Propst Bros. Dists., Inc. v. Shree Kamnath Corp.
Propst Bros. Dists., Inc. v. Shree Kamnath Corp.
Opinion
*455 I. Factual and Procedural History
Central Distributing Company sold a 6.31-acre tract of real property (the "Tract"), located in Cabarrus County, to Catawba Oil Company, Inc. ("Catawba Oil"), on 8 June 1990. The Tract was located directly northeast of the intersection of North Carolina Highway 73 and Interstate 85. Catawba Oil subdivided the Tract in February 1998, which resulted in three separate lots: Lot 1, consisting of 3.06 acres; Lot 2, consisting of 2.55 acres; and Lot 3, consisting of 0.67 acres. The Tract is bisected by a non-exclusive private right-of-way granted to a landowner whose property borders the north end of the Tract. Lots 2 and 3 are on the western side of the right-of-way, while Lot 1 is on the eastern side. Lot 3 is adjacent to Lot 2, and makes up the easterly part of the southern border of Lot 2. The southern border of Lot 3 adjoins Highway 73. The 1998 survey of the subdivision of the Tract indicates that Propst Brothers Distributors, Inc. ("Propst") owned property adjoining the western border of Lot 3 and the southern border of Lot 2 at that time.
*636 Catawba Oil conveyed the entirety of Lot 3 to Hillcrest Foods, Inc. ("Hillcrest") on 23 February 1998. The general warranty deed conveying Lot 3 to Hillcrest included two restrictive covenants (the "Deed Restrictions"):
Grantee, or Waffle House, Inc., ... or any subsequent grantee of theirs may not operate a drive-thru type food service restaurant on the real property granted by this deed so long as Grantor, or its successors, operates a drive-thru type food service restaurant in its convenience store on the tract adjacent to this property [Lot 1].
*456 No motor vehicle fuels may be sold or disposed from this real property so long as Grantor or any Grantee of Grantor sells or disposes motor vehicle fuels on [Lot 1. 1 ]
At the time Lot 3 was conveyed to Hillcrest, Catawba Oil was operating a drive-thru type restaurant in a convenience store and selling motor vehicle fuels on Lot 1. A Waffle House was built on Lot 3 and operated for a number of years. Hillcrest then conveyed Lot 3 to the North Carolina Department of Transportation ("DOT") on 2 October 2013, and a portion of the southernmost part of Lot 3 was used by DOT for a "new right of way," and a "permanent utility easement for [a] N.C. Highway Project" involving Highway 73 and I-85. At some point in time, the Waffle House building and all related structures were razed.
Catawba Oil conveyed Lot 1 to Shree Kamnath Corp. ("Shree") on 10 March 2015. Shree operates a convenience store that sells motor vehicle fuels and includes a McDonald's Corporation ("McDonald's") restaurant franchise on Lot 1.
Catawba Oil conveyed Lot 2 to Propst on 28 May 2015. Catawba Oil did not add any restrictive covenants to the general warranty deed conveying Lot 2 to Propst. DOT conveyed the remaining portion of Lot 3 to Propst on 13 June 2017-being 0.434 acres that was not used for the "Highway Project." Therefore, at the time of this action, Propst owned all of the Tract on the western side of the private right-of-way. Propst anticipated that development of Lot 2 would involve construction of a "QuickTrips" convenience store and gas station, which might include a "QT Kitchen" ("QT")-a walk-in made-to-order food service business located inside the convenience store. 2 Although the QuickTrips would be located entirely on Lot 2, a portion of Lot 3 would be used for ingress and egress, and include some parking spaces for QuickTrip's use.
Propst filed a complaint for declaratory judgment on 9 August 2017, seeking a declaration that its proposed uses of Lot 3-the construction of a driveway and parking spaces to service the QuickTrip on Lot 2-would not violate the Deed Restrictions. Shree filed an answer and *457 counterclaim on 25 September 2017 seeking a declaratory judgment that the Deed Restrictions prohibited Propst's proposed uses of Lot 3. McDonald's alleged that, as a tenant of Lot 1, it had a substantial legal interest in the proceeding, and was allowed to intervene in this action with the consent of Propst and Shree. The matter was heard on 9 October 2017. The trial court entered a declaratory judgment on 5 February 2018, ruling that the Deed Restrictions did not prohibit Propst's proposed uses of Lot 3. Shree and McDonald's appeal.
