Opinion ID: 848849
Heading Depth: 1
Heading Rank: 5

Heading: analysis

Text: A. COVENANTS We granted leave in this case to consider whether the operation of a family day care home violates covenants permitting only residential uses and prohibiting commercial, industrial, or business uses. Further, assuming arguendo that such activities do violate the covenant, the question becomes whether the covenant is unenforceable because it violates some public policy in favor of day care facilities. In Beverly Island Ass'n v. Zinger, 113 Mich. App. 322, 317 N.W.2d 611 (1982), the Court of Appeals addressed a somewhat similar issue. There, the Court, faced with a narrower covenant that permitted only residential uses, concluded that the operation of a family day care home did not violate that covenant. [4] Stressing the relatively small scale of the particular day care operation and that [t]he only observable factor which would indicate to an observer that defendants do not simply have a large family is the vehicular traffic in the morning and afternoon when the children arrive and depart, id. at 328, 317 N.W.2d 611, the Court found this sort of day care use to be residential in nature, and thus not a use in violation of the covenant. Beverly Island was relied upon by the Court of Appeals in the instant matter to conclude that the day care use here was not violative of the covenants at issue. However, such reliance was misplaced, in our judgment, because, the covenant at issue in Beverly Island merely prohibited nonresidential uses, whereas the covenants at issue here prohibit not only nonresidential uses, but also any commercial, industrial, or business uses as well. There is a significant distinction between such restrictions, as more is prohibited in our case then was prohibited in Beverly Island. Not only did defendants in this case covenant not to use their property for nonresidential uses, but they also covenanted not to use their property for commercial, industrial, or business uses. Interestingly, the Beverly Island Court itself recognized the distinction between a covenant permitting only residential uses and one that also expressly prohibits commercial, industrial, or business uses. Before it even began its analysis, the Beverly Island Court noted that the covenant at issue permits residential uses rather than prohibiting business or commercial uses. Id. at 326, 317 N.W.2d 611. It further recognized that a restriction allowing residential uses permits a wider variety of uses than a restriction prohibiting commercial or business uses. Id. While the former proscribes activities that are nonresidential in nature, the latter proscribes activities that, although perhaps residential in nature, are also commercial, industrial, or business in nature as well. The distinction between the covenants at issue here and the one at issue in Beverly Island was not viewed as persuasive by the Court of Appeals in this case. [5] The Court of Appeals in this case reasoned that, because the operation of a family day care home does not violate a covenant permitting only residential uses, [6] the operation of a family day care home also does not violate a covenant prohibiting commercial, industrial, or business uses. We disagree with such reasoning. Because these are separate and distinct covenants, that an activity complies with one does not necessarily mean that the same activity complies with the other. In other words, an activity may be both residential in nature and commercial, industrial, or business in nature. Therefore, Beverly Island simply does not answer the question raised here. We must determine whether the operation of a family day care home violates covenants prohibiting both nonresidential uses and commercial, industrial, or business uses. We find that it does. The operation of a family day care home for profit is a commercial or business use of one's property. We find this to be in accord with both the common and the legal meanings of the terms commercial and business. Commercial is commonly defined as able or likely to yield a profit. Random House Webster's College Dictionary (1991). Commercial use is defined in legal parlance as use in connection with or for furtherance of a profit-making enterprise. Black's Law Dictionary (6th ed). Commercial activity is defined in legal parlance as any type of business or activity which is carried on for a profit. Id. Business is commonly defined as a person ... engaged in ... a service. Random House Webster's College Dictionary (1991). Business is defined in legal parlance as an [a]ctivity or enterprise for gain, benefit, advantage or livelihood. Black's Law Dictionary (6th ed). This Court has previously discussed the meaning of commercial activity in a related context. In Lanski v. Montealegre, 361 Mich. 44, 104 N.W.2d 772 (1960), this Court addressed whether the operation of a nursing home was in violation of a reciprocal negative easement prohibiting commercial activity upon certain property. We determined that it was, observing that the circumstances were indicative of a general plan for a private resort area  and that this suggested that a broad definition of commercial activity was intended. Id. at 49, 104 N.W.2d 772 (emphasis in the original). Therefore, [i]n its broad sense commercial activity includes any type of business or activity which is carried on for a profit. Id. We concluded that the operation of a nursing home