Morgan v. Townsend

• Docket Number: Docket: BCD-22-201
• Decision Date: 05 September 2023
• Citation: Morgan v. Townsend, 2023 ME 62, 302 A.3d 30 (Me. 2023)
• Parties: Debra MORGAN et al. v. Erik S. TOWNSEND
• Court: Maine Supreme Court

302 A.3d 30

2023 ME 62

Debra MORGAN et al.

v.Erik S. TOWNSEND

Docket: BCD-22-201

Supreme Judicial Court of Maine.

Argued: January 12, 2023

Decided: September 5, 2023

Andrew W. Sparks, Esq.(orally), and William J. Kennedy, Esq., Drummond & Drummond, LLP, Portland, for appellantErik S. Townsend

David A. Soley, Esq.(orally), and Glenn Israel, Esq., Bernstein Shur, Portland, for appelleesDebra Morgan, Douglas Morgan, and P. Jason Ward as Trustee of the P. Jason Ward Revocable Trust

Panel: STANFILL, C.J., and MEAD, JABAR, HORTON, CONNORS, and LAWRENCE, JJ.

Majority: JABAR, HORTON, CONNORS, AND LAWRENCE, JJ.

Dissent: MEAD, J., and STANFILL, C.J.

HORTON, J.

[¶1]Erik S. Townsend appeals from an entry of summary judgment by the Business and Consumer Docket (Duddy, J. ) in an action brought by Townsend's neighbors, Debra and Douglas Morgan and P. Jason Ward as Trustee of the P. Jason Ward Revocable Trust (collectively "the Morgans and Ward").The court issued a declaratory judgment and injunction based on its determination that Townsend's short-term rentals of his oceanfront property have violated a deed restriction that limits the use and occupancy of the property and the structures on it.We affirm the court's declaratory judgment that Townsend's rentals have violated the restriction, but we vacate the injunction against further violations because it needs to be more specific on what does and does not comply with the deed restriction.We remand for further proceedings consistent with this opinion.

I.BACKGROUND

[¶2]"The following facts are derived from the summary judgment record" and viewed in the light most favorable to Townsend.Stiff v. Jones , 2022 ME 9, ¶ 2, 268 A.3d 294.We discern no disputed material facts.

[¶3] Townsend, the Morgans, and Ward own three neighboring oceanfront lots in a residential subdivision created in the 1960s by the McConchie brothers on a peninsula in the Town of Cushing.Each lot in the subdivision is subject to a restrictive covenant contained in the deeds transferring the lot that, in one pertinent single sentence, provides,

The premises herein conveyed shall not be used or occupied for any purpose other than for private residential purposes and no trade or business shall be conducted therefrom; and no building, structure, trailer, mobile home, object or thing whatsoever other than a private dwelling house for use and occupancy by one family and such out buildings as are usual, customary and appurtenant to a private residence shall be erected or placed thereon, and not more than one such dwelling shall be erected or placed on said lot[.]

The restriction also specifies that it is intended to burden and benefit the other lots created from the same original tract:

Conveyances of other lots from the tract of land of which the herein conveyed premises is a portion, shall be conveyed subject to the above restrictions, which said restrictions shall inure to the benefit of the respective land owners from said original tract.

[¶4] The structures on Townsend's five-acre lot are a five-bedroom, five-bathroom main house, and a two-bedroom, one-bathroom guest cottage with a kitchen.He advertises the structures as providing sleeping space for up to thirty-two people.The main house has a 900-square-foot recreation room, twenty-four commercial-grade Adirondack style chairs, a hot tub, a commercial-grade lobster cooker, a fire pit, outdoor recreation equipment, flood lighting, an outdoor deck, and a barbeque grill.Townsend has not lived full-time on the property since the 1970s and has not visited it since 2019, but he continues to store personal belongings there.

[¶5] Both the Morgans and Ward have resided primarily at their properties since 2020.Ward's property also has a main house and guest house, although only the main house is winterized.In addition to the main house, the Morgans’ property has a garage with an upstairs bedroom and bath.

[¶6] In 2019, Townsend began renting his entire property for short intervals to one group at a time.¹Townsend advertises his rental property on Vrbo and AirBnb.²

Townsend's advertisements have described the property as the "[b]est oceanfront property for large groups on the coast of Maine!"Townsend has required rentals between May and November to be for a minimum of one week but has allowed shorter rentals between November and May.Between May 2019 and September 2021, Townsend rented out the property to approximately fifty-nine groups (allowing up to thirty-two people in each group) with an average size of a dozen.Townsend has not limited rentals of the property to family groups, nor has he inquired whether prospective renters are members of the same family.

