APPEAL FROM THE Circuit Court for Harford County. Cypert O. Whitfill, JUDGE
Alpert, Bloom and Cathell, JJ.
This case concerns the creation of a subdivision known as "Bynum Overlook" in Harford County; the imposition of a "Declaration of Covenants, Conditions, Restrictions and Easements" (declaration) for the purpose of "protecting the value and desirability of the Property and the Lots"; and a reservation by the declarant in that declaration of the power to approve building plans.*fn1 It also involves the effects, on this power of approval, of the grantor's advertising sign stating that the subdivision was one of "exclusive homesites" or signs posted by builder-purchasers of lots in the subdivision advertising "homes from the $160,000's."
Stephen and Tamara Markey and Wilson and Sandy Atkins, appellants, are the only couples involved in this appeal.*fn2 The suit was originally filed against Morris Wolf, James C. Wolf, and Sharon L. Steinberg, individually and as officers and directors of the Bynum Overlook Homeowners Association, H.M. Land Limited Partnership, M.W.W. Development Company, Terrapin Development, Inc., Leigh
Homes, Inc., and Stephen Homes, Incorporated (appellees). H.M. Land Limited Partnership (Developer) is the developer of the Bynum Overlook Subdivision as well as the declarant of the declaration. Its general partners are M.W.W. Development Company and Terrapin Development. Morris Wolf is not only an officer and a director of the Homeowner's Association, he is also president of M.W.W. Development Company. Wolf signed the declaration on behalf of the general partners of the Developer. Leigh Homes, Inc. (Leigh), and Stephen Homes, Incorporated (Stephen) are home builders which purchased lots in the subdivision and subsequently built, or were to build, homes in the subdivision. However, as far as we can discern, neither Leigh nor Stephen constructed any homes belonging to the present appellants. The evidence does not indicate that the Developer was a home builder in the subdivision. Stephen and Leigh have resolved their differences with the appellants and appellants, therefore, have dismissed their appeal as to these parties. Thus, their claims against Stephen and Leigh do not directly concern us.
The appellants inform us in their brief that they filed a complaint on April 8, 1991, which alleged that the Developer had violated the restrictive covenants governing the subdivision and had violated its fiduciary duty to the Bynum Overlook Homeowners Association by approving the building of homes substantially smaller and less expensive than pre-existing homes in the subdivision. That original complaint, according to appellants' brief, also alleged that certain builders, including Leigh, misrepresented to prospective purchasers their intentions concerning the size and value of the homes they would build and thus conspired with the Developer to assist it in violating its fiduciary duties to the homeowners.
Thereafter, on May 1, 1991, Stephen filed an Answer and a Motion for Summary Judgment. On May 8, 1991, Morris Wolf, James C. Wolf, and Sharon L. Steinberg (hereinafter
collectively referred to as Wolf) and the developer filed a motion for summary judgment. On May 17, 1991, Leigh filed a motion to dismiss the complaint and motion for summary judgment. By June 3, 1991, the plaintiffs had filed an opposition to each of the motions. On the same day, according to their brief, they filed an "amended complaint."
On June 12, 1991, the trial judge granted Stephen's, Wolf's and the developer's motions for summary judgment. On June 18th, Leigh filed a motion to dismiss the amended complaint. Stephen filed a motion to dismiss the amended complaint on June 20th. Thereafter, on June 24, 1991, the appellants filed a second amended complaint. According to appellants' brief, at a hearing on July 19, 1991, the trial judge again granted summary judgment for Stephen, Wolf and the developer and dismissed the second amended complaint as to them. Finally, on July 31, 1991, the court entered a summary judgment and dismissal of the case against Leigh.*fn3
The trial court's July 31, 1991, memorandum opinion states that the trial court adopted the reasoning set forth in its June 12, 1991, opinion as to all defendants except Leigh. The June 12, 1991, opinion was in reference to the original complaint. It could not have been in reference to the second amended complaint, which had not been filed as of June 12th, and the trial judge could not have relied on the first amended complaint because, as he later stated when he rendered his July 31st opinion, he was unaware that the first amended complaint had been filed. Having been informed by the appellants that the amended complaints added only claims for punitive damages and a prayer for a jury trial, the trial court then rendered a summary judgment for all of the appellees except Leigh for the same reasons given in its June 12th opinion. The July 31st opinion thus applied only to Leigh, except to the extent it adopted the June 12th opinion as to the other appellants.
We note that when appellants' counsel informed the trial court that the function of the amended complaints was to provide for punitive damages and for a jury trial, that was incorrect. There are several important factual modifications that occurred between the original complaint and the second amended complaint.
The original complaint incorrectly alleged that the Association was charged with enforcing the building restrictions contained in the declaration. The second amended complaint correctly alleges that the developer is charged with enforcing those restrictions. Appellants further added in paragraph 14 of the second amended complaint an allegation that in approving the plans of Stephen and Leigh, Wolf and the developer had violated their fiduciary duties to appellants. Additionally, the second amended complaint
includes a provision added to count one -- that the developer owed a fiduciary duty to the appellants to exercise architectural control, so as not to injure the value of appellants' property. This provision was conspicuously absent from the original complaint, which based this count solely on an alleged breach of fiduciary duty by the officers and directors of the Homeowner's Association -- the alleged duty being to enforce the covenants. Not only were these additions in the second amended complaint absent from the original and first amended complaints, they are conspicuously not included in the version of the second amended complaint found in the extract.
