Sea Watch Stores Ltd. Liability Co. v. Council of Unit Owners of Sea Watch Condominium

• Citation: 115 Md.App. 5,691 A.2d 750
• Decision Date: 01 September 1996
• Docket Number: No. 1121,1121
• Parties: SEA WATCH STORES LIMITED LIABILITY COMPANY et al. v. The COUNCIL OF UNIT OWNERS OF SEA WATCH CONDOMINIUM ,
• Court: Court of Special Appeals of Maryland

Page 5

115 Md.App. 5

691 A.2d 750

SEA WATCH STORES LIMITED LIABILITY COMPANY et al. v. The COUNCIL OF UNIT OWNERS OF SEA WATCH CONDOMINIUM

No. 1121, Sept.Term, 1996.

Court of Special Appeals of Maryland.

April 1, 1997.

Mary T. Keating, Baltimore, for appellants.

Lee H. Ogburn (Kevin F. Arthur and Kramon & Graham, P.A., on the brief), Baltimore, for appellee.

Argued before CATHELL, HARRELL and THIEME, JJ.

CATHELL, Judge.

Sea Watch Stores Limited Liability Company (Sea Watch Stores) and the Club at Sea Watch, Ltd. (the Club at Sea Watch LTD appears to be a managing entity for the Sea Watch Stores) appeal from a judgment rendered against them granting injunctive relief in favor of The Council of Unit Owners of Sea Watch Condominium (Council of Unit Owners) by the Circuit Court for Worcester County (Eschenburg, J., presiding). Appellants present five questions:

1. Should the Council have been permitted to avail itself of the judicial system before it complied with the dispute settlement mechanism mandated by the Maryland Condominium Act?

2. Did the lower court err in ruling that the Council may impose rules for a condominium by means of restrictive covenants without compliance with the Declaration, the bylaws of the condominium, and the Maryland Condominium Act?

3. Did the lower court err in failing to hold the Council to a standard of reasonableness in its enforcement of restrictions regulating the use by a small minority of owners of the general common elements, where such restrictions were not provided for in the Declaration, Bylaws, and in particular err in finding that the Council's actions were reasonable in:

(A) refusing to approve the opening of a doorway between two units, where the Appellants provided an engineer's certificate of safety?

(B) refusing to approve signs advertising the services?

(C) insisting that Appellants' game room needed a special exception for an arcade, where the city zoning administrator testified that no such license was required or available? And

(D) otherwise attempting to impose unreasonable restrictions on the operation of Appellants' stores?

4. Did the lower court err in holding that the name of a condominium complex constitutes a service mark which the Appellants misappropriated by using it in their corporate names and businesses?

5. Did the lower court err in awarding attorneys' fees to the Council?

We shall answer question one in the affirmative, and questions two, three, four, and five in the negative. We shall affirm Judge Eschenburg's well reasoned decision.

Preliminary Discussion

In order to comprehend fully the present dispute, certain precepts of the law of real property generally and of condominiums specifically must be examined. We shall first address the nature of a condominium. ¹ It is a subdivision of land as land is defined to include all of its constituent elements, including the airspace above the physical land. A condominium is no less a subdivision in real property terms than a subdivision of physical ground that extends, not vertically, but horizontally. To conceptualize that a condominium is a subdivision, one needs to visualize that if the vertical building comprised of individual condominium units were to be laid horizontally on the ground, the condominium would then be a subdivision of that ground. ² All a condominium is, is a vertical, rather than a horizontal, subdivision of one of the incidents of real property, the airspace.

One must always remember that the condominium statutes did not create new real property. They simply created another way to own airspace ³ and to regulate the use of that incident of real property that had always been a part of real property. ⁴ Judge Eschenburg anticipated the focus of our discussion on the susceptibility of condominium units to encumbrances that can be imposed generally on any real property when he stated in his thoughtful opinion:

[Appellee] was the record owner of the eight store units and entered into a Deed, Agreement, and Declaration[ ⁵] of Covenants, Restrictions, Charges, and Liens, which contains the Restrictions. The Court finds that these Restrictions amount to restrictive covenants running with the land. In order to be valid and enforceable, restrictive covenants may not be unreasonable, nor may they be against public policy. Eisenstadt v. Barron, 252 Md. 358, 250 A.2d 85 (1969).

