Sides v. Saliga

Michael Sides, Susan Sides, Bobby Sides, Gregory George,Staci George, Claudio Acosta, and Laura Acosta, Appellants v. Shon Saliga, Jani Saliga, and Garden Grove, LLC, Appellees

NO. 03-17-00732-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

June 20, 2019

FROM THE 428TH DISTRICT COURT OF HAYS COUNTY

NO. 16-1225, THE HONORABLE WILLIAM R. HENRY, JUDGE PRESIDING

MEMORANDUM OPINION

Appellants Michael Sides, Susan Sides, Bobby Sides, Gregory George, Staci George, Claudio Acosta, and Laura Acosta filed suit against appellees Shon Saliga, Jani Saliga, and Garden Grove, LLC. Appellants and the Saligas are neighbors in the same subdivision, and appellants sought declaratory and injunctive relief barring the Saligas from operating Garden Grove, a wedding and special events venue, on their property. Following a bench trial, the trial court signed a judgment in favor of the Saligas. We will reverse the final judgment and remand for further proceedings.

FACTUAL AND PROCEDURAL SUMMARY

In 2000, two large adjacent tracts of land were acquired by related entities: SGL Development, Ltd. acquired a 281-acre tract, and SGL Investments, Ltd. acquired a 577-acre tract. SGL Development and SGL Investments are both managed by SGL Management, LLC. In 2002, a Declaration of Covenants was filed, imposing restrictions on 196 acres out of the 281-acre tract owned by SGL Development. The Declaration of Covenants, however, recites that it was made by "SGL, Ltd." as Declarant, not SGL Development. At its conclusion, the Declaration recites:

DECLARANT:

SGL, LTD., a Texas limited partnership

By: SGL MANAGEMENT, LLC

The document is signed by J. Kelly Gray, as manager of SGL Management, and it was filed in Volume 1957, page 835 through 842, of the real property records of Hays County. The restrictions, among other things, provide that the property shall be used for single-family residential purposes and not for commercial uses; that trash would not be allowed to accumulate; and that firearms could not be discharged.

In 2005, the properties were sold to WFCRW, LLC, which subdivided the land and sold some of the subdivided lots to the parties herein. The relevant tracts are within the 196 acres described in the restrictive covenants. Jani Saliga bought her twelve-acre tract in March 2006, before her marriage to Shon Saliga. Because she was living in another state at the time, she closed on the property via a mail transaction, receiving a FedEx envelope of documents that were flagged for her signature, signing where indicated, and returning them via FedEx. Jani's deed, dated March 3, 2006, states, "This conveyance is made and accepted subject to the following matters, to the extent same are in effect at this time: (i) any and all restrictions, covenants, conditions and easements, if any, relating to the Property, but only to the extent they are still in effect, and shown of record in the hereinabove mentioned county and state." The closing documents included a survey of the property and a Commitment for Title Insuranceprepared by Chicago Title Insurance Company. The commitment stated that title insurance "insures you against loss resulting from certain risks to your title" and that certain risks will not be covered, specifically excluding from coverage "[t]he following restrictive covenants of record itemized below," including in that list the covenants, specifying that they were located at "Volume 1957, Page 835, Official Public Records, Hays County, Texas." The survey likewise notes that the land was subject to "restrictive covenants of record itemized below," including those located at "volume 1957, page 835."

In September 2014, the Saligas again obtained title insurance so that they could obtain financing to build their house. The new title commitment, issued by Westcor Land Title Insurance Company, did not exclude from coverage any restrictive covenants. The Saligas built their home in 2015, and in November 2015, Jani deeded the property to herself and her husband. In April 2016, the Saligas first hosted a wedding at their home, operating under the name "Garden Grove." In June 2016, appellants filed the underlying lawsuit, alleging that Garden Grove offered overnight lodging for up to thirty people and that "hundreds" of people and vehicles would attend events held at the venue. Appellants sought injunctive relief barring the Saligas from using their home as an event venue and declarations that the Saligas's property was subject to the covenants and that the operation of Garden Grove was in violation of those covenants.¹ The Saligas asserted that they were not bound by the covenants because Jani Saliga was a bona fide purchaser who had no notice of the covenants before buying the property and that appellants had waived the right to enforce the covenants by not enforcing them against other breaches in the area, including the operation of a substance-abuse-treatment facility that allows for overnight stays. They further asserted that the covenants could not be considered toencumber any of the properties because the filings were in the name of "SGL, Ltd.," as opposed to "SGL Development, Ltd."

