The opinion
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-21-00244-CV
Appellant, Richard Witt Duncan// Cross-Appellants, Prewett Rentals Series 2 752 Military,
LLC, Tami Jan, Ward Galbreath, Sumit Kapoor, Rachel Kapoor, Nakul Jeirath, Tasha
Jeirath, Mark L. Reis, Janis R. Reis, Charles A. Bess, Jr., Dancee D. Bess, Christopher
Bellshaw, Catherine Bellshaw, Santos S. Salinas, and Debra Salinas
v.
Appellees, Prewett Rentals Series 2 752 Military, LLC, Tami Jan, Ward Galbreath, Sumit
Kapoor, Rachel Kapoor, Nakul Jeirath, Tasha Jeirath, Mark L. Reis, Janis R. Reis,
Charles A. Bess, Jr., Dancee D. Bess, Christopher Bellshaw, Catherine Bellshaw, Santos S.
Salinas, and Debra Salinas// Cross-Appellee, Richard Witt Duncan
FROM THE 433RD DISTRICT COURT OF COMAL COUNTY
NO. C2018-15744D, THE HONORABLE DIB WALDRIP, JUDGE PRESIDING
MEMORANDUM OPINION
This permissive appeal involves the interpretation of restrictive covenants
governing the Canyon Lake Island subdivision in Comal County (“the Subdivision”). The
parties are property owners in the Subdivision. Appellant Richard Witt Duncan filed suit against
the cross-appellants named above (collectively, “Defendants”), seeking to enjoin them from
engaging in activities that Duncan alleged violated the restrictive covenants. Defendants
counterclaimed, seeking declarations that the activities in which they were engaged did not
violate the restrictions. The parties filed competing motions for summary judgment, which the
district court denied. We will affirm the district court’s order.
BACKGROUND
According to the allegations in Duncan’s petition, the Subdivision, platted in
1970, “is one of the older residential subdivisions on Canyon Lake in Comal County.” In 1999,
the Subdivision property owners voted to amend the restrictive covenants governing the
Subdivision. Section III of the restrictions, labeled “Property Use,” provides in relevant
part that:
1. No building or lot shall ever be used or occupied for any purpose except
that of a private residence, . . . An owner or other resident of the
residential unit may conduct business activities within a residential unit so
long as:
a.) the existence or operation of the business activity is not detectable
by sight, sound or smell from outside the residential unit . . . .
(Emphasis added.) The restrictions provide the following definition of “business”:
The term “business” shall be construed to have ordinary, generally accepted
meanings, and shall include, without limitation, any occupation, work or activity
undertaken on an ongoing basis which involves the provision of goods and/or
services to persons other than the provider’s family and for which the provider
receives a fee, compensation or other form of consideration, regardless of
whether: (a) such activity is engaged in full or part time; (b) such activity is
intended or does generate a profit; or (c) a license is required from such activity.
Duncan alleged that Defendants violated the above restrictions by using their
properties other than as private residences, operating detectable businesses on their properties,
and using their properties to operate detectable businesses. More specifically, Duncan
contended that:
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Defendants are engaged in vacation rental operations, including renting their
properties to members of the public for use and occupancy other than as a private
residence, in violation of Section III of the Restrictions.
Defendants’ vacation rental operations involve the provision of goods and/or
services to persons other than their families for a fee, compensation, or other form
of consideration, in violation of Section III of the Restrictions.
Defendants’ vacation rental businesses are detectable, in that they collectively
book as many as 67 (or more) vacationers most summer weekends, while
Defendants themselves are absent. Subdivision residents have readily detected
these groups, by sight, sound, and smell. Defendants have made no effort
whatsoever to limit the detectability of their business operations at their properties
in the Subdivision. To the contrary, Defendants have repeatedly broadcasted to
every possible resident in the neighborhood that they conduct vacation rental
operations on their properties, and they will continue to do so until restrained by
a court.
Defendants’ vacation rental operations are ongoing and are clearly a “business”
within the Restrictions’ definition of “business.”
Duncan thus sought to permanently enjoin Defendants from: (1) participating in, allowing, or
permitting transient use or occupancy that is not as a private residence on any of their respective
properties in the Subdivision; (2) participating in, allowing, or permitting to exist any detectable
business on properties in the Subdivision including paid, transient occupancy; and (3) violating
any of the other covenants, conditions, and restrictions of the Subdivision.
