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Kalenka v. Taylor dba Colony builders (5/26/95), 896 P 2d 222
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Notice: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, telephone (907) 264-0607, fax (907) 276-
5808.
THE SUPREME COURT OF THE STATE OF ALASKA
UWE KALENKA and RALF KALENKA, )
) Supreme Court No. S-5678
Appellants, )
) Superior Court No.
) 3AN-91-10706 Civil
v. )
) O P I N I O N
WILLIAM F. TAYLOR, III, d/b/a )
COLONY BUILDERS, WILLIAM F. ) [No. 4211 - May 26, 1995]
TAYLOR, III, individually, )
TAMI D. TAYLOR, DORCAS MARIE )
TEALL, JAMES C. SANDERS, )
NANCY L. SANDERS, SCOTT J. )
SHREVE, BARBARA E.F. SHREVE, )
BERT N. MOMA, SHEILA D. MOMA, )
and SHELBY JOHANSEN, )
)
Appellees. )
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
J. Justin Ripley, Judge.
Appearances: Martin A. Farrell, Jr.,
Anchorage, for Appellants. Timothy M. Stone
and Alex K.M. Vasauskas, Stone, Waller &
Jenicek, Anchorage, for Appellees William F.
Taylor, III, d/b/a Colony Builders, William
F. Taylor, individually, and Tami D. Taylor.
Gordon F. Schadt and Tracey A. Tillion, Law
Offices of Gordon F. Schadt, Anchorage, for
Appellee Dorcas Marie Teall. Calvin R.
Jones, Hoge & Lekisch, Anchorage, for
Appellees James C. Sanders, Nancy L. Sanders,
Scott J. Shreve, Barbara E. F. Shreve, Bert
N. Moma, Sheila D. Moma, and Shelby Johansen.
Before: Moore, Chief Justice,
Rabinowitz, Matthews, Compton and Eastaugh,
Justices.
MOORE, Chief Justice.
I. INTRODUCTION
Uwe Kalenka and his brother Ralf brought suit to
enforce restrictive covenants which bind nine lots in a
subdivision. The defendants are (1) Dorcas Teall, Uwe's former
wife, who sold four lots to a developer and approved construction
on them; (2) William and Tami Taylor, d/b/a Colony Builders
(collectively, the Taylors), who purchased Teall's lots, built
single family houses on them, and then resold the properties; and
(3) seven people who purchased the properties from the Taylors
and now live there (the residents).1 The Kalenkas appeal from
summary judgment against them on all alleged covenant violations.
We affirm summary judgment on the major claims but reverse in
part.
II. FACTS AND PROCEEDINGS
While married, Uwe Kalenka and Dorcas Teall purchased
property, which they subdivided into nine lots. In 1984 the
couple, as "Developer"of the property, recorded a "Declaration
of Covenants, Conditions and Restrictions" applicable to the
lots. Later that year, the couple sold lot number one to Curt
Kutil. No other lots were sold during the marriage.
In 1987 Uwe transferred his interest in the subdivision
to his sister Evi Kalenka. In 1988, Uwe and Teall were divorced.
Teall received title to Lots 2, 3, 4, and 8 of the subdivision;
title to lots 5, 6, 7, and 9 had been conveyed to Evi. In 1990
Evi Kalenka transferred her lots to her brother Ralf. According
to Ralf, Uwe retains a right of first refusal to purchase those
lots should Ralf decide to sell.
In November 1990 and March 1991, Teall conveyed her
lots to the Taylors. In the spring and summer of 1991, after
obtaining approval for construction from Teall, the Taylors began
construction of single family homes on the lots. Teall based her
approval of the construction on a set of house plans given to her
by the Taylors and a tour of other homes built by the Taylors.
Despite the fact that Teall advised them to contact Uwe, the
Taylors did not contact him or receive his approval.
All four buildings were substantially completed by mid-
summer of 1991, when the Taylors called Evi Kalenka in Germany
and expressed an interest in purchasing the remaining lots.
Through the Taylors' contact with Evi, Uwe and Ralf became
informed of the construction. William Taylor then met with Uwe
and Ralf. Ralf informed Taylor that lots 5, 6, 7, and 9 were not
for sale and that the construction undertaken by the Taylors was
in violation of the covenants. The Taylors then sought and
obtained from Teall written permission authorizing their already-
completed construction.
