Supreme Court Digest: April 19, 2023

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Civil

Real Property
Restrictive Covenants

Appellants are homeowners in a common interest residential subdivision where lots are subject to restrictive land use covenants. One restrictive covenant purports to limit the size of outbuildings on lots to 1,200 square feet. This appeal arose out of a dispute between appellants and their homeowners’ association, respondent, which argues that appellants’ newly constructed, 1,656 square foot garage violates the restrictive covenant. Appellants argued that any ambiguity in the restrictive covenant must be strictly construed against the land use restriction as a matter of law. The District Court, finding the covenant ambiguous, agreed with appellants’ position and granted summary judgment in their favor. The Court of Appeals disagreed, concluding that the interpretation of the restrictive covenant was a question of fact for a jury.

The Supreme Court held that (1) if the language of a restrictive land use covenant is ambiguous, a court may consider extrinsic evidence of the covenanting parties’ intent to resolve the ambiguity; (2) the interpretation of an ambiguous restrictive covenant is a question of fact for a jury unless the extrinsic evidence is conclusive as to the covenanting parties’ intent; the jury should be instructed to strictly construe an ambiguity in a restrictive covenant against a land use restriction only if the jury is unable to resolve the ambiguity from the extrinsic evidence by a preponderance of the evidence; and (3) because the restrictive covenant at issue was ambiguous and the extrinsic evidence did not conclusively resolve the ambiguity, the matter was remanded to the District Court for a properly instructed jury to decide the meaning of the restrictive covenant. Affirmed.

A21-0700 Windcliff Assoc., Inc. v. Breyfogle (Court of Appeals)

Receiverships

Arbitration

The issue in this case was whether a court appointed receiver seeking to enforce a lease term against a tenant to the property for which the receiver was appointed was bound by an arbitration clause in the lease. Respondent-owner, the owner of a building in downtown Minneapolis, entered into a lease with respondent-tenant. Following appointment of a receiver, tenant continued to refuse to pay rent despite the receiver’s demand for payment starting from the date of the receivership. Tenant asserted that it could withhold rent to recoup monies that owner owed tenant. Receiver brought a claim against tenant before the judge that appointed him; tenant sought to send the dispute to arbitration. The District Court refused to send the dispute to arbitration and resolved the claim itself. It ruled that tenant must make rent payments to receiver. The Court of Appeals reversed, concluding that the receiver was subject to the arbitration agreement in the lease.

The Supreme Court held that (1) under the Minnesota Receivership Act, Minn. Stat. ch. 576 (2022), a receiver is bound by an arbitration provision in a lease agreement between the person over whose property the receiver is appointed and a tenant of that property when the receiver asserts a claim that the tenant breached the lease terms; and (2) the lease that formed the basis for the receiver’s claim that the tenant must pay rent also required that the claim be submitted to arbitration. Affirmed.

A21-0963 Wilmington Trust, Nat’l Assoc. v. 700 Hennepin Holdings, LLC (Court of Appeals)