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Wilkinson v. Chiwawa Communities Ass'n

Supreme Court of Washington, En Banc

April 17, 2014

Ross Wilkinson et al., Respondents,
v.
Chiwawa Communities Association, Appellant

Argued March 19, 2013.

Page 615

Philip A. Talmadge (of Talmadge / Fitzpatrick ); Yen B. Lam (of Galvin Realty Law Group ); and Emmelyn Hart (of Lewis Brisbois Bisgaard & Smith LLP ), for appellant.

Dennis W. Jordan, for respondents.

Leslie J. Garrison on behalf of Gold Beach Community Club, amicus curiae.

AUTHOR: Justice Debra L. Stephens. WE CONCUR: Justice Charles W. Johnson, Justice Mary E. Fairhurst, Justice James M. Johnson, Justice Steven C. González. AUTHOR: Chief Justice Barbara A. Madsen. AUTHOR: Justice Sheryl Gordon McCloud. WE CONCUR: Justice Susan Owens, Justice Charles K. Wiggins.

OPINION

Page 616

Stephens, J.

[180 Wn.2d 244] ¶ 1 Chiwawa Communities Association (Association) appeals the trial court's grant of summary [180 Wn.2d 245] 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 rental of their homes for less than 30 days. We must decide if short-term vacation rentals conflict with the covenants in place prior to 2011, if the Association validly amended the covenants to prohibit them, and if the trial court erred by striking portions of the offered evidence. We hold short-term rentals do not violate the covenants barring commercial use of the property or restricting lots to single-family residential use. We also hold the Association exceeded its power to amend the covenants when it prohibited short-term vacation rentals in 2011, and the trial court did not err by granting in part motions brought by the Wilkinsons to strike evidence. Accordingly, we affirm the trial court. [1]

FACTS

¶ 2 Chiwawa River Pines (Chiwawa) is a planned residential community located in

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Chelan County. Clerk's Papers (CP) at 54-55. The community is comprised of a mix of permanent and vacation residents. CP at 134.

¶ 3 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 plan of [180 Wn.2d 246] development" for the community. See, e.g., CP at 55. Under the Pope & Talbot covenants, ownership of the property in Chiwawa automatically carries a right of membership in the Association. CP at 63, 67, 72, 75, 78. In 1988, a majority of the Association's members voted to consolidate the Pope & Talbot covenants into a single set of covenants governing all six phases of the development (1988 covenants). CP at 178, 186. The 1988 covenants preserved much from the earlier Pope & Talbot covenants, including the right of membership in the Association for all landowners, CP at 84, and the power " to change these protective restrictions and covenants in whole or in part" by majority vote, CP at 83. The 1988 covenants also carried over earlier restrictions on construction and land use from phases three through six, CP at 55-57, and restrictions on signage from phase two, compare CP at 63-64, with CP at 82. In 1992, the Association voted to eliminate the clause permitting construction of " one guest cottage" on Chiwawa lots, compare CP at 81, with CP at 85, but made no other material amendments. Thus, the resultant 1988/1992 covenants provide in pertinent part:

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 [180 Wn.2d 247] exception of horses, etc. stabled on the lot for short-term recreational activities complying with non-road 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.

¶ 4 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.

¶ 5 In response to member complaints, in 2007 the Association distributed a survey to gauge interest in barring what it characterized as

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" 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.

¶ 6 In a predecessor case, Ross and Cindy Wilkinson and other homeowners (collectively Wilkinsons) successfully challenged the 2008 amendment in superior court. Wilkinson v. Chiwawa Cmtys. Ass'n, noted at 162 Wn.App. 1005. The trial court granted [180 Wn.2d 248] summary judgment in their favor, declaring the prohibition on rentals invalid and unenforceable. Id. at *8. The trial court also fashioned sua sponte a new covenant that barred rentals of less than one month in duration. Id. at *12. The Wilkinsons successfully appealed this judicial rewriting. Id. at *13-14. The Court of Appeals held that the trial court lacked authority to rewrite the covenants except on motion, and approved, in dicta, the trial court's invalidation of the 2008 amendment. Id. at *12-14. No review of the decision was sought in this court.

¶ 7 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.

¶ 8 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 2011 amendment was invalid. 1 VRP at 35. The trial court rejected the Association's arguments that residential rentals of any duration are a " commercial" use of land and that renting a home to unrelated persons violates the single-family residential use covenant. See CP at 1087-89; 1 VRP at 35-37. The court also granted the Wilkinsons' evidentiary motions in part, striking comments from the 2007 member survey and portions of declarations by three Chiwawa residents. CP at 1101-02; 1 VRP at 35-36.

[180 Wn.2d 249] ¶ 9 The Association sought direct review in this court under RAP 4.2(a)(3) and (4). See Statement of Grounds for Direct Review at 14. The Association argues that the trial court wrongly ruled that short-term vacation rentals are consistent with single-family residential uses, that a majority of Chiwawa homeowners cannot amend the governing covenants to prohibit short-term vacation rentals, and that the 2007 survey and testimony from several homeowners were inadmissible. Br. of Appellant at 13-15. This court accepted direct review. Order, No. 86870-1 (Wash. Oct. 9, 2012).