II. Standard of Review
"Our standard of review of a declaratory judgment is the same as in other cases."
Calhoun v. WHA Med. Clinic, PLLC
,
III. Shree's Appeal
Shree's sole argument is that Propst's "proposed use of Lot 3 as access and parking to serve the sale or disposal of motor vehicle fuels on Lot 2 violates the Deed Restrictions" and, therefore, the trial court erred in ruling otherwise in the declaratory judgment. We disagree.
It is undisputed that the Deed Restrictions apply to Lot 3. Therefore, our review is limited to whether the Deed Restrictions prevent the intended use of Lot 3. The Deed Restriction relevant to Shree's appeal reads as follows: "No motor vehicle fuels may be sold or disposed from [Lot 3] so long as Grantor or any Grantee of Grantor sells or disposes motor vehicle fuels on [Lot 1]" (the "Fuel Restriction"). Shree has stipulated that "[t]he intended construction on Lot 3 by Propst [ ] will only establish parking and egress for Lot 2." Therefore, the intended uses of Lot 3-parking, ingress, and egress-standing alone, do not violate the Fuel Restriction. Propst intends to sell "motor vehicle fuels" on Lot 2; however, Lot 2 is unencumbered by any restrictive covenants relevant to this appeal, and Propst is free to sell motor vehicle fuels on Lot 2.
*637
This Court is ever cognizant that determinations concerning restrictive covenants are fact specific. As our Supreme Court has made clear: "Each case must be determined on its own particular facts."
Long v. Branham
,
We first note there are two kinds of restrictive covenants that may encumber real property-"affirmative" and "negative." Our Supreme Court in
Long
,
Realty Company
, and
Starmount
, was considering "affirmative" covenants. In
Long
, the restrictive covenant provided: "[N]o lot in Timbercrest Subdivision 'shall be used
except for
residential purposes[.]' "
Long
,
While conceding the drainage system may serve a commercial purpose, [the appellant] argues that since it also serves the residential community by preventing flooding, it should be considered a residential use of the property. We find this argument unconvincing when the plain language of the covenant states: "This property shall be used for residential purposes only ." (emphasis added). The expression "shall be used for residential purposes only" is not ambiguous. As used in this covenant, the word "only" is synonymous with the word "solely" and is the same as the phrase "and nothing else."
Buie v. High Point Associates Ltd. Partnership
,
Our Supreme Court in Long held:
It is quite clear that the use or grant of a right-of-way across property restricted to residential use to reach property used for business, commercial, or other forbidden enterprises violates the restrictive covenants. Restricted property *459 cannot be made to serve a forbidden use even though the enterprise is situated on adjacent or restricted land.
Long
,
*638
Riverview Property Owners Assoc. v. Hewett
,
In the present case, the Fuel Restriction is not an "affirmative" covenant. It is a "negative" covenant, because, instead of
mandating
that Lot 3
only
be used
for
a specific purpose-e.g. "residential purposes only"-it includes a
single prohibited use
-sale of "motor vehicle fuels ... from [Lot 3]."
See
Russell v. Donaldson
,
However, Shree argues, because the intended uses of the driveway and parking spaces are to service a business that-among other things-sells "motor vehicle fuels," we should consider these intended uses of Lot 3 to be functionally equivalent to the actual sale of "motor vehicle fuels ... from [Lot 3]." We find Long , Realty Company , and Starmount inapposite, as the Fuel Restriction does not mandate that Lot 3 be used for a particular purpose that Propst's proposed use violates.
Shree also cites this Court's opinion in
Charlotte Pavilion Rd. Retail Inv., LLC v. N.C. CVS Pharmacy, LLC
,
This covenant must be construed according to the plain ordinary meaning of its words. [Appellant] CVS argues that the restrictive covenant ... prohibits the construction of a parking lot that would serve Walmart. It is CVS's position that the purpose of the restrictive covenant is to prohibit the construction of a pharmacy on the restricted parcel that would compete with CVS-this includes the prohibition of a parking lot which would serve a prohibited use. CVS notes that because the city of Charlotte's ordinance requires Walmart to provide parking for its customers, parking is integral to the store's operation and therefore falls within the purview of the restrictive covenant.
