Scioto Props. SP-16, LLC v. Graf

349 So.3d 172

SCIOTO PROPERTIES SP-16, LLC, and Brandi's Hope Community Services, LLC

v.Andy GRAF and Sheryl Graf

NO. 2021-CA-00525-SCT

Supreme Court of Mississippi.

October 13, 2022

ATTORNEYS FOR APPELLANTS: MARJORIE SELBY SELF, WILLIAM HOLCOMB HUSSEY, Jackson

ATTORNEYS FOR APPELLEES: MARGARET SAMS GRATZ, MICHAEL B. GRATZ, JR., Tupelo

BEFORE KING, P.J., MAXWELL AND GRIFFIS, JJ.

MAXWELL, JUSTICE, FOR THE COURT:

¶1. The issue in this appeal is straightforward—does Brandi's Hope Community Services, LLC, a for-profit business that provides residential support services and leases a home in The Grove subdivision in Tupelo, use the home commercially in violation of The Grove's protective covenants?

¶2. To answer this question, Brandi's Hope asks this Court to focus on how its sublessees—four disabled men—use the home as their residence. And it insists the fact these men receive round-the-clock residential support services from Brandi's Hope does not change the residential character of the men's use.

¶3. But under the undisputed facts, Brandi's Hope does not merely come to the home to provide services. Brandi's Hope is a business that leases the home for the express purpose of providing residential home services for which it is paid. Further, the sublease with the tenants requires each man to exclusively use Brandi's Hope as their residential-support-services provider. And should they choose to terminate Brandi's Hope's services, they can no longer live in the home.

¶4. In other words, any residential use by the sublessees is conditioned on and preceded by Brandi's Hope's commercial use of the property—and not the other way around. Thus, the chancery court did not err by declaring that Brandi's Hope's commercial use violated the clear and unambiguous intent of the protective covenants. We affirm.

The Protective Covenants

¶5. In 2016, Scioto Properties SP-16, LLC, purchased the residence on Lot 62 in The Grove. Scioto is a for-profit limited-liability company based in Ohio. Scioto specializes in helping individuals with developmental and/or physical disabilities to find residential housing. Under the express terms of the warranty deed, Scioto agreed to abide by any and all protective covenants.

¶6. Mississippi courts generally do not favor covenants restricting the use of real property, which "are subject more or less to a strict construction[.]" Kemp v. Lake Serene Prop. Owners Ass'n, Inc. , 256 So. 2d 924, 926 (Miss. 1971), abrogated on other grounds by Tideway Oil Programs, Inc. v. Serio , 431 So. 2d 454 (Miss. 1983). But neither will courts disregard the clear and unambiguous working of a restrictive covenant "merely because a use is prohibited or restricted." Andrews v. Lake Serene Prop. Owners Ass'n , 434 So. 2d 1328, 1331 (Miss. 1983). "If the intent to prohibit or restrict [is] expressed in clear and unambiguous wording, enforcement is available in the courts of this state." Id.

¶7. Here, the covenants clearly and unambiguously express the intent to prohibit commercial use of the property. It is clearly not allowed:

Only one single family residence shall be constructed or permitted on each lot and it shall be used for residence purposes only.

The term "residence purposes" shall generally be defined as single family homes, and shall exclude all commercial and professional uses , and among other things, garage apartments, apartment houses, duplex and multi-family residences, profit or non-profit, nursing homes, hospitals and other similar private or charitable enterprises , and any and all such usages of this property is hereby expressly prohibited.

(Emphasis added.)

The Lease and Sublease

¶8. Despite the covenants’ clear prohibition of commercial and professional use, Scioto leased the home on Lot 62 to Brandi's Hope in June 2017. Brandi's Hope is a for-profit Mississippi limited-liability company that provides services to individuals with developmental and/or physical disabilities. A condition of the lease with Scioto was that Brandi's Hope agreed to use the home on Lot 62 "solely to provide residential support services" to the residents living in the home.

¶9. In October 2017, Brandi's Hope entered into four separate subleases with four individuals. These subleases were for separate private bedrooms within the house along with the right to use the common areas of the house.

¶10. As a condition of living in the home, each disabled individual agreed to exclusively use Brandi's Hope's residential support services. These services include helping these men dress, maintain proper hygiene, and prepare meals. While no Brandi's Hope employee lives with the clients, Brandi's Hope employees provided around-the-clock care, taking turns tending to clients overnight. Brandi's Hope is compensated for its services by the Mississippi Department of Medicaid.

