Craig Zgabay and Tammy Zgabay v. NBRC Property Owners Association

ACCEPTED

03-14-00660-CV

4015019

THIRD COURT OF APPEALS

AUSTIN, TEXAS

2/4/2015 10:48:09 AM

JEFFREY D. KYLE

CLERK

No. 03-14-00660-CV

FILED IN

3rd COURT OF APPEALS

In The Court of Appeals For the Third AUSTIN, TEXAS

2/4/2015 10:48:09 AM

District of Texas at Austin JEFFREY D. KYLE

Clerk

CRAIG ZGABAY AND TAMMY ZGABAY,

Appellants,

v.

NBRC PROPERTY OWNERS ASSOCIATION,

Appellee.

On Appeal from the 433rd District

Court of Comal County, Texas

Trial Court Cause No. C2014-0501C

REPLY BRIEF OF APPELLANTS

J. Patrick Sutton

SBOT 24058143

1706 W. 10th Street

Austin Texas 78703

Tel. (512) 417-5903

Fax. (512) 355-4155

jpatricksutton@jpatricksuttonlaw.com

Counsel for Appellants

February 4, 2015

TABLE OF CONTENTS

INTRODUCTION ....................................................................................... 1

FACTS IN REPLY ...................................................................................... 3

ARGUMENT AND AUTHORITIES .......................................................... 4

I. "Single family" does not restrict or relate to serial residency,

occupancy, or leases................................................................................. 4

II. Multi-owner homes are equivalent to STR’s ................................... 5

III. The Zgabays didn't waive the owner-occupancy argument .......... 6

IV. The meaning of the injunction is the problem ............................... 9

CONCLUSION ......................................................................................... 10

CERTIFICATE OF SERVICE ................................................................. 11

CERTIFICATE OF COMPLIANCE ........................................................ 12

INDEX OF AUTHORITIES

Cases

Benard v. Humble, 990 S.W.2d 929 (Tex. App.—Beaumont 1999,

pet. denied) ........................................................................................... 10

McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337 (Tex.

1993) ........................................................................................................ 7

Vaughn v. Drennon, 202 S.W.3d 308 (Tex. App.-Tyler 2006) ........... 9

Wilmoth v. Wilcox, 734 S.W.2d 656 (Tex. 1987) .................................. 1

Statutes and Rules

Tex. Bus. Orgs. Code § 101.052 .............................................................. 5

Tex. Prop. Code § 92.010 ......................................................................... 5

Other Authorities

NBRC POA DCCRs, Draft 2015-1-21 .................................................... 3

ii

INTRODUCTION

Homebuyers buy into restrictive covenants. Buyers have

many choices; the variety of restrictive covenants is endless. See,

e.g., Wilmoth v. Wilcox, 734 S.W.2d 656, 658 (Tex. 1987) ("[J.B.

Overturf], his brother and a surveyor named Hodges sat around

the table and created the restrictions"). And the restrictions can

always be found and read in the county records.

Some restrictive covenants clearly and unambiguously limit

the duration of leasing so that anyone can comprehend the

limitations on their property rights. CR43, 46-47. Some restrictive

covenants regulate leasing little if at all. That is the case here,

where the covenants do not differentiate leasing and owner-

residency apart from a brief mention of signage. And though the

restrictive covenants in this case do address duration issues in

some residency-related contexts, they do not do so as regards

leasing. Appendix 0016, 0018.

The HOA and the Zgabays are in accord that the restrictive

covenants are clear and unambiguous, but the HOA's takeaway is

that the conspicuous omissions restrict the Zgabays' leasing rights.

Furthermore, that the conspicuous omissions impose, very

precisely, a minimum duration, not a maximum duration; that the

1

minimum duration has no fixed number; and that the minimum

duration applies to tenant "residents" but not to owner "residents."

In the HOA's view, not only the complete absence, but even the

conspicuous omission of lease duration restrictions, must be

interpreted against property owners.

The HOA never does address the profound question at the

heart of this case: How could the Zgabays or anyone else know that

the complete and conspicuous absence of duration limits equates to

a ban on leasing (but not owner residency) for some undefined

minimum term? Restrictive covenants exist for precisely the

purpose of telling people in readily comprehensible terms what

they can and cannot do with their land. Their land.

And restrictive covenants can readily be amended to redefine

all the use parameters, according to the collective democratic will

of the owners. All the HOA in this case had to do was get together

a community vote on the issue of short-term rentals, as it is now

trying to do belatedly. Instead its board, acting alone,

prestidigitated something from nothing and declared it the law.

2

FACTS IN REPLY

The record does not support the HOA's assertion that the

Zgabays did not read the restrictive covenants at all until after

they purchased. Brief of HOA at 1. Mr. Zgabay testified merely

that long after he bought his land and built a house on it, he read

the restrictive covenants concerning leasing restrictions. CR50.

