Wachter Dev., Inc. v. Martin

• Decision Date: 30 July 2019
• Docket Number: No. 20180379,20180379
• Citation: 931 N.W.2d 698
• Parties: WACHTER DEVELOPMENT, INC., Plaintiff and Appellee v. Kevin and Andrea MARTIN, Defendants and Appellants
• Court: North Dakota Supreme Court

931 N.W.2d 698

WACHTER DEVELOPMENT, INC., Plaintiff and Appellee

v.Kevin and Andrea MARTIN, Defendants and Appellants

No. 20180379

Supreme Court of North Dakota.

Filed July 30, 2019

Randall J. Bakke (argued) and Grant T. Bakke (appeared), Bismarck, ND, for plaintiff and appellee.

Robert W. Martin, Minot, ND, for defendants and appellants.

McEvers, Justice.

[¶1] Andrea and Kevin Martin appeal a district court judgment ordering the removal of a fence on their property after finding the fence violated restrictive covenants recorded against the property. The Martins argue the restrictive covenants do not apply to their property because they agreed to purchase the property before the covenants went into effect. They also claim the restrictive covenants are unconscionable. We affirm.

I

[¶2] Wachter Development has an interest in the Promontory Point V development in Bismarck. In April 2012, Wachter entered into a purchase contract with K&L Homes for 30 lots in the development. In July 2012, the Martins entered into a contract with K&L for a lot in the development.

[¶3] In April 2013, Wachter recorded a Declaration of Restrictions and Obligations (DRO) against the development property. One of the building restrictions prohibited fences on the property. In August 2013, Wachter conveyed title to the property to K&L. In the fall of 2013, the Martins were informed of the prohibition on fences during the construction of their home. In December 2013, the Martins requested a variance from the fence restriction, but Wachter’s Architectural Review Committee denied the request. In March 2014, K&L conveyed the lot title to the Martins.

[¶4] In July 2016, the Martins installed a "dog run" in their yard, an enclosed area built with fencing material. Wachter requested the removal of the dog run, but the Martins refused, claiming the DRO did not apply to their property because they agreed to purchase their lot before the DRO was recorded against the property.

[¶5] In February 2017, Wachter sued the Martins, requesting the district court order removal of the fence. The Martins counterclaimed, alleging the DRO does not apply to their property because they were equitable owners of their lot before the DRO was recorded. They also alleged Wachter waived its right to enforce the DRO, and the DRO was unconscionable.

[¶6] Before trial, the district court granted summary judgment to Wachter on two issues: 1) the court concluded the DRO applied to the Martins' property; and 2) the court concluded the Martins' dog run constituted a fence prohibited under the DRO.

[¶7] At trial, the parties presented evidence relating to the Martins' counterclaim: whether Wachter was precluded from enforcing the DRO on the basis of waiver or unconscionability. In its order following trial, the district court ruled the DRO was not unconscionable and Wachter did not waive its ability to enforce the DRO. The court entered a judgment ordering removal of the fence from the Martins' property.

II

[¶8] This Court’s standard of review for summary judgments is well established:

Summary judgment is a procedural device under N.D.R.Civ.P. 56(c) for promptly resolving a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. The party seeking summary judgment must demonstrate there are no genuine issues of material fact and the case is appropriate for judgment as a matter of law. In deciding whether the district court appropriately granted summary judgment, we view the evidence in the light most favorable to the opposing party, giving that party the benefit of all favorable inferences which can reasonably be drawn from the record. A party opposing a motion for summary judgment cannot simply rely on the pleadings or on unsupported conclusory allegations. Rather, a party opposing a summary judgment motion must present competent admissible evidence by affidavit or other comparable means that raises an issue of material fact and must, if appropriate, draw the court’s attention to relevant evidence in the record raising an issue of material fact. When reasonable persons can reach only one conclusion from the evidence, a question of fact may become a matter of law for the court to decide. A district court’s decision on summary judgment is a question of law that we review de novo on the record.

Frontier Fiscal Servs., LLC v. Pinky’s Aggregates, Inc. , 2019 ND 147, ¶ 6, 928 N.W.2d 449 (quoting Becker v. Burleigh Cty. , 2019 ND 68, ¶ 7, 924 N.W.2d 393 ).

[¶9] In KLE Constr., LLC v. Twalker Dev., LLC , 2016 ND 229, ¶ 5, 887 N.W.2d 536 (quoting Border Res., LLC v. Irish Oil & Gas, Inc. , 2015 ND 238, ¶ 14, 869 N.W.2d 758 ), we explained the standard of review for an appeal from a bench trial:

[T]he trial court’s findings of fact are reviewed under the clearly erroneous standard of N.D.R.Civ.P. 52(a) and its conclusions of law are fully reviewable. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing all the evidence, we are left with a definite and firm conviction a mistake has been made. In a bench trial, the trial court is the determiner of credibility issues and we do not second-guess the trial court on its credibility determinations.

