Title: Morgan v. Townsend

State: maine

Issuer: Maine Supreme Court

Document:

MAINE SUPREME JUDICIAL COURT 
Reporter of Decisions 
Decision: 
 2023 ME 62 
Docket: 
BCD-22-201 
Argued: 
January 12, 2023 
Decided: 
 September 5, 2023 
 
Panel: 
 STANFILL, C.J., and MEAD, JABAR, HORTON, CONNORS, and LAWRENCE, JJ. 
Majority: 
 JABAR, HORTON, CONNORS, and LAWRENCE, JJ. 
Dissent: 
 MEAD, J., and STANFILL, C.J. 
 
 
DEBRA MORGAN et al. 
 
v. 
 
ERIK S. TOWNSEND 
 
 
HORTON, J. 
 
[¶1]  Erik S. Townsend appeals from an entry of summary judgment by 
the Business and Consumer Docket (Duddy, J.) in an action brought by 
Townsend’s neighbors, Debra and Douglas Morgan and P. Jason Ward as 
Trustee of the P. Jason Ward Revocable Trust (collectively “the Morgans and 
Ward”).  The court issued a declaratory judgment and injunction based on its 
determination that Townsend’s short-term rentals of his oceanfront property 
have violated a deed restriction that limits the use and occupancy of the 
property and the structures on it.  We affirm the court’s declaratory judgment 
that Townsend’s rentals have violated the restriction, but we vacate the 
injunction against further violations because it needs to be more specific on 
 
2 
what does and does not comply with the deed restriction.  We remand for 
further proceedings consistent with this opinion. 
I.  BACKGROUND 
 
[¶2]  “The following facts are derived from the summary judgment 
record” and viewed in the light most favorable to Townsend.  Stiff v. Jones, 2022 
ME 9, ¶ 2, 268 A.3d 294.  We discern no disputed material facts. 
 
[¶3]  Townsend, the Morgans, and Ward own three neighboring 
oceanfront lots in a residential subdivision created in the 1960s by the 
McConchie brothers on a peninsula in the Town of Cushing.  Each lot in the 
subdivision is subject to a restrictive covenant contained in the deeds 
transferring the lot that, in one pertinent single sentence, provides, 
The premises herein conveyed shall not be used or occupied for 
any purpose other than for private residential purposes and no 
trade or business shall be conducted therefrom; and no building, 
structure, trailer, mobile home, object or thing whatsoever other 
than a private dwelling house for use and occupancy by one family 
and such out buildings as are usual, customary and appurtenant to 
a private residence shall be erected or placed thereon, and not 
more than one such dwelling shall be erected or placed on said 
lot[.] 
 
The restriction also specifies that it is intended to burden and benefit the other 
lots created from the same original tract: 
Conveyances of other lots from the tract of land of which the herein 
conveyed premises is a portion, shall be conveyed subject to the 
 
3 
above restrictions, which said restrictions shall inure to the benefit 
of the respective land owners from said original tract. 
 
 
[¶4]  The structures on Townsend’s five-acre lot are a five-bedroom, 
five-bathroom main house, and a two-bedroom, one-bathroom guest cottage 
with a kitchen.  He advertises the structures as providing sleeping space for up 
to thirty-two people.  The main house has a 900-square-foot recreation room, 
twenty-four commercial-grade Adirondack style chairs, a hot tub, a 
commercial-grade lobster cooker, a fire pit, outdoor recreation equipment, 
flood lighting, an outdoor deck, and a barbeque grill.  Townsend has not lived 
full-time on the property since the 1970s and has not visited it since 2019, but 
he continues to store personal belongings there. 
 
[¶5]  Both the Morgans and Ward have resided primarily at their 
properties since 2020.  Ward’s property also has a main house and guest house, 
although only the main house is winterized.  In addition to the main house, the 
Morgans’ property has a garage with an upstairs bedroom and bath. 
 
[¶6]  In 2019, Townsend began renting his entire property for short 
intervals to one group at a time.1  Townsend advertises his rental property on 
 
1  Prior to 2019, Townsend rented out only the guest cottage. 
 
4 
Vrbo and AirBnb.2  Townsend’s advertisements have described the property as 
the “[b]est oceanfront property for large groups on the coast of Maine!”  
Townsend has required rentals between May and November to be for a 
minimum of one week but has allowed shorter rentals between November and 
May.  Between May 2019 and September 2021, Townsend rented out the 
property to approximately fifty-nine groups (allowing up to thirty-two people 
in each group) with an average size of a dozen.  Townsend has not limited 
rentals of the property to family groups, nor has he inquired whether 
prospective renters are members of the same family. 
 
[¶7]  Townsend employs a property manager to coordinate rentals, 
cleaning, and maintenance, and he pays the manager fifteen percent of the 
rental income.  He reports the rental fees as income on his federal tax returns 
and indicates that the property is not for his personal use.  Townsend collects 
Maine lodging taxes on the rental fees and remits them to the state. 
 
2  Vrbo (an acronym for “Vacation Rentals by Owner”) and AirBnb are website businesses that 
connect owners of residential property with people seeking lodging.  Get to know Vrbo, Vrbo, 
vrbo.com/about (last visited Aug. 23, 2023), available at https://perma.cc/83WY-D9L3; About Us, 
Airbnb, news.airbnb.com/about-us/ (last visited Aug. 24, 2023), available at https://perma.cc/4GSE-
YJUB; see Nat Ives, Vrbo Changes Its Name to Match How People Say It, Wall St. J. (Mar. 27, 2019), 
https://www.wsj.com/articles/vrbo-changes-its-name-to-match-how-people-say-it-
11553659260#:~:text=The%20company%20long%20known%20as,%27, available at https://per
ma.cc/RM5Z-MRGT. 
 
5 
 
[¶8]  On June 17, 2020, the Morgans and Ward filed a two-count 
complaint against Townsend.  Their standing to assert their claims has never 
been in question because their title descended from the land that the 
McConchie brothers once owned, and their title is subject to the same 
restrictive covenant.  See Doyon v. Fantini, 2020 ME 77, ¶ 6 n.3, 234 A.3d 1222.  
The first count of their complaint sought a declaratory judgment that 
Townsend is violating the restrictive covenant by 
(i) erecting on the premises two structures designed to house 
transient guests; 
(ii) using the property and the structures for lodging houses; 
(iii) allowing dozens of people from multiple families to utilize the 
property simultaneously; and 
(iv) using the entirety of the property to operate a business. 
 