Id.
at 13-14,
In the instant case, we interpret the restrictive covenant to prohibit exactly what it purports to ban on the face of the restriction-the erection of a structure on the ... tract that operates as a prohibited type of retail store, namely a pharmacy. Thus, a developer may not build a store-four *639 walls and a roof-that constitutes a vitamin store, beauty aid store, or pharmacy. We do not believe that the intent of the grantor ... was to outlaw the construction of those things which are integral or essential to the operation of a retail business. If such prohibition was intended, the drafter could have said as much by incorporating phrases such as "used for store purposes" or "used for purposes incidental to a store." However, without more , we conclude the construction of a parking lot and access easement on the restricted property is not a prohibited use.
Id.
at 15,
*462
Hobby & Son v. Family Homes
,
There was no necessity to read any unwritten intent into the "affirmative" covenants at issue in
Long
,
Realty Company
,
Starmount
, and
Buie
in order to find violations of those covenants. "A restriction of the enjoyment of property must be created in express terms, or by plain and unmistakable implication."
Starmount
,
It is correct that "the fundamental rule is that the intention of the parties governs, and that their intention must be gathered from study and consideration of
all
the covenants contained in the instrument or instruments creating the restrictions."
Long
,
"Such restrictions will not be aided or extended by implication or enlarged by construction to affect lands not specifically described , or to grant rights to persons in whose favor it is not clearly shown such restrictions are to apply. Doubt will be resolved in favor of the unrestricted use of property , so that where the language of a restrictive covenant is capable of two constructions, the one that limits, rather than the one which extends it, should be *640 adopted, and that construction should be embraced which least restricts the free use of the land ."
We hold that there is, at a minimum, doubt concerning whether the proposed uses of Lot 3 violate the Fuel Restriction. Even assuming,
arguendo
, the Fuel Restriction can be read as prohibiting Propst's proposed uses of Lot 3, it can also be read as permitting them. Therefore, our rules of construction dictate that we hold in favor of the free use of
*463
Lot 3, and affirm the trial court.
IV. McDonald's Appeal
McDonald's argues "the trial court erred in concluding that [Propst's] proposed development does not violate the Deed Restrictions." We disagree.
The relevant restrictive covenant (the "Restaurant Restriction") states:
Grantee, or Waffle House, Inc., ... or any subsequent grantee of theirs may not operate a drive-thru type food service restaurant on [Lot 3] so long as Grantor, or its successors, operates a drive-thru type food service restaurant in its convenience store on [Lot 1].
It is undisputed that Propst is a subsequent grantee of Lot 3, that McDonald's is currently operating "a drive-thru type food service restaurant ... on [Lot 1,]" that Propst's proposed development will not include a "restaurant ... with a drive-thru type food service window" on Lot 2 or Lot 3, and that "[t]he purpose of the improvements to Lot 3 shall be an entry and exit drive and limited parking[.]" Propst intends "to improve Lots 2 and 3 such that Lot 3 will provide parking and ingress/egress for the benefit of Lot 2 and a convenience store will be constructed on Lot 2. The convenience store will not have a drive-thru type food service window," but "may use touch screens to sell made-to-order fast foods which are consumed in the car or at home" that will require customers to "exit their vehicle[s] to order and get food prepared and/or sold on Lot 2."
McDonald's argues that the language "drive-thru type food service restaurant" does not specifically limit the Restaurant Restriction to restaurants that provide actual drive-thru service. Although "the fundamental rule is that the intention of the parties governs, and that their intention must be gathered from study and consideration of
all
the covenants contained in the instrument or instruments creating the restrictions[,]"
Long
,
*464 McDonald's fundamental argument is that the Restaurant Restriction bans the operation of any fast food type restaurant on Lot 3, and that the proposed QT
is essentially a new drive-thru-type restaurant because of the way you go in, push something on the screen, get your food, you know, as you're paying for your gas and you've got that, essentially fast food restaurant exactly competitive with what McDonald's does whether it's a biscuit or the sandwich, you're getting it that same way that's different than a sit-down restaurant, it's different than a Waffle House, and our argument is it is a drive-thru-type restaurant.
