ROSS WILKINSON and CINDY WILKINSON; MONTE KARNES and KIMBERLY KARNES; DAVID BETHEL and JEANIE BETHEL; DARRELL McLEAN; JIM PAULUS and KATHY PAULUS; JUSTIN HARGIS and TABITHA HARGIS, JOE HARGIS and LINDA HARGIS; DANIEL MaciNDOE and ISIDRA MaciNDOE; DAVID SPICER and MARTHA SPICER, TED TREPANIER and RUBY AKINS TREPANIER, Respondents, v. CHIWAWA COMMUNITIES ASSOCIATION, a Washington Non-Profit corporation, Appellant.
NO. 86870-1
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
APR 17 2014
EN BANC
STEPHENS, J.—Chiwawa Communities Association (Association) appeals the trial court‘s grant of summary judgment to owners of homes in the Chiwawa River Pines community. Respondents Ross and Cindy Wilkinson et al. asked the trial court to invalidate a 2011 amendment to the community covenants prohibiting
FACTS
Chiwawa River Pines (Chiwawa) is a planned residential community located in Chelan County. Clerk‘s Papers (CP) at 54-55. The community comprises of a mix of permanent and vacation residents. CP at 134.
As developer Pope & Talbot Inc. completed each of the development‘s six phases, it recorded a separate set of covenants that purported to establish a “general
4. LAND USE.
Lots shall be utilized solely for single family residential use consisting of single residential dwelling and such out-buildings (garage, patio structure), as consistent with permanent or recreational residence. All habitable structures must be located not nearer than 20 feet to the front lot line. Structures shall be of new construction and shall not be commenced until building permit of appropriate public body is obtained . . . .
5. NUISANCE OR OFFENSIVE USE.
No nuisance or offensive use shall be conducted or suffered as to lots subject hereto, nor shall any lot be utilized for industrial or commercial use (excepting only appropriate real estate sale signs in sale of lots, grantor further reserving to itself, its successors and assigns, the right to operate a conventional real estate sales or agency office upon an unsold lot within such plat), nor as a dump, nor shall there be kept animals or stock of any kind
other than conventional, domestic pets with the exception of horses, etc. stabled on the lot for short-term recreational activities complying with nonroad usage in Chiwawa River Pines, except for entrance and exit. Lot owners retaining animals must confine their animals from wandering off the lot and must maintain cleanliness of grounds to eliminate animal offensive wastes, odors, flies, etc. at all times . . . . 6. TRASH DISPOSAL.
. . . No sign of any kind shall be displayed to the public view on any lot, tract or subdivision thereof in the plat, except one sign of not more than 3 feet square giving the names of the occupants of the lot, tract, or approved subdivision thereof, and one sign of not more than 6 square feet advertising the property for sale or rent.
CP at 85-86 (emphasis added). The 1988/1992 covenants remained unchanged until the Association sought to amend them in 2008 and again in 2011 to prohibit short-term rentals.
Chiwawa residents have rented their homes to unrelated persons on a short-term, for-profit basis for decades without controversy.2 CP at 59. However, as the number of homes available for short-term rental and the frequency of rentals increased, the Association noted rising concerns among members about vacation rentals. CP at 655, 689.
In response to member complaints, in 2007 the Association distributed a survey to gauge interest in barring what it characterized as “nightly rentals.” CP at 135. A majority favored such a prohibition and, in September 2008, voted to bar all rentals of less than six months as prohibited commercial uses. CP at 135-36.
In a predecessor case, Ross and Cindy Wilkinson and other homeowners (collectively Wilkinsons) successfully challenged the 2008 amendment in superior
Shortly after the Court of Appeals issued its decision, a majority of the Association again voted to amend the covenants, this time to prohibit rentals “for less than one month[ or] 30 continuous days.” CP at 160-61, 173, 175 (2011 amendment). The Wilkinsons again filed suit in superior court to invalidate the 2011 rental restriction. CP at 3, 60-61. Both sides moved for summary judgment, CP at 88, 442, and the Wilkinsons additionally moved to strike portions of the evidence offered by the Association in support of its motion, CP at 906-07, 1077-80.
The trial court granted the Wilkinsons’ motion for summary judgment in full, holding the 2011 bar on short-term rentals invalid and unenforceable. CP at 1087-89; Verbatim Report of Proceedings (Dec. 15, 2011) (1 VRP) at 34-35. The court concluded that the Pope & Talbot and 1988/1992 covenants “contemplated that there could be rentals,” and that “[t]here were no limitations on those rentals.” 1 VRP at 34. The trial court granted the Wilkinsons’ motion for summary judgment, holding
The Association sought direct review in this court under
ANALYSIS
We review a trial court‘s order on cross motions for summary judgment and related evidentiary rulings de novo. Davis v. Baugh Indus. Contractors, Inc., 159 Wn.2d 413, 416, 150 P.3d 545 (2007) (citing Folsom v. Burger King, 135 Wn.2d 658, 663, 958 P.2d 301 (1998)). We will affirm the trial court‘s order granting summary judgment “if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.” Dowler v. Clover Park Sch. Dist. No. 400, 172 Wn.2d 471, 484, 258 P.3d 676 (2011);
I. Vacation Rentals Are Not Commercial Uses and Are Consistent with Single-Family Residential Use Provisions
The Association argues that short-term vacation rentals are inconsistent with the governing restrictive covenants prohibiting commercial use and restricting lots to single family residential use. See id. at 13. We disagree.
