In 2018, Kafka Properties, LLC, purchased a portion of the property subject to a restrictive covenant, referred to as Lot One. The covenant provides, in relevant part, that the owner of the property subject to the covenant agrees “not to mine, excavate, sever, sell or remove nonmetallic minerals upon, within or under the surface” of the property. At its Lot One facility, Kafka processes large blocks of granite, marble, and quartz quarried off site into finished products. Kafka stores the finished products on Lot One for some time before transportation to other locations for distribution or sale; these products are visible from the adjacent highway. Kafka does not conduct any ongoing mining or quarrying activities on Lot One. However, during the construction of the facility and an adjacent parking lot, Kafka excavated a substantial amount of dirt containing nonmetallic minerals from Lot One and transported the excavated dirt to a nearby property that it also owns. Kafka crushes and sells rock on that nearby property.
Red Rock sued Kafka, alleging an ongoing violation of the restrictive covenant. Kafka denied that it was engaging in any of the activities prohibited by the restrictive covenant. Red Rock filed affidavits asserting that (1) the intent of the restrictive covenant was to “prohibit all commercial activity on the Restricted Property that would adversely impact … [Red Rock] in any way”; (2) splitting larger rocks into smaller pieces by a mechanical means is an “integral part of mining and selling rock to the general public”; and (3) the only purpose for displaying finished and unfinished rock to the public along the highway is to advertise products as part of the sales process. The court granted summary judgment in Kafka’s favor; Red Rock appealed.
JUDGE STARK Generally speaking, “[c]ourts use the rules of contract interpretation to ascertain the meaning of restrictive covenants.” When the meaning of a contract can be determined from its face with “reasonable certainty,” a court need not consider evidence beyond the contract and should enforce the clear language itself. Deed restrictions, however, are generally disfavored by Wisconsin law. Public policy therefore requires that the language in a restrictive covenant “be strictly construed to favor unencumbered and free use of property.”
Here, both parties contend that the terms of the restrictive covenant are clear and unambiguous, even though they each advance different interpretations of the covenant and its application to the facts of this case. Red Rock asserts that the plain purpose of the covenant was to protect it from commercial activity on that land that would adversely affect its economic interests. Red Rock then argues that Kafka violated the covenant by excavating and removing dirt containing nonmetallic minerals from Lot One incident to the construction of the fabrication facility and then selling the excavated minerals from another location. Red Rock further argues that Kafka continues to violate the covenant by displaying finished rocks outside of the facility in order to advertise them as part of the “selling process.”
Kafka asserts that the plain purpose of the covenant was to prohibit quarrying activity on Lot One. It argues that removing dirt incident to construction was not quarrying activity and, therefore, it did not constitute the excavation and removal of minerals. Kafka further contends that the covenant does not prohibit it from selling the incidentally excavated minerals from another site, or from selling minerals quarried off-site on Lot One.
We conclude that the terms of the restrictive covenant are unambiguous, although we do not fully agree with the interpretations advanced by either party. In particular, Red Rock’s assertion that the covenant prohibits commercial activity on the land that would harm its economic interests is too broad because the covenant makes no mention of competition and does not define Red Rock’s business. Conversely, Kafka’s assertion that the covenant restricts only quarrying activity is too narrow, because mining and excavation may be broader than quarrying, and selling may occur without quarrying.
The noscitur a sociis canon of construction provides that “words grouped in a list should be given related meaning.” In relation to “nonmetallic minerals upon, within or under the surface” of Lot One, the list of terms “mine, excavate, sever, sell or remove” plainly refer both to physically separating any nonmetallic minerals originating on the property from the property and to selling any minerals originating on the property.
Here, the parties agree that merely removing dirt from Lot One incident to construction would not violate the covenant. Red Rock maintains, however, that selling minerals contained in the excavated dirt violated the covenant. The problem with Red Rock’s contention is that there is nothing in the summary judgment materials evidencing that Kafka actually sold any of the excavated minerals.
Red Rock’s affidavits averred generally that Kafka made sales from the property to which the excavated dirt had been transferred, but they did not cite a single sale that involved minerals originating on Lot One.
Red Rock’s general assertion was insufficient to rebut Kafka’s more specific assertion that it processed only rocks quarried off-site in its facility on Lot One before sending them for sale on its other property. Moreover, even if there was a basis to conclude that Kafka violated the restrictive covenant, Red Rock’s general assertion did not provide any basis for a damages award.
Next, Red Rock argues that selling is a process that involves more than the transfer of ownership—it necessarily includes offering products for sale. Even if there is some truth in that statement, we would distinguish between sales activities involving specific customers and advertising to the general public. There is nothing in the summary judgment materials to suggest that Kafka’s employees ever brought or allowed potential customers onto the property to view the piles of rock stored there. To the extent that the mere visibility of its products could be considered a form of advertising, we agree with Kafka that such advertising did not constitute “selling” in violation of the covenant, particularly given the disfavor with which restrictive covenants are viewed under Wisconsin law. We conclude that the circuit court properly granted summary judgment in Kafka’s favor.
CRITICAL THINKING:
What was ambiguous about the restrictive covenant? How could that covenant have been more clearly worded to obtain the goals of the seller?
ETHICAL DECISION MAKING:
What values are furthered by this decision?