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Forshee v. Neuschwander

Court of Appeals of Wisconsin, District III

June 13, 2017

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.

         APPEAL from an order of the circuit court for Sawyer County No. 2016CV4: JOHN M. YACKEL, Judge. Reversed and cause remanded with directions.

          Before Stark, P.J., Hruz and Seidl, JJ.

          STARK, P.J.

         ¶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]

         BACKGROUND

         ¶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: 1. No dwelling can be erected on said property with a living space of less than 1, 000 square feet. 2. There shall be no subdivision of the existing lots. 3. There shall be no commercial activity allowed on any of said lots.

         ¶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.

         DISCUSSION

         ¶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.

         ¶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. When the meaning of language in a restrictive covenant is doubtful, all doubt should be ...


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