The Kalenkas filed suit in late 1991, asserting nine
causes of action: one claim accusing Teall of wrongfully
authorizing construction and seeking $500,000 in punitive
damages; one claim alleging that the residents had purchased
homes that violated the covenants and that several residents were
violating a covenant prohibiting pets; and seven claims against
the Taylors. The Kalenkas assert that the Taylors violated
the covenants by (1) failing to get the Developer's approval to
build; (2) building single family homes instead of duplexes; (3)
failing to side the houses with redwood or cedar siding; (4)
failing to screen construction from view during the erection of
the houses; and (5) failing to landscape lots under construction.2
The Kalenkas seek from the Taylors $1 million in punitive damages
for "wilfully violating"the covenants and additional "punitive
assessments" of $1000 per day under a covenant provision that
sets out "penalties" for initiating construction without
Developer approval. The Kalenkas also seek injunctive relief to
force the Taylors and the residents to comply with the Kalenkas'
interpretation of the covenants.
The trial court granted summary judgment against the
Kalenkas with regard to all alleged covenant violations. The
court then entered final judgment on those issues under Civil
Rules 54(b), 58, 58.1 and 78. The Kalenkas appeal.
III. DISCUSSION3
A. The Covenant Violation Claims
In urging this court to affirm the entry of summary
judgment, the defendants argue that the covenants have been
waived or abandoned. They also argue that their construction of
single family houses with grooved plywood siding complies with
the covenants. Finally, they argue that even if their
construction does not comply with the covenants, Dorcas Teall's
approval of their actions immunizes them from claims brought
under the covenants.
We hold that the defendants have not shown that the
covenants were waived or abandoned. We do agree, however, that
Dorcas Teall's approval of the construction is sufficient grounds
for granting summary judgment on the claims that the houses'
materials and design violate the covenants. We also hold that
the construction of single family homes does not violate the
covenants and that the claims regarding landscaping were properly
dismissed. We further hold that summary judgment was properly
entered against the Kalenkas' major damages claims. We conclude,
however, that a pair of the Kalenkas' less important claims
should have survived summary judgment.
1. The covenants were not waived or
abandoned
The defendants argue that Uwe and Dorcas abandoned
covenants on building type, landscaping, shielding construction
from view, and pets. They base this assertion on the allegation
that those covenants were not enforced against the first dwelling
in the subdivision, which was built in 1984 by Curt Kutil on lot
number one. The defendants contend that the Kutil house was not
a duplex, that it was not landscaped, that the construction was
not screened, that the residents kept pets, and that Uwe and
Dorcas acquiesced in these covenant violations.
We have said that covenants will be deemed waived if
the "evidence reveals substantial and general noncompliance."
B.B.P. Corp. v. Carroll, 760 P.2d 519, 523-24 (Alaska 1988). In
adopting the "substantial and general noncompliance" standard,
B.B.P. Corp. cited authority from a number of other states,
including Hawaii, Washington, and Nevada. An examination of the
law in those and other jurisdictions reveals that a failure to
enforce covenants against a single property does not constitute
abandonment. See Sandstrom v. Larsen, 583 P.2d 971, 976-77
(Hawaii 1978); Tompkins v. Buttrum Constr. Co., 659 P.2d 865, 867
(Nev. 1983); Swaggerty v. Petersen, 572 P.2d 1309, 1314-15 (Or.
1977); Crimmins v. Simonds, 636 P.2d 478, 480 (Utah 1981); Mt.
Baker Park Club v. Colcock, 275 P.2d 733, 735-36 (Wash. 1954).
Consistent with this authority, we hold that the Kalenkas'
alleged non-enforcement of covenants with regard to lot one does
not rise to the level of "substantial and general
noncompliance." Therefore, the covenants in this case have not
been abandoned.
2. Summary judgment was properly granted on
the Kalenkas' claims that the construction of
single-family houses with plywood siding violated
the covenants
The defendants argue that since Teall approved the
Taylors' construction of single family homes with plywood siding,
summary judgment was properly entered against the claims that the
houses' design and materials violate the covenants. The Kalenkas
resist this conclusion. They argue that the Taylors did not
provide Teall with the detailed construction application required
by the covenants, and contend that Teall's approval amounted to
an illegitimate modification of the covenants. The Kalenkas cite
Young Bros. Construction Co. v. Rollins Burdick Hunter, Inc., 659
P.2d 1168 (Alaska 1983), for the proposition that acting alone,
Teall lacked the power to approve the Taylors' construction.
