Opinion
23-0448
03-06-2024
STEVE PETTETT, TRACEY PETTETT, JOE FLOWER, DANITA FLOWER, STEVE HARPER, and LYNNETTE HARPER, Plaintiffs-Appellees, v. JOHN KRUGHEL and TRISHA KRUGHEL, Defendants-Appellants.
Robert S. Gallagher of Gallagher, Millage & Gallagher, P.L.C., Bettendorf, for appellants. William Stengel of Stengel, Bailey & Robertson, P.C., Rock Island, Illinois, for appellees.
Appeal from the Iowa District Court for Scott County, Mark R. Fowler, Judge.
Property owners appeal from a judgment ordering them to demolish a building they built in noncompliance with their property's restrictive covenants. AFFIRMED.
Robert S. Gallagher of Gallagher, Millage & Gallagher, P.L.C., Bettendorf, for appellants.
William Stengel of Stengel, Bailey & Robertson, P.C., Rock Island, Illinois, for appellees.
Considered by Bower, C.J., and Buller and Langholz, JJ.
LANGHOLZ, JUDGE
About a month before the trial to decide whether they could legally do so, John and Trisha Krughel built a 1496-square-foot metal building on their residential lot in the Prairie Woods Estates subdivision of the City of Blue Grass. Despite a restrictive covenant requiring approval from the subdivision's building committee for all structures, the Krughels never obtained that approval. Nor did they comply with other restrictive covenants governing the design and placement of the building. So the district court agreed with the neighboring landowners who had sued to enforce the covenants and ordered the Krughels to demolish the building.
The Krughels appeal, arguing-as they did in the district court-that the building committee did not exist, and thus compliance with that covenant should be excused as impossible or impractical. They also contend-for the first time on appeal-that all the covenants are unenforceable against them under the doctrines of laches or estoppel by acquiescence because the covenants had not been consistently enforced against other landowners. But on our de novo review, we agree with the district court that the building committee existed and the Krughels chose to ignore the contact they received from one of its members rather than comply. And we decline to consider the Krughels' new laches and estoppel-by-acquiescence arguments because they did not preserve error by raising them with any specificity in the district court. We thus affirm the district court.
I.
Prairie Woods Estates was originally platted in 2007 and then replatted in 2014 after a bank foreclosed on the original developer's mortgage and became the owner of ninety percent of the subdivision. The lots established in 2014, which became known as Prairie Woods Estates Second Addition, are all subject to restrictive covenants that were created and properly recorded at that time.
Those covenants include a few provisions relevant here. First, the lots are required to be used for "Single Family residential purposes" with "a private garage attached thereto, unless otherwise approved by the Building Committee or Association." And lots cannot be "subdivided so as to permit erection of more than one" single-family residence absent approval by the building committee. While the covenants do permit one additional "storage building" on each lot, they impose several requirements for any such building. Besides complying with any city ordinances, the building must be:
• "placed in the rear of the" single-family residence and no "closer than 20 feet from any Lot line";
• "constructed of wood with a shingle type roof";
• limited in size to no more than "180 square feet in area" and in height to a "single story";
• matched in "[e]xterior design, color, and placement" to the single-family residence; and
• "reviewed and approved by the Building Committee prior to its installation."
Other covenants detail the composition, operation, and dissolution of the building committee. It "shall be composed of such persons as the Lot Owners may from time to time designate by majority vote." If a committee member resigns or dies, "the remaining members of the Building Committee shall designate a replacement member." The committee may also "designate a representative to act on its behalf and with its full authority."
The building committee is charged with approving not just storage buildings, but any structures-including houses, patios, pools, fences, and tennis courts. Without the committee's written approval, "as to conformity and harmony of external design and quality workmanship and materials with existing Buildings and with respect to topography and finished ground elevation," "[n]o Building or Structure shall be erected, placed, or altered." To obtain approval, "the building plans, specifications, and plot plan" must "be submitted in duplicate" to the committee. And if the committee or its representative "fails to approve or disapprove" the structure within seven days, the committee's "approval will not be required and this covenant will be deemed to have been fully complied with."
