Shalimar Ass’n v. D.O.C. Enters., Ltd.

Brief Fact Summary.

Plaintiff sued Defendant for violating the implied restriction on the use of the golf course when they intended to develop the golf course. The trial court barred Defendant from developing the golf course until the 40-year period had expired. Defendant appealed.

Synopsis of Rule of Law.

A purchaser of a servient estate is held to have notice of restrictions that are evident upon an inspection of the estate, even if the restrictions do not appear in government records.

Facts.

Shalimar Estates is a residential land development in Tempe, Arizona. The initial developer intended for a centrally-located golf course to be an integral part of the development. Starting in 1960, he used the golf course in advertisements for the surrounding houses. Many buyers relied on the advertisement when deciding to purchase houses beginning in 1960. The deeds for the surrounding properties each contained restrictions, including where structures could be located, that were designed to improve the appearance of the golf course. Additionally, at the property sales, the developer told the buyers that the golf course would be maintained as such for the next 40 years, with the time period to be extended another 25 years unless a majority of the homeowners agreed in writing to change the golf course. Despite this, no restrictions were ever recorded against the golf course property itself. In 1978, three Canadian men, a lawyer and the two real estate agents, purchased the golf course land intending to develop it. The men visited the golf course several times and had notice that the initial developer had intended to restrict the land to being used as a golf course. Nonetheless, they intended to develop the golf course. Acting on behalf of the homeowners, Shalimar Association (Plaintiff) sued D.O.C. Enterprises, Ltd. (Defendant), an entity created by the Canadians to handle the development. The trial court found that, due to the restrictions on the homeowners’ properties, there was an implied restriction on the use of the golf course, and that the Canadians would have learned of the restriction if they had made reasonable inquiries. The judge barred them from developing the golf course until the 40-year period had expired. They appealed.

Issue.

Whether the purchaser of a servient estate is bound by restrictions that do not appear in government records but that are evident upon an inspection of the estate.

Held.

Yes. The trial court’s ruling is affirmed. A purchaser of a servient estate is held to have notice of restrictions that are evident upon an inspection of the estate, even if the restrictions do not appear in government records.

Discussion.

A purchaser of a servient estate is held to have notice of restrictions that are evident upon an inspection of the estate, even if the restrictions do not appear in government records. This rule applies to implied use restrictions, which are created for purposes of equity. In this case, equity requires an implied restriction on the golf course. The initial developer owned both the golf course and the surrounding lots, and sold the surrounding lots to the homeowners with the promise that the golf course would remain a golf course for the next 40 years. The circumstances were such that Defendant would have learned of the restrictions if they had made reasonable inquiries. The trial court was correct to require them to maintain the land as a golf course. The other arguments that they raise on appeal are without merit. The Statute of Frauds does not require the restriction to be in writing because Defendant is bound by the equitable principle of estoppels. The Statute of Frauds also does not apply because the homeowners and the initial developer acted in conformity with the easement. This constitutes partial performance that prevents the Statute of Frauds from applying. The parol evidence rule, which bars the use of parol evidence to modify the terms of a written contract, does not apply because there is no written contract at issue. The doctrine of changed circumstances, which allows relief from restrictive covenants, does not apply because there have not been sufficient changes to frustrate the purpose of the restrictive covenant. In short, there is no reason to lift the restriction on the use of the golf course.