[¶7] Townsend employs a property manager to coordinate rentals, cleaning, and maintenance, and he pays the manager fifteen percent of the rental income.He reports the rental fees as income on his federal tax returns and indicates that the property is not for his personal use.Townsend collects Maine lodging taxes on the rental fees and remits them to the state.

[¶8] On June 17, 2020, the Morgans and Ward filed a two-count complaint against Townsend.Their standing to assert their claims has never been in question because their title descended from the land that the McConchie brothers once owned, and their title is subject to the same restrictive covenant.SeeDoyon v. Fantini , 2020 ME 77, ¶ 6 n.3, 234 A.3d 1222.The first count of their complaint sought a declaratory judgment that Townsend is violating the restrictive covenant by

(i) erecting on the premises two structures designed to house transient guests;

(ii) using the property and the structures for lodging houses;

(iii) allowing dozens of people from multiple families to utilize the property simultaneously; and

(iv) using the entirety of the property to operate a business.

The second count asserted a nuisance claim against Townsend based on the noise associated with his rentals and trash left on the neighbors’ properties.

[¶9] The Morgans and Ward later filed an amended complaint to clarify that Ward's land is held in a trust.In August 2020, Townsend answered the complaint, and in March 2021, he filed a counterclaim.³In his counterclaim, Townsend alleged that if he were in breach of the restrictive covenant then the Morgans and Ward were also in breach of the same covenant.In July 2021, the Morgans and Ward filed a second amended complaint to add a claim for injunctive relief.The Morgans and Ward asked the court to permanently enjoin Townsend "from using his land or erecting or maintaining structures on his land in violation of the restrictive covenants in his deed."

[¶10] In January 2022, the Morgans and Ward filed a motion for summary judgment.Townsend opposed the motion and cross-moved for summary judgment on the grounds that his rentals of his property do not violate the restrictive covenant and that the Morgans and Ward had violated the restrictive covenants in their own deeds.None of the parties’ summary judgment filings offered extrinsic evidence of the intent of the McConchie brothers in imposing the restrictions.

[¶11] On May 9, 2022, the court entered summary judgment in favor of the Morgans and Ward on their claims for declaratory judgment and injunctive relief, but denied summary judgment on the nuisance claim, citing genuine disputes of material fact.In the same order, the court denied Townsend's cross-motion on his counterclaim because he had failed to show that the Morgans and Ward had violated the restriction in their own deeds.The court observed that it did not need to reach the Morgans and Ward's potentially applicable defenses of laches and unclean hands.

[¶12] Citing precedent from Maine and other jurisdictions, the court determined that the restrictive covenant unambiguously limited Townsend's property and the structures on it to use and occupancy by one family.It decided that Townsend's pattern of short-term rentals to large groups, with no effort by him to determine whether each group constituted a family, violated the restriction's requirement that the property be used and occupied for "private residential purposes," as well as its requirement that the "single dwelling house [be] for use and occupancy by one family."The court also decided that the same pattern of rentals, along with Townsend's tax treatment of the rental income, payment of lodging taxes, use of an accounting system, and retention of a property manager, demonstrated that Townsend "is using the [p]roperty to conduct a full-scale commercial business in violation of the restrictive covenant."The court held that the Morgans and Ward had waived any claim based on the presence of two dwellings on Townsend's property.The court entered an injunction as follows: "Townsend is permanently enjoined from using his Property in violation of the restrictive covenant contained in his deed."

[¶13] Townsend filed a motion to alter or amend the judgment to clarify the scope of the injunction.M.R. Civ. P. 59(e).The court denied the motion without comment.Townsend timely appealed.⁴SeeM.R. App. P. 2B(c)(1), (2)(D).

II.DISCUSSION

[¶14] This appeal presents the first occasion for us to consider the effect of a restrictive covenant that limits the uses of residential property upon short-term rentals through online services such as Vrbo and Airbnb.

[¶15]"We review a grant of a motion for summary judgment de novo, [and] view[ ] the evidence in the light most favorable to [Townsend]" as the nonmoving party.Badler v. Univ. of Me. Sys. , 2022 ME 40, ¶ 5, 277 A.3d 379(quotation marks omitted);seeRiver Dale Ass'n v. Bloss , 2006 ME 86, ¶ 5, 901 A.2d 809."A grant of summary judgment will be affirmed if there are no genuine issues of material fact and the undisputed facts show that the prevailing party was entitled to a judgment as a matter of law."Badler , 2022 ME 40, ¶ 5, 277 A.3d 379(quotation marks omitted)."A fact is material if it has the potential to affect the outcome of...