The second count asserted a nuisance claim against Townsend based on the 
noise associated with his rentals and trash left on the neighbors’ properties. 
 
[¶9]  The Morgans and Ward later filed an amended complaint to clarify 
that Ward’s land is held in a trust.  In August 2020, Townsend answered the 
complaint, and in March 2021, he filed a counterclaim.3  In his counterclaim, 
Townsend alleged that if he were in breach of the restrictive covenant then the 
 
3  Townsend also filed a third-party complaint that added several parties to the litigation, including 
neighbors whose lots are subject to the same restrictive covenant.  Many of the added parties filed 
motions to dismiss, which the court granted.  By the time of Townsend’s appeal, the parties added by 
the third-party complaint were no longer part of the case. 
 
6 
Morgans and Ward were also in breach of the same covenant.  In July 2021, the 
Morgans and Ward filed a second amended complaint to add a claim for 
injunctive relief.  The Morgans and Ward asked the court to permanently enjoin 
Townsend “from using his land or erecting or maintaining structures on his 
land in violation of the restrictive covenants in his deed.” 
 
[¶10]  In January 2022, the Morgans and Ward filed a motion for 
summary judgment.  Townsend opposed the motion and cross-moved for 
summary judgment on the grounds that his rentals of his property do not 
violate the restrictive covenant and that the Morgans and Ward had violated 
the restrictive covenants in their own deeds.  None of the parties’ summary 
judgment filings offered extrinsic evidence of the intent of the McConchie 
brothers in imposing the restrictions. 
 
[¶11]  On May 9, 2022, the court entered summary judgment in favor of 
the Morgans and Ward on their claims for declaratory judgment and injunctive 
relief, but denied summary judgment on the nuisance claim, citing genuine 
disputes of material fact.  In the same order, the court denied Townsend’s 
cross-motion on his counterclaim because he had failed to show that the 
Morgans and Ward had violated the restriction in their own deeds.  The court 
 
7 
observed that it did not need to reach the Morgans and Ward’s potentially 
applicable defenses of laches and unclean hands. 
 
[¶12]  Citing precedent from Maine and other jurisdictions, the court 
determined that the restrictive covenant unambiguously limited Townsend’s 
property and the structures on it to use and occupancy by one family.  It decided 
that Townsend’s pattern of short-term rentals to large groups, with no effort by 
him to determine whether each group constituted a family, violated the 
restriction’s requirement that the property be used and occupied for “private 
residential purposes,” as well as its requirement that the “single dwelling house 
[be] for use and occupancy by one family.”  The court also decided that the same 
pattern of rentals, along with Townsend’s tax treatment of the rental income, 
payment of lodging taxes, use of an accounting system, and retention of a 
property manager, demonstrated that Townsend “is using the [p]roperty to 
conduct a full-scale commercial business in violation of the restrictive 
covenant.”  The court held that the Morgans and Ward had waived any claim 
based on the presence of two dwellings on Townsend’s property.  The court 
entered an injunction as follows: “Townsend is permanently enjoined from 
using his Property in violation of the restrictive covenant contained in his 
deed.” 
 
8 
 
[¶13]  Townsend filed a motion to alter or amend the judgment to clarify 
the scope of the injunction.  M.R. Civ. P. 59(e).  The court denied the motion 
without comment.  Townsend timely appealed.4  See M.R. App. P. 2B(c)(1), 
(2)(D). 
II.  DISCUSSION 
 
[¶14]  This appeal presents the first occasion for us to consider the effect 
of a restrictive covenant that limits the uses of residential property upon 
short-term rentals through online services such as Vrbo and Airbnb. 
[¶15]  “We review a grant of a motion for summary judgment de novo, 
[and] view[] the evidence in the light most favorable to [Townsend]” as the 
nonmoving party.  Badler v. Univ. of Me. Sys., 2022 ME 40, ¶ 5, 277 A.3d 379 
(quotation marks omitted); see River Dale Ass’n v. Bloss, 2006 ME 86, ¶ 5, 901 
A.2d 809.  “A grant of summary judgment will be affirmed if there are no 
genuine issues of material fact and the undisputed facts show that the 
prevailing party was entitled to a judgment as a matter of law.”  Badler, 2022 
ME 40, ¶ 5, 277 A.3d 379 (quotation marks omitted).  “A fact is material if it has 
the potential to affect the outcome of the suit, and a genuine issue of material 
 
4  The court granted the parties’ consented-to motion to dismiss Count 2 (the nuisance claim) of 
the Morgans and Ward’s second amended complaint, thereby creating a final judgment.  
M.R. Civ. P. 41(a)(2). 
 
9 
fact exists when a fact-finder must choose between competing versions of the 
truth, even if one party’s version appears more credible or persuasive.”  Angell 
v. Hallee, 2014 ME 72, ¶ 17, 92 A.3d 1154 (quotation marks omitted). 
 
[¶16]  Our analysis begins with an overview of the law regarding 
interpretation of covenants and then turns to the deed restriction on the 
parties’ properties. 
A. 
Interpretation of a Restrictive Covenant in a Deed 
 
[¶17]  The interpretation of a deed containing a restrictive covenant 
presents a question of law that we consider de novo.  River Dale Ass’n, 2006 
ME 86, ¶ 6, 901 A.2d 809; Sleeper v. Loring, 2013 ME 112, ¶ 10, 83 A.3d 769.  
“The cardinal rule in the interpretation and construction of deeds, as in the case 
of any contract, is to seek to ascertain the intention of the parties.”  Sargent v. 
Coolidge, 399 A.2d 1333, 1344 (Me. 1979).  “In determining the intent of the 
parties to the deed, we look at the instrument as a whole.”  Windham Land Tr. 
v. Jeffords, 2009 ME 29, ¶ 24, 967 A.2d 690. 
 