¶11. While the subleases "acknowledge[d] that all individuals have a choice in the provider of all services, including residential support services, and that [sublessees] may choose to terminate the provision of residential support services by Brandi's Hope Community Services, LLC at any time," the subleases expressly "provided that this Agreement and any occupancy and use rights in and of these premises shall be terminated effective upon the termination of residential support services provided by Brandi's Hope Community Services, LLC." (Emphasis added.)

¶12. In short, the men were required to use Brandi's Hope to live in the home.

The Declaratory Judgment Action

¶13. Soon after the four individuals moved in, the owners of the residence directly across the street, Andy and Sheryl Graf, filed a complaint in the Chancery Court of Lee County against Scioto and Brandi's Hope.¹ The Grafs alleged the residence on Lot 62 was being used for business purposes, which violated the protective covenants. The Grafs sought a declaratory judgment and injunctive relief.

¶14. Notably, the Grafs did not name the individuals subleasing rooms from Brandi's Hope as defendants. And none have participated in this litigation.

¶15. Something else that is not part of this litigation is Brandi's Hope claim that the Grafs’ enforcement action violates the Federal Fair Housing Act (FHA). Instead of raising an FHA defense to the Grafs’ chancery-court complaint, Brandi's Hope elected to file a separate action in federal court. Brandi's Hope Cmty. Servs., LLC v. Graf , No. 1:18-CV-00022-NBB-RP, 2018 WL 3520126 (N.D. Miss. July 20, 2018). That federal litigation has been stayed pending completion of this state-court case. Id. at *3.

¶16. Thus, the only issue before the chancery court was whether Scioto and Brandi's Hope's use of the property violated the protective covenant expressly prohibiting commercial use.

¶17. Scioto and Brandi's Hope sought summary judgment on this issue, which the chancery court denied following a hearing.

¶18. The Grafs, Scioto, and Brandi's Hope then submitted to the chancery court a joint stipulation of facts. Based on this additional evidence, the Grafs renewed their request for a declaratory judgment. And the chancery court, having been advised no further hearing was necessary, granted their motion.

¶19. The chancellor concluded Scioto's and Brandi's Hope's use of the property was commercial and thus prohibited by the protective covenants. The chancery court was persuaded by the terms of lease between Scioto and Brandi's Hope, which contemplated Brandi's Hope would conduct its business in the residence. It considered the lease in conjunction with the subleases between Brandi's Hope and the four individuals, which required these individuals to use Brandi's Hope as their exclusive round-the-clock service provider. Further, the joint stipulation of facts established Brandi's Hope had in fact been conducting the activities in the home for its sublessees as contemplated by the lease with Scioto. Specifically, the chancery court concluded that it was "[t]he merging of the foregoing arrangements and activity [that] falls within the expressly prohibited uses of property within The Grove."

Scope of Appeal and Standard of Review

¶20. Scioto and Brandi's Hope have appealed both the order denying their motion for summary judgment and the final order entering a declaratory judgment in favor of the Grafs. But the only reviewable ruling before this Court is the grant of the declaratory judgment.

¶21. Recently, this Court "adopt[ed] the general rule that, once a case has been tried, a pretrial order denying summary judgment will not be reviewed on appeal." City of Jackson v. Johnson , 343 So. 3d 356, 367 (Miss. 2022). Here, there was no subsequent trial. But the parties did submit additional evidence to the chancellor before asking her to make a final ruling. So Johnson ’s principle applies. This Court will not review "two different sets of evidence"—the evidence presented to the trial court when it denied the motion for summary judgment and the evidence presented at trial. Id. (quoting Franklin Collection Serv. Inc. v. Collins , 206 So. 3d 1282, 1284 (Miss. Ct. App. 2016) ). Instead, "[w]hen in due course the final trial is had on the merits it becomes the best test of the rights of the movant." Id. (quoting Collins , 206 So. 3d at 1285 ).

¶22. For this reason, we address only Scioto and Brandi's Hope's claim that the chancellor erred by granting the Grafs’ motion for declaratory judgment. We review that ruling de novo. Pre-Paid Legal Servs. v. Battle , 873 So. 2d 79, 82 (Miss. 2004).

Discussion

¶23. In addressing Scioto and Brandi's Hope's claim, we begin by emphasizing what this case is not about.

¶24. First, this case is not about whether four unrelated disabled men living in a house together meets the definition of a "single-family home." Scioto and Brandi's Hope claim the chancellor erroneously ignored several cases from other jurisdictions that have concluded such an arrangement does not violate single-family home restrictions.² But the Grafs have never argued the four men's living in the home per se violated the...