In response to Duncan’s petition, Defendants filed a counterclaim seeking
declarations as to their leasing rights under the restrictions. In their pleading, Defendants
acknowledged that they “have been renting out their homes in the subdivision for short terms for
at least 14 years,” that “[a]ll the defendants in this case advertise their homes for rent on the
internet,” that they “rent their homes for terms less than 30 days while reserving the right to rent
for any other duration, more or less than 30 days,” that “[s]ome of the defendants use property
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management entities to handle the rentals of their homes,” and that “[a]ll the defendants applied
for and remit the Texas Hotel Tax, which is applicable to all rentals of less than 30 days in the
state of Texas.” Defendants further claimed that “[a]ll the defendants lease their main dwelling
homes solely to natural persons for use as dwelling homes,” that “[t]hey lease the entirety of the
homes at a time, and not individual rooms,” that “[t]he properties contain no business offices,
leasing offices, signage, or any business activity upon the lots,” that “[n]o concierge or room
services are provided,” and that “[t]raffic and occupancy are consistent with the requirements of
law and ordinances.”
Defendants argued that the restrictions expressly contemplated the leasing of their
properties to renters. Specifically, Section II provides that “[a]ll covenants and restrictions shall
be binding on the owners, his successors, heirs and assigns and on any persons renting or leasing
from the owners, and are to inure to the benefit of the entire Subdivision.” (Emphasis added.)
Additionally, Section III allows for the placement of one sign outside each property for the
express purpose of “advertising the property for sale or rent.” (Emphasis added.) However, the
restrictions contain no provisions regarding the duration of any such rental or leasing activity.
Thus, Defendants sought declarations that “the deed restrictions at issue do not bar Defendants’
leasing according to minimum duration” and that “if Defendants’ leasing for any given duration
is a ‘business’ under the 1999 Restrictions, then their leasing for any given duration is still
allowed under the 1999 Restrictions because it satisfies the requirements for an allowed
business use.”
Defendants subsequently sought (1) traditional summary judgment on their
counterclaim and against Duncan on his claim for breach of the restrictive covenants, and
(2) no-evidence summary judgment on Duncan’s claim for breach of the restrictive covenants.
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Duncan also filed a traditional motion for summary judgment on his claim that Defendants had
violated the restrictive covenants. Summary-judgment evidence admitted by the district court
included a copy of the restrictive covenants; Duncan’s deposition testimony and discovery
admissions; Defendants’ unsworn declarations and responses to discovery requests; and sworn
declarations by Duncan and other witnesses to activities by renters that occurred in the
Subdivision. The district court denied Defendants’ traditional and no-evidence motions for
summary judgment and, in a separate order, denied Duncan’s traditional motion for
summary judgment. 1
In its order denying Duncan’s traditional motion for summary judgment, the
district court explained its reasoning for denying both Duncan’s motion and Defendants’
traditional and no-evidence motions. The district court first concluded that the relevant
restrictions were unambiguous: “[P]ermissible uses and occupations are limited to that of a
private residence as well as allowable business activities within a residential unit.” Regarding
Duncan’s motion, the district court concluded that: (1) Duncan was “not able to establish, as a
matter of law, that an owner’s rental, in and of itself, of restricted property is inconsistent with
the ‘Property Use’ provisions of the covenants”; (2) “the summary judgment evidence fails to
sufficiently establish that the tenants in question use or occupy the buildings or lots for a purpose
other than family-styled residential living-type activities, nor does any evidence demonstrate, as
1 Duncan filed an additional motion for summary judgment, seeking to dismiss
Defendants’ counterclaim for declaratory judgment on the grounds that the Uniform Declaratory
Judgment Act is not available to settle disputes already pending before a court and that a party
may not merely restate a defense in the form of a declaratory judgment in the hopes of
recovering attorney’s fees. See MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d 660,
669, 671 (Tex. 2009); BHP Petrol. Co. v. Millard, 800 S.W.2d 838, 841–42 (Tex. 1990).
However, there is no indication in the record that the district court has ruled on this motion, and
we will not address it in this appeal.