Eisenstadt did not concern a condominium. It concerned restrictions on a lot within a subdivision. Accordingly, Judge Eschenburg was resolving the issues in this case according to the general law applicable to the placement of restrictions on the use of real property. He was completely correct in doing so. We hold, as Judge Eschenburg essentially found, that both the general law as to the use of real property and the law regulating condominiums apply when one is dealing with the uses to which horizontal slices of a vertical column of real property, i.e., a condominium unit, may be subjected. Unless the statute provides to the contrary, when a condominium unit is encumbered by restrictions contained in the governing documents and by restrictions contained in that unit's chain of title, all reasonable restrictions, i.e., the most restrictive provision, will generally apply.

In the case sub judice, a prior owner in the chain of title to the real property at issue "as a part of that general plan" of development of the eight commercial units caused to be recorded a declaration that contained restrictions by conveying the property to a subsequent owner in the chain of title by a deed containing that declaration of restrictions. As Judge Eschenburg found, this is one way in which restrictions may be imposed on the use of real property. ⁶ That deed (recorded among the Land Records of Worcester County at Liber 564, folio 416 et seq. in 1976) for the most part contains the restrictions and conditions appellants were alleged to have violated. The deed conveyed, and restricts, the use of store units 1, 2, 3, 4, 5, 6, 7, and 8, apparently comprising commercial units in the Sea Watch Condominium in Ocean City, a primarily residential complex. The store units were conveyed to 11500 Ocean Highway Limited Partnership, also described in the deed as "Declarant." ⁷ The deed notes that the "Declarant" intended to "take title to the Store Units" and thereafter to sell them "under a general plan of development." ⁸

This deed provides that both the named "Declarant" (the grantee), and the owner, the Council of Unit Owners of Sea Watch Condominium (the grantor), wished to create "certain rights and obligations regarding the maintenance and operation of the Store Units." ⁹ It states that both parties chose to accomplish their desires by subjecting "the Store Units to certain covenants, charges, restrictions, and liens as hereinafter set forth" to be "collectively referred to as the 'Restrictions.' " The deed also notes that the restrictions were for the benefit of the "Store Units, all other Condominium Units within Sea Watch Condominium and the Council." The Council of Unit Owners was expressly delegated enforcement responsibility.

The actual granting clause states: "The Council does hereby grant, convey and assign unto the Declarant the Store Units, subject, however, to, and burdened, benefited and bound by, the Restrictions." (Emphasis added.) The habendum clause provides that the "Declarant" (the grantee), its successors and assigns, would have and hold the store units, forever, in fee simple "subject, however, to the" restrictions. The habendum clause, moreover, stated explicitly, in reference to the restrictions, that the restrictions were

hereby covenanted and agreed shall be binding upon the Declarant [the grantee], its successors and assigns, and the Store Units and each of them, to the end that the Restrictions shall run with, bind, benefit and burden the Store Units and each of them for and during the period of time specified hereafter.

Thereafter, the grantor and grantee specified the duration of the restrictions:

All Restrictions ... shall be deemed covenants running with the land or charges and liens upon the land, or both, and any and every conveyance of any Store Unit shall be absolutely subject to the Restrictions whether or not it shall be so expressed in the deed.... The Restrictions ... shall continue in full force and effect ... until the 31st day of December in the year 2015, and thereafter shall be automatically extended ... for successive periods of ten years.

We shall, as did Judge Eschenburg, construe the restrictions at issue in this case as we would review any restrictive covenant imposed on real property. We acknowledge that the condominium documents may contain provisions that conflict with these deed restrictions. There may also be zoning restrictions in conflict. The conflicts between reasonable restrictions are, so long as a conflict does not create an impossible situation in regard to use, resolved, as they generally always have been, by applying the reasonable provision that most restricts the use.

The Facts

The complaint in the instant case establishes the creation of the condominium through the execution and recording of the pertinent documents and discusses the powers of the board of directors and provisions of the condominium bylaws. It then discusses the conveyance of the eight store units at issue in the case at bar by the deed, which we have mentioned, from the Council of Unit Owners, as the owner of the stores, to 11500 Ocean Highway Limited Partnership. The complaint notes that the conveyance to 11500 Ocean Highway Limited Partnership was subject to certain restrictions intended to run with the land as a part of a general plan of development of the eight stores. ¹⁰ The various relevant restrictions are set out in the complaint, and a copy of the deed in which they were established is attached to the complaint and incorporated therein by reference. Appellee, the plaintiff...