OR Court of Appeals on Conversion of Golf Course to Residential Land | Davis Wright Tremaine LLP

[author: Matthew Mues]

In desirable areas of the Pacific Northwest, including Portland, Seattle, and central Oregon, land use disputes and concerns, the lack of developable properties within the limits of urban growth, and their effects on housing supply and demand and housing prices have taken center stage.1

In this context, the Oregon Court of Appeals, in a split decision, determined on December 29, 2021 that the Terms, Conditions, and Restrictions (CC&R) governing the Creekside Golf Course in Salem, Oregon, did not require as the owner of this course to maintain it in perpetuity and allowed the owner to convert the course into residential lots.2

Background to the case

Plaintiff Creekside Homeowners Association brought an action against Defendant Creekside Golf Club Operations, LLC, the course owner, and Golf Club Operations, LLC, the golf club operator, seeking a declaration that the CC&R require defendants maintain the golf course in perpetuity or that due to the marketing of the lands by the defendants as part of a “golf course community” and the reasonable expectations of the unit owners, the Association is the beneficiary of an equitable easement by estoppel or implication on the golf course that prevents its development.3

After a trial en banc, the trial court dismissed the Association’s claims and issued a declaration that the CC&Rs do not prohibit the defendants from ceasing to operate the golf course and that the plaintiff cannot prevent the defendants to develop the property for residential purposes. The Association appealed.4

The committee’s decision

In upholding the trial court’s judgment, the Court of Appeals analyzed CC&R, as a matter of law, consistent with Oregon’s approach to contract interpretation.5 That is, first, if the text of the impugned provisions in their context of the CC&R set is clear, the tribunal’s analysis ends. The court focused on a provision of CC&R, Article III, Section 4, which the court found spoke “directly to the matter”.6

This provision states that “the golf course and related facilities may be altered, expanded or contracted, abandoned or converted to other uses or sold or transferred by the owner thereof … all as further described in Article VII.”7 In the court’s view, this provision gives the defendants “plenary power” over the real estate of the golf course, including the power to remove or convert the golf course to other uses, or to sell it.8

The court reached this conclusion despite the Association’s position that Article III and Article VII, which are referred to in Article III, should be read together in the context of the document as a whole, with which the court agreed, and that, insofar as two articles are inconsistent, Article VII, which the Association considered to be the “more specific” provision, control, with which the court is not agree (both that they are incompatible and that Article VII is the most specific provision).9

Article VII, Section 1, in relevant part, stated: “Golf course. A portion of the immovable property described in Exhibit A must include the golf course and related facilities. »ten The court concluded that the Association’s interpretation “eviscerates the reserved power … under Article III, Section 4, and for this reason is not plausible”.11 The court went on to state that “Article VII is to be understood to be subject to the general authority of the declarant set forth in Article III, Section 4, and not the reverse” and that such a reading is the only “which gives meaning to both sections.”12

Since the court found that the CC&Rs did not restrict the defendants’ ability to convert the golf course into a residential development, it rejected the Association’s contention that the CC&Rs themselves created an equitable easement.13 With respect to representations regarding the golf course made by the original declarant prior to the golf course being transferred to defendant Creekside Golf Course, LLC, as successor in interest, the court – in considering the evidence ‘a request for equitable easement14— refused to examine the file de novo and make new findings, as he should do so “only in exceptional cases” and considered himself bound by the findings of the trial court if there was evidence in the record to support them.15

The court cited the trial court’s findings that the Association had failed to prove by clear and convincing evidence (a higher standard of proof than a preponderance of proof in a civil case) that its members relied on an express or implied statement that the golf course would exist in perpetuity or for a future term.16 And the court relied on the trial court’s finding that there was insufficient evidence to conclude that the defendants, as subsequent owners, had actual or implied knowledge of any equitable easement at the time of the transfers.17

Thus, the court found that the trial court’s findings were supported by the record and that the record supported its decision that the plaintiff had failed to discharge its duty to establish with clear and convincing evidence that the golf course is subject to an equitable easement, either expressed or implied.18

The dissent of the panel

Judge DeHoog, in his dissenting opinion, held that the two competing provisions of the CC&R (Article III, Section 4, and Article VII, Section 1, as well as Article VII, Section 3), considered together and in the context of the CC&R as a whole, can be construed as supporting each party’s point of view and, therefore, the CC&R is ambiguous, requiring the trial court to resolve this ambiguity in accordance with Oregon’s approach to litigation. interpretation of contracts.19

Capturing the difference in the wording of Article VII, Section 3, of the treatment of what an owner may do with the golf course, versus any related facility of the golf course, DeHoog J. noted that the word “eliminate” was “[c]conspicuously absent” from what the owner could do with respect to the “golf course”, but was included in what the owner could do with any related facilities of the golf course.20

Lessons learned

This opinion from the Court of Appeals offers valuable lessons regarding the development of CC&Rs for golf courses and similar communities, as well as guidance for interpreting and, potentially, challenging them.

FOOTNOTES

1 See, for example, the dispute between a homeowners association and the owner of a golf course in Bend, Ore.; the “huge problem” over the lack of developable land in Bend, Ore., and its effect on supply and demand and prices; and the “imbalance” of supply and demand in Portland, Ore.and same as Seattle.
2 Creekside Homeowners Association, Inc. v. Creekside Golf Course, LLC316 Or App 646, 656-59, 2021 WL 6134871 (2021).
3 Identifier. at 653.
4 Identifier.
5 Identifier. at 654, citing Yogman versus Parrott325 Or 358, 361-364, 937 P2d 1019 (1997).
6 Identifier. at 655.
7 Identifier. (emphasis added in opinion).
8 Identifier. at 656.
9 Identifier. at 650, 654-57.
ten Identifier. at 650-51, n. 3.
11 Identifier. at 656.
12 Identifier.
13 Identifier. at 658.
14 The court, citing Mountain High Homeowners Assn. against JL Ward Co.228 Or App 424, 438, 209 P3d 347 (2009), identified the following elements of a claim for equitable easement: “‘(1) [E]either an express or implied statement made in circumstances where (2) it is reasonably foreseeable that the person to whom the statement is made will rely on it, (3) that person relies on it, (4) such reliance is reasonable, and (5) the establishment of an easement is necessary to avoid injustice.'” Creekside Homeowners Association, Inc.316 Or Call 658.
15 Creekside Homeowners Association, Inc.316 Or Call 658.
16 Identifier. at 659.
17 Identifier.citing Ebbe vs. Senior Estates Golf61 Or App 398, 405, 657 P2d 696 (1983) for the premise that a “promise is binding as an equitable easement if, among other things, ‘the subsequent beneficiary [has] notice of engagement, real or implied” (in parentheses in original).
18 Creekside Homeowners Association, Inc.316 Or App at 660.
19 Identifier. at 661-62.
20 Identifier. at 663-64.

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