Craig Tracts Homeowners' Ass'n, Inc. v. Brown Drake, LLC

• Decision Date: 08 December 2020
• Docket Number: DA 20-0214
• Citation: 402 Mont. 223,477 P.3d 283,2020 MT 305
• Parties: CRAIG TRACTS HOMEOWNERS’ ASSOCIATION, INC., Tara J. Chapman & Matthew B. Losey, Donald C. and Beverly A. Friend, Robert J. & Andrea E. Maricich Family Trust, Mickelson Investments, LLC, Sallie A. Losey, Hemingway Patrick & Carol T. Revocable Living Trust, Plaintiffs and Appellants, v. BROWN DRAKE, LLC, Defendant and Appellee.
• Court: Montana Supreme Court

402 Mont. 223

477 P.3d 283

2020 MT 305

CRAIG TRACTS HOMEOWNERS’ ASSOCIATION, INC., Tara J. Chapman & Matthew B. Losey, Donald C. and Beverly A. Friend, Robert J. & Andrea E. Maricich Family Trust, Mickelson Investments, LLC, Sallie A. Losey, Hemingway Patrick & Carol T. Revocable Living Trust, Plaintiffs and Appellants,

v.BROWN DRAKE, LLC, Defendant and Appellee.

DA 20-0214

Supreme Court of Montana.

Submitted on Briefs: October 28, 2020

Decided: December 8, 2020

For Appellants: Dave Dalthorp, Scott Svee, Jackson, Murdo & Grant, P.C., Helena, Montana

For Appellee: Reid J. Perkins, Worden Thane P.C., Missoula, Montana

For Amicus Curiae Community Association Institute: Alanah Griffith, Patrick Tillisch, Griffith & Cummings, PLLC, Big Sky, Montana

For Amicus Curiae Steven and Gayle Muggli: Afton E. Ball, Stephanie Baucus, Moulton Bellingham PC, Billings, Montana

Chief Justice Mike McGrath delivered the Opinion of the Court.

¶1 Plaintiffs appeal a First Judicial District Court ruling on cross motions for summary judgment in favor of defendant Brown Drake, LLC. We affirm.

¶2 We restate the issue on appeal as follows:

Whether the District Court erred in determining that Brown Drake, LLC's operation of the Brown Drake Lodge violated the Amended Covenant's requirement that the property be "used for residential purposes only."

FACTUAL AND PROCEDURAL BACKGROUND

¶3 Brown Drake, LLC (Brown Drake) consists of four individuals and owns a fishing lodge on the Missouri River known as the Brown Drake Lodge (the Lodge). Brown Drake's owners built the Lodge in 2017 with fly anglers in mind. The Lodge is on property that is part of the Craig Tracts Homeowners’ Association (HOA). A restrictive covenant (Original Covenants) recorded on July 13, 1983, restricted the property as follows:

USE FOR RESIDENCE ONLY: The above described real property ... shall be used for residential purposes only.

There shall be no use of the real property or any building constructed thereon for commercial or business use or for the use of a motel, hotel or apartment house, except for professional occupations.

¶4 The Original Covenants were amended on September 29, 1984 (Amended Covenants), deleting the reference to commercial, business, or hotel/motel/apartment house uses such that it simply reads: "USE FOR RESIDENCE ONLY: The above described real property ... shall be used for residential purposes only." The Amended Covenants were in effect at the time Brown Drake purchased the property. While a member of Brown Drake was undertaking this purchase, a real estate agent informed the individual that at least one other home in the area subject to the HOA had previously been used for a short-term rental at various times. The Brown Drake member went forward with the purchase with the expectation that Brown Drake would use the property in a similar manner.

¶5 Brown Drake advertises short term stays at the Lodge on a website and a Facebook page. A local flyfishing shop also advertises the Lodge and does all of the Lodge's booking. A stay at the Lodge costs $650 per night, plus a seven percent lodging tax and a three percent sales tax. The Lodge is licensed and insured as a "tourist home" under Montana law. See § 50-51-102(12), MCA. According to Brown Drake, those who stay at the Lodge spend their time doing various activities including: bathing; showering; grooming; dressing; sleeping; cooking; preparing, eating, and cleaning up after meals; talking; rearing children; watching television; enjoying the scenery; playing; using the bathroom; maintaining hygiene; sitting and relaxing; walking; entertaining; browsing the internet and social media; reading; sheltering; and to "couple." For approximately eight or nine months out of the year, the owners of Brown Drake stay at the property, on and off, when the Lodge is not occupied by paying members of the public.

¶6 On December 28, 2018, the plaintiffs (collectively, "the HOA") commenced this action for injunctive and declaratory relief against Brown Drake, alleging that the operation of the Lodge violated the Amended Covenants’ requirement that property be "used for residential purposes only." After both parties moved for summary judgment, the District Court issued a March 10, 2020 order ruling in favor of Brown Drake. This appeal followed.

STANDARD OF REVIEW

¶7 A district court's interpretation of a restrictive covenant is a conclusion of law which the Montana Supreme Court reviews for correctness. Czajkowski v. Meyers , 2007 MT 292, ¶ 21, 339 Mont. 503, 172 P.3d 94 (citation omitted). We review a district court's summary judgment ruling de novo. Bardsley v. Pluger , 2015 MT 301, ¶ 11, 381 Mont. 284, 358 P.3d 907 (citation omitted).

