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Sky Canyon Properties, LLC v. Golf Club at Black Rock, LLC

Supreme Court of Idaho., Coeur D'alene

November 26, 2013

SKY CANYON PROPERTIES, LLC, an Idaho limited liability company; Robert C. Samuel; Joe K. Donald and Lisbeth Lillemore Donald, husband and wife; Wayne A. Gianotti and Carolyn M. Gianotti, husband and wife; Russell M. Wicks and Evelyn L. Wicks, husband and wife; Buddy C. Stanley and Judith L. Stanley, Trustees of the Stanley Family Trust dated February 26, 2004; Craig R. Fallon and M. Ellen Fallon, husband and wife
THE GOLF CLUB AT BLACK ROCK, LLC, an Idaho limited liability company, Defendant-Respondent.

Coeur d'Alene, September 2013 Term.

Page 793

Mischelle R. Fulgham, Lukins & Annis, Coeur d'Alene, argued for appellants.

John F. Magnuson, Coeur d'Alene, argued for respondent.

EISMANN, Justice.

This is an appeal out of Kootenai County regarding the interpretation of covenants, conditions, and restrictions for a subdivision. We reverse the judgment of the district court and award the appellants attorney fees on appeal.


Factual Background.

Black Rock Development, Inc., an Idaho corporation, developed a planned unit development consisting of residential homes and a golf course on the shore of Lake Coeur d'Alene. The development was named Black Rock. The plat was recorded on August 16, 2001, and thereafter plats were recorded for additions one through eight. The development consists of about 659 acres.

On July 21, 2001, Black Rock Development recorded covenants, conditions, and restrictions (CC & R's) applicable to the development. The CC & R's created the position of " Declarant," named Black Rock Development as the Declarant, stated the rights of the Declarant, defined the time period that the Declarant would be entitled to exercise those rights, and specified the qualifications for a " Successor Declarant." The rights of the Declarant included " the exclusive powers to appoint, remove and replace Directors and officers of the [Black Rock Homeowners'] Association."

The golf course in the development was developed and owned by The Club at Black Rock, LLC (The Club). Its property, consisting of about 206 acres, included an eighteen-hole, championship golf course, a 31,000-square-foot clubhouse, golf practice and maintenance facilities, tennis courts, a swimming pool and Jacuzzi, and a private beach. The Club had executed deeds of trust as security for the payment of bank loans it had obtained from the Washington Trust Bank (Bank). On August 11, 2010, The Club conveyed its real property to the Bank in lieu of foreclosure. On the same date, Black Rock Development assigned to the Bank all of its rights and interests as the Declarant under the CC & R's.

On August 23, 2010, the Bank assigned the real property and the Declarant rights to West Sprague Avenue Holdings, LLC (West Sprague). On October 29, 2010, West Sprague deeded the real property and assigned the Declarant rights to an entity named The Golf Club at Black Rock, LLC (The Golf Club), which is a different entity than The Club. On November 5, 2010, Black Rock Development assigned to The Golf Club any Declarant rights that Black Rock Development may still have retained due to any procedural or substantive defect in the prior assignments.

On April 1, 2011, the Plaintiffs, who are the owners of at least one lot in Black Rock and are members of the Black Rock Homeowner's Association, Inc., filed this action against The Golf Club seeking a declaratory judgment that it was not qualified to be a Successor Declarant and therefore could not exercise the Declarant rights. Both sides moved for summary judgment on the issue of whether The Golf Club satisfied the requirements of being a Successor Declarant under the CC & R's. The district court held that it did. It therefore dismissed the complaint and awarded court costs, including attorney

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fees, against the Plaintiffs. They then timely appealed.


Did the District Court Err in Its Interpretation of the CC & R's?

When interpreting CC & R's, this Court generally applies the rules of contract construction. Pinehaven Planning Bd. v. Brooks, 138 Idaho 826, 829, 70 P.3d 664, 667 (2003). However, because provisions in the CC & R's that restrict the free use of property are in derogation of the common law right to use land for all lawful purposes, the Court will not extend by implication any such restriction not clearly expressed and all doubts are to be resolved in favor of the free use of land. Id.

" If a contract's terms are clear and unambiguous, the contract's meaning and legal effect are questions of law to be determined from the plain meaning of its own words." Bream v. Benscoter, 139 Idaho 364, 367, 79 P.3d 723, 726 (2003). " Whether a contract is ambiguous is a question of law over which we exercise free review." Howard v. Perry, 141 Idaho 139, 142, 106 P.3d 465, 468 (2005). " Ambiguities can be either patent or latent." Swanson v. Beco Constr. Co., Inc., 145 Idaho 59, 62, 175 P.3d 748, 751 (2007). " Idaho courts look solely to the face of a written agreement to determine whether it is [patently] ambiguous." Ward v. Puregro Co., 128 Idaho 366, 369, 913 P.2d 582, 585 (1996). " A latent ambiguity is not evident on the face of the instrument alone, but becomes apparent when applying the instrument to the facts as they exist." In re Estate of Kirk, 127 Idaho 817, 824, 907 P.2d 794, 801 (1995). In this case, the parties do not contend that there is a latent ambiguity in the relevant provisions of the CC & R's. " [T]he parties to a contract are free to define in the contract words that are used therein, even if those definitions vary from the normal ...

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