The Supreme Court of Utah recently denied the appeal of a group of landowners (the “Landowners”) who sought to invalidate restrictive covenants imposed on them by a homeowners’ association as violative of public policy. See Wdis v. Hi-Country Estates Homeowners Ass’n, 2022 UT 17 (Utah 2022). In the case, the HOA, encompassing approximately 2,000 acres of land, was established in 1973. The Landowners and the HOA had litigated for years over the HOA’s refusal to allow the Landowners to develop their property. In 2015, the Landowners obtained the HOA’s governing document and discovered that they were signed and recorded by Charles Lewton (“Lewton”), who owned only eight of the 2,000 acres (0.4%) he sought to include within the boundaries of the HOA, and lacked the signature of any other property owner. The Landowners sued the HOA to quiet title to their properties, and in their summary judgment motion, argued that the restrictive covenants were void ab initio and therefore incapable of ratification because they were signed only by Lewton. They based their argument on public policy reflected in such authority as the Wrongful Lien Act (“WLA”), the statute of frauds, and Utah case law, including Ockey v. Lehmer, 2008 UT 37, which directs courts to examine (1) whether the law has already declared the type of contract at issue to be “absolutely void as against public policy” and (2) whether such contract harms the general public. The trial court disagreed with the Landowners that the WLA and the statute of frauds evinced a clear public policy against the covenants and found that the covenants potentially harmed only the property owners within the HOA's purported jurisdiction and not the public as a whole. The Landowners appealed.
The Court agreed with the lower court and upheld denial of the summary judgment motion, denying the Landowners’ contention that the restrictive covenants were void ab initio, and holding that the unauthorized conveyance of a property interest was merely voidable, not void. First, the Court held that the WLA, which defines a wrongful lien as “any document that purports to create . . . [an] encumbrance on an owner’s interest in certain real property” if it is not expressly authorized by statute, authorized by a court, or “signed by . . . the owner of the real property” and directs courts to declare wrongful liens “void ab initio,” did not intend to include restrictive covenants in HOA documents, and thus did not establish public policy as to the restrictive covenants at issue. Second, the Court held that the statute of frauds did not express a clear public policy that “conveyances and encumbrances that are not signed by the owner are unlawful and absolutely void” as argued by the Landowners, holding that the purpose of the statute of frauds was merely evidentiary, and that the facts that the statute of frauds contains many exceptions weighed against the argument that the statute of frauds could declare restrictive covenants “completely void.” Third, the Court distinguished case law cited by the Landowners involving cases where courts found restrictive covenants unenforceable due to statute of frauds and stating that if the plaintiffs had wanted the land to be under the restrictive covenants, “they should have had [the owner] sign the document.” See, e.g., Gunnell v. Hurst Lumber Co., 30 Utah 2d 209 (1973). The Court noted that, in making that determination, it did not declare that the type of contract at issue was “unlawful” and “absolutely void,” and thus held that this case law suggested that the restrictive covenants were voidable, but not void. Finally, the Court rejected the Landowners argument that the restrictive covenants harmed the public as a whole because they “call into question the fundamentals upon which land ownership is based,” holding that “generally speaking, we cannot see how permitting landowners to ratify restrictive covenants violates their right to control their land.” As such, the Court upheld the denial of summary judgment, holding that “restrictive covenants that are recorded without the signature of the affected landowner are voidable, not absolutely void, and they are therefore ratifiable.”