Hill v. Community of Damien of Molokai: New Mexico Supreme Court Rules Enforcement of Restrictive Covenant Violates Fair Housing Act

In Hill v. Community of Damien of Molokai, the Supreme Court, of New Mexico addressed the enforcement of a restrictive covenant against a group home for individuals with AIDS. The court held: (1) the current use constituted a residential use by a single family, and (2) enforcement of the covenant would violate the Fair Housing Act (FHA) through disparate impact and failure to make a reasonable accommodation.

The Community of Damien (COD) was a nonprofit corporation that provided homes for people with AIDS and other terminal illnesses. COD established a group home in the Four Hills Village subdivision of Albuquerque. The four residents who moved into the home were unrelated, suffered from AIDS, and required some degree of in-home nursing care. Hill was a neighbor of the group home. Shortly after the group home opened, Hill and other neighbors began noticing an increase in traffic going to and from the home. The neighbors felt that the use of the home violated a restrictive covenant stating regarding single-family use.

The neighbors filed for an injunction to enforce the covenant and to prevent further use as a group home. The trial court held that the restrictive covenant prevented the use of the house as a group home and issued a permanent injunction. COD appealed the order based on an improper interpretation of the covenant and the application of the FHA. The state supreme court granted a stay of the injunction pending appeal.

The Court noted that if the language of a restrictive covenant is unclear or ambiguous, it would resolve it in favor of the free enjoyment of the property and against restrictions. The covenant in question stated: "No lot shall ever be used for any purpose other than single family residence purposes." Regarding the residence requirement, the supreme court rejected the trial court's finding that the use was more commercial than residential. Rather, it found that group homes are designed to provide individuals with a traditional family structure, setting, and atmosphere. For these reasons, it concluded that the group home was unlike a boarding house, hostel, or institution, and held that it met the residential requirement.

Regarding the single-family use requirement, the Supreme Court of New Mexico stated that "the word 'family' is not defined in the restrictive covenant and nothing in the covenant suggests that it was the intent of the framers to limit the term to a discrete family unit comprised only of individuals related by blood or by law." It found the term ambiguous and resolved the restriction in favor of the free enjoyment of the property. In support of the expanded definition of "family," the court cited the Albuquerque Municipal Zoning Ordinance, the Fair Housing Act, and the state Developmental Disabilities Act. It also quoted, Open Door Alcoholism, Inc. v. Board of Adjustment 200 N.J. Super. 191, 491 A.2d 17 (N.J. Super. Ct. App. Div. 1985), which stated: '[t]he controlling factor in considering whether a group of unrelated individuals living together as a single housekeeping unit constitutes a family. . . is whether the residents bear the generic character of a relatively permanent functioning family unit." The court found that the COD residents operated as a family unit by providing moral support and guidance for each other and creating an environment that assisted them in living with their disease. It also found that the home exhibited the kind of stability, permanency, and functional lifestyle which was equivalent to that of the traditional family unit.

The Court also addressed the applicability of the FHA, which prohibits the enforcement of restrictive covenants that discriminate or have the effect of discriminating on the basis of handicap. Three FHA provisions were raised on appeal: (1) discriminatory intent; (2) disparate impact; and (3) failure to make a reasonable accommodation. Regarding the first, the court noted that discriminatory intent claims focus on whether a defendant has treated handicapped individuals differently from other similarly situated individuals. To prevail, a plaintiff must show that the handicap of the residents was in some part the basis for the policy being challenged. The court found that the evidence produced by the plaintiffs did not meet this burden.

Regarding the disparate impact claim, the court noted that the plaintiffs must show that "the defendants conduct actually or predictably results in discrimination or has a discriminatory effect." The court addressed four factors to consider: (1) the strength of the plaintiffs showing of discriminatory impact; (2) evidence of discriminatory intent; (3) the defendant's interest in taking the challenged action; and (4) whether plaintiff is seeking to compel defendant to affirmatively provide housing to the handicapped or merely to restrain the defendant from interfering with individual landowners who wish to provide this housing. The court concluded that enforcement of the covenant as interpreted by the neighbors would violate the FHA. It also found that the factors weighed in favor of COD, as a covenant that restricts occupancy only to related individuals or that bars group homes has a disparate impact not only on the current residents, but also on all disabled individuals who need congregate living arrangements in order to live in traditional neighborhoods and communities.

The Court noted that "discrimination includes a refusal to make reasonable accommodations in rules when such accommodations may be necessary to afford a handicapped person equal opportunity to use and enjoy a dwelling." An accommodation is reasonable (1) if it does not require a fundamental alteration in the nature of the restrictions, or (2) if it does not impose undue financial or administrative burden on the defendant. The court found that the underlying purpose of the covenant was to regulate structural appearance and to prevent commercial uses. It also found that no undue hardship was imposed by waiving the covenant. For these reasons, the court found that the reasonable accommodation requirement of the FHA precluded enforcement of the covenant.

Hill v. Community of Damien of Molokai, 121 N.M. 353, 911 P.2d 861(1996).

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