### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-10-00067- CV

Cedar Oak Mesa, Inc., Appellant

v. Altem ate R eal Estate, LLC, Appellee

F ROM TH E DISTRI CT COURT O F H AY S CO UNTY, 428 TH JUDICI AL DISTRICT NO. 09- 0886 , H ONO RAB LE JACK H . RO B ISO N, JUDGE P RESIDING

M E M O R A N D U M O P I N I O N Appellant Cedar Oak Mesa, I nc. (“Ceda r Oak” ), a proper

ty owner s’ association, filed suit ag ainst one of its residents, appellee Altem at e R ea l Estate, L L C (“A ltemate”) , to p reve nt Altemate from opera ting a short-term, vacation-rental proper ty within the Campfire No. 2 Subdivis ion in Hay s County (“the Subdivis ion”). Cedar Oak asser ted that the renting of proper ty within the Sub d iv is io n for periods of less than six months constituted “commer cial activity ” prohibited by the Subdivis ion’s restric tive covena nts a nd By laws. The pa

rties filed cross-motions for summary judgme nt. The trial court, finding that Altemate’ s use of the p ro perty was not restric ted, g rante d Altemate’ s no-evide nce motion for summary judgme nt and denied Cedar Oak’ s summary -judg ment motion. Cedar Oak appea ls, arg uing that it was entitled to summary judgme nt beca use the restric tions at issue unambi guously prohibit the ty pe of commerc ial activity in whichAltemate is eng ag ed. We will reve rs e t h e j u d gm ent of the trial court and rema nd the cause for further proce eding s.

F ACTUAL AND P ROCEDURAL BACK GR OUND The fac ts of this case are larg ely undisputed. Cedar Oak is a non-prof it corpor ation established for the purpose of administering and enfor cing deed restric tions for a p o rt i o n o f the Subdivis ion. I n 2 0 0 7 , Al t em ate purcha sed proper ty in the Subdivis ion. Altemate’ s proper ty is improved with a log cabin, which it rents on a temporar y or transient basis for wee kend and wee kly
renta ls. Altemate repor

ts rec eipts for these re n t al s an d p ay s hotel taxes on them. Dan Mey ers, president of Cedar Oak, aver red that afte r Cedar Oak lear ned of Altemate’ s use of its proper ty “for short term Bed & Brea

kfast ty pe rentals,” it provided Altemate written not ice that its use vi olated the Subdivis ion’s deed restric tions and reque sted that Altemate discontinue all commerc ial uses of the proper

ty

. When Al t em ate ref

used, Cedar Oak obtained a temporar y injunction preve nting Altemate from renting or leasing its proper ty to the public for temporary or transient housing purposes in violation of the Subdivision’s deed re strictions.

Cedar Oak then filed the prese nt suit seeking decla rat o ry and injunctive relief and civil penalties. Altemate answe red and filed a no-evide nce motion for summary judgme nt, alleg ing that Cedar Oak had produce d no evidenc e that the deed restric tions prohibit Altemate from renting the proper

ty for short- term re cre ational purposes. Ceda r Oa k filed a response and counter -motion for summary judgme nt, asser ting that the rele vant restric tions permit only residential, not

commerc ial, uses of prope rty in the Subdivis ion.

2The deed restric tions at i s s u e are contained in the Subdivis ion’s Covenants and

Restrictions (the “Covena nts”) and its By

laws. The first para g raph of the Covenants states that the deed restric tions apply to al l l o t s i n the Subdivis ion exc ept lot 240 (which is desig nated “commer cial”) , another lot desig nated “rese rve,” and the water -we ll trac t adjac ent t o the reserve

. The Covena

nts further sta te, in pertinent pa rt:

Since this Subdivis ion has been p rimarily desig ned as a haven for rec rea tion vehicles, i.e., m otor homes , t rave l trailers, and campe rs, i t is anticipated that few perma nent str u ct u re s will be built or implaced on the proper ty

. Howeve r, in this event, Parag raphs 1 throug h 5 following will gove rn such installation.

