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Sides v. Saliga

Court of Appeals of Texas, Third District, Austin

June 20, 2019

Michael Sides, Susan Sides, Bobby Sides, Gregory George, Staci George, Claudio Acosta, and Laura Acosta, Appellants
v.
Shon Saliga, Jani Saliga, and Garden Grove, LLC, Appellees

          FROM THE 428TH DISTRICT COURT OF HAYS COUNTY NO. 16-1225, THE HONORABLE WILLIAM R. HENRY, JUDGE PRESIDING

          Before Chief Justice Rose, Justices Triana and Kelly

          MEMORANDUM OPINION

          JEFF ROSE, CHIEF JUSTICE.

         Appellants Michael Sides, Susan Sides, Bobby Sides, Gregory George, Staci George, Claudio Acosta, and Laura Acosta filed suit against appellees Shon Saliga, Jani Saliga, and Garden Grove, LLC. Appellants and the Saligas are neighbors in the same subdivision, and appellants sought declaratory and injunctive relief barring the Saligas from operating Garden Grove, a wedding and special events venue, on their property. Following a bench trial, the trial court signed a judgment in favor of the Saligas. We will reverse the final judgment and remand for further proceedings.

         FACTUAL AND PROCEDURAL SUMMARY

         In 2000, two large adjacent tracts of land were acquired by related entities: SGL Development, Ltd. acquired a 281-acre tract, and SGL Investments, Ltd. acquired a 577-acre tract. SGL Development and SGL Investments are both managed by SGL Management, LLC. In 2002, a Declaration of Covenants was filed, imposing restrictions on 196 acres out of the 281-acre tract owned by SGL Development. The Declaration of Covenants, however, recites that it was made by "SGL, Ltd." as Declarant, not SGL Development. At its conclusion, the Declaration recites:

DECLARANT:
SGL, LTD., a Texas limited partnership
By: SGL MANAGEMENT, LLC

         The document is signed by J. Kelly Gray, as manager of SGL Management, and it was filed in Volume 1957, page 835 through 842, of the real property records of Hays County. The restrictions, among other things, provide that the property shall be used for single-family residential purposes and not for commercial uses; that trash would not be allowed to accumulate; and that firearms could not be discharged.

         In 2005, the properties were sold to WFCRW, LLC, which subdivided the land and sold some of the subdivided lots to the parties herein. The relevant tracts are within the 196 acres described in the restrictive covenants. Jani Saliga bought her twelve-acre tract in March 2006, before her marriage to Shon Saliga. Because she was living in another state at the time, she closed on the property via a mail transaction, receiving a FedEx envelope of documents that were flagged for her signature, signing where indicated, and returning them via FedEx. Jani's deed, dated March 3, 2006, states, "This conveyance is made and accepted subject to the following matters, to the extent same are in effect at this time: (i) any and all restrictions, covenants, conditions and easements, if any, relating to the Property, but only to the extent they are still in effect, and shown of record in the herein above mentioned county and state." The closing documents included a survey of the property and a Commitment for Title Insurance prepared by Chicago Title Insurance Company. The commitment stated that title insurance "insures you against loss resulting from certain risks to your title" and that certain risks will not be covered, specifically excluding from coverage "[t]he following restrictive covenants of record itemized below," including in that list the covenants, specifying that they were located at "Volume 1957, Page 835, Official Public Records, Hays County, Texas." The survey likewise notes that the land was subject to "restrictive covenants of record itemized below," including those located at "volume 1957, page 835."

         In September 2014, the Saligas again obtained title insurance so that they could obtain financing to build their house. The new title commitment, issued by Westcor Land Title Insurance Company, did not exclude from coverage any restrictive covenants. The Saligas built their home in 2015, and in November 2015, Jani deeded the property to herself and her husband. In April 2016, the Saligas first hosted a wedding at their home, operating under the name "Garden Grove." In June 2016, appellants filed the underlying lawsuit, alleging that Garden Grove offered overnight lodging for up to thirty people and that "hundreds" of people and vehicles would attend events held at the venue. Appellants sought injunctive relief barring the Saligas from using their home as an event venue and declarations that the Saligas's property was subject to the covenants and that the operation of Garden Grove was in violation of those covenants.[1] The Saligas asserted that they were not bound by the covenants because Jani Saliga was a bona fide purchaser who had no notice of the covenants before buying the property and that appellants had waived the right to enforce the covenants by not enforcing them against other breaches in the area, including the operation of a substance-abuse-treatment facility that allows for overnight stays. They further asserted that the covenants could not be considered to encumber any of the properties because the filings were in the name of "SGL, Ltd.," as opposed to "SGL Development, Ltd."