The committee's authority to approve or disapprove structures "shall cease upon the completion of Buildings on all of the Lots." In other words, once a residential home has been built on every lot, the obligation to seek approval for alterations or for other new structures would end. But the owners of a majority of the lots in the subdivision may choose to reconstitute the committee by appointing a new three-person building committee with all the same powers as the original.
The building committee-and all the restrictive covenants-also expressly ceases to exist on April 28, 2035 (twenty-one years after the covenants' filing) "unless a claim is filed to renew the covenants pursuant to Iowa Code § 614.24." See generally Fjords N., Inc. v. Hahn, 710 N.W.2d 731, 734-36 (Iowa 2006).
Finally, the covenants expressly give "[a]ny Owner . . . the right to enforce by any proceeding at law or in equity all restrictions, conditions, covenants, or reservations now or hereafter imposed." And they clarify that "[f]ailure by any Owner to enforce any covenant or restriction herein contained shall in no event be deemed a waiver of the right to do so thereafter."
Sometime after creating the covenants, the bank, as the owner of ninety percent of the lots, designated two people to serve on the building committee. One was a local realtor, Tom Bracey; the other was a homebuilder, Bob Martin. By the trial, neither committee member had died or resigned. And not all the lots had yet been completed with residential homes built on them. So the building committee with its original members existed at all relevant times.
The record is unclear whether the bank designated a third committee member. But it matters not because the covenants do not require any specific number of members for the original committee. They only set the three-person size for the reconstituted committee if the original committee ends upon completion of building on all lots.
The Krughels bought a home on a lot in Prairie Woods Estates in August 2018. Their home was built and sold by Martin of the building committee. And the listing agent was Bracey of the building committee. A copy of the restrictive covenants on their property were provided to them before they agreed to buy the home. Indeed, they initialed both the first page of the covenants and a clause of the purchase agreement affirming that they had "received and read any/and all covenants, bylaws, and plats of survey provided by the Builder." The covenants were also part of their abstract, which was in the Krughels' possession. And they made their purchase offer subject to obtaining "approval by Building Committee of concrete slab along garage [and] shed in back less than 180 sq. ft. within 7 days of acceptance of" their offer.
Despite this contingency, Trisha Krughel denied that they ever had any plans to build the small shed. And it was never built. The record does not show whether they received approval and placed the concrete slab.
About two years later, the Krughels decided to build a large storage building on their property. They bought the materials as a kit from the manufacturer. They obtained a building permit from the city. And they adjusted the precise location at least twice in response to complaints from their neighbors.
In this process, the city's building inspector told the Krughels he was unaware of any building committee for the subdivision. But compliance with the restrictive covenants is irrelevant to the city's building-permit process.
The Krughels also hired a grading and excavating company to prepare the land for their building. When their next-door neighbors saw the land preparation, the neighbors approached the contractor expressing concern about his work. And one day when he was working at the site in early December 2021, the neighbors handed him a phone with Bracey of the building committee on the line. Bracey asked the contractor what he was doing and asked for the Krughels' phone number. The contractor refused to share their number but later texted Trisha Krughel that Bracey wanted to speak with her. The same day, Bracey wrote to the Krughels:
Please be advised that all buildings to be built in Prairie Wood Estates must get approval from the building committee. I am currently on the building committee. This requirement is clearly stated in the covenants that you received when you purchased your home. You must submit plans and details of the building you would like to construct for approval prior to construction.
He also offered to answer their questions, provided his contact information, and instructed that any plans should be sent to him for consideration by the committee.
Shortly after receiving the notice from Bracey, Trisha Krughel spoke with him by phone. He told her that based on what he had seen of the preliminary work for the building's foundation and its planned size that he "would never approve anything like that." He also made a comment that he would like to see the lot owners vote to replace him with a new building committee because he thought the people who live in the development should play that role once the lots were all sold. The Krughels did not submit the plans for their building to Bracey or anyone else for building committee approval.
