In Matthew Thiel & Nikole Thiel v. David Goyings & Helen Goyings, issued July 24, 2019 (No. 156708), the Michigan Supreme Court held that the construction of a partially modular home did not violate the subdivision’s restrictive covenants prohibiting modular homes.
Defendants had purchased a lot and hired builders who specialized in systems-built homes to design and build their home. Through this method, part of the home was stick-built on-site, with three modular components built off-site and delivered to the lot. In total, the completed home was to be composed of about 59% stick-built construction and 41% modular components. After Defendants ignored their warnings, Plaintiffs brought suit, asking the Allegan County Circuit Court to halt construction and order the modular components to be removed or destroyed. After a three-day bench trial, the trial court held that although the covenants in the deed might not seem to be ambiguous, they did not contemplate a home like the Defendants’, and dismissed the case.
On appeal, the Court of Appeals concluded that the trial court erred when it held that the covenants did not contemplate the type of home built by Defendants. Rather, because the Defendants’ home unambiguously fit the commonly understood definition of “modular,” the trial court should have granted judgment in the Plaintiffs’ favor and ordered the Defendants to tear down their new home.
In its opinion, the Supreme Court first noted that the main dispute is how the subdivision’s restrictive covenants defined a “modular home.” After looking at various definitions and readings of the term “modular,” the Court held that the most natural reading of the phrase “modular home” is a home that is mostly or generally modular – that is, a home is a modular home under the restrictive covenants if it is more modular than not. In addition, the covenants enforce construction standards from the opposite side; homes in the subdivision must be stick-built on-site. Therefore, a home must be predominately stick-built on-site, and a home built using predominately modular construction cannot be erected in the neighborhood.
Applying the covenants to the facts found by the trial court, the Supreme Court concluded that the Defendants’ home was not a “pre-fabricated or modular home” as the restrictive covenants used that term. The Plaintiffs also did not establish that the Defendants’ home violated either of the two narrow restrictions. First, the home did not fit the definition of §1.B.3, as the modules were not a “residence” when placed on the lot. And second, the home did not breach the prohibition in §1.B.4 against “manufactured housing units,” as the home would not fit the common understanding of those terms. Because the Supreme Court agreed with the trial court that the Defendants’ home was mainly stick-built, with modular components integrated into it, the Court of Appeals erred when it held that the Defendants’ home violated the terms of the covenant. Accordingly, the Supreme Court reversed the opinion of the Court of Appeals and reinstated the decision of the trial court.
Justice Viviano wrote a separate concurring opinion to explain that an alternative basis for reversal would be the Court of Appeals’ erroneous conclusion that the only solution was to grant injunctive relief and order that the home be removed.
A link to the opinion can be found here: https://law.justia.com/cases/michigan/supreme-court/2019/156708.html
This article was written by Emily Honet, Law Clerk