[¶18]  In construing language within a deed, we first give words their 
plain and ordinary meaning to determine if they create any ambiguity.  Sleeper, 
2013 ME 112, ¶ 12, 83 A.3d 769; River Dale Ass’n, 2006 ME 86, ¶ 6, 901 A.2d 
809.  The ordinary or plain meaning of a term within a restrictive covenant is 
 
10 
determined by its dictionary definition if the covenant itself does not define the 
term.  See River Dale Ass’n, 2006 ME 86, ¶¶ 7-8, 901 A.2d 809.  “[I]f the language 
of a deed is unambiguous, it will guide interpretation of the parties’ intent.”  
Green v. Lawrence, 2005 ME 90, ¶ 7, 877 A.2d 1079 (quotation marks omitted).  
If language in a deed is ambiguous, meaning that it is susceptible of multiple 
interpretations and “the intention of the parties [to the deed] is in doubt,” then 
extrinsic evidence may be introduced to determine the parties’ or grantor’s 
intent.  Sylvan Properties Co. v. State Plan. Off., 1998 ME 106, ¶ 8, 711 A.2d 138; 
see Green, 2005 ME 90, ¶ 7, 877 A.2d 1079; N. Sebago Shores, LLC v. Mazzaglia, 
2007 ME 81, ¶ 13, 926 A.2d 728.  “In the absence of extrinsic evidence, the 
intent of the parties should be ascertained” by using the rules of construction 
of deeds.  Almeder v. Town of Kennebunkport, 2019 ME 151, ¶ 26, 217 A.3d 1111 
(quotation marks omitted).  The rules of construction of deeds require us “to 
give effect to the intention of the parties ascertained from the language used in 
the instrument, or the circumstances surrounding creation of the servitude, and 
to carry out the purpose for which it was created.”  Restatement (Third) of 
Prop.: Servitudes § 4.1(1) (Am. L. Inst. 2000); see 3 Michael Allan Wolf, Powell 
on Real Property § 24.04, Lexis (database updated 2023).  Any remaining 
“ambiguities [will] be resolved in favor of the interpretation that least restricts 
 
11 
the free use of the property.”  Doyon, 2020 ME 77, ¶ 8, 234 A.3d 1222.  If the 
covenantor’s intent remains in doubt, we will turn to public policy for guidance.  
Restatement (Third) of Prop.: Servitudes § 4.1(2); see 9 Michael A. Wolf, Powell 
on Real Property § 60.05. 
B. 
The Deed Restriction 
 
[¶19]  Bearing in mind that the deed is to be interpreted as a whole, there 
are three phrases that are especially pertinent and merit individual attention: 
• “[t]he premises herein conveyed shall not be used or occupied for any 
purpose other than for private residential purposes”; 
 
• “no trade or business shall be conducted therefrom”; and 
• “no building . . . other than a private dwelling house for use and 
occupancy by one family.” 
 
As have the parties and the court, we examine each in terms of its common 
meaning or meanings and then assess all three in the context of the restriction 
as a whole. 
 
1. 
“Private residential purposes” 
[¶20]  The term “private” has two unambiguous meanings relevant 
here—“not public” and “reserved for use.”  See Hines v. Heisler, 439 So. 2d 4, 6 
(Ala. 1983) (“We conclude that when the word ‘private’ is used in connection 
with the word ‘residence,’ it means single family residence.”); Flaks v. Wichman, 
 
12 
260 P.2d 737, 739 (Colo. 1953) (“The word ‘private’ has a clear meaning, and, 
as applied here, connotes that the word ‘residence’ as used in its singular sense 
is peculiar to the privacy of one . . . family, and would not apply to structures for 
two or more families.”); Fox v. Sumerson, 13 A.2d 1, 2-4 (Pa. 1940) (“The 
distinction between a private dwelling house or a private residence on the one 
hand and a house built or occupied as a residence for two or more families is 
quite obvious.  In the one case it is single, private, and personal; in the other it 
is a sort of tenement affair.” (quotation marks omitted)); see also Property, 
Private Property, Black’s Law Dictionary (11th ed. 2019) (“Property—
protected from public appropriation—over which the owner has exclusive and 
absolute rights.”).  The “not public” meaning somewhat favors the 
interpretation of the Morgans and Ward, because Townsend has advertised and 
made available the use and occupancy of his property to members of the public 
dozens of times.  The “reserved for use” meaning weighs somewhat in favor of 
Townsend’s interpretation because the use and occupancy of Townsend’s 
property has always been “private” for the group renting it.  We conclude that 
the restriction’s use of the word “private” serves simply to limit Townsend’s 
rentals to one group at a time.  There is no evidence that Townsend has ever 
violated that limitation. 
 
13 
 
[¶21]  Regarding the “residential purposes” term of the covenant, what 
appears to be a slight majority of the courts that have interpreted the word 
“residential” in the context of deed restrictions has deemed it not to preclude 
short-term rentals.  See, e.g., Slaby v. Mountain River Ests. Residential Ass’n, 100 
So. 3d 569, 578-79 (Ala. Civ. App. 2012); Lowden v. Bosley, 909 A.2d 261, 267-69 
(Md. 2006); Tarr v. Timberwood Park Owners Ass’n, 556 S.W.3d 274, 288-92 
(Tex. 2018); Craig Tracts Homeowners’ Ass’n v. Brown Drake, LLC, 477 P.3d 283, 
286-87 (Mont. 2020); Lake Serene Prop. Owners Ass’n v. Esplin, 334 So. 3d 1139, 
1142-43 (Miss. 2022).  As the Montana Supreme Court in Craig Tracts observed, 
“[t]hese decisions focus on what is being done at a particular premises, not how 
long any particular individual is doing the activity for.”  477 P.3d at 286 
(emphasis in original).  The Court of Appeals in Lowden noted, “[t]he word 
‘residential’ has been applied to apartment buildings, fraternity houses, hotels, 
and bed-and-breakfasts, because such structures are used for habitation 
purposes.  The transitory or temporary nature of such use does not defeat the 
residential status.”  909 A.2d at 267 (citations omitted); see also 334 So. 3d at 
1142 (“Even though the property had been rented out for as little as one 
day, . . . when the property is used as a place of abode, the use is considered 
residential no matter how short the rental period.”). 
 