Young Bros. is inapplicable here, however. In Young
Bros., we held that a joint venturer lacked the power to execute
a promissory note on behalf of the joint venture without the
knowledge and permission of his co-venturers. This holding was
based in part on the fact that the joint venture agreement
explicitly provided that no party could borrow money or use
credit without the written consent of the other co-venturers.
Id. at 1169.
Unlike the joint venture agreement in Young Bros.,
which explicitly required the approval of all co-venturers before
any party indebted the joint venture, the covenants at issue here
do not clearly require the consent of both Uwe and Teall to
achieve the approval of a construction proposal. The covenants
require the approval of a singular "Developer." The covenants do
state that "Uwe Kalenka and Dorcas Kalenka [are] hereinafter
called the Developer,"but they also state that "the Developer is
the owner of the real property [governed by the covenants]." It
is thus at least arguable that Dorcas Teall has the ability to
grant construction approval by herself: she is called "the
Developer" (although this is in conjunction with Uwe);
additionally, the Developer is referred to as the "owner of the
real property,"and Teall was the sole owner of the lots on which
the Taylors built their houses.
We have held that "[b]ecause restrict[ive covenants]
are in derogation of the common law, they should not be extended
by implication and doubts should be resolved in favor of the free
use of land." Gordon v. Brown, 836 P.2d 354, 357 (Alaska 1992);
Lamoreaux v. Langlotz, 757 P.2d 584, 587 (Alaska 1988). Applying
this standard to the question of whether Dorcas Teall could
approve the Taylors' construction, we hold that the covenants
must be interpreted to validate the authorization Teall gave to
the Taylors.
It follows from this that summary judgment was
correctly entered with regard to the Kalenkas' claims that the
houses' design and materials violated the covenants. Moreover,
summary judgment was properly entered against the claims accusing
the Taylors of breaching the covenants by failing to obtain
architectural approval from Uwe, and charging Teall with
"wrongfully authoriz[ing] Taylor to build lesser quality single
family residences."
These results are bolstered by our conclusion that the
covenants do not prohibit the construction of single family
houses. The parties cite Collins v. Goetsch, 583 P.2d 353 (Haw.
1978), in support of their opposing positions on this issue.
Collins involved an attempt to prevent property owners from
constructing a duplex on property restricted by the following
covenant:
Said lot shall contain no more than one
single-family dwelling, except, where a
second living unit is legally permitted, any
such second unit shall be a part of and
annexed to the main dwelling, and maintain an
outward appearance of a single-family
dwelling rather than of a duplex.
Id. at 356. The property was zoned to allow duplexes. The
court, following the rule that covenants are to be strictly
construed in favor of the free use of land, held that the
property owners were not prohibited from constructing a duplex on
the lot, so long as it maintained the appearance of a single
family dwelling. Id. at 358. The court noted that "if the
drafters of the covenants had intended that no duplexes were to
be built in the subdivision, they could easily have so provided
in the covenant." Id.
The Taylors seize on this reasoning and apply it to
this case. They also note the Collins court's dictum that
"[s]uch an explicit prohibition [on duplexes] was particularly
necessary where the existing zoning for the subject property
permitted" such dwellings. 583 P.2d at 359. The Kalenka
subdivision's zoning permits both duplexes and single family
homes. The Taylors conclude that given this zoning
classification, and since the covenants here fail to dictate "no
single-family homes,"a strict reading of the covenants allows
their construction. The Kalenkas argue that the covenant in
Collins had a broad exception clause ("where [duplexes are]
legally permitted") that is not present here with regard to
single family homes. They also argue that zoning is irrelevant
to the interpretation of covenants, which are a purely private
form of structuring land use.
The Kalenkas' argument about the interrelationship of
covenants and zoning ordinances is correct. See Singleterry v.
City of Albuquerque, 632 P.2d 345, 347 (N.M. 1981) (zoning
ordinances cannot relieve private property from valid restrictive
covenants even though the ordinances are less stringent). The
fact remains, however, that the principle of strict construction
enunciated in Collins has also been adopted in Alaska. See
Gordon, 836 P.2d at 357.
A thorough reading of the covenants reveals that while
they clearly envision multiple-unit dwellings, they contain no
express prohibition on the construction of single-family homes.4
Applying Gordon's strict construction, we hold that the covenants
at issue allow the construction of single-family homes.
3. The remaining covenant violation claims
We now discuss summary judgment entered against the
Kalenkas' remaining claims: the charge that the Taylors violated
the covenants by failing to screen construction from public view;
the charge that two of the residents are violating the covenants
prohibiting pets; and the charge that both the Taylors and the
residents have violated the covenant requiring landscaping.