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a matter of law, a usage of the properties that was open to the public”; and (3) the
summary-judgment record “does not include evidence that would establish as a matter of law
that either owners or tenants conducted any other business activity (regularly providing goods or
services to non-family for compensation) ‘within the residential unit’ of which its existence is
detectable from outside the residential unit.” The district court added, “Beyond that, what may
or may not be later adequately proven to be a proscribed and detectable business activity need
not be determined at this juncture” because “[r]esolution of such questions are inherently fact
driven and thus inappropriate for summary judgment.”
Regarding its denial of Defendants’ motions for summary judgment, the district
court explained that “use of the term ‘private’ does have meaning, albeit the common meaning as
applied here, i.e., not public,” and that it was possible for an occupant of the property to use their
residence in a manner that was not “private”:
Whether one is an owner, co-owner or other resident, including a tenant, of a
subject building or lot, it is possible that either type of possessor or occupant of
such restricted property could violate the undefined yet unambiguous covenant if
it were made available to public use with, in absurdum, some open-ended, no
holds-barred, come-and-go-as-you please, party-at-the-palace advertisement. . . .
If shown that either an owner or a tenant allowed unfettered access by anyone to
“trample through the house or swim in its pool,” a factfinder might determine
such public access violated the covenants regarding use or occupancy of a
restricted building or lot to that of a “private residence.”
The district court found that Duncan had presented at least some evidence that such a violation
had occurred:
Within the affidavits submitted by Duncan, witnesses relate numerous alleged
eyewitness accounts of drastically increased frequency of motor vehicle traffic on
the roads and foot traffic in and out of residences, increased traffic pulling fishing
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boats to and from rentals and Canyon Lake, increased and overflowing amounts
[of] trash when occupants appear not to be homeowners, etc. The relative
increases in these areas at least raises an eyebrow causing one to rationally find or
believe that business and commerce might likely be involved as visitors come and
go from rented properties. Plaintiff’s summary judgment proof, when viewed in
the light most favorable to him as non-movant therein, established more than a
scintilla of evidence that the complained-of uses or occupancies could be
something other than “private.” Accordingly, [Defendants’] use of the subject
properties may, factually, have been inconsistent with the common meaning of
that term as used within the covenants, and summary judgment for Defendants
would be improper.
The parties filed cross-petitions for permissive appeal, and the district court later
amended its order denying summary judgment to grant permission for a permissive interlocutory
appeal to address: (1) whether the Subdivision’s 1999 deed restrictions are ambiguous regarding
whether the Defendants’ vacation-rental operations are prohibited; (2) if the 1999 deed
restrictions are not ambiguous, whether the Defendants’ “alleged violation of these deed
restrictions,” specifically their vacation-rental operations, “is a matter of law for the trial court to
decide”; and (3) whether the 1999 deed restrictions preclude the Defendants’ vacation-rental
operations as a matter of law. This Court then granted Duncan’s petition for permissive appeal
and granted in part 2 Defendants’ petition for permissive appeal to address these and any “fairly
included” subsidiary issues. See Tex. Civ. Prac. & Rem. Code § 51.014(d), (f); Tex. R. App. P.
28.3; see also Elephant Ins. Co. v. Kenyon, 644 S.W.3d 137, 146–47 (Tex. 2022) (explaining that
“permissive appeals are resolved according to the same principles as any other appeal, including
addressing all fairly included subsidiary issues and ancillary issues pertinent to resolving the
controlling legal issue”).
2 We denied the Defendants’ petition for permissive appeal of the district court’s
“implied denial of Defendants’ motion for sanctions.” See Duncan v. Prewett Rentals Series 2
752 Military, No. 03-21-00244-CV, 2021 WL 3118420, at *2 (Tex. App.—Austin July 22, 2021,
order) (per curiam).
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STANDARD OF REVIEW
A trial court’s ruling on a motion for summary judgment is reviewed de novo.
Tarr v. Timberwood Park Owners Ass’n, Inc., 556 S.W.3d 274, 278 (Tex. 2018) (citing Joe
v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 156 (Tex. 2004)). “To prevail on a motion
for traditional summary judgment, the movant must show that no material fact issues exist and
that it is entitled to judgment as a matter of law.” Rosetta Res. Operating, LP v. Martin,
645 S.W.3d 212, 218 (Tex. 2022) (citing Tex. R. Civ. P. 166a(c)). “To prevail on a no-evidence
summary-judgment motion, a movant must allege that there is no evidence of an essential
element of the adverse party’s claim.” Southwestern Elec. Power Co. v. Grant, 73 S.W.3d 211,
215 (Tex. 2002) (citing Tex. R. Civ. P. 166a(i)). “When competing summary-judgment motions
are filed, ‘each party bears the burden of establishing that it is entitled to judgment as a matter of
law.’” Tarr, 556 S.W.3d at 278 (quoting City of Garland v. Dallas Morning News, 22 S.W.3d 351,
356 (Tex. 2000)). In conducting our review of the motions, “we take as true all evidence
favorable to the nonmovant, and we indulge every reasonable inference and resolve any doubts
in the nonmovant’s favor.” Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).
