KAUTZ, Justice.
[¶ 1] The Appellants, Felix Felicis, LLC, Carol Baker and Mark Stein (hereinafter the Baker-Steins), filed a Complaint against the Appellees, Riva Ridge Owners Association and the members of the Association's Board of Directors and Site Committee, Cody Mueller, John Campbell, and Jeff Hussey, after the Site Committee rejected the Baker-Stein's building plans for their home and writer's studio in the Riva Ridge subdivision outside of Jackson, Wyoming. The Baker-Steins alleged breach of contract, tortious breach of the covenant of good faith and fair dealing, intentional interference with a contract and prospective economic advantage, injunctive relief, and punitive damages. The Baker-Steins then filed a Complaint for Declaratory Judgment, requesting that the district court determine the meaning of the term "principal residence site" in the covenants, and whether the Baker-Steins must
[¶ 2] The district court granted summary judgment in favor of the Appellees on several issues including the breach of contract claim and that the Baker-Steins must gain Site Committee approval before planting trees for landscaping. Following a bench trial, the district court determined that the covenants intended to protect the landowners' views of the Tetons and interpreted "principal residence site" in a way that required complete invisibility between the homes in the Riva Ridge subdivision. The Baker-Steins appeal the district court's decisions. We affirm in part, and reverse and remand in part.
[¶ 3] The Baker-Steins raise the following issues for our review:
[¶ 4] On December 19, 1996, Betty I. Lucas, Russell C. Lucas, James F. Lucas, Lynda E. Lucas, and Leeann K. Lucas (hereinafter collectively referred to as "the Declarant") signed a Declaration of Covenants, Conditions and Restrictions of Riva Ridge Tracts (covenants). Riva Ridge is an approximately 365 acre area in Teton County that the Declarant divided into seven tracts. Six of the tracts are approximately forty acres, while the seventh tract is just less than 118 acres. In the covenants, the Declarant stated that the property within Riva Ridge "contains significant wildlife habitat and is of high scenic and natural value, and Declarant is adopting the following Covenants, Conditions and Restrictions to preserve and maintain the natural character and value of the Property [Riva Ridge] for the benefit of all Owners of the Property or any part thereof." The covenants established the Riva Ridge Owners Association (the Association) of which every Riva Ridge tract owner is a member. The Association is managed by a three member Board of Directors, and the Board members also serve as the Association's Site Committee. The current members of the Board and Site Committee are Mr. Mueller, Mr. Campbell and Mr. Hussey. One of the Site Committee's duties is to consider and act upon building plan proposals for homes in Riva Ridge.
[¶ 5] As most covenants do, the Riva Ridge covenants specify and restrict certain aspects of the proposed homes in the development. One such restriction addresses the visibility of the homes on the different tracts in the area. That section of the covenants states:
Exhibit H is a topographic map of the area that shows the seven different tracts and the acreage of each tract. Each tract contains a small square with the notation "Homesite" on it.
[¶ 6] Article X, Section 8 of the covenants allows for the relocation of the building envelopes and the location of the "principal residence site" shown on Exhibit H with the Site Committee's approval under the following conditions:
[¶ 7] The covenants also require Site Committee approval before a tract owner can alter any part of the tract from its natural state. Specifically, Article VIII, Section 2(a) states:
Additionally, Article VIII, Section 3(o) states: "No on-site mining or other mineral extraction or Development activities shall be permitted on any Tract, including the removal of gravel; provided that excavation for construction, wildlife enhancement or landscape purposes may be permitted with the prior written approval of the Board."
[¶ 8] The covenants were drafted by the Declarant's attorney, David Larsen. During the process, Mr. Larsen and a land surveyor, Sean O'Malley, went to Riva Ridge to look at the general area of what would become the seven tracts in the development. The two put a story pole on each of the tracts to make sure the plans would comply with county zoning regulations regarding scenic overlay and skylining.
[¶ 9] After the covenants were recorded, the Declarant began selling the tracts in Riva Ridge. Homer Luther purchased Tract A in July of 1998 and thereafter built a home on the property. Karla Tessler purchased Tract E and, according to Mr. Luther, in January of 2000 requested permission from the Association to relocate the principal residence site for that tract. According to Mr. Luther, the Association approved that request and at some point in time Ms. Tessler built a home on Tract E. The house is not built on or near the original principal residence site shown as the "homesite" on Exhibit H of the covenants. Cody Mueller purchased Tract E from Ms. Tessler in 2007, and Susan and John Jackson purchased Tract A from Mr. Luther in 2011.
