Background
Chad and Lindy Steele and SRH, LLC own lots in Kentucky Lake Subdivision. The Steeles’ deed contains a covenant prohibiting commercial uses, while neither SRH’s deed nor any instrument in its chain of title contains that covenant. After SRH advertised its lots for short-term rental on VRBO, the Steeles sued for an injunction, alleging that a common development scheme imposed the commercial-use restriction throughout the subdivision.
SRH counterclaimed for abuse of process, asserting that the Steeles knew the restriction did not appear in SRH’s chain of title and filed suit to coerce SRH into stopping the rentals. The circuit court granted summary judgment to SRH on the covenant claim and later granted summary judgment to the Steeles on the counterclaim. The parties pursued consolidated cross-appeals.
The Court’s Holding
The Court of Appeals affirmed summary judgment for SRH on the Steeles’ claim. Under Oliver v. Schultz, a restrictive covenant may be enforced only when it appears in a recorded instrument that would put an ordinarily prudent attorney conducting a title search on notice. The commercial-use covenant appeared in the deeds or chains of title for 168 of the subdivision’s 174 lots, but not in SRH’s deed or chain of title, a recorded declaration of restrictions, or the subdivision plat.
The plat’s designation of one lot as “commercial” did not specifically restrict the other lots or give sufficient record notice that SRH’s lots were burdened by the covenant. The court also affirmed dismissal of SRH’s abuse-of-process counterclaim because the Steeles used the lawsuit for its stated purpose—seeking to enforce the alleged covenant and enjoin the rentals—not to obtain a collateral advantage. That the claim ultimately lacked merit did not establish an ulterior purpose or misuse of process.
Key Takeaways
- A commercial-use restriction appearing only in collateral deeds did not burden SRH’s lots when no recorded instrument in their chain of title supplied the notice required by Kentucky law.
- Labeling one subdivision lot “commercial” on a recorded plat did not, without an express restriction, impose a commercial-use covenant on the remaining lots.
- An unsuccessful lawsuit does not constitute abuse of process when the plaintiff uses the proceeding to pursue the relief for which the process was designed rather than a collateral objective.
Why It Matters
The decision underscores the importance of recorded title documents when Kentucky property owners seek to enforce subdivision restrictions. Evidence of a broad development plan or restrictions in most neighboring deeds will not necessarily bind a lot whose chain of title lacks the covenant and whose recorded plat or declaration supplies no adequate notice.
It also distinguishes a legally unsuccessful enforcement action from abuse of process: without evidence that judicial process was used to secure an improper collateral advantage, the failure of the underlying claim is insufficient.