Philip F Conlin v. Tom Upton , 313 Mich. App. 243 ( 2015 )

STATE OF MICHIGAN
COURT OF APPEALS
PHILIP F. CONLIN, JERRY L. HELMER, FOR PUBLICATION
RUTHANN HELMER, JOHN D. November 24, 2015
MCCULLOUGH, and DAVID G. HELMER, 9:00 a.m.
Plaintiffs-Appellants,
v No. 322458
Washtenaw Circuit Court
TOM UPTON, TIM HALLER, CHRIS CONLIN, LC No. 12-000942-CH
BARBARA HALLER, DAVID BAKER, and
DIXBORO FARMS PROPERTY OWNERS
ASSOCIATION,
Defendants-Appellees.
Before: M. J. KELLY, P.J., and MURRAY and SHAPIRO, JJ.
PER CURIAM.
In this real property dispute, plaintiffs, Philip F. Conlin, Jerry L. Helmer, Ruthann
Helmer, John D. McCullough, and David G. Helmer (collectively, the Developers), appeal by
leave granted the trial court’s final judgment and order, which the trial court entered after the
jury returned a verdict in favor of defendants, Dixboro Farms Property Owners Association (the
Association), and the Association’s officers and directors, Tom Upton, Tim Haller, Chris Conlin,
Barbara Haller, and David Baker (collectively, the Officers). The Developers and the Officers
each own or owned real property in a residential development known as Dixboro Farms.
Dixboro Farms had 34 total lots. During the events at issue, the Developers owned eleven
undeveloped lots, which they hoped to sell to third parties. The present dispute arose after the
Association adopted bylaws that required the lot owners to submit plans to the Association’s
architectural review committee for approval prior to any new construction or renovation. The
Developers sued, in part, to prevent the Officers and the Association from enforcing the bylaws
in a way that restricts their right to develop their lots. For the reasons more fully explained
below, we reverse the jury’s verdict, vacate the judgment, and remand for further proceedings.
I. BASIC FACTS
Philip Conlin testified that he and others purchased “just over ninety” acres of land in
1998 or 1999 and split the land into lots for development as Dixboro Farms. The land gently
slopes down from north to south. The north end of the property has nicer features—it is hilly,
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wooded, and has a seasonal creek. The south end, however, abuts an easement with 200-foot-
high towers for power lines. Accordingly, the northern lots were more expensive than those on
the south end of the development.
Philip Conlin stated that he and his co-developers established a set of restrictions and
protective covenants for the development and recorded them in January 2001. The restrictions
and covenants served as a “roadmap to any prospective purchaser” and helped define the “future
use” of the land. He placed a restriction in the covenants that required a prospective purchaser to
obtain his permission—in his role as the developer—before building on any parcel. He requires
the purchaser to provide him with plans, and has the right to determine whether the proposed
home is harmonious with the development as a whole. Philip Conlin rejected more proposals
with this development than he had rejected in any of his previous developments; he was
surprised by the number of people who wanted to buy a $200,000 lot and then build a $100,000
home. “I mean, I had more people that were just so off base with what they thought I would
allow there but still knew the high quality of the development and thought that paying for the
land would raise up their value of the inferior structure that I wouldn’t allow to be built.”
The covenants included a provision for the formation of a property owners association,
which Philip Conlin incorporated in 2007. The covenants provided that Philip Conlin would
appoint the board of directors for the association after the sale and development of 50% of the
lots. The members had the right to elect the board of directors after sale of 90% of the lots.
William Farley testified at his deposition, which was read into the record at trial, that he
was one of the first purchasers in Dixboro Farms. As one of the first to build, he felt he was
setting “the standard for the development” and was “very concerned” about building a house that
might not be “compatible with what was going to be built in the remaining lots.” He did not
want to build a high-end home only to have “mid-level tract homes” follow. The lots were
priced at the high-end—around $150,000 to $200,000—which suggested to him that the whole
development would be high-end. Farley spoke with Philip Conlin about his concerns. He
submitted plans to Philip Conlin for a home that was from 3400 to 3800 square feet in size, had a
four-stall garage, and was four-sided brick. Philip Conlin told him that the plans reflected
“ ‘precisely what we want the Dixboro Farms subdivision to be.’ ”
Philip Conlin confirmed on cross-examination that there were no new homes built in
Dixboro Farms from 2006 through 2009 because the real estate market had taken a turn for the
worse. However, he approved two new homes—referred to as the Guenther homes—for
construction in 2010. After the completion of the homes later that year, Philip Conlin learned
that many of the existing homeowners were upset about the new homes. They were dissatisfied
with the homes and felt that they were not in harmony with the quality of the existing homes.
There was, according to Farley, “a lot of discussion among the neighbors” about the new
homes; they had invested several hundred thousand dollars in their own homes and were worried
that if the remaining lots were built with similar housing to the Guenther homes, it would
dramatically alter the character of Dixboro Farms. Timothy Haller, who also owns a home in
Dixboro Farms, explained that there was “a groundswell of dissatisfaction that these homes had
been erected . . . .” Farley said the neighbors all thought the new homes were not in harmony
with the previous eleven homes: they “were typical low-end, middle, medium-type tract homes,
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no brick and mortar, no architectural definition, lots of shingles, exposed roof lines, vinyl-sided.”
Farley felt that Philip Conlin had backed away from his earlier representation about the character
of Dixboro Farms when he approved those homes. Haller similarly testified that the Guenther
homes were “not even close” to the homes that were built over the “prior ten years.” Because
the neighbors now had “trust issues” with Philip Conlin, Farley stated that they met to consider
how they might exercise some influence over future development.
