Opinion ID: 1703027
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Heading: Solowicz's Reasonableness Requirement

Text: ¶ 32 Solowicz next contends that Wisconsin has a longstanding reasonableness requirement such that agreements with unreasonable terms, even if unambiguous, are unenforceable. The Developer contends that because the Community Declaration's terms are unambiguous, the court need not, and should not, determine the reasonableness of such terms. Accordingly, the second question we must address is whether the terms of the Community Declaration, if unambiguous, must also be reasonable. But, before we answer this question we must first determine whether the Community Declaration's terms are unambiguous. We consider each question in turn.
¶ 33 We note that neither Solowicz nor the Developer dispute that the terms of the Community Declaration must be unambiguous; however, they do dispute whether the terms are unambiguous. ¶ 34 Ordinary contract rules apply to interpreting the terms of contracts such as the Community Declaration. See Siler v. Read Inv. Co., 273 Wis. 255, 261, 77 N.W.2d 504 (1956). Wisconsin public policy favors freedom of contract. AKG Real Estate, LLC v. Kosterman, 2006 WI 106, ¶ 34, 296 Wis.2d 1, 717 N.W.2d 835. Freedom of contract is based on the idea that individuals should have the power to govern their own affairs without interference. Id. Our goal in interpreting contracts that were freely entered into is to determine and give effect to the parties' intention. Wis. Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 2000 WI 26, ¶ 23, 233 Wis.2d 314, 607 N.W.2d 276 (citing Gorton v. Hostak, Henzl & Bichler, S.C., 217 Wis.2d 493, 506, 577 N.W.2d 617 (1998)). Wisconsin public policy also favors the free and unrestricted use of property. Dodge v. Carauna, 127 Wis.2d 62, 65, 377 N.W.2d 208 (Ct.App.1985) (citing Crowley v. Knapp, 94 Wis.2d 421, 434, 288 N.W.2d 815 (1980)). ¶ 35 In order to accommodate the principle favoring free and unrestricted use of property and the principle favoring individuals' right to freely contract in ordering their own affairs, we generally have said that documents such as the Community Declaration must be expressed in unambiguous language to be enforceable contracts. Pertzsch v. Upper Oconomowoc Lake Ass'n, 2001 WI App 232, ¶ 8, 248 Wis.2d 219, 635 N.W.2d 829 (citing Dodge, 127 Wis.2d at 65, 377 N.W.2d 208); see also Crowley, 94 Wis.2d at 435, 288 N.W.2d 815 (to be enforced, restrictions must be expressed in clear, unambiguous, and peremptory terms). We apply the standard set forth in Zinda, which includes ascertainment of the purpose of the contract, to determine whether the Community Declaration is expressed in unambiguous terms. See Zinda, 191 Wis.2d at 167, 528 N.W.2d 55. ¶ 36 Language is ambiguous if it is susceptible to more than one reasonable interpretation. Id. at 165-66, 528 N.W.2d 55. However, if the intent of the contract can be certainly ascertained from the document itself, it will be enforced. Id. at 166, 528 N.W.2d 55. By intent we do not mean the subjective intent of the drafter, but the scope and purpose of the [document] as manifest by the language used. Id. Furthermore, a document need not expressly prohibit the specific activity in question; when the purpose is ascertainable, the document should be construed to give effect to that purpose. Bubolz, 159 Wis.2d at 294, 464 N.W.2d 67. Applying these principles of law to the Community Declaration, we determine that its terms are unambiguous in light of its purpose. ¶ 37 As previously stated, Article IX of the Community Declaration reserved to the Declarant control over Geneva National until conveyance by Declarant of eighty-five percent (85%) of the maximum number of residential units. Solowicz contends that the term conveyance is ambiguous because it was redefined two times, [23] which demonstrates that the term is subject to more than one reasonable interpretation. Solowicz further contends that because GN Partners, the original developer, conveyed certain undeveloped land in Geneva National to its lenders, who in turn transferred most of that land to the current Developer, the Declarant's control is terminated because it conveyed more than 85 percent of the units. We are unpersuaded. ¶ 38 We give effect to the purpose of the Community Declaration as manifest by the language used. See Zinda, 191 Wis.2d at 166, 528 N.W.2d 55. We agree with the circuit court's characterization of the Community Declaration's purpose. It is unambiguously an attempt to position control of Geneva National with the Declarant until a significant number of the residential units are sold to allow the Declarant to promote the orderly development of the property according to the master plan. Accepting Solowicz's contention would contravene this purpose by eliminating Declarant control when only 52 percent of the residential units have been conveyed to individual unit owners; conveying land to a third-party lender does not eliminate the need for Declarant control over the property. The Declarant's two explanations of what constitutes a conveyance did not redefine the term, but instead served to reinforce the Community Declaration's purpose by concluding that a conveyance occurs when the Developer conveys a parcel to an owner or to a third-party developer who has platted the parcel. [24] Accordingly, the terms of the Community Declaration unambiguously maintain the Declarant's control until 85 percent of the residential units are conveyed to individual unit owners or to a third-party developer who has platted the parcels. Conveyance of 85 percent of the residential units to individual unit owners or third-party developers who have platted the parcels has not yet occurred.