DISCUSSION
Whether the deed restrictions are ambiguous
We first address whether the restrictions are ambiguous. “Whether a restrictive
covenant is ambiguous is a question of law for the court to decide by looking at ‘the covenants as
a whole in light of the circumstances present when the parties entered the agreement.’” Tarr,
556 S.W.3d at 280 (quoting Pilarcik v. Emmons, 966 S.W.2d 474, 478 (Tex. 1998)).
“[R]estrictive covenants are subject to the general rules of contract construction.” Id. “Like a
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contract, covenants are ‘unambiguous as a matter of law if [they] can be given a definite or
certain legal meaning.’” Id. (quoting Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455,
458 (Tex. 1997)). “On the other hand, if the covenants are susceptible to more than one
reasonable interpretation, they are ambiguous.” Id. However, “‘[m]ere disagreement over the
interpretation of a restrictive covenant does not render it ambiguous.’” Id. (quoting Buckner
v. Lakes of Somerset Homeowners Ass’n, 133 S.W.3d 294, 297 (Tex. App.—Fort Worth 2004,
pet. denied)). “A paramount concern when construing covenants is giving effect to the objective
intent of the drafters of the restrictive covenant as it is reflected in the language chosen.” Id.
(citing Wilmoth v. Wilcox, 734 S.W.2d 656, 658 (Tex. 1987); Owens v. Ousey, 241 S.W.3d 124,
129 (Tex. App.—Austin 2007, pet. denied)). “Accordingly, ‘[c]ourts must examine the
covenants as a whole in light of the circumstances present when the parties entered the
agreement,’ giving the ‘words used in the restrictive covenant . . . the meaning which they
commonly held as of the date the covenant was written, and not as of some subsequent date.’”
Id. (quoting Pilarcik, 966 S.W.2d at 478; Wilmoth, 734 S.W.2d at 658).
The restrictions at issue here provide that “[n]o building or lot shall ever be used
or occupied for any purpose except that of a private residence.” Because the restrictions do not
define “private residence,” we must give those words their common meaning. See id. “Private”
means “belonging to or for the use of one particular person or group of people only,” Private,
New Oxford American Dictionary (2001), and “secluded from the sight, presence, or intrusion of
others,” Private, American Heritage College Dictionary (3rd ed. 2000). “Residence” means “a
person’s house,” Residence, New Oxford American Dictionary (2001), and “the place in which
one lives; a dwelling,” Residence, American Heritage College Dictionary (3rd ed. 2000). Thus, a
“private residence” is a house or other dwelling place where one lives that belongs to one person
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or a group of people and that is secluded from the sight, presence, or intrusion of other people
who do not live there.
The restrictions further provide that “[a]n owner or other resident of the
residential unit may conduct business activities within a residential unit so long as the existence
or operation of the business activity is not detectable by sight, sound or smell from outside the
residential unit.” The restriction defines “business” broadly, using its “ordinary, generally
accepted meanings,” including “without limitation, any occupation, work or activity undertaken
on an ongoing basis which involves the provision of goods and/or services to persons other than
the provider’s family and for which the provider receives a fee, compensation or other form of
consideration,” without regard to whether “(a) such activity is engaged in full or part time; (b)
such activity is intended or does generate a profit; or (c) a license is required from such activity.”
This restriction is unambiguous in that it clearly prohibits any business activity that is detectable
from outside the residence. Thus, the restrictions have a definite legal meaning and are not
ambiguous: the property can be used only as a secluded dwelling place for a person or group of
people, and any business activity conducted within that dwelling place is limited to that which is
“not detectable by sight, sound or smell from outside the residential unit.”