In December 2010, Chris Conlin, who is Philip Conlin’s cousin and a homeowner in
Dixboro Farms, sent an email to Philip Conlin requesting that he appoint the board of directors
for the Association and call a meeting of the homeowners. Chris Conlin wrote that it was
“understood” that the new board would form an architectural committee at this first meeting and
that the residents would “move to amend” the covenants to include “ ‘preferred three sides brick’
in the language.” Philip Conlin appointed the Association’s first board of directors later that
month.
The homeowners met in January 2011. All the homeowners in attendance at the meeting
signed a letter with a summary of their position, which was sent to Philip Conlin. In the letter,
which is misdated January 2010, they expressed their gratitude to Philip Conlin for establishing
and developing Dixboro Farms. They noted that they had reached a consensus on “a number of
issues” and were sending him the letter to “inform” him about their decisions and seek his
“concurrence in the progress and basis of continuing cooperation.” They wanted to elect their
own board for the Association and they expected him to “concur” with this decision. The
homeowners also “acted to appoint” an architectural control committee to “cooperate and assist
in maintaining architectural harmony in the subdivision.” They wrote that the committee’s
duties would be defined in cooperation with him. Finally, the homeowners stated that they
intended to develop bylaws for the Association. The homeowners closed the letter with a request
that he sign the letter to indicate his “acceptance and acknowledgement” of the newly formed
Association.
Philip Conlin signed the letter and dated it January 14, 2011. He conceded at trial that he
had signed the letter and acquiesced to the homeowners’ decision to elect their own board of
directors for the Association, notwithstanding his continued right to appoint the board.
Haller testified that the Association hired a lawyer, Walter Hamilton, to advise it on the
adoption of bylaws. In June 2011, Haller hosted a meeting of the property owners to consider a
proposed set of bylaws. Haller stated that the debate centered on the “purpose of the bylaws and
protecting our property values moving forward . . . .” Philip Conlin and Jerry Helmer attended
the meeting and actively opposed the adoption of the bylaws, but a majority approved them.
The Association’s bylaws established an architectural review committee and, in relevant
part, prohibited the Association’s members from commencing, erecting, or maintaining on “any
Lot” a “building, fence, wall, deck, swimming pool, out-building or other structure, original
landscaping on new construction or exterior improvement” without first obtaining the
committee’s approval. Under section 3 of that same article, a lot owner had to submit a $2,000
fee with a set of required plans. Although the committee had the authority to deny a plan that
violated the original covenants or restrictions, it could also deny the plan on the basis of
“dissatisfaction with the effect of the proposed construction on the harmonious development” of
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Dixboro Farms. The bylaws included guidelines that the committee was to enforce “to insure
that all construction in the subdivision is in harmony with the character of the subdivision” as it
develops. The Association’s lawyer recorded the bylaws in December 2011.
In December 2011, Philip Conlin submitted a proposed plan of development for a lot to
the Association. In his cover letter, he stated that he was submitting the plans as part of the
review that he was required to perform as the developer, but he invited the Association’s
comments and suggestions on the plan.
Haller responded to the letter by email. He related that the committee had met about the
proposed plan and offered some “preliminary feedback.” The committee, he wrote, felt that the
proposed home should have a 100-foot setback rather than a 60-foot setback and should be 100%
stone or brick or a combination, but in any event “must” be brick or stone on the first floor. The
committee also reminded him that his client would have to submit plans along with $2,000 for a
comprehensive review, as required under the bylaws.
In August 2011, the Developers sued the Association’s Officers. They alleged that the
Officers caused the Association’s bylaws to be recorded and that the bylaws contained invalid
restrictions on the development of lots within Dixboro Farms. The recording of these
restrictions, the Developers further stated, made it more difficult to sell their remaining lots. In
their first count, the Developers asked the trial court to declare that the additional restrictions did
not bind, and were not applicable to, the Developers’ lots. They also alleged that the recording
of the bylaws amounted to slander of title in a second count. In December 2012, the trial court
entered an order allowing the Developers to amend their complaint to include the Association.
In April 2013, the Developers moved for partial summary disposition under MCR
2.116(C)(10). They maintained that the undisputed evidence showed that Philip Conlin did not
assign to the Association his right to approve proposed plans for the development of lots.
Because he did not assign that right, and it was undisputed that the original covenants and
restrictions did not give the Association the right to add new restrictions, the Association could
not—under the guise of enforcing the harmony of the development—establish new restrictions
through the adoption of bylaws. The Developers argued that they were entitled to a declaration
that the new restrictions contained in the Association’s bylaws did not apply to their lots.
The trial court held a hearing on the motion in June 2013. After hearing arguments, the
trial court determined that there was a question of fact as to whether Philip Conlin assigned to
the Association his right to review any proposed plans for development. For that reason, it
denied the Developers’ motion.
In October 2013, the Association moved for partial summary disposition. It argued that
the Developers’ slander of title claim was untimely and must be dismissed. The Officers also
each individually moved for summary disposition of the Developers’ claims against them on the
grounds that the Developers did not validly state claims against them as individuals and did not
plead in avoidance of their immunity. The trial court entered orders dismissing the Developers’
slander of title claim and their claims against the individual Officers.
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The case proceeded to trial in March 2014. After the close of proofs, the Developers
moved for a directed verdict. They argued that the undisputed evidence showed that the bylaws
burdened their properties with new or expanded restrictions, which were not permitted by the
original covenants. They further argued that the evidence did not establish that Philip Conlin
assigned to the Association his authority to approve proposed plans for development or that the
Developers were estopped from challenging the new restrictions in the bylaws. The trial court
determined that it was for the jury to decide whether the bylaws imposed restrictions beyond
those permitted by the original covenants and whether Philip Conlin assigned to the Association
his right to preapprove. Consequently, it denied the motion.
The parties submitted a special verdict form to the jury. They asked the jury to answer
whether the bylaws constituted “restrictive covenants” that ran with the land and whether the
bylaws impaired the Developers’ rights by violating the 2001 covenants and restrictions. The
jury answered “No” to both questions. Because they were told to skip the next two questions if
they answered ‘no’ to the first two questions, the jury did not find whether Philip Conlin
assigned to the Association his right to determine whether new developments were harmonious.