¶ 39 Solowicz argues that even if the terms of the Community Declaration are unambiguous, the court must determine whether its terms are reasonable, and the Community Declaration unreasonably provides for unlimited and unending Developer control over the condominiums in Geneva National and is thereby unenforceable. ¶ 40 The Community Declaration is a contract or agreement between the Developer and those who choose to purchase property within Geneva National, as we have discussed above. However, the Community Declaration is also a type of servitude upon the land underlying Solowicz's condominiums because it places certain burdens on the ownership estates. Black's Law Dictionary 1492 (9th ed. 2009). ¶ 41 Wisconsin courts have consistently held that a servitude that is unambiguous at the time of its creation will be strictly enforced. Gojmerac v. Mahn, 2002 WI App 22, ¶ 31, 250 Wis.2d 1, 640 N.W.2d 178 (citing Hunter v. McDonald, 78 Wis.2d 338, 342-43, 254 N.W.2d 282 (1977)). Courts do not determine the reasonableness of such unambiguous servitudes. See Pertzsch, 248 Wis.2d 219, ¶ 10 n. 3, 635 N.W.2d 829; Zinda, 191 Wis.2d at 171, 528 N.W.2d 55. The reasons for this conclusion are many. For example, we apply ordinary contract rules when interpreting the terms of a servitude. See Siler, 273 Wis. at 261, 77 N.W.2d 504. Parties also have the freedom to contract as they see fit, which is a well-established principle of law that Wisconsin courts have long recognized. Watts v. Watts, 137 Wis.2d 506, 521, 405 N.W.2d 303 (1987). ¶ 42 Here, the contract (the Community Declaration) was recorded, affording plaintiffs' notice of all its terms. While we acknowledge that the freedom to contract may be tempered by basic common law principles, courts will not intervene and void an unambiguous contract absent the violation of a common law principle, which under the circumstances, requires that result. See, e.g., unconscionability, Wis. Auto Title Loans, Inc. v. Jones, 2006 WI 53, ¶ 29, 290 Wis.2d 514, 714 N.W.2d 155; bad faith, M & I Marshall & Ilsley Bank v. Schlueter, 2002 WI App 313, ¶ 15, 258 Wis.2d 865, 655 N.W.2d 521; performance becomes impossible due to facts existing when the contract was made, which the non-performing party did not know and had no reason to know, Estate of Zellmer v. Sharlein, 1 Wis.2d 46, 49, 82 N.W.2d 891 (1957); terms that contravene public policy, Watts, 137 Wis.2d at 521, 405 N.W.2d 303; or terms that contravene a statute, Baierl v. McTaggart, 2001 WI 107, ¶ 12, 245 Wis.2d 632, 629 N.W.2d 277. No such common law principle has been contravened by the Community Declaration. ¶ 43 As noted, Solowicz contends that there is a long line of cases holding that restrictive covenants with unreasonable terms are unenforceable. Solowicz misconstrues these cases. The Community Declaration is not simply a covenant that contains restrictions, but rather the overarching plan for the development of a 1,600 acre parcel. However, we nevertheless review the principles established by the restrictive covenant cases that Solowicz cites. ¶ 44 First, Solowicz cites to restraint of trade cases and wrongly attempts to import the reasonableness requirement in such cases to the contract at issue here. Contracts that contain restraints of trade are distinguishable because they are disfavored at law and must withstand close scrutiny as to their reasonableness. Star Direct, Inc. v. Dal Pra, 2009 WI 76, ¶ 19, 319 Wis.2d 274, 767 N.W.2d 898. In Huntley v. Stanchfield, 174 Wis. 565, 183 N.W. 984 (1921), cited by Solowicz, Patnaude sold a hotel property with a restrictive covenant in the deed that prohibited the property from being used as a hotel for 15 years. In a previous action, the court enjoined the defendants from using the property as a hotel. Id. at 566, 183 N.W. 984. Huntley claimed the defendants violated the injunction and requested the court hold them in contempt. Id. The defendants argued that the covenant was void because it was an illegal restraint of trade. Id. at 569, 183 N.W. 984. On this point, the court noted that the proper inquiry is whether: the restriction [is] a reasonable one under all the facts and circumstances of the transaction in the light of the situation, business, and objects of the parties, and was the restriction for a just and honest purpose, for the protection of the legitimate interests of the party in whose favor it is imposed, reasonable as between them and not specially injurious to the public[.] Id. at 570, 183 N.W. 984 (quoting Cottington v. Swan, 128 Wis. 321, 323, 107 N.W. 336 (1906) and cases there cited). Solowicz is correct in pointing out that the Huntley court determined whether the restrictive covenant was reasonable; however, Huntley is distinguishable because the covenant contained a restraint of trade. Id. at 568-69, 183 N.W. 984. The Community Declaration does not restrain trade. Accordingly, Huntley 