Whether the Defendants’ vacation-rental operations violate the deed restrictions as a
matter of law and whether the deed restrictions preclude the Defendants’ vacation-rental
operations as a matter of law
The other two issues involved in this permissive appeal are interrelated. Because
the restrictions provide unambiguously that the properties can be used only as “private
residences” and that any “business activity” conducted on the properties cannot be detectable by
sight, sound, or smell from outside the residential unit, the remaining questions are whether
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Defendants’ vacation-rental operations are allowed or prohibited by those restrictions as a matter
of law and whether Duncan provided some evidence that the rentals in this case violated the
restrictions so as to survive Defendants’ no-evidence motion for summary judgment.
“[C]ovenants restricting the free use of land are not favored by the courts, but
when they are confined to a lawful purpose and are clearly worded, they will be enforced.”
Wilmoth, 734 S.W.2d at 657 (citing Davis v. Huey, 620 S.W.2d 561 (Tex. 1981)). “All doubts
must be resolved in favor of the free and unrestricted use of the premises, and the restrictive
clause must be construed strictly against the party seeking to enforce it.” Id. “A covenant under
review ‘may not be enlarged, extended, stretched or changed by construction.’” JBrice Holdings,
L.L.C. v. Wilcrest Walk Townhomes Ass’n, Inc., 644 S.W.3d 179, 183 (Tex. 2022) (quoting Tarr,
556 S.W.3d at 280). “Thus, to validly limit an owner’s property use, a covenant must plainly
prohibit that use.” Id. “No construction, no matter how liberal, can construe a property
restriction into existence when the covenant is silent as to that limitation.” Tarr, 556 S.W.3d at 285.
The Texas Supreme Court elaborated upon these principles in Tarr
v. Timberwood Park Owners Association, Inc., a case involving restrictive covenants similar to
the restrictions at issue here. In Tarr, the covenants included the restriction that “[a]ll tracts shall
be used solely for residential purposes, except tracts designated on the above-mentioned plat for
business purposes, provided, however, no business shall be conducted on any of these tracts
which is noxious or harmful by reason of odor, dust, smoke, gas fumes, noise or vibration.”
556 S.W.3d at 285–86. The homeowners’ association in Tarr, which sought to enjoin short-term
rentals, argued that “residential” implied living on the property for a prolonged time period,
which would exclude “transient” and “temporary” leasing of the property. Id. at 288.
Additionally, the covenants limited the type of building that could be built on the property to
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“single-family residences.” Id. at 286. The association argued that renting the property to
parties who were not members of a single family violated that restriction. Id. at 285.
The court rejected these contentions. The court first observed that “[t]he
single-family residence restriction merely limits the structure that can properly be erected upon
Tarr’s tract and not the activities that can permissibly take place in that structure.” Id. at 287.
The court then examined the “residential purposes” restriction and concluded that it applied to
“the activity that actually takes place on the land” as opposed to the “owner’s use of the
property.” Id. at 289. Thus, the homeowner could use the property to generate rental income, so
long as the income was generated from activity on the property that was limited to “residential
purposes.” See id. The court then defined “residential purposes” to mean “living purposes” as
opposed to “business purposes” and declined to construe any additional restrictions beyond the
express prohibition against the use of the property for anything other than residential purposes:
The covenants in the Timberwood deeds fail to address leasing, use as a vacation
home, short-term rentals, minimum-occupancy durations, or the like. They do not
require owner occupancy or occupancy by a tenant who uses the home as his
domicile. Instead, the covenants merely require that the activities on the property
comport with a “residential purpose” and not a “business purpose.” We decline to
add restrictions to the Timberwood covenants by adopting an overly narrow
reading of “residential.”
....
Affording these phrases their general meanings and interpreting the restrictions as
a whole, we hold that so long as the occupants to whom Tarr rents his
single-family residence use the home for a “residential purpose,” no matter how
short-lived, neither their on-property use nor Tarr’s off-property use violates the
restrictive covenants in the Timberwood deeds. Moreover, Tarr’s use does not
qualify as a commercial use. Accordingly, as the association failed to adduce any
evidence that Tarr’s tenants have used the property in any manner inconsistent
with a residential purpose, summary judgment for the association was improper.
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Id. at 290–91. However, the court added, “[W]e confine this interpretation to the unambiguous
language of these particular restrictive covenants. We recognize that another court may reach a
different conclusion if the covenant it reviews defines ‘residential’ or ‘business’ uses by
specifically enumerating prohibited conduct.” Id. at 291.