[¶ 10] The Baker-Steins purchased Tract B in December 2010, and they hired a Jackson architectural firm with prior experience designing homes in Riva Ridge to design their home and separate writer's studio. The Baker-Steins first submitted their plans to the Site Committee in November 2011, and despite submitting several amended proposals to address Site Committee concerns, the Site Committee rejected all versions of the plans. The Site Committee rejected the plans on the basis that some of the Baker-Steins' proposed home would be visible from some locations in the Mueller (being the same Mr. Mueller who is the president of the Association and on the Site Committee) and Jackson constructed homes, although those locations are not necessarily the "homesites" shown on Exhibit H of the covenants. The visibility from the Mueller and Jackson homes continued to be a problem even though the Baker-Steins changed the proposed height of their home from twenty-seven feet to twenty-two feet, while all of the other homes in the area are approximately thirty feet tall.
[¶ 11] The Baker-Steins' proposed resolution to the visibility problem was to plant trees to block their home from the Mueller's and Jacksons' view. However, the Site Committee informed the Baker-Steins that the covenants do not allow them to mitigate any visibility of the proposed structures by planting trees. Further, the Site Committee concluded that, based upon Article VIII, Section 2(a) and 3(r)(1), the Baker-Steins need Site Committee approval before planting any trees on the property.
[¶ 12] The Baker-Steins filed a Complaint for Damages and Injunctive Relief, claiming breach of contract, intentional interference with contract and prospective economic advantage, tortious breach of the covenant of good faith and fair dealing, and seeking injunctive relief and punitive damages. They also filed a Complaint for Declaratory Judgment wherein they sought a declaration from the district court regarding whether the term "principal residence site" in the covenants required that the Baker-Steins' proposed home be invisible from anywhere in the Mueller and Jackson homes, and whether the covenants require Site Committee approval before the Baker-Steins can plant trees on the property. The Appellees submitted a counterclaim for declaratory relief seeking a declaration from the district court that the authority to issue permits is vested in the Board of Directors and Site Committee, that the court does not have the authority to amend the Association's documents, that decisions regarding plan submissions are within the discretion of the Site Committee, and that the Site Committee is the sole entity charged with enforcing, interpreting, and applying the governing documents of the Riva Ridge Development.
[¶ 13] Each party filed a motion for partial summary judgment. Of significance to this appeal, the district court determined that the phrase "principal residence site" in the covenants was ambiguous and, thus, a question of fact existed regarding the intent of the drafter and the meaning of the visibility restriction.
[¶ 14] Thereafter, the district court held a bench trial to determine the meaning of "principal residence site." The court received testimony from many witnesses, including Mr. Larson, Mr. O'Malley, Mr. Stein, Mr. Mueller, Mr. Campbell, and the Jacksons. The court also heard the testimony of the architect who designed the Baker-Steins' home, an architect who was assisting the Site Committee, and the parties submitted the deposition testimony of Mr. Luther.
[¶ 15] The Baker-Steins argue the district court improperly concluded that the covenants require all homes in Riva Ridge be invisible from one another. Specifically, the Baker-Steins submit that when interpreting the ambiguous phrase "principal residence site," the district court improperly gave more consideration to the current homeowners' belief of what the covenants mean than to the testimony of Mr. Larson, who actually wrote the covenants.
[¶ 16] When reviewing a bench trial, this Court reviews the trial court's findings of fact for clear error and its conclusions of law de novo. Moore v. Wolititch, 2015 WY 11, ¶ 9, 341 P.3d 421, 423 (Wyo. 2015). Covenants are contractual in nature and will be interpreted in accordance with contract law principles. Stevens v. Elk Run Homeowners' Ass'n, 2004 WY 63, ¶ 12, 90 P.3d 1162, 1165-66 (Wyo. 2004). The construction and interpretation of a contract is a matter of law and, thus, will be reviewed de novo. Id., ¶ 12, 90 P.3d at 1166. Here, the district court determined at the summary judgment stage that the phrase "principal residence site" was ambiguous, requiring the resolution of a factual issue at trial.