Short-term rentals via the web didn't exist when the Zgabays

bought their land in 2000.

The Zgabays moved below to strike the HOA's affidavits

concerning alleged misbehavior by tenants, and the Zgabays

submitted evidence rebutting the HOA's allegations. CR104-105,

CR112.

The HOA recently published on its web page draft

amendments to the restrictive covenants. The draft would bar

rentals with a duration of 30 days or less. NBRC POA DCCRs,

Draft 2015-1-21 §§ 1.12(e), 3.16. 1

1Accessed Feb. 4, 2015, at:

http://riverchasepoa.org/river_chase_poa_ee/index.php?/riverchase/home_page/

3

ARGUMENT AND AUTHORITIES

I. "Single family" does not restrict or relate to serial

residency, occupancy, or leases

The HOA asserts in two places that "[e]ntering into a series

of short-term rentals with separate families (or other groups) is

not a 'single family' use." Brief of HOA at 12, 14. That is

preposterous. Investor-owners always engage in serial leasing,

whether for days, weeks, months, years, or decades at a time.

Some people purchase shares in properties precisely for serial

short-term use on the part of multiple owners, and that's

functionally equivalent to serial leases. The HOA's argument

demands the conclusion that once someone has purchased a home

and lived in it, they can never lease it to someone else; or having

leased it out once, they can never lease it out again. The HOA has

focused very narrowly on one fact pattern -- the owner-occupied,

one-owner subdivision dwelling not even implicated by this case -

- without taking into account the many ways in which property is

owned and used. Based on one narrow conception of "use" that is

nowhere accorded special status in the restrictive covenants

themselves, the HOA would literally limit a home’s use to one

single family!

This points up, again, how the HOA shies away from

4

explaining how a point on the timeline changes the character of

an ordinary family’s use of a dwelling for sleeping, eating,

brushing teeth, and watching the Super Bowl. Some deed

restrictions do declare a duration marker. Even the HOA's

proposed restrictions contain a clear minimum duration. The

current deed restrictions simply do not, and that is the crux of

this case.

II. Multi-owner homes are equivalent to STR’s

Any number of unrelated persons can be co-owners of a

home. Multiple owners can divvy up the time shares into small

increments. That can be accomplished formally by placing

ownership in an LLC, then using a detailed company agreement

to set out co-owners’ time-shares. The company agreement can

even permit shares to be transferred or conveyed. See generally,

Tex. Bus. Orgs. Code § 101.052.

Texas law restricts the maximum occupancy of leased homes

but not owner-occupied homes. Tex. Prop. Code § 92.010 (3 adults

per bedroom).

There is no functional difference between LLC-owned homes

with time-sharing co-owners and one-owner homes leased serially

to different tenants. Different paperwork is involved, but from

5

the perspective of a neighbor with concerns about traffic,

maximum occupancy, noise, or any other aspect of the human

incidents of dwelling-house habitation, both legal arrangements

involve a succession of different families moving in and out for

short terms in a furnished home. In the case of the home with

many owners, there does not even appear to be a statutory

occupancy limit as there is for a leased home, making the

arrangement potentially worse from a neighbor's perspective. The

problem with all the HOA’s arguments in this case is that they

depend upon a distinction between tenants and owners that the

restrictive covenants do not support. There are many legal ways

to address the problems caused by bothersome neighbors,

whether owners or tenants, but torturing the restrictive

covenants is not one of them.

III. The Zgabays didn't waive the owner-occupancy

argument

The HOA contends it didn't get fair notice from the Zgabays'

motion for summary judgment of the Zgabays’ contention that the

restrictive covenants do not bar short-term rentals. Brief of HOA

at 13. But there was no brief apart from the motion in this case,

which is the issue dealt with in the McConnell decision the HOA

cites. See McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d

6

337, 338 (Tex. 1993) ("This case presents the question whether

grounds for summary judgment must be expressly presented in

the motion for summary judgment itself or whether such grounds

may be presented in . . . a brief filed contemporaneously with the

motion."). Furthermore, the HOA filed a motion for summary

judgment involving all the same issues.

In any event, McConnell requires a party to “address the

cause of action” in a meaningful way so as to give fair notice what

grounds a party is asserting. 858 S.W.2d at 340 (internal citation

omitted). The grounds for the Zgabays’ case has always been that

the restrictive covenants do not impose duration limits on

leasing. Their motion for summary judgment argues their cause

of action for a declaratory judgment as to the meaning of the

restrictive covenants. It strains credulity for the HOA to assert it

was confused what the Zgabays were contending, which is the

rationale behind the rule in McConnell. Id. at 343-44. The parties

vigorously argued their respective mirror-image DJ claims in the

motions and hearing below.

