Estates at Prairie Ridge Homeowners Assn. v. Korth , 298 Neb. 266 ( 2017 )


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    ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
    Cite as 
    298 Neb. 266
    The Estates at Prairie R idge Homeowners Association,
    a Nebraska nonprofit corporation, appellee, v.
    Duane R. Korth and K athryn A. Korth,
    husband and wife, appellants.
    ___ N.W.2d ___
    Filed December 1, 2017.   No. S-16-1108.
    1.	 Restrictive Covenants: Equity. An action to enforce restrictive cov-
    enants is equitable in nature.
    2.	 Equity: Appeal and Error. On appeal from an equity action, an appel-
    late court decides factual questions de novo on the record and, as to
    questions of both fact and law, is obligated to reach a conclusion inde-
    pendent of the trial court’s determination.
    3.	 Restrictive Covenants: Intent. Restrictive covenants are to be con-
    strued so as to give effect to the intentions of the parties at the time they
    agreed to the covenants.
    4.	 Restrictive Covenants. The language of restrictive covenants must be
    interpreted in its entirety.
    5.	 ____. If the language of a restrictive covenant is unambiguous, the cov-
    enant shall be enforced according to its plain language, and the covenant
    shall not be subject to rules of interpretation or construction.
    6.	 Contracts: Restrictive Covenants. As in the interpretation of a con-
    tract, a court must first determine, as a matter of law, whether the lan-
    guage of restrictive covenants is ambiguous.
    7.	 Contracts: Words and Phrases. Ambiguity exists in a document when
    a word, phrase, or provision in the document has, or is susceptible of, at
    least two reasonable but conflicting interpretations or meanings.
    8.	 Restrictive Covenants. Restrictive covenants are not favored in the law
    and, if ambiguous, should be construed in a manner which allows the
    maximum unrestricted use of the property.
    9.	 Restrictive Covenants: Intent. Extrinsic evidence is not permitted to
    explain the terms of restrictive covenants where they are not ambiguous.
    Instead, the intentions of the parties must be determined from the docu-
    ment itself.
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    ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
    Cite as 
    298 Neb. 266
    10.	 Summary Judgment: Appeal and Error. The denial of a motion for
    summary judgment is neither appealable nor reviewable.
    Appeal from the District Court for Sarpy County: George
    A. Thompson, Judge. Reversed and remanded with directions.
    John M. Walker, of Lamson, Dugan & Murray, L.L.P., for
    appellants.
    Larry R. Forman, of Hillman, Forman, Childers &
    McCormack, for appellee.
    Heavican,     C.J.,   Miller-Lerman,     Cassel,   Stacy,    and
    Funke, JJ.
    Cassel, J.
    I. INTRODUCTION
    After homeowners repainted their residence in a blue color,
    a homeowners association sued to enforce restrictive covenants
    and the district court decreed that the house be repainted in
    an “earth tone.” The homeowners’ appeal turns on the cov-
    enants’ plain language, which does not control the color of
    repainting. Because the covenants were not ambiguous and did
    not prohibit the homeowners’ action, we reverse, and remand
    with directions.
    II. BACKGROUND
    1. R estrictive Covenants
    The Estates at Prairie Ridge, LLC (Developer), filed the
    restrictive covenants at issue in 2003. The covenants included
    prohibitions of certain “external improvement[s]” (except those
    specifically approved by Developer), as well as storage of any-
    thing that would be “obnoxious to the eye.” They also specified
    that “[n]o objectionable, unlawful or offensive trade or activity
    shall be carried on upon any Lot nor shall anything be done
    thereon which may be or become a nuisance or annoyance to
    the neighborhood or surrounding Lots.”
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    ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
    Cite as 
    298 Neb. 266
    In 2004, Duane R. Korth and Kathryn A. Korth (Homeowners)
    purchased a residential lot from Developer which was sub-
    ject to the restrictive covenants. Homeowners submitted
    plans for construction of a residence on their purchased lot to
    Developer as required by the covenants. After the residence
    was built, Homeowners spoke to Developer and proposed to
    paint their residence blue. Developer denied this proposal and
    recommended that they choose an earth-tone color instead.
    Homeowners ultimately painted their residence in an earth-
    tone color.
    2. A lleged Violations
    Ten years later, Homeowners informed a member of The
    Estates at Prairie Ridge Homeowners Association (the HOA)
    of their decision to repaint their residence a shade of blue.
    The parties disagreed as to whether the restrictive covenants
    required approval of the new paint color, and conflict ensued.