14 
 
[¶22]  Other courts have concluded that, in the context of both deed 
restrictions and zoning regulations, short-term property rentals are not 
consistent with “residential” uses and character.  See, e.g., Styller v. Zoning Bd. 
of Appeals, 169 N.E.3d 160, 170-71 (Mass. 2021); Slice of Life, LLC v. Hamilton 
Twp. Zoning Hearing Bd., 207 A.3d 886, 899-904 (Pa. 2019); Hensley v. Gadd, 
560 S.W.3d 516, 521-26 (Ky. 2018); Bostick v. Desoto Cnty., 225 So. 3d 20, 23-26 
(Miss. Ct. App. 2017); O’Connor v. Resort Custom Builders, Inc., 591 N.W.2d 216, 
219-21 (Mich. 1999); Ewing v. City of Carmel-By-The-Sea, 286 Cal. Rptr. 382, 
388-90 (Cal. Ct. App. 1991). 
 
[¶23]  Our own precedent includes a few decisions in which we have 
considered covenants that limit use of property to “residential purposes” or 
“residential uses,” or disallow use for “commercial” purposes.  See Silsby v. 
Belch, 2008 ME 104, ¶¶ 2, 8-14, 952 A.2d 218; Sanseverino v. Gregor, 2011 ME 
8, ¶¶ 9-10, 10 A.3d 735; Jeffords, 2009 ME 29, ¶¶ 24-36, 967 A.2d 690.  In Silsby, 
we considered residential restrictions without defining the word “residential.”  
See generally Silsby, 2008 ME 104, 952 A.2d 218.  In Jeffords, we defined the 
word “residential” in a way that appears to favor the interpretation that the 
Morgans and Ward give the covenant here but on closer review is more neutral.  
2009 ME 29, ¶¶ 27-28, 967 A.2d 690. 
 
15 
 
[¶24]  In Jeffords, a land trust that held a conservation easement limiting 
use of the burdened property to “residential recreational purposes” sued the 
property owners, claiming that the owners’ plan to open the property to paying 
members of the public for fishing, skiing, hiking, and sleigh rides violated the 
easement.  Id. ¶¶ 2-10.  We agreed with the land trust, based on our 
interpretation of “residential”: 
We apply the common, everyday understanding of the word 
“residential,” which is “of or relating to residence or residences.”  
Webster’s New Collegiate Dictionary 977 (1979).  The definition of 
“residence” is understood to include: “1a: the act or fact of dwelling 
in a place for some time; b: the act or fact of living or regularly 
staying at or in some place for the discharge of a duty or the 
enjoyment of a benefit; 2a(1): the place where one actually lives as 
distinguished from his domicile or a place of temporary sojourn.”  
Id. 
 
The meaning of “residential recreational purposes,” 
therefore, refers, unambiguously, to recreational activities 
associated with those who are regularly living at that locale.  Thus, 
the deed’s several references to “residential recreational purposes” 
indicate the parties’ intent to restrict the use of the Protected 
Parcel to the residents of the front fifteen acres for their 
recreational purposes, and to preclude the income-producing 
or -generating uses proposed by the Owners. 
 
Jeffords, 2009 ME 29, ¶¶ 27-28, 967 A.2d 690. 
 
 
[¶25]  What distinguishes Jeffords from this case, however, is that the 
servient owner sought to open the burdened property to recreational use by 
day visitors, i.e., people whose use could not be deemed “residential” under any 
 
16 
reasonable definition of the term.  Id. ¶¶ 32, 36.  The issue of whether 
“residential recreational purposes” would extend to recreational use of the 
property by overnight guests was not before us. 
 
[¶26]  To say that a covenant limiting use of property to “private 
residential purposes” means literally that only persons legally domiciled at the 
property may spend the night there would impose a wholly impractical 
limitation on property by prohibiting the owner from inviting friends, family, 
and other guests to visit.  Such a stance would likewise be contrary to the 
principle of construing restrictive covenants in favor of the free use of property.  
Doyon, 2020 ME 77, ¶ 8, 234 A.3d 1222.  We therefore do not interpret the 
phrase “private residential purposes” in the covenant, standing alone, to 
prevent Townsend or any of the other lot owners from inviting overnight 
guests, including paying guests, to their properties.  Still, we do not exclude the 
possibility that Townsend’s practice of renting it in absentia on a short-term 
basis to dozens of groups yearly could have an adverse effect on the residential 
character of the neighborhood and thus violate the “private residential 
purposes” provision of the covenant.  Exploring that possibility would entail a 
fact-intensive inquiry, similar in focus to the inquiry that the Morgans and 
Ward’s nuisance claims would have entailed had they been pursued, and the 
 
17 
court’s grant of summary judgment on this ground might not stand.  See River 
Dale Ass’n, 2006 ME 86, ¶¶ 12-13, 901 A.2d 809.  However, it becomes 
unnecessary for us to proceed further regarding “private residential purposes” 
because we agree that the Morgans and Ward were entitled to summary 
judgment on their contention that Townsend has violated the “no trade or 
business” provision of the covenant. 
2. 
“No trade or business shall be conducted therefrom” 
 
[¶27]  The Morgans and Ward argue that Townsend conducts a business 
on his property akin to an unhosted hotel or bed-and-breakfast business 
because he regularly rents his property to large groups, receives rental income, 
pays lodging taxes on that income, reports that income on his taxes, and 
maintains an accounting system.5  Townsend points out that he only rents to 
one group at a time.  He also relies on our clear precedent to the effect that the 
owner of residential property does not engage in commercial activity merely 
by renting the property.  See Silsby, 2008 ME 104, ¶¶ 11-14, 952 A.2d 218. 
 
5  The Morgans and Ward also point to various components of Townsend’s property as evidence 
of business activity: the 900-square-foot recreation room, the twenty-four commercial-grade 
Adirondack chairs, the hot tub, the commercial-grade lobster cooker, the fire pit, the outdoor 
recreation equipment, the flood lighting, the outdoor deck, and the barbeque grill.  Although these 
amenities could be consistent with the operation of a business, they are not necessarily inconsistent 
with an owner-occupied property. 
 
18 
 
[¶28]  Townsend’s deed does not define the meaning of “trade or 
business,” and the dictionary includes at least ten different definitions.  One 
definition of “business” refers to “a commercial or industrial establishment; 
store, factory, etc.”  Business, Webster’s New World College Dictionary 
(5th ed. 2016).  The definition of “business” contained in the Maine tax statute 
is even broader: “any activity engaged in with the object of gain, benefit or 
advantage, either direct or indirect.”  36 M.R.S. § 1752(1-C) (2023). 
 