Apparently, there are not tables in the QT for the purpose of eating its food in-store. We hold that the term "drive-thru type food service restaurant" is too ambiguous to prohibit the type of restaurant Propst proposes to operate on Lot 2-one in which customers must park and enter the convenience store in order to place an order, purchase, and pick up their food.
Even if we were to hold that "drive-thru type food service restaurant" could reasonably be interpreted as meaning "fast food type restaurant," and that QT is a "fast food type restaurant," McDonald's argument still fails. "[W]here the language of a restrictive covenant is capable of two constructions, the one that limits, rather than the one which extends it, should be adopted, and that construction should be embraced which least restricts the free use of the land."
V. Conclusion
Upon our
de novo
review, we hold that the trial court's findings of fact are supported by stipulation and competent evidence.
Calhoun
,
6. [T]hat the term "drive-thru type food service restaurant" [in the Restaurant Restriction] means a restaurant with a traditional drive-thru window through which food is served. ....
7. Based on the specific facts stipulated here, ... the proposed convenience store is not a "drive-thru type food service restaurant."
8. The restrictions on Lot 3 do not prohibit ... parking and ingress and egress for the benefit of Lot 2 or any other property owned by the owner of Lot 2 when Lot 2, or any other property owned by the owner of Lot 2, is used as a convenience store with no drive-thru type food service restaurant, but sells or disposes of motor vehicle fuels.
....
10. The [trial court] further concludes that the proposed convenience store to be developed on Lot 2 does not violate the restriction on the sale or disposal of motor vehicle fuels from the restricted Lot 3. [ 7 ]
This Court cannot "rewrit[e] [a] restrictive covenant to add a limitation not currently there."
Winding Ridge Homeowners Ass'n v. Joffe
,
AFFIRMED.
Judges ELMORE and ARROWOOD concur.
Judge Elmore concurred in this opinion prior to 31 December 2018.
The wording of the Deed Restrictions would also include Lot 2. However, for the purposes of this appeal we only need to consider Lot 1.
Propst's attorney informed the trial court that the exact nature of the development of Lot 2 was uncertain, stating that it was possible that "it could be just a gas station," but if the sale of made-to-order food was included, it would either be a QT, or some other arrangement that required the customer to walk into the convenience store to order and collect the food. For the sake of this appeal, we will assume the development of Lot 2 will involve a QuickTrips that both sells motor vehicle fuels and includes a QT.
Sometimes the grantor's intent, discernable from amendments or other relevant documents, may clearly demonstrate that a more restrictive meaning of "residential purposes" applies to a restrictive covenant.
See
Long
,
Shree attempts to dismiss the relevance of the "affirmative" covenant and "negative" covenant distinction by pointing out that the same rules of construction apply to both. However, the distinction lies not in what rules of construction apply, but in how the prohibited activities are defined, and in how that might impact application of the relevant rules of construction.
We recognize that, in
dicta
considering an opinion from Texas, this Court noted the Texas opinion held that a restrictive covenant banning the "
activity
" of operating a business on the encumbered property also banned that property from being used for any " 'integral part of the proposed' " business-even when the actual business was located on an adjacent lot. The Texas court further held that a parking lot was such an "integral part" of the prohibited business, and subject to the restrictive covenant.
Id.
at 14-15,
We also note that when Propst granted the roadway easement that bisects the Tract to the northerly adjacent property owner, the easement included a restrictive covenant stating the northerly adjoining property could "not be used for restaurant purposes for on site preparation, sale, and consumption of food" for a period of fifteen years. Propst was clearly capable of drafting a more expansive restrictive covenant than the one encumbering Lot 3.
In Conclusion 9., the trial court stated that if "the proposed convenience store ... qualified as a drive-thru type food service restaurant, the use of Lot 3 for parking and ingress/egress supporting the convenience store ... would clearly violate the [Restaurant R]estriction." We make no determination regarding the legal correctness of Conclusion 9., because it has not been challenged on appeal.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.