    Homeowners ultimately repainted their residence blue, without
    seeking or acquiring approval of their chosen paint color.
    After the house was repainted, Developer assigned its inter-
    ests under the restrictive covenants to the HOA pursuant to
    article II, section 1, of the covenants. As Developer’s succes-
    sor in interest, the HOA filed a lawsuit requesting the court to,
    among other things, (1) declare Homeowners to be in willful
    violation of certain provisions of the restrictive covenants, (2)
    order Homeowners to submit a substitute earth-tone color to be
    approved by the HOA, and (3) order Homeowners to repaint
    their residence in the approved color.
    3. Motions for Summary Judgment
    Before filing an answer, Homeowners filed a motion to
    dismiss, which was converted to a motion for summary
    judgment.1 The HOA then filed its own motion for sum-
    mary judgment. At a hearing, both parties presented evidence
    and argued that there was no genuine issue of material fact.
    1
    See Neb. Ct. R. Pldg. § 6-1112(b)(6).
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    ESTATES AT PRAIRIE RIDGE HOMEOWNERS ASSN. v. KORTH
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    However, the court disagreed and overruled both motions. It
    identified issues of fact regarding the HOA’s level of control
    over color under the restrictive covenants and whether the
    particular color violated the restrictive covenants.
    Both parties moved for reconsideration of their motions for
    summary judgment. At the hearing, Homeowners principally
    argued that the HOA had no control over the color of their
    residence, because the restrictive covenants did not specifically
    refer to exterior paint as an improvement. The court took the
    matter under advisement and reviewed Kalkowski v. Nebraska
    Nat. Trails Museum Found.2 and Tyler v. Tyler3 to determine
    that painting the exterior of a residence can be an improvement
    or an ordinary repair, depending on the factual circumstances
    of the case. After concluding that this was a disputed factual
    issue, the court overruled the parties’ motions. The court later
    overruled Homeowners’ renewed motion for summary judg-
    ment on these same grounds.
    4. Trial
    At trial, an agent of Developer testified over Homeowners’
    objection that the intent and purpose of the restrictive cov-
    enants was to give Developer “fairly broad authority to deal
    with matters in [the] subdivision” and that Developer “was to
    be able to control color.” He further testified that it was the
    intent of Developer to keep the development “a very natural,
    earth tone environment” in line with its name, The Estates at
    Prairie Ridge (Prairie Ridge), and have residences “blend in
    with the environment.” However, he admitted that there was
    no language in the restrictive covenants specifically referenc-
    ing paint color or a preference for earth tones.
    2
    Kalkowski v. Nebraska Nat. Trails Museum Found., 
    290 Neb. 798
    ,
    
    862 N.W.2d 294
    (2015) (defining term “improvements” in farm lease
    agreement as distinguished from ordinary repair).
    
    3 Tyl. v
    . Tyler, 
    253 Neb. 209
    , 214, 
    570 N.W.2d 317
    , 320 (1997) (painting
    of dwelling’s exterior as “improvement” of marital home).
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    Current and former residents of surrounding lots also testi-
    fied that they had been required to disclose exterior paint color
    for approval by Developer when building their residences.
    They all additionally testified to their opinions that the blue
    color chosen by Homeowners was a nuisance, an annoyance,
    and obnoxious.
    Homeowners presented evidence that a board member of
    the HOA communicated there were “not currently” any restric-
    tions on paint color in the restrictive covenants and that
    Homeowners were copied on the communication. The HOA
    board member testified that he said “not currently,” because
    there were ongoing discussions of rewriting the covenants
    to specifically address paint color and clear up any ambigu-
    ity in the covenants. However, he and other board members
    also testified that Developer had the final say in all improve-
    ments, including paint color, until it assigned its interests in
    the restrictive covenants to the HOA in July 2015, at which
    point, the HOA had the final say in all improvements. Even so,
    Homeowners testified that they understood that the covenants
    did not include restrictions on paint color before repainting
    their house.
    5. District Court Judgment
    After trial, the district court entered a judgment in favor of
    the HOA. The court found that “[t]he evidence showed that
    anyone purchasing a lot and erecting a residence at Prairie
    Ridge needed to obtain prior approval from [Developer] for
    such items including square footage, septic system, paint color,
    garage location, etc.” And, the court specifically found that
    Homeowners’ painting of their residence was an improve-
    ment as a “permanent addition to and for the betterment of
    [Homeowners’] residence and the property.” As such, the court
    concluded that they needed approval before they could repaint
    the residence.