[¶29]  The fact that Townsend and his property manager are not on the 
property while renters are present may distinguish Townsend’s property from 
a hotel and a bed-and-breakfast establishment, but it does not necessarily mean 
that he is not operating a trade or business at the property.  Businesses with 
physical premises accessible to customers—for example, laundromats, parking 
lots, amusement arcades, ATM locations, and farmstands—may operate 
without any staff on site. 
 
[¶30]  In Silsby, we considered whether the conversion of an existing 
single-family structure into a three-unit apartment building violated a 
restrictive covenant that prohibited use of the property “for any commercial 
purposes.”  2008 ME 104, ¶¶ 3, 11-14, 952 A.2d 218 (quotation marks omitted).  
We said that “the fact that this use may involve income in some fashion does 
 
19 
not change a fundamentally residential use to a commercial enterprise.”  Id. 
¶ 14.  We further commented that to hold otherwise “would result in an 
affirmative rule of law holding that every single- or multi-family residence that 
is rented for use by someone other than the owner is a commercial enterprise.  
Under such a rule of law, innumerable properties would invariably run afoul of 
local zoning ordinances prohibiting commercial uses.”  Id.  In the context of 
residential property rental, the rule of Silsby is that the owner of a three-unit 
building who rents to long-term tenants is not running a business at the 
property.  Silsby, 2008 ME 104, ¶¶ 11-14, 952 A.2d 218.  Though the restriction 
at issue here derives from a covenant rather than an ordinance, and though the 
covenant does not utilize the word “commercial,” the analogy to Silsby remains 
apropos.  That Townsend rents his property and has a property manager does 
not establish that he is operating a trade or business there. 
 
[¶31]  On the other hand, Townsend’s claim that he is not running a 
business on the property is contrary to the growing trend among state and local 
governments, in Maine and elsewhere, to regulate short-term rentals—often 
defined to mean rentals for fewer than thirty days at a time—as a business 
activity.  See, e.g., 30-A M.R.S. § 4364-C(2) (2023) (authorizing municipalities to 
“establish and enforce regulations regarding short-term rental units”); 
 
20 
Bar Harbor, Me., Code § 174 (Sept. 7, 2021), https://ecode360.com/37980653 
(last visited Aug. 30, 2023), available at https://perma.cc/24DJ-S3DK; 
Falmouth, 
Me., 
Code 
ch. 
II-23 
(July 
26, 
2021), 
https://online.encodeplus.com/regs/falmouth/doc-viewer.aspx#secid-778, 
(last visited Aug. 30, 2023), available at https://perma.cc/L4DN-9LR3; 
Commission to Increase Housing Opportunities in Maine by Studying Land Use 
Regulations and Short-term Rentals, 130th Legis. 49-52 (Nov. 2022) (providing 
a summary of Maine municipal short-term rental ordinances compiled by the 
Maine Legislature’s Office of Policy and Legal Analysis); see generally Nicholas 
E. Anania, Comment, The Short-Term Rental Economy in Rural Maine 
Communities: An Opportunity for Economic Growth Instead of a Target for 
Regulation, 71 Me. L. Rev. 341, 352-55 (2019) (reviewing Maine municipal 
ordinances regulating short-term rentals).  The fact that Townsend’s rentals 
are subject to the Maine sales tax imposed on lodging is also indicative of the 
operation of a business, because it means that his rentals are treated as if he 
were operating a hotel or rooming house.  36 M.R.S. § 1811(1)(D)(3) (2023) 
(sales tax assessed at “[n]ine percent on the value of rental of living quarters in 
any hotel, rooming house or tourist or trailer camp”).  The lodging tax 
obligation is the direct result of the short-term nature of his rentals because 
 
21 
rentals of more than twenty-eight days to persons who reside at the property 
are exempt from sales and use tax.  See 36 M.R.S. § 1760(20)(A) (2023). 
 
[¶32]  Townsend’s fifty-nine rentals in twenty-eight months equates to 
an average of more than two a month, or twenty-four per year.  “Frequency of 
sales is one criterion of a business.”  Adam v. Comm’r, 60 T.C. 996, 1001 (1973).  
Although “[n]o arbitrary or definite rule can be laid down which would describe 
the boundary between the doing of certain infrequent or isolated transactions 
for profit and the continuous and habitual carrying on of such transactions to 
such an extent as to amount to a regular business,” Kaplan v. Gaskill, 187 N.W. 
943, 945 (Neb. 1922), that does not mean that the boundary can never be 
drawn.  A household that puts items in the driveway to sell on one Saturday is 
holding a garage sale; a household that does it every Saturday is operating a flea 
market business.  Townsend’s pattern of use, maintenance, advertising, and 
holding out of his property brings his rentals squarely within the definition of 
a business, such as a “hotel.”  See 36 M.R.S. § 1752(4) (“‘Hotel’ means every 
building or other structure kept, used, maintained, advertised as or held out to 
the public to be a place where living quarters are supplied for pay to transient 
or permanent guests and tenants.”). 
 
22 
 
[¶33]  We conclude that the court was correct in deciding that the 
undisputed facts show that Townsend has been using the property to operate 
a business on his property in violation of the covenant.6 
 
3. 
“No building . . . other than a private dwelling house for use and 
 
 
occupancy by one family” 
 
 
[¶34]  Of the three restrictions contained in the covenant, the “one 
family” restriction is the most ambiguous in terms of both its interpretation and 
its enforcement.  The Morgans and Ward argue that Townsend has violated the 
 
6  The Dissent contends that Townsend is not violating the “no trade or business” provision of the 
covenant because the pertinent provision includes the word “therefrom” as opposed to “therein” or 
“thereon” and notes that “[n]one of Townsend’s rentals are taking place from the property—they take 
place wholly upon the property.”  Dissenting Opinion ¶ 44.  This interpretation of the covenant would 
mean that Townsend could operate a hotel, a bed and breakfast, or a campground on his property, 
because all those businesses would operate on the property and cater to overnight guests.  In fact, 
like any business with a physical location, Townsend’s rental business seeks to attract customers to 
his property, and in that sense, it operates from, on, and at his property. 
 
The Dissent states, “If the grantors intended to forever bar residential rentals of the property, the 
deed language could have, and presumably would have, explicitly said so.”  Id.  We do not construe 
the covenant to bar residential rentals, only the operation of a short-term residential rental business.  
See supra ¶ 26. 
 
