Valenti v. Hopkins

• Decision Date: 21 November 1996
• Docket Number: CV-0323-TM
• Citation: 324 Or. 324,926 P.2d 813
• Parties: John G. VALENTI and Margaret M. Valenti, Respondents on Review, v. Benjamin T. HOPKINS and Susan Hopkins, Petitioners on Review. CC 90-; CA A74166; SC S42001.
• Court: Oregon Supreme Court

Page 813

926 P.2d 813

324 Or. 324

John G. VALENTI and Margaret M. Valenti, Respondents on Review, v. Benjamin T. HOPKINS and Susan Hopkins, Petitioners on Review.

CC 90-CV-0323-TM; CA A74166; SC S42001.

Supreme Court of Oregon.

Argued and Submitted March 4, 1996.

Decided Nov. 21, 1996.

John R. Faust, Jr., of Schwabe, Williamson & Wyatt, Portland, argued the cause for petitioners on review. With him on the briefs was Michael W. Peterkin, Bend.

James E. Mountain, Jr., of Harrang Long Gary Rudnick P.C., Salem, argued the cause and filed the briefs for respondents on review.

Jon A. Chandler, Lake Oswego, filed a brief on behalf of amicus curiae Oregon State Home Builders Association.

Ray W. Shaw, Joel L. Augee, and Melinda Iresta Roy, Salem, filed a brief on behalf of amicus curiae Oregon Association of Realtors. TM

Gerald A. Martin and C.E. Francis, Bend, filed a brief on behalf of amicus curiae Central Oregon Board of Realtors.

Before CARSON, C.J., and GILLETTE, VAN HOOMISSEN, FADELEY, GRABER, and DURHAM, JJ. ^*

VAN HOOMISSEN, Justice.

This is an action to enforce restrictive covenants in a residential subdivision. After the subdivision's architectural control committee (ACC) approved defendants' house plans, plaintiffs brought this action, asserting that defendants' construction would obstruct plaintiffs' view in violation of the subdivision's restrictive covenants. The trial court denied injunctive relief. The Court of Appeals gave no deference to the ACC's determination and, on de novo review, held that defendants had violated the restrictive covenants. The Court of Appeals, therefore, reversed and remanded the case to the trial court to fashion a remedy. Valenti v. Hopkins In 1988, plaintiffs purchased their two-story home in the West Ridge Subdivision in Deschutes County. At that time, plaintiffs had an unobstructed view of the Cascade mountains to the west and of the Paulina and Ochoco mountains to the east. At the time plaintiffs purchased their home, the subdivision's restrictive covenants provided that "[t]he height of improvements * * * on a lot shall not materially restrict the view of other lot owners" and that the ACC "shall be the sole judge of the suitability of such heights."

131 Or.App. 100, 883 P.2d 882 (1994). The issue is whether the decision of a contractually created private architectural control committee is reviewable de novo by the courts, with no deference being given to the committee's interpretation of the enabling restrictive covenants or to its conclusions on the merits. For the reasons that follow, we reverse the decision of the Court of Appeals.

In 1989, the owners of the lots in the subdivision approved amended covenants that control the design of newly constructed homes. Article I of the amended covenants provides in part:

"Section 1. Architectural Control Committee.

"(A) An Architectural Control Committee is hereby established. This Committee shall consist of three (3) lot owners with the selection being made by an annual vote of all then lot owners to be held on or about May 1st of each year, with each lot owner entitled to one vote regardless of the number of lots owned. * * *

"(B) Generally, the Committee will be responsible for approval of plans and specifications of private areas and for promulgation and enforcement of its rules and regulations governing the use and maintenance of private areas and improvements thereon.

" * * * * *

"(D) Neither the Architectural Control Committee nor any member thereof shall be liable to any lot owner for any damages, loss or prejudice suffered or claimed, on account of any action or failure to act of the Committee, or a member thereof, provided only that the member, in accordance with actual knowledge possessed by him/her, has acted in good faith.

"Section 2. Architectural Control Committee Consent.

"Consent of the Architectural Control Committee is required for all new construction, exterior remodel, landscaping, and any major improvements upon the lot. In all cases, the following provisions shall apply:

" * * * * *

"(B) Architectural Control Committee Discretion and Guidelines.

"The Architectural Control Committee may at its discretion withhold consent with respect to any proposal which the Committee finds would be inappropriate for the particular lot or would be incompatible with the neighboring homes and terrain within West Ridge Subdivision. Considerations such as size, height, color, design, view, effect on other lots, disturbance of existing terrain and vegetation, and any other factor which the Committee reasonably believes to be relevant, may be taken into account by the Committee in determining whether or not to consent to any proposal." (Emphasis added.)