The restrictions in this case, similar to the restrictions in Tarr, do not prohibit and
in fact contemplate renting the properties to others. This is demonstrated by the language in
Section II of the covenants providing that the restrictions “shall be binding on . . . any persons
renting or leasing from the owners,” and the language in Section III allowing for the placement
of one sign outside each property for the express purpose of “advertising the property for sale or
rent.” However, the restrictions are silent as to “vacation rentals” specifically, and therefore,
following the reasoning in Tarr, we cannot conclude that such rentals are prohibited as a matter
of law. At the same time, we cannot conclude that they are permitted as a matter of law. The
restrictions prohibit any use of the property other than as a “private residence” and any “business
activity” on the property that is “detectable by sight, sound or smell from outside the residential
unit.” Vacation rentals may or may not violate those restrictions, depending on the facts and
circumstances surrounding the rentals.
According to the affidavits submitted by Defendants, the following facts and
circumstances are characteristic of their rentals:
Defendants rent out the entirety of their properties to tenants for the tenants’
exclusive use for the full lease term, usually less than 30 days. Tenants have
exclusive possession of the property during the term of the lease, and the
homeowners “do not surveil them or violate their privacy or right of possession.”
The homes are rented fully furnished, but the owners do not sell the furnishings to
the tenants.
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The tenants engage in the “ordinary incidents of residential occupancy,” such as
eating, sleeping, parking, entering and exiting, lounging outside, and generally
using and enjoying the homes and the grounds that they have rented.
None of the defendants operate businesses from their Canyon Lake Island homes,
have business offices in their homes, or otherwise engage in business activities or
transactions at their homes or upon their properties in the subdivision. None of
the defendants engage in the sale of goods or services at their homes or upon the
properties. All transactions surrounding the leasing out of the properties is done
via the internet, on the telephone, or otherwise not upon the properties. There are
no employees at the homes. There is no cash register or business information or
payment processing system at any of the homes.
The tenants do not run businesses at the homes, have business offices at the
homes, or otherwise engage in business activities or transactions at the homes or
upon the properties.
All the defendant homeowners accept compensation, in the form of rent, from
their tenants in exchange for the tenants’ right to occupy, use, and enjoy the
homes during their periods of occupancy.
Some of the defendant homeowners use internet websites and portals to list or
market their homes for rent, and to “book” rentals; others use third-party
property managers.
The defendants and their rental documents refer to their tenants as “guests,” and
to lease inception as “check in” and lease expiration as “check-out.”
The defendants hire third parties to clean, maintain, and repair their homes.
Tenants can be complete strangers to the defendant homeowners apart from the
landlord-tenant relationship.
Some tenants are on vacation when they occupy the defendants’ homes.
However, the defendants do not question tenants on the purpose of their stay.
Some tenants use cars to drive to and park at the defendants’ homes.
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All the defendants pay mandatory local and state “hotel” occupancy taxes for
tenant stays of less than 30 days. The defendants also pay federal income taxes.
However, the defendants do not pay hotel or federal taxes from their Canyon Lake
homes; they do that online and from other places.
Defendants characterize the above activities as “the ordinary incidents of leasing,” which would
not be prohibited by the restrictive covenants. Duncan, on the other hand, characterizes
Defendants’ activities as running “tourist lodging businesses” that are more akin to hotels than to
rental properties. In Duncan’s view, Defendants’ “guests” are licensees rather than tenants, with
only “the limited privacy associated with licensing a hotel room,” and Defendants and their
guests are engaged in detectable business activities on the properties, which would be prohibited
by the restrictive covenants.
In April of this year, the Texas Supreme Court decided JBrice Holdings, L.L.C.
v. Wilcrest Walk Townhomes Association, Inc., 644 S.W.3d at 184–86, and rejected arguments
similar to those made by Duncan here. In that case, the covenants included the
following restriction:
No Owner shall occupy or use his Building Plot or building thereon, or permit the
same or any part thereof to be occupied or used for any purpose other than as a
private single family residence for the Owner, his family, guests and tenants . . . .
No Building Plot shall be used or occupied for any business, commercial, trade or
professional purposes either apart from or in connection with the use thereof as
a residence.
