Terrien v. Zwit
| Decision Date | 25 July 2002 |
| Docket Number | Docket No. 115924, Calendar No. 1. |
| Citation | 467 Mich. 56,648 N.W.2d 602 |
| Parties | Janice TERRIEN, Thomas Hagen, and Janet Thomas, Plaintiffs-Appellants, v. Laurel ZWIT, Tim Zwit, Ken Clark, and Nicci Clark, Defendants-Appellees. |
| Court | Michigan Supreme Court |
Rose & Eklund, P.L.C. (by James M. Rose), Montague, for the plaintiffs-appellants.
Culver, Sheridan, Knowlton, Even & Franks ), Muskegon, for the defendants-appellees.
Farhat & Story, P.C. (by Charles R. Toy and David E. Rudgers), East Lansing, for the Michigan Association for the Education of Young Children.
We granted leave in this case to consider whether covenants permitting only residential uses, and expressly prohibiting commercial, industrial, or business uses, preclude the operation of a "family day care home." We also granted leave to consider whether a covenant precluding such an operation is unenforceable as violative of Michigan "public policy." The circuit court granted summary disposition in favor of defendants, holding that a covenant precluding the operation of a "family day care home" is contrary to the public policy of the state of Michigan. The Court of Appeals affirmed, but for a different reason. It held that the operation of a "family day care home" is not precluded by such covenants. It concluded that, because the operation of a "family day care home" is a residential use, it could not also be a commercial or business use because the two uses are mutually exclusive. 238 Mich.App. 412, 605 N.W.2d 681 (1999). We respectfully disagree with both lower courts. A covenant barring any commercial or business enterprises is broader in scope than a covenant permitting only residential uses. Furthermore, covenants such as these do not violate Michigan public policy and are enforceable. Accordingly, we reverse the decision of the Court of Appeals and remand this case to the circuit court for entry of an order granting summary disposition in favor of plaintiffs.
All parties in this case own homes within the Spring Valley Estates subdivision in Fruitland Township.1 Defendants each operate licensed "family day care homes" pursuant to M.C.L. § 722.111 et seq. in their homes within the subdivision.2 The subdivision is subject to the following covenants:
1. No part of any of the premises above described may or shall be used for other than private residential purposes.
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3. No lot shall be used except for residential purposes.
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14. No part or parcel of the above-described premises shall be used for any commercial, industrial, or business enterprises nor the storing of any equipment used in any commercial or industrial enterprise.3
Plaintiffs sought an injunction prohibiting the continued operation of defendants' "family day care homes." The parties agreed to file cross-motions for summary disposition before engaging in discovery. Plaintiffs moved for partial summary disposition pursuant to MCR 2.116(C)(9), and defendants moved for summary disposition pursuant to MCR 2.116(C)(8) and (10). The circuit court denied plaintiffs' motion and granted defendants' motion, finding that a "covenant precluding the operation of a family day care home in a residential setting is contrary to the public policy of the State of Michigan." The Court of Appeals affirmed this decision. However, instead of invalidating the covenants as being against public policy, the Court concluded that defendants' operation of "family day care homes" did not violate the covenants. This Court granted plaintiffs' application for leave to appeal.
Because the parties have stipulated the essential facts, our concern here is only with the law: specifically, whether covenants permitting only residential uses, and expressly prohibiting commercial, industrial, or business uses, preclude the operation of a "family day care home," and, if so, whether such a restriction is unenforceable as against "public policy." These are questions of law that are reviewed de novo, Kelly v. Builders Square, Inc., 465 Mich. 29, 34, 632 N.W.2d 912 (2001), which standard is identical to the standard of review for grants or denials of summary disposition. MacDonald v. PKT, Inc., 464 Mich. 322, 332, 628 N.W.2d 33 (2001).
