Phillips v. Hatfield

• Decision Date: 18 December 2019
• Docket Number: No. E2019-00628-COA-R3-CV,E2019-00628-COA-R3-CV
• Parties: RITCHIE PHILLIPS ET AL. v. MARK HATFIELD
• Court: Tennessee Court of Appeals

RITCHIE PHILLIPS ET AL. v. MARK HATFIELD

No. E2019-00628-COA-R3-CV

COURT OF APPEALS OF TENNESSEE AT KNOXVILLE

October 17, 2019 Session

December 18, 2019

Appeal from the Chancery Court for Sullivan County

No. 17-CB-25948(C)

E. G. Moody, Chancellor

In this declaratory judgment action involving neighboring landowners in a residential development, the trial court determined that the restrictive covenants applicable to the development would prevent the defendant from constructing a commercial business on his property. The trial court accordingly entered an injunction preventing the defendant from constructing a business on his real property. The defendant has appealed. Discerning no reversible error, we affirm.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed; Case Remanded

THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which CHARLES D. SUSANO, JR., and JOHN W. MCCLARTY, JJ., joined.

Edward T. Brading, Johnson City, Tennessee, for the appellant, Mark Hatfield.

Ricky A.W. Curtis, Blountville, Tennessee, for the appellees, Ritchie Phillips and Roma Phillips.

OPINION

I. Factual and Procedural History

On April 20, 2017, the plaintiffs, Ritchie and Roma Phillips, filed a "Complaint for Declaratory Judgment and Motion for Immediate, Temporary Injunction" against Mark Hatfield in the Sullivan County Chancery Court ("trial court"). The Phillipses alleged that they owned two parcels of real property in Sunnybrook Addition Subdivision ("Sunnybrook Addition") and that Mr. Hatfield also owned four lots within Sunnybrook Addition. Three of Mr. Hatfield's parcels had road frontage on Highway 11E. The Phillipses further alleged that Mr. Hatfield also owned an adult bookstore, Intimate Treasures, and that he planned to build a new 4,000-square-foot structure to house this business upon one or more of his parcels in Sunnybrook Addition that abut Highway 11E.

The Phillipses claimed that Sunnybrook Addition was subject to protective covenants and restrictions mandating that the lots be used for residential purposes only. According to the Phillipses, the covenants and restrictions also provide that any lot owner maintains standing to enforce the restrictions by way of private action and that the restrictions would renew every ten years until the majority of property owners chose to rescind or modify them. The Phillipses thus sought to have construction of Mr. Hatfield's nonconforming structure halted.

The trial court conducted a hearing regarding the temporary injunction on May 2, 2017, and subsequently entered an order granting the injunction on May 24, 2017. The court specifically found in its order that the protective covenants for Sunnybrook Addition applied to the lots owned by Mr. Hatfield and that he had notice of same when he purchased the lots because the protective covenants had been recorded prior to his purchase. The court also found that Sunnybrook Addition was subject to a general plan of development. Furthermore, it found, despite Mr. Hatfield's protestations to the contrary, that the nature of the neighborhood had not radically changed in recent years such that the covenants should be vacated. Moreover, the court determined that the Phillipses would be harmed by construction of Mr. Hatfield's proposed retail establishment on his lots. The court therefore issued a temporary injunction halting construction.

On May 25, 2017, Mr. Hatfield filed a motion seeking to dissolve the temporary injunction. Mr. Hatfield also sought, alternatively, an interlocutory appeal to this Court. On May 30, 2017, Mr. Hatfield filed an answer and counterclaim, wherein he denied that the restrictive covenants applied to all of the lots in Sunnybrook Addition or to his lots specifically. Mr. Hatfield raised several affirmative defenses, including failure to state a claim upon which relief could be granted, unclean hands, lack of standing, failure to join indispensable parties, estoppel, and waiver. Mr. Hatfield further stated a counterclaim for damages for, inter alia, lost profits and attorney's fees.

On June 21, 2017, the trial court entered an order denying Mr. Hatfield's motion to dissolve the temporary injunction and his request for an interlocutory appeal. The court ordered that the temporary injunction would remain in place and that the Phillipses would file a $5,000 bond, which they accomplished on June 23, 2017. The Phillipses subsequently filed an answer to Mr. Hatfield's counterclaim, denying that he was entitled to any relief.