The trial court held a bench trial in which it heard testimony by Greg Way, Robert Burton, Michael and Susan Sides, Staci and Gregory George, the Saligas, Matthew Gorman, and Patrick Chase. Greg Way is a registered professional land surveyor who did survey work for the SGL entities on the two large tracts of land. Way was asked for his opinion about whether "SGL, Limited should be SGL Development, Limited," and he answered, "There's never been an SGL anything but development or investments associated with the property management—you know, the property work itself out there. We've never done work for an SGL, Limited." For Jani Saliga's original purchase of her twelve-acre tract in 2006, Way did the survey and the field notes that describe the property and note the restrictive covenants. His company also did the new survey for the Saligas about ten years later, when they were obtaining construction financing. The new survey tracked the new title commitment and did not note any restrictive covenants. Way said, "There's one title company that deleted those. Because we're—on a survey we show the title commitment information."

Robert Burton, a real estate attorney, testified that he was hired by SGL Development to prepare the restrictive covenants in question. He testified that the "declarant name is incorrect" and should read "SGL Development comma LTD period." He testified that the field notes attached to the covenants identify the tract that includes the Saligas's property. He also testified about his experience in reviewing title insurance commitments, explaining that "the best practice is to, number one, rely on the search of the title company. Number two, to—to determine what encumbrances actually affect the property that have been filed against the property in the official public records of the county in which the property is located." Whenasked if by that he meant "you revert to the property description," Burton answered, "Yes." However, when Burton was later asked about how landowners are "indexed" with the county clerk, he said that "once you record the document it would be indexed under SGL comma LTD," not SGL Management or SGL Development. Asked if someone was "doing a grantor to grantee search using the names of the owners of the property as they appear in the chain of title, it would not pick up SGL, Limited," Burton said that he was "[n]ot sure" and that he had not "done a grantor search in a long time." However, he said, "Usually when we do one on—online it—it hits all of the similar names." He testified that he had executed an affidavit "indicat[ing] that I prepared the deed restrictions on behalf of SGL Development, Limited," to identify and correct the error. That affidavit was attached to a "Correction Instrument to: Declaration of Covenants [Rutherford Ranch]," which was filed by Staci George in the Hays County records in April 2017.

Michael Sides testified that before filing the lawsuit, he researched the real property records because the Saligas had asserted that "the restrictions weren't valid" because they had been "improperly filed." Michael said,

So I went down to the county to check it out and I found—you know, it was pretty easy. It took me ten minutes and I found the restrictions. They have a map pretty much like that. You look it up, you go on the little computer and you can pull up the restrictions.

He explained further about the process, saying that the county's office has a map of the whole county, including all the subdivisions. He found their subdivision and looked it up on the county's computer, which pulled up the restrictive covenants.

Michael went on to testify about the events held at Garden Grove since the venue opened. He said the first event involved "probably several hundred cars," a live band that started "pretty loud" but got quieter, and then a DJ that "was extremely loud . . . because they had areally bass beat." Michael testified that the music played by the DJ caused his windows to vibrate and shake and that the wedding went until past 10:00 p.m.

When he was asked about the substance-abuse-treatment facility, Michael said he was aware of the facility before the lawsuit was filed and that "my understanding of what it is is they have probably less than a dozen kids staying there that were maybe abused or—I don't know." He said that he was not aware of any complaints and that "they don't make any noise." Asked why he and others had not attempted to stop that use of property in the subdivision, Michael said, "They had eight or nine kids staying there, just like a family would, as opposed to we're talking about 500 people having parties every night. It's a little different." Michael also testified that although he had used his home address on his business filings for his construction business, he did not have clients...