Shawver v. Huckleberry Estates, LLC

• Decision Date: 29 April 2004
• Docket Number: No. 28855.,28855.
• Parties: J. Scott SHAWVER, a/k/a Scott Shawver and Mary L. Shawver, a/k/a Mary Shawver, Plaintiffs-Respondents-Cross Appellants, v. HUCKLEBERRY ESTATES, L.L.C., an Idaho limited partnership, Defendant-Appellant-Cross Respondent.
• Court: Idaho Supreme Court

93 P.3d 685

140 Idaho 354

J. Scott SHAWVER, a/k/a Scott Shawver and Mary L. Shawver, a/k/a Mary Shawver, Plaintiffs-Respondents-Cross Appellants, v. HUCKLEBERRY ESTATES, L.L.C., an Idaho limited partnership, Defendant-Appellant-Cross Respondent.

No. 28855.

Supreme Court of Idaho, Boise, December 2003 Term.

April 29, 2004.

Rehearing Denied June 22, 2004.

Bohner Law Office, Boise, for appellants. A.J. Bohner argued.

Westburg, McCabe & Collins, Boise, for respondent. William D. Collins argued.

SCHROEDER, Justice.

This case involves a real estate purchase and sale agreement between Scott and Mary Shawver ("Shawvers") and Huckleberry Estates, L.L.C. ("Huckleberry"). The Shawvers allege Huckleberry breached the sale agreement by making an invalid amendment to the restrictive covenants applicable to the property, which rendered the Shawvers' proposed house designs nonconforming. Both parties moved for summary judgment and the district court found Huckleberry in breach. Following a court trial on issues relating to the interpretation of the original covenants and appropriate damages, the district court awarded specific performance of the sale agreement in favor of the Shawvers, subject only to the original covenants. Both parties appealed.

I. FACTUAL BACKGROUND

On November 9, 1999, Huckleberry and the Shawvers executed an agreement to reserve for the Shawvers the purchase of Lot 11, Block 2, of the Huckleberry Estates subdivision ("the Subdivision"). The sale was to close within 30 days of the recording of the final plat of Phase 1 of the Subdivision. Huckleberry's agent provided the Shawvers with a copy of the preliminary plat and restrictive covenants as then drafted ("Draft CC & Rs"). By signing the reservation agreement, the Shawvers acknowledged that they had received a copy of the restrictive covenants that applied to the lot, had familiarized themselves with the covenants and agreed to abide by them. The Draft CC & Rs provided in relevant part:

c. MINIMUM BUILDING SIZE: All residential buildings erected upon said property shall have a finished floor area of not less then 2,200 square feet of ground area, exclusive of garages, carports, breezeways, storage rooms, porches or similar structures; or 2,600 square feet of finished area in the case of a two story house. All dwellings must have at least a three-car garage, attached or detached. Lot 3 Block 4 shall be excepted from this condition and shall have a minimum residential finished floor area of 1,600 square feet on the ground floor level and a two-car garage.

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r. DESIGN REVIEW: Grantor or other persons designated by Grantor shall review all structures and site plans prior to commencement of construction.

After signing the reservation agreement, the Shawvers designed a house for the Huckleberry property which met the square-footage requirements of the Draft CC & Rs. The plan was for a two-story structure with 1370 square feet on the first floor and 1770 square feet on the second floor. The Shawvers engaged a contractor to build the house.

On July 21, 2000, Huckleberry recorded the final plat and original CC & Rs for the Subdivision. The original recorded CC & Rs contained an amendment provision, which allowed amendment of any provision of the CC & Rs upon written approval of "at least seventy-five percent of the lot owners." The Shawvers received a copy of the original recorded CC & Rs on August 1, 2000. Aside from the addition of the amendment provision, the recorded CC & Rs did not differ from the Draft CC & Rs in any respect relevant to this case.

On July 28, 2000, a real estate purchase and sale agreement ("Sale Agreement") was initialed by Huckleberry¹ and delivered to the Shawvers by Huckleberry's real estate agent. The Shawvers signed the Sale Agreement and delivered it to Huckleberry's real estate agent on August 17, 2000. Pursuant to the agreement, the Shawvers were responsible for obtaining and reviewing a copy of the applicable CC & Rs. The Shawvers checked the corresponding "yes" box adjacent to this provision, indicating that they had in fact reviewed the applicable CC & Rs.