The trial court conducted a bench trial on January 3, 2019. On April 3, 2019, the court entered an order finding that the Phillipses owned Lots 7 and 8 in Sunnybrook Addition and that Mr. Hatfield owned Lots 1, 2, 3, and a portion of Lot 4. The court determined that Mr. and Ms. J.C. Chambers were the original developers of the "Sunnybrook" neighborhood, which was comprised of three platted developments: Sunnybrook Addition, Sunnybrook Heights, and Sunnybrook Acres. The court further found that Mr. and Mrs. Chambers recorded identical protective covenants for all three developments comprising the Sunnybrook neighborhood in 1955 and 1956. These covenants provided in relevant part that the lots would be designated as residential and would only contain single-family dwellings.

In support of its order, the trial court found that although Lots 1 and 2 had been sold by Mr. and Ms. Chambers prior to the recording of the covenants, Mr. Chambers reacquired those lots in 1955 and 1956. The court further found that since the recording of the protective covenants, Lots 1 through 4 had been sold numerous times and were ultimately purchased by Mr. Hatfield on October 12, 2016. The court specifically noted that Mr. Hatfield's deeds to his lots stated that the conveyances were subject to "valid restrictive covenants and easements, if any, appearing of record."

The trial court found that Lots 1 through 4 had not been used for a non-residential purpose since the inception of Sunnybrook, although a billboard had been erected on Lot 3. The court determined that Mr. Chambers was the original, common grantor for all of Sunnybrook neighborhood, including Sunnybrook Addition, and that he maintained a general plan of development, intending for the restrictive covenants to apply to all of Sunnybrook Addition. The court also found that Mr. Hatfield had constructive notice of the restrictions because they were publicly recorded. The court therefore declared that an implied negative reciprocal easement existed, which applied to Mr. Hatfield's property, and that a retail shop would be in violation of those covenants. The court accordingly ordered that the temporary injunction against Mr. Hatfield be made permanent. Mr. Hatfield timely appealed.

II. Issues Presented

Mr. Hatfield presents the following issues for our review, which we have restated slightly:

1. Whether the trial court erred by determining that the protective covenants for Sunnybrook Addition, recorded in the Sullivan County Register's Office, applied to Mr. Hatfield's lots.

2. Whether the trial court erred by determining that Mr. Hatfield's lots were restricted by virtue of a negative reciprocal easement.

3. Whether the trial court erred by enjoining Mr. Hatfield from constructing any retail or other business or commercial enterprise on his lots when the protective covenants have been rendered invalid due to abandonment or changed conditions within the subdivision.

4. Whether the trial court erred by taxing costs to Mr. Hatfield.

The Phillipses raise the following additional issue:

5. Whether Mr. Hatfield has waived consideration of the trial court's decision to tax costs to him by failing to provide any legal authority or argument supporting his position in his appellate brief.

III. Standard of Review

We review a non-jury case de novo upon the record with a presumption of correctness as to the findings of fact unless the preponderance of the evidence is otherwise. See Tenn. R. App. P. 13(d); Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn. 2000). "In order for the evidence to preponderate against the trial court's findings of fact, the evidence must support another finding of fact with greater convincing effect." Wood v. Starko, 197 S.W.3d 255, 257 (Tenn. Ct. App. 2006). We review questions of law de novo with no presumption of correctness. Bowden, 27 S.W.3d at 916 (citing Myint v. Allstate Ins. Co., 970 S.W.2d 920, 924 (Tenn. 1998)); see also In re Estate of Haskins, 224 S.W.3d 675, 678 (Tenn. Ct. App. 2006). We afford deference to the trial court's credibility assessments of the witnesses. See Wells v. Tenn. Bd. of Regents, 9 S.W.3d 779, 784 (Tenn. 1999).

As this Court has previously explained concerning restrictive covenants:

Construction of a restrictive covenant is also a question of law, which we review de novo with no presumption of correctness. Hughes v. New Life Dev. Corp. (Hughes II), 387 S.W.3d 453, 480-81 (Tenn. 2012). "Tennessee law does not favor restrictive covenants because they are in derogation of the rights of free use and enjoyment of property." Id. at 474-75. Thus, our courts strictly construe restrictive covenants and resolve any doubt concerning the applicability of a restrictive covenant against the restriction. Id. at 481. Ambiguities will be construed "against the party seeking to enforce the restriction and in a manner which advances the unrestricted use of the property." Id.

Still, in appropriate cases, restrictive covenants, like any other contract, "will be enforced according to the clearly expressed intention of the parties." Benton v. Bush, 644 S.W.2d 690, 691 (Tenn. Ct. App. 1982).

When properly created, restrictive covenants run with the land and are "binding on remote grantees if they appear in the chain of title or if the grantee had actual notice of them when the grantee acquired title." Hughes v. New Life Dev. Corp. (Hughes I), No. M2008-00290-COA-R3-CV, 2009 WL 400635, at *3 (Tenn. Ct. App. 2009).

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