    The court also found that the blue color of the residence was
    “a nuisance, annoyance, and obnoxious to the eye,” based on
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    the cumulative testimony of surrounding lot owners express-
    ing the opinion that it “clashed with the neighborhood” and
    “does not fit in.” The court concluded that this violated several
    restrictive covenants. It therefore ordered Homeowners to sub-
    mit a substitute color in an earth tone reasonably acceptable
    to the HOA by a certain date and then repaint their residence
    within 30 days after approval of the substitute color.
    Homeowners timely appealed, and we moved the appeal to
    our docket.4
    III. ASSIGNMENTS OF ERROR
    Homeowners assign, reordered, restated, and combined, that
    the district court erred when it (1) construed sections 2(a), 15,
    and 16 of article I of the covenants to give the HOA the ability
    to control the paint color of Prairie Ridge residences; (2) failed
    to find that the terms “or other external improvement,” “nui-
    sance or annoyance,” and “obnoxious to the eye” were ambigu-
    ous; (3) failed to construe ambiguous provisions in a manner
    which allowed the maximum unrestricted use of their property;
    (4) determined that Homeowners violated sections 2(a), 15,
    16, and 14 of article I of the covenants; (5) determined that
    the restrictive covenants vested the HOA’s predecessor in
    interest with “absolute and sole discretion concerning the use
    and makeup of the land”; and (6) ruled that genuine issues of
    material fact existed as to whether the painting of a residence
    was an “external improvement” or a “repair” and whether exte-
    rior paint color may be a “nuisance” or an “annoyance” to the
    neighborhood or surrounding lots.
    IV. STANDARD OF REVIEW
    [1,2] An action to enforce restrictive covenants is equitable
    in nature.5 On appeal from an equity action, an appellate
    4
    See Neb. Rev. Stat. § 24-1106(3) (Reissue 2016).
    5
    See, Skyline Woods Homeowners Assn. v. Broekemeier, 
    276 Neb. 792
    , 
    758 N.W.2d 376
    (2008); Boyles v. Hausmann, 
    246 Neb. 181
    , 
    517 N.W.2d 610
          (1994).
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    court decides factual questions de novo on the record and, as
    to questions of both fact and law, is obligated to reach a con-
    clusion independent of the trial court’s determination.6
    V. ANALYSIS
    The principal issue in this case is whether Homeowners’
    repainting their residence a shade of blue without approval by
    Developer violated the restrictive covenants on their property.
    Homeowners argue that the restrictive covenants relied upon
    by the HOA are silent regarding exterior paint color. In the
    alternative, they argue that if the language is ambiguous, the
    covenants must be construed against the drafter (Developer)
    and its successors in interest.
    1. R estrictive Covenants
    Our analysis depends upon the meaning of the relevant
    restrictive covenants. Thus, we begin by recalling basic prin-
    ciples of the governing law.
    [3-5] Restrictive covenants are to be construed so as to
    give effect to the intentions of the parties at the time they
    agreed to the covenants.7 The language of restrictive cov-
    enants must be interpreted in its entirety.8 If the language
    of a restrictive covenant is unambiguous, the covenant
    shall be enforced according to its plain language, and the
    covenant shall not be subject to rules of interpretation or
    construction.9
    [6,7] Thus, as in the interpretation of a contract, a court
    must first determine, as a matter of law, whether the language
    of restrictive covenants is ambiguous.10 Ambiguity exists in a
    6
    Mutual of Omaha Bank v. Watson, 
    297 Neb. 479
    , 
    900 N.W.2d 545
    (2017).
    7
    Southwind Homeowners Assn. v. Burden, 
    283 Neb. 522
    , 
    810 N.W.2d 714
          (2012).
    8
    See Wessel v. Hillsdale Estates, Inc., 
    200 Neb. 792
    , 
    266 N.W.2d 62
    (1978).
    9
    Southwind Homeowners Assn. v. Burden, supra note 7.
    10
    See David Fiala, Ltd. v. Harrison, 
    290 Neb. 418
    , 
    860 N.W.2d 391
    (2015).
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    document when a word, phrase, or provision in the document
    has, or is susceptible of, at least two reasonable but conflict-
    ing interpretations or meanings.11
    [8] However, as Homeowners correctly argue, ambiguity
    must be interpreted in their favor. Restrictive covenants are
    not favored in the law and, if ambiguous, should be construed
    in a manner which allows the maximum unrestricted use of
    the property.12
    The district court held that Homeowners violated four
    restrictive covenants: article I, sections 2(a), 15, 16, and 14.