In April 2014, the trial court entered a judgment of no cause of action against the
Developers and ordered them to pay more than $58,000 in attorney fees to the Association.
The Developers now appeal in this Court.
II. DIRECTED VERDICT
A. STANDARD OF REVIEW
The Developers argue on appeal that the Association adopted bylaws that plainly
imposed new building and use restrictions on the real property in Dixboro Farms. Because the
covenants did not—as a matter of law—give the lot owners or the Association the authority to
adopt new restrictions with less than majority consent, the new restrictions had to have been
adopted by unanimous consent of the lot owners, which it is undisputed did not occur.
Consequently, the Developers state, the trial court erred when it determined that there was a
question of fact for the jury as to the proper construction of the covenants and bylaws; instead,
the trial court should have granted them judgment as a matter of law, directed verdict in their
favor, or granted them judgment notwithstanding the verdict.
This Court reviews de novo a trial court’s decision on a motion for a directed verdict.
Taylor v Kent Radiology, PC, 286 Mich. App. 490, 499; 780 NW2d 900 (2009). This Court also
reviews de novo the proper construction of restrictive covenants involving real property.
Johnson Family Limited Partnership v White Pine Wireless, LLC, 281 Mich. App. 364, 389; 761
NW2d 353 (2008). The proper construction of a contractual agreement is likewise a question of
law that this Court reviews de novo. Miller-Davis Co v Ahrens Construction, Inc, 495 Mich. 161,
172; 848 NW2d 95 (2014). Finally, this Court reviews de novo whether the trial court properly
applied this state’s common law. Roberts v Salmi, 308 Mich. App. 605, 612; 866 NW2d 460
(2014).
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B. ANALYSIS
In this case, there is no dispute that the deed restrictions and protective covenants for
Dixboro Farms, which were recorded in January 2001, are valid and enforceable against the lots
in Dixboro Farms. The dispute concerns whether the Association’s bylaws include additional
restrictions on the use and development of the lots within Dixboro Farms and, if so, whether the
Association can validly enforce those restrictions against the lots owned by the Developers even
though the Developers did not consent to the adoption of the bylaws.
1. ARTICLE XII UNAMBIGUOUSLY IMPOSES RESTRICTIONS ON THE LOTS
Operating agreements, such as a corporation’s bylaws, are intended to govern the future
conduct of the entity and its members. People ex rel Pulford v Fire Dep’t of City of Detroit, 31
Mich. 458, 465 (1875). Generally, an entity’s bylaws or membership agreement may provide for
the regulation and management of its affairs so long as the provision is not inconsistent with law
or the articles authorizing the entity. See MCL 450.1231; MCL 450.4210. When validly
promulgated, an entity’s bylaws or similar governing instrument will constitute a binding
contractual agreement between the entity and its members. See Mayo v Great Lakes Greyhound
Lines, 333 Mich. 205, 214; 52 NW2d 665 (1952) (providing that the members of a voluntary
association are bound by the association’s constitution and general laws); Kauffman v The
Chicago Corp, 187 Mich. App. 284, 287; 466 NW2d 726 (1991) (stating that the constitutions,
rules, and bylaws of the entities at issue “constitute a contract by all members” of the entities
“with each other and with the [entity] itself”); Allied Supermarkets, Inc v Grocer’s Dairy Co, 45
Mich. App. 310, 315; 206 NW2d 490 (1973) (“The bylaws of a corporation, so long as adopted in
conformity with state law, constitute a binding contract between the corporation and its
shareholders.”). In this case, the parties do not dispute that the Association had the authority to
adopt bylaws and that the bylaws were adopted by a majority of the Association’s members.
Thus, to the extent that they do not conflict with the Association’s articles of incorporation or
this state’s law, the bylaws would constitute a binding contractual agreement between the
Association and its various members.
The Association’s members have a common law right to try and enhance the value of
their property through contractual agreements concerning the use and development of their real
property. It is “well-grounded” in Michigan’s common law “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.” Terrien v Zwit, 467 Mich. 56, 71; 648 NW2d
602 (2002) (quotation marks, emphasis, and citation omitted). “A covenant is a contract created
with the intention of enhancing the value of property, and, as such, it is a ‘valuable property
right.’” Id., quoting City of Livonia v Dep’t of Social Services, 423 Mich. 466, 525; 378 NW2d
402 (1985). However, although Michigan courts recognize that restrictions are a valuable
property right, this right must be balanced against the equally well-settled principle that courts
will not lightly restrict the free use of property. See O’Connor v Resort Custom Builders, Inc,
459 Mich. 335, 341; 591 NW2d 216 (1999) (characterizing the protection of the free use of
property as a fundamental principle). Courts sitting in equity “do not aid one man to restrict
another in the use to which he may put his property unless the right to such aid is clear.” Eveleth
v Best, 322 Mich. 637, 642; 34 NW2d 504 (1948) (quotation marks and citation omitted).
Similarly, the provisions of a covenant “are to be strictly construed against the would-be enforcer
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. . . and doubts resolved in favor of the free use of property.” Stuart v Chawney, 454 Mich. 200,
210; 560 NW2d 336 (1997). When construing a restrictive covenant, courts may only give it a
fair construction; courts may not broaden or limit the restriction. Kelly v Carpenter, 245 Mich.
406, 409; 222 N.W. 714 (1929). To that end, courts will not infer the existence of a restriction—
the restriction must be expressly provided in the controlling documents. O’Connor, 459 Mich. at
341, citing Margolis v Wilson Oil Corp, 342 Mich. 600, 603; 70 NW2d 811 (1955) (“The
restrictions contain no express prohibition against a side entrance to defendant’s lots from
Robson avenue. None will be implied.”). Courts will not enlarge or extend a restriction through
interpretation, even to accomplish what it may be thought the parties would have desired had a
situation that later developed been foreseen by them at the time the restriction was written.