. . . . 3. No more than one private dwelling house may be ere cted on any lot in the Subdivis ion and no more than one mobile home may be perma nently parke d on any lot.

. . . . 7. Eac h and ever

y restric tion a

nd condition c ontained her ein shall continue and rema in in full forc e for the longe st period allowed by law, unless one or more of said restric tions and conditions are sooner modified or abrog ated by joint written ag ree ment by the owner s of record of 66-2/3% of the lots in said Campfire Subdivision. 8. Campfire Association [now known as Cedar Oak M es a, I nc. Property Owner s Association] shall be cre ated and the owner or owner s of Campfire lots shall be entitled to one voting membership per lo t

. . . . The purpose of said Association shall be for upkeep, promotion, and mai n t enance of [t he Subdivis ion] , and it may promulg ate r

ules from time to time for the be tterment of the c ommunity

. Parag raph 24 of the Covenants reiter ates that any land desig nated as “commer cial” is not subject to the above restric tions.

3The By laws, which Cedar Oak purports to have adopted pursuant to para g raph eig ht of the Covenants, state that with respe ct to any Subdivis ion proper ty that is rente d or lease d, “[t] he
tenant occupa

ncy period shall be for no less than 6 months, unless the Boa rd approve s extenuating circ umstances.” Altemate disputes the validity of the By laws, asser

ting that Cedar Oak “provide [d]

no evidenc e that the By

laws upon which i t relies wer e ag ree d upon by any lot owner s, let alone 66 2/3%, or that they wer e proper ly authorized by the owner s. There fore , the Court cannot rely on the B y laws as de ed re strictions in this case .” Cedar Oak counte rs that, at a minimum, the validity of the B y laws is a fa ct question prec luding summary judgme nt for Altemate

. The trial court, afte r revie wing both parties’ summary -judg ment motions and response s, found that Altemate’ s proper ty “is not restric ted from use as a short-term vacation renta l” and there fore g rante d Al t em ate’ s summary -judg ment motion and denied Cedar Oak’ s motion. Cedar O ak appe als.

DISCUSSIO N

I n its first issue, Cedar Oak arg ues that the trial court err ed in g rantin g Al t emate’s no-evide nce motion for summary judgme nt becaus e Cedar Oak produce d more than a scintilla of evidenc e that short-term, commerc ial renta ls on proper ty within the Subdivis ion wer e prohibited by the Covenants and By

laws. I n its second issue, Cedar Oak arg ues that the trial court err ed in deny ing its mot ion for summary

judgme nt.

4Sum m ary-Judgm ent Stan dard of Revie w We revie w the trial court’s summary judgme nt de novo. Joe v. Two Thirt y Nine Joint Venture , 145 S.W .3d 150, 156 (Tex. 2004). Under the no-evide nce standard, a defe ndant may move for summary judgme nt afte r adequate time for discovery on the g round that there is no evidenc e of

one or more essential elements of a claim on which the plaintiff would have the burden of proof at trial. See Tex. R. Civ. P. 166a(i). A no-evide nce summ ar y j u dg ment is essentially a pre- trial direct ed v er dict; there fore , we apply the same leg al-suff iciency standard. King Ranch, Inc.

v. Chapman , 118 S.W .3d 742, 750-51 (Tex. 2003). Under the “tra diti o n al” summary -judg ment standard, a summary judgme nt should be g rante d only when the movant establishes that there is no g enuine issue as to any materia l fac t and that it is entitled to judgme nt as a matter of law. See Tex. R. Civ. P. 166a(c ); Provident Life & Acc ident Ins. Co. v. Knott , 128 S.W .3d 211, 2 1 5 -1 6 (T ex . 2003). When, as here , both parties file motions for summary judgme nt and the court g rants one and denies the other, we must decide all questions prese nted and rende r the judgme nt that the trial court should have rende red. City of Garland v. Dallas Morning News , 22 S.W .3d 351, 356 (Tex. 2000). Review of Restrictive

