theory in any claim. In Brown v. Woodrun Ass'n, 157 N.C.App. 121, 577 S.E.2d 708 (2003) disc. review denied, 357 N.C. 457, 585 S.E.2d 384 (2003), a case comparing Miles I and Allen, the Brown Court stated:

In Miles, a declaration containing a provision with language similar to that in Paragraph 11 in this case was at issue. By relying on Allen, the Miles Court held the declaration was unenforceable because the ambiguous provision did not clearly authorize an extension. However, unlike Allen, the trial court in Miles had found that an implied contract existed between the defendant and several of the plaintiffs, which required those plaintiffs to contribute to the maintenance, repair, and upkeep of their subdivision for a specific period of time. Thus, on appeal, this Court remanded the case to the trial court for a determination as to whether all plaintiffs had impliedly agreed to pay for maintenance, repair, and upkeep of the subdivision, and if so, in what amount.

Unlike Miles, the trial court in the case sub judice never found that an implied contract existed. This theory of relief was never raised by defendant at the trial level

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