         The trial court held a bench trial in which it heard testimony by Greg Way, Robert Burton, Michael and Susan Sides, Staci and Gregory George, the Saligas, Matthew Gorman, and Patrick Chase. Greg Way is a registered professional land surveyor who did survey work for the SGL entities on the two large tracts of land. Way was asked for his opinion about whether "SGL, Limited should be SGL Development, Limited," and he answered, "There's never been an SGL anything but development or investments associated with the property management-you know, the property work itself out there. We've never done work for an SGL, Limited." For Jani Saliga's original purchase of her twelve-acre tract in 2006, Way did the survey and the field notes that describe the property and note the restrictive covenants. His company also did the new survey for the Saligas about ten years later, when they were obtaining construction financing. The new survey tracked the new title commitment and did not note any restrictive covenants. Way said, "There's one title company that deleted those. Because we're-on a survey we show the title commitment information."

         Robert Burton, a real estate attorney, testified that he was hired by SGL Development to prepare the restrictive covenants in question. He testified that the "declarant name is incorrect" and should read "SGL Development comma LTD period." He testified that the field notes attached to the covenants identify the tract that includes the Saligas's property. He also testified about his experience in reviewing title insurance commitments, explaining that "the best practice is to, number one, rely on the search of the title company. Number two, to-to determine what encumbrances actually affect the property that have been filed against the property in the official public records of the county in which the property is located." When asked if by that he meant "you revert to the property description," Burton answered, "Yes." However, when Burton was later asked about how landowners are "indexed" with the county clerk, he said that "once you record the document it would be indexed under SGL comma LTD," not SGL Management or SGL Development. Asked if someone was "doing a grantor to grantee search using the names of the owners of the property as they appear in the chain of title, it would not pick up SGL, Limited," Burton said that he was "[n]ot sure" and that he had not "done a grantor search in a long time." However, he said, "Usually when we do one on-online it-it hits all of the similar names." He testified that he had executed an affidavit "indicat[ing] that I prepared the deed restrictions on behalf of SGL Development, Limited," to identify and correct the error. That affidavit was attached to a "Correction Instrument to: Declaration of Covenants [Rutherford Ranch]," which was filed by Staci George in the Hays County records in April 2017.

         Michael Sides testified that before filing the lawsuit, he researched the real property records because the Saligas had asserted that "the restrictions weren't valid" because they had been "improperly filed." Michael said,

So I went down to the county to check it out and I found-you know, it was pretty easy. It took me ten minutes and I found the restrictions. They have a map pretty much like that. You look it up, you go on the little computer and you can pull up the restrictions.

         He explained further about the process, saying that the county's office has a map of the whole county, including all the subdivisions. He found their subdivision and looked it up on the county's computer, which pulled up the restrictive covenants.

         Michael went on to testify about the events held at Garden Grove since the venue opened. He said the first event involved "probably several hundred cars," a live band that started "pretty loud" but got quieter, and then a DJ that "was extremely loud . . . because they had a really bass beat." Michael testified that the music played by the DJ caused his windows to vibrate and shake and that the wedding went until past 10:00 p.m.

         When he was asked about the substance-abuse-treatment facility, Michael said he was aware of the facility before the lawsuit was filed and that "my understanding of what it is is they have probably less than a dozen kids staying there that were maybe abused or-I don't know." He said that he was not aware of any complaints and that "they don't make any noise." Asked why he and others had not attempted to stop that use of property in the subdivision, Michael said, "They had eight or nine kids staying there, just like a family would, as opposed to we're talking about 500 people having parties every night. It's a little different." Michael also testified that although he had used his home address on his business filings for his construction business, he did not have clients or customers out to the house and did not conduct business at the house. Asked whether he ever had employees or subcontractors come to his house, he said, "No. I think maybe once or twice I might have had a sub come pick up a check or something." Michael said he might occasionally store "some stuff in my garage," although he said those materials might be for his personal use.