Interpretation of a restrictive covenant presents a question of law. Wimberly v. Caravello, 136 Wn. App. 327, 336, 149 P.3d 402 (2006). We apply the rules of contract interpretation. Id. While Washington courts once strictly construed covenants in favor of the free use of land, we no longer apply this rule where the dispute is between homeowners who are jointly governed by the covenants. Riss v. Angel, 131 Wn.2d 612, 621-24, 934 P.2d 669 (1997). This change in approach was driven by the recognition that “‘[s]ubdivision covenants tend to enhance, not inhibit, the efficient use of land.‘” Mains Farm Homeowners Ass‘n v. Worthington, 121 Wn.2d 810, 816, 854 P.2d 1072 (1993) (quoting Robert D. Brussack, Group Homes, Families, and Meaning in the Law of Subdivision Covenants, 16 GA. L. REV. 33, 42 (1981); see also Green v. Normandy Park Riviera Section Cmty. Club, Inc., 137 Wn. App. 665, 683, 151 P.3d 1038 (2007). Rather than place a thumb on the scales in favor of the free use of land, “[t]he court‘s goal is to ascertain and give effect to those purposes intended by the covenants.” Riss, 131 Wn.2d at 623. Courts “place ‘special emphasis on arriving at an interpretation that protects the homeowners’
Thus, our primary objective in contract interpretation is determining the drafter‘s intent. Hollis v. Garwall, Inc., 137 Wn.2d 683, 696, 974 P.2d 836 (1999); Riss, 131 Wn.2d at 623; Mains Farm, 121 Wn.2d at 815. “While interpretation of the covenant is a question of law, the drafter‘s intent is a question of fact.” Ross v. Bennett, 148 Wn. App. 40, 49, 203 P.3d 383 (2009) (citing Wimberly, 136 Wn. App. at 336). “But where reasonable minds could reach but one conclusion, questions of fact may be determined as a matter of law.” Id. at 49-50 (citing Owen v. Burlington N. Santa Fe R.R., 153 Wn.2d 780, 788, 108 P.3d 1220 (2005)). In determining the drafter‘s intent, we give covenant language “its ordinary and common use” and will not construe a term in such a way “so as to defeat the plain and obvious meaning.” Mains Farm, 121 Wn.2d at 816; Riss, 131 Wn.2d at 623. We examine the language of the restrictive covenant and consider the instrument in its entirety. Hollis, 137 Wn.2d at 694 (quoting Mountain Park Homeowners Ass‘n v. Tydings, 125 Wn.2d 337, 344, 883 P.2d 1383 (1994)); Wimberly, 136 Wn. App. at 336. The lack of an express term with the inclusion of other similar terms is evidence of the drafters’ intent. See Burton v. Douglas County, 65 Wn.2d 619, 622, 399 P.2d 68 (1965). “Extrinsic evidence is . . . used to illuminate what was written, not what was intended to be written.” Hollis, 137 Wn.2d at 697. We, however, do not consider extrinsic “[e]vidence that would vary, contradict or modify the written word” or “show an intention independent of the instrument.” Id. at 695.
The dissent argues that the restriction on rental signage merely establishes that the drafters intended to permit some rental activity and that it remains a question of fact to determine, based on extrinsic evidence, whether the drafters contemplated long-term or transient rentals, or both. Dissent (Gordon McCloud, J.) at 3-4, 6 n.6, 8. This argument misapprehends Washington law. While extrinsic evidence can be “used to illuminate what was written,” Hollis, 137 Wn.2d at 697, it cannot be used to “show an intention independent of the instrument.” Id. at 695. Had the covenants expressed a durational limitation, such as specifying long-term rentals, then extrinsic evidence would be admissible to elucidate the meaning of the word “long-term.”
Based on the drafters’ detailed discussion about what Chiwawa homeowners could not do, their clear expression that rentals were permissible uses, and the absence of any durational restriction on such rentals, reasonable minds could reach but one conclusion—that the drafters intended to permit rentals without any durational limitation. It was therefore proper for the trial court to determine the issue of the drafter‘s intent as a matter of law.