III

[¶10] This Court has said "planned unit developments present a modern trend in residential living, and [d]eed restrictions and covenants are vital to the existence and viability of such communities, and if clearly established by proper instruments, are favored by definite public policy." Wheeler v. Southport Seven Planned Unit Dev. , 2012 ND 201, ¶ 10, 821 N.W.2d 746 (internal quotations omitted). A servitude, such as a restrictive covenant, is created if the owner of the property to be burdened conveys a lot in a general-plan development subject to a recorded declaration of servitudes for the development. Id.

[¶11] Covenants running with the land are defined in N.D.C.C. § 47-04-24 :

Certain covenants contained in grants of estates in real property are appurtenant to such estates and pass with them so as to bind the assigns of the covenantor and to vest in the assigns of the covenantee in the same manner as if they personally had entered into them. Such covenants are said to run with the land.

In regard to restrictive covenants, a landowner may sell land subject to restrictive covenants so long as they are not contrary to public policy. Wheeler , 2012 ND 201, ¶ 13, 821 N.W.2d 746.

[¶12] The interpretation of restrictive covenants is governed by the rules for contract interpretation. Hill v. Lindner , 2009 ND 132, ¶ 8, 769 N.W.2d 427. "A restrictive covenant must be construed as a whole to ascertain the parties' intent in light of the surrounding circumstances and words must be given their plain and ordinary meaning." Id. (citing N.D.C.C. §§ 9-07-02 ; 9-07-04; 9-07-06; 9-07-09; and 9-07-12).

IV

[¶13] The Martins claim the DRO’s building restrictions do not apply to their property because they contracted with K&L to purchase their lot before the DRO was recorded. Their argument is based on the doctrine of equitable conversion. They claim they were equitable owners of the property when they entered into the lot contract with K&L.

[¶14] This Court has discussed the doctrine of equitable conversion:

Under the doctrine of equitable conversion, "once parties have executed a binding contract for the sale of land, equitable title vests in the purchaser and the vendor holds legal title only as security for payment of the balance of the purchase price." Black’s Law Dictionary 538 (6th ed. 1990). Equity regards the realty as "converted" into personalty, and the purchase money as "converted" into realty. Clapp v. Tower , 11 N.D. 556, 93 N.W. 862, 863 (1903) ; 27 Am. Jur. 2d Equitable Conversion § 1 (1966). The doctrine evolved from the equitable maxim: "that is regarded as done which should be done." Clapp v. Tower, supra , 93 N.W. at 863. The doctrine applies, however, only where there is a valid contract for sale which could be specifically enforced. Henry S. Grinde Corp. v. Klindworth , 77 N.D. 597, 44 N.W.2d 417, 425 (1950) ; Clapp v. Tower, supra , 93 N.W. at 864 ; 27 Am. Jur. 2d Equitable Conversion § 8 (1966).

United Bank of Bismarck v. Trout , 480 N.W.2d 742, 748 (N.D. 1992). "The doctrine of equitable conversion does not apply where it interferes with other equitable considerations or violates the intentions of the parties of the sales contract." 27A Am. Jur. 2d Equitable Conversion § 4 (2019).

[¶15] In April 2012, Wachter and K&L executed a Real Estate Sales Purchase Contract for the purchase of 30 lots in Promontory Point V. The contract provided that at closing Wachter would deliver a warranty deed conveying title to the real property "free and clear of all encumbrances except ... covenants, conditions and restrictions of record."

[¶16] In July 2012, the Martins entered into a lot sale and earnest money contract with K&L for a lot in the development. The parties agreed that at closing the Martins would pay the balance of the purchase price, and K&L would deliver possession of the lot and a warranty deed.

[¶17] On April 8, 2013, Wachter recorded the DRO against the development property. The DRO states "all of ... the said conditions and restrictions shall inure to the benefit of, be binding upon and pass with said Real Property, and each and every lot and/or parcel thereof, and shall inure to the benefit of, apply to, and bind the respective successors in title or interest of Developer." The DRO contains numerous building restrictions that apply to the development. The building restriction at issue in this case provides "No fences shall be constructed."

[¶18] On August 1, 2013, Wachter delivered a warranty deed to K&L for the lots. The warranty deed states, "[s]ubject to easements, rights-of-way, restrictive...