Introduction

This commentary examines the seminal decision in Robert and Melissa Hood, Thomas and Patricia Donovan, Bernard and Maria Jung, William and Janice Price, James and Kay Fenenga, Larry and Darlene Bailly, Greg and Deb Peters, Mark and Kitty Gustaf, and Rodney and Gina Broadwire v. Clyde and Nancy Straatmeyer (2025 S.D. 12) handed down by the Supreme Court of South Dakota on March 5, 2025. The case involves a dispute over the enforcement of a restrictive covenant within the Shadowland Ranch subdivision. The covenant, adopted in 1976, imposed limits on residential architecture and property use in the subdivision. The dispute arose when the Straatmeyers, having purchased a subdivided lot (Lot 6B), moved to construct a house with an attached three-car garage. Their project was challenged by the neighbors, who demanded that the restrictive covenant be enforced. In response, the Straatmeyers counterclaimed, arguing that the longstanding, pervasive non-enforcement of the covenant rendered it void and inequitable to enforce now.

The case presented the court with several key issues: the interpretation of specific covenant provisions, the admissibility of extrinsic evidence in resolving ambiguities, and most notably, whether the continued inaction regarding covenant enforcement by the community effectively waived the right to stringent enforcement. This decision establishes a new precedent that in cases of widespread non-compliance, equitable considerations may mandate the nullification of restrictive covenants.

Summary of the Judgment

The circuit court in Meade County had previously declared the 1976 restrictive covenant null and void, basing its decision on the evidence of extensive and unchecked violations by numerous lot owners, including some of the plaintiffs. The court reasoned that enforcing the covenant strictly would lead to an impractical and inequitable outcome, as it would unfairly penalize some property owners while others continued to flout the rules. On appeal, the Supreme Court of South Dakota affirmed the circuit court’s decision. The appellate court upheld the interpretations of the covenant’s terms—such as the meaning of “three-car garage,” “boundary of said lot,” and what constitutes a “building”—and agreed with the equitable analysis that selective enforcement was inherently unjust. Ultimately, the court declared that enforcing the covenant would be inequitable under the circumstances, thereby permanently enjoining its enforcement against all parties.

Analysis

Precedents Cited

The judgment relies on several critical precedents which shape its interpretation of restrictive covenants and equitable discretion:

• Countryside S. Homeowners Ass'n, Inc. v. Nedved – This case affirmed that a covenant represents a contractual meeting of the minds, thereby warranting the same interpretative standards as contracts. It was instrumental in framing the covenant as not subject to unilateral or sweeping change by any one party.
• HALLS v. WHITE – The court in this decision provided guidance on the principle that the construction of covenant terms must adhere to standard contractual interpretation, particularly when ambiguity is present.
• LaMore Rest. Grp., LLC v. Akers – This precedent was cited regarding the use of extrinsic evidence in interpreting an ambiguous term, such as “three-car garage.”
• Prairie Hills Water & Dev. Co. v. Gross – Quoted to reinforce that the original intention of the parties, especially that of the grantor, should guide interpretation when ambiguities arise.
• Other cases such as VAUGHN v. EGGLESTON and HAMMERQUIST v. WARBURTON were pivotal in establishing that waiver or acquiescence in enforcement may result in the loss of the right to enforce restrictive covenants.

The reliance on these precedents underpinned the appellate court’s approach by ensuring that established judicial principles were applied to the factual matrix before it.

Legal Reasoning

The court’s legal reasoning can be divided into two principal strands:

1. Interpretation of Covenant Terms:

   The court addressed several disputed interpretations:

   • Three-Car Garage Provision: Using extrinsic evidence, including testimony by Eddie Opstedal (the creator of the subdivision), the court held that the phrase “three-car garage” refers broadly to the number of vehicles rather than the physical dimensions of the garage or distinctions between attached and detached structures.
   • Boundary of Said Lot: The court dismissed the plaintiffs' argument that the boundary extended to the midpoint of a publicly dedicated road. Instead, it held that the legal boundary is the lot line, a conclusion that was supported by the deed and recordation evidence.
   • Definition of “Building”: The court determined that while the plaintiffs argued that movable structures like sheds should be excluded, many structures indeed fell under the covenant’s purview, particularly when their presence contributed to non-compliance with the boundary restriction.
   • Prohibition of Business Activities: Testimonies revealed that business-related uses led to the storage of materials or vehicles outside the primary dwelling, thereby violating the covenant’s restrictions for residential use.
2. Equitable Discretion to Void the Covenant:

   The central equitable issue was whether the covenant, subjected to long-term inattention and pervasive violations, could still be enforced selectively. The court referred to the doctrine of waiver, noting that the continuous, indifferent enforcement over decades had effectively signaled an abandonment of the covenant’s original purpose. Citing both South Dakota and out-of-state cases (e.g., Shippan Point Ass'n, Inc. v. McManus and Davis v. Canyon Creek Ests. Homeowners Ass'n), the court determined that when enforcement is inconsistent and inequitable, the covenant loses its binding force. This reasoning reflects an innovative application of equitable principles whereby strict legal obligations may be rendered moot by the conduct of the parties over time.

Impact on Future Cases

This judgment is ripe with potential implications for future property law disputes, especially regarding restrictive covenants and homeowner associations. Key impacts include:

• Precedential Value: By affirming that long-standing non-enforcement can lead to a waiver of covenant rights, this judgment guides lower courts on assessing equitable defenses in similar disputes.
• Property Developer Considerations: Developers and property owners may need to re-evaluate the enforceability of covenants that have not been uniformly applied, potentially leading to amendments or defeasance of such agreements.
• Legal Strategy for Homeowners Associations: Associations must now account for the risk of selective enforcement claims which can undermine covenant power if inconsistent enforcement patterns are evident.

Complex Concepts Simplified

Some of the legal concepts in this case may seem daunting. Here is a simplified breakdown:

• Restrictive Covenant: A contractual agreement that limits how property in a subdivision may be used. It binds property owners to specific rules (e.g., limitations on building size or the use of property).
• Equitable Discretion: The ability of a court to apply principles of fairness in deciding a case. Even if a law or agreement is clear, a court may decide not to enforce it if doing so produces unfair results.
• Doctrine of Waiver: When a party intentionally gives up the right to enforce a provision by failing to act on it over a long period, they may no longer be able to insist on its strict application later.
• Extrinsic Evidence: Outside evidence (such as testimony from someone involved in creating the covenant) used to clarify ambiguous terms in a legal document.

Conclusion

The Supreme Court of South Dakota’s decision in this case crystallizes a new legal doctrine whereby a restrictive covenant may be declared unenforceable when long-standing non-enforcement has led to an equitable abandonment of its original purpose. The judgment reinforces that while covenants are binding contracts, the equitable principles of fairness and consistency require that courts not enforce rules selectively, thereby preventing unjust results. This precedent is likely to shape future disputes over property restrictions by highlighting that substantial and prolonged waiver may nullify covenant obligations, urging property owners and homeowners associations alike to maintain uniform enforcement practices.

In summary, the decision underscores the role of equitable discretion in contract and property law and clarifies that when the original restrictions have been routinely ignored, enforcing them may do more harm than good. The ruling serves as a guiding beacon for interpreting similar enforceability issues and resolving them through a balanced blend of legal and equitable reasoning.