Not only is it manifestly clear that the drafters intended to permit vacation rentals without any durational limitation, such rentals are consistent with the prohibition on commercial use. If a vacation renter uses a home “for the purposes
The Association argues that we created in Mains Farm and reaffirmed in Metzner v. Wojdyla, 125 Wn.2d 445, 866 P.2d 154 (1994), “a bright line rule . . . that prohibits any commercial or business use of a property subject to a residential use restriction.” Reply Br. of Appellant at 7-8. The Association reads these cases too broadly. In Mains Farm, “[w]e caution[ed] that the interpretation of a particular covenant is largely dependent upon the facts of the case at hand.” 121 Wn.2d at 827. We held the operation of an adult family home violated a covenant restricting use to “‘single family residential purposes only‘” because it was “‘more institutional in nature than . . . familial‘“; “‘[t]he single-family residential nature of defendant‘s use of her home [was] destroyed by the elements of commercialism and around-the-clock care.‘” Id. at 813, 821 (emphasis omitted). Similarly, in Metzner, we held the operation of a child day care violated a provision requiring properties “‘be used for
The Wilkinsons’ short-term rental of their properties is distinguishable from the commercial uses in Mains Farm and Metzner. Both the operations in Mains Farm and Metzner provided some form of on-site service that the Wilkinsons do not provide to their guests. Thus, the Wilkinsons’ short-term rentals do not, without more, violate the 1988/1992 covenant prohibiting commercial use.3
Nor does the 1988/1992 covenants’ “single family residential use” restriction limit to whom vacation rentals may be rented. Reading the restriction, as the Association does, to prohibit unrelated persons from residing within Chiwawa would require us to read the provision out of context. The “single family, residential use” restriction is incorporated into a provision that restricts the type of structures that
Moreover, reading the provision to prohibit unrelated persons from residing together would produce absurd results. Under the Association‘s reading, Chiwawa residents would violate their covenants whenever they host a sleepover for their children‘s playmates, share their homes with friends for a weekend, or cohabitate with a partner outside of marriage. We reject “forced or strained” interpretations of covenant language if they lead to absurd results. Viking Props., Inc. v. Holm, 155 Wn.2d 112, 122, 118 P.3d 322 (2005).
We emphasize that our holding does not prohibit residential communities from prohibiting short-term rentals. We merely hold that the Chiwawa River Pines community did not do so through covenants allowing rentals while prohibiting commercial uses and limiting homes to single-family structures.
A prohibition on short-term rentals is unrelated to the 1988/1992 covenants and therefore cannot be adopted by a simple majority vote. We do not hold that homeowners can never limit the duration of rentals, as the dissent believes, just that a majority of Chiwawa homeowners cannot force a new restriction on a minority of unsuspecting Chiwawa homeowners unrelated to any existing covenant. Dissent (Gordon McCloud, J.) at 3. While Chiwawa homeowners knew that existing restrictive covenants could be changed by majority vote so long as the changes were consistent with the general plan, they did not buy into the creation of new restrictions unrelated to existing ones.
In Washington, the authority of a simple majority of homeowners to adopt new covenants or amend existing ones in order to place new restrictions on the use of private property is limited. When the governing covenants authorize a majority of homeowners to create new restrictions unrelated to existing ones, majority rule prevails “provided that such power is exercised in a reasonable manner consistent with the general plan of the development.” Shafer v. Bd. of Trs. of Sandy Hook Yacht Club Estates, Inc., 76 Wn. App. 267, 273-74, 883 P.2d 1387 (1994). However, when the general plan of development permits a majority to change the covenants but not create new ones, a simple majority cannot add new restrictive covenants that are inconsistent with the general plan of development or have no relation to existing covenants. See Ebel v. Fairwood Park II Homeowners’ Ass‘n, 136 Wn. App. 787, 793, 150 P.3d 1163 (2007); Meresse v. Stelma, 100 Wn. App. 857, 865-66, 999 P.2d 1267 (2000); Lakeland Prop. Owners Ass‘n v. Larson, 121 Ill. App. 3d 805, 459 N.E.2d 1164, 77 Ill. Dec. 68 (1984). This rule protects the reasonable, settled expectation of landowners by giving them the power to block “‘new covenants which have no relation to existing ones‘” and deprive them of their property rights. Meresse, 100 Wn. App. at 866 (emphasis omitted) (quoting Lakeland, 459 N.E.2d at 1167, 1169). As the Court of Appeals observed, “‘[t]he law will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land.‘” Id. (quoting Boyles v. Hausmann, 246 Neb. 181, 517 N.W.2d 610, 617 (1994)).
While we recognize, as does the dissent, that no Washington case has described the precise contours of when an amendment would be “consistent with the general plan of development,” we need not provide that guidance here because the Chiwawa general plan did not authorize a majority of owners to adopt new covenants. The Chiwawa general plan of development merely authorized a majority of owners “to change these protective restrictions and covenants in whole or in part.” CP at 83; see Lakeland, 459 N.E.2d at 1167, 1169 (interpreting a covenant that permitted changes to “‘the said covenants in whole or in part‘” as permitting changes “not the add[ition] of new covenants which have no relation to existing ones“); see also Meresse, 100 Wn. App. at 864-66 (emphasizing that its analysis of a covenant allowing a majority “‘to change or alter [the covenants] in full or in part‘” was in accord with Lakeland, which interpreted a similar provision as allowing changes but not the addition of new covenants unrelated to existing ones (emphasis omitted)).
As determined earlier, the Chiwawa general plan of development allows homeowners to rent their homes without any durational limitation. Homeowners who took title under these covenants were not on notice that short-term rentals might be prohibited without their consent. The Association defends its actions as consistent with the general plan because it did not ban all rentals, just some rentals. See Reply Br. of Appellant at 5. The Association, however, misses the distinction between contracts that permit changes to existing covenants by majority vote and those that allow the creation of new covenants by majority vote. In distinguishing between these types of contracts, we respect the expectation of the parties and the contract they entered. While it is true that in Shafer, the court upheld the adoption of new restrictions on outdoor storage of inoperative motor vehicles and commercial fishing, even though no such rule had previously existed, the court did so only because the dissenting homeowners “had notice of the reservation of power” that allowed the homeowner corporation to create new covenants that benefited the community. 76 Wn. App. at 270, 272, 277. The Chiwawa homeowners did not. We reject the Association‘s position in favor of protecting the reasonable and settled expectation of landowners in their property.