Covenants We also revie w the trial court’s construction of a r e s tr ic ti v e covena nt de novo. Owens

v. Ousey , 241 S.W .3d 1 2 4 , 1 2 9 (Tex. App.—Austin 2007, pet. denied)

. The g ener al rules for
contra ct construction apply to restric tive covena nts. Pilarcik v. Emmons , 966 S.W .2d 474, 478 (Tex. 1998). We construe re s t ri ct i v e covena nts as a whole in light of the circ umstances at the time the parties enter ed into the ag ree ment, g iving eff ect to ever

y sentenc e, clause , and word of a covena nt, and av o i d i n g constructions that would rende r parts of the covena nt superf luous or inopera tive.
5Owens , 241 S.W .3d at 129-30. Our primary obliga tion in construing restric tive covena nts is to g ive eff ect to the true intention of the parties as expressed in the instrument. Id. We focus not on their subjective intent but on their objective intent, as it is ref lected in the written contra ct. See Lopez v. Munoz, Hoc kem a & Ree d , 22 S.W .3d 857, 861 (Tex. 2000).

Covenants restric ting the fre e use of land are not favor ed by the courts, but they will be enfor ced if they are clea rly worde d and confine d t o a l aw fu l purpose. W ilmoth v. W

ilcox , 734 S.W .2d 656, 657 (Tex. 1987). The proper ty code require s that restri ct i v e covenants be construed liberally in order to g ive eff ect to their purpose and intent. Tex. Prop. Code Ann. § 202.003(a) (West 2007). 1

Altem ate’s Sum m ary Judgm ent

Parag raph three of the Covenants s tates that “[n] o more than one private dwelling house m ay be erec ted on any lot in the S ubdivision.” Altemate s o u gh t and was g rante d summary judgme nt on the g round that the lang uag e of para g raph three does not prohibit the use of Subdivis ion proper ty for short-t er m co m m er cial renta ls. Whil e conce ding that para g raph three applies to its proper ty , Altemate urg es that the provision itself place s no restric tion on the use of the proper ty —be it residential, commerc ial, or otherwise

. Al t em ate emphasizes that the words “use,” “used,”

This Court has previously deter mined that section 202.003 of the pr operty code does not 1 conflict wi t h t h e l o n g-standing common-law rule that, if there is ambig uity or doubt as to the draf ter’s intent, a covenant is to be st rictly construed ag ainst the party seeking to enfor ce it and in favor of the fre e and unrestric ted use of land. S ee Reagan Nat’l Adve r. of Austin, Inc. v. Capital Outdoors, Inc. , 96 S.W .3d 4 9 0 , 4 9 3 n .2 (Tex. App.—Austin 2002, pet. g rante d, judgm’ t vacated w.r.m.). Severa l other courts of appea ls, howeve r, have questioned whether th e s t at u t o ry and common-law rules can be rec onciled. See City of Pasadena v . Genne dy , 125 S.W .3d 687, 693-95 (Tex. App.—Houston [1s t Dist.] 2003, pet. denied) (collec ting c ases)

. 6“re sidence ,” or “re sidential” do not appea r any wher e in the Covenants. I n Altem at e’s view, para g raph three limit s only the number and “ar chitectur al form” of improvements that may be

ere cted on a single lot, i.e., a lot may contain n o more than one perma nent structure and such structure shall be a dwelling house (such as a log cabin)

. Altemate urg es that its interpre tation best ref lects the draf

ters’ intent that the Subdivis ion be “tra nsient friendly ,” as indicated by the prea mbular l an gu age s tating that the Subdivis ion shall be a haven for mobile homes and
trave l trailers. Cedar Oak, on the other hand, interpre ts this provision to mean that the Covenants’ ref er e n c e to “ p r iv ate dwelling houses” logic ally was intended to restric t owner s to private, residential

use. See, e.g. , W

ebster’s Third New Int’l Dictionary 706 (2002) (def ining “dwe lling” as “a building

