Court Opinion

ID: 4710704
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:01:26.561821+00
Date Added: 2024-06-11T08:07:04.927454
License: Public Domain

Madsen, C. J.
¶36 (dissenting) — The issue is whether the Chiwawa Communities Association (Association) validly amended the communities’ restrictive covenants to prohibit the homeowners within the communities from renting their homes for less than 30 days at a time (short-term rentals). The majority decides as a matter of law that an existing restriction limiting the number and size of “for Rent” signs that a resident may display on the property conclusively proves intent that rentals of any duration were consciously considered when the covenants were written. I cannot agree with this incredible supposition.
¶37 The majority also concludes as a matter of law that the covenants did not reserve authority to a majority of association members to ban rentals of under 30 days because this durational restriction is “unrelated” to any existing covenant. “Relatedness” to an existing covenant involves an artificial distinction between changes to restrictive covenants and creation of new restrictive covenants. Although some courts recognize the distinction, the better analysis is presented by courts that have wisely rejected it. This court should reject the distinction as well.
¶38 Both the question of what the existing covenants mean in regard to duration, if anything, and the question whether the covenants reserved power to a majority to impose a durational ban on rentals should be remanded so that the parties may submit extrinsic evidence, if any is available, to illuminate the meaning of the covenants.
*263Discussion
¶39 The questions posed by this case are twofold: What, if anything, did the restrictive covenants say about renting property for short terms prior to adoption of the explicit ban on short-term rentals, and did the reservation of power provision in the covenants authorize a majority of homeowners to adopt the ban on short-term rentals.
¶40 The primary responsibility of a court when faced with a dispute about the meaning of restrictive covenants is to determine the intent of the parties who established the covenants. Riss v. Angel, 131 Wn.2d 612, 621, 934 P.2d 669 (1997). The court examines the language used as indicating the parties’ intent, with the language given its ordinary and common meaning. Id.; Metzner v. Wojdyla, 125 Wn.2d 445, 450, 886 P.2d 154 (1994); Mains Farm Homeowners Ass’n v. Worthington, 121 Wn.2d 810, 815, 854 P.2d 1072 (1993).5

