### IN THE CO URT OF APPEALS OF TE NNE SS EE AT KNOX VILLE Decem be r 7, 2 00 9 S es si on

CARROLL C. MARTIN, v . JI MMY BANKSTO N, et al

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A p p e a l f r o m t h e C h a n c e r y C o u r t f o r H a m i l t o n C o u n t y N o . 0 7

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. P e o p l e s , C h a n c e l l o r

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o r c e t h e r e s t r i c t i v e c o v e n a n t s o n d e f e n d a n t s ' p r o p e r t y

a s t o a n o u t b u i l d i n g c o n s t r u c t e d o n d e f e n d a n t s ' p r o p e r t y a n d s e e k i n g a n i n j u n c t i o n a g a i n s t d e f e n d a n t s ' a l l e g e d o p e r a t i o n o f a b u s i n e s s o n t h e i r p r e m i s e s i n v i o l a t i o n o f t h e r e s t r i c t i v e

c o v e n a n t s

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e n d a n t s , a n d p l a i n t i f

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a f f i r m t h e J u d g m e n t o f t h e T r i a l C o u r t

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. 3 A p p e a l a s o f R i g h t ; J u d g m e n t o f t h e C h a n c e r y C o u r t A f f i r m e d

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H E R S C H E L P IC K E N S F R A N K S , P

. J

. , d e l i v e r e d t h e o p i n i o n o f t h e C o u r t , i n w h i c h C H A R LE S D

. S U S A N O , J R

. , J

. , a n d

. D

. M IC H A E L S W IN E Y , J

. , j o i n e d

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B r y a n B

. M a r t i n , J o h n s o n C i t y , T e n n e s s e e , f o r t h e a p p e l l a n t , C a r r o l l C

. M a r t i n

.

J a m e s W

. C l e m e n t s , I I I

. , C h a t t a n o o g a , T e n n e s s e e , f o r t h e a p p e l l e e s , J i m m y B a n k s t o n a n d C a t h y B a n k s t o n

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O P I N I O N

Plaintiff's Complaint ag ainst the defe ndants al l ege d that both parties own proper ty in the Morning Glory Fa

rms development, and that defe ndants had v i o l at ed t he restric tive covena nts. Fur ther, that defe ndants built an outbuilding that violated the covena nts, and they partially opera ted a business, B ankston Hea ting a nd Air, fr om this property , in violation of the covena nts.

Def endants Answer ed, deny ing they had violated any of the covena nts, and denied that theirg ara g e was not in compliance with the restric tions, and that plaintiff had waived any rig ht to enfor ce

the cove nants bec ause the re ha d been nume rous other violations in the neig hborhood.

The parties enter ed an ag ree d Protective Orde r, which s t ated that cer tain documents, including the tax returns and other financ ial documents of Ba nkston Hea ting & Air and Mr. and Mrs. Ba nkston would be filed under seal.

After the Court denied a Motion for summary J udg ment an evidentiar y hear ing was held and plaintiff was the first witness

. He testified that he was retire d, but had been involved in the developm en t o f Morning Glory Fa rms. Plaintiff identified the restric tions that applied to the defe ndants' proper

ty , and the restric tions stated that the trac ts wer e to b e re s i d en t ial and the restric tions further stated that eac h resident had to provide a g ara g e space for a minimum of two car s.

Plaintiff testified the defe ndants' home, as it was orig inally built, h ad a two car attache d
g ara g e, but that defe ndants later enclose d it and conver ted it into living space

. Plaintiff testified that he beca me awa re they wer e eng ag ing in a commerc ial activity
, when they ere cted a larg e outbuilding

on their proper

ty and p u t a s i g n out front that said Ba nkston Hea ting & Air. He said he told defe ndants they could not opera te the business on the proper ty , and the sign disappea

red. Plaintiff later saw a listi ng in the y ellow pag es for Ba nkston Hea ting & Air with defe ndants’ home addre ss.

