Spur at Williams Brice Owners Ass'n, Inc. v. Lalla

• Decision Date: 18 November 2015
• Docket Number: Appellate Case No. 2013–001479.,No. 5362.,5362.
• Citation: 415 S.C. 72,781 S.E.2d 115
• Court: South Carolina Court of Appeals
• Parties: The SPUR AT WILLIAMS BRICE OWNERS ASSOCIATION, INC., Respondent, v. Sunil V. LALLA and Sharan W. Lalla, Appellants.

415 S.C. 72

781 S.E.2d 115

The SPUR AT WILLIAMS BRICE OWNERS ASSOCIATION, INC., Respondent,

v.Sunil V. LALLA and Sharan W. Lalla, Appellants.

Appellate Case No. 2013–001479.

No. 5362.

Court of Appeals of South Carolina.

Heard Oct. 15, 2014.

Decided Nov. 18, 2015.

Rehearing Denied Jan. 21, 2016.

S. Jahue Moore and John Calvin Bradley Jr., both of Moore Taylor Law Firm, P.A., of West Columbia, for appellants.

Brian Matthew Lysell, D. Reece Williams III, and W. Taylor Stanley of Callison Tighe & Robinson, LLC, of Columbia, for respondent.

McDONALD, J.

Sunil V. Lalla and Sharon W. Lalla (collectively, the Lallas), co-owners of a unit in a horizontal property regime known as The SPUR at Williams Brice Stadium (The SPUR), appeal the circuit court's order allowing The SPUR to enforce a restrictive covenant prohibiting the Lallas from renting their unit to any student currently enrolled in a two or four-year college. The Lallas argue the restriction has no reasonable basis and discriminates against a specific class of individuals. The Lallas further argue the circuit court erred in failing to hold the restrictive covenant null and void. We affirm.

FACTS AND PROCEDURAL HISTORY

The SPUR is a horizontal property regime consisting of real property, condominiums, and general limited common areas. The SPUR was created by master deed dated September 19, 2006 (Master Deed). The SPUR at Williams Brice Owners Association, Inc. (the Association) is a nonprofit corporation that exists for the sole purpose of administering The SPUR and enforcing The SPUR's Master Deed and bylaws pursuant to the South Carolina Horizontal Property Act.¹ Article XIV of the Master Deed provides, in relevant part, the following:

The rental of any unit to any student currently enrolled in a two (2) or four (4) year college, institute, or university is strictly prohibited. Additionally, any tenant of any Unit shall be prohibited from having any roommate that is enrolled in a two (2) or four (4) year college, institute, or university. Any tenant in violation of this Restriction shall have their lease automatically terminated, and shall have thirty (30) days to vacate the Unit.²

Landmark Resources, LLC (Landmark) has managed the Association since July 1, 2007.

In 2007, the Lallas purchased a three-bedroom condominium at The SPUR (Unit 101) for $470,000. Sunil Lalla explained by affidavit that he "purchased the condo to enjoy football games at USC." When the Lallas purchased the unit, their daughter was considering attending college at the University of South Carolina. The Lallas intended for their daughter and two roommates to occupy Unit 101 during their college years and planned to receive rental payments from their daughter's roommates.

In 2008,³ the real estate market declined, and Unit 101, like homes across the United States, substantially decreased in value. Despite their attempts, the Lallas were unable to sell the unit. At the time of the hearing in this matter, Unit 101 had been on the market for approximately four years.

During the summer of 2010, the Lallas notified the Association of their decision to rent to college students and began doing so. The Association's board meeting minutes from June 3, 2010, indicate the following:

Management brought to the attention of the Board a comment form completed by an owner. The comment card stated that the Association is allowing the condominium to turn into a dormitory.... After discussing the comment card [with] the Board[,] a motion was made to consult with [the] drafters of the Master Deeds as it pertains to rentals. The motion was made to clarify the parameters of student rentals with the attorney—find out if a moratorium for students to rent can be placed immediately; motion was carried unanimously.

On July 6, 2010, Landmark sent notice to each owner regarding enforcement of the Master Deed provision barring rentals to unrelated college students. The notice gave owners until May 31, 2011, to terminate any such leases.

The February 11, 2011 board meeting minutes state that "[a] letter was presented to the [b]oard from an attorney on behalf of Unit # 111 ^{[4 ]} contesting the [Association's] Master Deed of enforcing rental requirements." On May 25, 2011, Landmark sent another notice reminding owners that the Master Deed prohibited unit rentals to unrelated college students. Again, on July 14, 2011, the Association addressed the student rental issue in its board meeting minutes: "To identify renter[s] who are attending a 2 or 4 year school, all owner[s] must have potential renters complete [an] application and forward that application to the Board for approval ... The Board will also start enforcing the Rules and Regulations concerning renting units."

