Melvin R. Berlin Revocable Tr. v. Rubin

1

MELVIN R. BERLIN REVOCABLE TRUST, RANDY LAMM BERLIN REVOCABLE TRUST, JANIS HEHMEYER TRUST, CAROL J. NEWTON REVOCABLE TRUST, JEAN I. SMITH REVOCABLE TRUST, and STEPHEN L. SMITH REVOCABLE TRUST, Plaintiffs/Counterdefendants-Appellees, v. THOMAS C. RUBIN, NINA D. RUSSELL, and 14288 LAKESHORE ROAD, LLC, Defendants/Counterplaintiffs/Third-Party Plaintiffs-Appellants, and SWIFT ESTATES ASSOCIATES, also known as SWIFT ESTATES ASSOCIATES, INC., CHRISTOPHER HEHMEYER, and STEPHEN L. SMITH, Third-Party Defendants-Appellees.

No. 359300

Court of Appeals of Michigan

July 20, 2023

UNPUBLISHED

Berrien Circuit Court LC No. 2019-000034-CH

Before: SHAPIRO, P.J., and LETICA and FEENEY, JJ.

PER CURIAM

Defendants/counterplaintiffs/third-party plaintiffs, 14288 Lakeshore Road, Thomas C. Rubin, and Nina D. Russell (collectively, defendants) appeal as of right the injunction and judgment entered in favor of plaintiffs Melvin R. Berlin Revocable Trust, Randy Lamm Revocable Trust Janis Hehmeyer Trust, Carol J. Newton Revocable Trust, Jean I. Smith Revocable Trust, and Stephen L. Smith Revocable Trust (collectively, plaintiffs). We affirm.

I. BASIC FACTS AND PROCEDURAL HISTORY

Swift Estates is comprised of 10 large lots with nine homes spread over 22 acres; a private road (Swift Lane); a private beach on Lake Michigan; a private tennis court, and a pathway and stairs that go through a ravine to the beach. Seven of the nine homes are owner-occupied for at least six months of the year. Each of the plaintiff-trusts owns a lot in Swift Estates.^[1] Defendant 14288 Lakeshore Road, LLC (Lakeshore LLC), formed for the benefit of Laura and Scott Malkin. They purchased Swift Estates' Lot 8 and began renting the property in 2012. They reside in London, England. Defendants Thomas Rubin and Nina Russell, husband and wife, purchased Lot 5, and live in Washington.

Historically, Swift Estates owners occasionally rented their homes to family and friends. Scott and Laura Malkin, through Lakeshore LLC, acquired Lot 8 in 2011.^[2] According to Laura Malkin, being able to rent their Swift Estates home when they were not using it was an important factor in their decision to purchase the home. She asserted it was general knowledge that rentals were permitted in Swift Estates, and she claimed to receive confirmation of rentals through realtor Karen Strohl, and with the seller of the home. Shortly after they purchased the home, the Malkins signed a homeowner rental agreement with Aqua Vacation Rentals, which began to use its online platform to market the home as a seasonal vacation rental. Rentals began in summer 2012 and generated a number of complaints most revolving around the renters' use of the common properties, especially the subdivision's private beach. The complaints were addressed by Aqua Vacation Rentals and by the Malkins, who offered to adopt certain voluntary restrictions for their renters in response to the concerns of other owners. The Malkins' home rented 49 times from 2012 to 2018.

Rubin and Russell purchased their home in Swift Estates in 2017. Russell attested that being able to rent the home when they were not using it was critical to their decision to purchase it because the rental income offset the expenses of ownership. Rubin and Russell asserted that their broker, Strohl, contacted the president of the Swift Estates Association, the homeowners association that oversees Swift Estates, and was advised that rentals were permitted in Swift Estates. Rubin and Russell contracted with Aqua Vacation Rentals, which rented their home several times from 2018 to 2020.

Over the years, there was debate regarding whether rentals were allowed, and a formal opinion was eventually requested. The Association's attorney opined that short-term, transient rentals were not allowed, nor was renters' use of the common properties. The owners were advised of this opinion, and a special meeting of the Association was held to discuss the matter. When a consensus could not be reached, plaintiffs filed a complaint for declaratory and injunctive relief to enforce the Declaration that governed property use in Swift Estates. After the trial court issued a ruling that the Declaration did not allow short-term rentals, defendants counterclaimed against plaintiffs for acquiescence, unclean hands, equitable estoppel, laches, and waiver. Defendants also raised claims against third-party defendants, Stephen L. Smith and Christopher Hehmeyer, in their official capacities as Association officers for fraudulent misrepresentation, negligent misrepresentation, and silent fraud. Defendants later amended their third-party complaint to add Smith and Hehmeyer as defendants in their individual capacities, and added additional claims.

