Thiel v. Goyings

504 Mich. 484

939 N.W.2d 152

Matthew T. THIEL and Nikole M. Thiel, Plaintiffs/Counterdefendants-Appellees,andWilliam Traywick and Marcia Traywick, Intervening Plaintiffs/Counterdefendants-Appellees,

v.David L. GOYINGS and Helen M. Goyings, Defendants/Counterplaintiffs-Appellants.

Docket No. 156708

Supreme Court of Michigan.

Argued on application for leave to appeal March 6, 2019

Decided July 24, 2019

McCormack, C.J. David and Helen Goyings designed and built a retirement home on a lakefront lot. Their neighbors insist that the Goyingses violated the subdivision’s restrictive covenants that bar "pre-fabricated or modular home[s]" (along with mobile homes, berm-houses, geodesic domes, shacks, and barns) and that they must tear it down.

After a three-day bench trial, the trial court found no cause of action and dismissed the case. But the Court of Appeals concluded that the trial court erred when it held that the covenants "did not contemplate a home of the type built by Defendants." The Court of Appeals reasoned that the Goyingses' home unambiguously fit the commonly understood definition of "modular" but never construed the disputed term used in the covenants—"modular home." The panel reversed and held that the trial court should have granted judgment in the neighbors' favor and ordered the Goyingses to tear down their new home.

We disagree. We reverse the Court of Appeals and affirm the trial court’s dismissal of the case.

I. FACTS AND PROCEDURAL HISTORY

Timber Ridge Bay is a subdivision on the shores of Big Lake in Allegan County. Fourteen of the sixteen residential parcels within the subdivision are subject to Timber Ridge Bay’s "Declaration of Restrictions, Covenants and Conditions," which was drafted by the developer and recorded with the county register of deeds in December 2006. At the time of trial, four homes had been built in the subdivision that were subject to these deed restrictions, covenants, and conditions.¹ Three of those belong to the Thiels, the Traywicks, and the Goyingses, respectively. The fourth homeowner has not joined in this litigation.

As relevant here, the covenants provide:

COVENANTS, RESTRICTIONS AND CONDITIONS

Section 1. Establishment of Restrictions. In order to provide for congenial occupancy of the Premises, and for the protection of the value of the Parcels therein, the Parcels 1-14 shall be subject to the limitations set forth below:

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B. Building and Use Restrictions.

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3. Relocated Residences. No residences, including modular, manufactured, mobile or prefabricated homes, may be moved from a location outside the Premises and placed or located within a Parcel within the Premises.

4. Manufactured Housing Units. No manufactured homes, whether classified as a mobile home, modular home, or otherwise, and no prefabricated homes shall be permitted on any Parcel in the Premises, regardless of which building codes are applicable to said homes.

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C. Residential Dwelling Restrictions

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4. Miscellaneous Provisions. The height of any building will not be more than four (4) stories. If any portion of a level or floor within a residence is below grade, all of the level or floor shall be considered a basement level. All residences shall be stick built on site and no geodesic dome, berm house, pre-fabricated or modular home, mobile home, shack or barn will be erected on any of the Parcels unless provided for herein.

The third sentence of § 1.C.4 is the source of the plaintiffs' complaint: the plaintiffs contend that the defendants' home violates the prohibition against erecting a "pre-fabricated or modular home."

When the Goyingses built their new home on a lakefront lot, they selected Heritage Custom Builders, Cassidy Builders, Inc., and Ritz-Craft Corporation of Michigan, Inc., to design and custom-build it. These builders specialize in system-built homes constructed using a hybrid method of homebuilding that integrates modular components into traditional, on-site, stick-built construction. The Goyingses custom-designed their home (including the modular components) using a computer-aided design program. They also selected the interior colors and finishes for the carpet, flooring, backsplashes, and countertops.

