El Di, Inc. v. Town of Bethany Beach

Brief Fact Summary. A restaurant wanted to sell alcohol in a community that has restrictive covenants prohibiting the sale of alcohol.

Synopsis of Rule of Law. When the character of a community drastically changes, restrictive covenants may no longer be enforced if the enforcement will not benefit the community.

Facts. El Di, Inc. (Defendant) is a restaurant on a beach that has applied for a license to sell alcoholic beverages because of public demand. The surrounding town (Plaintiffs) used to be a quiet beach community. When it was originally formed, restrictive covenants were made on plots which prohibited the sale of alcohol because the creators wanted the area to be a quiet community. Over the years, the town has become much larger and more commercial. Defendant’s patrons may carry their own alcohol into the restaurant without violating any covenants.

Issue. If a restrictive covenant no longer benefits a parcel of land, must it still be enforced?

Held. No. Judgment reversed.
A restrictive covenant will not be enforced where a fundamental change has occurred in the intended character of the neighborhood that renders the benefits of the restriction incapable of enjoyment.
The purpose of the covenant was to maintain a quiet, residential atmosphere in the area and the community. But, a long time has passed, and much of the area is used for commercial businesses.
The practice of carrying alcohol into restaurants by people in the town is also evidence of a change in the community. The public has an interest in the availability and consumption of alcohol in the area, and that interest would be subverted if the covenant was enforced.
The covenant no longer benefits the owners of the parcels of land in the town. The community has gone through such drastic changes that the covenant will no longer be of substantial benefit, so it should not be enforced.

Dissent. The beach remains a quiet, family-oriented resort. The conditions of the community are still consistent with the enforcement of a restrictive covenant which forbids the sale of alcohol. Those who choose to buy land with restrictions should abide by those restrictions.