                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                 August 16, 2011 Session

                ERIC KERNEY, ET AL. v. GARY ENDRES, ET AL.

                 Appeal from the Chancery Court for Sullivan County
                     No. K0033175     E. G. Moody, Chancellor


             No. E2010-02217-COA-R3-CV-FILED-NOVEMBER 7, 2011




This case is before us for the second time on appeal. In our first Opinion, Kerney v. Endres,
No. E2008-01476-COA-R3-CV, 2009 Tenn. App. LEXIS 408 (Tenn. Ct. App. June 30,
2009), no appl. perm. appeal filed (“Kerney I”), we found and held that defendants’ beauty
salon violated the restrictive covenants of residential use only, vacated the Trial Court’s order
to the contrary, and remanded the case for a determination of whether the restrictive
covenants had been waived. On remand, the Trial Court entered its order finding and
holding, inter alia, that the restrictive covenants of residential use only had been waived and
were unenforceable. Plaintiffs appeal the finding of waiver to this Court. We find that the
evidence preponderates against the Trial Court’s finding that the restrictive covenants had
been waived. We, therefore, reverse the Trial Court’s May 3, 2010 order.


 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed;
                                  Case Remanded


D. M ICHAEL S WINEY, J., delivered the opinion of the Court, in which H ERSCHEL P. F RANKS,
P.J., and J OHN W. M CC LARTY, J., joined.


W. Tyler Chastain, Margo J. Maxwell, and Gwendolyn M. Kerney, Knoxville, Tennessee,
for the appellants, Eric Kerney and Cassandra Kerney.

Gary Endres and Susan Endres, Kingsport, Tennessee, pro se.
                                                 OPINION

                                               Background

              Eric and Cassandra Kerney (“Plaintiffs”) and Gary and Susan Endres
(“Defendants”) are neighbors who live at the cul-de-sac end of Coralwood Drive in the
Plantation Manor Subdivision in Kingsport, Tennessee. In addition to residing on their
property, Defendants operate a beauty salon called “California Cuts” in their house on their
property.

                 Plaintiffs sued Defendants alleging that Defendants were in violation of the
restrictive covenants of residential use only. The case was tried without a jury1 . Mr. Kerney
testified at trial that he and his family moved into the subdivision in 2004. When asked if he
was aware of any businesses in the neighborhood other than Defendants’, Mr. Kerney stated:
“I was not aware of any businesses until this trial came about.… There are no to and from
businesses that I’m aware of where people are coming to and from people’s homes.” Mr.
Kerney testified that a college age individual has a lawn mowing business down the street
and another neighbor parks a vending truck at their home. With regard to the neighbor with
the vending truck, Mr. Kerney explained: “They do not work out of their home. They park
their vehicles there.” Mr. Kerney also stated that an accountant operates a business nearby,
but that business actually is located in another subdivision.

               To Mr. Kerney’s knowledge, Defendants were not running their business in
their house when he and his family moved in, but started it shortly thereafter. Mr. Kerney
testified that he voiced his objections about the beauty salon to Defendants when he first
found out about the beauty salon.

              When asked, Mr. Kerney testified that his wife does some internet work at
home in relation to their business. He stated: “She has access to our server at work. She, you
know, would see what goes on daily. Did we receive orders at the plant that day,
bookkeeping issues, and etc.”

               John Mark Masters, who lives two houses down from the cul-de-sac, and
across the street from Defendants, testified at trial. Mr. Masters has lived in the subdivision
for ten years. When asked if he was aware of any businesses other than Defendants’, Mr.
Masters stated: “The Camponovo’s son across the street has a lawn mowing business that he
keeps the lawn mower in the back yard. But that’s all that comes to mind immediately.”



       1
           In this Opinion we discuss only the evidence relevant to the issues involved in this appeal.

                                                      -2-
               Michael Peter Jaskoski, whose house is “cattycorner” to Defendants’ house,
testified that he has lived there for approximately 23 years. Mr. Jaskoski was aware of a
young boy up the street who cuts lawns, but was not aware of any other businesses in the
subdivision.

               Ms. Endres testified that her family has lived in the subdivision for twelve
years. She testified that her next-door neighbors, Acie and Star Mullins, run, refurbish, and
sell old vending trailers, and operate a jewelry business from their home. Ms. Endres also
testified that Joey Camponovo does landscaping and lawn care, and another neighbor,
Michael Peters, gives swimming lessons and has every summer for the last six years. Ms.
Endres testified about the swimming lessons stating: “Right next to [Plaintiffs’] is - - well,
he’s actually my daughter’s best friend all through high school and he runs swimming lessons
every summer for about eight weeks solid, about 20 kids or so. And I even - - I believe
[Plaintiffs] even have their daughter over there for lessons.” Ms. Endres admitted that
Michael Peters was a high school student when he started giving the lessons.