The dissent makes a similar mistake. The dissent contends that we must remand this case for a factual inquiry to determine whether the 2011 amendment
Like the covenants in Meresse, the Chiwawa covenants prohibiting nuisance or offensive uses or the display of excessive rental signs would not have placed Chiwawa homeowners on notice that short-term rentals would be prohibited. Thus,
III. The 2007 Survey Comments and Testimony of Residents Were Properly Excluded
We also affirm the trial court‘s exclusion of the homeowners’ comments in the 2007 survey and portions of the declarations of three Chiwawa residents: Judy Van Eyk, James Padden, and Gloria Fisk.
a. 2007 Survey Comments
The 2007 survey comments were inadmissible hearsay. See Smith v. Sturm, Ruger & Co., 39 Wn. App. 740, 749, 695 P.2d 600 (1985) (surveying opinion-polling cases and noting survey answers given by interested parties describing past events “have consistently been held to be double hearsay“). The 2007 survey comments discussed homeowner support or rejection of the Association‘s proposed ban on nightly rentals and projections about the impact short-term rentals have had on the community. See CP at 153-57.
The Association does not dispute that the 2007 survey comments were hearsay but argues that they fall within the judge-made exception followed in Simon v. Riblet Tramway Co., 8 Wn. App. 289, 505 P.2d 1291 (1973). Br. of Appellant at 35-36. This is incorrect. Simon rests on a hearsay exception fashioned in Nordstrom v. White Metal Rolling & Stamping Corp., 75 Wn.2d 629, 632-34, 453 P.2d 619 (1969),4 regarding the inherent trustworthiness and reliability of surveys compiled by disinterested authorities in published materials. In Nordstrom, this court held a published industry manual on the safety of ladders was admissible, although hearsay, because it was “produced by persons or groups having special knowledge regarding the subject under discussion, and having no motive to falsify, but having rather every reason to state the facts as they are known to the author or authors.” Id. at 633. Similarly, in Simon, the National Society of Professional Engineers’ survey of salaries among engineers was “trustworthy and reliable” because it was “published by a reputable society . . . without any apparent reason to falsify it.” Simon, 8 Wn. App. at 294. In contrast, here, the 2007 survey comments were made by interested homeowners as part of a contentious vote over property rights and compiled by an organization that was interested in the outcome. As such, the comments do not have the hallmarks of inherently reliable evidence. We affirm the trial court‘s decision to strike these hearsay comments.
b. Individual Residents’ Declarations
The trial court also properly struck various portions of declarations by Judy Van Eyk, James Padden, and Gloria Fisk. An affidavit supporting a motion for summary judgment “shall be made on personal knowledge [and] shall set forth such facts as would be admissible in evidence.”
The trial court properly excluded portions of Ms. Van Eyk‘s and Mr. Padden‘s declarations because they lacked personal knowledge. In her declaration, Ms. Van Eyk comments that homeowners who rent their residences “make more money renting weekends this time of year and do not want a full-time tenant,” and states that that her long-term tenant had a friend that was willing to pay a premium for a three-month term rental, and opines that “[p]laintiffs’ goal in this lawsuit is to protect their businesses and bottom line.” CP at 1082-83. Mr. Padden‘s declaration similarly consists of opinions. Mr. Padden conjectures that “it was clear that the developer, Pope & Talbot, intended to create a community of single families,” that in the early days of the development, “[n]o one . . . was renting” or “advertising their homes” or “had a commercial license for their rental businesses,” that “[t]he community‘s focus was on providing an enjoyable refuge for families, not to provide an opportunity to make money,” and that the current state of affairs “is not [what] the developer intended.” CP at 1085-86. Neither the developers’ intent, the activities of all other residents, the motivations of other Chiwawa homeowners, nor the desires of strangers to move into the community are within Ms. Van Eyk‘s or Mr. Padden‘s personal knowledge or perceptions. Therefore, the trial court correctly struck them.
The trial court also properly excluded Ms. Fisk‘s statement that the board had threatened enforcement action against a homeowner for renting out his property “for less than one month—the same type of activity at issue in this lawsuit.” CP at 992.
CONCLUSION
The trial court properly excluded inadmissible testimony offered by the Association and granted summary judgment in favor of the Wilkinsons. The covenants in effect before the 2011 amendment allowed Chiwawa homeowners to rent their homes without limitations on duration. Such short-term rentals do not violate the ban on commercial use or the requirement that structures be suitable for single-family residential use. Because a durational restriction on rentals would be inconsistent with the 1988/1992 covenants, it cannot be adopted by a simple majority vote of Chiwawa homeowners. Therefore, the 2011 amendment barring short-term rentals was invalid. We affirm.
