Forshee v. Neuschwander, Appeal No. 2016AP1608
| Decision Date | 13 June 2017 |
| Docket Number | Appeal No. 2016AP1608 |
| Citation | 377 Wis.2d 162,2017 WI App 43,900 N.W.2d 100 |
| Parties | Richard FORSHEE, Jean Forshee, Judith Timmerman, Verlan E. Edwards, Mary L. Edwards on behalf of Verlan & Mary Edwards LLP, Robert R. Olson and Janet A. Olson, Plaintiffs-Respondents, v. Lee NEUSCHWANDER and Mary Jo Neuschwander, Defendants-Appellants. |
| Court | Wisconsin Court of Appeals |
On behalf of the defendants-appellants, the cause was submitted on the briefs of Anne Berleman Kearney of Appellate Consulting Group, Milwaukee.
On behalf of the plaintiffs-respondents, the cause was submitted on the brief of Linda I. Coleman of Spears, Carlson & Coleman, S.C., Washburn.
A nonparty brief was filed by Cori Moore Lamont of Wisconsin REALTORS®> Association, Madison.
Before Stark, P.J., Hruz and Seidl, JJ.
¶1 Lee and Mary Jo Neuschwander appeal an order denying their summary judgment motion and instead granting summary judgment in favor of their neighbors, Richard and Jean Forshee, Judith Timmerman, Verlan Edwards, Mary Edwards on behalf of Verlan & Mary Edwards LLP, and Robert and Janet Olson (collectively, the Neighbors). The Neighbors argued that, by renting their property to others on a short-term basis, the Neuschwanders violated a restrictive covenant prohibiting "commercial activity" on the Neuschwanders' lot. The circuit court agreed that short-term rentals violated the restrictive covenant. At the Neighbors' request, the court issued an injunction prohibiting the Neuschwanders from renting their property on a short-term basis, except during the weekend of the American Birkebeiner cross country ski race.
¶2 We conclude the restrictive covenant is ambiguous as to whether short-term rentals of the Neuschwanders' property are prohibited. Because restrictive covenants must be clear and unambiguous in order to be enforced, the circuit court erred by concluding the Neuschwanders' short-term rentals violated the restrictive covenant. We therefore reverse the order granting summary judgment to the Neighbors and enjoining the Neuschwanders from renting their property on a short-term basis. We remand with directions that the circuit court enter summary judgment in favor of the Neuschwanders.1
¶3 The following background facts are undisputed. The Neuschwanders own a single-family waterfront residence in Hayward located on Sorenson Drive, a private, dead-end road. Each of the Neighbors also owns property on Sorenson Drive, either adjacent to or near the Neuschwanders' property. Both the Neuschwanders' property and the Neighbors' properties are subject to the following restrictive covenants:
¶4 The Neuschwanders began renting out their property on a short-term basis in 2014. They advertised the property both in printed media and online as "Lake Point Lodge." A listing for the property on the vacation rental website vrbo.com specified it was available for minimum stays of two to seven nights, for a maximum of fifteen overnight guests. During the year 2015, the Neuschwanders rented their property to over 170 people. They received $55,784.93 in rent, including taxes, and they paid the City of Hayward $4,973.81 in room tax.
¶5 In January 2016, the Neighbors filed the instant lawsuit, alleging short-term rentals of the Neuschwanders' property violated the restrictive covenant prohibiting "commercial activity" on the Neuschwanders' lot. The Neighbors sought an injunction prohibiting the Neuschwanders "from using [their] property as a vacation rental." In their answer, the Neuschwanders admitted renting out their property on a short-term basis; however, they denied that such rentals violated the restrictive covenant prohibiting "commercial activity" on their lot.
¶6 Both sides ultimately moved for summary judgment. In its written decision, the circuit court observed the term "commercial" is commonly defined as "viewed with regard to profit." The court concluded the Neuschwanders had "clearly" profited from the short-term rentals of their property. The court also relied on the affidavit of James Correll, one of the individuals involved with the creation of the parties' subdivision, for the proposition that the "purpose of the restrictive covenant was to ensure and maintain a quiet neighborhood where people would know their neighbors." The court reasoned the short-term nature of the Neuschwanders' rentals "and the high volume of different people staying in the neighborhood" violated that purpose. The court therefore concluded the restrictive covenant prohibited the short-term rentals.
¶7 Accordingly, the circuit court issued an order granting summary judgment to the Neighbors and denying the Neuschwanders' summary judgment motion.