              Ms. Endres also testified about past businesses in the subdivision. She stated
that the Papugas had a daycare, but admitted that they moved out in approximately 2003.
Ms. Endres also testified that when she started her business there was an automobile detailing
business, but she admitted that this business has since moved. Ms. Endres further testified
that another neighbor ran a daycare for two years around 2002 or 2003.

              Pam Sandage, who lives directly behind Defendants, testified that she has lived
there approximately twenty-one years. Ms. Sandage’s home is in different subdivision than
the subdivision where Plaintiffs and Defendants live. Ms. Sandage testified that she has
known Susan Endres “[f]or as long as they’ve lived there.” Ms. Endres does hair for the
Sandage boys. Ms. Sandage’s oldest son is Defendants’ son’s best friend. Ms. Endres also
has done Mr. Sandage’s hair. Ms. Sandage was asked if she knew Plaintiffs, and her
response was “[u]nfortunately.”

             When asked if she is aware of any businesses on Coralwood Drive, Ms.
Sandage stated:

       The Mullins on the end of the street have a vending business that refurbishes
       vending trucks to sell. They also sell jewelry. The Papugas that live across
       from the Endres ran a daycare. Tony Evans had an automotive body shop.
       Michael Peters runs a swimming - - gives swimming lessons all summer long.
       The Camponovos have a landscaping and mowing out of their house. And the
       Holts have a CPA business.



                                             -3-
When asked further, Ms. Sandage admitted that the Evans’ business is no longer there and
the Papugas’ business is no longer there.

               After a trial, the Trial Court entered its order on June 5, 2008 finding and
holding, inter alia, that the use of Defendants’ property as a beauty shop for commercial
purposes was incidental to Defendants’ use of it for residential purposes, but that a
significant change in Defendants’ business would violate the restrictive covenants. The Trial
Court’s June 5, 2008 order enjoined Defendants from expanding the beauty shop business.

               Plaintiffs appealed the Trial Court’s June 5, 2008 order and this Court found
that Defendants’ beauty salon violated the restrictive covenants, vacated the Trial Court’s
order, and remanded the case for a determination of whether the restrictive covenants had
been waived. Upon remand, the Trial Court entered its order on May 3, 2010 finding and
holding, inter alia:

              Ms[.] Endres testified that an auto detailing business was operated on
       tax parcel 46 for two or three years; that a daycare business was operated on
       tax parcel 47 for two years; that a jewelry and vending related business has
       been operating on tax parcel 48 for several years; that the Endres’s beauty shop
       business is located on tax parcel 49; that the Plaintiff, Cassandra Kerney,
       conducts an internet related business on tax parcel 50; that a swimming
       instruction business has been operating on tax parcel 51 seasonally for six
       years and that a landscaping and lawn[-]care business has been operating on
       tax parcel 52 for several years. The Court finds that Ms. Endres’ testimony
       was corroborated by a neighbor, Pam Sandage, and the Court finds that Ms.
       Endres’ testimony was credible. The Plaintiff, Eric Kerney, admitted he knew
       about the lawn[-]mowing, vending and accounting businesses. He also
       admitted that his wife conducted an internet business in their home.

                The Court finds that the character of the neighborhood has changed to
       the extent that it has resulted in a waiver and/or an abandonment of the
       restrictive covenant of “residential use only” in view of the commercial use of
       all six tax parcels (46, 47, 48, 50, 51, and 52) surrounding the Defendants’ tax
       parcel 49, including the Plaintiffs’, and that the violations were not “sporadic
       and distant” and that the waiver and/or abandonment rose to a level of
       “community acquiescence”.

Plaintiffs filed a motion to alter or amend or for a new trial, which the Trial Court denied.
Plaintiffs appeal to this Court.



                                             -4-
                                          Discussion

               Although not stated exactly as such, Plaintiffs raise three issues on appeal: 1)
whether the Trial Court erred in not holding a new trial upon remand; 2) whether the Trial
Court erred in finding and holding that the restrictive covenants were unenforceable when
all the other property owners in the subdivision were not made parties to the suit; and 3)
whether the Trial Court erred in finding and holding that the restrictive covenants were
unenforceable due to waiver or abandonment.

               Our review is de novo upon the record, accompanied by a presumption of
correctness of the findings of fact of the trial court, unless the preponderance of the evidence
is otherwise. Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001).
A trial court's conclusions of law are subject to a de novo review with no presumption of
correctness. S. Constructors, Inc. v. Loudon County Bd. of Educ., 58 S.W.3d 706, 710 (Tenn.
2001).

