Ridgepoint Rentals, LLC v. McGrath

• Decision Date: 07 December 2017
• Docket Number: NO. 09-16-00393-CV,NO. 09-17-00006-CV,09-16-00393-CV,09-17-00006-CV
• Parties: RIDGEPOINT RENTALS, LLC, Appellant v. JAMES W. MCGRATH AND BERNADINE L. MCGRATH, Appellees
• Court: Texas Court of Appeals

RIDGEPOINT RENTALS, LLC, Appellant v. JAMES W. MCGRATH AND BERNADINE L. MCGRATH, Appellees

NO. 09-16-00393-CV

NO. 09-17-00006-CV

Court of Appeals Ninth District of Texas at Beaumont

Submitted on July 11, 2017

December 7, 2017

On Appeal from the 258th District Court Polk County, Texas

Trial Cause No. CIV30246

MEMORANDUM OPINION

In cause number 09-16-00393-CV, Ridgepoint Rentals LLC ("Ridgepoint" or "Appellant") filed an interlocutory appeal of an order granting a temporary injunction in favor of James W. and Bernadine L. McGrath ("the McGraths" or "Appellees"). In cause number 09-17-00006-CV, Ridgepoint filed an appeal of an order granting a summary judgment and a permanent injunction in favor of the McGraths. The McGraths and Ridgepoint each own property located in Oak Terrace Estates in Montgomery County, Texas. The dispute between the parties relates to certain deed restrictions for Oak Terrace Estates that were recorded on February 1, 1971 (the "Deed Restrictions"). We dismiss the appeal in cause number 09-16-00393-CV as moot, and we affirm the trial court's order appealed in cause number 09-17-00006-CV.

Original Petition

On September 29, 2016, the McGraths filed an original petition against defendant Ridgepoint for alleged violations of the Deed Restrictions. According to the original petition, on March 22, 2010, Lot 18 of Section 4 of Oak Terrace Estates ("the Property") was conveyed to Susan and Stefan Ractliffe. On the following day, Ridgepoint was formed as a Texas limited liability company, with Stefan Ractliffe as its sole member, and on April 21, 2010, the Ractliffes conveyed the Property to Ridgepoint.

The McGraths alleged that Ridgepoint was violating the Deed Restrictions, and that the restrictions were covenants running with the land.¹ The Deed Restrictions stated in relevant part:

1. These covenants are to run with the land and shall be binding upon all parties and all persons claiming under them until December 31st., 2000, A.D., at which time said covenants shall be automatically extended for successive periods of Ten (10) years, unless an instrument signed by a majority of the then owners of the tract has been recorded, agreeing to change said covenants in whole or in part.

2. If the parties hereto, or any of them, or their heirs, successors, or assigns, shall violate or attempt to violate any of the covenants herein, it shall be lawful for the undersigned owners, their heirs, administrators, or assigns to enter and abate such violation without liability, or they, their heirs, administrators, or assigns, and any other persons owning any real property situated in said subdivision shall have the right to prosecute any proceeding at law or equity against the person or persons violating or attempting to violate such restrictions and either to prevent him or them from doing, or to cause to be removed such violation, or to recover damage for such violation.

. . . .

10. The land to be conveyed hereunder shall be used for residential purposes only, except those which are designated on the official plat of said addition as being commercial lots or reserves and except those lots which may from time to time be designated by grantor, its successors or assigns, for business, recreational or commercial purposes. The term "residential purposes" as used herein shall be held and construed to exclude hospitals, clinics, duplex houses, apartment houses, boarding houses, hotels, and all other commercial uses and all such uses of said property are hereby expressly prohibited. No building shall be erected, altered, placed or permitted to remain on any residence tract other than one detached single family dwelling and a private garage for not more than two cars.

. . . .

13. No structure of a temporary character, trailer, mobile house, basement, tent, shack, garage, barn, or other outbuilding shall be used on any tract any time as a residence either temporarily or permanently.

The McGraths alleged that Ridgepoint had violated the Deed Restrictions by "operating a weekend/vacation rental of the home situated" on the Property and by "operation of a hotel" on the Property. The McGraths sought a temporary and permanent injunction, enjoining Ridgepoint from using the Property for weekend or vacation rentals and enjoining Ridgepoint from advertising the Property for rent for any period of time less than ninety days.