The Dissent also suggests that our opinion “provides no rationale or quantitative standards for 
how parties and the trial courts are to define what constitutes a ‘trade or business’ in this frequently 
occurring setting.”  Dissenting Opinion ¶ 48.  We have decided that because Townsend’s sole use of 
his property is to rent it very frequently and exclusively for short periods, he is conducting a business 
from and at his property in violation of the covenant.  See supra ¶¶ 32-33.  If he rented it month-to-
month or year-to-year, or if he rented it only occasionally for short periods, he would not be.  See 
supra ¶ 31.  The Dissent also faults our decision for not defining in concrete numerical terms what 
rentals the covenant does and does not permit.  Dissenting Opinion ¶ 48 (“The Court’s model 
anticipates a continuum based in part on the degree of use where, at some undefined tipping point, 
the rental of a vacation property ceases to be a ‘non-business’ and becomes a business.”).  We easily 
could define a “tipping point,” but we view the promulgation of specific standards for the permanent 
injunction as, at least initially, a task for the trial court with input from the parties.  See infra ¶ 39 & 
n.9. 
 
23 
“one family” restriction in the covenant by renting the property to groups of up 
to thirty-two people without verifying that they are members of one family.  
Townsend responds by pointing out that there is no evidence that any of his 
fifty-nine groups of up to twenty-eight people have not consisted of members 
of a family. 
 
[¶35]  Relying on our decisions in Silsby and in Boehner v. Briggs, 528 A.2d 
451 (Me. 1987),7 Townsend contends that the restriction’s linkage of the “one 
family” reference to the description of the dwelling demonstrates an intent only 
to “limit[] the type of structure to a single-family dwelling, i.e., a single family 
dwelling is permitted, but a multi-unit or apartment building is not.”  The 
Morgans and Ward respond by pointing out that the restriction’s phrasing, “a 
private dwelling house for use and occupancy by one family,” consists of a 
description of the structure—“private dwelling house” followed by a separate 
 
7  In Silsby, one issue was whether a deed restriction limiting structures to those that “serve a 
homestead” should be construed to prohibit construction of a three-unit apartment building on the 
property.  Silsby v. Belch, 2008 ME 104, ¶¶ 3-4, 8-10, 952 A.2d 218.  The opponent of the project 
contended that “the use of the word ‘homestead’ in the covenants . . . creates, as a term of art, a use 
restricted to owner-occupied, single-family dwellings.”  Id. ¶ 8.  We rejected that interpretation, 
noting that “[t]he plain language of the deeds does not invoke the word ‘homestead’ to define the use 
of the property.  On the contrary, ‘homestead’ is used to describe the type and character of 
outbuildings that may be constructed upon the property.”  Id. ¶ 9.  In Boehner v. Briggs, we considered 
a challenge to the construction of an addition to a home on property subject to a deed restriction 
prohibiting the erection of “more than a one family dwelling on the . . . premises.”  528 A.2d 451, 452 
(Me. 1987).  We explained that the addition did not violate the covenant because “[t]he new structure 
does not contain any kitchen facilities to support a separate family nor a full bath.  There is no 
evidence in the record that the new structure will house a family other than the Briggs’ immediate 
family.”  Id. at 453. 
 
24 
limitation that can only be construed to apply to how the structure may be used 
and occupied. 
 
[¶36]  What undercuts the Morgans and Ward’s argument is that the “one 
family” restriction cannot be construed strictly or literally; if it were, no 
unrelated houseguest could ever be invited to stay the night on any of the 
properties subject to the restriction.  In addition, the definition of “family” has 
plainly evolved over the decades since the covenant was instituted.  Keeping 
those points in mind, along with the precept favoring the free use of property, 
Doyon, 2020 ME 77, ¶ 8, 234 A.3d 1222, we conclude that the single-family 
limitation can reasonably be interpreted to indicate that at least some of the 
people who are occupying and using the property at any given time should be 
related in some way.  The record does not establish that any of Townsend’s 
rental groups failed to meet that standard. 
4. 
The Restriction as a Whole 
 
[¶37]  Viewing the restriction as a whole, we conclude that, by using his 
property exclusively for short-term rentals, Townsend is operating a business 
at the property in violation of the covenant.  We therefore agree with the court 
that the Morgans and Ward are entitled to injunctive relief to prevent future 
violations. 
 
25 
C. 
The Injunction 
 
[¶38]  The court’s judgment includes an injunction stating only that 
“Townsend is permanently enjoined from using his Property in violation of the 
restrictive covenant contained in his deed.”  The court later denied Townsend’s 
motion pursuant to M.R. Civ. P. 59(e) seeking clarification.  “Rule 65(d) of the 
Rules of Civil Procedure requires that an injunction be specific in terms and 
describe in reasonable detail the act or acts sought to be restrained.”  
Sebago Lake Camps, Inc. v. Simpson, 434 A.2d 519, 522 (Me. 1981) (alteration 
and quotation marks omitted); see M.R. Civ. P. 65(d).  Rule 65(d) requires 
specificity and “reasonable detail” so that courts create injunctions that provide 
a clear understanding of what is allowed and what is prohibited.  
M.R. Civ. P. 65(d); Sebago Lake Camps, Inc., 434 A.2d at 523.  We agree with 
Townsend that the injunction against him needs to be recrafted. 
 
[¶39]  The interpretation that we have given the deed restriction does 
not prohibit Townsend from renting his property.  Two forms of rental do not 
violate the prohibition of the conduct of a trade or business from the property.  
A year-round or month-to-month rental of the property to a single group clearly 
would not violate the covenant because it would not constitute business or 
commercial activity under Silsby and also would fall outside the common 
 
26 
definition of “short-term rental” to mean rentals for fewer than twenty-eight 
days.  Similarly, occasional short-term rentals to one group at a time totaling a 
small number of days per year would not indicate the conduct of a trade or 
business.  See 36 M.R.S. § 1764 (2023) (generally exempting from sales and use 
tax “casual rentals” of a single residential unit for fewer than fifteen days per 
year).  On remand, the court should recraft the injunction to define “short-term 
rental” and to set a limit, consistent with the definition, on the number of days 
per year that Townsend may use the property for short-term rentals.  As noted 
above, one source for defining “short-term rental” consists of municipal 
ordinances and state laws regulating short-term rentals.  See supra ¶¶ 27-33.  
Guidance for setting the limit on the total days per year permitted for 
short-term rentals may also be found in the distinctions that federal and state 
tax laws have drawn between business rentals and non-business rentals of 
residential properties.8  The court may, in its discretion, convene an evidentiary 
hearing limited to the question of what specific terms should be included in a 
 