He fu rt h er testified that there wer e about 200 homes in Morning Glory
, but only 7 other homes wer e subjec t to the same re strictions as defe ndants’.

Plaintiff admitted that Ba

nkston testified in his deposition that he had lived in that house for 15 y ear s, and had opera ted his business the entire time. Plaintiff admitted that he had no idea about the business until 2006, and that he had not seen a ny commerc ial activity

occur ring at defe ndants’ home, other than on an occa sion seeing an HVAC unit sitti ng on a trailer. He said he had no problem with de fenda

nt a nswering the phone for his business at his home, and that he had no problem with

a detac hed g ara g e when the home was larg e. He admitted that the house next door to defe ndants had a deta ched g ara g e.

Plaintiff testified that he had draf ted the restric tive covena

nts, and the restric tion did not say "no c ommercia l activity ".

Ba nkston was the next to testify
, and said that he purcha sed the proper ty in 1992, and he was employ ed i n t h e heat and air business as a service technicia n at the time. He said he had his business license a t that time, and then opened his own service business in the mid-1990's. H e said that he parke d his business van at his home, but otherwise his business activities wer e not open and

o b v i o us, and the only employ ees wer e him and his wife, and all other technicia ns were subcontrac tors. He said they had no other office besides their residenc e, and his wife did bookkeeping and billing f or the c ompany

from his home.

Ba nkston te stified that his distributor place d the phone book ad and not him, so he was not

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re of it until it was shown to him. He testified that he did not do any adver tising on his own, and that his c ompany service d and installed heat and air units a ll a way from his pr emises. He testified that they built an outbuilding on their proper ty in 2001, which was approximately 100 fee t from the house, and that o n l y about t wice a y ear he mi g ht have an HVAC unit on his trailer overnig ht. He testified that the outbuilding wa s built wit h the intention of having more storag e for lawn mower s and such, and that they later enclose d their attache d g ara g e in 2003 or 2004, and that the money for the outbuilding ca

me from their

persona l acc ount.

On cross-e x amination, Ba nksto n admitted that his business tax returns listed his home addre ss, and that they showed the company pay ing rent to him and his wife for the use of the home. He testified tha t the way

his business operate d was that a customer would call him for se rvice and h e wo u l d go to the custom er’ s home and perf orm his service s at t hat address. He said he kept no inventory at his home, and only on a few occa sions would pick up a unit in the afte rnoon and store it at his house to take to a site the next morning

. He said customers did not come to his house, and he did not do a

ny fabr ication work at his home
, and had no signs out on the lawn. He admitted on

one occa sion that he put a “job site” sign at his residenc e, which he would do at any residenc e wher e he was working which advertised his service s, an d at t he ti me he put one in front of his house, he

was re placing

his own unit.

Following an evidentiar

y hear ing, the Trial Court said that defe ndants rec eiving calls at their home wa s no differ ent t han lawy ers, doctors, plumbers, etc., who receive d calls at home and then took their t ools and went elsewhe re to do the work. The Court found the re sidence was primarily used for a residence
, and only i n ci d en t ally used for commerc ial activity

. The Court held t hat t his activity would not violate the restric tion, beca use there was no evidenc e that any service work took place at the home.

Re gar d i n g t h e g ara g e, the Court found that plaintiff testified that it was okay to have a detac hed g ara g e if the house was larg e enoug h. The Court found the develope r could not pick and choose how the restric tions could be enfor ced, and that the restric tions wer e somewhat ambig uous, beca use num ber one said that other struc tures could be built, and number three said that there had
to be g ara g e space to acc ommodate two car s, but did not say that the g ara g e had to be attache d to the dwelling

.

I n t h e C o u rt' s final Orde r, the Court held that the evidenc e did not prove sufficie nt

commerc ial activity to rise to the level prec luded by the restric tion, and that the restric tion as to the outbuilding was ambig uous as to whether the g ara g e had to be attache d to the dwelling

. The suit was dismiss ed.