or construction used for residenc e: abode, habitation”); Black’ s Law Dictionary 582 (9th ed. 2009) (def ining “dwe lling-house ,” often shortened to “dwe lling,” as “the house or other structure in which

a person lives; a residenc e or abode” ). Cedar Oak argu es t h at i t s interpre tation harmonizes and g ives eff ect to the entire instrument, which elsewhe re exempts “commer cial” lots from the Covenants—re fer ence s that would be meaning less if the lots g overne d by para g raph three could also be used f or commer cial purpose s. For a court to be able to construe a re s t ri cti ve covena nt as a matter of law, the

covena nt must be unambig uous. TX Far W est, Ltd. v. Texas Invs. Mgmt. , 127 S.W .3d 295, 302 (Tex. App.—Austin 2004, no pet.) (citing Columbia Gas Transmissi on Corp. v. New Ulm Gas, Ltd. , 940 S.W .2d 587, 589 (Tex. 1996)); see Dynamic Publ’g & Distrib. L.L.C

. v. Unitec Indus. Ctr. Prop. Owners Ass’n , 167 S.W .3d 341, 345 (Tex. App.—San Antonio 2005, no pet

. ). “Lik e a contra ct,

7covenan t s ar e ‘unambig uous as a matter of law if [t hey ] can be g iven a definite or cer tain leg al meaning .’” Pilarcik , 966 S.W .2d at 478. By contra st, if a covena nt is susceptible of more than one

rea sonable interpre tation, it is ambig uous, which cre ates a fact i s s u e as to the parties’ intent. Id. Whether restric tive covena nts are ambig uous is a question of l aw fo r t h e court to decide by revie wing the covena

nt as a whole in light of the circ umstances p re s en t wh en the covena nt was enter ed. Id. ; Jennings v . Bindseil , 258 S.W .3d 190, 195 (Tex. App.—Austin 2008, no pet.).

We conclude that t h e lang uag e of the C ovenants themselves—setting aside for the
moment the tenanc y -limitation provision in the disputed By laws—ca n rea sonably be rea d either as distinguishing betwee n commerc ial uses of proper ty and proper

ty that is used as a “dwe lling” in the

manner urg ed by Cedar Oak, or as simply limit ing the number and ty pe of improvements that may be ere cted on a lot to a single dwelling , as Altemate sug g est s . Be ca u s e the Covenants cannot be g iven a definite or cer

tain leg al meaning , they are ambig uous. See TX Far W est , 127 S.W .3d at 303. Be cause the ambig uous lang uag e of the Covenants cannot establish as a matter of law whether the orig inal parties intended to allow commerc ial, non-re sidential uses of buildings constructe d on the subject lots, the lang uag e of the Covenants alone is insufficient to support the trial court’s summary judgme nt. See id. Acc ording ly , we sustain Cedar Oak’ s first issue and hold that summary judgme nt for Altema te was imprope r.

Cedar Oak’s Sum m ary Judgm ent

As to Cedar Oa

k, it too was not entitled to summ ary judgme nt on the basis that the Covenants are unambig uous i n i t s fa v o r. Cedar Oak further arg ues, howeve r, that the Covenants must be rea d in conjunction with the By laws, which it claims unambiguously prohibit the lease of
8Subdivis ion proper ties for less than six months witho u t ap p roval from Cedar Oak’ s board of direc tors. Altemate responds that this provision in the By laws is “unenf

orce abl e” for
two rea sons. First, Altemate asser ts that this provision amounts to a modification of the Covenants, which would have require d the ag ree ment of 66 2/3% of the proper ty owner s in the Subdivis ion in

acc ordanc e with para g raph seven o f the Covenants, and, acc ording to Altemate, Cedar Oak produce d

no evidenc e that the requisite number of proper ty owner s approve d the modification. Second, Altemate contends that para g raph eig h t o f t h e Covenants authorizes Cedar Oak to make rules reg arding only upkeep, promotion, and maintenance of the S ubdivision and does n o t allow C edar Oak to enac t “use restrictions” such as t he one contained in the By laws. Ced ar Oa k counter s that the By laws do not modi fy any of t he restrictions contained in the C ovenants and there fore it need
not have complied the with 66 2/3% voting requirement in para g raph seven. I nstead, Cedar Oak