    Therefore, we must first address whether each covenant is
    ambiguous in the light of the entire document and then deter-
    mine whether the covenants governed the exterior paint color
    of Prairie Ridge residences.
    (a) Article I, Section 2
    Article I, section 2, is a general use and building restrictive
    covenant. That section states in pertinent part:
    No residence, building, fence, wall, driveway, patio, patio
    enclosure, swimming pool, dog house, tree house, pool
    house, antenna, satellite receiving stations, dishes or
    discs, flag poles, solar heating or cooling devices, tool or
    storage shed, or other external improvement . . . shall be
    constructed, erected, placed or permitted to remain on any
    Lot . . . except Improvements which have been approved
    by [Developer.]
    Section 2(a) also requires that any “Lot owner desiring to
    erect an Improvement on such Lot shall submit construction
    plans to [Developer].” This language is unambiguous.
    Homeowners’ residence was “constructed,” “erected,”
    “placed,” and “permitted to remain” in 2004. Homeowners
    submitted construction plans at that time. The “improvement”
    11
    See Frohberg Elec. Co. v. Grossenburg Implement, 
    297 Neb. 356
    , 
    900 N.W.2d 32
    (2017).
    12
    Southwind Homeowners Assn. v. Burden, supra note 7.
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    was made at that time. At the time of repainting 10 years later,
    Homeowners were not “desiring to erect an Improvement”;
    it had been erected 10 years earlier. Sections 2 and 2(a) are
    silent as to painting the exterior of a residence. And, exterior
    paint, in and of itself, is not something which is typically
    “constructed,” “erected,” “placed,” or “permitted to remain”
    on land. Thus, we conclude that repainting is not governed by
    the plain language of the covenant. This is in line with cases
    from other jurisdictions in which courts have found paint color
    governed by general use and building restrictions only where
    “‘exterior design and color’” or “‘color scheme’” is specifi-
    cally referenced in the covenant.13
    Nonetheless, the HOA advances three arguments in support
    of its allegation that painting the exterior of a residence is an
    “external improvement” within the plain meaning of article I,
    section 2. None are persuasive.
    First, the HOA argues that exterior painting is an improve-
    ment, because it is a “‘betterment of real property that enhances
    its capital value and that involves the expenditure of labor and
    money . . . .’”14 It cites to our opinion in Kalkowski v. Nebraska
    Nat. Trails Museum Found., which generally defined the term
    “improvements” in two ways; however, our opinion used these
    broad definitions in the context of a farm lease agreement
    permitting a tenant to remove “improvements” from the land
    at the expiration of the lease.15 Here, the covenants define
    “external improvements” by the list of examples. And paint or
    paint color is simply not in that list. Moreover, the HOA deem-
    phasizes critical aspects of our broad definitions in Kalkowski.
    Our “betterment” definition spoke not just of enhancement to
    13
    See, e.g., Village of Pheasant Run v. Kastor, 
    47 S.W.3d 747
    , 751 (Tex.
    App. 2001). See, also, e.g., West Hill Colony v. Sauerwein, 
    138 N.E.2d 403
          (Ohio App. 1956).
    14
    Kalkowski v. Nebraska Nat. Trails Museum Found., supra note 
    2, 290 Neb. at 805
    , 862 N.W.2d at 301.
    15
    
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    capital value and expenditure of labor and money, but also
    described such an improvement as “‘designed to make the
    property more useful or valuable as distinguished from ordi-
    nary repairs.’”16 And another definition of “improvements”
    spoke of “‘“enhanc[ing] the value of premises permanently
    for general uses.”’”17 Repainting does not fit either definition
    from Kalkowski. Repainting does not permanently enhance
    value. And it amounts to an ordinary, recurring repair. Under
    the HOA’s application of Kalkowski, a tenant who painted the
    landlord’s barn would be entitled to remove the barn or at least
    the paint. That would be absurd. To the extent that the defini-
    tions of Kalkowski have any application here, they inform us
    that painting is not an “improvement.”
    Second, the HOA suggests that this court has already spe-
    cifically determined that the painting of the exterior of a resi-
    dence is an “improvement” in Tyler v. Tyler.18 But we did so
    in an entirely different context, where we attempted to credit a
    husband for value personally contributed to a marital home. We
    are not persuaded that this has any application in the context of
    restrictive covenants.