Furthermore, the amended complaint and second amended complaint contain an entirely new count, "Breach of Restrictive Covenant," that was absent from the original complaint. It is also absent from the copy of the second amended complaint contained in the extract. The second amended complaint also added prayers for punitive damages and asked the court to impose a constructive trust on the proceeds of all sales of lots and/or homes where houses of less than 1,800 square feet are built.
It is clear that when the appellants' counsel informed the trial court that the amended complaints concerned punitive damages and jury trial rights, he was not fully or correctly informing the court of the full scope of the amendments. Thus, the reasons given on June 12th by the trial court could not have addressed all of these new matters introduced in the amended complaints as they were not brought to the attention of the court.
The inference we glean from the record is that the court would not have proceeded as it did absent the representations made by appellants' counsel that the amendments concerned only a punitive damage prayer and/or a jury trial request.
In any event, we hold that, because the count for breach of covenant was not before the trial court when he rendered his June 12th opinion and because he merely adopted that
opinion upon the representation of appellants that the amendments contained no substantive changes, appellants have failed to preserve for our review any objections they may have as to the effect of the trial court's ruling upon that count.
Each party furnished a separate statement of facts which differ in certain respects. We shall try to simplify the factual situation by summarizing the statements.*fn4
Bynum Overlook is a land subdivision created by the developer. The developer did not construct or build houses in the subdivision. It caused the declaration to be recorded and initially advertised on the property with a sign that the subdivision was one of "Exclusive Homesites."*fn5 No evidence was presented below that the developer ever defined "Exclusive Homesites" in any manner.
The developer sold several of the lots to builders, including Leigh, Stephen, and others. Rylea Builders, not a party to this suit, subsequently erected a sign or signs on the lots in the subdivision advertising its business. One or more of these signs stated "Single Family Homes from $160,000." Other builders may have attached their sign to either the sign of Rylea Builders or to the developer's sign. That is not clear.
The complaints allege generally that the signs at the entrance to the community and certain statements caused the appellants to believe that this subdivision would be built up with homes costing $160,000 or more. They allege on appeal that one such statement, from a salesman of Rylea, was that the developer had told the salesman that the development would consist of medium to larger scale homes
of 2,000 square feet, that several plans for houses less than 1,800 square feet had been rejected, and that Rylea erected its sign that homes were to be priced in the $160,000 range based upon the developer's representations to Rylea.*fn6
Another affidavit alleged that Stephen informed the affiant that the reason it was selling lower-priced homes was because Leigh was selling lower priced homes. This affiant stated that Stephen had posted signs first advertising $120,000 homes and had later changed the signs to advertise $100,000 homes. The affiant further stated that those signs were situated where the $160,000 sign of Rylea had been previously. He stated that a representative of Leigh had steered him to Bynum Overlook because it was to be a neighborhood of larger homes. He further stated that, at a Homeowners Association meeting, Morris Wolf informed him that he, Wolf, had 211 votes and therefore refused to commit the Association to take action to require homes to have at least 2,000 square feet. He stated that Morris Wolf then voted his slate to be the Board of Directors and Officers of the Association. He stated that a representative of Leigh Homes stated at a meeting that Leigh's smaller homes were merely enticements and that Leigh was actually converting prospective buyers into larger homes. Other affiants confirmed what the above affiant had stated.
All of the affiants essentially stated that they had been led to believe that the homes were to be valued at $160,000 or more because (1) the developer at one stage erected a sign saying "Exclusive Homesites" (or Exclusive Homes); (2) that thereafter builder-purchasers of the lots erected signs advertising homes from $160,000; and (3) that various
representatives of the builder-purchasers told appellants that the homes were to be large, costly, etc. Not one of the plaintiffs below, as far as we can discern from the record, ever had any contact with the developer prior to purchasing in the subdivision; nor did any plaintiff rely on any direct representation of the developer except to the extent that the developer's sign, "Exclusive Homesites" or "Exclusive Homes," might be construed as a representation. We shall further address the facts as necessary within our discussion of the law and the resolution of the issues.
We rephrase appellants' allegations as follows:
I. In exercising its right to approve of building plans it was improper under the Declaration for the Declarant to approve of homes of less than 1,800 square feet that cost less than $160,000.
II. The trial court erred in finding, in respect to the approval of house plans, that Wolf owed no fiduciary duty "to appellants by reason of their positions with the Bynum Overlook Homeowners Association, Inc."