Sampson v Kaufman, 345 Mich. 48, 53; 75 NW2d 64 (1956).
The Association’s members were not required to establish their covenants and restrictions
through any particular type of instrument. See Erichsen v Tapert, 172 Mich. 457, 463; 138 N.W.
330 (1912) (“The fact that the restriction is created in an instrument independent of the deed
conveying title is of no consequence, as long as there is a valuable consideration moving to and
from the signers.”). Accordingly, they could adopt covenants concerning their real property
through the adoption of bylaws, which would then be contractually binding on the members to
the same extent that any other properly adopted covenant would be binding.
The Association’s bylaws contain numerous provisions governing the Association’s
affairs that are not in dispute. The parties do not dispute the provisions establishing the
Association’s membership, governing meetings and voting, stating the qualifications and duties
of officers and directors, or regulating finance and assessments. The dispute, rather, centers on
Article XII of the bylaws, which establishes an architectural review committee.
The first section of that article prohibits the members from commencing, erecting, or
maintaining any “building, fence, wall, deck, swimming pool, out-building or other structure,
original landscaping on new construction or exterior improvement” or making an addition,
change, or alteration to such an improvement without first submitting plans for the improvement
to the committee and obtaining its approval. A member who submits his or her plans to the
committee must pay $2,000 for the review and must deposit $5,000 to cover possible damages
from the development. The committee has broad authority to deny a proposed plan: it may
disapprove the plan because it does not comply with the restrictions and covenants for the
development, but it also may disapprove the proposed improvement because it is dissatisfied
“with the effect of the proposed construction on the harmonious development” of Dixboro
Farms. The latter ground for disapproval may be founded on the proposed “location of the
structure . . ., the materials used, the color scheme, the finish, design, proportion, shape, height,
style or appropriateness of the proposed improvement or alteration or because of any matter or
thing which . . . would render the proposed improvement or alteration inharmonious . . . .”
The bylaws also provide rules—labelled guidelines—that regulate the committee’s ability
to exercise its discretion to approve proposed plans. The guidelines, for example, provide that no
building or structure can exceed 35 feet in height and that all first floor walls must be “stone or
brick, or a combination of both.” The guidelines also specifically prohibit the use of plywood
siding, aluminum siding, or vinyl siding on any home. Although the bylaws refer to these
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requirements as guidelines, it is evident that the committee has a responsibility to reject as
unharmonious a proposed development or alteration that does not meet these criteria.
Article XII is not reasonably susceptible to more than one construction and clearly
imposes limits on the members’ ability to develop and use their lots through the committee’s
review process—that is, the bylaws unambiguously establish rules governing the use and
development of the land within Dixboro Farms. Farm Bureau Mut Ins Co Mich v Nikkel, 460
Mich. 558, 566; 596 NW2d 915 (1999). Accordingly, we must determine whether the
Association had the authority to regulate its members’ use and development of their lots and, if
the Association had that authority, whether it exceeded its scope.
2. THE ORIGINAL PROPERTY OWNERS DID NOT GIVE THE ASSOCIATION THE
AUTHORITY TO REGULATE THE PROPERTIES THROUGH BYLAWS
The Association’s articles of incorporation provide that the Association was formed to
“manage and administer the affairs and to maintain Dixboro Farms . . . .” It was also formed to
“levy and collect assessments against and from the members,” “to make reasonable rules and
regulations governing the use and enjoyment” of the subdivision, and to “enforce the provisions”
of the covenants, restrictions, articles of incorporation, bylaws, and rules and regulations that
may be adopted. These provisions are also not ambiguous and give the Association broad
authority to promulgate bylaws regulating the members’ conduct within the Association itself
and also as property owners in Dixboro Farms. Consequently, if the bylaws do not conflict with
this State’s law, they must—as with any other type of contract—be enforced as written. Rory v
Continental Ins Co, 473 Mich. 457, 468; 703 NW2d 23 (2005).
Under Michigan’s common law, a property owner normally cannot be contractually
bound by a covenant regulating the use of his or her real property without his or her agreement to
the covenant. Thus, a group of property owners cannot impose building and use restrictions on a
neighboring property owner without his or her consent. See Eveleth, 322 Mich. at 641-642
(holding that the restrictions did not apply to the lot at issue because the restrictions were not
imposed by a common owner and were not agreed to by the current lot owners or by their
grantors in the chain of title); Hart v Kuhlman, 298 Mich. 265, 267; 298 N.W. 527 (1941) (“The
right of defendant cannot be made to rest upon a mere neighborhood plan to which he was not a
consenting party.”); Doxtator-Nash Civic Ass’n v Cherry Hill Professional Bldg, Inc, 12 Mich
App 468, 472; 163 NW2d 262 (1968) (“The fact that other lot owners in the subdivision who
were strangers to the title to defendants’ property may have agreed on a plan of restrictions
governing their property could not result in restrictions binding upon defendants or their
predecessors in title.”). However, a party may be bound by a covenant to which he or she did not
personally agree, if that party’s predecessor in interest established the restrictive covenant and
the covenant appears in the owner’s record title. See Sanborn v McLean, 233 Mich. 227, 230;
206 N.W. 496 (1925).
A covenant affecting the use of real property may be personal or may run with the land,
as determined by the parties’ intent. See Greenspan v Rehberg, 56 Mich. App. 310, 320-321; 224
NW2d 67 (1974), citing, among other authorities, Mueller v Bankers Trust Co, 262 Mich. 53, 56;
247 N.W. 103 (1933). A covenant affecting the use of real property runs with the land if, in
relevant part, the parties express their intent to bind their successors and assigns. Greenspan, 56
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Mich App at 320-321. If the covenants are structured to run with the land, a subsequent
purchaser will be bound by the covenants if he or she purchases the land with actual or
constructive notice of the covenants. Phillip v Naff, 332 Mich. 389, 393; 52 NW2d 158 (1952).