[¶ 17] At the outset, it is important to address a stance the Appellees have taken in the district court and on appeal. They argue
[¶ 18] The method we use in interpreting covenants is well established:
Id., ¶ 12, 334 P.3d at 1210 (quoting Anderson v. Bommer, 926 P.2d 959, 961-62 (Wyo. 1996) (alterations in original). Further, "restrictions upon the use of land are not favored and, accordingly, such restrictions will not be extended by implication." Stevens, ¶ 13, 90 P.3d at 1166.
[¶ 19] The Declarant expressly stated that the purpose of the Riva Ridge covenants is "to preserve and maintain the natural character and value of the Property for the benefit of all Owners of the Property or any part thereof." In order to further this purpose, the covenants include a section regarding the visibility between structures in Riva Ridge. That section states: "In order to provide for the maximum privacy and in order to maintain views from the principal residences on each of the Tracts without buildings or other structures in the foreground, building envelopes are hereby established for each of the Tracts." The section goes on to explain that each tract has a "principal residence site" which has been approved by Teton County as being in conformance with skylining and scenic resource overlay regulations. Further, it states that the "principal residence site" for each of the individual tracts is shown on a topographic map of the area designated at Exhibit H. Under the covenants, "No structure may be so constructed or placed within a building envelope so that it is visible from any principal residence site as designated on Exhibit `H', or from any principal residence site relocated pursuant to the provisions of these Covenants, Conditions, and Restrictions."
[¶ 20] The Baker-Steins argue that the phrase "principal residence site" refers to a specific point on the ground, and that specific point is shown on Exhibit H. Thus, their proposed home does not need to be invisible from anywhere in the Mueller and Jackson
[¶ 21] The language in the covenants about visibility between structures on the tracts is straightforward and clear. It unambiguously requires that a structure may not be visible from any "principal residence site." The covenants then unambiguously state that the "principal residence site" of each tract is shown on Exhibit H. On Exhibit H, each tract includes a small box which denotes the location of the "homesite." Exhibit H contains no other possible "principal residence site" for each tract. Thus, the plain language of the covenant states that structures on other tracts may not be visible from that specific location — the "homesite" or principal residence site — as established on Exhibit H. In order to adopt the Appellees' interpretation of "principal residence site," this Court would have to deviate from its established procedure in interpreting covenants. We decline to do so and address the deficiencies in Appellees' interpretation below.
[¶ 22] First, to accept the Appellees' interpretation would mean that "principal residence site" and "principal residence" essentially have the same meaning. The phrase "principal residence site" is not defined in the covenants. However, "principal residence" is defined as "the single family residential Structure, constructed on any Tract of the Property...." At times, the two phrases are used within the same sentence, signifying that the terms are not synonymous. For example, when discussing the relocation of the building envelope, the covenants state, "No portion of a house or principal residence constructed at the approved relocated principal residence site shall be visible from any designated principal residence site on any other Tract of the Property." If the phrase "principal residence site" means the same thing as the principal residence, as the trial court ruled, the Declarant would have stated that no portion of a principal residence shall be seen from any other principal residence. The Declarant did not do so and, instead, used different and distinct phrases to describe two different and distinct things.
[¶ 23] Further, the Appellees' interpretation of the "principal residence site" has no meaning unless a "principal residence" has already been built on a tract. This conclusion is contrary to the explicit role the "principal residence site" plays in the overall covenant scheme. The "principal residence sites" are the only locations of significance that were designated by the Declarant at the time the covenants were written. The covenants require the tract owners to determine the placement and shape of the building envelopes, simply requiring that they be a certain size and include within it the "principal residence site" as shown on Exhibit H. Any structures on the tract must be placed within the building envelope. Therefore, one cannot even begin to contemplate where a "principal residence" may be built without first recognizing the existing "principal residence site" shown on Exhibit H. To accept the Appellees' interpretation that the "principal residence site" is simply the site of the principal residence would render this important part of the covenants meaningless. Shaffer v. WIN-health Partners, 2011 WY 131, ¶ 17, 261 P.3d 708, 713 (Wyo. 2011) ("Our rules of contract interpretation require us to give effect to each word if possible, and we strive to avoid construing a contract so as to render one of its provisions meaningless, because each provision is presumed to have a purpose.") (Internal quotations and quotation marks omitted).