On appe al, plaintiff ra ises these issues:

1. Whether the Trial Court err ed in concluding that plaintiff’s evidenc e failed to prove

commerc ial activity

by the def endants in violation of the re strictive cove nants?

-3-2. Whether the Trial Court err ed in concluding that the restric tive covena nt applicable
to g ara g es was ambig uous as to whether the g ara g e had to be att ac h ed t o the dwelling ?

Plaintiff insists the Trial Court err ed i n fi n ding that plaintiff failed to show sufficie nt

comm ercial activity by defe ndants to violate the restric tive covena nts. The applicable restric tion
states that all “tra cts in the development shall be used, known and descr ibed as residential trac ts.” I t g oes on to state that, “No building or structure shall be ere cted, altere d, pl ac ed
, o r p er mitted to

rema in on any residential trac t o t h er t han a single -fa mily residential dwelling and, if any , its customary and usual acc essory structure s, and those s t ru ct u re s that are customary and usual to a

ra nch or far

m.” Fur ther, plaintiff insists that defe ndants violated these covena nts by opera ting a heating and air

service business from their home.

The evidenc e established that defe ndants kept books and rec ords at the residenc e, answe red the phone at the residenc e and took service calls, and then went out to individuals’ homes to perf orm the work. Def

endants had an ad in the y ellow pag es that adver tised their business with a number that they answe red a t t heir home and their home address. Def endants had a busi ness l icense and filed business tax returns showing a profit for the business. There wer e n o s i gn s o r o t her indicia of a business at the home, except that Mr. Ba nkston testified that once or twice a y ear he would have an HVAC unit on his truck overnig ht, to take to a job site the n ex t morning

. The business has no employ ees, no c ustomers come to the home , and no deliver ies are made to the home.

We c onclude f

rom the evide nce tha t the home was be ing use d for r esidential purposes and
not commerc i al p u rp o ses, in violation of the restric tions as found by the Trial Court. Whil e defe ndant answe red the phone for service calls at home and kept his business rec ords there
, no work
was pe rfor

med at the r esidenc e, other than bookkee ping.

Appellant ar gu es t h i s case is simil ar to the case of Kerney v. Endres
, 2009 WL 1871933 (Tenn. Ct. App. J une 30, 2009), wher e the d ef en d an t s wer e opera ting a beauty salon from their home. I n that case , the restric tions stated that the use of th e proper ty was to be “exclusively residential” and that there should be no “commer cial underta king”

. Id

. Def endants had conver

ted

a room in their home to a b ea u t y s alon, wher e they worke d by appointment only
, a few day s per

wee k. Id. They estimated that they saw 63 customers per month there
, and ear ned a profit. Id. They had n o s i g ns nor any other exterior indicia of the business, and did not have any employ ees, and

rec eived no business de liveries ther e. Id

.

The Tr ial Court ruled that the use of the residence as a beauty salon was mer ely incidental and did not violate the re strictions, but thi s Court disagr eed. Id . This Court stated:

The courts enfor ce restric tions acc ording to the clea rly expressed intentions of the parties manifested in the restrictions themselves. We g ive t he terms used i n restric tions t h ei r fair and rea sonable meaning
, and we decline to extend them bey ond their clea rly expressed
scope. We also construe the terms of a restric tion in l i g ht of the context in which they

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When the restric tion’s terms are cap ab l e o f more than one construction, we should adopt the construction that advanc es the unrestric ted use of the proper ty

. . . . [W ]e should resolve all doubts conce rning a cove nant’s applica bility ag ainst apply ing the covena nt.

Kerney, at p. 4, quoting Maples Homeowne rs Ass’n, Inc., v. T & R Nashville Ltd. Partnership
, 993 S.W .2d 36 (Tenn. Ct. App. 1998). We held that the restric tion in that case was clea r and unambig uous and prohibited opera t ion of a beauty salon in the subdivision, as it stated that the
proper ty was to be used only for residential purposes, and also contained a “broa d n ega t ive prohibition ag ainst ‘any

commerc ial underta king.’ ” Kerney , at p. 5.