The majority also concludes as a matter of law that the covenants did not reserve authority to a majority of association members to ban rentals of under 30 days because this durational restriction is “unrelated” to any existing covenant. “Relatedness” to an existing covenant involves an artificial distinction between changes to restrictive covenants and creation of new restrictive covenants. Although some courts recognize the distinction, the better analysis is presented by courts that have wisely rejected it. This court should reject the distinction as well.
Discussion
The questions posed by this case are twofold: What, if anything, did the restrictive covenants say about renting property for short terms prior to adoption of the explicit ban on short-term rentals, and did the reservation of power provision in the covenants authorize a majority of homeowners to adopt the ban on short-term rentals.
The primary responsibility of a court when faced with a dispute about the meaning of restrictive covenants is to determine the intent of the parties who established the covenants. Riss v. Angel, 131 Wn.2d 612, 621, 934 P.2d 669 (1997). The court examines the language used as indicating the parties’ intent, with the language given its ordinary and common meaning. Id.; Metzner v. Wojdyla, 125 Wn.2d 445, 450, 886 P.2d 154 (1994); Mains Farm Homeowners Ass‘n v. Worthington, 121 Wn.2d 810, 815, 854 P.2d 1072 (1993).1
The existing covenants recognized that property may be rented. A covenant restricting the number and size of “for rent” signs that homeowners may place on their property says in part:
No sign of any kind shall be displayed to the public view on any lot, tract or subdivision thereof in the plat, except one sign of not more than 3 feet square giving the names of the occupants of the lot, tract, or approved subdivision thereof, and one sign of not more than 6 square feet advertising the property for sale or rent.
Clerk‘s Papers (CP) at 86.
This restriction begins with a general rule—no signs allowed—and then lists certain specific, detailed exceptions for signs of limited size and number. The obvious purpose is to prevent multiple or large signs and the immediate concern is also obvious—addressing the appearance (aesthetics) of the properties and the residential neighborhoods. This interpretation is fortified by the placement of the restrictive language in a covenant titled “TRASH DISPOSAL” that also provides that “[n]o trash, garbage, ashes or other refuse may be thrown, dumped, or otherwise disposed of on any lot, vacant or otherwise.” Id. Plainly, the covenant is concerned primarily with property upkeep and appearance.
The restriction also implicitly acknowledges that home rentals may occur. On its face, however, this is all it does.
To interpret the reference to “for rent” signs to mean as a matter of law that rentals were considered and allowed for any duration, including short-term rentals (vacation rentals), is truly extraordinary.
Nonetheless, the reference to rent is in the restriction and because no more is apparent from the restriction itself, deciding whether the parties to the covenants intended anything by it about the duration of rentals will depend on extrinsic evidence. As with other contracts, extrinsic evidence may be admissible to aid in determining the intended meaning of restrictive covenants under Berg v. Hudesman, 115 Wn.2d 657, 801 P.2d 222 (1990), and its progeny. In Hollis v. Garwall, Inc., 137 Wn.2d 683, 695, 974 P.2d 836 (1999), the court held that extrinsic evidence may be relevant to determining the intent of restrictive covenants provided that the extrinsic evidence is relevant in giving meaning to the words used in the covenants. In applying the Berg principles in this context, just as with other contracts, such evidence cannot include evidence of a party‘s unilateral or
Remand to allow the parties an opportunity to submit extrinsic evidence about what was intended by the language regarding signs and whether it is relevant to duration is necessary before any conclusion can be made about intent to address length of rentals.
When extrinsic evidence is to be considered under the Berg line of cases, it is generally for the trier of fact. In Berg, 115 Wn.2d at 667, the court adopted Restatement (Second) of Contracts § 212 (1981), which provides:
“(1) The interpretation of an integrated agreement is directed to the meaning of the terms of the writing or writings in the light of the circumstances, in accordance with the rules stated in this Chapter. (2) A question of interpretation of an integrated agreement is to be determined by the trier of fact if it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence. Otherwise a question of interpretation of an integrated agreement is to be determined as a question of law.”
Berg, 115 Wn.2d at 667-68 (emphasis added) (quoting RESTATEMENT § 212).
Whether the trier of fact must make these determinations does not require that ambiguity appear on the face of the document. “[A] party may offer extrinsic evidence in a contract dispute to help the fact finder interpret a contract term and determine the contracting parties’ intent regardless of whether the contract‘s terms are ambiguous. Extrinsic evidence is not admissible, however, to show intention independent of the
In summary on this issue, I very strongly disagree with the majority‘s conclusion that the restriction on the size of “for rent” signs proves a conscious decision to permit rentals of any duration. The sign restrictions do not on their face disclose anything about duration of permitted rentals. If relevant intent is to be found in the restrictive covenants prior to adoption of the ban, it must be found by a trier of fact based on extrinsic evidence.
Whether the reservation of power in the covenants authorized a majority of the members of the association to adopt a ban on short-term rentals
The second question is whether the Association had the authority to adopt the ban on short-term rentals by majority vote. At the outset, I do not agree with the Court of Appeals’ artificial distinction in Meresse v. Stelma, 100 Wn. App. 857, 999 P.2d 1267 (2000), that dictates a difference in reserved authority depending on whether a change in covenants or a new restriction is at issue. This is the ill-advised theory adopted by the majority.
