Poole Point Subdivision Homeowners' Association and Poole Point Architectural Control Committee v. Sean DeGon and Erie DeGon ( 2022 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-20-00618-CV
Poole Point Subdivision Homeowners’ Association and
Poole Point Architectural Control Committee, Appellants
v.
Sean DeGon and Erie DeGon, Appellees
FROM COUNTY COURT AT LAW NO. 2 OF TRAVIS COUNTY
NO. C-1-CV-19-009597, THE HONORABLE TODD T. WONG, JUDGE PRESIDING
MEMORANDUM OPINION
Poole Point Subdivision Homeowners’ Association and Poole Point Architectural
Control Committee (collectively, “Poole Point”) appeal from the trial court’s judgment declaring
that an amendment to the Poole Point Subdivision’s deed restrictions imposing a minimum
duration on leases of residences in the subdivision was unenforceable against Sean DeGon and
Erie DeGon. For the reasons set forth below, we will reverse the trial court’s judgment and
remand the case to the trial court.
BACKGROUND
Our recitation of the pertinent facts in this case is taken from an agreed statement
of facts signed by the parties. See Tex. R. Civ. P. 263 (providing for submission of agreed
statement of facts). In December 2013, Sean and Erie DeGon, who reside in Houston, bought
a residence on a lot in the Poole Point Subdivision (“the Property”). The Property is subject to
the “Declaration of Covenants, Conditions and Restrictions” (“the Restrictions”) dated April 1,
1987, and filed in the Real Property Records of Travis County, Texas. The Restrictions provide,
in part:
NOW THEREFORE, Declarant, the sole Owner in fee simple of POOLE
POINT hereby declares that all lots in POOLE POINT shall be held, transferred,
sold and conveyed subject to the following covenants, restrictions, reservations
and charges, hereby specifying and agreeing that this Declaration and its
provisions shall be and are covenants to run with the land and shall be binding on
Declarant, its successors and assigns, all subsequent Owners of each lot, and the
Owners by acceptance of their deeds do for themselves, their heirs, executors,
administrators, successors and assigns, covenant and agree to abide by the terms
and conditions of this Declaration.
....
RESTRICTIONS
1. All property (except for Lot 164) shall be used, devoted, improved and occupied
exclusively to Single Family Residential Use. Only one single family dwelling
unit may be erected on a lot.
2. No business and/or commercial activity to which the general public is invited
shall be conducted within POOLE POINT; except that this shall not be read to
prevent the leasing of a single family dwelling unit by the Owner thereof, subject
to all the provisions of this Declaration.
....
LAND USE AND STRUCTURES
1. All lots in POOLE POINT shall be used and occupied for residential purposes
only; except that Lot 164 is hereby reserved, set aside and dedicated as an
easement for access to Lake Travis.
GENERAL PROVISIONS
7. Deeds of conveyance to any lot may contain the provisions, restrictions
covenants and conditions herein by reference to this Declaration; however,
whether reference is made in any or all of said deeds, by acceptance of a deed to a
lot in POOLE POINT each Owner for himself, his heirs, personal representatives,
successors and assigns, binds himself and such heirs, personal representatives
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successors and assigns to all the terms of and provisions of this Declaration and
any amendments thereto.
The DeGons stated that they reviewed and relied on the Restrictions before purchasing the
Property.
In 2017, the DeGons began leasing the Property for durations of fewer than 30
days. In 2019, pursuant to the Restrictions’ amendment provision, owners of more than 67% of
the lots in the Poole Point Subdivision executed and recorded an amendment to the Restrictions
(“the Amendment”). The Amendment provides:
The Deed Restrictions are hereby amended to include the following:
No lot or property (including without limitation, any residence, room or rooms in
a residence, any dwelling house, guest quarters, servants quarters, garage, or any
other structure located on any lot) in the Subdivision, may be rented for a period
of less than 180 consecutive days, and the lessee or lessees under any such rental
must use the property as the lessee’s residence, and must intend to occupy the
property as their place of abode for the duration of the 180 consecutive days.
The DeGons did not sign the Amendment but they do not contest the validity of the votes or the
procedure by which the Amendment was executed and recorded. After the Amendment became
effective, the DeGons continued to lease the Property for periods of 30 days and stated that they
intend to continue this practice despite the Amendment. Poole Point then sent a cease-and-desist
letter to the DeGons demanding that they comply with the Restrictions and the Amendment. The
DeGons responded by suing Poole Point seeking a declaratory judgment that the Amendment
could not be enforced against them. Poole Point filed a counterclaim asserting that the DeGons
were in breach of the Restrictions and the Amendment by leasing the Property to third parties for
prohibited durations and occupancies and requesting that the court enter a cease-and-desist order
and grant declaratory relief.
