Facts
- Cindy Smith and Robert Ahlquist owned the Cosina del Lago Restaurant overlooking Lake Chelan; the dining room was on the second floor and the lounge on the first floor.
- An apple orchard tract lay between the restaurant and the lake; developers wanted to subdivide the orchard for single-family homes and needed access across the restaurant parcel.
- Before the restaurant was sold to later owners, Ahlquist executed an easement and right-of-way agreement (labeled “Do Not Record Agreement”) granting access across the restaurant property.
- In exchange, the developers agreed to protect the restaurant’s lake view by establishing and monitoring building covenants so that no homes or structures in the development would interfere with the view from the restaurant and its first-floor lounge.
- The agreement also required creation of a homeowners association (HOA) to protect Ahlquist’s rights under the agreement.
- Jack Johnson (associated with the development entities) made himself president of the HOA, did not disclose the agreement to later home builders, and allowed “maximum height levels” for homes that obstructed the view protected by the agreement.
- The Kenagys purchased the restaurant from Smith and Ahlquist and leased it to their company, Deep Water Brewing, LLC.
- As construction progressed, including a two-story home begun by Michael and Patricia Taylor, the Kenagys and Deep Water Brewing sued to enforce the view protections and sought declaratory and injunctive relief and damages.
- After a bench trial, the trial court ruled that the developer defendants breached the agreement and that the HOA and Johnson tortiously interfered with it, awarding approximately $245,000 (including damages and attorney fees) to the Kenagys and Deep Water Brewing.
- The trial court also ruled the Taylors were bona fide purchasers without notice of the unrecorded agreement and therefore not liable; the defendants other than the Taylors appealed.
Issues
- Whether the view-protection/height-limitation covenant in the easement/right-of-way agreement was enforceable by successors as a covenant running with the land.
- Whether the developer defendants breached the agreement by failing to establish and monitor building covenants that preserved the restaurant’s lake view.
- Whether the HOA and its president, Johnson, were liable for tortious interference by approving or allowing construction that obstructed the protected view.
- Whether the Taylors were bona fide purchasers without notice of the covenant and thus not subject to liability for violating it.
- Whether the trial court’s attorney-fee and cost award was supported by adequate findings for appellate review.
Decision
- The Court of Appeals held the restaurant owner could enforce the view-protection covenant as one that runs with the land.
- The court affirmed the trial court’s determination that the developer defendants breached the agreement by failing to implement and monitor effective covenants preventing view obstruction.
- The court affirmed tortious-interference liability against the HOA and Johnson based on their knowing actions that frustrated the agreement’s protections.
- The court left intact the ruling that the Taylors were bona fide purchasers without notice and therefore not liable; it also affirmed denial of attorney fees to the Taylors.
- The court affirmed the judgment and damages in substance but remanded for the trial court to revisit attorney fees and enter the necessary findings and conclusions to support any fee and cost award.
Legal Principles
- A covenant runs with the land when it is enforceable between the original parties, touches and concerns the land, the parties intended it to bind successors, and the required privity is present.
- A restriction aimed at preventing buildings from blocking a specified view can touch and concern land because it limits the use of the burdened parcels and protects the use and value of the benefited parcel.
- Successors to the benefited property may enforce a covenant that was written and negotiated as part of a land-related exchange and intended to continue beyond the original parties.
- Tortious interference with a contractual relationship may be shown where a defendant knew of the contract, intentionally interfered without justification, and caused resulting damage.
- A purchaser without actual or constructive notice of an unrecorded restriction may take free of it; whether a buyer is a bona fide purchaser can limit remedies against that buyer.
- Attorney-fee awards must be supported by sufficient documentation and trial-court findings to permit meaningful appellate review; absent adequate findings, remand is appropriate.
Conclusion
The Washington Court of Appeals treated the lake-view protection language in the unrecorded easement/right-of-way agreement as a covenant running with the land that the restaurant’s later owners (and their tenant, Deep Water Brewing) could enforce, affirmed breach and tortious-interference liability against the developer-related defendants and the HOA leadership, preserved the Taylors’ bona fide purchaser protection, and remanded only for proper findings to support any attorney-fee and cost award.