For this theory, Meresse relies on Lakeland Property Owners Ass‘n v. Larson, 121 Ill. App. 3d 805, 459 N.E.2d 1164, 1167, 1169, 77 Ill. Dec. 68 (1984). Meresse, 100 Wn. App. at 859. Referring to Lakeland Property Owners and other cases, the Colorado Supreme Court recognized a split in jurisdictions on the matter. Evergreen Highlands Ass‘n v. West, 73 P.3d 1, 4-7 (Colo. 2003).
I do not agree with the majority‘s view that we should treat reservation of power provisions differently depending on whether a change or amendment is made to an existing restriction or is by way of a new restriction. In either case, a modification is made to the covenants, and in the latter case, the modification is to the entire set of restrictions. Moreover, the distinction followed by the majority is flawed because the
The important guideline is that the change or addition must be reasonably consistent with the general plan of development, and it should make no difference whether a change is made to an existing restriction or a new restriction is added.
Here, the question is whether the restrictive covenants, as they existed before the ban, permitted a majority of the homeowners to approve a restriction limiting the minimum period for which homeowners may rent their houses in the communities. When covenants reserve power to less than all of the affected homeowners to adopt additional restrictions, then less than all may adopt restrictions provided this power is exercised in a reasonable manner and is consistent with the general plan of development. E.g., Shafer v. Bd. of Trs. of Sandy Hook Yacht Club Estates, Inc., 76 Wn. App. 267, 273-74, 883 P.2d 1387 (1994). The reason for this rule is that
[i]n a sense, there is an inherent inconsistency between an elaborate set of restrictive covenants designed to provide for a general scheme or plan of development (generally considered to be for the benefit of the respective grantees), and a clause therein whereby the grantor reserves to itself the power at any time in its sole discretion to change or even arbitrarily abandon any such general scheme or plan of development (a power which is solely for the benefit of the grantor).
Flamingo Ranch Estates, Inc. v. Sunshine Ranches Homeowners, Inc., 303 So. 2d 665, 666 (Fla. App. 1974), quoted in Lakemoor Cmty. Club, Inc. v. Swanson, 24 Wn. App. 10, 15, 600 P.2d 1022 (1979); see also Shafer, 76 Wn. App. at 273. Or, to put it another way, the rule ensures that a neighborhood will retain its essential nature and character as
As Justice Gordon McCloud‘s dissent notes, there may be circumstances where a court may be able to make this determination as a matter of law. But in many cases extrinsic evidence will be available that bears on the matter of whether an amendment to the restrictive covenants is reasonably consistent with the covenants. Under Berg‘s context rule, such evidence includes “the circumstances leading to the execution of the contract, the subsequent conduct of the parties and the reasonableness of the parties’ respective interpretations. Berg, [115 Wn.2d] at 667-69.” Shafer, 76 Wn. App. at 275.
The trial court realized that extrinsic evidence may well be relevant and admissible, but there is no indication that such evidence was considered here. In particular, evidence of surrounding facts may be highly relevant, i.e., in what environment were the restrictive covenants written. Particularly where the propriety of short-term rentals is concerned, the nature and character of the area and of other nearby developments may shed light on what is reasonably consistent with the restrictive covenants and what the property owners could reasonably expect.
If, for example, the development is in an area where short-term rentals are usually allowed in nearby, similar developments because of recreational activity in the vicinity that homeowners can take advantage of by making short-term rentals, it will be less likely that a ban on short-term rentals is reasonably consistent with the restrictive covenants.
But at this point, remand for consideration of the question of consistency with the existing covenants, including whether possible extrinsic evidence sheds light on this question, is appropriate as well.
I turn next, briefly, to another concern.
Whether a ban on short-term rentals is relevant to the restriction that lots must be utilized solely for single family residential use
Although not my reason for writing separately, I am troubled by the conclusion that because renters for short terms live in, eat in, sleep in, and so on, in the residence, there is no distinction to be drawn between a short-term rental, essentially renting to others for vacation use, and longer-term rentals where renters use the home as their primary residence. Individuals on vacation are not limited by constraints of the same kind as other renters. It seems odd to ignore the fact that many people equate vacations with freedom to act in ways outside their normal conduct. It is to be expected that spirits may be higher and conduct more uninhibited. Noise levels, for example, could well be higher as a consequence. Vacationers might not be as considerate of neighbors and their neighbors’ peace and quiet as if they were residents on a more permanent basis. It cannot be gainsaid that some on vacation consume alcoholic beverages to a greater degree than
I recognize that many courts have refused to accept the distinction, and without factual, almost scientific evidence, my view is not likely to prevail. Nonetheless, I think it almost disingenuous to act as if rentals for under 30 days are the same as renting to persons who use homes in the communities as their primary residences.
In conclusion, remand should be directed to permit submission of extrinsic evidence on the questions of whether the reference to rent signs in the covenants shows any intent about rental duration and whether the ban on short-term rentals is reasonably consistent with the existing covenants.
For the reasons stated, I dissent.
Madsen, C.J.
