El Di, Inc. v. Town of Bethany Beach

Facts

El Di bought the Holiday House, a restaurant in Bethany Beach, in 1969. The chain of title for the lot included restrictive covenants that barred the sale of alcoholic beverages and nonresidential construction. The same restrictions were placed on Bethany Beach property as early as 1900 and 1901, when the area was first developed as a quiet beach community. The Town was incorporated in 1909 with 750 acres, and only 15 percent of it stayed subject to the covenants. Commercial development began in the 1920's on restricted property. Of the 34 commercial buildings in the Town, 29 stood in the original development, called the old-Town. In 1952 the Town zoned part of the old-Town, including the Holiday House lot, as a central commercial district called C-l. Patrons had long been allowed to bring their own liquor into restaurants there, known as "brown-bagging." Alcohol was also sold at nearby licensed places, including a package store some 200-300 yards from the Holiday House. In December 1981 El Di applied for a state license to sell alcohol, hoping to control excessive use and use by minors. On April 15, 1982 the state commission granted an on-premises license, and sales began within 10 days.

Issues

1. Did conditions in Bethany Beach change so much since the covenants were imposed that a court should refuse to enforce the covenant barring the sale of alcoholic beverages on the Holiday House lot?
2. Can a court find such a change in only the part of the restricted area that is now zoned commercial, without finding a change in the entire restricted area?

Holding

The change in the character of the old-Town area zoned C-l was so substantial that it was unreasonable and inequitable to enforce the covenant against El Di's alcohol sales. The Court reversed the injunction and confined its judgment to that commercial area.