ANALYSIS

¶ 10 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); CR 56(c). " Here, the parties largely agree[ ] on the material facts." Br. of Appellant at 15 n.7.

I. Vacation Rentals Are Not Commercial Uses and Are Consistent with Single-Family Residential Use Provisions

¶ 11 The Association argues that short-term vacation rentals are inconsistent with

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the governing restrictive covenants prohibiting commercial use and restricting lots to single-family residential use. See id. at 13. We disagree.

¶ 12 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 [180 Wn.2d 250] 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' collective interests.'" Id. at 623-24 (quoting Lakes at Mercer Island Homeowners Ass'n v. Witrak, 61 Wn.App. 177, 181, 810 P.2d 27 (1991)).

¶ 13 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 (2008) (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 its 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 [180 Wn.2d 251] 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.

¶ 14 As the text of the Chiwawa covenants demonstrates, the drafters included detailed provisions outlining what residents cannot do. From this it is evident that had the drafters wanted to prohibit rentals of a particular duration, they would have done so. The 1988/1992 covenants specify the rights and duties of Chiwawa residents in painstaking detail, spelling out, inter alia, the animals residents may keep, the minimum distance houses must be set back from the front lot line, the size of name signs residents may display, and their authority to bring enforcement actions. See CP at 81-82, 85-86. Most apparently, the drafters specifically anticipated and permitted rentals when they restricted the size of rental signs residents could hang. CP at 82, 86. Indeed, the limit on rental signage proves not just that the Pope & Talbot and 1988/1992 covenants allow some rentals but that the drafters anticipated rentals and consciously decided not to limit their duration, restricting just the appearance of rental signs.

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¶ 15 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 273-74, 275 n.13, 276-77. 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 [180 Wn.2d 252] 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." See Bauman v. Turpen, 139 Wn.App. 78, 90, 160 P.3d 1050 (2007) (permitting extrinsic evidence to clarify the meaning of the term " one story" ); Wimberly, 136 Wn.App. at 331, 337 (permitting extrinsic evidence to clarify the phrase " simple, well-proportioned structures" ); Day v. Santorsola, 118 Wn.App. 746, 750, 758, 76 P.3d 1190 (2003) (considering extrinsic evidence to determine whether a covenant that restricted homes to two stories addressed height as opposed to view). Such was the circumstance in all the cases that the dissent relies upon as support that we should admit extrinsic evidence in this instance. See dissent (Gordon McCloud, J.) at 276 n.15. Despite the dissent's belief, silence as to duration does not create ambiguity. Id. at 273-74. " 'It is the duty of the court to declare the meaning of what is written, and not what was intended to be written.'" Berg v. Hudesman, 115 Wn.2d 657, 669, 801 P.2d 222 (1990) (quoting J.W. Seavey Hop Corp. v. Pollock, 20 Wn.2d 337, 348-49, 147 P.2d 310 (1944)).

¶ 16 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.

¶ 17 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 of eating, sleeping, and other residential purposes," this use is residential, not commercial, no matter how short the rental duration. Ross, 148 Wn.App. at 51-52 [180 Wn.2d 253] (holding rental use was residential not commercial because such use " is identical to [the homeowner's] use of the property, as a residence, or the use made by a long-term tenant" ). " The owner's receipt of rental income either from short- or long-term rentals in no way detracts or changes the residential characteristics of the use by the tenant." Id. at 51. Nor does the payment of business and occupation taxes or lodging taxes detract from the residential character of such use to make the use commercial in character. See id . (determining that " whether the short-term rental is subject to state tax does not alter the nature of the use" ).

¶ 18 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 residential purposes only'" because it involved

Page 621

the exchange of money for care of persons unrelated to the homeowner. 125 Wn.2d at 447, 451 (emphasis omitted).

¶ 19 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' [180 Wn.2d 254] short-term rentals do not, without more, violate the 1988/1992 covenant prohibiting commercial use. [3]

¶ 20 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 can be built and how far from the front line they must be built. Read in context, the single-family covenant restricts only the type and appearance of buildings that may be constructed on the lot, not who may reside there. This reading is preferred as it " protects the homeowners' collective interest" and is consistent with how other states interpret single-family covenants. See generally Mark S. Dennison, Annotation, Construction and Application of " Residential Purposes Only" or Similar Covenant Restriction to Incidental Use of Dwelling for Business, Professional, or Other Purposes, 1 A.L.R.6th § 5, at 135 (2005).

[180 Wn.2d 255] ¶ 21 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).

¶ 22 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.

II. A Simple Majority Sought To Deprive Chiwawa Landowners of Their Property Rights, Inconsistent with the General ...


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