The Shawvers submitted site, floor and elevation plans for their home to Huckleberry on August 8, 2000. On August 11, 2000, Huckleberry returned those plans to the Shawvers and told the Shawvers that the plans had not been approved. Huckleberry subsequently recorded amendments to the original recorded CC & Rs ("First Amended CC & Rs") on August 28, 2000, which included an increase in the minimum square footage requirement for all homes built in the Subdivision. A copy of the First Amended CC & Rs was provided to the Shawvers on August 30, 2000. As amended, the CC & Rs prevented the Shawvers from constructing their home according to the plans they had previously designed and submitted to Huckleberry. The relevant amendments were as follows:

Article I, Paragraph c. is hereby amended to read as follows:

c. MINIMUM RESIDENTIAL BUILDING FLOOR AREA: Floor area shall be exclusive of eaves, steps, porches, entrances patios and garages. The floor area of a one-story house shall have not less than two thousand two hundred (2,200) square feet on the ground floor. Two story houses shall have not less than a total of two thousand six hundred (2,600) square feet and shall have the following minimums on each floor: one thousand six hundred (1,600) square feet on the ground floor and not less than 800 hundred (800) square feet on the second floor. All dwellings must have at least a three-car garage, attached or detached, which must be identical in architecture to the residential dwelling if detached. Lot 3 Block 4 shall be excepted from this condition and may have a total minimum floor area of one thousand (1,600) square feet and a two-car garage. The Architectural Committee shall have the discretion to reduce the minimum floor areas if the proposed design warrants such an adjustment. Provided, however, that the minimum ground floor area of any dwelling shall not be reduced below one thousand five hundred (1,500) square feet.

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Article I, Paragraph w. is hereby amended to read as follows:

w. DESIGN REVIEW: Grantor or other persons designated by Grantor, shall act as the Architectural Committee. The Architectural Committee shall consider and act upon any and all proposals or plans and specifications submitted for its approval pursuant to this Declaration, including the inspection of construction in conformance with plans approved by the Architectural Committee. The Architectural Committed shall have the power to determine, by rule or other written designation consistent with this Declaration, which types of improvements shall be submitted for Architectural Committee review and approval. The Architectural Committee shall approve proposals or plans and specifications submitted for its approval only if it deems that the construction, alternation, or additions contemplated thereby in the locations indicated are in conformity with this Declaration, and that the appearance of any structure affected thereby will be in harmony with the surrounding structures on other properties within the Subdivision.

Article I, Paragraph z. is hereby amended to read as follows:

z. AMENDMENTS: The Grantor reserves the right to amend this Declaration until all lots are sold in the subdivision. No amendments shall be made to this Declaration by any of the owners until ten (10) years after the date of the sale of the last lot in the subdivision and then such amendment may be only made by approval of seventy-five percent of the then lot owners.

On August 31, 2000, the Shawvers tendered to the closing agent, First American Title, the balance of the purchase price, but only if First American could assure them they were purchasing under the original recorded CC & Rs and not the First Amended CC & Rs. When First American refused to close under these conditions the Shawvers filed suit against Huckleberry.

II. PROCEDURAL BACKGROUND

On September 1, 2000, the Shawvers filed a complaint against Huckleberry seeking specific performance of the Sale Agreement. The Shawvers amended their complaint on March 7, 2001, to add damages as an alternative basis for relief and to seek a declaration that the August 28, 2000 amendments to the CC & Rs were void. Huckleberry answered the Shawvers' amended complaint and counterclaimed.

On June 1, 2002, the parties submitted cross motions for summary judgment. The Shawvers claimed that the First Amended CC & Rs were invalid because Huckleberry alone did not constitute seventy-five percent of the lot owners, the percentage required for the adoption of a valid amendment under the original recorded CC & Rs. They also asserted that Huckleberry's invalid amendment to the original CC & Rs constituted a breach of the covenant of good faith and fair dealing and that Huckleberry was prevented from amending the original CC & Rs by the doctrine of quasi estoppel. Huckleberry claimed that summary judgment was inappropriate because a contested issue of material fact existed regarding representations made to the Shawvers by Huckleberry's agent concerning the applicability of the Draft CC & Rs. Alternatively, Huckleberry claimed that it was entitled to summary judgment because the Shawvers were seeking to reform the parties' agreements, which could not be accomplished through application of specific performance or the implied covenant of good faith and fair dealing.

On July 23, 2001, Huckleberry recorded a second amendment to the original recorded CC & Rs ("Second Amended CC & Rs"). The Second Amended CC & Rs included essentially the same provisions as the First Amended CC & Rs with the exception of the provision for amendments which was changed to remove the grantor's reservation. Unlike the First Amended CC & Rs, the Second Amended CC & Rs were approved by over seventy-five percent of the existing lot owners in compliance with the amendment provision contained in...