was a commercial use because a fee was charged, a profit was made, the services were open to the public, and such an operation subtracted from the general plan of the private, noncommercial resort area originally intended. Id. at 50, 104 N.W.2d 772. The facts here indicate that a similar definition of commercial activity was intended. Not only does the covenant here prohibit commercial or business activities, it also prohibits the mere storing of any equipment used in such activities. This is a strong and emphatic statement of the restrictions' intent to prohibit any type of commercial or business use of the properties. Defendants here, through the operation of family day care homes are providing a service to the public in which they are making a profit. [7] Clearly, such use of their properties is a commercial or business use, as those terms are commonly and legally understood. It is of no moment that, as defendants assert, the family day care homes cause no more disruption than would a large family or that harm to the neighbors may not be tangible. As we noted in Austin v. Van Horn, 245 Mich. 344, 347, 222 N.W. 721 (1929), the plaintiff's right to maintain the restrictions is not affected by the extent of the damages he might suffer for their violation. This all comes down to the well-understood proposition that a breach of a covenant, no matter how minor and no matter how de minimis the damages, can be the subject of enforcement. As this Court said in Oosterhouse v. Brummel, 343 Mich. 283, 289, 72 N.W.2d 6 (1955), `If the construction of the instrument be clear and the breach clear, then it is not a question of damage, but the mere circumstance of the breach of the covenant affords sufficient ground for the Court to interfere by injunction.' (Citations omitted.) B. PUBLIC POLICY Defendants further contend that, even if the covenant here does prohibit the operation of these day care facilities, such a restriction should be unenforceable as against public policy. The circuit court agreed, while the Court of Appeals did not find it necessary to reach this issue. [8] To determine whether the covenant at issue runs afoul of the public policy of the state, [9] it is first necessary to discuss how a court ascertains the public policy of the state. In defining public policy, it is clear to us that this term must be more than a different nomenclature for describing the personal preferences of individual judges, for the proper exercise of the judicial power is to determine from objective legal sources what public policy is, and not to simply assert what such policy ought to be on the basis of the subjective views of individual judges. This is grounded in Chief Justice Marshall's famous injunction to the bench in Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L Ed 60 (1803), that the duty of the judiciary is to assert what the law is, not what it ought to be. In identifying the boundaries of public policy, we believe that the focus of the judiciary must ultimately be upon the policies that, in fact, have been adopted by the public through our various legal processes, and are reflected in our state and federal constitutions, our statutes, and the common law. [10] See Twin City Pipe Line Co. v. Harding Glass Co., 283 U.S. 353, 357, 51 S.Ct. 476, 75 L.Ed. 1112 (1931). The public policy of Michigan is not merely the equivalent of the personal preferences of a majority of this Court; rather, such a policy must ultimately be clearly rooted in the law. There is no other proper means of ascertaining what constitutes our public policy. [11] As this Court has said previously: As a general rule, making social policy is a job for the Legislature, not the courts. This is especially true when the determination or resolution requires placing a premium on one societal interest at the expense of another: `The responsibility for drawing lines in a society as complex as ours  of identifying priorities, weighing the relevant considerations and choosing between competing alternatives  is the Legislature's, not the judiciary's.' [ Van v. Zahorik, 460 Mich. 320, 327, 597 N.W.2d 15 (1999) (citations omitted).] Instructive to the inquiry regarding when courts should refrain from enforcing a covenant on the basis of public policy is W R Grace & Co. v. Local Union 759, 461 U.S. 757, 766, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983), in which the United States Supreme Court said that such a public policy must not only be explicit, but that it also must be well defined and dominant.... [12] As the United States Supreme Court has further explained: Public policy is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests. As the term public policy is vague, there must be found definite indications in the law of the sovereign to justify the invalidation of a contract as contrary to that policy. [ Muschany v. United States, 324 U.S. 49, 66, 65 S.Ct. 442, 89 L.Ed. 744 (1945).] [13] This Court has found no definite indications in the law of Michigan to justify the invalidation of a covenant precluding the operation of family day care homes. Indeed, nothing has been cited, nor does our research yield anything, in our constitutions, statutes, or common law that supports defendants' view that a covenant prohibiting family day care homes is contrary to the public policy of Michigan. Defendants contend that family day care homes are a favored use of property, and a restriction against such a