's reasonableness inquiry is inapplicable here. Doherty v. Rice, which reiterates the inquiry in Huntley, is also a restraint of trade case. Doherty, 240 Wis. 389, 3 N.W.2d 734 (1942). The deed in that case prohibited sale to and occupation by non-Caucasians, construction of residences that cost less than $600 and the use of outside toilets. Id. at 392, 3 N.W.2d 734. ¶ 45 Next, Solowicz argues that McKinnon v. Benedict, 38 Wis.2d 607, 157 N.W.2d 665 (1968), Le Febvre v. Osterndorf, 87 Wis.2d 525, 275 N.W.2d 154 (Ct. App.1979), Dodge, 127 Wis.2d 62, 377 N.W.2d 208 and Weiland v. Paulin, 2002 WI App 311, 259 Wis.2d 139, 655 N.W.2d 204, [25] hold that the terms of a contract must be reasonable to be enforceable. We disagree. None of these cases declines to enforce a contract on the grounds that its terms are unreasonable; rather, the cases demonstrate the court applying equitable principles. Such equitable principles require the enforcement of a contract's terms be reasonable, not that the terms themselves be reasonable. ¶ 46 In McKinnon, the defendants purchased land that was being used as a resort. In need of financial assistance, defendants obtained a loan from plaintiff, the terms of which imposed a restraint on trade such that defendants could use the land for no purpose other than as a summer resort for a period of 25 years. McKinnon, 38 Wis.2d at 615, 157 N.W.2d 665. Because of financial pressures, defendants added a trailer park and campsite. Plaintiff sought to enjoin defendant from operating the trailer park and campsite. Id. at 614-15, 157 N.W.2d 665. The court declined to use its equitable injunctive powers because the terms of the agreement were so unreasonably enforced that the contract was unconscionable. See id. at 622, 157 N.W.2d 665. ¶ 47 In Le Febvre, the condominium declaration stated that no unit may be rented without the prior written consent of the Board of Directors. Le Febvre, 87 Wis.2d at 528, 275 N.W.2d 154. Plaintiffs, members of the board of directors, sought an injunction against the continued rental of certain units by the developer, which the circuit court granted. Id. The court affirmed, holding that based upon all the facts and circumstances, it [was] reasonable to enforce this restriction by injunction. Id. at 535, 275 N.W.2d 154. ¶ 48 In Dodge, a deed restriction reserved the right for the subdivision developers to approve all buildings. Dodge, 127 Wis.2d at 64, 377 N.W.2d 208. The court held that the restriction's approval standard was arbitrary and concluded that where, as here, a common grantor reserves the right to approve building on a deeded property by arbitrary standards, the exercise of that right and not the restriction itself  must be reasonable. Id. at 66, 377 N.W.2d 208 (emphasis added). ¶ 49 Weiland, citing McKinnon, reaffirmed that the reasonableness requirement for a deed restriction is grounded in principles of equity. Weiland, 259 Wis.2d at 152, 655 N.W.2d 204. Weiland unequivocally states that if the intent of a restrictive covenant can be clearly ascertained from the covenant itself, the restrictions will be enforced. Id. at 149, 655 N.W.2d 204 (citing Zinda, 191 Wis.2d at 166, 528 N.W.2d 55). In Weiland, the subdivision developers sought injunctive relief against the lot owners, alleging that the owners erected a manufactured structure on their lot without preapproval in violation of the declarations governing the subdivision. Id. at 143, 655 N.W.2d 204. The court held that it was reasonable to enforce the deed restriction and affirmed the grant of injunctive relief. Id. at 151, 655 N.W.2d 204. ¶ 50 In the case now before us, both the court of appeals and the circuit court cited Pertzsch in support of the proposition that unambiguous contract terms need not be assessed for their reasonableness. Specifically, they relied on this passage: Because we reject the argument that the covenants contain no specific standard of approval for boathouses, we also reject the Association's reliance on Dodge v. Carauna .... [B]ecause the standards of approval in this case are not arbitrary, but are clear and specific, we are precluded from inquiring into the developer's intent or into any other evidentiary matters outside the four corners of the agreement. Pertzsch, 248 Wis.2d 219, ¶ 10 n. 3, 635 N.W.2d 829. ¶ 51 Solowicz contends that Pertzsch should be overruled because it attempts to eliminate what Solowicz contends is Wisconsin's longstanding reasonableness requirement. We disagree. Rather, Pertzsch is the latest in a long line of cases recognizing that the reasonableness analysis of unambiguous contracts is limited to determining whether the terms of the contract were reasonably enforced. [26] ¶ 52 Here, we have concluded that the terms of the Community Declaration are unambiguous and therefore, its terms need not pass a test as to their reasonableness in order to be enforceable.