## Facts

- A beach development was originally planned as a quiet, family-oriented resort, and many lots were burdened by recorded restrictive covenants limiting use to residential cottages and prohibiting the sale of alcoholic beverages.
- Over time, the town expanded well beyond the original development, and commercial activity and tourism increased substantially, including within areas once treated as residential-only.
- El Di, Inc. bought and operated the “Holiday House” restaurant within the restricted area.
- Before licensing, the restaurant allowed patrons to bring their own alcohol (“brown-bagging”), and alcohol was readily obtainable nearby; the covenant barred sale, not consumption.
- El Di obtained a state on-premises alcohol license after a finding of public need and convenience and began selling alcohol.
- The town and other plaintiffs sued for a permanent injunction to enforce the covenant’s alcohol-sale prohibition.
- The Court of Chancery granted the injunction, reasoning that Bethany Beach’s basic character as a quiet, family resort had not changed.
- El Di appealed.

## Issues

1. Whether a restrictive covenant prohibiting alcohol sales should be enforced by injunction when the neighborhood’s character and uses have changed substantially since the covenant’s creation.
2. Whether changed conditions have so reduced or eliminated the covenant’s intended benefits that equity should deny enforcement.

## Decision

- The Delaware Supreme Court reversed the injunction.
- The court held that a fundamental change had occurred in the neighborhood’s intended character, and the covenant’s original purpose could no longer be effectively achieved.
- Because the restriction no longer conferred a substantial benefit on owners of the restricted parcels, equity would not enforce it to bar El Di’s alcohol sales.
- A dissent would have affirmed, emphasizing reliance interests in recorded restrictions and disputing that conditions had changed enough to defeat enforcement.

## Legal Principles

- A restrictive covenant may be denied equitable enforcement when changed conditions have fundamentally altered the neighborhood so that the covenant’s intended benefits are no longer capable of meaningful enjoyment.
- In deciding whether to enjoin conduct as a covenant violation, courts assess the covenant’s original purpose, current neighborhood conditions, and whether enforcement would still provide a substantial benefit to those entitled to enforce the restriction.
- Even when a restriction remains textually applicable, injunctive relief may be refused if enforcement would be inequitable because the restriction has become functionally ineffective in serving its original objective.

## Conclusion

The court declined to enforce an alcohol-sale restriction by injunction because commercialization and related changes had fundamentally altered the community, leaving the covenant without a substantial remaining benefit to landowners and making equitable enforcement inappropriate.


El Di, Inc. v. Town of Bethany Beach, 477 A.2d 1066 (Del. 1984)