Whether the existing covenants addressed duration of rentals

¶41 The existing covenants recognized that property may be rented. A covenant restricting the number and size of “for Rent” signs that homeowners may place on their property says in part:
No sign of any kind shall be displayed to the public view on any lot, tract or subdivision thereof in the plat, except one sign of not more than 3 feet square giving the names of the occupants of the lot, tract, or approved subdivision thereof, and one sign of not more than 6 square feet advertising the property for sale or rent.
Clerk’s Papers (CP) at 86.
*264¶42 This restriction begins with a general rule — no signs allowed — and then lists certain specific, detailed exceptions for signs of limited size and number. The obvious purpose is to prevent multiple or large signs and the immediate concern is also obvious — addressing the appearance (aesthetics) of the properties and the residential neighborhoods. This interpretation is fortified by the placement of the restrictive language in a covenant titled “TRASH DISPOSAL” that also provides that “[n]o trash, garbage, ashes or other refuse may be thrown, dumped, or otherwise disposed of on any lot, vacant or otherwise.” Id. Plainly, the covenant is concerned primarily with property upkeep and appearance.
¶43 The restriction also implicitly acknowledges that home rentals may occur. On its face, however, this is all it does.
¶44 But, astonishingly, the majority concludes that the sign restriction “proves . . . that the drafters anticipated rentals and consciously decided not to limit their duration.” Majority at 251 (emphasis added). The majority’s reading is not consistent with the ordinary language used and is far from reasonable. The specific reference to “for Rent” signs reflects the fact that both selling and renting homes are common occurrences in residential neighborhoods when homeowners decide not to live in their homes and predictably will place signs on their property to advertise its availability.
¶45 To interpret the reference to “for Rent” signs to mean as a matter of law that rentals were considered and allowed for any duration, including short-term rentals (vacation rentals), is truly extraordinary.
¶46 Nonetheless, the reference to rent is in the restriction and because no more is apparent from the restriction itself, deciding whether the parties to the covenants intended anything by it about the duration of rentals will *265depend on extrinsic evidence. As with other contracts, extrinsic evidence may be admissible to aid in determining the intended meaning of restrictive covenants under Berg v. Hudesman, 115 Wn.2d 657, 801 P.2d 222 (1990), and its progeny. In Hollis v. Garwall, Inc., 137 Wn.2d 683, 695, 974 P.2d 836 (1999), the court held that extrinsic evidence may be relevant to determining the intent of restrictive covenants provided that the extrinsic evidence is relevant in giving meaning to the words used in the covenants. In applying the Berg principles in this context, just as with other contracts, such evidence cannot include evidence of a partys unilateral or subjective intent, evidence to show intent independent of the written document, or evidence that would alter or contradict what is written. Id.6
¶47 Remand to allow the parties an opportunity to submit extrinsic evidence about what was intended by the language regarding signs and whether it is relevant to duration is necessary before any conclusion can be made about intent to address length of rentals.
¶48 When extrinsic evidence is to be considered under the Berg line of cases, it is generally for the trier of fact. In Berg, 115 Wn.2d at 667, the court adopted Restatement (Second) of Contracts § 212 (1981), which provides:
“(1) The interpretation of an integrated agreement is directed to the meaning of the terms of the writing or writings in the light of the circumstances, in accordance with the rules stated in this Chapter.
“(2) A question of interpretation of an integrated agreement is to be determined by the trier of fact if it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence. Otherwise a question of interpretation of an integrated agreement is to be determined as a question of law.”
*266Berg, 115 Wn.2d at 667-68 (emphasis added) (quoting Restatement § 212).
¶49 Whether the trier of fact must make these determinations does not require that ambiguity appear on the face of the document. “[A] party may offer extrinsic evidence in a contract dispute to help the fact finder interpret a contract term and determine the contracting parties’ intent regardless of whether the contract’s terms are ambiguous. Extrinsic evidence is not admissible, however, to show intention independent of the contract.” Brogan & Anensen, LLC u. Lamphiear, 165 Wn.2d 773, 775-76, 202 P.3d 960 (2009) (citation omitted) (citing Berg, 115 Wn.2d at 667-69; Hollis, 137 Wn.2d at 695).
¶50 In summary on this issue, I very strongly disagree with the majority’s conclusion that the restriction on the size of “for Rent” signs proves a conscious decision to permit rentals of any duration. The sign restrictions do not on their face disclose anything about duration of permitted rentals. If relevant intent is to be found in the restrictive covenants prior to adoption of the ban, it must be found by a trier of fact based on extrinsic evidence.

Whether the reservation of power in the covenants authorized a majority of the members of the association to adopt a ban on short-term rentals