[¶ 24] Acceptance of the Appellees' interpretation would also result in owners who build their homes later in time being subjected to far more arduous standards than those
[¶ 25] The Appellees argue that interpreting "principal residence site" to mean something less than the site where the principal residence is built will frustrate the purposes of the covenants; specifically, "to provide for the maximum privacy and in order to maintain views from the principal residences on each of the Tracts without buildings or other structures in the foreground...." They contend this requires complete invisibility between the homes in Riva Ridge.
[¶ 26] Finally, the Appellees point out that the "principal residence site" cannot be a specific location on the ground because Exhibit H and the covenants do not contain survey information or give a legal description for each site. It is true that Exhibit H does not contain survey information; however, we do not believe that means the "principal residence site" for each tract as marked on Exhibit H does not occupy a precise area on each tract. Exhibit H clearly shows each distinct tract, includes information regarding the topography of each tract, and the Appellees acknowledge that Exhibit H is drawn to scale. Additionally, while we reached our determination regarding the unambiguous meaning of the covenants without considering
[¶ 27] We find that the term "principal residence site" for each tract unambiguously refers to the specific areas illustrated on Exhibit H and identified thereon as "homesite." Therefore, to comply with the covenants, the Baker-Steins' proposed home cannot be visible from that specific area on the Jacksons' and Mueller's property.
[¶ 28] The Baker-Steins sought damages for breach of contract against the Appellees based on the Site Committee's decisions not to approve the Baker-Steins' building plans. The district court granted summary judgment in favor of the Appellees, determining that the Baker-Steins had not identified any provision of the covenants that would allow them to seek damages.
[¶ 29] When reviewing the district court's decision to grant summary judgment:
Star Valley Ranch, ¶ 11, 334 P.3d at 1211.
[¶ 30] The district court determined as a matter of law that the Baker-Steins could not prevail on their breach of contract claim. In doing so, the court relied upon this Court's decision in Dwan v. Indian Springs Ranch Homeowners Ass'n, Inc., 2010 WY 72, 232 P.3d 1183 (Wyo. 2010) (Dwan II). In Dwan II, the plaintiff sought damages against the homeowners association for breach of contract after this Court determined the association had unreasonably denied the plaintiff's application to build an addition on her home. Id., ¶ 5, 232 P.3d at 1184. The district court granted summary judgment in favor of the association and we affirmed. Id., ¶¶ 5, 9, 232 P.3d at 1184, 1186. We explained that, while covenants are contractual in nature, a homeowner is not necessarily entitled to recover contract damages against an association. Id., ¶ 9, 232 P.3d at 1186. The plaintiff had failed to point to any provision in the covenants that would allow
[¶ 31] Here, the district court determined that, like the plaintiff in Dwan II, the Baker-Steins failed to identify a provision in the covenants that would entitle them to seek damages against the Appellees. However, two different sections of the covenants clearly contemplate that members of the board and site committee may be liable to owners in some circumstances. Article IV, Section 5 states:
Article VI, Section 8 of the covenants contains a liability clause that is specific to the Site Committee:
[¶ 32] These provisions exempt the Board of Directors, Site Committee, and members thereof from liability in certain circumstances, but those circumstances require that the underlying action be done in good faith. The logical extension of that limitation is that liability may exist if the action is done in bad faith. While Section 5 does not use the specific term "damages," one cannot be liable or responsible for something that does not incur damages. Section 8, however, does specifically state the Site Committee and its members shall not be liable to any owner for damages, so long as the Committee and/or members were acting in good faith. Thus, if the Site Committee or one of its members acts in bad faith, it could be liable for the damages sustained by the owner.
[¶ 33] The Baker-Steins' allegations are that Mr. Mueller, Mr. Campbell and Mr. Hussey, in their individual capacities and as members of the Site Committee, acted in bad faith when they denied the Baker-Steins' building plans. If the Baker-Steins are able to prove bad faith, they may be entitled to damages as this is the type of conduct for which the covenants do not protect the Board of Directors, Site Committee, or its members from liability. Therefore, the district court erred in granting summary judgment to the Appellees on the basis that the covenants do not provide the Baker-Steins a cause of action.