The question presented by this case is whether the homeowner-majority can do that, or whether this amendment is so inconsistent with the original covenants that the court should require homeowner unanimity to make this change. The majority answers this with a broad legal holding that all rental activity—presumably including hourly rentals—is protected by covenants like the ones at issue here, which certainly contemplated some rental activity but are actually silent on the topic of rental duration. This extremely broad holding ignores the limited and fact-specific
1. The majority‘s holding is so broad that it prospectively invalidates any limit on the duration of rentals
Before I address the majority opinion in detail, I pause to note the breadth of the trial court order it affirms. The majority characterizes this dispute as limited to the validity of the 2011 amendment prohibiting rentals of less than 30 days, majority at 5, but in fact, the Wilkinsons sought and obtained four separate rulings from the trial court:
- That the Plan of Development of Chiwawa River Pines (hereinafter “the Plan“) for phase 2 and for phases 3-6 each allow residential rentals of any duration - including residential rentals of less than 30 days.
- That specifically the Pope & Talbot Protective Covenants and the 1988 and 1992 Protective Covenants allow residential rentals of any duration - including residential rentals of less than 30 days.
- That a prohibition on commercial uses of lots as expressed by the Protective Covenants as set forth in the Pope & Talbot Covenants for phase [2] and for phases 3-6 and the 1988 and 1992 Covenants described above does not include residential rentals of any duration - including residential rentals for less than 30 days.
- That to the extent that the 2011 Amendment . . . seeks to bar residential rentals of any duration, including those of less than 30 days, it is unenforceable.
As the majority correctly observes, a court‘s primary objective in interpreting restrictive covenants is to determine the drafter‘s intent,2 and if that intent is not clear from the covenants’ plain language, then the court may consider extrinsic evidence.3 According to the majority, however, the language of the covenants makes it “manifestly clear that the drafters [of the Chiwawa River Pines covenants] intended
Second, despite the majority‘s protestations to the contrary, its reasoning does affirm the trial court‘s summary judgment in its entirety. The effect of this reasoning is a blanket prohibition on any amendments to the Chiwawa River Pines covenants that limit rental activity by duration. The majority leaves open the possibility that vacation rental activity may be limited in Chiwawa River Pines in other ways—perhaps by a ban on the provision of room service because that is too “commercial” under Mains Farm Homeowners Ass‘n v. Worthington, 121 Wn.2d 810, 816, 854 P.2d 1072 (1993)—but it absolutely prohibits any purely durational limit.
This is so because the majority‘s decision turns entirely on the “use” to which the property is put during the rental term. According to the majority, if that use is “‘eating, sleeping, and other residential purposes,‘” it is permitted “‘no matter how short the rental duration.‘” Majority at 11 (quoting Ross v. Bennett, 148 Wn. App. 40, 51-52, 203 P.3d 383 (2008)). Thus, according to the majority, there is no legal distinction in this case between a 30-day residential rental and a one-night residential rental.
If the majority believes that shorter term bans can be distinguished from bans on 30-day rentals, it should explain how. The Association came to this court assigning error to the trial court‘s contrary ruling, and this court accepted review.
I disagree. Instead, those covenants make it manifestly clear that the drafters intended to permit some rental activity, but it is not clear what type of rental activity the drafters contemplated—long-term, transient, or both. Because the covenants are ambiguous in this respect, extrinsic evidence is admissible to, in the majority‘s words, “‘illuminate what was written.‘” Majority at 8 (quoting Hollis, 137 Wn.2d at 697).
Further, because extrinsic evidence is admissible to clarify an ambiguity in a restrictive covenant, the meaning of the ambiguous language is at least in part a question of fact. Some lower courts, however, have erroneously characterized the interpretation of a restrictive covenant as solely a question of law.4 Both the trial court and the majority made that error here.
In the trial court, the Wilkinsons argued that any amendment “seek[ing] to bar residential rentals of any duration, including those of less than 30 days . . . is unenforceable” under Ross v. Bennett, 148 Wn. App. 40, 52, 203 P.3d 383 (2008). CP at 442-43, 466-67. They reasoned that because Ross held that “short-term
The trial court thus treated the meaning of a residential use provision as a question of law and foreclosed any factual inquiry into the intent embodied in the Pope & Talbot and 1988/1992 Chiwawa River Pines covenants. The majority repeats this error by stating that, under Ross, “[i]f a vacation renter uses a home ‘for the purposes of eating, sleeping, and other residential purposes,’ this use is residential, not commercial, no matter how short the rental duration.” Majority at 11 (quoting Ross, 148 Wn. App. at 51-52).
The majority misapprehends Ross‘s significance to this case and to the law of restrictive covenants in general. Ross was not a broad holding applicable to every
In contrast to the Ross court, the trial court in this case had very little evidence before it regarding the intent embodied in the original Pope & Talbot and 1988/1992 Chiwawa River Pines covenants. The trial court therefore ruled as a matter of law that short-term vacation rentals are always consistent with residential and single-family use.