8  Federal income tax law provides that if the owner of a residence rents the property for fewer 
than fifteen days per year, rental receipts need not be reported as income and any rental expenses 
are not deductible.  26 U.S.C.A. § 280A(g)(1)-(2) (Westlaw through Pub. L. No. 118-10).  As previously 
discussed, Maine tax law does not treat residential rentals of twenty-eight days or more as subject to 
the sales tax imposed on lodging, consistent with our jurisprudence holding that a long-term 
residential rental is not inherently a commercial or business activity.  36 M.R.S. § 1760(20)(A) 
(2023); Silsby, 2008 ME 104, ¶¶ 11-14, 952 A.2d 218.  Maine also exempts from lodging tax casual 
rentals, meaning “rental of living quarters rented for a total of fewer than 15 days in the calendar 
year.”  36 M.R.S. § 1764 (2023). 
 
27 
permanent injunction,9 and in any event may invite recommendations from the 
parties on these and other aspects of the injunction, including verification 
procedures and requirements for enforcing, modifying, or terminating the 
injunction. 
 
[¶40]  We therefore affirm the court’s judgment as to Townsend’s 
violation of the covenant, vacate the injunction, and remand for the court to 
amend the injunction. 
The entry is: 
 
Injunction vacated.  Judgment affirmed in all 
other 
respects. 
 
Remanded 
for 
further 
proceedings consistent with this opinion. 
 
 
 
 
 
 
 
 
 
MEAD, J., with whom STANFILL, C.J., joins, dissenting. 
 
[¶41]  I respectfully dissent. 
 
9  An evidentiary hearing is not required on whether the Morgans and Ward are entitled to 
injunctive relief because the essential facts are undisputed.  See Wedgewood Ltd. P’ship I v. Twp. of 
Liberty, 610 F.3d 340, 349 (6th Cir. 2010) (“In the usual course, a district court should conduct an 
evidentiary hearing before issuing a permanent injunction.  However, because no factual issues 
remained for trial, the district court’s decision to grant a permanent injunction without such a 
hearing can still be upheld if it properly granted summary judgment . . . .”) (alterations, quotation 
marks, and citation omitted).  However, there may be factual questions relating to relief—the terms 
of the injunction—that should be developed at a hearing.  See United States v. Microsoft Corp., 253 
F.3d 34, 101 (D.C. Cir. 2001) (“A hearing on the merits—i.e., a trial on liability—does not substitute 
for a relief-specific evidentiary hearing unless the matter of relief was part of the trial on liability, or 
unless there are no disputed factual issues regarding the matter of relief.”). 
 
28 
[¶42]  I do not disagree with the Court’s recitation of facts,10 identification 
of the issues, standards for reviewing summary judgments, identification of 
principles for the interpretation of deed restrictions, or well-reasoned analysis 
of the “private residential purposes” and “occupancy by one family” issues.  I 
do, however, depart from the Court’s conclusion that the “no trade or business” 
restrictive covenant in these parties’ deeds limits Townsend’s prerogative to 
make use of his property by renting it as a vacation destination.  The Court’s 
particular focus on the frequency and length of Townsend’s rentals in 
determining whether the practice constitutes a business creates, in my view, an 
elusive standard with enormous implications for the legions of Maine property 
owners who derive income from the rental of their residential properties, 
particularly in the summer months. 
[¶43]  As noted by the Court, the parties’ deeds contain the following 
restrictive covenant in a single sentence: 
The premises herein conveyed shall not be used or occupied for 
any purpose other than for private residential purposes and no 
trade or business shall be conducted therefrom; and no building, 
structure, trailer, mobile home, object, or thing whatsoever other 
than a private dwelling house for use and occupancy by one family 
and such out buildings as are usual, customary and appurtenant to 
a private residence shall be erected or placed thereon, and not 
 
10  I would note the fact that Count 2 in the original complaint alleging nuisance has been 
voluntarily dismissed without prejudice and remains available to the appellees as an alternative 
means of addressing their grievances. 
 
29 
more than one such dwelling shall be erected or placed on said 
lot[.] 
 
Court’s Opinion ¶ 3 (emphasis added).  The summary judgment record contains 
no information regarding the grantors’ intent as to whether rentals of the 
properties constituted a “trade or business.”  Furthermore, it is probably safe 
to assume that the grantors could not have anticipated the emergence of online 
private rental services such as Vrbo and Airbnb. 
 
[¶44]  At the outset, I note that the grantors used the word “therefrom” 
and not “therein” or “thereon.”  The difference is subtle, but potentially 
significant.  One dictionary defines “therefrom” as “from there; from a . . . place.”  
Therefrom, 
Cambridge 
Dictionary, 
https://dictionary.cambridge.org 
/dictionary/english/therefrom (last visited August 15, 2023) (emphasis 
added).  None of Townsend’s rentals are taking place from the property—they 
take place wholly upon the property.  If the grantors intended to forever bar 
residential rentals of the property, the deed language could have, and 
presumably would have, explicitly said so.11 
 
11  It seems unlikely that the original grantors would have intended to wholly prevent rentals in 
what is described in the summary judgment record as a vacation community.  More importantly, as 
the trial court correctly found, “The parties do not dispute that renting out properties in the 
neighborhood is permissible under the covenants.” 
 