              We first address whether the Trial Court erred in not holding a new trial upon
remand. In Kerney 1, this Court discussed the fact that the Trial Court had not ruled on the
issue of waiver and explained:

              We will now address the trial court’s comment that the testimony
       indicated “the character of the neighborhood has changed.” We do so in light
       of the court’s determination that “it is not necessary to rule on this issue.”
       Defendants assert that “[i]f this Court were to reverse the Trial Court on the
       issue of incidental use, then this Court would have to remand the case to the
       Trial Court for its determination on the waiver issue.” Plaintiffs argue that this
       Court should either refuse to consider the issue or treat the trial court’s
       comment as an erroneous factual finding. On this point, we must agree with
       the defendants.

              Abandonment of the restrictive covenant was clearly pleaded in
       paragraph 5 of the answer, and evidence was presented that several other
       businesses operated in the neighborhood. The trial court’s comments indicate
       that abandonment or waiver was a viable issue in the case, but the court
       stopped short of a complete analysis upon determining another issue that it saw
       as dispositive. A complete analysis would have included, at least, further
       consideration of whether or not the alleged violations rose to the level of
       “community acquiescence.” Scandlyn v. McDill Columbus Corp., 895 S.W.2d
       342, 349 (Tenn. Ct. App. 1994). Sporadic violations do not prove community
       waiver or abandonment. Id. The violations must be so pervasive “as to

                                              -5-
       frustrate the object of the scheme with the result that enforcement of the
       restriction involved would seriously impair the value of the burdened lot
       without substantially benefiting the adjoining lots.” Id. Whether there has
       been a waiver or abandonment of the restriction is a fact question. Taylor v.
       Burleson, 2002 Tenn. App. LEXIS 595, 2002 WL 1870269 (Tenn. Ct. App.,
       E.S., filed August 15, 2002). We decline plaintiffs’ invitation to decide this
       fact question before the trial court has that opportunity. See Zaharias v.
       Vassis, 789 S.W.2d 906, 911 (Tenn. Ct. App. 1989) (factual issues should be
       determined first at trial level).

Kerney 1, at **14-16.

              A portion of Plaintiffs’ argument on this issue concerns the assertion that the
parties attempted to resolve the issue but were unable to reach an agreement. Plaintiffs
appear to suggest that the Trial Court erred in not allowing them a further hearing after the
parties were unable to reach an agreement. As proof already had been presented on the issue,
as discussed above, no further hearing was required. We find no error in the Trial Court’s
allowing the parties time to attempt to reach a resolution prior to the Trial Court entering an
order, and no error in the Trial Court’s entry of an order after the parties were unable to reach
a settlement.

               As we noted in Kerney 1, the issue of waiver or abandonment was pled and
tried and the Trial Court simply had pretermitted making findings on this issue. As the issue
had been tried and just not decided, it was unnecessary to re-try the issue upon remand. As
such, we find this issue to be without merit.

               We next consider whether the Trial Court erred in finding and holding that the
restrictive covenants were unenforceable when all the other property owners in the
subdivision were not made parties to the suit. To begin, we note that this issue was not raised
until the instant appeal was filed.

              As pertinent to this issue, Tenn. R. Civ. P. 12.08 provides:

       12.08. Waiver of Defenses. – A party waives all defenses and objections
       which the party does not present either by motion as hereinbefore provided, or,
       if the party has made no motion, in the party’s answer or reply, or any
       amendments thereto, (provided, however, the defenses enumerated in 12.02(2),
       (3), (4) and (5) shall not be raised by amendment), except (1) that the defense
       of failure to state a claim upon which relief can be granted, the defense of
       failure to join an indispensable party, … may also be made by a later pleading,

                                               -6-
       if one is permitted, or by motion for judgment on the pleadings or at the trial
       on the merits, ….

Tenn. R. Civ. P. 12.08. As this Court succinctly stated in Griswold v. Income Prop., II:
“failure to join an interested or indispensable party must be raised no later than a trial on the
merits.” Griswold v. Income Prop., II, 880 S.W.2d 672, 678 (Tenn. Ct. App. 1993). Because
the issue of whether or not other property owners in the subdivision should be made parties
to the suit was not raised until well after the trial on the merits, the issue was waived.

