Statutory Interpretation – Restrictive Covenant

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WI Supreme Court

Case Name: Richard Forshee, et al. v. Lee Neuschwander, et al.

Case No.: 2018 WI 62

Focus: Statutory Interpretation – Restrictive Covenant

Lee and Mary Jo Neuschwander purchased property on Hayward Lake in Hayward, Wisconsin. They renovated the large house and began renting it to vacationers on both short-term and long-term bases. Several neighboring property owners (the “Neighbors”) objected to the use of the property as a vacation rental. They brought suit in Sawyer County Circuit Court, claiming that a restrictive covenant that encumbers all lots in the subdivision of which Neuschwanders’ property is a part, precludes short-term rentals of property.

The Sawyer County Circuit Court held in favor of the Neighbors and enjoined Neuschwanders from further short-term rentals, except for the Birkebeiner weekend. The court of appeals reversed. Forshee v. Neuschwander, 2017 WI App 43, 377 Wis. 2d 162, 900 N.W.2d 100. The Neighbors petitioned for review, which we granted.

We review a single issue: Whether the short-term rental of the Neuschwanders’ property constitutes “commercial activity” under the restrictive covenant that encumbers their property. We conclude that the term, “commercial activity,” which is undefined in the covenant, is ambiguous. Therefore, we narrowly interpret it and conclude that it does not preclude either short-term or long-term rentals of Neuschwanders’ property. Accordingly, we affirm the decision of the court of appeals.

Affirmed

Concur: ABRAHAMSON, J. concurs (Opinion filed). KELLY, J. concurs (joining majority except to the extent it is inconsistent with this concurrence), joined by BRADLEY, R. G., J. (Opinion filed).

Dissent: BRADLEY, A. W., J. dissents (Opinion filed).

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.