Richard Forshee, Judith Timmerman, Verlan E. Edwards, Robert R. Olson, Mary L. Edwards on behalf of Verlan & Mary Edwards LLP and Jean Forshee, Janet A. Olson, Plaintiffs-Respondents-Petitioners,
Lee Neuschwander and Mary Jo Neuschwander, Defendants-Appellants.
Submitted on Briefs: oral argument: February 23, 2 018
OF DECISION OF THE COURT OF APPEALS Reported at 377 Wis.2d
162, 900 N.W.2d 100');">900 N.W.2d 100
Circuit Court Sawyer county (L.C. No. 2 016CV4) John M.
the plaintiffs-respondents-petitioners, there were briefs
filed by Linda I. Coleman, John R. Carlson, and Spears,
Carlson, & Coleman, S.C., Washburn. There was an oral
argument by Linda J. Coleman.
the defendants-appellants, there was a brief filed by Anne
Berleman Kearney, Joseph D. Kearney, and Appellate Consulting
Group, Milwaukee. There was an oral argument by Anne Berleman
amicus curiae brief was filed on behalf of the Wisconsin
REALTORS Association by Cori Moore Lamont and Wisconsin
REALTORS Association, Madison.
PATIENCE DRAKE ROGGENSACK, C.J.
Lee and Mary Jo Neuschwander purchased property on Hayward
Lake in Hayward, Wisconsin. They renovated the large house
and began renting it to vacationers on both short-term and
long-term bases. Several neighboring property owners (the
"Neighbors") objected to the use of the property as
a vacation rental. They brought suit in Sawyer County Circuit
Court, claiming that a restrictive covenant that encumbers
all lots in the subdivision of which Neuschwanders'
property is a part, precludes short-term rentals of
The Sawyer County Circuit Court held in favor of the
Neighbors and enjoined Neuschwanders from further short-term
rentals, except for the Birkebeiner weekend. The court of
appeals reversed. Forshee v. Neuschwander, 2017
WI.App. 43, 377 Wis.2d 162, 900 N.W.2d 100');">900 N.W.2d 100. The Neighbors
petitioned for review, which we granted.
We review a single issue: Whether the short-term rental of
the Neuschwanders' property constitutes "commercial
activity" under the restrictive covenant that encumbers
their property. We conclude that the term, "commercial
activity, " which is undefined in the covenant, is
ambiguous. Therefore, we narrowly interpret it and conclude
that it does not preclude either short-term or long-term
rentals of Neuschwanders' property. Accordingly, we
affirm the decision of the court of appeals.
The Neuschwanders' property was purchased by the
Louisiana Pacific Corporation in 1984 and 1985. It consists
of two lots of a 15-lot subdivision that was originally owned
by four individuals. All lots in the subdivision have been
encumbered by a restrictive covenant that provides:
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 existing lots.
3. There shall be no commercial activity allowed on any of
Louisiana Pacific built the first house in the subdivision.
It is a large building that Louisiana Pacific used to provide
short stays to clients, vendors, politicians and employees.
The house was used for everything from single-night events to
month-long stays, as well as serving as a corporate social
In 2014, the Neuschwanders bought the property and expended a
substantial amount of money renovating the large house. While
the Neuschwanders used the property themselves on occasion,
the primary use has been the rental of the property to
vacationers on both short-term and long-term bases through
the website VRBO (Vacation Rental By Owner).
Neuschwanders' property consists of two lots equaling 2.2
acres and a large house. It is located on a peninsula in Lake
Hayward in the City of Hayward, Wisconsin. It is accessible
via a narrow, private road that Louisiana Pacific built.
There are a number of other residents in the subdivision,
several of whom filed this action. Each of their homes was
built after Louisiana Pacific's construction of the
The Neuschwanders' house is large, about 4, 000 square
feet, and able to sleep up to 15 people. When renting the
property, the occupants treat the house in the same way that
an owner would: They sleep, cook, eat, and recreate in their
preferred manner. During the course of renters' stays the
Neuschwanders do not provide any services to renters. For
example, there is no maid or room service of any type.
The Neighbors' complaint alleged that the restrictive
covenant that proscribes "commercial activity" was
violated by short-term rentals of the property. They sought
injunctive relief to prevent the Neuschwanders from
"further violating the restrictions placed upon [their
property]." Upon the parties' competing motions for
summary judgment, the circuit court agreed with the Neighbors
and concluded that short-term rentals of the
Neuschwanders' property violated the restrictive
The circuit court explained that the unstated "purpose
of the restrictive covenant was to ensure and maintain a
quiet neighborhood where people would know their neighbors,
" and that the Neuschwanders' short-term rentals
violated that purpose. The circuit court enjoined the
Neuschwanders from using their property for short-term
rentals except for the Birkebeiner weekend.  The Neuschwanders
On appeal, the Neuschwanders alleged that the restrictive
covenant is ambiguous and that the circuit court improperly
considered extrinsic evidence in coming to its conclusion. In
a published opinion,  the court of appeals agreed with the
Neuschwanders, concluding that the restrictive covenant is
ambiguous and that it did not bar short-term rentals.