A subsequent purchaser is on constructive notice that his or her use of the property will be
subject to the covenants when the covenants appear in the purchaser’s chain of title. Sanborn,
233 Mich. at 231.
There is no language within the bylaws to suggest that the members intended the
provisions dealing with the architectural committee to constitute a new set of covenants that
would run with the land. In any event, the record evidence shows that the Developers did not
agree to the adoption of the bylaws with the property restrictions contained under Article XII; as
such, even if the drafter of the bylaws intended to establish new covenants or restrictions with
the adoption of the bylaws, those covenants and restrictions would not be binding on the
Developers or their successors or assigns. Eveleth, 322 Mich. at 641-642. Moreover, Philip
Conlin filed the Association’s articles of incorporation in June 2007, which was after the first
lots within Dixboro Farms had been sold. Because some lots had already been sold to third-
parties subject only to the covenants recorded in 2001, Philip Conlin could not use his role as the
developer to impose new covenants or alter the existing covenants unilaterally by incorporating
the Association and purporting to give it the power to establish new covenants or alter the
existing covenants for the subdivision with less than unanimous approval. See McQuade v
Wilcox, 215 Mich. 302, 305-306; 183 N.W. 771 (1921) (stating that the original owner could not
unilaterally alter the restrictive covenants applicable to the lots at issue because others purchased
the lots in reliance on the restrictions). If the Association had the authority to alter the existing
covenants or adopt new covenants with less than unanimous consent, its authority must derive
from the covenants and restrictions recorded in 2001.
3. THE COVENANTS DID NOT AUTHORIZE THE IMPOSITION OF NEW OR
EXPANDED RESTRICTIONS WITH LESS THAN UNANIMOUS CONSENT
The parties to covenants that run with the land may agree that they or their successors or
assigns can amend the covenants with less than unanimous agreement. See Ardmore Park
Subdivision Ass’n, Inc v Simon, 117 Mich. App. 57, 62; 323 NW2d 591 (1982). If the owners
subsequently alter the covenants in compliance with the terms of the original covenants, the
change will bind the owners of all the properties subject to the original covenants, even those
owners who opposed the change. Id. Therefore, if the owners of the lots in Dixboro Farms or
their predecessors in interest gave the Association the power to amend or establish restrictions on
the use and development of the lots within Dixboro Farms with less than unanimous approval,
and the bylaws were adopted in compliance with that grant of power, the restrictions contained in
the bylaws would be valid and enforceable against the Developers and their successors even
though they differ in nature and extent from those contained in the original covenants and even
though the Developers did not agree to the adoption of the bylaws.
The original owners of Dixboro Farms recorded a series of deed restrictions and
protective covenants in January 2001. Paragraph one of the covenants, for example, placed
limits on the use of the lots and on the types of buildings that could be constructed on the lots;
paragraph two required the lot owners to maintain easements for utilities; paragraph three
required all utilities to be below ground; paragraph six subjected the lots to an annual
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maintenance charge; paragraph ten imposed additional requirements and limitations on the
development of lots, and paragraph 14 limited the use of signs and billboards. The covenants
also included paragraph five, which established the Association.
In paragraph five, the original landowners gave the Association the power to sue: “The
Association shall have the right and power in its own name to take and prosecute all suits, legal,
equitable or otherwise which may be, in the opinion of the Association, necessary or advisable
for any purpose deemed for the benefit of the Association members.” The original landowners
also expressly granted the Association certain other powers at various points in the covenants:
under paragraph six, it has the power to adjust the amount of the annual maintenance fee,
including the power to raise the fee beyond the maximum with the approval of a majority of the
members; it has the power to spend the maintenance fund on various things under paragraphs six
and eight; it has the power to enforce a provision requiring property owners to repair damage that
the owner might have caused to certain common areas under paragraph ten; paragraph 26 granted
the Association the power to hire contractors to perform maintenance on neglected property and
charge the owner; and, it has the power to abate violations of the restrictions and covenants with
notice to the property owner and charge the expense to the owner under paragraph 29.
Conspicuously absent from these provisions is any reference to the Association’s power to
amend the covenants, or to establish new restrictions or covenants. Indeed, the only reference to
such a power in the covenants is in paragraph 30, which expressly provides that two-thirds of the
owners of the lots have the power to release certain “restrictions, conditions, covenants, charges
and agreements” and then only after the passage of 15 years.
By reserving the power to amend the covenants by less than unanimous consent to the
owners, and then limiting that power in extent (release of certain specified restrictions) and time
(after 15 years), the original landowners plainly expressed their intent that the covenants and
restrictions could not be altered by the Association acting on its own initiative, could not be
altered until 15 years after the recording of the covenants in January 2001, and could only be
altered to “release” certain specified restrictions. The covenants are unambiguous and did not
expressly provide the Association with the authority to alter the original covenants and
restrictions on its own initiative and did not authorize the owners to add new restrictions or
increase the burden of existing restrictions with less than unanimous consent. Accordingly, this
Court must enforce the covenants as written. Rory, 473 Mich. at 468. We conclude that the
bylaws violate this state’s common law requirement that covenants and restrictions be
unanimously approved by all the affected property owners to the extent that the bylaws impose
burdens on the individual members’ real property beyond those expressly provided in the
covenants recorded in 2001.
4. ARTICLE XII IMPOSES NEW OR EXPANDED BURDENS ON THE LOTS
The original covenants granted certain powers to the Association. Because the
Association’s articles authorize it to “to make reasonable rules and regulations governing the use
and enjoyment” of the subdivision, and to “enforce the provisions” of the covenants and
restrictions, the Association could validly promulgate rules governing the manner of its exercise
of the powers expressly granted to it. And, as long as the rules did not impose additional burdens
on the members’ properties, the adoption of the rules by less than all members would not violate
this State’s common law unanimity requirement.