On October 10, 2011, the Association filed this declaratory judgment action seeking interpretation and enforcement of the Master Deed and bylaws. Specifically, the Association asked that the circuit court find the Lallas were "in violation of the Master Deed by renting to a student or students and should be enjoined from doing so now or in the future." The Association further sought an award of "costs and fees pursuant to [section 15–53–100 of the South Carolina Code (2005) ] and Section XXIIIC of the Master Deed."

The Lallas answered and counterclaimed, seeking a declaration that the restrictive covenant was null and void due to changed circumstances. The parties agreed to have the circuit court rule on the outstanding issues without testimony. The circuit court's order demonstrates that the parties had a "full opportunity" to create a record, present evidence through stipulated facts and affidavits, and present arguments through briefs.

The circuit court granted the Association's request for declaratory relief, ruling that "[w]hen the [Lallas] purchased Unit 101, they became subject to the provisions of the Master Deed and [b]ylaws." The Lallas appealed, asserting that the restrictions discriminate against a specific class of individuals (college students) and are unreasonable as there has been no damage to other property owners. The Lallas further assert the circuit court erred in declining to hold the rental restriction null and void due to its unreasonableness and the changed economic circumstances depressing condominium values substantially below the 2007 purchase price.

Finally, the Lallas contend the court erred in ruling their affirmative defense of waiver inapplicable and in enjoining the Lallas from continuing to rent Unit 101 to their current tenants.

STANDARD OF REVIEW

"Declaratory judgment actions are neither legal nor equitable and, therefore, the standard of review depends on the nature of the underlying issues." Judy v. Martin, 381 S.C. 455, 458, 674 S.E.2d 151, 153 (2009). "An action to enforce restrictive covenants by injunction is in equity." S.C. Dep't of Nat. Res. v. Town of McClellanville, 345 S.C. 617, 622, 550 S.E.2d 299, 302 (2001) ; see also Cedar Cove Homeowners Ass'n, Inc. v. DiPietro, 368 S.C. 254, 258–59, 628 S.E.2d 284, 286 (Ct.App.2006). "In an action at equity, tried by a judge alone, an appellate court may find facts in accordance with its own view of the preponderance of the evidence." Inlet Harbour v. S.C. Dep't of Parks, Recreation & Tourism, 377 S.C. 86, 91, 659 S.E.2d 151, 154 (2008). "However, we are not required to disregard the findings of the trial judge who saw and heard the witnesses and was in a better position to judge their credibility." Straight v. Goss, 383 S.C. 180, 192, 678 S.E.2d 443, 449 (Ct.App.2009). "Moreover, the appellant is not relieved of his burden of convincing the appellate court the trial judge committed error in his findings." Pinckney v. Warren, 344 S.C. 382, 387–88, 544 S.E.2d 620, 623 (2001). In an action for declaratory relief, the burden of proof rests with the party seeking the declaration, and that party must meet its burden by a greater weight or preponderance of the evidence. See Vt. Mut. Ins. Co. v. Singleton, 316 S.C. 5, 10, 446 S.E.2d 417, 421 (1994) ; see also Menne v. Keowee Key Prop. Owners' Ass'n, Inc., 368 S.C. 557, 564, 629 S.E.2d 690, 694 (Ct.App.2006).

LAW AND ANALYSIS

I. Restrictive Covenant

The Lallas argue the circuit court erred in determining that they failed to meet their burden of establishing that the restrictive covenant is unreasonable and unenforceable. We disagree.

"Restrictive covenants, sometimes referred to as ‘real covenants,’ are agreements ‘to do, or refrain from doing, certain things with respect to real property.’ " Kinard v. Richardson, 407 S.C. 247, 257, 754 S.E.2d 888, 893 (Ct.App.2014). "Restrictive covenants are contractual in nature, and thus, the language used in the restrictive covenant is to be construed according to its plain and ordinary meaning." Penny Creek Assocs., LLC v. Fenwick Tarragon Apartments, LLC, 375 S.C. 267, 271, 651 S.E.2d 617, 620 (Ct.App.2007). Restrictions on the use of property are historically disfavored. Sea Pines Plantation Co. v. Wells, 294 S.C. 266, 270, 363 S.E.2d 891, 893 (1987). "The historical disfavor of restrictive covenants by the law emanates from the widely held view that society's best interests are advanced by encouraging the free and unrestricted use of land." Rhodes v. Palmetto Pathway Homes, Inc., 303 S.C. 308, 311, 400 S.E.2d 484, 485 (1991).

The law governing the enforceability of covenants restricting the use of real property is well-established in South Carolina. "A restriction on the use of the property must be created in express terms or by plain and unmistakable implication, and all such restrictions are to be strictly construed, with all doubts resolved in favor of the free use of property." Buffington v. T.O.E. Enters., 383 S.C. 388, 392, 680 S.E.2d 289, 291 (2009). In order to enforce a restrictive covenant, "a party must show that the restriction applies to the property either by the covenant's express language or by a plain and unmistakable implication." Id.; see also Sea Pines Plantation Co., 294 S.C. at 269, 363...