The court enjoined the Neuschwanders from renting their property on a short-term basis, except during the weekend of the American Birkebeiner cross country ski race. The Neuschwanders now appeal.
¶8 We independently review a grant of summary judgment, using the same methodology as the circuit court. Pertzsch v. Upper Oconomowoc Lake Ass'n , 2001 WI App 232, ¶ 7, 248 Wis.2d 219, 635 N.W.2d 829. Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2) (2015-16). Here, the circuit court determined the Neighbors were entitled to summary judgment because the restrictive covenant prohibited the Neuschwanders from renting out their property on a short-term basis. The interpretation of a restrictive covenant is a question of law. Pertzsch , 248 Wis.2d 219, ¶ 7, 635 N.W.2d 829.
¶9 Wisconsin's public policy favors the free and unrestricted use of property. Crowley v. Knapp , 94 Wis.2d 421, 434, 288 N.W.2d 815 (1980). "Accordingly, restrictions contained in deeds ... must be strictly construed to favor unencumbered and free use of property." Id. In order to be enforceable, deed restrictions must therefore be expressed "in clear, unambiguous, and peremptory terms." Id. at 435, 288 N.W.2d 815. When the meaning of language in a restrictive covenant is doubtful, all doubt should be resolved in favor of the property owner's free use. Zinda v. Krause , 191 Wis.2d 154, 165, 528 N.W.2d 55 (Ct. App. 1995).
¶10 Whether a restrictive covenant is ambiguous is a question of law. Id. A restrictive covenant is ambiguous if its language is susceptible to more than one reasonable interpretation. Id. "However, if the intent of a restrictive covenant can be clearly ascertained from the covenant itself, the restrictions will be enforced." Id. at 166, 528 N.W.2d 55. In this context, "intent" does not mean the subjective intent of the drafter, but rather "the scope and purpose of the covenant as manifest by the language used."2 Id.
¶11 The restriction at issue in this case prohibits "commercial activity ... on any of said lots." The phrase "commercial activity" is undefined. However, we may consider dictionary definitions in order to determine the ordinary meanings of terms used in a restrictive covenant. See, e.g. , Diamondback Funding, LLC v. Chili's of Wis., Inc. , 2004 WI App 161, ¶ 16, 276 Wis.2d 81, 687 N.W.2d 89. As relevant here, the term "commercial" is defined as "concerned with or engaged in commerce" or "making or intended to make a profit." Commercial , NEW OXFORD AMERICAN DICTIONARY (2001). "Commerce" is defined as "the activity of buying and selling, esp. on a large scale." Commerce , NEW OXFORD AMERICAN DICTIONARY (2001). Applying these definitions to the instant case, the restrictive covenant prohibits the Neuschwanders from engaging in activity on their lot that is concerned with the activity of buying and selling, or activity by which they make or intend to make a profit.
¶12 We conclude reasonable minds could differ as to whether short-term rentals of the Neuschwanders' property meet this standard. On one hand, it is undisputed that the Neuschwanders make money, and intend to make money, and by inference a profit, by renting their property to others on a short-term basis. In addition, by selling to tenants the right to use their property, the Neuschwanders appear to engage in "commerce"—that is, the activity of buying and selling. See id. This suggests that short-term rentals of the Neuschwanders' property do constitute commercial activity.
¶13 On the other hand, however, the actual use of the property by the short-term tenants is residential in character—they use the Neuschwanders' property as a dwelling. Moreover, the restrictive covenant specifically prohibits commercial activity "on" the Neuschwanders' lot. There is no evidence that any actual exchange of money occurs "on" the Neuschwanders' lot, or that the Neuschwanders use the lot as an office space to manage or promote their short-term rentals. No goods are purchased or sold "on" the property. Stated differently, there is no evidence the actual "activity" on the lot, by either the Neuschwanders or their tenants, is anything other than residential. The commercial activity of elsewhere purchasing the residential use of the property does not render the actual activity "on" the property commercial. This suggests the Neuschwanders' short-term rentals do not constitute commercial activity "on" the property.
¶14 Because reasonable minds could differ as to whether the restrictive covenant prohibits short-term rentals, we conclude the covenant is ambiguous. Nevertheless, "if the intent of a restrictive covenant can be clearly ascertained from the covenant itself, the restrictions will be enforced." Zinda , 191 Wis.2d at 166, 528 N.W.2d 55. Here, the circuit court relied on the affidavit of James Correll, one of the individuals involved with the creation of the parties' subdivision, for the...
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