III. Because there were disputed facts, the trial court erred in granting summary judgment for appellees.
IV. The trial court's denial of appellants' request for postponement was erroneous.
We rephrase appellees' contentions as follows:
I. Because covenants restricting the use of land are disfavored and are to be strictly construed, the provisions in the Declaration declaring them to be for the purpose of protecting the value and desirability of the property and reserving to the Declarant the sole right to approve of building plans does not impose an enforceable condition requiring the Declarant to withhold plan approval from proposed plans for homes of less than 1,800 square feet and/or costing less than $160,000.00.
II. The Developer has breached no contracts with any of the appellants nor has the Developer made any misrepresentations to any of the appellants.
III. The trial court did not abuse its discretion in deciding to postpone the hearing because the discovery purposes stated in the request for a postponement would not have generated relevance and because of the cloud on title that was created by the appellants' filing of the suit.
IN EXERCISING ITS RIGHT TO APPROVE OF BUILDING PLANS, IT WAS PROPER FOR THE DECLARANT TO APPROVE OF HOMES OF LESS THAN 1,800 SQUARE FEET COSTING LESS THAN $160,000.
The trial court in its judgment below found no impropriety. We concur and shall explain. We shall in that explanation furnish a historical perspective of the cases recognizing the right to create restrictions; the manner in which restrictive covenants were, and have come to be construed; and the effect of the reservation of powers when such covenants are created.
A. Historical Perspective
The validity of properly created restrictive covenants is well established in Maryland. In Jones v. Northwest Real Estate Co., 149 Md. 271, 280-81, 131 A. 446 (1925), the Court of Appeals stated:
[W]e are here dealing with an original grantor, who still owns a considerable part of the land, and the assignees of an original purchaser, and, as the deed specifically states that the covenants are to bind "the grantees their heirs and assigns," there would seem to be no question, under the authorities, of the grantor's right to enforce the covenants . . . . [Citations omitted.]
[O]ne owning a tract of land . . . may validly impose upon the part granted restrictions upon the use thereof for the
benefit of the part retained, and upon the part retained for the benefit of the part granted, or upon both for the benefit of both; that, where the covenants . . . are not expressly for or on behalf of the grantor, his heirs and assigns, they are personal and will not run with the land, but that, if in such a case it appears that it was the intention of the grantors that the restrictions were part of a uniform general scheme or plan of development and use which should affect the land granted and the land retained alike, they may be enforced in equity . . . .
McKenrick v. Sav. Bank of Baltimore, 174 Md. 118, 128, 197 A. 580 (1938). See also Gnau v. Kinlein, 217 Md. 43, 48-49, 141 A.2d 492 (1958); Turner v. Brocato, 206 Md. 336, 352, 111 A.2d 855 (1955); Middleton Realty Co. v. Rolan Park Civic League, Inc., 197 Md. 87, 97, 78 A.2d 200 (1951); Oak Lane Corp. v. Duke, 196 Md. 136, 139, 75 A.2d 80 (1950); Levy v. Dundalk Co., 177 Md. 636, 647, 11 A.2d 476 (1940). For a more complete review of the Maryland law with respect to covenants and uniform plans of development, see Steuart Transp. Co. v. Ashe, 269 Md. 74, 304 A.2d 788 (1973), and cases therein cited.
It is clear that the declaration in the case at bar was designed in furtherance of a general plan of development. The declaration expressly states that it is to benefit the property (Bynum Overlook) and the prospective owners of the lots. We hold that these covenants can, therefore, be enforced by the developer and/or the lot owners. It is, therefore, necessary to construe the meaning of the pertinent provisions of the covenants in order to determine: (1) what, if any, conditions exist affecting the declarant's reservation of plan approval; and (2) whether the facts contained in the respective affidavits of appellants are sufficient to foreclose summary judgment.
B. Construction of Restrictive Covenants
As we have said, the imposition of restrictive covenants is almost universally recognized. A more difficult problem is the interpretation of such covenants. From the
very early days of subdivision development, the cases have been concerned primarily with the adoption and applicability of rules of construction. Generally, covenants have been construed narrowly and strictly though in more recent years a "reasonableness rule" (termed a modern rule in some foreign jurisdictions) has been engrafted upon the general rule. We explain the metamorphosis as it occurred in Maryland and other jurisdictions.
The early case of Peabody Heights Co. v. Willson, 82 Md. 186, 32 A. 1077 (1895), involved certain restrictions. The Court in Willson framed the question there presented as whether the restrictions requiring "(1) buildings to be speedily built and (2) building plans to be approved by the directors, were restrictions for the benefit of the grantors or of the grantees." Id. at 202, 32 A. 1077. The Court held that the purpose of the restrictions were:
[T]o make the property in every way attractive and desirable for suburban and city homes, and the covenants and agreements were made in furtherance of this general plan or scheme. They required all plans or designs for buildings should be submitted to the directors for their approval . . . . The object of these restrictions was to prevent the erection of buildings of any kind that might diminish the value of the property or injuriously affect it as a location for better class of dwelling houses.
The Court also held that the restrictions on plan approval, as well as other restrictions, were for "the common advantage of all persons who might become lessees or grantees of the company. . . . all '. . . parties so coming in with notice. . . .' [are] bound by the terms of covenants . ...