         Michael's wife, Susan Sides, testified that she was a real estate agent. In addition to their having bought land in the subdivision, she also helped her father-in-law buy his tract in 2006. During that process, she obtained a marketing document for the subdivision from Dana Hunt, who "was marketing all of the different lots." That document, which listed the Saligas's tract, stated that the land was subject to "architectural restrictions, no mobile homes," and Susan investigated "if there were, in fact, architectural restrictions" and found "[t]hat there were." Susan testified about the first wedding held at Garden Grove and said that the guests parked close to their property, possibly over the property line; that the "live music went on for a while"; that the ceremony was held close enough to the Sides' house for them to hear the words; and that "the loudest part was later in the night when either a DJ or, like, some kind of recorded music came on." She said,

It is our dream home. It's our neighbors' dream home. It's my 80-year-old-plus father-in-law's home. And they're trying, for their financial gain, to manipulate the system by a typo in my opinion. And it makes me feel hurt and sad and disappointed in people in general and-and-and upset.

         Staci George testified that in about 2015, the Saligas told her that they were looking into hosting events at their house and that although they had complied with the covenants thus far, they had come to believe that the covenants were "not valid anymore or there's a defect in the restrictions." She also testified about the large number of cars and the music played at the wedding in April 2016. She said that at the time of that wedding, she and her husband had just started construction on their house. She said, "And it's unfortunate that we worked for 15 years to save and sacrifice, and now we're potentially going to be in our dream home next to a wedding venue with the goal of-one event-every weekend having an event." She also said that she and her husband had two small children "and it's not an ideal situation." Greg George testified that the title insurance policy he and Staci obtained when buying their property in 2013 noted the restrictive covenants and that a copy of the covenants was provided to them by "the seller's agent." The Georges provided videos taken at one of the Saligas's events at Garden Grove. Greg noted how many cars were parked, how close they were to the Georges' property, and how the entire ceremony was visible from his house. He further testified about the description of Garden Grove provided on the venue's webpage, which says the venue could accommodate "groups up to 500" and overnight "glamping"-"glamorous camping."

         Shon Saliga testified that he did not see the document referred to by Susan Sides, which noted "architectural restrictions," until sometime in 2007, after Jani Saliga had purchased the tract, despite that document listing the Saligas's property among the tracts for sale. Shon testified that before they decided to build their house, he and Jani tried to sell the property and were told repeatedly that it "would be a perfect wedding venue." The Saligas "didn't believe we could do that" because Susan Sides had told them there were restrictive covenants on the property, but one agent responded that "she had sold property along that area-or had been involved with transactions on those tracts of land and that she didn't believe there were restrictions." The Saligas asked that agent to investigate further, and "[s]he reached out to our title company to confirm that the restrictions existed, came back and said-told us that we don't have restrictions." The Saligas were initially surprised but then, "We finally understood why the drug and rehab center was operating all of those years. We understood why the container business and everybody else was violating restrictions." He also testified that there was a deer feeder on Bobby Sides' property and that Bobby had called the Saligas in the past to tell them "that he's about to shoot a deer out there." Further, Shon testified, there were "trash piles" and construction material on Bobby's property, also in violation of the covenants.

         Jani Saliga testified that she had no idea about the restrictive covenants when she bought the property in March 2006 and that it was important to her that the contract stated that there was no homeowner's association. She also testified that no one informed her that there were any restrictive covenants and that had she known, she "would not have bought this property" because she wanted "a piece of land that was free and clear." Jani testified that she did not "remember receiving a title commitment" in the closing documents she received in the mail. Although the closing documents referenced title insurance, Jani initially said, "I did not receive that title policy." However, she then said that "evidently it was part of a title policy in my closing paper" but that she did not "look at it" or read it. She testified similarly about the survey-that she did not remember when she got it and that she did not read it.