Summary judgment was properly entered on the claim that
the defendants violated the covenants' landscaping requirement.
The relevant covenant provides that all required landscaping work
must be completed "within one year following issuance of
Certificate of Occupancy for the residence." At the time of the
defendants' summary judgment motion, a year had not elapsed since
the homes had been completed. The claims that the Taylors and
the residents violated the landscaping covenant were therefore
premature and properly dismissed through summary judgment.5
We see no grounds on which to support summary judgment
dismissal of the remaining claims, however. The defendants do
not argue that these claims are factually infirm. Instead, they
contend that Teall "knowingly waived or abandoned any
restrictions regarding screening of construction, pets, . . .
[and] tree planting." An examination of the record, however,
does not support this assertion; rather, the record indicates
only that Teall believed the covenants at issue had been
abandoned. We have rejected the abandonment argument. See A.1,
supra. Moreover, Teall's approval of the design, materials, and
construction of the houses has no bearing on the alleged
violation of covenant provisions dealing with screening
construction, pets, and landscaping. Consequently, summary
judgment is reversed on the Kalenkas' claims that the Taylors
failed to shield construction and that several residents are
violating the covenant that prohibits pets.6
B. The Kalenkas May Not Pursue Punitive Damages
and/or $1000 Per Day "Penalties"
The Kalenkas sought both punitive damages against the
Taylors and Dorcas Teall, and additional "assessed penalties"
against the Taylors. We affirm the trial court's dismissal of
both of these types of claimed damages.
The Kalenkas' breach of covenant claims sound in
contract, rather than tort. Punitive damages are unavailable in
a contract claim, and a contract claim cannot be transmuted into
one that gives rise to punitive damages simply by alleging that
the defendants violated the covenants "wilfully and with reckless
disregard for the Kalenkas' interest." See Lee Houston & Assocs.
v. Racine, 806 P.2d 848, 856 (Alaska 1991) ("'[P]unitive damages
are not recoverable for breach of contract unless the conduct
constituting the breach constitutes an independent tort.'")
(quoting ARCO Alaska, Inc. v. Akers, 753 P.2d 1150, 1153 (Alaska
1988)); Walt v. State, 751 P.2d 1345, 1354 (Alaska 1988)
(punitive damages unavailable because claimant "assert[ed] no
recognizable tort claims").7 Accordingly, summary judgment was
properly entered on the Kalenkas' claims for punitive damages.
The Kalenkas also seek "[a]ssessed penalties"under two
provisions of the covenants which provide:
Architectural Control and Penalty: No
construction, clearing or site grading shall
begin until the Developer has approved the
proposed construction. A penalty of $1000.00
per day shall be assessed for unapproved
construction.
Architectural Control Procedures: No
building . . . shall be constructed without
the express approval of the Developer.
Failure to obtain the Developer's approval
prior to making an improvement to the land
shall cause an Automatic Punitive Assessment
to be levied in the amount of One Thousand
Dollars ($1000) per day for each day
following commencement of construction until
the Developer [sic] approval is delivered.
(Emphasis added.)
Our analysis of this claim for "penalties" is
facilitated by the commentary to the Restatement (Second) of
Contracts 356 (1981), which states:
[T]he parties to a contract are not free
to provide a penalty for its breach. The
central objective behind the system of
contract remedies is compensatory, not
punitive. Punishment of a promisor for
having broken his promise has no
justification on either economic or other
grounds, and a term providing such a penalty
is unenforceable on grounds of public policy.
Id. 356 cmt. a.
We have voiced our agreement with the Restatement's
disapproval of punitive contractual damages, Zerbetz v. Alaska
Energy Ctr., 708 P.2d 1270, 1281 (1985), and are inclined to
disallow the "penalties"sought by the Kalenkas based on their
moniker alone. Our inclination is strengthened by the fact that
the "penalty" provisions exhibit the classic signs of
impermissible liquidated damages. Quantified contractual damages
are illegitimate
where there is no attempt to calculate
the amount of actual damages that might be
sustained in case of breach. An indication
of this lack of calculation is deemed present
when the amount of stipulated damages is the
same for a total or partial breach, or for
breach of minor or major contract provisions.
Unified Sch. Dist. No. 315 v. DeWerff, 626 P.2d 1206, 1209 (Kan.