Id. at 184. The homeowners’ association, which opposed short-term rentals, attempted to
distinguish its case from Tarr by arguing that the above restriction “regulates the use of the
property, unlike the restriction in Tarr, which merely regulated activity occurring on the
property.” According to the association, the homeowner “generate[d] rental income from its
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leases,” which made its use of the property “commercial rather than residential.” Id. The
association further argued that “a short-term tenant’s use is not residential; rather, courts should
classify such tenants as licensees, like hotel guests, instead of true lessees.” Id. The association
also argued that the restriction “requires an occupant’s use to be both residential and ‘private,’”
and short-term rentals were not “private.” Id. In the association’s view, a short-term rental was
“more like a hotel license because a short-term renter is a transient occupant.” Id. at 186 n.30.
The court rejected these arguments, concluding that the restriction in that case
was similar to the restriction in Tarr:
Like the restriction in Tarr, the Wilcrest Walk residential-use covenant describes
the permitted use of a townhome and imposes no minimum on the duration of a
lease agreement. The reading of “residential” the Association advances—that the
term implies a lease of a particular duration—is identical to the reading we
rejected in Tarr. We reject it here as well.
Id. at 185. Moreover, as in Tarr, the covenants did not “preclude rental income generated by
residential occupancy.” Id. The covenants equated tenant use with owner, family, and guest use,
thereby excepting tenant use from the prohibition against commercial activity. Id. The court
explained, “When the income derived from a use is in the form of rent, and the nature of that use
is residential occupancy, then this residential-use provision does not prohibit it.” Id. The
homeowner’s “leasing business does not occupy the premises; its tenants do. Because tenants
are included among those permitted to use the townhomes, with no expressed restriction as to the
minimum duration of such use, a short-term tenant does not violate the residential-use
covenant.” Id.
The court also rejected the association’s attempt to equate “private” use with
“non-commercial” use. The court defined “private” to mean “for the use of one particular person
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or group of people only” and observed that in the Wilcrest Walk covenants, “such a group
expressly includes ‘tenants,’ which deprives ‘private’ of the meaning the Association assigns the
term.” Id. The court added, “Even if ‘private’ ordinarily could evoke non-commercial use, the
commercial use provision excepts tenant occupancy, and it requires no minimum duration for the
exception to apply.” Id. at 186.
Finally, the court rejected the association’s attempt to equate short-term
occupancy to hotel use. The court noted that “a short-term rental—even one subject to hotel
occupancy taxes—is not a hotel use if the owner conducts no business onsite” and explained that
“a short-term rental is a lease so long as it maintains the characteristics of a lease; namely, the
right to use and occupy the property.” Id. at 186 & n.30. In that case, the homeowner “contracts
with tenants to allow them the right to exclusively occupy the townhomes for the duration
specified in the rental agreements,” and “[t]he Association introduced no agreement to
demonstrate that [the homeowner] granted a license rather than a tenancy to occupants of its
townhomes.” Id. at 186.
In this case, as in JBrice, the covenants do not distinguish between owners and
tenants. Accordingly, tenant use of the property, and any income generated from that use, is
generally allowed under the restrictive covenants, provided that the rentals “maintain the
characteristics of a lease, namely, the right to use and occupy the property,” and further provided
that, consistent with the specific restrictions in this case, the tenants are using the properties for
no purpose “except that of a private residence” and engaging in no business activities detectable
by sight, sound or smell from outside the residential unit.
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However, although vacation rentals are generally allowed, Duncan provided at
least some evidence that the vacation rentals in this case violate the restrictive covenants. First,
the rental agreements of at least three of the Defendants contain the following provision:
LIMITED SHORT-TERM RENTAL. It is expressly understood and agreed that
this is a short-term vacation rental and is not a lease or other long-term residential
tenancy agreement. This Agreement is only for the licensed use of the Vacation
Rental for the stated reservation dates. It creates no property rights in you and no
rights to renewal or for recurring usage. You shall not sublet the Vacation Rental
or any part of it and shall not assign any interest (in whole or in part) to this
Agreement or any rights hereunder.
(Emphases added.) Additionally, some of the rentals are booked through Airbnb, and that
service informs guests that their “booking of an Accommodation . . . is a limited license granted
to [them] by the Host” (i.e., the Defendants) and that if they “stay past the agreed upon checkout
time,” they “no longer have a license to stay in the Accommodation.” Further, the rental
agreement of Tami Jan and Ward Galbreath provides that the homeowner “reserves the right to
enter the home anytime to investigate disturbances, check occupancy, check for damage, and
make repairs or improvements as Owner deems necessary or appropriate,” which is inconsistent
with a tenant’s right to occupy the property exclusively for the duration of the rental agreement.