               We now consider whether the Trial Court erred in finding and holding that the
restrictive covenants were unenforceable due to waiver or abandonment. As discussed
above, this Court noted in Kerney I, that a determination of this issue involved:

       consideration of whether or not the alleged violations rose to the level of
       “community acquiescence.” Scandlyn v. McDill Columbus Corp., 895 S.W.2d
       342, 349 (Tenn. Ct. App. 1994). Sporadic violations do not prove community
       waiver or abandonment. Id. The violations must be so pervasive “as to
       frustrate the object of the scheme with the result that enforcement of the
       restriction involved would seriously impair the value of the burdened lot
       without substantially benefiting the adjoining lots.” Id.

Kerney I, at **15-16.

              Although the Trial Court found commercial use of six surrounding parcels, the
evidence in the record on appeal reveals that the alleged commercial uses included two high
school or college age individuals who mowed lawns or gave swimming lessons, a neighbor
who parked work-related vending trucks at their property, and three past businesses, i.e., an
automobile detailing business and two day-cares, all three of which closed some time ago.
In fact, Ms. Endres herself testified that both of the day-cares closed and moved prior to
Plaintiffs moving into the subdivision.

              Given the evidence in the record now before us, we do not agree that the young
individuals who mow lawns or give swimming lessons qualify as commercial businesses
which would be violations of the restrictive covenants “so pervasive ‘as to frustrate the object
of the scheme with the result that enforcement of the restriction involved would seriously
impair the value of the burdened lot without substantially benefiting the adjoining lots.’” Id.
Nor do we agree that a neighbor who parks a work-related vehicle in a driveway meets this
standard. Furthermore, the other neighbors from the subdivision, i.e., Mr. Masters and Mr.
Jaskoski, were completely unaware of any businesses in the neighborhood other than
Defendants’ beauty shop, and the young man who mows lawns. Even taking into account

                                               -7-
the fact that the Trial Court found Ms. Endres to be credible, the testimony given by Ms.
Endres simply does not support a finding of violations sufficient to support a finding of
waiver because they were “so pervasive ‘as to frustrate the object of the scheme with the
result that enforcement of the restriction involved would seriously impair the value of the
burdened lot without substantially benefiting the adjoining lots.’” Id. The preponderance of
the evidence in the record shows sporadic and non-pervasive violations, at best, which are
insufficient to prove community waiver or abandonment.

              We also will address the Trial Court’s finding that “Plaintiff, Cassandra
Kerney, conducts an internet related business on tax parcel 50….” In their brief on appeal,
with regard to this specific finding Defendants argue:

       Plaintiffs, themselves, conducted commercial aspects of their own Internet tax
       business at their home. While Plaintiffs are quick to argue such activity is not
       relevant compared to the other neighborhood home-based businesses, the fact
       is “any commercial undertaking” means just that. In this 21 st century of cell
       phones, personal computers, Internet, Ebay and other technology, use of homes
       for business purposes and commercial undertakings is the norm and not the
       exception. They can easily involve amounts of money far greater than the
       profits of a one-chair beautician enterprise. This “outside change” to our
       society impacted and continues to impact the neighborhood at issue and our
       whole nation, and should be considered in conjunction with the several other
       businesses found by the Trial Court to exist.

               First, we are unclear as to how the Trial Court reached its finding that
“Plaintiff, Cassandra Kerney, conducts an internet related business on tax parcel 50 ….” The
evidence in the record on appeal shows only that Mr. Kerney is the self-employed owner of
a manufacturing company, which does such things as cut glass and manufacture wooden
shipping containers. Mr. Kerney’s business is located in Orebank, not in his home. When
asked if he did any work related to his business at home, Mr. Kerney stated that he did not,
but that his wife would use their home internet for “access to our server at work. She, you
know, would see what goes on daily. Did we receive orders at the plant that day,
bookkeeping issues, and etc.”

              We fail to see how this evidence that Mrs. Kerney uses their home internet
connection to look-up work related matters translates into conducting an internet related
business from the home. The evidence in the record on appeal simply does not support a
finding that Mrs. Kerney conducts an internet related business on Plaintiffs’ property.

              If we held as Defendants urge us to, then anyone who had a work-related

                                             -8-
telephone conversation on their cell phone while at home, or brought work-related papers
home to read during the evening or weekend, or used their home computer to look-up
anything work-related would be in violation of restrictive covenants for residential use only.
Such a holding would be untenable, at best. Adoption of Defendants’ position would mean
that most, if not all, restrictive convenants for residential use only in Tennessee would no
longer be enforceable. We find Defendants’ position on this issue to be without merit.

                                        Conclusion

              The judgment of the Trial Court is reversed, and this cause is remanded to the
Trial Court for collection of the costs below. The costs on appeal are assessed against the
Appellees, Gary Endres and Susan Endres.




                                                   _________________________________
                                                   D. MICHAEL SWINEY, JUDGE




                                             -9-