I t is not disputed that the restric tions in this cas e s t at e t hat the proper ty is to be used for residential purpo s es , j u s t as the restric tions did in Kerney. They do not, howeve r, contain the 1 seconda ry prohibition ag ainst any

commerc ial activity , but that is not dispositi ve in this inst ance

. The Kerney case is clea

rly distinguishable. The activity taking place in this case , as opposed to the

commerc ial activity shown in Kerney
, is that Kerney involved a busin es s t h at was opera ted completely on the subject proper ty , such that customers came t o the home to have a service perf ormed. All income g ener ated by the beauty salon was g ener ated on the premises, vis a vis this

case wher ein no ac t i v i t y (other than rec ord keeping and answe ring the phone) occur red on defe ndants' proper

ty

. No cus t o m er s o r employ ees come to the home, no deliverie s wer e broug ht there
, and no eq u i p m en t o r i n ventory was kept at the home. There is no outward indicia of any business activity

at the home, a

nd no income-g ener ating work take s place in the home.

Other cases that have a found a si milar violation involved signific ant activity t ak ing place

on the subject proper

ty , such as u s ing the home as a “tourist home” or a vacation renta l proper ty , which this Court found to be in the same usag e as a hotel, or wher e persona l training service s wer e perf ormed within a g y

m inside the home. These usag es involved the g ener al public coming to the residential proper

ty and all business activity taking place there on. See Carr v. Trivett
, 143 S.W .2d 900 (Tenn. Ct. App. 1940); Shields Mtn. Prop. Owners Ass’n, Inc. v. Teffeteller, 2006 WL 408050 (Tenn. Ct. App. Fe b. 22, 2006); Island Brook Homeowne rs A ss’n, Inc. v. Aughenbaugh
, 2007 WL 2917781 (Tenn. Ct. App. Oct. 5, 2007); Kerney
, supra

. These authorities are clea rly distinguishable from the instant ca se, and the Trial Court prope rly found that the a ctivity

involved in this case did
not rise to the level of a violation of t he restric tive covena nt. Clearly
, defe ndants' proper ty in the words of the restric tive covena nt is "used, known a

nd descr ibed" as re sidential proper ty

.

Plaintiff also arg

ues that the Trial Court err ed in ruling that the restric tive covena nt reg arding
g ara g es was ambig uous as t o wh et h er the g ara g e had to be attache d to the dwelling

. As we have noted, restric tive covena

nts must be strictly construed, and any ambig uity must be resolved ag ainst apply ing the covena

nt. The restric tion at issue states that “[e]ach single -fa mily residential dwelling

I n Kern ey , t h e r e s t r i c ti on is "e xcl usi ve re si den ti al " vi s a vi s her ei n "known and des cr ibe d" as 1

re si den ti al

.

-5-er ected on any trac t in the development shall provide g ara g e space for a mini m u m o f t wo

conventional automobiles.” As the Trial Court fo u n d
, this para g raph is ambig uous reg arding whether the gar ag e space must be attached to the dwelling. Pl aintiff testi fied that he authored t he restric tions at issue, and he did not believe that the g ara g e had to be attache d if the house itself was larg e enoug h. As s u ch
, we “adopt the construction that advanc es the unrestric ted use of the
proper ty .” Kerney, at p. 4. We there fore aff irm the Trial C o u rt 's fi n d i ng that the defe ndants'
proper ty violated none of

the re strictive cove nants.

The J udg ment o f t h e Trial C ourt is aff irmed, and the cause remanded, with the cost of t he
appea l assessed to the plaintiff, Ca rroll Martin.

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H E R S C H E L P I C K E N S F R A N K S
, P

. J

.

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