asser ts, the By

laws are rules that it is authorized to promulg ate “for the betterme nt of the community ” pursua

nt to parag raph e ight. “A developer g ener ally has t he unil ater al right to impose on its Subdivis ion, in the first instance, any restric tions that it chooses, to alter or to canc el restric tions, o r t o ab ro gate restric tions entirely , so long as no Subdivis ion lots have been sold.” City of Pasadena v. Genne dy , 125 S.W .3d 687, 698 (Tex. App.—Houston [1st Dist.] 2003, p et

. d enied) (citing Dye gard Land P’ship v. Hoove r , 39 S

. W

. 3 d 300, 313 (Tex. App.—For t Worth 2001, no pet.)). After any of the Subdivis ion’s lots has been sold, the power to amend the deed restric tions may nonetheless continue if the dedica

ting instrument g rants the develope r the rig ht to amend the restric tions and establishes

9a method of doing so. Id. Any amendment that the de veloper makes must be in the exact manne r that the dedica tion provides. Id

. ; see Norwood v. Davis , 345 S.W .2d 944, 948 (Tex. Civ. App.—Austin 1961, no writ).

I n this case , assuming arg uendo that the By laws do indeed amend or modify the deed restric tions i n t h e orig inal Covenants, the rec ord contains no evidenc e of when the By laws wer e first enac ted, whether any lots ha d been sold in the Subdivis ion at that time, and whether they ever restric ted short-term l eases of Subdivis ion proper ty

. The copy of the By laws that the parties prese nted to the trial court simply rec ites that the By laws wer e amende d in 1992, rea ffirme d in 1996, revised in 2002, and revised and rea ffirme d in 2003. On this rec ord, the trial court lacke d 2 sufficie nt fac ts to deter

mine as a matter of law whether the By laws are invalid for the rea sons arg ued by Altemate. Nor can this Court conclude that the By laws are binding as a matter of law. The party

see k i n g t o enfor ce a deed restric tion bear s the burden of showing that the restric tion is valid

an d enfor cea

ble. See Genne dy , 125 S.W .3d at 698; Dye gard , 39 S.W .3d at 308. He re , t h e summary -judg ment evidenc e does not conclusively show the validity of the By laws. There fore , we hold that Cedar Oa

k was not entitled to summary judgme nt and over

rule its second issue.

I n its brief, Altemate sug g ests that Cedar Oak “tried to amend its deed restric tions and filed 2 purported ‘B y laws’” only in 2003, an asser tion that seems to be inconsistent with the rec itations in the B y laws themselves. 10CONCLUSION Having held that neith er p arty was entitled to summary judgme nt, we reve rse the judgme nt of the trial court and rema nd the cause to that court for further proce eding s consistent with this opini on. 3

J . Woodfin J ones, Chief Just ice Be fore Chief J ustice Jones, J ustices Pemberton a nd Waldrop Reverse d and Remande d Filed: Aug ust 31, 2010

Altemate asser

ts that if the Covenants are held to be ambig uous, we mu s t resolve any 3 ambig uities in its favor under the common-law principle that doubts about the meaning of the terms of a restric tive covena

nt must be resolved in favor of the fre e use of land. See, e.g. , Travis Heights Improve ment Ass’n v. Small , 662 S.W .2d 406, 409-10 (Tex. Ap p . — Au s t i n 1983, no writ). Consist ent with the prec edent of this Court, howeve r, we con cl u d e t h at beca use the restric tive covena nt at issue is ambig uous and a fac t dispute exis ts reg arding the intent of the draf ting parties, neither party i s entitled to summary judgme nt. Remanding the cause for further proce eding s is there fore proper . See TX Far W est, Ltd. v. Texas Invs. Mgmt. , 127 S.W .3d 295, 308-09 (Tex. App.—Austin 2004, no pet.). 11