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The covenants expressly granted the Association the authority to abate violations “of any
condition or restriction or breach of any covenant” in paragraph 29. Because homeowners
associations generally have standing to enforce restrictions on behalf of their members, Civic
Association of Hammond Lake v Hammond Lake Estates No 3 Lots 126-135, 271 Mich. App. 130,
135; 721 NW2d 801 (2006), and the covenants expressly gave the Association the authority to
abate violations, the Association could promulgate rules interpreting the covenants and
restrictions and setting the procedures governing its own enforcement of those covenants and
restrictions. For instance, paragraph 20 of the covenants and restrictions provides that the lot
owners may keep “common household pets” unless “they become an annoyance or nuisance to
the neighborhood.” The restriction does not define common household pet and does not define
the conditions under which a common household pet will be deemed to be a nuisance. The
Association could for that reason promulgate rules expressing its understanding of those terms
and governing its procedure for enforcing that particular restriction. The Association could not,
however, expand that restriction or impose a new burden on the lot owners with less than
unanimous consent under the guise of interpreting the restriction. See Golf View Improvement
Assoc v Uznis, 342 Mich. 128, 130-131; 68 NW2d 785 (1955) (“We do not accept this round-
about interpretation of the restrictions to fix a minimum area when it could have been expressed
directly in so many words. We conclude that it would have been so expressed had it been the
intent of the subscribers.”). It could not—by way of example—define “an annoyance or
nuisance to the neighborhood” to mean the keeping of any animal over 5 pounds in weight
because that requirement would categorically exclude numerous common household pets without
a finding of actual nuisance—that is, the interpretive bylaw would in effect amount to an
additional burden on the land; and courts will not enforce restrictions that were not expressly
stated in the covenants or permit the expansion of a restriction under the guise of interpretation.
O’Connor, 459 Mich. at 341; Golf View, 342 Mich. at 130-131; Kelly, 245 Mich. at 409.
On appeal, the Association and officers argue that Article XII of the bylaws does not
amount to a new set of restrictions on the properties; rather, in Article XII, the Association
merely interpreted the existing restrictions and provided guidance for the Association’s
enforcement of the restrictions. In particular, the Association and officers maintain that the
architectural review committee is just enforcing paragraph eleven of the covenants and
restrictions.
Paragraph eleven of the covenants and restrictions requires a property owner to obtain
advanced permission before constructing various improvements and states that permission may
be denied if the proposed improvement is not in harmony with the development:
11. BUILDING APPROVAL. No dwelling, structure, swimming pool, fence,
TV disc, permanent sports type outdoor court or facility, out building, or other
development shall be permitted upon any parcel in the development, nor shall any
grade in the development be changed or other construction work done, unless
Developer’s written approval is obtained in advance as follows: The proposed
plot plan, construction plans and specifications shall be submitted in duplicate to
the Developer, for approval and said written approval received prior to
submission to Salem Township for a Zoning Compliance Permit or Building
Permit. The plot plans shall show the finished grade, the plot, the location of the
dwelling, mailbox post and all other buildings and structures. The construction
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plan and specifications shall show the size, square footage, type and materials of
exterior construction together with the grade and elevation of all buildings and
structures and shall provide other pertinent construction details. One copy of
these plans and specifications shall be permanently retained by the Developer.
Developer shall not give its approval to the proposal unless in its sole and
absolute opinion such construction and development will comply in all respects
with the building and use restrictions set forth in this document; nor shall
Developer give its approval unless the external design, materials and location of
the construction proposal shall be in harmony with the character of the
development as it develops and with the topography and grade elevations both of
the parcel upon which the proposed construction is to take place, and the
neighboring parcels in the development. Developer shall have the right to assign
his responsibilities and authority hereunder to a third party. If anyone begins any
such construction without the above stated approval, he hereby agrees to forthwith
completely remove such construction upon being informed by the Developer,
regardless of the stage of completeness of such construction. If it is not
appropriately removed, the Developer has the full right to enter upon such
property and cause such construction to be removed; the cost of removal plus all
appropriate legal expenses etc. shall be chargeable to the parcel owner and the
Developer may place a lien upon the subject parcel for such charges plus
applicable interest.
This restriction is poorly drafted and cluttered with legalese, but it does not give the
Association the authority to require its members to seek the architectural review committee’s
approval before improving their lots or making changes to existing improvements on their lots.
The first sentence awkwardly prohibits the ‘permitting’ of certain structures and prohibits
changes to the grade of a parcel or construction without written approval from the developer.
The first sentence further provides that the developer’s approval must be obtained in “advance as
follows” and ends with a colon. By introducing the remaining portion of the paragraph in this
way, the drafter indicated that the remainder of the paragraph clarifies the procedures applicable
to the developer’s approval process. Moreover, the specific provisions in the remainder of the
paragraph consistently state that the obligation and authority to review a proposed plan belongs
to the developer. A person seeking approval must submit his or her plans to the developer and
the developer must retain a copy. The developer must not give his approval if the proposal does
not comply with the building and use restrictions or is not “in harmony with the character of the
development as it develops . . .” The developer has the right to assign his “responsibilities and
authority” to approve proposed plans to a third party and it is the developer who has the right to
remove any construction commenced without his approval.