To answer these questions, a court cannot simply rely on a prior appellate court‘s interpretation of one similar covenant provision in a case with different facts. Rather, the court must consider the disputed covenants in their entirety, along with any extrinsic evidence relevant to their interpretation. The majority refuses to acknowledge the admissibility of any extrinsic evidence at all in this case, because it concludes (apparently as a matter of law) that the drafters of the original and 1988/1992 Chiwawa River Pines covenants “anticipated rentals and consciously decided not to limit their duration.” Majority at 9 (emphasis added). This constitutes a major departure from precedent.9
For at least a decade, Washington courts have held that where a set of restrictive covenants empowers residents to adopt amendments by majority vote, those amendments are valid only so long as they are adopted “‘in a reasonable manner [and are] consistent with the general plan of development.‘” Majority at 14 (quoting Shafer v. Bd. of Trs. of Sandy Hook Yacht Club Estates, Inc., 76 Wn. App. 267, 273-74, 883 P.2d 1387 (1994)). Our courts have also recognized that an amendment is unreasonable as a matter of law where it imposes an obligation that differs fundamentally from those contemplated in the original covenants. Meresse, 100 Wn. App. at 866-67 (amendment authorizing access road‘s “relocation” unreasonable where original covenants addressed only “‘maintenance, repairs‘” and “‘additional constructions‘” involving said road, and the clause permitting future amendments was limited to certain topics).
In applying these holdings, our cases have never distinguished between amendments that “change” existing covenants and amendments that “create new restrictions.” Majority at 14 (emphasis added). But in today‘s opinion, the majority adopts that distinction as a new rule. This new rule contrasts covenants that permit homeowners to “change” existing covenants with covenants that permit
Instead, I would stick with current precedent, which holds that a court determines whether a restrictive covenant amendment is permissible—that is,
In its oral summary judgment ruling, the trial court below acknowledged the factual component of the “reasonable and consistent” inquiry.12 That court‘s orders, however, do not reveal any consideration of the facts “surrounding” the drafting of the original Pope & Talbot covenants or their consolidation in 1988/1992. This omission may reflect a need for guidance; unfortunately, the majority provides none.
While no Washington case precisely describes the scope of the “surrounding facts” inquiry, the North Carolina Supreme Court provides a useful guide:
A disputing party will necessarily argue that an amendment is reasonable if he believes that it benefits him and unreasonable if he believes that it harms him. However, the court may ascertain reasonableness from the language of the original declaration of covenants, deeds, and plats, together with other objective circumstances surrounding the parties’ bargain, including the nature and character of the community. For example, it may be relevant that a particular geographic area is known for its resort, retirement, or seasonal ‘snowbird’ population. Thus, it may not be reasonable to retroactively prohibit rentals in a mountain community during ski season or in a beach community during the summer. Similarly, it may not be reasonable to continually raise assessments in a retirement community where residents live primarily on a fixed income. Finally, a homeowners’ association cannot unreasonably restrict property rental by implementing a garnishment or ‘taking’ of rents (which is essentially an assessment); although it may be reasonable to restrict the frequency of rentals to prevent rented property from becoming like a motel.
Armstrong v. Ledges Homeowners Ass‘n, 360 N.C. 547, 559-60, 633 S.E.2d 78 (2006) (emphasis added). This approach rightly focuses on landowners’ reasonable expectations. “The character of the community” necessarily informs these expectations; it should therefore inform a court‘s assessment of what is reasonable
CONCLUSION
The trial court erred in concluding that the meaning of the disputed covenants in this case was a question of law controlled by prior precedent. The majority makes the same error. This deprives the parties of an opportunity to present evidence on how to interpret the original covenants and how to determine the homeowners’ reasonable expectations about how those covenants might be amended. This also substitutes the values of this court‘s majority for the values of the drafters and homeowners. Instead, I would remand for a proper factual inquiry. I therefore dissent.
Gordon McCloud, J.
Owens, J.
Wiggins, J.
Notes
The purpose of RAP 12.1(a) is to encourage efficiency and fairness and to give parties a certain degree of control over the theory of their case. To these ends, RAP 12.1(a) prevents an appellate court from finding an error that the parties did not assign. State v. Hubbard, 103 Wn.2d 570, 573-74, 693 P.2d 718 (1985). It also prevents appellate courts from deciding legal issues the parties have not argued “[unless] necessary to reach a proper decision.” Harris v. Dep‘t of Labor & Indus., 120 Wn.2d 461, 467-68, 843 P.2d 1056 (1993) (citing Alverado v. Wash. Pub. Power Supply Sys., 111 Wn.2d 424, 429-30, 759 P.2d 427 (1988)); see also RAP 12.1(b). But RAP 12.1(a) does not require this court to ignore portions of the summary judgment order to which the Association assigned error in this case.
This is so for two reasons. First, as the majority concedes, the Association assigned error to the trial court‘s entire summary judgment order. See majority at 2 n.1 (citing Br. of Appellant at 3-4). Having done so, the Association will surely be surprised to learn that the majority has decided not to address every issue in that order. As noted above, the trial court‘s summary judgment order stated that “to the extent that the 2011 Amendment . . . seeks to bar residential rentals of any duration, including those of less than 30 days, it is unenforceable.” CP at 443 (emphasis added). Clearly, the Association hoped that this court would recognize its authority to ban rentals of 30 days. I see no indication that it wanted this court, in the event that we upheld the trial court‘s ruling on the 30-day rental ban, to quietly leave in place the rest of the trial court‘s order banning rental limits of “any duration.” Id. Certainly, RAP 12.1(a) is not a license to do so.