Answer and Counterclaim

In its answer, Ridgepoint admitted the Ractliffes conveyed the Property to Ridgepoint. Ridgepoint further alleged that the Ractliffes use the Property as their own vacation home, that Ridgepoint advertises and leases the Property "for varying terms, generally less than 14 days[,]" that Ridgepoint pays "the Texas Hotel Tax for leases of thirty days or less[,]" and that "[h]ouses have long been leased throughout the subdivision." Ridgepoint counterclaimed for a declaratory judgment, asking the court to declare that the Deed Restrictions permit "leasing and leasing for any duration[.]" Ridgepoint also asserted that the McGraths' claims were barred by waiver, abandonment, and estoppel.

October 2016 Hearing

On October 7, 2016, the court held a hearing on the McGraths' motion for temporary injunction. Oscar Good testified that he is a member of the Oak Terrace Estates architectural committee that was established by the Deed Restrictions for the subdivision. Good agreed he was aware that Ridgepoint had used the Property for "weekend rentals or vacation rentals" and he was not aware of any other property in Section 4 of the subdivision used as a hotel. According to Good, at times "four to five cars" were at the Property on weekends, and the driveway does not hold that many cars.

Stefan Ractliffe testified that he and his wife purchased the Property in 2010 and subsequently conveyed it to Ridgepoint, which is a business that he owns. Ractliffe agreed he had file an application for a hotel occupancy tax on the Property and that "we've obviously been renting it out[]" in addition to staying there and allowing friends to stay there. Ractliffe explained as follows:

Q. Okay. So you have charged for a short-term rental for a weekend or a few days?

A. It's typically a weekend or over a week, a period of a week, typically, yeah.

Q. Okay. And how many times have you rented it and reported under this hotel occupancy tax, the use of this as a hotel?

A. Maybe 15 or 20 times.

. . . .

Q. So you're still renting the property to weekend people.

A. Currently, yes.

Ractliffe explained that he advertises the Property for rent on the VRBO website. He explained that the rental amount varies by season but ranges "from about $300 to about $450[]" per day. Ractliffe testified that his gross income on the Property was about $50,000, of which he netted about $42,000 to $45,000.

According to Ractliffe, he had spoken with his neighbors concerning tenants parking on the street, and the rental agreement he uses limits the number of vehicles to five. Ractliffe also explained that he limits the number of people to nine because that is how many people the Property sleeps and more than nine people creates wear and tear on the house and disruption in the area.

James McGrath testified that he and his wife live in the subdivision, where they own two lots. McGrath explained that he did not know whether people staying at the Property owned by Ridgepoint were tenants or friends of the Ractliffes and that no one has parked in the McGraths' driveway. He agreed that his complaint was that the Property was rented for weekends, and he understood that rentals for shorter than ninety days were not allowed by the Deed Restrictions.

On October 19, 2016, the trial court signed an order granting a temporary injunction, enjoining Ridgepoint from weekend or vacation rentals of the Property for a period of less than ninety days and ordering Ridgepoint to remove all advertising of the Property for a rental period of less than ninety days. Ridgepoint filed an interlocutory appeal of the temporary injunction with this Court.

On November 17, 2016, Ridgepoint filed an amended answer that included a counterclaim requesting dismissal of the plaintiffs' claims with prejudice. Therein, Ridgepoint argued that the McGraths' claims were barred by waiver or abandonment because

. . . [l]easing of the living areas of main dwellings for various durations, including for terms of under 90 days, has occurred at a sign[i]ficant number of properties at the subdivision for many years without any owner or entity taking any enforcement action.

Motion for Summary Judgment

The McGraths filed a motion for summary judgment on November 18, 2016. The McGraths argued that no material issues of fact existed and that "the only issues are legal issues." Citing to the testimony of Stefan Ractliffe provided during the hearing on temporary orders, the McGraths alleged that Ridgepoint started renting the Property for weekend rentals in August or September 2015, the Property has nine beds, and Ridgepoint has rented the property "[m]aybe 15 or 20 times[]" for periods of a week or less, charging $300 to $450 a night. Further, the McGraths alleged that Ridgepoint has netted around $42,000 to $45,000 in the last year from renting the Property to persons who are typically from the Houston area and who are not members of the Ractliffes' family, that Ridgepoint advertises the Property for rent on the internet, Ridgepoint filed a Texas Questionnaire for Hotel Occupancy Tax on May 24, 2016, and Ridgepoint began paying hotel occupancy taxes on July 14, 2016. According to the McGraths, such activities indicate that Ridgepoint "is operating a weekend/vacation rental of the home . . . in violation of the 1971 Deed Restriction, number 10."

The McGraths argued that the Deed Restrictions at issue in this case compare to those in Benard v. Humble, 990 S.W.2d 929, 930-32 (Tex. App.—Beaumont 1999, pet. denied), a case in which this Court construed a deed restriction that limited the use of a home to "single-family...