Paragraph 11 is not reasonably susceptible to more than one meaning. Farm Bureau Mut
Ins, 460 Mich. at 566. Rather, it unambiguously states that the individual lot owners have an
obligation to get their proposed improvements approved by the developer before commencing
construction; the paragraph does not establish an obligation to submit a proposal to any other
person, the Association, or a committee of the Association. And the covenants define the
developer to be Philip Conlin. To the extent that the Association had the authority to enforce
paragraph 11, it had to enforce it by compelling property owners to submit their plans to the
developer for approval and by requiring him to comply with the requirements imposed on his
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review of the proposed plans—specifically, by requiring him to review the plans for compliance
with the restrictions and for harmony with the development as it has developed. Thus, the
Association had the authority to enforce this restriction by ensuring that the developer acted
reasonably and in good faith when reviewing whether the proposed plan was in harmony with
the development. See Burkhardt v City Nat’l Bank of Detroit, 57 Mich. App. 649, 652; 226
NW2d 678 (1975). But it could not unilaterally usurp that role for itself. Therefore, to the extent
that Philip Conlin had not assigned his rights and duties as the developer, the trial court should
have enforced this provision as written and concluded that—as a matter of law—the Association
did not have the authority to establish its own independent approval process and require lot
owners to submit to that process.
The Association and Officers, however, argue that the Association’s power to abate a
violation of the covenants and restrictions necessarily gives rise to a right to approve
construction beforehand; specifically, they maintain that the Association “need not wait
inefficiently for construction to occur and then seek to abate it. Rather, it can proactively
approve a potential construction.” The Association’s argument is inapt; its bylaws do not
provide that an individual lot owner may submit their proposed plans to the architectural
committee for approval so as to avoid any potential future dispute or abatement action. The
bylaws require the lot owners to submit their plans to the architectural committee rather than the
developer. The bylaws further require the lot owners to pay a $2,000 fee and make a $5,000
deposit, which were not required in the original covenants. The bylaws also deprive the lot
owners of a case-by-case determination concerning whether their proposed plan is in harmony
with the development as it has developed (and in light of any change in the character of the
development over the years) by requiring the proposed plan to conform to a detailed set of
criteria not contemplated in the original covenants. That is, the bylaws effectively circumscribe
the discretion of the developer or his assign to fairly and reasonably determine whether a
proposed plan would be in harmony with the development as a whole. See Ardmore Ass’n v
Bankle, 329 Mich. 573, 578; 46 NW2d 378 (1951) (stating that a requirement that construction be
preapproved is valid, but must be exercised in a fair and reasonable manner). These limits on the
developer’s discretion constitute an additional burden not contemplated by the original covenants
and restrictions.
Relying on Meadow Bridge Condominium Assoc v Bosca, 187 Mich. App. 280; 466 NW2d
303 (1990), the Association argues that Article XII merely implements existing restrictions. The
Association’s reliance is, however, misplaced. In Bosco, the existing restrictions prohibited the
maintenance of animals without the condo association’s permission and broadly authorized the
condo association to adopt any additional rules and regulations respecting animals that it may
deem proper. Id. at 281. The condo association’s authority to promulgate the new rule was,
therefore, permitted by the existing rules. Id. at 282-283. Here, the original covenants and
restrictions did not authorize the Association to adopt new rules or regulations, and the
provisions in Article XII plainly impose restrictions which are inconsistent with the original
recorded restrictions.
The bylaws unambiguously impose new burdens on the lot owners through the
architectural committee’s review process. Because the lot owners did not unanimously approve
the creation of these new burdens and the original covenants did not authorize the Association to
establish these new burdens with less than unanimous consent, they are contrary to law and
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invalid. Eveleth, 322 Mich. at 641-642; Ardmore Park Subdivision Ass’n, 117 Mich. App. at 62.
If the Association, through its architectural review committee, has any authority to require lot
owners to submit their proposed plans to the committee for preapproval, that power must be
derived from the assignment of the developer’s authority to it. But, even if Philip Conlin
assigned his right to preapprove proposed plans to the Association, the committee’s power of
approval would be subject to the same criteria and limits that were applicable to the developer
under paragraph 11; thus, the additional burdens stated in article XII are still invalid.
The Association also cannot derive its authority to require a property owner to submit its
plans for preapproval from any other covenant. None of the other paragraphs expressly require
an owner to submit a proposed change to his or her property to the other owners, the developer,
or any entity. For example, paragraph one of the covenants requires each lot to be used as a
“single family residence” and further limits the types of improvements that may be made on the
lot:
No building or other structure shall be permitted on any lot other than a single
family dwelling with an attached garage of not less than three car capacity; except
that a swimming pool, tennis court, or similar facility, walls or other accessory
buildings may be built in such a manner and location deemed to be in harmony
with the character of the development, and in conformity with these building and
use restrictions . . . .
The harmony provision in this restriction applies to “a swimming pool, tennis court, or
similar facility, walls or other accessory building” and not to the single family dwelling and its
attached garage.
Similarly, the abatement provision stated under paragraph 29 grants the Association
(along with the developer) the authority to take action to redress a purported violation of the
covenants and restrictions, but that paragraph does not expressly grant the Association the
authority to require preapproval for every improvement that might be the subject of an action to
abate. It provides that the Association has, “in addition to all other remedies, the right to enter
upon the land as to which such violation or breach exists, and summarily to abate and remove
[the violation], at the expense of the owner . . . .” Nevertheless, the land owner may proceed at
his or her own risk and the Association’s only recourse is to take legal action or abate the
perceived noncompliance. The Association does not have the authority to compel the owner to
submit a proposed change to the Association, does not have the authority to order the owner to
pay a review fee, and does not have the authority to order the owner to pay a deposit. Rather, the
Association must proceed to abate at its own expense (and risk), and, if the owner was in fact
violating the covenants or restrictions, the Association may seek compensation for its expenses.
Paragraph 29 expressly permits nothing more. Id.
The instruments at issue in this appeal—the 2001 covenants and restrictions, along with
the Association’s articles of incorporation and bylaws—are not ambiguous. Further, with one
exception to be discussed below, the application of the law to the provisions at issue did not
involve a question of fact. Therefore, the jury should not have been asked to “find” whether the
bylaws amounted to new restrictions and should not have been asked to “find” whether the
bylaws conflicted with the covenants and restrictions recorded in 2001.