Trisha Krugel offered a different account of the phone conversation, including a claim that Bracey told her she should "just go ask some neighbors" for approval of the storage building. The district court expressly found "the testimony from John and [Trisha] Krughel to be less credible and infected by confirmation bias." And on our de novo review, giving that credibility determination due weight, we agree that Bracey's account of the call is more credible.
In March 2022, an attorney for the couple who owned the neighboring lot wrote to the Krughels warning that they intended to enforce the restrictive covenants, including seeking to compel demolition of any building not in compliance with the covenants. They also sent a copy of the covenants and highlighted the size limitation and building-committee-approval requirement.
After building materials were delivered to the Krughels' lot, the attorney followed up with a stronger message in early April 2022. He wrote that the neighbors "will file suit to enjoin the erection of a structure" that violates the covenants. He also suggested that the Krughels may wish to seek a declaratory judgment before building to avoid the risk of "the cost and frustration of demolition." And he advised them to consult an attorney.
Receiving no response, the neighboring couple-and two other couples who owned nearby lots on their street-sued to enforce the covenants at the end of April. They sought a declaratory judgment that the Krughels' planned building would violate the subdivision's restrictive covenants and an injunction prohibiting the Krughels from constructing the building. The Krughels answered the suit by denying that the covenants were enforceable. They claimed that "there is not a building committee from whom they can secure approval to build the garage" and thus the covenants were "unenforceable under the doctrine of impossibility, the doctrine of discharge by supervening impracticability and [the] doctrine of servitude estates."
While the suit was pending, the Krughels circulated a petition to many lot owners in the subdivision asking them to state that they "do not acknowledge the covenants," and "do not want to form a committee that would cause us all to pay an HOA." The petition also sought affirmation that the owners "are okay with all residents, including us, to be able to build anything we want, including a garage." Owners of about a dozen lots signed the petition. The six plaintiffs did not.
In December 2022 and January 2023-about a month before the scheduled February trial-the Krughels built the building. The building is 1496 square feet- over eight times the maximum size for a compliant storage building. It has steel siding rather than wood and a steel roof rather than shingles. It is on the street rather than in the backyard. And it is placed eight feet from the property line rather than twenty. The Krughels explained at trial that they went ahead with construction of the building because they had bought the materials and they believed the restrictive covenants were unenforceable.
After the two-day bench trial, hearing from sixteen witnesses, the district court disagreed with the Krughels. The court found that the Krughels' building violated multiple restrictive covenants. It also found that the building committee existed and that the Krughels had notice of that fact. And so, the court rejected their argument that compliance with the building-committee-approval requirement was impossible or impractical. Because the building was constructed shortly before trial, the district court reasoned that it was left with "only one remedy" and thus ordered the Krughels to demolish it and return the lot "to its original state."
The Krughels now appeal. And after requiring the Krughels to post a bond, the district court stayed its judgment pending appeal so that the Krughels were not immediately required to demolish their building. See Iowa. R. App. P. 6.601(4).
II.
The parties agree this case was tried in equity and is thus reviewed de novo. See Stone Hill Cmty. Ass'n v. Norpel, 492 N.W.2d 409, 409 (Iowa 1992); see also Iowa R. App. P. 6.907. Still, we give weight to the district court's fact findings, especially those based on witness-credibility determinations, even though they do not bind us. See Iowa R. App. P. 6.904(3)(g).
Restrictive covenants "are recognized under Iowa law and exist to protect existing and future property owners in a subdivision by placing certain restrictions on the land so that lot owners use their lots in conformity with those restrictions." Norpel, 492 N.W.2d at 410. By buying property subject to a restrictive covenant, the new owners "agree[] to abide by the restrictive covenants that [come] with it." Id. "Because restrictive covenants are contractual in nature, we apply contractbased rules of construction to interpret them." Sky View Fin., Inc. v. Bellinger, 554 N.W.2d 694, 697 (Iowa 1996).
The Krughels do not contend that their building complies with the restrictive covenants on their property. (And properly so. Their building violates nearly every one of the bulleted restrictions highlighted above.) Rather, they argue that the covenants are unenforceable because no valid building committee existed from which they could seek approval. And so they reason, relying on DuTrac Community Credit Union v. Radiology Group Real Estate LLC, 891 N.W.2d 210, 216 (Iowa 2017), that compliance is excused by the doctrines of impossibility or supervening impracticability.