Article II (Restrictions On Use Of Property) provides in part:

"Section 2. Construction and Alteration of Improvements in Private Areas.

"No person, association, or owner shall construct or reconstruct any improvement on any lot, make any change in any lot, whether by excavation, fill, alteration of existing drainage, * * * unless such person, association, or owner has first obtained written consent thereto from the Architectural Control Committee."

Article III (Architectural Rules) provides in part:

"Section 4. View and Building Height.

"The height of improvements or vegetation and trees on a lot shall not materially obstruct the view of adjacent lot owners. The Architectural Control Committee shall judge the suitability of such heights and Article IV (General Provisions) provides in part:

may impose restrictions. ¹ If the Architectural Control Committee determines there is such obstruction of view of adjacent lot owners, written notice shall be delivered to the offending owner. If after 30 days the improvement, vegetation or trees are not removed or reduced in height, as approved by the Architectural Control Committee, the Committee shall arrange to have the removal or reduction completed, charging the owner of the lot the reasonable costs for work done. This section is not to be read as justification to create views not present when the lot was originally purchased." (Emphasis added.)

"Section 2. Enforcement.

"Enforcement shall be by proceedings at law or in equity against any person or persons violating or attempting to violate any Covenants either to restrain violation or to recover damages and may be brought by any owner in the subdivision. In the event that suit or action is initiated, the prevailing party shall be entitled to recover all costs and reasonable attorney's fees incurred in such action."

Plaintiffs' lot and house are on the east side of West Ridge Avenue. In 1990, defendants purchased a lot across West Ridge Avenue to the west of plaintiffs' home. In March 1990, defendants submitted their house plans to the ACC. Plaintiffs objected on the ground that defendants' proposed house would obstruct their view of the mountains to the west. Plaintiffs understood that the view from their first floor would be obstructed by any house built on defendants' lot; however, they expected the ACC to protect the view from their second floor. The ACC rejected defendants' plans for reasons unrelated to plaintiffs' objection. Defendants then submitted alternate plans for a two-story house, which the ACC approved. Defendants later withdrew those plans and, instead, proposed to build another type of house of the same basic design. With some alterations unrelated to height, the ACC approved those plans. Most importantly, the ACC interpreted the subdivision's amended covenants to mean that, because plaintiffs' home was located on the east side of West Ridge Avenue, plaintiffs' lot was not "adjacent" to defendants' lot within the meaning of Article III, section 4, and, therefore, that plaintiffs did not have a protected western view. ² After the ACC approved defendants' plans, they began construction. As expected, their house obstructed plaintiffs' second-floor view of the mountains to the west.

Plaintiffs then filed this action in circuit court, seeking injunctive relief and specific performance of the covenants or monetary damages. The trial court concluded that the ACC had not acted "arbitrarily or unreasonably" in approving defendants' plans, dismissed plaintiffs' complaint, and awarded defendants attorney fees. The court relied primarily on Lincoln Const. v. Thomas J. Parker & Assoc., 289 Or. 687, 617 P.2d 606 (1980) (recognizing a "fraud, bad faith, or failure to exercise honest judgment" standard of review for decisions of private entities like the ACC). Plaintiffs appealed, contending that the trial court erred in failing to find that defendants had breached the amended covenants, in failing to conclude The Court of Appeals rejected defendants' first cross-assignment of error and then concluded that it was not required to defer to the ACC's interpretation of the enabling covenant or to its findings on the merits, relying on Hanson v. Salishan Properties, Inc., 267 Or. 199, 515 P.2d 1325 (1973). The court proceeded to review the trial court's decision de novo and concluded that, within the meaning of the covenants, plaintiffs' and defendants' lots were "adjacent" and that plaintiffs were entitled to protection of their view to the west over defendants' lot. The court found that defendants' house materially obstructed plaintiffs' view and concluded that defendants had breached the covenants. Accordingly, the court remanded the case to the trial court to fashion a remedy. Valenti, 131 Or.App. at 109, 883 P.2d 882. We allowed defendants' petition for review to determine the proper role of the courts in reviewing decisions of a contractually created private design committee charged with enforcing a subdivision's restrictive covenants.

that the ACC's decision was "arbitrary and unreasonable," and in failing to grant appropriate relief from defendants' alleged breach. Defendants cross-appealed, arguing that plaintiffs' complaint did not state...