DISCUSSION

¶8 Issue: Whether the District Court erred in determining that Brown Drake, LLC's operation of the Brown Drake Lodge violated the Amended Covenant's requirement that the property be "used for residential purposes only."

¶9 The HOA challenges the District Court's conclusion that the Lodge's use complies with the Amended Covenants and grant of summary judgment. Summary judgment is appropriate when there is "no genuine issue as to any material fact" and the party "is entitled to judgment as a matter of law." M. R. Civ. P. 56(c)(3). Restrictive covenants, like contracts, are interpreted to ascertain the intention of the parties. Creveling v. Ingold , 2006 MT 57, ¶ 8, 331 Mont. 322, 132 P.3d 531 (citations omitted). Where language is clear and explicit, the Court will apply the language as written. Creveling , ¶ 8. The language should be interpreted according to its ordinary and popular meaning. Creveling , ¶10 The Court will construe restrictive covenants strictly and resolve ambiguities in favor of free use of property. Czajkowski , ¶ 21 (citation omitted). We will consider evidence extrinsic to the language of the restrictive covenant itself if an ambiguity is found. See Creveling , ¶ 9. Ambiguity is a question of law for the Court to determine and exists where the language, as a whole, is subject to two different reasonable interpretations. Czajkowski , ¶ 21. The simple presence of a dispute among the parties is insufficient to establish an ambiguity. Creveling , ¶ 8 (citations omitted).

¶10 What appears to be the majority of other jurisdictions to have considered this issue have found that "residential purposes" provisions do not prohibit short term rentals. See Santa Monica Beach Prop. Owners Ass'n v. Acord , 219 So.3d 111, 114 (Fla. Ct. App. 2017) ; Houston v. Wilson Mesa Ranch Homeowners Ass'n , 360 P.3d 255 (Colo. Ct. App. 2015) ; Wilkinson v. Chiwawa Communities Ass'n , 180 Wash.2d 241, 327 P.3d 614 (2014) (en banc); Estates at Desert Ridge Trails Homeowners’ Ass'n v. Vazquez , 300 P.3d 736 (N.M. Ct. App. 2013) ; Slaby v. Mountain River Estates Residential Ass'n , 100 So. 3d 569 (Ala. Civ. App. 2012) ; Russell v. Donaldson , 222 N.C.App. 702, 731 S.E.2d 535 (2012) ; Applegate v. Colucci , 908 N.E.2d 1214 (Ind. Ct. App. 2009) ; Mason Family Trust v. DeVaney , 146 N.M. 199, 207 P.3d 1176 (N.M. Ct. App. 2009) ; Ross v. Bennett , 148 Wash.App. 40, 203 P.3d 383 (2008) ; Scott v. Walker , 274 Va. 209, 645 S.E.2d 278 (2007) ; Lowden v. Bosley , 395 Md. 58, 909 A.2d 261 (2006) ; Mullin v. Silvercreek Condo. Owner's Ass'n , 195 S.W.3d 484 (Mo. Ct. App. 2006) ; Pinehaven Planning Bd. v. Brooks , 138 Idaho 826, 70 P.3d 664 (2003) ; Yogman v. Parrott , 325 Or. 358, 937 P.2d 1019 (1997) (en banc); Catawba Orchard Beach Ass'n v. Basinger , 115 Ohio App.3d 402, 685 N.E.2d 584 (1996). These decisions focus on what is being done at a particular premises, not how long any particular individual is doing the activity for. See Acord , 219 So.3d at 114 ("[T]he critical issue is whether the renters are using the property for ordinary living purposes such as sleeping and eating, not the duration of the rental." (citation omitted)). According to Brown Drake, because those staying at the Lodge use it to eat, drink, use the bathroom, sleep, and conduct other activities consistent with "residential purposes," the Lodge is being used in a manner that does not violate the restrictive covenant at issue.

¶11 Brown Drake's proposed analysis focuses on the consequences stemming from particular activities taking place on a given parcel. For example, the disturbances caused by a neighboring Lodge occupant "enjoying the scenery" are likely negligible compared with that of a neighbor's busy autobody shop—regardless of whether the activity is undertaken by the same person or someone new each day.

¶12 In contrast, other jurisdictions looking at similar language have reached different conclusions. See Hensley v. Gadd , 560 S.W.3d 516, 524 (Ky. 2018) ("[O]ne-night, two-night, weekend, weekly inhabitants cannot be considered ‘residents’ within the commonly understood meaning of the word, or the use by such persons as constituting ‘residential.’ "); Eager v. Peasley , 322 Mich.App. 174, 911 N.W.2d 470, 478 (2017) ("Defendant's transient, short-term rental usage violates the restrictive covenant requiring ‘private occupancy only’ and ‘private dwelling.’ "). These determinations appear to align with dictionary definitions that frequently describe these terms with reference to an expectation of regularity over time. See Reside , Merriam-Webster Dictionary, https://perma.cc/RW2A-EYBD (last visited December 2, 2020) (defining "reside" as "to dwell permanently or continuously: occupy a place as one's legal domicile."); Residence , Black's Law Dictionary (5th ed. 1979) (defining "residence" as "personal presence at some place of abode with no present intention of definite and early removal and with purpose to remain for undetermined period, not infrequently, but not necessarily combined with design to stay permanently.").

¶13 We agree with these jurisdictions that the common understanding of the word "residential" often goes beyond the mere existence of an activity at a fleeting instant in time to imply a pattern of regularity or...