¶51 The second question is whether the Association had the authority to adopt the ban on short-term rentals by majority vote. At the outset, I do not agree with the Court of Appeals’ artificial distinction in Meresse v. Stelma, 100 Wn. App. 857, 999 P.2d 1267 (2000), which dictates a difference in reserved authority depending on whether a change in covenants or a new restriction is at issue. This is the ill-advised theory adopted by the majority.
¶52 For this theory, Meresse relies on Lakeland Property Owners Ass’n v. Larson, 121 Ill. App. 3d 805, 459 N.E.2d 1164, 1167, 1169, 77 Ill. Dec. 68 (1984). Meresse, 100 Wn. App. at 859. Referring to Lakeland Property Owners and *267other cases, the Colorado Supreme Court recognized a split in jurisdictions on the matter. Evergreen Highlands Ass’n v. West, 73 P.3d 1, 4-7 (Colo. 2003).
¶53 The relevant language in the covenants here authorizes a majority of the association members to agree “to change these protective restrictions and covenants in whole or in part.” CP at 87. Instead of reading this language to mean that the reserved authority extends only to making changes to the existing covenants, the Colorado court said that such a construction “seems illogically narrow.” Evergreen Highlands, 73 P.3d at 6. The court explained that “from a linguistic standpoint, the Lakeland conclusion that ‘change or modify’ can only apply to the alteration of existing covenants, and not the addition of new and different ones, is not well-founded. Webster defines ‘change’ as ‘to make different.’ ” Id. (quoting Webster’s Third New International Dictionary 373 (1986)); see also Ticor Title Ins. Co. v. Rancho Santa Fe Ass’n, 177 Cal. App. 3d 726, 223 Cal. Rptr. 175, 179 (1986) (“the words ‘changed’ and ‘modified’ include any alteration whether involving an increase or decrease”) “[Covenants could certainly be changed or made different either by the addition, subtraction, or modification of a term.” Evergreen Highlands, 73 P.3d at 6.7
¶54 I do not agree with the majority’s view that we should treat reservation of power provisions differently depending on whether a change or amendment is made to an existing restriction or is by way of a new restriction. In either case, a modification is made to the covenants, and in the latter case, the modification is to the entire set of restrictions. Moreover, the distinction followed by the majority is flawed because the result can be that a relatively minor new restriction can be precluded if there is no unanimous agreement, while a major change can be made by a simple majority vote.
*268¶55 The important guideline is that the change or addition must be reasonably consistent with the general plan of development, and it should make no difference whether a change is made to an existing restriction or a new restriction is added.
¶56 Here, the question is whether the restrictive covenants, as they existed before the ban, permitted a majority of the homeowners to approve a restriction limiting the minimum period for which homeowners may rent their houses in the communities. When covenants reserve power to less than all of the affected homeowners to adopt additional restrictions, then less than all may adopt restrictions provided this power is exercised in a reasonable manner and is consistent with the general plan of development. E.g., Shafer v. Bd. of Trs. of Sandy Hook Yacht Club Estates, Inc., 76 Wn. App. 267, 273-74, 883 P.2d 1387 (1994)). The reason for this rule is that
[i]n a sense, there is an inherent inconsistency between an elaborate set of restrictive covenants designed to provide for a general scheme or plan of development (generally considered to be for the benefit of the respective grantees), and a clause therein whereby the grantor reserves to itself the power at any time in its sole discretion to change or even arbitrarily abandon any such general scheme or plan of development (a power which is solely for the benefit of the grantor).
Flamingo Ranch Estates, Inc. v. Sunshine Ranches Homeowners, Inc., 303 So. 2d 665, 666 (Fla. App. 1974), quoted in Lakemoor Cmty. Club, Inc. v. Swanson, 24 Wn. App. 10, 15, 600 P.2d 1022 (1979); see also Shafer, 76 Wn. App. at 273. Or, to put it another way, the rule ensures that a neighborhood will retain its essential nature and character as originally developed. Homeowners’ legitimate expectations based on the covenants governing at the time they acquired their property will in general be protected.
¶57 As Justice Gordon McCloud’s dissent notes, there may be circumstances where a court may be able to make this determination as a matter of law. But in many cases *269extrinsic evidence will be available that bears on the matter of whether an amendment to the restrictive covenants is reasonably consistent with the covenants. Under Berg’s context rule, such evidence includes “the circumstances leading to the execution of the contract, the subsequent conduct of the parties and the reasonableness of the parties’ respective interpretations. Berg, [115 Wn.2d] at 667-69.” Shafer, 76 Wn. App. at 275.
¶58 The trial court realized that extrinsic evidence may well be relevant and admissible, but there is no indication that such evidence was considered here. In particular, evidence of surrounding facts maybe highly relevant, i.e., in what environment were the restrictive covenants written. Particularly where the propriety of short-term rentals is concerned, the nature and character of the area and of other nearby developments may shed light on what is reasonably consistent with the restrictive covenants and what the property owners could reasonably expect.
¶59 If, for example, the development is in an area where short-term rentals are usually allowed in nearby, similar developments because of recreational activity in the vicinity that homeowners can take advantage of by making short-term rentals, it will be less likely that a ban on short-term rentals is reasonably consistent with the restrictive covenants.
¶60 The court should acknowledge the possibility that there will be insufficient evidence to draw any conclusions about durational limits in the existing covenants or whether they are reasonably consistent with the existing covenants. If this proves to be the case, then the ban adopted by the Association cannot be given effect because it is in excess of the authority reserved by the covenants.
¶61 But at this point, remand for consideration of the question of consistency with the existing covenants, including whether possible extrinsic evidence sheds light on this question, is appropriate as well.
¶62 I turn next, briefly, to another concern.