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The bylaws imposed additional burdens on the lots in Dixboro Farms. Because it was
undisputed that the bylaws were not unanimously adopted, and the 2001 covenants and
restrictions did not expressly permit the Association to burden the lots with new restrictions on
its own initiative or allow the owners to alter or adopt restrictions with less than unanimous
consent, the new restrictions were invalid. Eveleth, 322 Mich. at 641-642; Ardmore Park
Subdivision Ass’n, 117 Mich. App. at 62. Consequently, the trial court should have determined
that Article XII of the bylaws was invalid under Michigan law, but only to the extent that it
burdened the lots in Dixboro Farms with restrictions and covenants beyond those provided in the
2001 covenants and restrictions. The extent to which Article XII of the bylaws imposed
additional burdens on the lots, however, depended in part on the resolution of a question of fact.
C. ASSIGNMENT OF RIGHT TO APPROVE
Paragraph 11 of the covenants gave Philip Conlin—as the developer—the “right to assign
his responsibilities and authority hereunder to a third party.” The covenants do not include any
limitations or conditions on his right to assign. Therefore, he could assign his right to the
Association expressly by oral or written agreement or impliedly through his representations and
course of conduct. Burkhardt v Bailey, 260 Mich. App. 636, 654-656; 680 NW2d 453 (2004)
(discussing the elements necessary to establish an assignment and stating that the assignor must
manifest a present intent to transfer and must not retain any control or any power of revocation);
Featherston v Steinhoff, 226 Mich. App. 584, 589; 575 NW2d 6 (1997) (“Where the parties do not
explicitly manifest their intent to contract by words, their intent may be gathered by implication
from their conduct, language, and other circumstances attending the transaction.”); see also, e.g.,
Hooton v Hooton, 230 Mich. 689, 692; 203 N.W. 475 (1925) (discussing whether the facts
established that the husband made a parol assignment of the insurance policy at issue to his
wife).
At trial, there was testimony that the owners of the lots in Dixboro Farms were upset by
the quality of the Guenther homes and felt betrayed by Philip Conlin’s approval of those homes.
Philip Conlin testified that he became aware of the other owners’ discontent shortly after the
homes were completed. As a result of the owners’ concern, Chris Conlin sent an email to Philip
Conlin in December 2010 requesting that he appoint the board of directors for the Association
and call a meeting of the residents. Chris Conlin further wrote that it was “understood” that the
new board would form an architectural committee at this first meeting. Thereafter, Philip Conlin
appointed the Association’s first board of directors.
There was testimony and documentary evidence that the homeowners met in January
2011 and signed a written summary of their position on the recent events, which they sent to
Philip Conlin. In the letter, they stated that they had reached a consensus on “a number of
issues” and were sending him the letter to “inform” him about their decisions and seek his
“concurrence in the progress and basis of continuing cooperation.” They told Philip Conlin that
they wanted to elect their own board for the Association, notwithstanding that he had that right
under the covenants, and wrote that they expected him to “concur” with this decision. The
homeowners also “acted to appoint” an architectural control committee to “cooperate and assist
in maintaining architectural harmony in the subdivision.” Finally, the homeowners stated that
they intended to develop bylaws for the Association and asked him to indicate his “acceptance
and acknowledgement” of the newly formed Association. The evidence showed that Philip
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Conlin signed and dated the letter. There was evidence that Philip Conlin later submitted
proposed plans for development to the Association’s newly formed architectural review
committee, albeit for its comments and suggestions.
Although it was by no means overwhelming, when the totality of the evidence is viewed
in the light most favorable to the Association, there is evidence from which a reasonable jury
could find that Philip Conlin assigned his rights under paragraph 11 of the covenants to the
Association. See Taylor, 286 Mich. App. at 500. If the jury had found that Philip Conlin assigned
his rights under that paragraph to the Association, it could properly form an architectural review
committee to handle the approval process and could promulgate rules in its bylaws governing
that process, so long as the rules did not impose burdens beyond those provided under paragraph
11 of the covenants. Consequently, the trial court did not err when it denied the Developers’
motion for a directed verdict on that limited issue.
Unfortunately, the special verdict form instructed the jury to skip that issue if it found
that the bylaws did not amount to restrictive covenants and did not violate the 2001 covenants
and restrictions, which it did. For that reason, this fact-question was not resolved below.
Although we conclude that Article XII of the bylaws was invalid to the extent that it imposed
new burdens on the lots at issue without the proper consent or authority, we cannot determine the
full extent that Article XII would be invalid without resolving this factual question.
Consequently, we must remand this case for possible retrial of that question of fact.
III. CONCLUSION
We reverse the jury’s verdict, vacate the judgment, and remand for further proceedings.
On remand, the trial court shall enter an order granting partial summary disposition in favor of
the Developers. Specifically, the trial court shall enter an order declaring that the 2001
covenants and restrictions did not give the Association the authority to burden the lots with
additional restrictions and did not give it the authority to add restrictions with less than
unanimous approval. The order should further declare that Article XII of the bylaws is invalid
and does not apply to the Association’s members to the extent that it includes burdens on their
lots beyond those stated under the 2001 covenants and restrictions, as explained in this opinion.
Finally, if necessary, the trial court shall hold a new trial to resolve whether Philip Conlin
assigned his rights under paragraph 11 of the covenants to the Association.
Reversed, vacated, and remanded for further proceedings consistent with this opinion.
Because this appeal involved issues of importance to the general public, we order that none of
the parties may tax their costs. MCR 7.219(A). We do not retain jurisdiction.
/s/ Michael J. Kelly
/s/ Christopher M. Murray
/s/ Douglas B. Shapiro
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