         Jani testified that she and Shon did not learn about the covenants until 2007, when they attempted to buy part of an adjoining lot. When they learned about the covenants, they "were extraordinarily bummed out" and decided to try to sell the tract. When that failed, they decided instead to build a house. As part of the loan process to get construction funds, they had another title commitment prepared, which showed that there were no restrictions on the property. Jani said that she and Shon called the escrow officer multiple times to doublecheck, and "she said, Yeah, there are no restrictions." Jani testified that she and Shon had noticed the signs for the treatment center and looked into it because "we were kind of curious because it was incongruent-incongruent with what" they had been told about the covenants. Jani testified:

This is something I would like to just say very clearly. We operated on good faith. We think we-like Shon always says, we color inside the lines. We asked people. We checked. We double checked and triple checked. And then we went all in. He cashed retirement accounts. Like we're in-we're so into this that if we don't have the money from Garden Grove we cannot service our debt, we cannot pay our bills.

Shon testified similarly, saying that he and Jani had "cashed in everything we had" to build Garden Grove.

         The Saligas testified that they had hired two off-duty sheriffs to be at the April 2016 wedding, and Shon explained that during the event, the officers monitored the sound level and verified that the music never violated any ordinances. Jani also testified that the reference to "glamping" should have been removed from Garden Grove's website.

         Sheriff Patrick Chase worked security at the April 2016 event at Garden Grove. He testified that he received a complaint about the noise level, at which point he checked the decibel level and found it to be "averaging in the high 70s. However, it peaked at 83 one or- once or twice." Chase testified that, based on his experience, the event did not violate the Hays County ordinance that bans "disorderly conduct, noise" and includes an 85-decibel limit. Although the sound level did not exceed the ordinance's limit, he told the Saligas about the complaint, and they turned the music down.

         Neighbor Matthew Gorman testified that he bought two tracts in the subdivision in 2011 and that he operates Nova, a for-profit substance-abuse-treatment program, on his property. His patients stay overnight, he can house up to sixteen patients at a time, and the treatment program is about seven or eight days long. He testified that he had a sign out in front of his facility "for several years" and that he advertised along a nearby farm-to-market road as well. He had never been told that he could not operate his facility, and he testified that "[t]here's no deed restrictions on that property."

         At the conclusion of trial, the court signed a final judgment in favor of the Saligas, signing findings of fact and conclusions of law that we will set out below as relevant to our discussion. On appeal, appellants assert that the trial court erred in denying their request for injunctive and declaratory relief. They challenge the court's conclusions that the Saligas's operation of Garden Grove does not violate the applicable restrictive covenants, that Jani Saliga was a bona fide purchaser without notice of the covenants, and that appellants waived the right to enforce the covenants. Finally, they argue that they should have been awarded attorney's fees.

         STANDARD OF REVIEW

         A buyer is bound by restrictive covenants only when she has actual or constructive notice of the limitations on her title. Tarr v. Timberwood Park Owners Ass'n, Inc., 556 S.W.3d 274, 282 (Tex. 2018). We review the trial court's construction of a restrictive covenant de novo, using the same rules of construction applicable to contracts. Id. at 279-80; Pilarcik v. Emmons, 966 S.W.2d 474, 478 (Tex. 1998); Bollier v. Austin Gurdwara Sahib, Inc., No. 03-09-00313-CV, 2010 WL 2698765, at *3 (Tex. App.-Austin July 9, 2010, pet. denied) (mem. op.); Owens v. Ousey, 241 S.W.3d 124, 129 (Tex. App.-Austin 2007, pet. denied). Thus, our primary concern is to give effect to the parties' intentions as expressed in the covenants. Tarr, 556 S.W.3d at 280; Owens, 241 S.W.3d at 129 (citing Gulf Ins. Co. v. Burns Motors, 22 S.W.3d 417, 424 (Tex. 2000)).

         As for the trial court's denial of a request for injunctive relief, we review that decision for an abuse of discretion, meaning we ask whether the court acted in an unreasonable or arbitrary manner or misapplied the law to the facts. Bollier, 2010 WL 2698765, at *3 (citing Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002); Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985)). In such a review, the factual and legal sufficiency of the evidence are not independent grounds for appeal but are relevant considerations.[2] Id.; Goodson v. Castellanos, 214 S.W.3d 741, 756 (Tex. App.-Austin 2007, pet. denied). If some evidence supports the trial court's order, the court did not abuse its discretion "to the extent it is called upon to resolve fact questions in deciding whether to grant or deny injunctive relief." Bollier, 2010 WL 2698765, at *3.

         WAS JANI A BONA FIDE ...


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