*270
Whether a ban on short-term rentals is relevant to the restriction that lots must be utilized solely for single family residential use

¶63 Although not my reason for writing separately, I am troubled by the conclusion that because renters for short terms live, eat, sleep, and so on, in the residence, there is no distinction to be drawn between a short-term rental, essentially renting to others for vacation use, and longer-term rentals where renters use the home as their primary residence. Individuals on vacation are not limited by constraints of the same kind as other renters. It seems odd to ignore the fact that many people equate vacations with freedom to act in ways outside their normal conduct. It is to be expected that spirits may be higher and conduct more uninhibited. Noise levels, for example, could well be higher as a consequence. Vacationers might not be as considerate of neighbors and their neighbors’ peace and quiet as if they were residents on a more permanent basis. It cannot be gainsaid that some on vacation consume alcoholic beverages to a greater degree than they ordinarily would, with consequent effects on their behavior. I do not doubt that many of these behaviors occur with residents as well as vacationers, but it seems to be to be putting blinders on to conclude that there is no meaningful distinction relevant to the commercial versus residential uses distinction. Certainly, in any given case, the vacationer may behave in every significant respect like a resident. But over the course of a year, over the course of seasonal changes, there will undoubtedly be a cumulative effect of noise, traffic, and disruption of neighborhoods from successive short-term rentals.
¶64 I recognize that many courts have refused to accept the distinction, and without factual, almost scientific evidence, my view is not likely to prevail. Nonetheless, I think it almost disingenuous to act as if rentals for under 30 days are the same as renting to persons who use homes in the communities as their primary residences.
*271¶65 In conclusion, remand should be directed to permit submission of extrinsic evidence on the questions of whether the reference to rent signs in the covenants shows any intent about rental duration and whether the ban on short-term rentals is reasonably consistent with the existing covenants.
¶66 For the reasons stated, I dissent.

 There is no rule that requires construing the restrictive covenants here favorably to the free use of land. By the time this court decided Riss, 131 Wn.2d 612, that rule had been either disregarded or questioned in a number of cases. In Riss, the court expressly held that in cases involving disputes “among homeowners in a subdivision governed by the restrictive covenants [the] rule[ ] of strict construction ... in favor of the free use of land [is] inapplicable.” Riss, 131 Wn.2d at 623. Headnote 7 (regional reporter) in Viking Properties, Inc. v. Holm, 118 P.3d 322 (2005), accordingly, is incorrect.

 Berg addresses parol evidence (extrinsic evidence) used to interpret the meaning of what is actually contained in a contract. DePhillips v. Zolt Constr. Co., 136 Wn.2d 26, 32, 959 P.2d 1104 (1998). In contrast, “the ‘parol evidence rule’ precludes use of parol evidence [(extrinsic evidence)] to add to, subtract from, modify, or contradict the terms of a fully integrated written contract.” Id.

 The Colorado court speculated that the differing outcomes in the cases were actually based on the different factual circumstances and the severity of the consequences presented rather than merely on the distinction between a change to a covenant and creation of a new covenant. Evergreen Highlands, 73 P.3d at 6.