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The DeGons and Poole Point agreed to a bench trial pursuant to rule 263 of the
Texas Rules of Civil Procedure. See Tex. R. Civ. P. 263 (providing for submitting controversy
to court on agreed statement of facts). After considering the filed stipulations and joint exhibits,
the trial court rendered judgment in favor of the DeGons and awarded them attorneys’ fees. The
trial court’s order recites that:
the DeGons are entitled to declaratory relief that the 2019 Amendment to the
[Restrictions] at issue, which places a mandatory minimum duration on leasing, is
not enforceable against [the DeGons] owing to its deprivation of their settled
property rights under the [Restrictions], under which they purchased [the]
property. The 2019 Amendment represents a new and different restriction which
defies the reasonable and settled expectations of the DeGons, who relied on the
1987 Declaration’s grant of the right to lease the main dwelling without duration
restriction and physical occupancy requirements.
After the trial court denied Poole Point’s motion for new trial, Poole Point perfected this appeal.
STANDARD OF REVIEW
Rule 263 of the Texas Rules of Civil Procedure provides:
Parties may submit matters in controversy to the court upon an agreed statement
of facts filed with the clerk, upon which judgment shall be rendered as in other
cases; and such agreed statement signed and certified by the court to be correct
and the judgment rendered thereon shall constitute the record of the cause.
Id. In an appeal involving an agreed statement of facts pursuant to Rule 263, the only issue on
appeal is whether the trial court properly applied the law to the agreed facts. See id.; Abbott v.
Blue Cross & Blue Shield of Tex., Inc., 113 S.W.3d 753, 757 (Tex. App.—Austin 2003, pet.
denied). We review this issue de novo. Panther Creek Ventures, Ltd. v. Collin Cent. Appraisal
Dist., 234 S.W.3d 809, 811 (Tex. App.—Dallas 2007, pet. denied). Our consideration is limited
to those agreed facts. Id. The agreed facts are binding on the parties, the trial court, and the
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appellate court. Patton v. Porterfield, 411 S.W.3d 147, 153-54 (Tex. App.—Dallas 2013, pet.
denied). In an appeal of an “agreed” case, there are no presumed findings in favor of the
judgment. State Farm Lloyds v. Kessler, 932 S.W.2d 732, 735 (Tex. App.—Fort Worth 1996,
writ denied). We presume conclusively that the parties have brought before the court all facts
necessary for the presentation and adjudication of the case. Cummins & Walker Oil Co. v. Smith,
814 S.W.2d 884, 886 (Tex. App.—San Antonio 1991, no writ). We do not review the legal
or factual sufficiency of the evidence but simply review the trial court’s order to determine if
it correctly applied the law to the agreed stipulated facts. Panther Creek Ventures, 234 S.W.3d
at 811.
DISCUSSION
To amend deed restrictions, three conditions must be met. See Wilchester W.
Concerned Homeowners LDEF, Inc. v. Wilchester West Fund, Inc., 177 S.W.3d 552, 562 (Tex.
App.—Houston [1st Dist.] 2005, pet. denied); Dyegard Land P’ship v. Hoover, 39 S.W.3d 300,
313 (Tex. App.—Fort Worth 2001, no pet.). First, the instrument creating the original
restrictions must establish both the right to amend and the method of amendment. Wilchester
West, 177 S.W.3d at 562; Dyegard Land P’ship, 39 S.W.3d at 313. Second, the right to amend
implies only those changes contemplating a correction, improvement, or reformation of the
agreement rather than its complete destruction. Wilchester West, 177 S.W.3d at 562; Dyegard
Land P’ship, 39 S.W.3d at 313. Third, the amendment must not be illegal or against public
policy. Wilchester West, 177 S.W.3d at 562; Dyegard Land P’ship, 39 S.W.3d at 313.
In the present case, the parties agree that the Restrictions established both the
right to amend and the method of amending them and the DeGons do not challenge the
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procedure by which the Restrictions were amended. Thus, the enforceability of the Amendment
depends on (1) whether it corrects, reforms, or improves the Restrictions, rather than destroying
them; and (2) whether the Amendment is illegal or against public policy.
