New Missouri Opinion on Amending Subdivision Indentures

On Wednesday, the Missouri Supreme Court issued an Opinion altering the established law regarding the procedure for amending subdivision indentures.  The case, styled as: The Trustees of Clayton Terrace v. 6 Clayton Terrace, LLC and Jeannette R. Huey, involved a dispute in which the Plaintiff/Trustees sought to prevent a Lot Owner from subdividing a two acre Lot into two separate one acre Lots consistent with the local zoning requirements.  The Trustees claimed that the Lot could not be subdivided because the Subdivision’s Indentures only permitted the construction of “one house per Lot.”  The Lot Owner, however, argued that the Lot could in fact be subdivided because, among other things, the alleged restriction was unenforceable.  The Lot Owner reasoned that because the alleged “one house per Lot” restriction was only adopted by 2/3 majority vote, rather than by the unanimous consent of all homeowners as required under the 1938 Missouri Supreme Court case of Van Deusen v. Ruth, 125 S.W.2d 1 (Mo. 1938), it could not be used to prevent the subdivision of the Lot and the construction of a new home thereon.

Importantly, the Lot Owner’s argument and rationale were in fact correct when made because in Van Deusen, the Missouri Supreme Court expressly held that the right to “amend” a subdivision’s Indentures did not include, and was not synonymous with, the right to add a new restrictions by majority vote unless the language of the Indenture expressly authorized it, which the Indentures at issue did not.  Van Deusen at 3-4.  That standard was then repeatedly echoed and applied by the Missouri Supreme Court and each of the appellate divisions for eighty years thereafter and was cited and relied-on by the State Supreme Courts of Arkansas, Iowa, Minnesota, Nebraska, Texas and Washington. See Windsong Enters. v. Upton, 233 S.W.3d 145 (Ark. 2006); In re Marriage of Carlson, 338 N.W.2d 136 (Iowa Sup.1983); In re Independent Consol. School Dist., 63 N.W.2d 543 (Minn. 1954); Boyles v. Hausmann, 517 N.W.2d 610 (Neb. 1994); Webb v. Finger Contract Supply Co., 447 S.W.2d 906 (Tex. 1969); Rodruck v. Sand Point Maintenance Com., 295 P.2d 714 (Wash. 1956).

Thus, the established law at the time of trial was that restrictive covenants could be changed at any time with the unanimous consent of all lot owners.  Pearce v. Scarcello, 920 S.W.2d 643, 645 n.3 (Mo. App. W.D. 1996); Kauffman v. Roling, 851 S.W.2d 789, 792 (Mo. App. 1993).  However, when amendments were adopted by fewer than one hundred percent of the owners, as happened in this case, the reviewing court was required to determine if the newly added restriction imposed a new or additional burden upon the affected property that did not exist prior to its adoption.  Bumm v. Olde Ivy Dev., L.L.C., 142 S.W.3d 895 (Mo. App. S.D. 2004); Hazelbaker v. County of St. Charles, 235 S.W.3d 598 (Mo. App. E.D. 2007).  If it did impose a new burden, Missouri law dictated that it must be adopted by the unanimous consent of all of the lot owners (Id.; Van Deusen v. Ruth, 125 S.W.2d 1 at 2-3 (Mo. 1938); Steve Vogli & Co. v. Lane, 405 S.W.2d 885 (Mo. banc 1966) and the failure to secure that unanimous consent rendered the new restriction invalid and unenforceable.  Hazelbaker v. County of St. Charles, 235 S.W.3d 598 (Mo. App. E.D. 2007).

By the instant Opinion, however, that is no longer the law in Missouri.  Instead, the use of the word “amend” in subdivision indentures and restrictive covenants must now be read to encompass and include the right to add additional restrictions on a homeowner’s use of their property so long as the newly imposed restriction is passed and adopted by the requisite number of affirmative votes set out in the indentures.  In so holding, the Court did not expressly overrule Van Deusen, but instead chose to greatly curtail, if not eliminate, any further reliance thereon by characterizing its reasoning as “suspect” and “unaccountably narrow” in its definition of the term, “amend.”  The Court further noted that the numerous appellate cases relying thereon, such as Jones v. Ladriere, 108 S.W.3d 736 (Mo. App. E.D. 2003); Webb v. Mullikin, 142 S.W.3d 822 (Mo. App. E.D. 2004) and Bumm v. Olde Ivy Dev., L.L.C., 142 S.W.3d 895 (Mo. App. S.D. 2004) (which contains a concise summary of the law as existed at the time), were no longer good law because they were “decided in error based on a misinterpretation and misapplication of Van Deusen.”

In so deciding, the Court has opened the door to what will undoubtedly be numerous subdivisions and home owners’ associations imposing new and additional prohibitions on an owner’s use of property—including using property as short term rentals in the form of Air-B-N-B, VRBO and other like internet based services.

The case can be found and accessed via this link: Trustees of Clayton Terrace Subdivision v. 6 Clayton Terrace, LLC, et al.

Please feel free to contact us if you have any questions concerning the Opinion or the underlying case and arguments.