The majority of the home would be stick-built on-site. This included the entire lower-level walkout basement, garage, roof gables, roofing, front porch, stone columns, deck, and other portions of the home. But three modular components would be built off-site and delivered to the lot. Together these components matched the dimensions of the foundation and would be delivered on trailers, lowered into place using cranes, and secured to the foundation. From there, the components—described at trial as "just ... raw piece[s] of construction material"—would require on-site construction to be incorporated into the home and to make the home habitable. After delivery of the system-built components, the general contractor would go on to install a furnace, water heater, plumbing, drain lines, and duct work throughout the entire home and complete the on-site construction to incorporate the modular components. All told, the completed home would be composed of about 59% stick-built construction and 41% modular components.

The Goyingses began to build. They dug the basement, poured the foundation, and began on-site construction of the lower level. But the neighbors took notice when the Goyingses' custom-designed modular components (which were to make up the bulk of the ground-floor living space) arrived on trucks. That same day, the plaintiffs intervened—Mr. Thiel called the defendants to tell them that installation of the modular home on their parcel would violate the covenants. The Goyingses brushed off the objection, telling Mr. Thiel that a crane was scheduled to install the components the next morning and that they intended to move forward with construction. Mr. Traywick e-mailed the Goyingses to warn that the property owners would take legal action.

All the same, the crane arrived, and over the next two days it moved the modular components into place so that they could be incorporated into the site-built structure. The modules were attached to a foundation of the same square footage as the assembled modules. They completed the home construction with on-site stick-building to install plumbing, an electrical system, a furnace, shingles, a garage, gables, a porch, and a deck and finished the basement.

Plaintiffs Matthew and Nikole Thiel sued 10 days later, asking the Allegan Circuit Court to halt construction and order the modular components removed or destroyed. About a month after that, the Traywicks joined as intervening plaintiffs.

After the trial court denied the plaintiffs' combined motion for summary disposition, the case proceeded to a three-day bench trial. The court heard testimony from the Goyingses, the Traywicks, and the Thiels, as well as three other witnesses: a township building official, an appraiser, and the Goyingses' builder. The Court also received de bene esse deposition testimony from the attorney who drafted the restrictive covenant in 2006, Zachary Bossenbroek.

The parties do not dispute any of the trial court’s factual findings. The court determined that the "home meets all of the standards and specifications of a stick-built home." It found that systems-building was a hybrid method of construction similar to modular construction but ultimately determined that "systems built" homes and "modular" homes occupied discrete categories. It found that the testimony was uncontroverted that the overall quality of the Goyingses' home would equal or surpass that of homes that are stick-built on-site. The completed home would be indistinguishable from a stick-built home in material quality and workmanship because the modules were constructed out of the same materials as a stick-built home and the construction methods used in the factory were the same as those used to build a home on-site. The home was subject to the same residential building codes as a stick-built home. And the builder affixed the modules to the foundation just as it would a framed, stick-built home.

The court also found that the home’s hybrid construction would not be visible. It would be visually attractive, and, from appearances, "it [would be] unlikely that anyone would know that the home had been built anywhere but on the property." The court also determined that although the plaintiffs believed "that knowledge that the construction of the home involved three modules would reduce the value of the other homes in the area," they did not present any evidence from an "appraiser, expert or other witness to support their belief."

Finally, on the basis of testimony from the plaintiffs and de bene esse deposition testimony from the covenants' drafter, the court determined that the purpose of the covenants was to protect the value of the parcels by maintaining a consistent standard of aesthetics, quality, and value for all homes built within the subdivision. The covenants prohibited manufactured homes, mobile homes, and modular homes on the basis of the assumption that such homes " ‘are not typically going to be of a standard and of esthetic [sic] appeal as what a stick built home would be ....’ "

The trial court held that although the restrictions, covenants, and conditions in the deed might not seem to be ambiguous in their wording, the covenants did not contemplate a home like the Goyingses built, which does not fit neatly into either the modular or stick-built category. Therefore, the court concluded that, reading the covenants as a whole and resolving all doubts in favor of the free use of the property, the Goyingses' home conformed to the intent of the drafter. It held: "While an entirely modular, premanufactured or prefabricated home cannot be moved onto the properties located within Timber Ridge Bay, the home designed by [the Goyingses] is sufficiently constructed, valued, and congenial as to allow it to remain....