We first consider whether imposing a minimum duration on leases of residences
in the Poole Point Subdivision destroys the right to lease that was originally granted in the
Restrictions. We conclude that it does not. The Restrictions do not grant homeowners an
absolute or unlimited right to lease their residences. Instead, that right is “subject to all the
provisions of” the Restrictions, which contain a provision permitting amendments. The
Amendment, which was validly executed and recorded, does not completely prohibit the owners’
ability to lease their residences. Rather, it imposes a minimum stay provision, establishing
the minimum duration for a lease of a property owner’s residence. See Cavazos v. Board of
Governors of the Council of Co-Owners of the Summit Condominiums, No. 13-12-00524-CV,
2013 WL 5305237, at *3 (Tex. App.—Corpus Christi-Edinburg Sept. 19, 2013, no pet.) (mem.
op.) (holding that minimum stay requirement did not completely prohibit the owners’ ability to
rent their property). The placing of certain conditions on the duration of a lease and the lessee’s
use of the leased property does not constitute “complete destruction” of the Deed Restrictions.1
The Amendment reformed the right to lease contained in the Restrictions by setting a minimum
duration for any leases and requiring that the lessees use the leased property as their residence
1
We note that the trial court did not conclude that the Amendment destroyed the
DeGons’ right to lease their residence in the Poole Point Subdivision. Instead, it based its
decision on its finding that the Amendment “defies the reasonable and settled expectations of the
DeGons, who relied on the 1987 Declaration’s grant of the right to lease the main dwelling
without duration restriction and physical occupancy requirements.” The DeGons purchased their
property knowing that the Restrictions could be amended and that the right to lease was “subject
to all provisions” in the Restrictions, including any valid amendments. For this reason, the
DeGons could not reasonably have expected that there could never be restrictions placed on the
right to lease their residence.
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for the duration of the lease. Thus, unless the Amendment is illegal or against public policy, it
constitutes an enforceable limitation on the right to lease the Property.
Modifications to deed restrictions that impose greater restrictions are not
prohibited by law when they are consistent with the overall plan of development. See Dyegard
Land P’ship, 39 S.W.3d at 313 (upholding amendment to property restrictions that imposed
prohibition against drilling private water wells when no such restriction previously existed);
Harrison v. Air Park Estate Zoning Comm., 533 S.W.2d 108, 111 (Tex. App.—Dallas 1976, no
writ) (holding that modification to original restrictive covenant, although more restrictive, “was
consistent with the overall plan of the development and was neither unreasonable nor prohibited
by law”); see also 16 Tex. Jur. 3d, Covenants, Conditions, and Restrictions § 115 (2021) (“A
restriction modified so as to make it even more restrictive is neither unreasonable nor prohibited
by law where it is consistent with the overall plan of development and is adopted according to
the subdivision plan.”). The Restrictions for the Poole Point Subdivision indicate the intent that
it be a residential community. For example, the Restrictions provide that “[a]ll property [] shall
be used, devoted, improved and occupied exclusively for Single Family Residential Use.” The
Restrictions also prohibit business or commercial activity within the subdivision with the
exception of “the leasing of a single family dwelling by the Owner thereof, subject to all the
provisions” of the Restrictions. “[R]estrictions placed upon lots for the purpose of prescribing
and preserving the residential character thereof are looked upon with favor by the courts.” Wald
v. West MacGregor Protective Ass’n, 332 S.W.2d 338, 343 (Tex. App.—Houston 1960, writ
ref’d n.r.e.). The minimum duration requirement created by the Amendment reinforced the
existing residential use and occupancy restriction and the prohibition against commercial
activities. Furthermore, the Texas Supreme Court has indicated that amending deed restrictions
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is an appropriate method for specifying a minimum duration for leases in a residential
subdivision. See Tarr v. Timberwood Park Owners Ass’n, 556 S.W.3d 274, 277 (Tex. 2018). In
Tarr, the supreme court was asked to determine whether short-term vacation rentals violated
restrictive covenants that limited tracts to residential purposes and single-family residences.
While declining to construe the covenants as they existed to prohibit short-term leases, the
supreme court noted that “throughout the dispute, neither the association nor Tarr attempted to
amend the deed restrictions to specify a minimum duration for leasing—an option available to
both of them under the deed’s amendment provisions.” Id. Thus, in Tarr the supreme court
acknowledged the propriety of amending residential-use deed restrictions to place durational
limits on leases, which is precisely what Poole Point did. If such amendments were illegal or
against public policy, the supreme court would not have described them as an available option.
We conclude that the Amendment is valid and enforceable because it meets the
requirements that it (1) corrects, reforms, or improves the Restrictions, rather than destroying
them; and (2) is not illegal or against public policy. See Wilchester West, 177 S.W.3d at 562;
Dyegard Land P’ship, 39 S.W.3d at 313. Consequently, the trial court erred in determining that
the Amendment was unenforceable against the DeGons and rendering judgment in their favor.