30 
[¶45]  Further, the fact that Townsend actively markets his property as a 
premium getaway destination and derives income from it does not, ipso facto, 
establish that he is conducting a business as prohibited by the “no trade or 
business” restrictive covenant.  See Slaby v. Mountain River Ests. Residential 
Ass’n, Inc., 100 So. 3d 569, 580 (Ala. Civ. App. 2012) (“When the [property 
owners] rent their cabin, they no doubt realize some pecuniary gain, but neither 
that financial benefit nor the advertisement of the property or the remittance 
of a lodging tax transforms the nature of the use of the property from 
residential to commercial . . . .”); 9 Michael Allan Wolf, Powell on Real Property 
§ 60.05, Lexis (database updated 2023). 
[¶46]  The Court does not disagree with that tenet and indeed 
underscores the danger stated in Silsby v. Belch, 2008 ME 104, ¶ 14, 
952 A.2d 218, that a holding to the contrary “‘would result in an affirmative rule 
of law holding that every single- or multi-family residence that is rented by 
someone other than the owner is a commercial enterprise.  Under such a rule 
of law, innumerable properties would invariably run afoul of local zoning 
ordinances prohibiting commercial uses.’”  Court’s Opinion ¶ 30 (quoting Silsby, 
2008 ME 104, ¶ 14, 952 A.2d 218).  The Court also notes, and I agree, that the 
fact that Townsend does not reside at the property, derives rental income from 
 
31 
it, and employs a property manager does not necessarily establish that he is 
operating a trade or business there.  Id. 
[¶47]  The Court draws heavily on provisions of Maine’s tax code that 
establish tax obligations and exemptions based upon a renter’s length of 
residence at rented facilities.  Court’s Opinion ¶ 31; see 36 M.R.S. 
§§ 1760(20)(A), 1811(1)(D)(3) (2023).  I respectfully submit that definitions 
and policies underpinning state tax obligations are of little use in ascertaining 
a grantor’s intent in creating a restrictive covenant or interpreting terms that 
are employed in non-tax settings. 
[¶48]  The linchpin for the Court’s determination that Townsend’s rentals 
constitute a business for purposes of the restrictive covenant—and the point 
where I depart company from the Court’s reasoning—is the frequency of the 
rentals.  Court’s Opinion ¶ 32.  The Court concludes that Townsend’s use, 
maintenance, advertising, and description of his property “bring his rentals 
squarely within the definition of a business, such as a ‘hotel,’”12 id., but provides 
no rationale or quantitative standards for how parties and the trial courts are 
to define what constitutes a “trade or business” in this frequently occurring 
 
12  Again the Court cites a tax code definition of “hotel,” thus now adopting that definition as 
precedent in non-tax cases.  Court’s Opinion ¶ 32. 
 
32 
setting.13  The Court’s model anticipates a continuum based in part on the 
degree of use where, at some undefined tipping point, the rental of a vacation 
property ceases to be a “non-business” and becomes a business. 
[¶49]  The Court’s attempt to define “trade or business” by essentially 
saying it is in the eye of the beholder and then invoking volume as the touchstone 
fails to provide guidance to the owners of the “innumerable properties” 
described in Silsby.  2008 ME 104, ¶ 14, 952 A.2d 218.  Indeed, the Court here 
vacates the injunction and remands the matter to the Superior Court with 
instructions that it be “recraft[ed] . . . to define what constitutes a short-term 
rental.”  Court’s Opinion ¶ 39. 
[¶50]  In doing so, the Court offers this vague guidance to the court and 
the parties: “occasional short-term rentals to one group at a time totaling a 
small number of days per year would not indicate the conduct of a trade or 
business” for purposes of the restrictive covenant despite the fact that money 
is clearly changing hands.  Id.  Whatever a “short-term rental” is thereafter 
deemed to mean becomes the foundation for the terms of the injunction.  The 
Court again directs the trial court to the state tax code for guidance on setting 
 
13  Although this matter concerns a particular restrictive covenant, the Court’s holding and 
adoption of tax code definitions will have implications for future ordinances and statutes concerning 
rentals of private residential properties. 
 
33 
limits on short-term rentals.  Id.; see supra n.13.  I cannot concur in this process, 
particularly when the plaintiffs do not challenge Townsend’s basic prerogative 
to rent his property—it is the irresponsible and disrespectful use by some 
renters that drove them to this action.  I fear that the Court’s adoption of a 
process that determines whether a permitted use is, or is not, a “business” 
based upon the extent of use creates a slippery slope that can devolve into 
arbitrariness. 
[¶51]  I do agree with the court’s observation that “[t]his appeal presents 
the first occasion for us to consider the effect of a restrictive covenant that 
limits the uses of residential property upon short-term rentals through online 
services such as Vrbo and Airbnb.”  Court’s Opinion ¶ 14.  The arrival of 
internet-based mass marketing has greatly increased the magnitude of use of 
many goods and services, including short-term rentals of privately owned 
properties.  Has this increased usage transmogrified these private properties 
into de facto hotels as the Court has concluded?  Rental of privately owned 
vacation properties or other residential facilities is a well-established practice 
in Maine.  The Court’s decision today threatens that practice, at least when a 
restrictive covenant—even one that does not specifically address such usage—
is involved.  Public policy in response to momentous changes in society should 
 
34 
be, in the first instance, within the exclusive domain of local ordinances and 
statewide statutes, not the subject of after-the-fact interpretation of restrictive 
covenants by grantors who could not have anticipated the advent of 
internet-based marketing of rental properties. 
[¶52]  The appellees’ reaction to their plight of owning property adjacent 
to a property where renters occasionally engage in raucous and annoying 
behavior that interferes with the peaceful enjoyment of their own properties is 
fully understandable.  The appellees’ chief objective is to foreshorten the 
behaviors, not necessarily to curtail private rentals.  Reducing the number of 
rentals may arguably (or hopefully) reduce the number of disturbances, but it 
will not provide them with the ultimate remedy they seek—neighbors who are 
as quiet and respectful as they are. 
[¶53]  I would conclude on the basis of the summary judgment record 
that Townsend’s rental of his property does not violate the terms of the 
restrictive covenant prohibiting “a trade or business . . . conducted therefrom.”  
Accordingly, I would vacate the summary judgment and remand for further 
proceedings.14 
 
 
14  I presume, without being certain, that the appellees’ nuisance claim might be resurrected in the 
context of such a remand. 
 
35 
 
 
 
 
 
 
 
Andrew W. Sparks, Esq. (orally), and William J. Kennedy, Esq., Drummond & 
Drummond, LLP, Portland, for appellant Erik S. Townsend 
 
David A. Soley, Esq. (orally), and Glenn Israel, Esq., Bernstein Shur, Portland, for 
appellees Debra Morgan, Douglas Morgan, and P. Jason Ward as Trustee of the 
P. Jason Ward Revocable Trust 
 
 
Business and Consumer Docket docket number REA-2021-4 
FOR CLERK REFERENCE ONLY