Accordingly, the court of appeals reversed the circuit
court's summary judgment and lifted the injunction on the
Neuschwanders' use of their property.
The Neighbors sought review of the court of appeals'
decision, which we granted. For the reasons explained
hereafter, we affirm the court of appeals.
Standard of Review
We independently review a grant or denial of summary judgment
by applying the same standards used in the circuit court and
the court of appeals, while benefitting from the discussions
of both courts. Sands v. Menard, 2017 WI 110,
¶28, 379 Wis.2d 1, 904 N.W.2d 789; Dufour v.
Progressive Classic Ins. Co., 2016 WI 59');">2016 WI 59, ¶12, 370
Wis.2d 313, 881 N.W.2d 678. Summary judgment is appropriate
where there is no genuine issue of material fact and the
movant has established the right to judgment as a matter of
law. Wis.Stat. § 802.08(2) (2015-16);Sands,
379 Wis.2d 1, ¶28.
Interpretation of a restrictive covenant is a question of law
that we review independently of prior court decisions.
Zinda v. Krause, 191 Wis.2d 154, 165, 528 N.W.2d 55
(Ct. App. 1995) . Whether the language employed in a
restrictive covenant is ambiguous is also a question of law
that we independently decide. Id. B. Restrictive
Covenants 1. General principles
Covenants come in various forms, and are characterized by the
nature of the burden or benefit imposed. Restatement (Third)
of Property: Servitudes § 1.3(3) cmt. e. (Am. Law Inst.
2000). A covenant becomes a servitude on the land if either
its burden or its benefit runs with the land. Id.
cmt. a. "A restrictive covenant is a negative covenant
that limits permissible uses of land." Id.
§ 1.3(3) .
Public policy of the State of Wisconsin "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 and in
zoning ordinances must be strictly construed to favor
unencumbered and free use of property." Id.
(citing McKinnon v. Benedict, 38 Wis.2d 607, 619,
157 N.W.2d 665 (1968) (further citations omitted)).
Consequently, in order to be enforceable, deed restrictions
that limit the free use of property "must be expressed
in clear, unambiguous, and peremptory terms."
Id. at 435.
In resolving contests about the meaning of a restrictive
covenant in a deed, we do not look for amorphous general
intent, but rather, we determine the meaning of the
restriction by the words actually used. Id. at 438.
Construction of a covenant is necessary when the covenant is
ambiguous. Id. at 434 (citing Bollenbeck v.
Vill. of Shorewood Hills, 237 Wis. 501, 297 N.W.568
(1941)); see also Peterson v. Gales, 191 Wis. 137,
139-40, 210 N.W. 407 (1926) (construing "house" as
an ambiguous term such that the restrictive covenant did not
prohibit the use of the property as a machine shop). If the
words employed in the restrictive covenant are ambiguous, we
resolve disputes about the meaning of the restriction in
favor of the free use of the property. Crowley, 94
Wis.2d at 438 n.3 (citing Schneider v. Eckhoff, 188
Wis. 550, 556, 206 N.W. 838 (1926) (providing that because
"the language used in the restriction is doubtful in
meaning . . . all doubt, under the general rule, should be
resolved in favor of the free use [of land]")) .
On the other hand, if the meaning of a restrictive covenant
clearly can be ascertained from the words of the covenant
itself, its restrictions will be enforced. See
Zinda, 191 Wis.2d at 166; see also Voyager Vill.
Prop. Owners Ass'n v. Johnson, 97 Wis.2d
747, 749, 295 N.W.2d 14 (Ct. App. 1980) (concluding that
"camping equipment" clearly included camping
trailers). 2. The restrictive covenant
Currently, individuals who rent and occupy the
Neuschwanders' residence on both short-term and long-term
bases use the property in a manner similar to how an owner
uses his or her own house. They buy their own food, cook
their own meals, make their own beds and recreate as the
house's location provides, just as a property owner
As we consider those uses, we review a restrictive covenant
that declares that "[t]here shall be no commercial
activity allowed on any of said lots." The key term in
the covenant, as focused on by the parties in their briefs
and at oral argument, is "commercial activity."
Therefore, we examine whether this term precludes short-term
rentals of Neuschwanders' property.
We consider the term, "commercial activity, " not
in isolation, but in the context of the deed's
restrictions as a whole. Zinda, 191 Wis.2d at 166.
However, reviewing "commercial activity" in the
context of the two other provisions of the restrictive
covenant at issue here does not add clarity to the term we
must interpret. We can see that the covenanters clearly
required dwellings to have a minimum size and that lots could
not be subdivided. However, those two provisions provide no
guidance as to what was meant by the "commercial
activity" that the covenant precludes. "Commercial
activity" is simply an undefined term, whether read
separately or in the context of the complete covenant.
