Deep Water Brewing, LLC v. Fairway Resources Limited

The Kenagys (plaintiffs) purchased a restaurant overlooking a lake from Cindy Smith and her brother Robert Ahlquist. The Kenagys then leased the restaurant to their company, Deep Water Brewing, LLC (plaintiff). Jack Johnson, president of Key Development Corporation (defendant), and David Milne, president of Fairway Resources, Limited (defendant) (collectively, the defendants) wanted to develop the land between the restaurant and the lake into single-family homes. Prior to the transfer of the restaurant to the Kenagys, Ahlquist executed an easement and right-of-way agreement that (1) allowed the defendants access across the restaurant property to begin the development and (2) placed a restrictive covenant prohibiting any constructed house to obscure the view of the lake from the restaurant’s first-floor lounge. Additionally, the agreement required the establishment of a homeowners’ association (HOA) (defendant) to protect the rights of Ahlquist. Johnson named himself president of the HOA but failed to disclose the agreements to subsequent home builders. Further, Johnson permitted “maximum height levels” of homes to be built so as to obscure the view of the lake from the first-floor lounge. The Kenagys brought suit for a declaratory judgment and injunctive relief to enforce the provisions of the easement and agreement that protected their view of the lake. The Kenagys later added Michael and Patricia Taylor as defendants. The Taylors had begun construction of a two-story home, approved by Johnson and the HOA, that significantly obscured the view of the lake from the restaurant. The trial court held that the defendants breached the initial agreement with Ahlquist and that the HOA and Johnson had tortiously interfered with the agreement and imposed a judgment of $245,000 in favor of the Kenagys and Deep Water Brewing. The trial court further held that the Taylors were bona fide purchasers without notice and were therefore not liable to the Kenagys. The defendants, other than the Taylors, appealed.