Daily Development for
By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of
Of Counsel: Blackwell Sanders Peper Martin
Kansas City,
prandolph@cctr.umkc.edu
WORDS AND PHRASES; "BUSINESS:"
In the context of a residential subdivision covenant prohibiting the
operation of a business, the term "business" means includes
"activities conducted for a profit," even if such activities are
consistent with the residential character of the neighborhood.
Terrien v. Zwit, 467
SERVITUDES; COVENANTS; USE RESTRICTIONS; PUBLIC POLICY:
Terrien v. Zwit, 467
The activity in question was a state licensed day care facility operated in
a private home for less than seven children.
In a 4-3 decision, with two quite distinct dissents, the Michigan Supreme
Court here upheld the application of a covenant prohibiting "commercial,
industrial or business uses" to restrain the operation of a "family
day care center" in a residential neighborhood. The court refused to follow the lead of the
trial court, which had struck down the application of the covenant in this
context as violative of public policy. It further refused to affirm the reasoning of
the court of appeals, which had affirmed the trial court on the grounds that
the covenants required that the properties in the subdivision be put to
"residential use," and therefore the covenants should be construed as
not intended to bar businesses that were residential in character.
In rejecting the argument of the Court of Appeals, the Supreme Court used
Black's Law Dictionary language to conclude that "business"
necessarily meant any "activity or enterprise for gain, benefit, advantage
or livelihood.."
The court emphasized that the covenants in question even prohibited the
storage of business equipment.
Consequently, the court concluded, it was the intent of the drafters of
this covenant that even "businesses" that were residential in
character that fit the definition were prohibited.
On this point, one dissenter argued that covenants ought to be interpreted
in light of the community in which they operated, and that where a business has
no adverse impact on the residential character of the area, it should be not be
viewed as a prohibited business. The
majority responded that the language of the covenants prohibited businesses
completely, and not just incompatible businesses, and
that to look to each neighborhood environment would open covenants to extensive
judicial interpretation not intended by the parties who entered into them.
The court noted a difficulty, raised by the dissent that its interpretation
would also appear to prohibit lawyers, stockbrokers and the like from working
on their professional activities in their homes, and would even prohibit
neighborhood children from mowing their neighbor's lawns for pay. The court simply stated that these issues
were not before it, and that it would address them when they were.
The more direct challenge came from a single dissenter who argued that the
court should declare that the public policy of the state prohibited the
enforcement of private restrictive covenants to preclude the operation of day
care centers of the type involved here.
The majority ruled that public policy in this context cannot simply be
declared by the court. It must derive
from Constitutional, statutory or regulatory declarations or actions.
"The public policy of
The majority conceded that several states, including
Reversed and remanded, directing summary judgment for the plaintiffs seeking
enforcement of the covenant.
Comment 1: The court has created a kind of conundrum for itself with its
broad definition of what constitutes a "business" within the meaning
of the covenant, and even appears to concede that it will eventually be forced
to withdraw from the broadest implications of its ruling when it gets to more
homespun activities such as homeowner slaving late at night in their home
offices in connection with businesses centered elsewhere.
Although arguably these activities also are "services conducted for
gain," the obvious implication of the court's language is that it will
permit them when the challenge arises.
See, e.g, .Gabriel v. Cazier,
938 P.2d 1209 (
Comment 2: Although none of the opinions mention the Restatement of
Servitudes, it should be noted that the Restatement favors the application of
public policy analysis to modify or bar the operation of servitudes, including
both covenants and easements. It
recommends this approach as a substitute for the "touch and concern"
requirement, which many have argued in practice embodies a public policy
component anyway.
The Restatement would abolish the touch and concern requirement. The court does not reject the application of public policy analysis to covenants, but its approach certainly would limit the reach of such applications.
Readers are urged to respond, comment, and
argue with the daily development or the editor's comments about it.
Items in the Daily Development section
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