App. 1981) (citation omitted). The penalty provisions at issue
here suffer from this failure to distinguish between different
degrees of covenant violations. As the Taylors note, "[a]n
unapproved alteration to a fence calls for the same penalty as
the unapproved construction of a building." Consequently, we
hold that, as is true regarding punitive damages, the "assessed
penalties" sought by the Kalenkas are impermissible. Summary
judgment on the damages claims is affirmed.
C. The Trial Court's Award of Attorney's Fees Should
Not Be Disturbed
On April 5, 1993, the superior court entered judgment
on the Kalenkas' covenant violation claims and awarded attorney's
fees to the defendants. The Kalenkas did not include the issue
of fees in their Statement of Points on Appeal, filed May 7. Nor
did they later amend their Points on Appeal and/or supplement the
record to include the fees issue; consequently, the record is
bereft of information on the question. They now wish to appeal
the fee award as excessive. [At. Br. 31-32]
Because they failed to properly appeal the fee award
and have offered no mitigating circumstances to explain their
failure to amend the Points on Appeal, the Kalenkas are precluded
from raising the issue here. Alaska R. App. P. 204(e); Oceanview
Homeowners Ass'n v. Quadrant Constr. & Eng'g, 680 P.2d 793, 797
(Alaska 1984) (absent mitigating circumstances, issues omitted
from Statement of Points on appeal will not be considered).8
IV. CONCLUSION
The judgment of the trial court is AFFIRMED, with the
exception of summary judgment granted against the Kalenkas'
claims that the Taylors violated the covenant requiring screening
of construction and that some residents are in violation of the
covenant prohibiting pets. Summary judgment on those two claims
is REVERSED and REMANDED to the trial court.
_______________________________
1 The residents are James and Nancy Sanders, Scott and
Barbara Shreve, Bert and Sheila Moma, and Shelby Johansen.
2 The Kalenkas also claimed that the Taylors negligently
damaged trees and vegetation on one lot and a water valve on
another. Summary judgment was not entered on these two claims,
and thus they are not before this court.
3 We will affirm summary judgment if the record fails to
disclose a genuine issue of material fact, drawing all reasonable
inferences in favor of the Kalenkas, and the defendants are
entitled to judgment as a matter of law. Dayhoff v. Temsco
Helicopters, Inc., 772 P.2d 1085, 1086 (Alaska 1989). Where, as
here, the trial court fails to specify a basis for summary
judgment, there is a presumption that it ruled in the movant's
favor on all grounds put forth. Estate of Arbow v. Alliance
Bank, 790 P.2d 1343, 1345 (Alaska 1990).
4 The relevant provisions of the covenants on building
type, with emphasis added, are
The Preamble declares the Developer's desire for a "high
quality community with attractive building designs . . .
within the duplex area and in common areas."
Article I, Section 1, "Land Use," states that every
building shall provide "sufficient parking for each and
every unit within the building."
Article I, Section 5, "Dwelling Sizes and Completion,"
provides:
Each building shall contain at least the
following areas, excluding porches, garages,
covered patios, sundecks, carports or garages:
Du-Plex - Minimum 2,400 square feet
(gross floor area); minimum of 2 bedroom
units.
No other type of building is discussed.
Article I, section 5 also requires minimum exterior
storage space "per dwelling unit."
5 The fact that the Taylors no longer owned the properties
when this lawsuit was filed is an additional reason why they
could not be charged with a violation of the landscaping
covenant.
6 We note, however, that since the Kalenkas do not live in
the subdivision and indeed did not even know of the construction
until it was nearly finished, it is difficult to see what damages
they will be able to show as a result of the Taylors' failure to
screen construction.
7 This is not a case involving the bad faith breach of an
insurance contract, where we have ruled that punitive damages are
available. State Farm Fire & Cas. Co. v. Nicholson, 777 P.2d
1152, 1156 (Alaska 1989). Additionally, while the Kalenkas'
complaint claims that the Taylors "fraudulent[ly] breach[ed]"the
covenants, they have failed to show or even allege any elements
of fraud.
8 The defendants have succeeded in dismissing the most
significant claims of covenant violation. They have also
successfully prevailed on the Kalenkas' claims for $1.5 million
in punitive damages and untold thousands in "penalties."
Consequently, our decision to reverse summary judgment on the
claims concerning the screening of construction and the
residents' pets does not alter the defendants' status as
prevailing parties. See Apex Control Sys., Inc. v. Alaska
Mechanical, Inc., 776 P.2d 310, 314 (Alaska 1989) ("A litigant
may be the prevailing party if successful with regard to the main
issue, even if the other party receives some affirmative
recovery.").
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