See Tex. Prop. Code § 92.001(6) (defining tenant as “a person who is authorized by a lease to
occupy a dwelling to the exclusion of others”); Levesque v. Wilkens, 57 S.W.3d 499, 504 (Tex.
App.—Houston [14th Dist.] 2001, no pet.) (“A lease grants a tenant exclusive possession of the
premises as against the owner.”). These provisions are some evidence that the rentals do not
“maintain the characteristics of a lease” as required by JBrice but are instead mere
licensing agreements.
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On the other hand, we cannot conclude that these agreements establish as a matter
of law that Defendants have violated the restrictive covenants. Again, “a short-term rental is a
lease so long as it maintains the characteristics of a lease; namely, the right to use and occupy the
property.” JBrice Holdings, L.L.C., 644 S.W.3d at 186 & n.30. Defendants presented some
evidence that their vacation rentals “maintain the characteristics of a lease.” According to the
affidavits submitted by Defendants, they “rent out the entirety of their properties to tenants for
the tenants’ exclusive use for the full lease term,” “[t]enants have exclusive possession of the
property during the term of the lease,” and the Defendants “do not surveil them or violate their
privacy or right of possession.” The tenants’ use and occupancy of the property includes “eating,
sleeping, parking, entering and exiting, lounging outside, and generally using and enjoying the
homes and the grounds that they have rented,” which is consistent with the characteristics of a
lease. Thus, while the agreements provide some evidence that the vacation rentals are licenses,
there is other evidence that the vacation rentals are leases, thus precluding summary judgment
for either Duncan or Defendants.
Finally, we agree with the district court that “use of the term ‘private’ does have
meaning,” and that meaning here includes “secluded from the sight, presence, or intrusion of
others.” Private, American Heritage College Dictionary, supra. Thus, if Defendants or their
guests used the properties in a manner that was not private, then they violated the restrictive
covenants. As the district court observed, “If shown that either an owner or a tenant allowed
unfettered access by anyone to ‘trample through the house or swim in its pool,’ a factfinder
might determine such public access violated the covenants regarding use or occupancy of a
restricted building or lot to that of a ‘private residence.’” There is some evidence that such
non-private use occurred here. Specifically, Duncan averred that he had “seen as many as 9 cars
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parked overnight at the Reis property, and several times 8, 7, or 6 cars there overnight.” Other
homeowners made similar statements. Duncan’s wife, Rose, averred that she had “seen
driveways so full of vehicles that multiple vehicles had to park out on the road,” including “as
many as 8 to 10 vehicles in the driveway next door.” She had also seen “countless strangers
staying at the Reis property on weekdays and weekends,” “overflowing trash cans on the curb,”
and “loud parties congregating . . . around the firepit and pool” in one of the vacation-rental
yards. Homeowner Larry Horton averred that he had “observed groups of cars (five or more)
parked in front of some of the vacation rental properties, as well as observed trash not in garbage
containers along the streets at some vacation rental properties, usually beside an over-filled
garbage container.” Homeowner Dan Carroll averred that he had “observed as many as six or
seven vehicles squeezed into the open space in front of a known rental house” and was “aware of
an incident where a short-term renter was sunbathing nude in the backyard and was visible from
the adjoining property.” Homeowner and board member Richard Conley averred that property
owners had complained to him “about the vacation rental properties being used as party houses”
and vacation rental guests “shooting fireworks, trespassing to get to the lake, flying a drone,
damaging a neighbor’s privacy fence, visibly swimming nude, speeding and reckless driving,
cars parked along the street, and loud cursing.” We conclude that this evidence, when viewed in
the light most favorable to Duncan as the non-movant, raises a genuine issue of material fact as
to whether Defendants and their guests used the properties in a manner that was inconsistent with
their restricted use as “private” residences.
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CONCLUSION
We affirm the district court’s denial of Duncan’s traditional motion for summary
judgment and the Defendants’ motions for traditional and no-evidence summary judgment.
__________________________________________
Gisela D. Triana, Justice
Before Chief Justice Byrne, Justices Triana and Kelly
Affirmed
Filed: August 19, 2022
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