[¶ 34] The Appellees argue that the Baker-Steins failed to present any evidence of bad faith at the time the district court granted summary judgment, did not litigate the issue of bad faith at the trial, and are precluded from doing so now because the district court determined the Site Committee's interpretation of the covenant was reasonable. The
[¶ 35] The fact that the district court held a bench trial and ultimately ruled in favor of the Appellees does not preclude the Baker-Steins from litigating the issue of bad faith on remand. All of the claims that would have required the Baker-Steins to show bad faith at trial had been resolved by the district court at summary judgment. Thus, the Baker-Steins had no reason to present evidence regarding bad faith at trial, and to do so may have been susceptible to a proper objection by the Appellees.
[¶ 36] The Appellees, however, argue that the Baker-Steins did present evidence at trial that could be indicative of bad faith, such as Mr. Mueller's potential conflict of interest and the Site Committee's amendment to the by-laws after the Baker-Steins filed the complaint. The Appellees assert that because that evidence was presented and the district court still determined the Site Committee acted reasonably, the Baker-Steins are foreclosed from litigating the bad faith claim. As pointed out above, the issue at trial did not involve whether the Site Committee and its members acted in good faith — the issue was what does "principal residence site" mean within the covenants. While the evidence could show bad faith, at the time of trial the evidence was used in an attempt to discredit Mr. Mueller's testimony regarding the interpretation of the covenants. Simply because the Baker-Steins presented some evidence that may be helpful to show bad faith does not mean they had the opportunity to fully and fairly develop the facts on the bad faith claim, and that fact should not preclude them from doing so on remand.
[¶ 37] Further, the Appellees' interpretation of the covenants was erroneous. Therefore, any finding by the district court that the Site Committee's actions were reasonable based upon its incorrect interpretation of the covenants is also erroneous and cannot be used to justify the Appellees' actions. Additionally, the district court never made a determination of whether genuine issues of material fact existed regarding bad faith. In light of the facts that Mr. Mueller is the president of the Riva Ridge Owners Association, his home happens to be one from which the Baker-Steins' proposed home is visible, the Site Committee (including Mr. Mueller) rejected the Baker-Steins' building plans on more than one occasion based on an incorrect interpretation of the covenants, and the Site Committee's actions to amend the Committee by-laws and rules after this litigation commenced, we believe reasonable minds could differ regarding the Site Committee's motives in denying the Baker-Steins' building permit. Therefore, genuine issues of material fact exist to determine whether the Appellees acted in bad faith on the breach of contract claim and the district court's order granting summary judgment was improper.
[¶ 38] In their Complaint for Declaratory Judgment, the Baker-Steins sought a determination from the district court that the covenants do not require an owner to seek approval from the Site Committee before planting trees on his or her tract. The Baker-Steins moved for summary judgment on this claim, arguing that the covenants only contain protections for existing vegetation and trees and does not prohibit planting new trees. The Appellees responded and agreed that the covenants are unambiguous, but argued that they unambiguously require Site Committee approval before planting trees. The district court agreed with all parties that the covenants were unambiguous, but agreed with the Appellees that, as a matter of law, the covenants require that an owner seek Site Committee approval before planting trees.
[¶ 39] On appeal, the Baker-Steins argue the district court's decision was erroneous; however, the basis of that argument is not entirely clear. Instead of discussing how the decision was incorrect as a matter of law, the Baker-Steins argue "the Site Committee's prohibition on using landscaping as screening is unreasonable, and there were disputed material facts that should have precluded summary judgment." The latter argument is particularly peculiar considering it
[¶ 40] As discussed above, the interpretation of a covenant is a question of law that is reviewed de novo. Stevens, ¶ 12, 90 P.3d at 1165-66. Additionally, we review a district court's decision to grant summary judgment de novo. Star Valley Ranch, ¶ 11, 334 P.3d at 1211.