It could be that the drafters were attempting to prevent a
lot from being used as a lakefront restaurant or a filling
station for boats. On the other hand, perhaps a homeowner
could maintain a daycare for preschool children in his or her
home without running afoul of the commercial activity
proscription. Because we are unable to clearly discern the
restrictive covenant's meaning through the text of
covenant itself, we conclude that it is ambiguous.
Id. at 165-66 ("The language in a restrictive
covenant is ambiguous if it is susceptible to more than one
When we determine the ordinary meaning of undefined words, a
dictionary often is helpful to our construction. Xcel
Energy Servs. v. LIRC, 2013 WI 64, ¶30, 349 Wis.2d
234, 833 N.W.2d 665 (quoting Cty. of Dane v. LIRC,
2009 WI 9, ¶23, 315 Wis.2d 293, 759 N.W.2d 571) . We do
so here as we construe "commercial activity" with
the aid of its dictionary definition.
Webster's Dictionary defines "commercial" as
"engaged in work designed for the market, "
"of or relating to commerce, " or
"characteristic of commerce." Commercial,
Webster's New Collegiate Dictionary 226 (1974
ed.) . "Commerce, " then, refers to "the
exchange or buying and selling of commodities on a large
scale involving transportation from place to place."
These dictionary definitions posit that "commercial
activity" includes some form of buying and selling.
However, the dictionary definition is very nonspecific. One
could read these definitions to mean that "commercial
activity" is limited to products bought or sold and
subsequently moved to another location, thereby excluding
purchases and sales that result in consumption or use of the
purchased item or service in a single place. However, what we
take away from our review of dictionary definitions is that
in the context of the entirety of the restrictive covenant on
the Neuschwanders' property, we cannot clearly decipher
the meaning of "commercial activity."
Case law requires that in order to be enforceable, deed
restrictions "must be expressed in clear, unambiguous,
and peremptory terms." Crowley, 94 Wis.2d at
435. However, we are unable to determine precisely what the
words in this covenant preclude. Stated otherwise, the
covenant presents no "clear, unambiguous, and peremptory
terms" to follow. Id. Accordingly, because this
restrictive covenant is ambiguous, we must resolve the
contest before us in favor of the property owners'
ability to use their property freely. Id. at 438
Furthermore, support for interpreting "commercial
activity" narrowly as not precluding use of the property
for short-term rentals is provided by the way in which the
first homeowner in the subdivision, Louisiana Pacific,
interpreted "commercial activity" as it used the
same property. The record establishes that since Louisiana
Pacific's construction of the house in the mid-1980s and
throughout its ownership, the house was used by individuals
who were not the owners,  for both short-term and long-term
stays. Under Louisiana Pacific's ownership, guests would
arrive at the house and leave anywhere from hours later to a
full month later. Therefore, because of Louisiana
Pacific's corporate status and because of its use of the
house, Louisiana Pacific's ownership did not further the
purpose of "ensuring a quiet neighborhood where people
would know their neighbors, " which the circuit court
concluded the restrictive covenant was enacted to provide.
And finally, if the encumbrance actually were placed on the
property to proscribe short-term stays, as the original owner
of the property who would have been well-aware of the
restrictive covenant, Louisiana Pacific would not have built
and maintained the house as it did.
Because we cannot specify the precise activities included in
the definition of "commercial activity, " we
interpret the covenant narrowly and conclude that short-term
rentals are not prohibited. Therefore, the Neuschwanders are
not precluded from renting their property for short or long
periods of time. Accordingly, we affirm the court of appeals
decision voiding the injunction issued by the circuit court.
Upon our review, we consider a single issue: Whether the
short-term rental of the Neuschwanders' property
constitutes "commercial activity" under the
restrictive covenant that encumbers their property. We
conclude that the term, "commercial activity, "
which is undefined in the covenant, is ambiguous. Therefore,
we narrowly interpret it and conclude that it does not
preclude either short-term or long-term rentals of
Neuschwanders' property. Accordingly, we affirm the
decision of the court of appeals.
decision of the court of appeals is affirmed.
SHIRLEY S. ABRAHAMSON, J. (concurring).
lead opinion reaches the right conclusion for the wrong
reasons. The decision of the court of appeals should be
affirmed, but not because "commercial activity" is
an ambiguous term that is construed in favor of the free and
unencumbered use of the property.
Instead, the decision of the court of appeals should be
affirmed because the Neuschwanders did not violate the
unambiguous language of the deed restriction.
Because the lead opinion incorrectly concludes that the term
"commercial activity" is ambiguous, it fails to
address many of the parties' substantive arguments
regarding the application of the restrictive covenant to the
activity in question, ...