We therefore reverse the trial court’s judgment granting the DeGons’ request for declaratory relief.
On appeal, Poole Point challenges the trial court’s award of attorneys’ fees to the
DeGons. See Tex. Civ. Prac. & Rem. Code § 37.009 (in proceeding under Uniform Declaratory
Judgments Act (UDJA), court may award costs and reasonable and necessary attorneys’ fees as
are equitable and just). Poole Point argues that, because the DeGons are not entitled to the
declaratory relief sought, this Court should reverse the award of attorneys’ fees and render
judgment denying them recovery of any attorneys’ fees. In the alternative, Poole Point argues
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that the Court should remand the cause to the trial court for reconsideration of whether the
DeGons are entitled to attorneys’ fees under the UDJA.
“Under section 37.009, a trial court may exercise its discretion to award attorneys’
fees to the prevailing party, the nonprevailing party, or neither.” Feldman v. KPMG LLP,
438 S.W.3d 678, 685 (Tex. App.—Houston [1st Dist.] 2014, no pet.). Thus, a trial court has the
discretion to award attorneys’ fees to a party even if it does not prevail. Feldman, 438 S.W.3d
at 685-86 (concluding that trial court had power to award attorneys’ fees under UDJA even
though it had dismissed claim for declaratory relief for lack of jurisdiction). However, because
on appeal the DeGons’ status has changed from a prevailing party to a non-prevailing party, we
will remand the issue of attorneys’ fees to the trial court for reconsideration. See Barshop v.
Medina Cnty. Underground Water Conservation Dist., 925 S.W.2d 618, 637-38 (Tex. 1996)
(remanding case to district court to consider and exercise its discretion to award attorneys’ fees
under UDJA when party may no longer have “substantially prevailed” in litigation); Berquist v.
Lamar Gateway Baceline Holdings, LLC, No. 03-19-00096-CV, 2020 WL 4462328, at *6 (Tex.
App.—Austin July 24, 2020, no pet.) (mem. op.) (when declaratory judgment is reversed on
appeal, trial court’s award of attorneys’ fees may no longer be equitable and just).
Poole Point maintains that this Court should render judgment awarding it
attorneys’ fees, in the amount the parties stipulated was reasonable and necessary, pursuant to
Texas Property Code section 5.006. See Tex. Prop. Code § 5.006. Section 5.006 provides that
“[i]n an action based on breach of a restrictive covenant pertaining to real property, the court
shall allow to a prevailing party who asserted the action reasonable attorney’s fees in addition to
the party’s costs and claim.” Id. However, at this stage Poole Pointe’s claims based on the
DeGons’ breach of the Restrictions and its request for a cease-and-desist order have not been
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adjudicated. In its original answer, Poole Point asserted a counterclaim alleging that the DeGons
breached the Restrictions and sought to enforce those restrictions through a cease-and-desist
order. Poole Point also sought declaratory judgment that the Restrictions, as amended, were
valid and enforceable against the DeGons. The trial court denied these requests in its final
judgment when it declared that the DeGons were entitled to the declaratory relief they
sought and concluded: “This judgment is final and appealable and disposes of all parties and
all claims. All relief not expressly granted herein is denied.” See Lehmann v. Har-Con Corp.,
39 S.W.3d 191, 195 (Tex. 2001) (“A judgment is final for purposes of appeal if it disposes of all
pending parties and claims in the record, except as necessary to carry out the decree.”). We are
remanding this case for the trial court to reconsider the award of attorneys’ fees to the DeGons
pursuant to the UDJA. On remand, and in light of this Court’s opinion, Poole Point may secure a
ruling on its counterclaim for breach of the Restrictions, request that the court enter a cease-and-
desist order, and request specific declarations regarding the enforceability of the Restrictions.
It may also seek to recover its “reasonable attorneys’ fees” pursuant to Texas Property Code
section 5.006.
CONCLUSION
For the reasons stated in this opinion, we reverse the trial court’s judgment
granting the DeGons’ request for declaratory relief. We remand the cause for the trial court to
reconsider the award of attorneys’ fees under section 37.009 of the UDJA. We also remand the
cause to the trial court to consider Poole Point’s counterclaims and request for attorneys’ fees
pursuant to section 5.006 of the Texas Property Code.
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__________________________________________
Thomas J. Baker, Justice
Before Chief Justice Byrne, Justices Baker and Smith
Reversed and Remanded
Filed: March 24, 2022
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