True, in DuTrac, our supreme court terminated a restrictive covenant requiring approval from an architectural control committee before constructing buildings in a subdivision because compliance "was both impossible and impractical." 891 N.W.2d at 218. But there-unlike here-the restrictive covenant named two specific people to be members with no provision for replacing them. See id. at 217. So when one member died and the other refused to serve or resigned, "it was objectively impossible for the committee to meet to approve any buildings or structures" since it had "no acting members and no succession plan to appoint new members." Id. at 218.
No similar objective impossibility or impracticability exists here. The building committee was formed by the bank's designation of Bracey and Martin to serve as its members when it was the owner of ninety percent of the lots. Neither committee member died or resigned. And the committee had not ceased by the terms of the covenants since there were still lots without residential homes built. So when the Krughels were planning their building and when they built it, the committee was in existence and able to meet to approve or reject their plans.
The Krughels challenge these factual findings. But the findings are well supported by the thorough evidentiary record in the district court taken from sixteen witnesses. We agree with the district court that "there is no question that a building committee exists." And we agree with the court's assessment that the Krughels testimony was "less than credible because it was plagued with confirmation bias." As the court aptly explained, "Instead of seeking out the building committee they sought to disprove its existence. They did not want anyone to tell them that they could not build this structure. Consequentially they only see facts that would allow them to build the structure."
To be sure, the Krughels presented testimony of some witnesses who were unaware of the building committee. And they showed some structures were built in the subdivision without building committee approval. But the court also heard evidence from at least three lot owners who submitted plans to the building committee for approval-one of whom had his plans rejected and had to modify them to gain approval. So too did it hear credible testimony from one of the building committee members-Bracey-about the committee's existence and its work.
What's more, the Krughels had actual notice of how to comply with the building-committee-approval requirement before they built the building. Bracey wrote to them, reminding them of the requirement and informing them how to submit their plans. He also spoke with Trisha Krughel on the phone. Indeed, he was the real estate agent who sold them their home, so there would have been no reason for them to think he was lying about his role. Even after that, an attorney for their next-door neighbors twice wrote to them warning of the restrictive covenant requirements that they were about to violate. And they also had longstanding notice of the covenants since the purchase of their home in 2018. But the Krughels ignored all this outreach. They failed to comply with the restrictive covenants because they refused to comply-not because compliance was impossible or impractical.
In their appellate brief, the Krughels also argue that all the covenants are unenforceable under the doctrines of laches or estoppel by acquiescence. But they did not make these arguments in the district court. Their answer does not raise these claims. Nor did they mention either doctrine during their opening statement or closing argument to the court. And the record contains no trial brief. While they presented evidence of other noncomplying structures in the subdivision, they argued that the evidence supported their view that the building committee did not exist rather than raising these alternative legal theories with any specificity. They thus failed to preserve error. See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002). And we will not consider these arguments for the first time on appeal.
But to be clear, the Krughels do not-and could not-argue that their neighbors in any way acquiesced or delayed in raising concerns about the Krughels' violations of the restrictive covenants by constructing the building. The neighbors began raising concerns to them about the building as soon as there were signs the Krughels were preparing the land-over a year before it was ultimately built. The neighbors warned of legal action and suggested seeking a declaratory judgment to determine the enforceability of the restrictive covenants. And then they filed this suit-again before the Krughels constructed the building. The only reason that the Krughels are now faced with demolishing a completed building is their choice to build it a month before trial. Cf. Johnson v. Pattison, 185 N.W.2d 790, 798 (Iowa 1971) ("Whatever hardship there it must be laid at defendants' door. It was their 'take a chance' conduct which has brought about this unfortunate result, and the consequences of that course should not, in fairness and justice, be visited upon plaintiff[s].").
In sum, the Krughels built a building on their lot in violation of the lot's restrictive covenants. Their preserved arguments for not enforcing the covenants fail. We thus affirm the district court's order to demolish the building and return that portion of their lot to its original state.
AFFIRMED.