Ultimately, the trial court granted summary disposition in favor of plaintiffs addressing the interpretation of the Declaration.^[3] The trial court entered a permanent injunction prohibiting defendants from "all renting or leasing of their respective Swift Estates properties that do not have a single family residence purpose, as provided for in the July 15, 1977 Declaration of Covenants and Restrictions . . . including the enjoinment of short-term vacation rentals by Defendants which were [the] subject of this action." The injunction restricted use of the common properties to "lot owners/members, their respective resident family members, or those duly delegated tenants who reside upon the respective property instead of the lot owners/members under a leasehold interest" as long as "the names and relations of all such resident family members and/or delegated tenants to the lot owners/members have been provided to the Swift Estates Association's Secretary in writing." Defendants now appeal.

II. STANDARDS OF REVIEW

A trial court's ruling on a motion for summary disposition is reviewed de novo. Empire Iron Mining Partnership v Tilden Twp, 337 Mich.App. 579, 586; 977 N.W.2d 128 (2021). Summary disposition is appropriate under MCR 2.116(C)(10) if there is "no genuine issue as to any material fact, and the moving party is entitled to judgment or partial judgment as a matter of law." MCR 2.116(C)(10). When reviewing a motion for summary disposition challenged under MCR 2.116(C)(10), the court considers the affidavits, pleadings, depositions, admissions, and other admissible documentary evidence then filed in the action or submitted by the parties in the light most favorable to the nonmoving party. MCR 2.116(G)(4), (G)(5); Buhl v City of Oak Park, 507 Mich. 236, 242; 968 N.W.2d 348 (2021).

III. RESTRICTIVE COVENANTS

Defendants contend that the trial court erred in its interpretation of the deed restrictions to exclude rentals and improperly imposed dictionary definitions. We disagree.

The interpretation of restrictive covenants presents a question of law that this Court reviews de novo. Mazzola v Deeplands Dev Co, LLC, 329 Mich.App. 216, 223; 942 N.W.2d 107 (2019). The interpretation of a contractual agreement also presents a question of law subject to de novo review. Conlin v Upton, 313 Mich.App. 243, 254; 881 N.W.2d 511 (2015). "[D]eed restrictions allow landowners to preserve the neighborhood's character." Thiel v Goyings, 504 Mich. 484, 496; 939 N.W.2d 152 (2019). A covenant is a contract created with the intent to enhance the value of property and constitutes a valuable property right. Terrien v Zwit, 467 Mich. 56, 71; 648 N.W.2d 602 (2002); Hickory Pointe Homeowners Ass'n v Smyk, 262 Mich.App. 512, 515; 686 N.W.2d 506 (2004). "Deed restrictions preserve not only monetary value, but [also] aesthetic characteristics considered to be essential constituents of a family environment." Bloomfield Estates Improvement Ass'n, Inc v Birmingham, 479 Mich. 206, 214; 737 N.W.2d 670 (2007) (quotation marks and citation omitted). Because the foundation of a covenant lies in contract, the intent of the drafter is deemed controlling. City of Huntington Woods v City of Detroit, 279 Mich.App. 603, 628; 761 N.W.2d 127 (2008).

Restrictive covenants are examined on a case-by-case basis. O'Connor v Resort Custom Builders, 459 Mich. 335, 343; 591 N.W.2d 216 (1999); Aldrich v Sugar Springs Prop Owners Ass'n,___ Mich. App___,___;___ N.W.2d___(2023) (Docket No. 359664), slip op at 3. Restrictive covenants are strictly construed against the party seeking enforcement and any doubt must be resolved in favor of the free use of property. O'Connor, 459 Mich. at 341; Huntington Woods, 279 Mich.App. at 628. When the intent of the parties may be clearly ascertained, the courts must give effect to the whole instrument. Hickory Pointe Homeowners Ass'n, 262 Mich.App. at 515-516. Nonetheless, the intention to limit the use of property to maintain a residential neighborhood of a specific character, if established by proper instruments, are favored by definite public policy. Terrien, 467 Mich. at 72. The designated right to live in a district free from stores, garages, businesses, and apartment buildings is a valuable right. Id. The nullification of such restrictions would create an injustice to those property owners because the right of privacy in the home is a valid property right. Id. "It is the function of the courts to protect such rights through the enforcement of covenants." Id. Despite the rules of application pertaining to construction of a restrictive covenant, they must not be applied in a manner to defeat the plain and obvious purposes of the contractual instrument or restriction. Brown v Hojnacki, 270 Mich. 557, 560; 259 N.W. 152 (1935).

[A restrictive covenant] is to be construed in connection with the surrounding circumstances, which the parties are supposed to have had in mind at the time they made it, the location and character of the entire tract of land, the purpose of the

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