use, therefore, violates public policy. [14] Amorphous as that claim may be, even if it is true that family day care homes may be permitted or even encouraged by law, it does not follow that such use is a favored one. Additionally, that family day care homes are permitted by law does not indicate that private covenants barring such business activity are contrary to public policy. [15] What is missing from defendant's argument is some definitive indication that to exclude family day care homes from an area by contract is incompatible with the law. [16] There is a significant distinction between something being permitted or even encouraged by law and something being required or prohibited by law. To fail to recognize this distinction would accord the judiciary the power to examine the wisdom of private contracts in order to enforce only those contracts it deems prudent. However, it is not the function of the courts to strike down private property agreements and to readjust those property rights in accordance with what seems reasonable upon a detached judicial view. Oosterhouse, supra at 289-290, 72 N.W.2d 6. Rather, absent some specific basis for finding them unlawful, courts cannot disregard private contracts and covenants in order to advance a particular social good. See Johnstone v. Detroit, G H & M R Co, 245 Mich. 65, 73-74, 222 N.W. 325 (1928). [17] As we said in Oosterhouse, supra at 288, 72 N.W.2d 6, [w]e do not substitute our judgment for that of the parties, particularly where, as in the instant case, restrictive covenants are the means adopted by them to secure unto themselves the development of a uniform and desirable residential area. Instead, we conclude that, if covenants that prohibit family day care homes should not be enforced on public policy grounds, such a decision should come from the Legislature, not the judiciary. [18] The Legislature may think that it is wise to bar such covenants, but until it does so, we cannot say that they are contrary to public policy. See Muschany, supra at 65, 65 S.Ct. 442. Further, although the circuit court and the Court of Appeals in this case considered what they viewed as the public policy in favor of family day care homes, they neglected to even mention the strong competing public policy, which is well-grounded in the common law of Michigan, supporting the right of property owners to create and enforce covenants affecting their own property. [19] Wood v. Blancke, 304 Mich. 283, 287-288, 8 N.W.2d 67 (1943). It is a fundamental principle, both with regard to our citizens' expectations and in our jurisprudence, that property holders are free to improve their property. We have said that property owners are free to attempt to enhance the value of their property in any lawful way, by physical improvement, psychological inducement, contract, or otherwise. Johnstone, supra at 74-75, 222 N.W. 325 (emphasis added). Covenants running with the land are legal instruments utilized to assist in that enhancement. A covenant is a contract created with the intention of enhancing the value of property, and, as such, it is a valuable property right. City of Livonia v. Dep't of Social Services, 423 Mich. 466, 525, 378 N.W.2d 402 (1985). [20] The general rule [of contracts] is that competent persons shall have the utmost liberty of contracting and that their agreements voluntarily and fairly made shall be held valid and enforced in the courts. Twin City, supra at 356, 51 S.Ct. 476; see also Port Huron Ed. Ass'n v. Port Huron Area School Dist., 452 Mich. 309, 319, 550 N.W.2d 228 (1996), quoting Dep't of Navy v. Federal Labor Relations Authority, 295 U.S. App DC 239, 248, 962 F.2d 48 (1992)(discussing the fundamental policy of freedom of contract under which parties are generally free to agree to whatever specific rules they like). Moreover, [r]estrictions for residence purposes, if clearly established by proper instruments, are favored by definite public policy. The courts have long and vigorously enforced them by specific mandate. Johnstone, supra at 74, 222 N.W. 325. The covenants at issue here are of this sort. They expressly prohibit nonresidential uses, as well as commercial, industrial, or business uses. Clearly, the intention was to limit the use of the property in order to maintain a residential neighborhood of a specific character. As we said in Signaigo v. Begun, 234 Mich. 246, 250, 207 N.W. 799 (1926), [t]he right, if it has been acquired, to live in a district uninvaded by stores, garages, business and apartment houses is a valuable right. Further, this Court has not hesitated in proper cases to restrain by injunction the invasion of these valuable property rights. Id. at 251, 207 N.W. 799. Moreover, the nullification of [such] restrictions [would be] a great injustice to the owners of property, Wood, supra at 287, 8 N.W.2d 67, because the right of privacy for homes is a valuable right. Johnstone, supra at 74, 222 N.W. 325. It is the function of the courts to protect such rights through the enforcement of covenants. Wood, supra at 287-288, 8 N.W.2d 67. Here, we conclude that a covenant precluding the operation of a family day care home is not violative of the public policy of our state because there are no definite indications in our law of any public policy against such a covenant. Indeed, there is considerable public policy regarding the freedom of contract that affirmatively supports the enforcement of such a covenant.