Appel v. Presley Companies

Supreme Court of New Mexico · Property

PropertyRestrictive covenantsMisrepresentationUnfair Trade Practicesrestrictive covenantsarchitectural control committeeamendment powerreasonableness

Facts

Presley recorded a replat for the Vista Del Sandia subdivision and later recorded restrictive covenants covering the subdivision property, including an arroyo tract. The Appels alleged that Presley and its agents made representations about certain lots and about the purpose and effect of the covenants, and that they relied on those representations when purchasing their lot and building their home. In 1984, the subdivision's Architectural Control Committee, composed entirely of Presley employees or officers, amended the covenants to delete nine lots from their coverage, including Lots 28-A and 30. Presley later sold Lot 28-A to Wolfe, which intended to replat it into four lots for single-family residences, while no development plans yet existed for Lot 30.

Issue

Whether summary judgment was proper on the Appels' claims where the covenants gave the Architectural Control Committee power to make amendments or exceptions, but the homeowners alleged that removing certain lots from the covenants was an unreasonable exercise of that power and that Presley had made actionable misrepresentations. The court also considered whether factual disputes existed on the unfair trade practices claim.

Rule

Even where restrictive covenants expressly permit an architectural control committee or developer to make amendments or exceptions, that reserved power is subject to a requirement of reasonableness and must be exercised in a manner that does not destroy the general scheme or plan of development. Where reasonableness, falsity of alleged representations, or reliance-related facts are genuinely disputed, summary judgment is improper. If a breach of the covenants is found, the trial court should consider injunctive relief under equitable balancing, including the doctrine of relative hardships.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A developer recorded covenants for a planned subdivision outside Santa Fe limiting all lots to detached single-family homes on one-acre parcels. The covenants also state that the developer-controlled design board may make 'amendments or exceptions' without obtaining consent from homeowners, and the board later exempts eight interior lots so they may be subdivided into much smaller parcels for clustered housing.

Several neighboring owners sue to stop the change. The developer moves for summary judgment, arguing the covenant language expressly authorizes exceptions. How should the court rule?

Explanation. The majority held that a clause allowing amendments or exceptions is valid, but its exercise is subject to a requirement of reasonableness. The reserved power cannot be exercised in a way that destroys the general scheme or plan of development. Whether that occurred is a factual matter, so summary judgment is improper where owners claim the exemptions undermine the original residential scheme. (Derived from Appel v. Presley Companies (n.d.).)