    [9] Third, the HOA argues that Homeowners’ initial disclo-
    sure to Developer of their intent to paint their residence blue in
    2005 is evidence of the parties’ intent that exterior paint color
    is an external improvement. But at oral argument, the HOA
    reiterated its argument that the covenants were not ambigu-
    ous. Extrinsic evidence is not permitted to explain the terms of
    restrictive covenants where they are not ambiguous.19 Instead,
    the intentions of the parties must be determined from the docu-
    ment itself.20
    16
    
    Id. 17 Id.
    (emphasis supplied).
    
    18 Tyl. v
    . Tyler, supra note 3.
    19
    See In re Claims Against Pierce Elevator, 
    291 Neb. 798
    , 
    868 N.W.2d 781
          (2015).
    20
    See 
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    Because we have determined that exterior paint color is
    not subject to the plain language of article I, section 2, we
    conclude that Homeowners did not violate the covenant when
    they repainted their residence without first seeking and acquir-
    ing approval from Developer.
    (b) Article I, Section 15
    Article I, section 15, states: “No objectionable, unlawful or
    offensive trade or activity shall be carried on upon any Lot
    nor shall anything be done thereon which may be or become
    a nuisance or annoyance to the neighborhood or surround-
    ing Lots.” Because there is nothing inherently ambiguous
    in this language, we must enforce the covenant by its plain
    language.
    The covenant’s plain language is limited to trade or activ-
    ity on a lot. Nowhere does it describe external paint, color, or
    siding as a trade, activity, or something which may be done on
    a lot. And, while numerous Prairie Ridge residents opine that
    the paint color at issue is a nuisance or annoyance, their opin-
    ions cannot vary the plain language of the covenant. We find
    no merit to the HOA’s reliance on article I, section 15.
    (c) Article I, Section 16
    The applicable provision in article I, section 16, prohibits
    the “storage of any property or thing that . . . will be obnoxious
    to the eye.” Though what constitutes “obnoxious to the eye”
    may be subjective, the relevant language of the covenant is not
    ambiguous and clearly indicates that it is limited to the “stor-
    age” of things on Prairie Ridge lots.
    The parties do not contest that exterior paint color is not
    something “stor[ed]” on land. Rather, the HOA would appar-
    ently have us ignore the limiting language “storage of any
    property or thing” to find that the covenant prohibits all things
    obnoxious to the eye. This would effectively rewrite the cov-
    enant. Therefore, we decline to adopt the HOA’s interpretation
    and we adhere to the plain language.
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    Because a residence’s exterior paint color is not something
    which is stored on the property, it is not governed by article I,
    section 16. Thus, Homeowners did not violate the covenant
    when they repainted their residence blue.
    (d) Article I, Section 14
    The last covenant, article I, section 14, provides: “Each Lot
    owner shall comply with all county and state health require-
    ments and permits, and observe all rules and regulations of all
    lawfully constituted authorities in the use and ownership of
    such Lot.”
    The district court apparently found Homeowners violated
    this covenant by failing to observe the rules provided in the
    restrictive covenants listed above, since no other evidence of
    alleged noncompliance was presented at trial. But because
    Homeowners did not violate any other restrictive covenants
    and the evidence does not show any other violations of laws,
    rules, or regulations, it necessarily follows that Homeowners
    did not violate article I, section 14.
    Although the plain language of the restrictive covenants does
    not control the color of repainting of an existing residence, the
    other residents are not without a potential remedy. Article III,
    section 3, states that the covenants “may be amended by and
    [sic] instrument signed by the owners of not less than seventy-
    five percent (75%) of the Lots covered by [the covenants].” It
    is not our function to in effect amend the covenants by inter-
    pretation or construction contrary to the plain meaning of the
    language used.
    2. R emaining Assignment of Error
    [10] We do not address Homeowners’ remaining assignment
    of error, because it challenges the denial of their motion for
    summary judgment. The denial of a motion for summary judg-
    ment is neither appealable nor reviewable.21
    21
    Caruso v. Parkos, 
    262 Neb. 961
    , 
    637 N.W.2d 351
    (2002).
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    VI. CONCLUSION
    The restrictive covenants at issue were not ambiguous and
    did not apply to Homeowners’ repainting of their residence.
    Because Homeowners did not violate any restrictive covenants,
    we reverse, and remand with directions to the district court to
    enter judgment in Homeowners’ favor.
    R eversed and remanded with directions.
    Wright and K elch, JJ., not participating.