Restrictive covenant barring a “pre-fabricated or modular home”; Defining a modular home; Modular defined; Principle that negative covenants are grounded in contract; Stuart v. Chawney; Interpretation of restrictive covenants; Terrien v. Zwit; Donnelly v. Spitza; Seeley v. Phi Sigma Delta House Corp.; Focus on the restrictor’s intent; Tabern v. Gates; Reading words together in context; GC Timmis & Co. v. Guardian Alarm Co.; Doctrine of noscitur a sociis; Koontz v. Ameritech Servs., Inc.; Canon of consistent usage; Robinson v. Lansing; Distinction between a structure that is constructed versus one that is erected; Enforcement of restrictive covenants as written; Bloomfield Estates Improvement Ass’n, Inc. v. Birmingham; Policy that courts will protect property owners who have not violated restrictions in the enjoyment of their homes; Carey v. Lauhoff

Holding that a fair reading of the restrictive covenants at issue prohibited a home that was more modular than not, and that defendants’ home was mostly not modular, the court reversed the Court of Appeals and reinstated the trial court’s decision dismissing the case. Plaintiffs-neighbors asserted that defendants “violated the subdivision’s restrictive covenants that bar ‘pre-fabricated or modular home[s]’ (along with mobile homes, berm-houses, geodesic domes, shacks, and barns) and that they must tear it down.” After a bench trial, the trial court found no cause of action. In reversing, the Court of Appeals reasoned that the home “unambiguously fit the commonly understood definition of ‘modular’ but never construed the disputed term used in the covenants—'modular home.’” The court concluded that “the most natural reading of the phrase ‘modular home’ is a home that is mostly or generally modular.” It found that “the covenants categorically bar landowners from moving or placing relocated residences or manufactured homes onto a parcel. These categorical restrictions apply to any structure that may be considered, without substantial further construction, to be a home or residence upon delivery.” While it agreed with the trial court “that an entirely prefabricated, manufactured, or modular home cannot be placed on or moved to a lot in” the subdivision, it found that the language imposed “a more stringent standard than the trial court found.” The prohibition was designed to bar “homes that are mostly modular or prefabricated.” Applying the covenants to the undisputed facts found by the trial court, the court held that the home was “not a ‘pre-fabricated or modular home’” under the restrictive covenants. Plaintiffs did not show that it violated “either of the two narrow restrictions.” It did not fit the definition “of ‘relocated residence’—the modules were not a ‘residence’ when placed on the lot.” Plaintiffs did not contend that it was a “manufactured home” or a “manufactured housing unit” and it would not fit the common understanding of these terms. The covenant language supported “the trial court’s finding that there is a distinction between a modular or prefabricated home and a site-built home with modular or prefabricated components. And the trial court found that the defendants’ home was mainly stick-built, with modular components integrated into it.” The court agreed.

The concurrence agreed that the Court of Appeals erred in ruling that the home was modular, but also found an alternate ground for reversal – “the Court of Appeals’ erroneous conclusion that ‘where defendants’ home was in clear violation of the unambiguous restrictive covenant, the only solution was to grant injunctive relief and order that the non-conforming home be removed.’” If the Court of Appeals had correctly determined that the home violated the covenant, the case should have been remanded for the trial court to exercise its discretion in deciding on an equitable remedy.

The dissent concluded that “a review of common and ordinary understandings of what comprises a modular home” showed that defendants acted in violation of the “straightforward prohibition” in the restrictive covenant by erecting a modular home and thus, breached a promise made in the covenant. “As a result, the ‘congenial’ enjoyment of plaintiffs’ property rights” in the restrictive covenants “was substantially undermined.” Further concluding that there were “no contrary equitable considerations” in defendants’ favor, the dissent would affirm the Court of Appeals’ ruling that the house be removed.