[¶ 41] We agree with the district court that the covenants require that the owners receive approval from the Site Committee before planting trees on a tract. Generally, the covenants require Site Committee approval for making changes or improvements to the tract that will alter the natural state of the tract. For example, Article VIII, Section 2 states:
Further, Article VIII, Section 3(r)(1) specifically prohibits the removal of trees except in limited circumstances. Of particular importance, Article VIII, Section 3(o) states:
The term "Development" is defined in the covenants as: "any alteration of the natural land surface, and all buildings, Structures or other site improvements on the Property." Excavate is not defined in the covenants, but the everyday definition of the term includes "to remove by digging or scooping out." American Heritage Dictionary (5th ed. 2015), https://ahdictionary.com.
[¶ 42] Planting trees is a common landscaping procedure that can improve a tract of land on the property. That process cannot be done without altering the existing natural state of the tract and engaging in some excavation when preparing a hole the tree will occupy. While this conduct may be minimal compared to other excavations and alterations that may occur on the tracts, it is excavation for landscaping nonetheless, and the covenants clearly require Site Committee permission before proceeding. Therefore, we affirm the district court's conclusion that an owner must seek the Site Committee's approval before planting trees on his or her tract.
[¶ 43] The phrase "principal residence site" in the Riva Ridge covenants is unambiguous and refers to a precise area of land on each tract, and those areas are shown on Exhibit H of the covenants. Thus, the covenants require that a "principal residence" be invisible only from that designated area on each tract and not from any other location within a "principal residence" on the other tracts. Additionally, the district court erroneously dismissed
[¶ 44] Affirmed in part, and reversed and remanded in part.
FORGEY, District Judge, concurring in part and dissenting in part.
[¶ 45] I concur with the majority to the extent that it affirms the district court's interpretation of the Riva Ridge covenants' "landscaping provision," but I otherwise respectfully dissent.
[¶ 46] In my opinion, the remaining sections of the covenants can also, as a matter of law, unambiguously be interpreted in the same way as the district court ultimately interpreted the covenants. It is clear from the plain language of the covenants that: 1) Riva Ridge "contains significant wildlife habitat and is of high scenic and natural value" and the covenants were adopted "to preserve and maintain the natural character and value of the Property for the benefit of all Owners of the Property or any part thereof;" and 2) structures are to be built within a designated area on each Riva Ridge tract "to provide for the maximum privacy and in order to maintain views from the principal residences on each of the Tracts without buildings or other structures in the foreground," including that "[n]o structure may be so constructed or placed within a building envelope so that it is visible from any principal residence site as designated on Exhibit `H', or from any principal residence site relocated...."
[¶ 47] These provisions, when read together and in a manner that gives effect to all of the applicable language, require a broader interpretation of the covenants than the interpretation adopted by the majority. There is no dispute that the drafters of the covenants intended and anticipated that multi-story structures up to thirty feet high, such as principal residences, would be built on Riva Ridge tracts.
[¶ 49] I would further find that the district court properly granted summary judgment to the Appellees on the Baker-Steins' breach of contract claim. Even if the Riva Ridge covenants allow the Baker-Steins to pursue such a cause of action in this case, the only evidence of "bad faith" referenced by the majority in holding that "reasonable minds could differ regarding the [Riva Ridge] Site Committee's motives in denying the Baker-Steins' building permit" and "genuine issues of material fact exist to determine whether the Appellees acted in bad faith on the breach of contract claim" is as follows: 1) the Site Committee "rejected all versions" of the Baker-Steins' building plans because "some of the Baker-Steins' proposed home would be visible from some locations" in two adjoining property owners' constructed homes; 2) this was based on an "incorrect interpretation of the covenants;" 3) a member of the Site Committee that rejected the Baker-Steins' building plans owned property adjoining the Baker-Steins' property and the Baker-Steins' proposed home would be visible from that owner's principal residence; and 4) the Site Committee sought to "amend the Committee by-laws and rules after this litigation commenced." These grounds are insufficient, as a matter of law, to establish "bad faith," particularly considering that the Site Committee, in my opinion, relied on a correct interpretation of the covenants in denying the Baker-Steins' building plans. There are, accordingly, no genuine issues of material fact regarding the Baker-Steins' breach of contract claim, and the Appellees are entitled to a judgment on the claim as a matter of law.
[¶ 50] For these reasons, I would affirm the district court in all respects. My analysis differs somewhat from that of the district court, but "we may affirm the district court upon any valid basis appearing in the record." Arnold v. Day, 2007 WY 86, ¶ 14, 158 P.3d 694, 698 (Wyo. 2007).