There is no authority that a summary judgment motion

must refine every argument of counsel to the n th degree or

anticipate every conclusion the trial court might draw from the

7

parties' arguments. If that were so, then decisive arguments

made at hearing would be waived merely because there was no

reporter’s record.

The Zgabays raised the owner-occupancy issue in their

response to the HOA's cross-motion, if not developed to the

degree it has been on appeal. CR104. They also argued at length

that the restrictive covenants contain no duration limits, and

their arguments on appeal are extensions of those and, more

fundamentally, stem from the same few words in the contract

that have consistently been the basis for contention. The

arguments the Zgabays honed for this appeal arise as well from

the trial court's order, which either does or does not contain the

errors in logic and contract interpretation the Zgabays have

asserted. As a general proposition, it would hamstring lawyers if

they were not allowed to refine and extend on appeal the

arguments made at the trial court level. That is particularly true

here, where the bone of contention has always been, both below

and on appeal, the meaning of the contract on a narrow issue in

contention (whether short-term rentals are a residential use),

and where the record plainly demonstrates extensive argument

below on an important issue of law for which there is no clear

8

appellate precedent.

IV. The meaning of the injunction is the problem

The Zgabays have not asserted that the “reasons” for the

injunction aren’t clear. Brief of HOA at 18. They are: the trial

court agreed with the HOA that short-term rentals violate the

restrictive covenants. It’s the vagueness of the injunction that’s

objectionable. A permanent injunction “must be definite, clear,

and concise, leaving the person enjoined in no doubt about his

duties, and should not be such as would call on him for

interpretations, inferences, or conclusions.” Vaughn v. Drennon,

202 S.W.3d 308, 316 (Tex. App.-Tyler 2006). The Vaughan court

invalidated a permanent injunction because it “[was] not clear

and [did] not contain sufficient detail for the Vaughns to

determine exactly what the court want[ed] them to do.” Id. at

317.

The injunction in this case is not clear and does not contain

sufficient detail for the Zgabays to determine exactly what the

trial court wants them to do. Many restrictive covenants and

local ordinances provide a numerical definition for minimum

rental terms because owners need certainty how to avoid onerous

legal consequences. The HOA's own draft amendments to the

9

restrictive covenants make the proposed minimum rental

duration clear. Undersigned counsel has litigated cases where the

owners in the HOA mooted the STR dispute mid-stream by

amending the restrictive covenants to impose a specific minimum

duration for rentals. The restrictive covenants in this case are

full of specific numerical deadlines for various things, just not

leases. Even the Benard decision that the HOA relies upon says

90 days, which at least has the virtue of clarity. Benard v.

Humble, 990 S.W.2d 929 (Tex. App.—Beaumont 1999, pet.

denied).

The Zgabays urge this court, if it concludes that typical,

bare-bones “residential use” wording in and of itself bars short-

term rentals, to give clear guidance to the many property owners

around the state who stand to be affected.

CONCLUSION

HOA’s are, in effect, local-local government that subdivision

owners control. Restrictive covenants are mini-Constitutions that

owners pay money to live under. Courts that substitute their views

for those of the subdivision homeowners acting collectively do a

disservice to those people and their local-local democratic

processes.

10

Respectfully submitted,

/s/ JPS

J. Patrick Sutton

Texas Bar No. 24058143

1706 W. 10th Street

Austin Texas 78703

Tel. (512) 417-5903

Fax. (512) 355-4155

jpatricksutton@

jpatricksuttonlaw.com

Attorney for Appellants

CERTIFICATE OF SERVICE

I certify that on February 4, 2015, per T.R.A.P. 6.3(b), a true

and correct copy of this brief was served by efiling and email on:

Tom Newton

Allen Stein & Durbin, P.C.

6243 IH-10 West, 7th Floor

San Antonio, Texas 78201

TNewton@ASDH.com

Brian Hensley

Thompson, Coe, Cousins & Irons, L.L.P.

701 Brazos, Suite 1500

Austin, Texas 78701

Ph (512) 708-8200

Fax (512) 708-8777

BHensley@thompsoncoe.com

/s/ J. Patrick Sutton

Attorney for Plaintiffs-Appellants

11

CERTIFICATE OF COMPLIANCE

This document complies with the typeface requirements of Tex. R.

App. P. 9.4(e) because it has been prepared in Century Schoolbook

14-point for text and 12-point for footnotes. Spacing is expanded

by .6 point for clarity. This document also complies with the word-

count limitations of Tex. R. App. P. 9.4(i), if applicable, because it

contains 1880 words, excluding any parts exempted by Tex. R.

App. P. 9.4(i)(1).

/s/ J. Patrick Sutton

Attorney for Appellants

12