Case of the Day – Wednesday, October 19, 2016

HOME WRECKERS

heckle150903A homeowner buys the house next door, planning to demolish it and turn the property into a playground for his kids. Touching, isn’t it?

Yes, except the homeowner knew that the deed restrictions on his place and the place he was buying required prior approval of a homeowners association before “changes or alterations.” But he reasoned that demolition was not a change, so he brought in the wrecking ball.

The company acting as the homeowners’ association sued and asked for an injunction. The case hadn’t gone to trial yet, but the Delaware trial court found that on balance, the equities of the case favor the homeowners association. First, the Court said, demolitions — like diamonds — are forever. The court all but told the property owner that his interpretation of “change and alteration” not to include “demolition” was a dead-bang loser.

And it turned out the property owner knew he was going to have to get permission, and busily and secretly stirred the pot for six months prior to going ahead by writing letters purportedly from other homeowners to the association supporting the demolition.

The court pretty much suggested to him that he had gotten just what he bargained for. Sow the wind, reap the whirlwind, Mr. Guzzetta.

Mr. Guzzetta had plans ...

Mr. Guzzetta had plans …

Service Corp. of Westover Hills v. Guzzetta, Not Reported in A.2d, 2007 WL 1792508 (Del.Ch., 2007). The Guzzettas had been homeowners in Westover Hills for 11 years, when they bought the property next to theirs, at corner of Berkeley and Stuart Roads. The adjoining property included a 1943 colonial-style house and mature maple and oak trees. The Guzzettas intended to raze the house in order to expand their backyard for their children.

Properties in Westover Hills, however, are subject to deed restrictions which are binding on all owners within the Westover Hills Section C development. One of the restrictions provides that “no building, fence, wall or other structure shall be commenced, erected, or maintained, nor shall any addition to or change or alteration therein be made, until the plans and specifications, showing the nature, kind, shape, height, materials, floor plans, color scheme, location and frontage on the lot and approximate cost of such structure shall have been submitted to and approved in writing by …” Service Corp., the property manager.

Service Corp. had the right to refuse to approve any such plans or specifications that it found not suitable or desirable for aesthetic or other reasons. Since 2004, Service Corp. has used an Architectural Review Committee to initially review proposals, request additional information as necessary, and make recommendations to the Service Corp. board. Service Corp. had approved demolitions before, as well as landscape plans.

The Guzzettas went ahead with their plans without obtaining approval, and Service Corp. sued for an injunction prohibiting the demolition of the home and landscaping. The trial court grated a temporary restraining order, and later heard Service Corp’s application for a preliminary injunction until a trial on the merits could be held. The central argument was whether a demolition of a building fell within the terms of the deed restriction, requiring Service Corp’s prior approval.

Held: Service Corp. was entitled to a preliminary injunction to maintain the status quo pending trial. Delaware’s standard for issuance of a preliminary injunction is much like other states. A party seeking the injunction must show (1) there is a reasonable probability that it will succeed on the merits of its claims; (2) it will suffer irreparable harm if injunctive relief is not granted; and (3) its need for the protection of an injunction outweighs any harm the Court can reasonably expect to befall the non-moving party if the injunction is issued.

Here, the Court found that Service Corp. was likely to succeed on the merits of its claim. Its interpretation of the deed restriction that the phrase “change or alteration” included outright demolition simply applied plain meaning to the words of the restriction. The dictionary defines “change” to include “replace with another.” The definitions, the Court said, do not support limiting the applicability of the restriction to modifications in the nature of an improvement or slight adjustment, as the Guzzettas suggest. The Court found it reasonably likely that, after trial, a court would construe the text of Article V to include any modification of a structure, especially those of a radical nature such as demolishing a house. Delaware courts have routinely upheld deed restrictions relating to design harmony and character of a neighborhood. In this case, the Court said, it is reasonably likely that Service Corp. will succeed in proving that the standards for review under the restriction are sufficiently objective to permit reasoned and nonarbitrary decisions.

demo150903Also, the Court held, Service Corp. — the agent for the property owners of Westover Hills — faces a significant risk of irreparable harm if the home is demolished and mature trees are removed before final resolution of Service Corp’s claims. Actions such as removing mature trees and demolishing a house are effectively irreversible. Moreover, as the process takes place, secondary harms may result. Heavy machinery could significantly damage the current landscaping on the Property and the association’s adjacent property by, for example, causing damage to Service Corp.’s London Plane trees, some of which are over 70 years old. BY contrast, the harm to the Guzzettas is only a delay of a few months in their ability to use the property as they wish.

The Court noted that at the hearing, Mr. Guzzetta admitted that he knew when he purchased the property that Service Corp. would not approve a demolition without an acceptable plan for the use of it following demolition, including a landscaping design to ensure that the demolition would not leave the property out of harmony with the neighborhood. Indeed, he admitted that he secretly drafted a series of letters from the previous owners to Service Corp. regarding the proposed demolition for more than six months before Service Corp. filed suit. By not disclosing his involvement to Service Corp. for a number of months and directly participating in a lengthy game of cat-and-mouse with it over the need for, and scope of review, Mr. Guzzetta bears responsibility for at least some unnecessary delay in the resolution of this matter.

The Court concluded that the balance of the equities in this case favors Plaintiff.

TNLBGray140407

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