We granted leave in this case to consider whether the operation of a "family day care home" violates covenants permitting only residential uses and prohibiting commercial, industrial, or business uses. Further, assumingarguendo that such activities do violate the covenant, the question becomes whether the covenant is unenforceable because it violates some "public policy" in favor of day care facilities. In Beverly Island Ass'n v. Zinger, 113 Mich. App. 322, 317 N.W.2d 611 (1982), the Court of Appeals addressed a somewhat similar issue. There, the Court, faced with a narrower covenant that permitted only residential uses, concluded that the operation of a "family day care home" did not violate that covenant.4 Stressing the relatively small scale of the particular day care operation and that "[t]he only observable factor which would indicate to an observer that defendants do not simply have a large family is the vehicular traffic in the morning and afternoon when the children arrive and depart," id. at 328, 317 N.W.2d 611, the Court found this sort of day care use to be residential in nature, and thus not a use in violation of the covenant.
Beverly Island was relied upon by the Court of Appeals in the instant matter to conclude that the day care use here was not violative of the covenants at issue. However, such reliance was misplaced, in our judgment, because, the covenant at issue in Beverly Island merely prohibited nonresidential uses, whereas the covenants at issue here prohibit not only nonresidential uses, but also any commercial, industrial, or business uses as well. There is a significant distinction between such restrictions, as more is prohibited in our case then was prohibited in Beverly Island. Not only did defendants in this case covenant not to use their property for nonresidential uses, but they also covenanted not to use their property for commercial, industrial, or business uses.
Interestingly, the Beverly Island Court itself recognized the distinction between a covenant permitting only residential uses and one that also expressly prohibits commercial, industrial, or business uses. Before it even began its analysis, the Beverly Island Court noted that the covenant at issue "permits residential uses rather than prohibiting business or commercial uses." Id. at 326, 317 N.W.2d 611. It further recognized that a "restriction allowing residential uses permits a wider variety of uses than a restriction prohibiting commercial or business uses." Id. While the former proscribes activities that are nonresidential in nature, the latter proscribes activities that, although perhaps residential in nature, are also commercial, industrial, or business in nature as well. The distinction between the covenants at issue here and the one at issue in Beverly Island was not viewed as persuasive by the Court of Appeals in this case.5
The Court of Appeals in this case reasoned that, because the operation of a "family day care home" does not violate a covenant permitting only residential uses,6 the operation of a "family day care home" also does not violate a covenant prohibiting commercial, industrial, or business uses. We disagree with such reasoning. Because these are separate and distinct covenants, that an activity complies with one does not necessarily mean that the same activity complies with the other. In other words, an activity may be both residential in nature and commercial, industrial, or business in nature.
Therefore, Beverly Island simply does not answer the question raised here. We must determine whether the operation of a "family day care home" violates covenants prohibiting both nonresidential uses and commercial, industrial, or business uses. We find that it does.
The operation of a "family day care home" for profit is a commercial or business use of one's property. We find this to be in accord with both the common and the legal meanings of the terms "commercial "and "business." "Commercial" is commonly defined as "able or likely to yield a profit." Random House Webster's College Dictionary (1991). "Commercial use" is defined in legal parlance as "use in connection with or for furtherance of a profit-making enterprise." Black's Law Dictionary (6th ed). "Commercial activity" is defined in legal parlance as "any type of business or activity which is carried on for a profit." Id. "Business" is commonly defined as "a person ... engaged in ... a service." Random House Webster's College Dictionary (1991). "Business" is defined in legal parlance as an "[a]ctivity or enterprise for gain, benefit, advantage or livelihood." Black's Law Dictionary (6th ed).
This Court has previously discussed the meaning of "commercial" activity in a related context. In Lanski v. Montealegre, 361 Mich. 44, 104 N.W.2d 772 (1960), this Court addressed whether the operation of a nursing home was in violation of a reciprocal negative easement prohibiting commercial activity upon certain property. We determined that it was, observing that the circumstances were indicative of a "general plan for a private resort area" and that this suggested that a broad definition of "commercial" activity was intended. Id. at 49, 104 N.W.2d 772 (emphasis in the original). Therefore, "[i]n its broad sense commercial activity includes any type of business or activity which is carried on for a profit." Id. We concluded that the operation of a nursing home was a commercial use because a fee was charged, a profit was made, the services were open to the public, and such an operation subtracted from the "general plan of the private, noncommercial resort area originally...
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